Russia 100222

Basic Political Developments Trend.az: Russian FM: Russia supports plans of Kazakhstan's chairmanship in

OSCE Gazeta.kz: Russian Foreign Minister to meet Nazarbayev Focus: Traycho Traykov: Bulgaria will use Russian funding for Belene

temporarily - Bulgaria will continue talks with Russia on lending some EUR 2 million to back the construction of NPP Belene until a strategic investor is attracted, Bulgarian Minister of Economy, Energy and Tourism Traycho Traykov told Dnevnik, as quoted by the online English edition of the daily.

Standart: Bulgarian-Russian Relations Should Be Dominated by Pragmatism – Interview with foreign minister Nikolay Mladenov

Jerusalem Post: ‘S-300 delivery a serious development’ - Russia is sending mixed messages about its pledge to deliver the advanced S-300 anti-missile system to Iran as part of an effort to increase its own influence over the Middle East, Israeli security analysts said on Sunday.

Hurriyet: Russia's patience on Iran strained but not snapped Russia Today: Russia has no obstacles for military cooperation with Iran – arms

exports chief: Russia’s military equipment is known worldwide, and state arms trading corporation Rosoboronexport is one of the biggest players on the market. RT spoke to its chief about current deals and future trading plans.

News.az: Iran, Russia, Azerbaijan hold trilateral talks - Iran's Energy Minister Majid Namjou says seven new countries have joined the list of states that have requested to buy electricity from Iran. "There are also trilateral talks with Iran, Azerbaijan and Russia underway, that aim to connect Iran's electricity network to Europe," he added.

Ukrainian News: Patriarch Kirill Of Moscow To Attend President-Elect Yanukovych's Inauguration On February 25

Gazeta.kz: President of Russia charged Federal Customs Service to work on question of joining of Ukraine of process of formation of Customs Union

Wall Street Journal: Ukraine's President-Elect to Visit Moscow - Russian President Medvedev Agreed to Meet Viktor Yanukovych in March, after Challenges to the Election Were Dropped

RIA: Russia ready to resume poultry talks with United States next Sunday - Russia's chief sanitary doctor Gennady Onishchenko said Sunday he was ready to discuss U.S. poultry supplies to Russia, suspended from January 1, on February 28.

Eurasia Review: Russia Gas Price Hike Shocks Armenians - The company that has a monopoly on selling Russian gas to Armenia has warned it will raise prices for ordinary consumers by 40 per cent in April, sparking anger in the country.

Telegraph: Britain angers Kremlin over Chechnya visit - A British parliamentary fact-finding mission to Chechnya has likened the pattern of killings and torture there to 1980s Central America in a damning series of comments certain to infuriate the Kremlin.

The News: New protest against prices in Russia - More than 1,500 people took to the streets Sunday in Russia's north to protest living costs -- the first of a new series of challenges to the Kremlin in coming weeks, organizers said.

RIA: 4,000-strong opposition rally takes place in Russia's north – Communists RFE/RL: Russian Police Detain Pension Fund Officials In St. Petersburg Kyiv Post: Right activist: Stalin's portraits on Moscow streets 'political

provocation' RIA: 400,000 cubic meters of snow removed from Moscow streets in 24 hours New Europe: Anti-missiles vs. the Re-start – by Konstantin Kosachev Businessneweurope: INTERVIEW: Eurasian Development Bank seeks to build

funds, links - 2010 is an important year for the Eurasian Development Bank (EDB), according to its chairman Igor Finogenov. The EDB plans to grow its investment portfolio by over 50% and take in new members, and is managing the Eurasian Economic Community's (EurAsEC) $10bn anti-crisis fund.

RFE/RL: Don’t Expect Miracles From Russia’s ‘Authoritarian Modernization’ - Georgy Satarov on Surkov interview to Vedomosti

Russia Profile Weekly Experts Panel: Should Modernization Be Imposed? - Medvedev is no Mikhail Gorbachev, nor even an Alexander II, just another bureaucratic reformer in a long line of such who inevitably fall short before the accumulated obstacles of vested interests, autocracy, despotism, and the absence of the rule of law.

Washington Post: In Russia, summer homes have become a cause célèbre - But if property rights are weak in Russia, the outpouring of support for Rechnik has underscored the nation's growing devotion to a particular kind of property, and delivered an unexpected warning to those who call the shots in Vladimir Putin's increasingly authoritarian state: Don't come between Russians and their dachas.

BBC: Police battle illegal Russian gamblers - Illegal gambling has spread rapidly across Russia since a new law came into force last July banning casinos and slots machines in towns and cities, according to a senior police officer in an exclusive interview with the BBC.

National Economic Trends Itar-Tass: Putin allocates RUB 5 bln to encourage grain sales from intervention

stock Bloomberg: Ruble Bond Sales Poised for Record This Year as Yields Tumble -

Domestic corporate bond sales will reach at least 1 trillion rubles ($33 billion), up from 814 billion rubles last year and 533 billion rubles in 2008, according to Trust Investment Bank in Moscow and ING Groep NV, the biggest Dutch financial-services company.

Business, Energy or Environmental regulations or discussions Steel Guru: Crisis protectionism and China hinder Russian companies Bloomberg: Rusal to Increase Aluminum Output as Demand Rebounds (Update2) AFP: Rusal says aluminium output down 11 percent in 2009 AFP: Ousted Russian investor wants to help finance Saab Bloomberg: RenCap Hires Merrill’s Sacks to Build African Equities Business Financial Times: RenCap sets up Johannesburg unit to focus on Africa

Activity in the Oil and Gas sector (including regulatory) Itar-Tass: Energy minister calls for creation of national hydrocarbon monitoring

system Bloomberg: Russia May Detail East Siberia Oil Tax Break, Shmatko Says UpstreamOnline: Lukoil misses full reserve replacement New Europe: BP, Rosneft give up on East Schmidt in Sakhalin-5 OilVoice: Russia's Sistema Drills Way Into Oil industry UpstreamOnline: Alliance rides oil price recovery - Russian-focused explorer

Alliance Oil reported improved quarterly and full year results to the end of 2009 on the recovery in international oil prices.

Gazprom Bloomberg: Gazprom Should Be ‘Innovative’ in Gas Contracts, Shmatko Says UpstreamOnline: Russia to adopt new price strategy - Russia's Gazprom, which

supplies Europe with a quarter of its gas needs, has agreed to add spot gas prices to its long-term contracts with customers, according tosources.

Georgian Daily: Gazprom, Romania, and South Stream Routes in the Black Sea Russia Today: Nord Stream commencement has South Stream players looking to

move quickly

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Full Text Articles

Basic Political Developments

Trend.az: Russian FM: Russia supports plans of Kazakhstan's chairmanship in OSCE http://en.trend.az/news/politics/foreign/1643137.html

22.02.2010 12:23

Kazakhstan, Astana, Feb. 22 / Trend News K. Konyrova /

The Russian Federation supports the plans of Kazakhstan's chairmanship in the OSCE, Russian Foreign Minister Sergei Lavrov said in Astana today.

"Russia supports the plan, which Kazakhstan has worked out during its chairmanship in the OSCE," minister said at a briefing after the talks with his Kazakh counterpart Kanat Saudabayev.

According to Lavrov, during the talks the sides discussed all aspects of the forthcoming OSCE activities this year.

"We have a common vision of how we should act for the year to complete successfully towards reforming the structure and turn it into a full-fledged international organization", Lavrov said.

Gazeta.kz: Russian Foreign Minister to meet Nazarbayevhttp://engnews.gazeta.kz/art.asp?aid=141593

12:10 22.02.2010 text: "Kazakhstan Today"

Astana. February 22. Kazakhstan Today - The meeting of the President of Kazakhstan, Nursultan Nazarbayev, with the Minister for Foreign Affairs of the Russian Federation, Sergey Lavrov, is expected to take place today in Astana. S. Lavrov will meet the Secretary of State - the Minister for Foreign Affairs of Kazakhstan, the OSCE chairman, Kanat Saudabaev, the press service of the Ministry of Foreign Affairs of Kazakhstan informed the agency.

According to the press service, the officials will discuss a wide range of questions.

According to ITAR-TASS, the officials will discuss cooperation of two countries on the international scene, including in the integration associations of the CIS and in the universal and regional organizations.

"The officials will discuss in details the course of the presidency of Kazakhstan in OSCE and the presidency of Russia in the CIS in 2010 and will plan some joint events," the official representative of the Ministry of Foreign Affairs of the Russian Federation, Andrey Nesterenko, explained.

"The officials will discuss the security questions, first of all, taking into account the influence of the Afghanistan factor on the situation in the Central Asian region, settlement of the legal status of Caspian Sea, and rational use of the transboundary rivers."

The Russian Foreign Minister will hold an exchange of opinions on the urgent issues of bilateral cooperation, in particular, will discuss some preliminary results of realization of the participatory action plan of Russia and Kazakhstan for 2009 - 2010.

Focus: Traycho Traykov: Bulgaria will use Russian funding for Belene temporarilyhttp://www.focus-fen.net/index.php?id=n21092922 February 2010 | 04:00 | FOCUS News Agency

Sofia. Bulgaria will continue talks with Russia on lending some EUR 2 million to back the construction of NPP Belene until a strategic investor is attracted, Bulgarian Minister of Economy, Energy and Tourism Traycho Traykov told Dnevnik, as quoted by the online English edition of the daily. On Friday Traykov met with his Russian counterpart Sergey Shmatko and Rosatom Director General Sergey Kirienko. Traykov said a new project company involving the National Electricity Company (NEK) or the Bulgarian Energy Holding will be set up and financed by the Russian side to ensure the project

moves forward. The loan will be secured by existing and future construction with no state guarantees required, he noted. In an interview with the 24 Chasa, Traykov explained that it was so far impossible to determine what stake the Russian side would have based on the EUR 2 billion investment, but assured that Bulgaria will hold the majority share in the project. He commented on Mr Shmatko’s statement implying that RWE might return as the strategic investor in the project, saying that when the German company had withdrawn the conditions were different. Traykov added that during the official visit of the Bulgarian delegation to Germany, German Chancellor Angela Merkel had promised to encourage German companies to participate in energy projects in Bulgaria. He said that Bulgaria relies upon Russia’s support during negotiations with potential investors.

Standart: Bulgarian-Russian Relations Should Be Dominated by Pragmatismhttp://paper.standartnews.com/en/article.php?d=2010-02-22&article=32290

MONDAY, 22 February 2010

It's high time that Macedonia stopped suspecting Bulgaria of ill will; we are not in negotiations over the deployment of missile shield elements in Bulgaria, foreign minister Nikolay Mladenov said

As a full member of the EU, Bulgaria should take an active part in the Union's policy, but not act like a country that is aspiring to join it. This means we should change our mindset when it comes to making the country's foreign policy, newly appointed foreign minister Nikolay Mladenov said. A reporter of the Standart asked minister Mladenov how it came to the scandal with the US missile defense shield and who would be Bulgaria's new ambassadors in the vacated missions.

- The question about the deployment of a US missile shield in Bulgarian gave vent to heated discussions in Bulgaria over the past few days; so much so that the Bulgarian ambassador in Moscow, Plamen Grozdanov, was summoned for consultations at the Russian foreign ministry. What is Sofia actually telling Moscow, Mr. Mladenov? - Bulgaria's ambassador in Russia was summoned at the foreign ministry in Moscow on another occasion but, of course, the question about the missile shield might have been discussed as well. In a nutshell, Mr. Grozdanov told his Russian colleagues that Bulgaria had never started negotiations on the possible deployment of elements of the US missile shield in its territory, but that it had participated together with its allies in the NATO in the development of a concept for a common missile defense system in Europe. This process of development has been going on for many years now. The threat against which this common missile defense shield is developed is valid as much for Bulgaria and the NATO, as it is for Russia. - Do you think that the missile dispute might affect the bilateral relations between Bulgaria and Russia?- There are a lot of projects on which hour two countries are working together. We share the same opinion on some issues, while we have different views on other. This is

something natural. I do not think that this missile ado will affect the dialogue between our two countries.- How do the Bulgarian-Russian energy projects develop? - We should divide this question in two. Firstly, we have relations with Russia as two sovereign countries. Secondly, Bulgaria needs security of energy supply. No matter where the supply comes and no matter where it goes, no country should be 100% dependent on one source. This is the reason why for the last two months the Government has undertaken certain actions towards better flexibility of energy supply. This is a separate and a principal issue.  The fact that a country should seek for diversification of energy sources and for security of energy supply does not mean that it is an attitude directed against Russia.  The Bulgarian-Russian relations should be based on mutual understanding coming from both sides that we are sovereign countries who settle the problems they have in their relations within a normal dialogue. In this dialogue we settle all issues without excessive emotions. Because, I think, that to a great extent, the problem is that all this debates on the relations between Russia and Bulgaria end in an emotionally-charged discussion which switches polarities from hatred to adoration. You can hate or love a concrete person but not a whole country. For this reason we should remove the emotional part, arrange our priorities, so that we can know what is important for us, what is important for them and see where we can meet. - What will be your politics towards Macedonia? - We support Macedonia's integration in the EU and NATO structures. The  question when this membership will actually happen is something which depends on the Macedonians. They have their way to go in negotiations as we had ours. But what they need is to free themselves from that constant suspicion that somebody in Bulgaria has bad intentions about them. Since the recognition of the Republic of Macedonia, Bulgaria has done its best to help, our policy has been completely benevolent. I hope we will witness what has been commented in Europe - it is not good that a candidate country constantly urges attitudes against Bulgaria. I can understand there is a lot of emotion in the case as well. Together, however, we can make much more than we can accomplish alone.

Krassimira Temelkova

Jerusalem Post: ‘S-300 delivery a serious development’ http://www.jpost.com/IranianThreat/News/Article.aspx?id=169319

BY YAAKOV LAPPIN 22/02/2010 02:22

Analyst: Russia sends mixed messages on Iran deal to increase ME influence. Russia is sending mixed messages about its pledge to deliver the advanced S-300 anti-missile system to Iran as part of an effort to increase its own influence over the Middle East, Israeli security analysts said on Sunday.

Should Teheran acquire the system, a potential military strike on Iranian nuclear sites could become far more difficult, but it remains far from clear when and if Moscow intends to transfer the military hardware to Iran.

“Russia does not want to see Iran a nuclear state, but short of that, it will be playing both sides – to ridiculous proportions,” said Emily Landau, senior research fellow and director, Arms Control and Regional Security Program, at Tel Aviv University’s Institute for National Security Studies (INNS).

“Right now, Russia is a little mad at the Iranians, because the Iranians rejected a nuclear fuel enrichment deal which would have seen uranium enriched by 20 percent in Russia,” Landau said.

“Russia has its own sense of strategic interests vis-a-vis the US and the Middle East, and right now it has no interest in being perceived to be on board any US agenda. They are a strategic rival of the US, and want to have a bigger role in the Middle East,” Landau added.

To that end, last week’s visit by Prime Minister Binyamin Netanyahu to Russia, aimed at acquiring a guarantee from Moscow that it will not sell Iran the S-300, was seen by Russia as a very positive development. Netanyahu walked away from the meeting expressing confidence in Russia’s desire to maintain regional stability.

Yet just a few days after the visit, the Russian Interfax news agency cited Russian Deputy Foreign Minister Sergei Ryabkov as saying that Russia would hold up the contract to deliver the anti-missile system to Iran.

“They’re changing their mind on the S-300 every few days, going back and forth. The fact that Netanyahu met with Russian President Dmitry Medvedev was good for Russia. It was a big meeting. Russia is seeking to gain power and influence from all sides,” Landau added.

The truck-mounted S-300 system can shoot down aircraft from a distance of 150 kilometers away, according to reports.

“If it is sold to Iran, it would mean they have a system many times more powerful than anything they have right now in terms of their defenses. It would seriously complicate Israeli contemplation of an attack, but we can’t know if it will be a game-changer. There is a whole set of considerations that Israel has to consider,” Landau said.

Ephraim Kam, deputy head of the INNS, and a former colonel in the Research Division of IDF Military Intelligence, said additional factors that Israel must consider when considering an attack include assessing the level of intelligence on Iran’s nuclear program, weighing up operational abilities to strike and looking at the degree to which the nuclear sites can be damaged.

Other factors include assessing Iran’s potential responses and looking at possible American responses.

“The S-300 is just one of many factors Israel has to consider,” Kam said, adding, “The Russians seem to be pushing for more time before delivery.”

Hurriyet: Russia's patience on Iran strained but not snappedhttp://www.hurriyetdailynews.com/n.php?n=russias-patience-on-iran-strained-but-not-snapped-2010-02-21

Sunday, February 21, 2010Stuart WILLIAMS MOSCOW - Agence France Presse

Senior Russian figures have recently signaled mounting frustration with Iran over its nuclear program, a departure from Moscow's usual practice of moderating the West's more hard-line approach to the Islamic republic. With the United States courting Moscow on the subject, Russia may join the West in agreeing sanctions

In half a decade of nuclear crisis, Iran's President Mahmoud Ahmadinejad has counted on the Russia of strongman Vladimir Putin to balance the hardline of the West with a more moderate stance.

But in the last weeks, senior Russian figures have signaled mounting frustration with Iran, saying that new sanctions could be realistic and even casting doubt on Tehran's insistence that its nuclear drive is peaceful.

With the United States courting Moscow on the subject, speculation has grown that the previously unthinkable might happen - Russia joining the West in agreeing sanctions that would threaten the Iranian economy.

Analysts caution however that while there has been an unprecedented shift in Russia's rhetoric on Iran, this does not equate to a wholesale change in policy that could see it back tough measures against the Iranian oil industry.

The position of Russia, which has the closest contacts with Iran of any major power, is crucial. It is a veto-bearing U.N. Security Council permanent member and also has an unmatched capacity to influence Tehran.

"In the last months it is true that a lot has changed in the behavior of Russia towards Iran," Rajab Safarov, director of the Center for Contemporary Iranian Studies in Moscow, told AFP. "But it is the emphasis and the tone that have shifted, while Russia's overall

position on Iran has not changed," he added. "These statements are an attempt to put pressure on Iran to make it more open to negotiations."

Fear of regional tensions

Russia's chief worry in the nuclear crisis was preventing any dramatic escalation of regional tensions, given that its southern border lies just 150 kilometers from Iran, said Safarov.

Prime Minister Benjamin Netanyahu of Israel, Iran's arch enemy in the region, was in Moscow last week to seek Russian support for "biting" sanctions against Iran that would hit the oil industry, its foreign currency lifeblood.

But while President Dmitry Medvedev has since September 2009 repeatedly said that sanctions could not be ruled out, Russia appears to be some way from backing Western calls for tough economic punishment.

Safarov said: "In spite of its threatening statements, Russia would not support a Security Council resolution for new sanctions if there was one now."

Russia is in "a slightly different place" to a few months ago, said one Western diplomat, asking not to be named. "But there is still a huge process to go through."

With Russia often finding itself sidelined in post-Cold War diplomacy, the prolongation of the Iran standoff allows it to flex its muscles on a big issue where it unquestionably remains a player.

"Russia has an interest in the issue remaining in suspense," said Alexei Malashenko of the Carnegie Centre in Moscow. "If Ahmadinejad gives in to the pressure, Russia will first get the credit but then its role would diminish. Russia will never vote for economic sanctions at the U.N. Security Council against Iran as it would lose its specific role."

With Russia's position crucial, one man has kept a careful public silence. The last major policy statement on Iran from Putin, who in 2007 became the first Kremlin chief to visit Tehran in the Islamic Republic's history, dates back to October.

But lower-ranking figures have made statements that would have been unimaginable just months before. Iran is "always changing its conditions" and Russia's fears were now "not so far away" from those of Europe and the United States, said parliament's foreign affairs committee chief Konstantin Kosachev last month.

A string of unpleasant surprises has given Russia good reason to revise its tone on Iran. Russia, which prides itself on having intelligence sources inside Iran far superior to those of the West, was taken aback by Tehran's revelation in September that it had built a new secret nuclear plant.

Along with France and the United States, it is also a key player in a deal brokered by the U.N. nuclear watchdog, the International Atomic Energy Agency that aimed to defuse the standoff by enriching Iranian uranium abroad.

Iran so far appears to have rejected the deal, a defiance that Russian Foreign Minister Sergei Lavrov has openly criticised as regrettable.

In the energy-sapping game of nerves Iran is playing against the international community, Russia still holds some powerful pieces that give it a leverage on Tehran that no-one else can boast.

Chief among these are five sophisticated S-300 air defense missile systems, which Russia agreed to sell to Iran for a reported 800 million dollars several years ago but has never delivered.

Russia is also building Iran's first nuclear power plant in the southern city of Bushehr, a much-delayed project dating back to the shah's era that is finally due to come online this year.

Russia Today: Russia has no obstacles for military cooperation with Iran – arms exports chiefhttp://rt.com/Top_News/2010-02-21/russia-arms-trade-rosoboronexport.html/print

21 February, 2010, 02:16

Russia’s military equipment is known worldwide, and state arms trading corporation Rosoboronexport is one of the biggest players on the market. RT spoke to its chief about current deals and future trading plans.

RT: Anatoly Isaikin, General Director of Rosoboronexport. Thank you very much for taking time for our program today. Mr. Isaykin, what countries does Russia trade with in the arms market?

Anatoly Isaikin: It’s easier to say what countries Russia doesn’t trade with. Last year we supplied weapons to 53 countries all across the globe.

RT: Russia used to lead in the international arms market. Then Russia’s place was taken by the Americans, but now Russia is gradually coming back. What place does Moscow rank?

AI: You’re right. The Soviet Union, but not Russia, was one of the biggest suppliers of military equipment and weapons. Since the 1990s, after the fall of the Soviet Union, significant changes took place, first of all, in its military-industrial complex. A significant part of the biggest enterprises remained in the territory of independent states.

Therefore, it’s obvious that it took Russia some time to restore its military and industrial potential. Back then we slashed the sales of weapons abroad.

Since the beginning of 2000 supplies of Russian military equipment and armament have been constantly growing. If we started with almost $3 billion – I mean in 2000 – then in 2009 we targeted $7.4 billion.

First of all, I am referring here to the figures for Rosoboronexport’s sales, not to all supplies. Consequently, we steadily come second after the United States in supplying arms abroad.

RT: And will you ever be the first?

AI: We are working on it, but it’s really hard.

RT: Mr. Isaikin, it’s always been said that the armament market goes not as much for economic as for political significance. Russia’s former partners, actually, as a rule, paid by friendship. How is Russia building its current relations, especially concerning going back to its old markets?

AI: I wouldn’t divide military-technical cooperation into two parts and estimate what prevails, politics or economy? In my view, both parts are essential. I believe the whole world bears in mind these two directions while establishing military and technical cooperation.

As for foreign policy, everything is also evident. After all, a country ordering weapons in Russia has confidence in Russia.

RT: Recently you said that there are no obstacles to delivering S-300 air defense missiles to Iran. Does it mean the talks with Saudi Arabia have failed? Or did it agree to supply weapons from Russia, despite its plans to arm Tehran? If it’s true, when do you expect to start dispatching air defense missiles?

AI: When I said that we don’t see obstacles to selling Iran any kind of weapons, including these missiles, first of all, I meant there is only one restriction here, which is the UN Council sanctions. When it applies such sanctions against any country, Russia strictly follows them. But no sanctions have been imposed on Iran.

RT: So far!

AI: Neither yesterday, nor today. That’s why we have every right to military cooperation with Iran in all directions. I’d like to emphasize: there are no formal restrictions. Personally, I’ve never been concerned about the supplies of defense weapons. And the S-300 is related to missile defense systems. It’s not an offensive armament. Each state has the right to defend its national borders. Therefore, I don’t see any threat or violation of the bipolarity in this region when supplying this type of arms.

RT: You’ve recently mentioned that negotiations with Iraq and Afghanistan are currently being held. What weapons are they interested in most of all? In what format will the deals be brokered – on market terms or as some kind of assistance?

AI: These two countries used to be major customers of Soviet arms. They still have a substantial arsenal of Soviet, not Russian, weapons. It’s natural that since 2003, when their military and political situation changed inside the countries and around, their armies have a growing demand for such weapons.

We keep receiving requests to supply armored vehicles, small arms, transport aircraft and helicopters. Our helicopters have showed themselves in the best way in Iraq and Afghanistan; they have proven to be the most reliable. Other equipment, which usually NATO has, as a rule, requires extremely thorough maintenance. It’s necessary to arrange special infrastructure for it, and this is a huge financial investment for these countries.

RT: The Russian government recently said it signed a contract with Libya for $1.3 billion. It prompts a question; isn’t it dangerous to sign contracts with such disturbing, in Western opinion, partners?

AI: Honestly, I don’t find Western countries, including the US, concerned about the delivery of arms to Libya. The United States excluded Libya from the list of countries which provide support for terrorism. The US opened an embassy in Tripoli and is negotiating the supply of military transport aircraft and strengthening coastal defenses. Great Britain is also involved in intensive talks there. France is taking an active part in negotiations on gas projects and weapons supplies. Experts say the contracts are worth around $10 billion, where arms supplies make up almost 50 percent.

So, as you see, these three countries, the leading producers of arms, in no way view Libya as a disturbing area – let alone Russia.

RT: Then how realistic is the scenario of supplying weapons to NATO countries? What type of equipment could be attractive to them?

AI: It already takes place. We’ve already been supplying arms to a number of NATO countries. We keep relations with “old members of NATO” and with Eastern Bloc countries which joined the alliance. We cooperate with France, Germany and Italy in the development of high-tech weaponry.

It’s a rather advanced field, therefore it requires more and more investment. Companies need to allocate more funds, more knowledge and more experience. Usually countries cooperate to develop these types of weapons. As for the Eastern Bloc countries, we assist them mostly in the maintenance of equipment they’ve had since Soviet times.

RT: Let’s now move away from NATO. Don’t you find it a bit strange to cooperate with India in the sphere of modern military technologies, for example, in designing the 5th

generation of fighter jets? They also say that Russia is buying an aircraft carrier from France. Won’t such moves weaken Russia’s defense?

AI: Our cooperation in new projects, especially in developing arms of the 5th generation, is just a necessity. Countries are forced to join their efforts here. Yes, that’s right, we work together with India in developing a 5th generation jet fighter. But other countries also follow this way. Let’s take the F-22 Raptor jet, which is a 5th generation jet. It was designed with the use of new technological achievements of other countries, too. Of course, first of all, these are NATO countries. Therefore, there is nothing wrong with it. We are willing to cooperate with any country in this field, especially with our strategic allies – as India is, first of all.

RT: Earlier you said that in 2009 your company’s exports increased by 10%, which makes up $7.4 billion, or an additional $15 billion in contracts. But there is an opinion that the defense industry has been working at its limit for a long time. Is it true?

AI: It is true that defense industry factories have become busier with the growth of exports. In fact, it requires an increase in industrial capacity. Soon, our current capacity won’t meet the demand in orders – for example, missile defense systems. That’s true, we now have so many requests for S-400 systems that we won’t be able to satisfy them in coming years.

RT: But will Russia manage to remain on the market under such conditions?

AI: No doubt, we’ll remain. We speak about the increase of supplies and consequently the increase of exports. Here I see good prospects for further development of military-technical cooperation and the growth of supplies.

News.az: Iran, Russia, Azerbaijan hold trilateral talks

http://www.news.az/articles/9696

Mon 22 February 2010 | 08:42 GMT

Iran's Energy Minister Majid Namjou says seven new countries have joined the list of states that have requested to buy electricity from Iran.

Namjou declared that Russia, India, Qatar, the UAE, Jordan, Syria and Oman are the new countries that have asked Iran for electricity.

He added that Iran has the capability to turn into a regional electricity hub.

"Iran exchanges electricity with most of its neighbors and many of them are interested in increasing their electricity exchange with Iran," Mehr news agency quoted Namjou as saying on Sunday.

"There are also trilateral talks with Iran, Azerbaijan and Russia underway, that aim to connect Iran's electricity network to Europe," he added.

Press TV

Ukrainian News: Patriarch Kirill Of Moscow To Attend President-Elect Yanukovych's Inauguration On February 25 http://un.ua/eng/article/249857.html

(08:38, Monday, February 22, 2010)

Patriarch Kirill of Moscow and all Rus will attend president-elect Viktor Yanukovych's inauguration ceremony on February 25.

Archpriest Heorhii Kovalenko, who heads the information and education division of the Ukrainian Orthodox Church of the Moscow Patriarchate, announced this to journalists.

"He is coming to Ukraine at the invitation of the newly elected president (Yanukovych)," Archpriest Kovalenko said.

According to him, the visit will last one day.

He did not say whether any service would be held on the day of Yanukovych's inauguration. According to him, the inauguration program is still being finalized.

Archpriest Kovalenko said that all the events that are presently planned for the Kyiv Pechersk Lavra in connection with the election of the new president will take place on Sunday.

In particular, the head of the Ukrainian Orthodox Church of the Moscow Patriarchate, Metropolitan Volodymyr, held a thanksgiving service on Sunday in connection with the conclusion of the presidential election campaign, blessed Yanukovych ahead of his presidency, and presented him with a copy of the Gospel of Peresopnytskyi and other religious items.

As Ukrainian News earlier reported, Metropolitan Volodymyr of the Ukrainian Orthodox Church of the Moscow Patriarchate has congratulated Yanukovych on his victory in the presidential elections.

The Central Electoral Commission declared Yanukovych as the winner of the presidential elections on February 14.

Patriarch Kirill paid a pastoral visit to Ukraine from July 27 to August 5, 2009.

Gazeta.kz: President of Russia charged Federal Customs Service to work on question of joining of Ukraine of process of formation of Customs Unionhttp://engnews.gazeta.kz/art.asp?aid=141585

10:36 22.02.2010 text: "Kazakhstan Today"

Almaty. February 22. Kazakhstan Today - The President of Russia, Dmitry Medvedev, charged the Federal Customs Service of the Russian Federation to work on the question of joining of Ukraine of the process of the formation of the Customs Union of the Russian Federation, Kazakhstan and Belarus, the agency reports citing ITAR-TASS.

"I sincerely hope that the new leadership of Ukraine, the new President of Ukraine, Yanukovych Victor Fedorovich, will bring contribution to strengthening of mutual relations, trade relations, economic relations as a whole - not only with Russia, but also with other countries," D. Medvedev underlined.

FEBRUARY 22, 2010

Wall Street Journal: Ukraine's President-Elect to Visit Moscow http://online.wsj.com/article/SB10001424052748703791504575079384080188358.html?mod=WSJ_World_LEFTSecondNews

Russian President Medvedev Agreed to Meet Viktor Yanukovych in March, after Challenges to the Election Were Dropped

By JAMES MARSON

KIEV, Ukraine—Russian President Dmitry Medvedev called Viktor Yanukovych this weekend as soon as the Ukrainian president-elect's challenger dropped a legal battle to block his inauguration. According to the Kremlin, the two men agreed that Mr. Yanukovych would visit Moscow in early March.

On Sunday, however, Mr. Yanukovych's aides declined to confirm or deny anything about a visit, though his Web site posted the Kremlin announcement. Hanna Herman, a legislator and a deputy leader of Mr. Yanukovych's Party of Regions, said the president-elect's first priority was to form a new government and deal with domestic problems.

The call from the Kremlin on Saturday signals Russia's interest in reasserting a preferential relationship with its former Soviet neighbor. But the reaction in Kiev leaves it unclear in which direction Mr. Yanukovych will tilt Ukraine, a country of 46 million wedged between Russia and the West.

Ukraine embraced a Western agenda after the 2004 Orange Revolution, when mass protests alleging electoral fraud overturned Mr. Yanukovych's tainted victory in that year's presidential election. Viktor Yushchenko won the revote and antagonized the Kremlin, which had openly backed Mr. Yanukovych, by pushing to advance negotiations to join the North Atlantic Treaty Organization and by supporting Georgia during its 2008 war with Russia.

In the recent campaign, the Kremlin played no favorite, and Mr. Yanukovych straddled the fence, calling for good relations with Russia and with the European Union. Ms. Herman had indicated last week that his first presidential trip abroad could be to Brussels.

The question of Mr. Yanukovych's foreign-policy priorities could complicate his effort to form a majority in parliament and replace Yulia Tymoshenko, his bitter rival in the presidential race, as prime minister.

Ms. Tymoshenko on Saturday dropped her court challenge to the results of the Feb. 7 election, clearing the way for Mr. Yanukovych's inauguration on Thursday. She said there was no point in pursuing the case after the Supreme Administrative Court refused to consider evidence she presented alleging vote falsification in favor of her opponent, who won by a margin of 3.48%.

As the political struggle moves to parliament, Mr. Yanukovych's opposition Party of Regions is trying to persuade two parties in Ms. Tymoshenko's fragile coalition to switch sides and oust her as prime minister. One of those parties, Mr. Yushchenko's Our Ukraine bloc, is divided: Its many nationalist supporters in western Ukraine are wary of Mr. Yanukovych because he has shown himself willing to take Russia's positions into account.

In interviews with Russian journalists last week, Mr. Yanukovych said he wouldn't pursue NATO membership and would consider prolonging an agreement to base Russia's Black Sea Fleet on Ukrainian soil. The Kremlin also wants Ukraine to join a customs union with Russia, Belarus and Kazakhstan, a step that could impede Kiev's talks on a trade agreement with the European Union.

Ms. Tymoshenko met with Our Ukraine lawmakers last week in an attempt to persuade them to stick with her coalition.

If Mr. Yanukovych fails to form a majority, he has said he would call early parliamentary elections. That prospect would prolong political uncertainty and further damage Ukraine's economy, which shrank 15% last year.

Write to James Marson at j.r.marson@gmail.com

RIA: Russia ready to resume poultry talks with United States next Sundayhttp://en.rian.ru/russia/20100221/157962804.html

19:1521/02/2010

Russia's chief sanitary doctor Gennady Onishchenko said Sunday he was ready to discuss U.S. poultry supplies to Russia, suspended from January 1, on February 28.

"They proposed meeting with us March 1-2. We confirmed our earlier voiced wish: we are ready at any moment, the sooner the better. They fly in on February 28, and I am ready to meet them on that day," he told RIA Novosti.

Russia banned imports of U.S. chlorine-treated poultry as of January 1, citing new safety requirements. Washington, which supplied 22% of poultry consumed in Russia last year, says the move will damage American poultry industry and push prices up for Russian consumers.

The new requirements, which apply to both imports and meat processed in Russia, state that the amount of chlorine in the solution used for the processing of poultry meat should not exceed the level set for drinking water, 0.3-0.5 milligrams per liter. They also state the fluid that separates when defrosting the meat should not exceed 4% of the total weight of the bird.

Chlorine in the United States has been used as the primary anti-microbial treatment for a quarter of a century.

Russia's quota for the United States this year is 600,000 metric tons of poultry. Imports from the United States, the world's largest poultry producer and exporter, accounted for some 750,000 tons of poultry consumed in Russia last year.

Russian producers and public have long been speculating over the possible dangers of the U.S. product, citing excessive levels of hormones, antibiotics, chlorine and other chemicals.

A U.S. expert earlier said the United States has its own strict poultry quality requirements and should it agree to Russian demands, it would no longer fall in line with its own sanitary requirements. Another American expert said it is more important for the U.S. to follow its own regulations than Russian ones not to lose its domestic market. He added that high content of chlorine is banned in Europe as a preventive measure while its risk has not been proven.

MOSCOW, February 21 (RIA Novosti)

Eurasia Review: Russia Gas Price Hike Shocks Armenians http://www.eurasiareview.com/2010/02/31906-russia-gas-price-hike-shocks.html

Sunday, February 21, 2010 By Naira Melkumyan

The company that has a monopoly on selling Russian gas to Armenia has warned it will raise prices for ordinary consumers by 40 per cent in April, sparking anger in the country.

Armrosgazprom, a Russian-Armenian joint venture, has sought permission for the increase from the official regulator and also wants to raise the gas price for businesses by 20 per cent. It is expected to be approved.

With Armenia still struggling to haul itself out of recession – the economy contracted by 14.4 per cent in 2009 - the proposals could severely harm the economy, as well as ordinary gas users, observers say.

“This is just insane. My husband has an unpredictable salary because of the crisis. I don’t work, and such a rise would seriously hit us in the pocket, and then a massive increase in prices would follow. What would we live on?” asked Rita Sargsyan, a 55-year-old Yerevan resident, reflecting a widely held view here.

Armrosgazprom said the price of gas will rise from April 1 to 136 drams (35 US cents) per cubic metre from the current 96 drams. The increase follows a decision by Gazprom, the Russian energy giant that owns 80 per cent of Armrosgazprom, to hike prices for gas exported to Armenia by 17 per cent from the beginning of April.

Lusine Harutiunyan, spokeswoman for the energy ministry, said Armrosgazprom had the right to raise prices and the government could do nothing to stop it, since it was only a minority shareholder.

Experts said the price rise would immediately lead to increases for electricity, transport and consumer goods, especially since three water companies have already indicated that they want to raise their tariffs by around two-thirds.

“Considering the increase in unemployment in the country, which in 2009 was already ten per cent, and the fall in the rate of economic growth, a gas price rise will directly impact on a significant part of the population,” Abgar Yeghoyan, head of the Union for the Protection of Consumer Rights, said.

The budget for this year includes no provision for increases in pensions, unemployment benefits or anything else that could compensate for the price rise.

“When we raised this question during discussion of the 2010 budget, the government said that they were concerned by the question of inflation, but it is already clear that the price rise for gas as the main energy source will lead to increases in the prices of other products,” said Artsvik Minasyan, a deputy in parliament from the opposition Dashnaktsutyun party.

“The government must propose salary and pension increases, or at least work out a mechanism of subsidies.”

The government has said it is concerned by the price increases, however, and promised to work out measures to limit their impact.

“The question of prices is permanently at the centre of the government’s attention and it is preparing a package of measures aimed at controlling inflation,” Prime Minister Tigran Sargsyan told parliament.

But he later said he was not considering subsidising gas prices from the budget to help keep bills low.

“I have not considered this, and I advise everyone against it. I am not a supporter of that,” he said.

According to Vazgen Khachikyan, head of the state social security service at the ministry of labour and social affairs, the effect of the gas price alone – without any associated rise in electricity cost – would add one per cent to inflation.

But he said that between 2007 and 2010 pensions almost doubled, at a time when inflation did not come close to that rate.

Last year, the state pension and unemployment benefit were 70 and 55 dollars a month respectively.

The government is forecasting that prices will rise by four per cent and, according to Vardan Bostandjyan, deputy head of parliament’s economic committee, it is unlikely that there will any increase in pensions before next year.

The International Monetary Fund, which is currently lending to Armenia, forecasts inflation of six per cent this year.

The fact that gas prices are rising twice as much for consumers as for companies has angered consumer rights groups.

“We want to understand why, when the Russians raise prices by 17 per cent, the Armenian company increases prices for companies by 20 per cent and for people by 40 per cent,” said Armen Harutiunyan, the state ombudsman.

Armrosgazprom said that the steeper increases for private users was a reflection of the higher cost of providing them with gas.

It also said that it was not seeking to profit from the price rises, and was reacting to a 20 per cent contraction in the market caused by the financial crisis, which had resulted in it

ending the year with a loss.

But, despite the explanations, its price rise caused public figures to question the wisdom of Armenia’s dependence on Russia for gas supplies.

Vahan Khachatryan, a representative of the opposition Armenian National Congress, said that if Armenia had more diversified supplies, it could resist such a dramatic price increase.

“Today Russia has a monopoly. Eighty per cent of the gas we use comes from there but we also have a pipeline from Iran, which is hardly used,” he said.

Iranian gas started to arrive in Armenia in 2008, but it sends less than three million cubic metres a day, while Russia sends an average of more than double that.

Harutiunyan, the energy ministry spokeswoman, said, “Of course the opposition gives this problem a political subtext, but the situation is different. Russia as our strategic partner for many years has sold us gas at a discount. We were receiving 1,000 cubic metres of gas for 110 dollars when Europe was paying 300 dollars.”

Naira Melkumyan is a reporter at Arka News Agency. This article originally appeared in Caucasus Reporting Service, produced by the Institute for War and Peace Reporting, www.iwpr.net

Telegraph: Britain angers Kremlin over Chechnya visit http://www.telegraph.co.uk/news/worldnews/europe/russia/7287334/Britain-angers-Kremlin-over-Chechnya-visit.html

A British parliamentary fact-finding mission to Chechnya has likened the pattern of killings and torture there to 1980s Central America in a damning series of comments certain to infuriate the Kremlin. By Andrew Osborn in Moscow Published: 6:00AM GMT 22 Feb 2010

Lord Judd and Jo Swinson, an MP, made their blunt assessment after a two-day visit to the volatile Russian republic last week during which they met and interviewed a large number of officials and human rights activists.

Both said they were deeply concerned by what they had heard and disclosed that they had tried in vain to learn more about ongoing investigations into the 2006 murder of crusading journalist Anna Politkovskaya and the 2009 killing of human rights defender Natalia Estemirova.

"I am constantly making comparisons to Guatemala, El Salvador and Central America in the late 1980s," said Lord Judd, a long-standing expert on Chechnya. "It is this business of the calculated creation of a climate of fear and targeted assassinations.

"It is more organised and systematic and sinister than when I was here seven years ago." Witnesses who saw atrocities in Chechnya were routinely intimidated, he added, and homes belonging to relatives of rebel fighters regularly burned to the ground. It was a policy that was bound to stoke Islamist extremism, he warned.

His comments are likely to anger the Kremlin and local authorities in Chechnya who have rejected foreign criticism in the past as meddlesome interference in Russia's internal affairs. They also come at a time when Britain's relations with Russia remain mired in the bitter fallout from the 2006 murder in London of Kremlin critic Alexander Litvinenko.

The delegation, part of Britain's All-Party Parliamentary Human Rights Group, ignored Foreign Office advice not to travel to Chechnya and asked for and was refused a meeting with Ramzan Kadyrov, the republic's Kremlin-backed president.

Rights activists have repeatedly accused Mr Kadyrov of complicity in torture, kidnapping and murder, allegations that Mr Kadyrov has strongly rejected.

Ms Swinson said she had been left "shocked and disgusted" by a meeting with Chechnya's own human rights ombudsman who she said had openly accused a leading human rights group of profiting from the murder of one of its activists.

"It is very clear that there is a climate of fear here and that nobody dares to criticise Ramzan Kadyrov," she said.

Lord Judd said the UK and other countries should place the issue of Chechnya at the heart of their relations with Russia in order to lobby for change.

He conceded that Grozny, the Chechen capital, had been impressively rebuilt under Mr Kadyrov's leadership after two wars but said such material changes needed to be accompanied by genuine moves to improve human rights.

"Stalin built a lot of impressive buildings too," he said.

The News: New protest against prices in Russia  

http://www.thenews.com.pk/updates.asp?id=99182

Updated at: 1800 PST, Sunday, February 21, 2010    

MOSCOW: More than 1,500 people took to the streets Sunday in Russia's north to protest living costs -- the first of a new series of challenges to the Kremlin in coming weeks, organizers said.

Despite freezing temperatures, protesters gathered in the port of Arkhangelsk to decry increasing prices. Some called for Prime Minister Vladimir Putin to step down, said a member of an opposition movement that helped organize the protest.

"People came out into the streets in solidarity with other cities, where protest action took and is taking place, (and) many speakers say time has come to take to the streets and seek the truth from the authorities," Ilya Yashin, a member of the Solidarnost (Solidarity) opposition movement, said on Echo of Moscow radio.

Fifteen independent trade unions joined the protesters in the city's main square, said the Communist party, which organized the event.

An Arkhangelsk police officer told a foreign news agency that between 450 and 500 people turned up for the hour-long protest.

Such protests are rare in Russia. The Kremlin, which has shown little tolerance for demonstrations since the start of the economic crisis more than a year ago, was stunned when around 10,000 people turned up for a rally in Russia's western exclave of Kaliningrad in January.

The fractured opposition hopes to stage a series of protests across Russia in the coming weeks.

RIA: 4,000-strong opposition rally takes place in Russia's north – Communistshttp://en.rian.ru/russia/20100221/157964032.html

22:1021/02/2010

A total of 4,000 representatives of Russia's opposition parties and their supporters took out to the streets in the northern Russian city of Arkhangelsk on Sunday protesting against rising prices for energy, heating and communal services, the Communist Party said.

However, according to police estimates, the number of protestors, who, in particular, demanded that utility prices be lowered to 2009 levels and that the governor resign, was ten times fewer, about 450 people.

Russia was badly hit by the global economic crisis, with the government devaluing the ruble and cutting spending. It has also introduced a set of unpopular measures in 2010, including higher community services bills, increased prices for food and medicines, and higher public transport fares.

The Russian leadership has been reluctant to allow the opposition to hold full-scale anti-government protests although a several-thousand-strong protest occurred in Russia's Baltic exclave on Kaliningrad in January.

Today's protest was organized by regional offices of the Communist Party, LDPR, Yabloko, Solidarity and other parties and movements.

Police said the hour-long rally was sanctioned by authorities and took place without incidents.

The Communists earlier said the Arkhangelsk Region authorities raised prices for cold and hot water supplies by 40-56%. Local authorities said the tariffs were only raised by 18% on the average.

Ruling United Russia Party representatives attended the rally.

"The party is also against high prices for communal services and power supplies. We support these demands," regional party office chief Anatoly Kozhin said.

ARKHANGELSK, February 21 (RIA Novosti)

RFE/RL: Russian Police Detain Pension Fund Officials In St. Petersburg http://www.rferl.org/content/Russian_Police_Detain_Pension_Fund_Officials_In_St_Petersburg/1964048.html

February 21, 2010 ST. PETERSBURG -- Police have detained Natalya Grishkevich, the head of the St. Petersburg and Leningrad Oblast branch of the state pension fund, RFE/RL's Russian Service reports.

Local officials said Grishkevich's detention is related to an investigation into alleged financial machinations at VEFK Bank.

The investigation was launched in March last year after some 1 billion rubles ($33.3 million) disappeared from the fund's accounts at the VEFK-Ural Bank in Sverdlovsk Oblast.

VEFK Bank Chairwoman Olga Chechushkova and Sverdlovsk Oblast pension fund head Sergei Dubinkin were also detained.

Investigators revealed that the money allocated for pensions and social allowances in Sverdlovsk Oblast had been wired to St. Petersburg.

Viktoria Gulyayeva, the spokeswoman for the St. Petersburg pension fund, told RFE/RL that the fund's offices in the city and Leningrad Oblast are functioning normally.

She declined to comment on Grishkevich's detention.

Kyiv Post: Right activist: Stalin's portraits on Moscow streets 'political provocation'

http://www.kyivpost.com/news/russia/detail/60112/

Today at 10:45 | Interfax-Ukraine

Moscow, February 22 (Interfax) - Human rights activists have called on Moscow authorities to review their plans to put up posters of Soviet leader Joseph Stalin ahead of the 65th anniversary of Victory in the Great Patriotic War.

"The authorities' intention to fill city streets with the executioner's portraits and use veterans as cover-up should be seen as a political provocation, as another "test" of Stalinists to see if this works," Alexander Brod, Director of the Moscow Bureau on Human Rights and member of the Public Chamber, told Interfax on Sunday.

The Moscow government is not planning a Stalin propaganda campaign during the days of celebrating the 65th anniversary of the Victory, head of Moscow's Advertising, Information and Decoration Committee Vladimir Makarov said earlier.

"Moscow authorities will start putting these stands at the city budget's expense as early as in April. Meanwhile, district authorities have already caught up the "patriotic" initiative and started hanging portraits of the "leader of peoples" within their subordinate areas," Brod said.

"No one gave former secretary of the Soviet Communist Party Central Committee Dolgikh to speak on behalf of all veterans. Not all our veterans are Stalinists. It would be good to recall the views about on Stalin held by war veterans Viktor Astafiyev and Alexander Solzhenitsyn," Brod said.

"Stalin is the executioner [] and this cannot be struck out from history," he said.

RIA: 400,000 cubic meters of snow removed from Moscow streets in 24 hourshttp://en.rian.ru/russia/20100221/157965101.html

23:5821/02/2010

A total of 392,000 cubic meters of snow have been removed from Moscow streets in the past 24 hours, a spokesman for the Russian capital's authorities said Sunday.

Igor Pergamenshchik said 12,000 snow clearing vehicles, 8,000 dump trucks and 5,500 people were used in the snow fighting effort on Saturday-early Sunday.

He said since the start of the winter, over 17 million cu m of snow have been cleared in Moscow.

Meteorologists say February has seen record snowfalls in the Russian capital in the past 40 years.

MOSCOW, February 21 (RIA Novosti)

New Europe: Anti-missiles vs. the Re-starthttp://www.neurope.eu/articles/Antimissiles-vs-the-Restart-/99177.php

Author: Konstantin Kosachev 21 February 2010 - Issue : 874

This February, the US announced the plan to construct missile defense elements (anti-missiles) in Romania and Bulgaria, in the black sea water area. These systems will, supposedly, provide protection for the US and their European allies against possible Iranian threat. Russian Minister of Foreign affairs stated that the Russian Federation would like the US to clarify the reasons for such a measure. Commentary given by the US representatives does not sound too convincing per se. It failed to help disperse the atmosphere of concern, but has indeed succeeded in causing utter disappointment with this decision in Moscow. It signaled a perplexing divergence from the “re-start” attitude in Russo-American relations.Our concern over this situation (as is over missile defense issues in general) does not always find understanding among our American and other western colleagues. For they claim that the system is going to solely serve the defensive purpose, and has limited capabilities. But here we have to remember how much unease is brought upon our western colleagues by the possibility of delivering equivalent S-300 Russian missile defense systems to Iran. And when missile defense systems are to be deployed in Europe, then we are offered to think of it as if it were a routine situation, which is of such small importance, that there is no need whatsoever to discuss it with Russia.It would have been a routine situation, had we had some system of checks and balances, which were to guarantee mutual trust, and excluded risks for whomever it could be in Europe. However, such system exists only within NATO, and because of this Norway, for instance, has no reasons to be concerned over US missiles being deployed on the South of the continent.

Unease in Russia But Russia is not a member of NATO, and we have to remember, that we are talking about armaments of a military bloc that Russia is not a part of. When security is at stake, no sensible politician or army officer is going to find spoken affirmations, especially those claiming that no weapon is aimed at his or her country sufficient. This is exactly why we say that we need an agreement basis for collective security in Europe. Once we have a written document on our hands, then within its framework we will be able to negotiate which missiles, missile defense systems we may or may not need in Europe. We initially said that – and American colleagues, as we believed, supported us (at least

such an agreement was reached between Presidents Obama and Medvedev) – it is imperative to draw up a list of possible threats, and in future, should any issue arise, act within the guidelines of this list. We should act jointly and in concord with each other. We should not put the partner in a position, where mass media is going to provide the information on any considerable decision. The deployment of missile defense elements in Romania and Bulgaria does not look like an appropriate course of action, especially given that the possible threats are still to be agreed upon. Does the current state of events require such haste? Is there any justification for so eagerly wanting to deploy the missiles that are supposed to protect Europe from the Iranian threat before fully implementing the long-awaited re-start in our relations? This makes us want to ask – who are these systems going to protect? Israel? The American fleet in the Persian Gulf? These are the two principal targets for future Iranian missiles. The quite limited range of Iranian missiles is not going to take them anywhere near Romania in the nearest future (and it’s doubtful that anyone in Tehran has had such intentions before – but this can now become a possible development.) The US has a lot of possibilities to bring its armaments close to the source of the potential threat without any political complications with anyone, and without having to breach into the ever so sensitive and disputable space of European security. There are several states neighboring Iran (Turkey, Saudi Arabia, Kuwait, Iraq, Azerbaijan, etc.), which would eagerly offer their support and territory to Washington. And despite this all, we constantly keep hearing about Europe. Without any doubt, this attitude provokes a natural reaction from the Russian side, and creates an impression of, I would say, some carelessness in approaching issues of such grand scale.

A question of balance It is regrettable that all of this is happening during the course of intricate talks between USA and Russia on the new START. Despite the obvious progress in this direction, not all issues have been resolved or agreed upon. The general mood of the negotiations is affecting the very course of these negotiations, their atmosphere. The important issue here is – without any exaggeration – the global security, the perspectives of a nuclear-free world, which have finally been given a tangible chance to come to life. And all of a sudden, as if it were orchestrated on the higher level, this Romano-Bulgarian missile issue emerges, creating an impression that someone was looking for a way to impede with the negotiation process. We understand that this process (as does the President Obama) has many critics, including powerful opponents in the US Congress and the Pentagon. It can be suggested that divulging plans to deploy missile defense elements in Romania and Bulgaria is supposed to facilitate the advance of the new START through the US Congress to some extent. There it is supposed to encounter harsh opposition, overcoming which will require additional arguments. First, there are the interests of the defense establishment lobby, which has its own reasons for the deployment of missiles in the Southern Europe. Also, according to some arguments, antimissiles pose no threat to the Russian military potential, because they were developed to counter short- and medium-range missiles, and Russia has none (however, we have not heard whether the US are only going to use this class of anti-missiles in the nearest future). References are being made to president Obama’s September 2009 modified European antimissile plan, which came as a

replacement for the construction of a third missile defense sector in Czech Republic and Poland.  All of these concepts are not without some ground to them, and can become topics for discussion. It is rather unfortunate that there has not been any discussion yet. And as for the matter of anti-missile deployment in Romania and Bulgaria – the US did not use its diplomatic channels to politely inform Russia beforehand. This is something that does not correlate with the proclaimed “restart” policy, which we would want to honor in our relations with the USA and the West as a whole. It is necessary to understand that Russia is very concerned over such intentions coming from the US, especially in the context of general European and global security, undergoing START negotiations, and discussion of a Russian proposal for the European security treaty. Such attitude can not be seemed as a product of just military reasons, or specific Russian fears, some unhealthy (“paranoid”) obsession of Moscow with missile defense (however, we have to accentuate that we are talking about the weapon systems created to counter missiles that are flying in close proximity to the borders, or even over the territory of Russia, which would, without any doubt, cause anxiety for any country: there is the aspect of the regional balance of power, which would be completely violated, were the new powerful weapons to appear near the Black Sea).We believe that the re-start of approach to security problems should undergo some qualitative and quantitative changes. Qualitative changes would mean changes in a wide area of aspects, including changing the relationship model between the partners, and higher regard of interests of one another. As for the quantitative changes – we should discuss a much wider and complex range of issues dealing with security. While sharing the same track, one can not make substantial progress by moving unilaterally without prior discussion with the partner or partners. Such approach would only result in the unfortunate shock effect. ( see page 14)

Konstantin Kosachev is a Russian political leader who is the Chairman of the State Duma Committee on Foreign Affairs. A doctoral graduate of the Moscow State Institute of International Relations, Kosachev was an accomplished diplomat before his election to the Duma in 1999

Businessneweurope: INTERVIEW: Eurasian Development Bank seeks to build funds, linkshttp://www.businessneweurope.eu/storyf1977/INTERVIEW_Eurasian_Development_Bank_seeks_to_build_funds_links

Clare Nuttall in Almaty February 22, 2010

2010 is an important year for the Eurasian Development Bank (EDB), according to its chairman Igor Finogenov. The EDB plans to grow its investment portfolio by over 50% and take in new members, and is managing the Eurasian Economic Community's (EurAsEC) $10bn anti-crisis fund.

In addition to economic development, the bank is helping to rebuild the links between its member countries that date back to the Silk Road era. "Integration in this region has an economic basis," Finogenov tells bne. "Looking at the region from a historical perspective, the countries have had very tight economic links.

Established in January 2006, today the bank has four members. In addition to founders Russia and Kazakhstan, it acquired two more full members - Armenia and Tajikistan - in 2009. "From the very beginning, our mission was to attract new members, with an initial focus on the EurAsEC countries," says Finogenov. "Since the name of our bank is 'Eurasian', and according to our charter there are no restrictions on which countries can join, theoretically any country in this region - from Iceland to Malaysia - could become a member of the EDB."

Membership for Belarus is imminent and Kyrgyzstan recently sent an official application to the bank's council. "There has not yet been an official application from Azerbaijan or Moldova, but I feel there is a great interest on the part of those two countries to work with our bank. We have also had close contact with the government of Mongolia regarding issues of cooperation," says Finogenov.

Pan-regional investor

The bank currently has a $1.3bn investment portfolio, which it plans to increase to $2.1bn by the end of the year. Its focus is on projects with a development effect that contribute to integration within the Eurasia region. Other factors it looks for include transparency, support for mutual trade and investment between member countries, and positive structural changes.

The EDB's pan-regional presence has given it the scope to act in sectors such as energy and transport where it can take advantage of existing connections and build new links between member countries.

The energy sector, for example, has been one of the main areas of activity for the EDB. Projects in this sector include funding the construction of a new generating unit at Kazakhstan's Ekibastuzskaya GRES-2 power plant, reconstruction of the Argun thermal power plant-4 in Chechnya - the region's largest energy infrastructure project - and support for the modernisation of the Siberian Coal Energy Company's operations. "Electrical power is one of our priority directions for investment. There used to be a deficit of it in this region. We are considering various projects to eliminate this deficit, which can only be implemented successfully on an inter-state basis," says Finogrenov.

The interconnection of Eurasian power systems has had benefits across the region, points out Finogenov, citing the example of the north Kazakhstan and South Siberian energy systems. "After the recent accident at the SS GES in Siberia, Kazakhstan provided additional electrical energy to make up the deficit in Siberia, illustrating that integration structures provide for sustainable economy of the counties and how important the economic ties are," he says.

Cross-border cooperation could also help Central Asia exploit its energy resources. "In Central Asia, the major hydro-energy potential is located in Tajikistan and Kyrgyzstan. An inter-governmental project in this area could cover the energy shortfall in those countries as well as in Afghanistan, Pakistan and China, which really suffer from a deficit of electrical energy," says Finogenov.

Other priority sectors for the bank include transport infrastructure, the high-tech and innovative industries, the agro-industrial sector, and the financial sector.

To fund its work, the bank carried out a successful $500m Eurobond issue in 2009. "We may consider a further issue this year, but this would depend on certain criteria," explains Finogenov. "First, we may consider issuing bonds in local currencies, because the currency risks when bonds are issued in foreign currencies are pretty high. We will monitor the situation carefully and will do our best to ensure that the state debt of our member countries does not grow as a result of any bond issues we decide to undertake. Second, we will look at the cost of the resources, because as a development institution we are financing infrastructure projects that need long-term, cheap resources."

Since the onset of the international economic crisis, the bank has responded by developing a special programme for operating under crisis conditions. "We review our investment portfolio and the programmes that are being considered for financing, we rejected some projects and changed the structure of others. As a result, we have not had any losses. In future, we will continue to very carefully monitor the economies of our member countries," says Finogenov.

In 2009, the EDB was appointed as manager of the EurAsEC anti-crisis fund, which, Finogenov says, will involve a huge amount of work this year. The bank is currently working to set out regulations for the fund's work. Rules for issuing finance to countries have already been approved, and rules for investment credits will soon be approved. The first applications to the fund are expected in the very near future. "The crisis taught serious lessons to every EDB member country, namely that the economic structure does not provide for sustainable development. This has taught us to work intensively to improve the economic structures in our member countries. Russia and Kazakhstan have launched programmes to modernise their economies, with the aim of eliminating the influence of the crisis," says Finogenov.

"The pace of recovery from the crisis has been pretty high, but this doesn't mean we can relax - we need to work," he adds.

RFE/RL: Don’t Expect Miracles From Russia’s ‘Authoritarian Modernization’ http://www.rferl.org/content/Dont_Expect_Miracles_From_Russias_Authoritarian_Modernization/1964183.html

February 21, 2010

By Georgy SatarovI was surprised by the reaction to the detailed interview that first deputy presidential administration head Vladislav Surkov gave to the respected “Vedomosti” newspaper this week.

For some reason it was generally taken as a tale of the authorities’ plans for constructing a Russian Silicon Valley as part of the realization of their ambitious idea to create an innovation economy in our country. I -- how do I say this politely? -- am not so sure. I think that Surkov had another aim. So I have taken upon myself the none-too-pleasant labor of annotating this interview.

First let me explain why the innovation economy and the creation of creative reservations for scientists are completely beside the point. For one thing, in recent months the media have been overloaded with discussions of all of the authorities’ various plans. The plans are grandiose and laid out in lofty (sometimes touching and sometimes spellbinding) rhetoric. The president himself kicked things off. Then everyone was talking about the report by the Contemporary Development Institute. And now Surkov -- and everyone is discussing his interview.

All of these developments have one thing in common -- a complete lack of any connection to reality. They are building for us a virtual space under the general rubric of “modernization” -- although there are probably other names for it, but that’s not the point. And we -- including myself -- have taken up this game with enthusiasm. But this idyllic picture was destroyed with the appearance of Surkov’s interview. He shouldn’t have done it. If it hadn’t been for that interview, I probably wouldn’t have written this article.

When you, dear readers and colleagues, find yourself eagerly discussing the various topics that are being thrown at you, please remember what is really going on in Russia, in our common country. Remember the constant, ongoing zombification of our people that is being conducted through the state-controlled mass media. Remember the astronomical levels of corruption that have never before been seen in our history, although our history has seen a lot indeed. Remember the uncontrolled police abuses going on across the country, the torture in our prisons and at our police precincts. By now, you yourself can remember the other things needed to fill out this list.

And don’t forget to take into account that all this has been going on for a long time and that the authorities are not in a position to cope with any of it. Many of you will recall the many examples of the authorities’ complete powerlessness to do anything except steal and protect themselves. Think of our burning Caucasus. Think about the destruction of things like the federal state, the separation of powers, political competition. Don’t forget the failed administrative reform or the laughable “war on corruption.”

And don’t forget about how the Soviet Union collapsed. It was also poisoned by the drug of oil. Its economy was also primitive and the dissatisfaction of its citizens was contained by imports. Its bureaucracy was also corrupt, although not nearly so much as today’s. The Brezhnev regime -- like the current one -- maintained the bureaucracy’s loyalty by

indulgences of permissiveness. But by this standard too it was way behind the Putin regime. I don’t think we need to recall how the Soviet Union ended. But now, dear readers and colleagues, answer this question honestly: in what way is the current regime stronger, solider, or more experienced than the Soviet regime?

And now, one last test. Honestly answer these two questions: what are the perspectives for the current regime? And -- the second question is based on the obvious answer to the first -- what are the perspectives for our country?

But please be honest with yourself. And then it will become clear that at the present moment Russia has only two real tasks: how to save the citizens of Russia from these authorities and how to save the country itself from these authorities. You and I and our country all have the same problem -- survival. But we shouldn’t think about this too much. Doing so is deadly dangerous. Not for us -- for them! That is why we are all now discussing all this rose-tinted nonsense.

I wouldn’t have written all of this if not for Surkov’s interview. It turned out to be useful in that it supplemented and shaped the general picture with its candor, which was unsuccessfully masked by simple cunning. It is like a lover who spends half an hour professing her love and then at the end asks for a mink coat. Let’s go through the interview together. It has the following structure: about the first 80 percent is all Potemkin innovation villages and at the end comes the main point (the mink coat).

How To Do Innovation

Let’s start with the villages.

First: The strategy for building an innovation economy that we are being offered is oriented toward the giants of business. In real life, this doesn’t happen. Giants are useful when you need to conquer new markets with new products that have been created by the research of scientists and then tested by small and medium-sized businesses. When the strategy is oriented toward large businesses, you run into two problems. First, they don’t understand what you are talking about. Second, they already have their own goals. It doesn’t matter which of these two problems dominates in the end; in either case, the promised result is unattainable.

Second: They are proposing that foreign specialists and our own who have been for years working successfully abroad will come to work on this reservation. But ask yourself, why in the world would they come? What has changed since they left? Have things gotten better? Those who are lured back will end up sitting inside a compound. Otherwise, they will encounter the same things that you and I encounter everyday. These are people with a sense of their own self-worth, which is what pushed them to leave in the first place and has since become natural for them. And do you know how our authorities react whenever anyone displays any sense of their own self-worth?

And, in general, can an innovation economy really thrive based on a bunch of imported

brains? We’ll need support staff -- our own. And do you know what is going on now in our institutions of higher education? Who are our young people going off to learn from? Do I need to go into details about this?

Where will qualified workers come from? They are dying off, and no new ones are appearing. Will we import them too? Maybe it would be more effective to import new bureaucrats.

Questions like these arise in connection with almost every thesis that forms part of the glorious panorama that Surkov paints in his interview. All you have to do is read it with a minimum of intellectual effort and a small dose of critical thinking.

Let’s conclude this section with the main point. Specialists agree that an effective innovation economy is based on an abundance of posited innovations. Only a small fraction of them will develop into future breakthroughs. Such abundance is built on the following foundations. The first is independent universities graduating independent-minded students.

Russian educational standards today do not set themselves this goal (free thinkers are dangerous). The second is the freedom and daring to try the most varied things. This is possible when, among other things, there exists a reliable and enforceable right of a person to enjoy the fruits of his or her labor. We don’t have this in Russia. Third, such abundance requires the infrastructure to quickly set up a business based on a new idea. This means affordable credit and the confidence that if a business succeeds, it won’t just be stolen from you. Who would be willing to say that we see even the beginnings of such an infrastructure in Russia today.?

But the main thing is freedom. That is the backbone of creative inquiry -- we’ll get back to freedom later.

So, what can we conclude? Under present conditions and under the present regime, there is only one reason to discuss the creation of an innovation economy and Silicon Valleys -- the creation of a virtual reality. And who is the country’s finest propagandist? You guessed it -- Surkov! Now it is clear why he is in charge of this project.

'Authoritarian modernization'

Now let’s get down to business. I’d like to proceed by introducing some quotations from Surkov’s interview and then following each one with my commentary.

Surkov: “We have a school that tells us that political modernization, by which they mean political dissipation, can ‘do anything’ -- that this is the key to the modernization of the economy.”

I don’t know anything about such a school. Never heard of it -- I mean, a school that says political modernization means dissipation and permissiveness. But that’s not the point.

After all, this is a fairly high-ranking government official talking. An official of a regime that is famed for its modesty and restraint. They are known for crashing their helicopters while hunting for endangered animals. They live in palaces in special compounds outside of Moscow. Their cufflinks cost about what person with a doctorate in physics earns in a year. You know the rest.

Surkov: “There is another conception, which I endorse.... Some call it ‘authoritarian modernization.’ I don’t care what they call it.”

Russia has been undergoing “authoritarian modernization” for 10 years now. We see the results.

Surkov: “Spontaneous modernization is a cultural phenomenon (it is cultural -- not political) and has only been achieved in Anglo-Saxon countries.”

Spontaneous modernization was carried out in the United States by the brains and hands of Germans, Jews, Chinese, Indians…and Anglo-Saxons, of course. It is simply that they lived under a political regime under which their ethno-cultural and other differences were secondary. Where you have brains and freedom, you will have success.

Surkov: "The 1990s in Russia proved that the splintering of society in itself does not create positive energy. Yes, some energy is released, but what is it used for and what does it lead to? We saw that nothing happens by itself."

This -- again, how can I phrase this politely? -- is a delusion. Hopefully, an honest one. During the 1990s, independent universities and independently educated people began to emerge. There is a reason why those universities have been suppressed. Independent courts began to appear and people began to use them independently. There is a reason why this independence has been destroyed over the last 10 years. And independent and (which is more important) effective business began to emerge. From furniture factories that were able to export their products to Italy to Yukos, which was looted and destroyed by the authoritarian modernizers. After the August 1998 crisis it was precisely independent business that lifted the country off its rear end in record time. And all it took was not getting in its way. There is no longer any free business in Russia. And all that was the very energy that we so sorely lack now.

Surkov: "If you want to throw up your hands and wait while until from the squabbling of the liberals, from their endless arguments, emerges a new economic miracle, then you have a long, long wait -- I guarantee it. You will have an extraordinarily colorful parliament. There will be talking shops everywhere -- in the presidential administration, in the government. We went through all that -- when one official says one thing and another says something else because one is working for one corporation and the other is working for a competitor."

I reproduce this tirade in its entirety on purpose so that you could feel for yourselves this cry from the soul. The part about the officials and the corporations is particularly

touching. It sounds like he knows his material. Of course, you should phrase it differently -- every official has his own business, and those who are stronger have corporations.

Surkov: "If we again have disorder, conflicts, and redistribution, if we undergo Ukrainization, then no one would ever consider investing in and cultivating anything in Russia. Under the noise and chatter about freedom, they’ll carry away everything.”

Here we see the main theme for the first time -- Ukrainization. That’s what happens when you can’t direct elections. As for “carrying things away,” judge for yourselves. No comment is needed.

Surkov: “I think that the main task of a democratic society is to protect people. To protect them from one another. Not to beat one another up  for some reason or for no reason, but to protect.”

This, of course, is about our police. And this is a good place to ask: where do the orders come from under which the riot police violently break up protest demonstrations?

Surkov: "For 50 years, Japan was ruled by one party. Didn’t it develop? Yes, we can hardly dream of what happened there."

There are a lot of nuances here, beginning with the fact that Japan is inhabited by the Japanese, and this is important. In Japan, the bureaucracy does what it does, and business does what it does. And the bureaucracy has one overriding task -- to help business, rather than pillaging it. And the reason for this is because in Japan business influenced the ruling party. Isn’t it the other way around in Russia?

Surkov: "Or take Sweden. They had a single ruling party for 70 years. Hasn’t Sweden developed?"

Again, how to say this politely? Delusion. He shouldn’t have mentioned Sweden. Sweden has a super-strong civil society. And what would happen to a bureaucrat who tried to restrict it? There officials resign -- on their own -- not when they are convicted of corruption, but the very moment they find themselves in a conflict of interests. And the reason for this is simple -- because the country has a powerful, independent opposition.

Surkov: “The relentless criticism of democratic institutions is a natural sign of democracy. I’m not the one who said that -- it was a famous European political scientist. If you criticize democracy in Russia, then that means it exists. If there are demonstrations, it means there is democracy. They don’t have demonstrations in totalitarian states.”

Sadly, this unnamed political scientist has deceived Surkov. In Europe, they don’t have “relentless criticism of democratic institutions.” They criticize politicians, that’s true. Sometimes relentlessly, like they did Boris Yeltsin. They criticize mistaken decisions, and they criticize correct ones. They also seek out defects in the way institutions function,

since there is no such thing as a perfect institution. And they criticize those defects. But in Russia, no one criticizes the institutions of democracy as much as Surkov and his “political scientists.” Of course, they criticize outside ones -- American, Ukrainian, Yeltsin-era ones. Other critics do not criticize the institutions of democracy in Russia, but the absence of them (the institutions, not the critics).

As for demonstrations, they are equally a sign of democracy and a sign of the absence of democracy. Otherwise, we’d have to say that the regime that Stenka Razin rebelled against in the 17th century was democratic. They most certainly do have demonstrations in totalitarian countries. Sometimes those demonstrations are met with gunfire, as happened in Novocherkassk in 1962.

Surkov: "The system must be adapted to a changing society, one that is growing more complex. But this doesn’t mean we should reject the system. It must be preserved. And we can’t release things that could destroy it. This system is inseparable from the people -- it is deeply rooted in the social fabric. Anyone who wants to destroy it is a social danger."

Here we see it again. The main thing is to save the system and that those who aren’t with us are socially dangerous. This is even more precise than the Stalinist formulation “socially estranged.” It sounds terrifying. But I am against preserving this system. As far as it being “rooted in the social fabric,” I think this formulation is not precise. It would be more accurate to say our social fabric is infected by this system.

Surkov: "It is crucially important to preserve political stability. Stability does not mean stagnation. It does not mean petrifaction. It is a tool of development. Modernization cannot result from chaos."

Here we see it again. The main thing is stability. This is a new scholarly term -- stability as a tool of development. Let me indulge in a short lecture: Stability is never a cause of anything. It is always a result, and a temporary result at that, since otherwise there would never be any development. There are two types of stability. The first is institutional stability. This is the stability of the basic principles and institutions of democracy which, first and foremost, ensures the adaptability of those very institutions. It also preserves a necessary amount of chaos, which ensures the search for the new in civil society and its social creativity, in science, in art, and in business. It is the variety of innovation that is born of creative chaos and ensures development.

But there is a second kind of stability -- extra-institutional stability. This is an illusory, temporary, unstable stability behind which stands the violence of clans or the inflated authority of The Leader. This is not the stability of development, but the stability of the dead end. What kind of stability do you think Surkov is talking about?

Surkov: “It is not certain that Russia could survive a second round of collapse. Although it is certain that it cannot survive in the absence of development.”

These are the last words of Surkov’s interview. And here I am in complete agreement

with him. Russia won’t survive. We don’t have Yeltsin. We don’t have our energy. Adaptive institutions have been destroyed. And here it is not just that I agree with Surkov, but that he agrees with me -- with the first part of this article. He is condemning the regime. Justly. Sincerely. Thank you. Maybe that was the main point of the interview?

Forget about the promised Silicon Valley. There won’t be any miracle. Not here. Not now. They don’t have enough time.

Georgy Satarov is president of the Moscow-based INDEM foundation. The views expressed in this commentary, which originally appeared on the website “Yezhednevny zhurnal” are the author's own and do not necessarily reflect those of RFE/RL.

February 19, 2010Russia Profile Weekly Experts Panel: Should Modernization Be Imposed?http://www.russiaprofile.org/page.php?pageid=Experts%27+Panel&articleid=a1266602090

Introduced by Vladimir FrolovRussia Profile

Contributors: Stephen Blank, Vladimir Belaeff, Ethan Burger, Vlad Ivanenko

Last week, President Dmitry Medvedev called on the leaders of big business to contribute to the modernization of the economy. Medvedev asked Russia’s business leaders to come up with a list of specific innovation projects involving cutting-edge technologies that would open new markets for Russian-made high-tech products. The list of such projects will be reviewed by the Kremlin’s Commission on Modernization in May, in order to determine which projects will receive state funding or a special tax regime. Will this approach to innovation succeed in Russia, where others did not? Can the state actually force private companies to innovate? What kind of incentives does the state have to encourage private investment in innovation?

Medvedev chaired a meeting of his commission to modernize the economy in Tomsk, where he met with the leaders of the business community, including RusAl Chairman Viktor Vekselberg, Onexim Group owner Mikhail Prokhorov, Rusnano Chief Anatoly Chubais and LUKoil CEO Vagit Alekperov. The president essentially acknowledged that private businesses should be forced to invest in innovation, since very little private investment in Russia is geared toward those objectives. It was an ultimatum, albeit a mild one. “I believe that all large private companies that have been established in our country in recent years have to make a major contribution to the modernization of Russia's economy and promote its growth,” Medvedev said, calling for significant growth in the innovation component in corporate investment programs.

He even went as far as to demand that the corporate social responsibility programs be redefined to move away from charity toward a practical focus on innovation and the companies’ effectiveness. Acknowledging that such demands amount to heavy government intervention, Medvedev reminded the oligarchs of their moral obligation to the state that bailed out their crumbling business empires at the peak of the financial crisis last year. “It is very important to remind ourselves that the government has shown itself to be a reliable partner during the crisis; it has not abandoned private companies to their fate. And today when we talk about the challenges of the innovative development of our economy, I hope that we can understand each other and formulate a plan of specific measures and long-term policy outlines,” Medvedev said.

Among innovative projects discussed at the meeting was Prokhorov's plan for a low-budget car, and Vekslberg’s Renova investment company plans to open a solar panel factory in Chuvashia by 2012. Prokhorov said that he plans to launch mass production of his car by the middle of 2012. The car will use liquefied natural gas as fuel and will fundamentally change the existing infrastructure of the automobile industry, he said. Both Vekselberg and Prokhorov are counting on state financing for their innovation projects.

Will this approach to innovation succeed in Russia, where others did not? Can the state actually force private companies to innovate? How can the state determine which private innovation projects need government support and which do not? What kind of incentives does the state have to encourage private investment in innovation? Why is Medvedev moving away from the recommendations of his think tank for less government interference in private business? Why is he adopting a sort of a statist approach to innovation? Will Medvedev’s efforts bear fruit?

Vlad Ivanenko, Ph.D. in economics, Ottawa, Canada:

It is laudable that president Medvedev proceeds with public consultations after having launched his modernization agenda in the article “Go Russia!” a few months ago. It indicates a certain structural break with the more familiar authoritarian approach exercised by the Kremlin up to now. However, a look at the list of projects proposed by big business makes me question the process by which the state selects the winners, and its transparency.

As part of my job responsibilities, I monitor the programs of modernization worldwide, particularly in the energy sector. It strikes me that projects that Frolov mentions – the production of liquefied natural gas-fuelled cars and solar panels – are borrowed from abroad. This is a disturbing development because the Russian proposals are not tailored to meet specific local objectives, unlike their foreign analogues. For example, the plan by American billionaire T. Boone Pickens to use natural gas in cars would eliminate the need for imported crude oil and, hence, reduce the U.S. trade imbalance – a major threat to the national financial stability. A similar project by Russian billionaire Michael Prohorov would be a boon to Gazprom, whose sales are in decline, but what else would it do for Russia? Similarly, the EU support of solar power plants in Spain and possibly in Sahara is conditioned on their ability, among other things, to rid the union of its

dependence on the import of Russian natural gas. Under the circumstances, the project by another Russian billionaire Victor Vekselberg to build a solar-panel factory is ill-thought out, unless it is somehow integrated in the EU plans. These observations suggest that for one reason or another, Russian big business is unwilling to synchronize its plans with the Russian state as much as its American and European peers do.

Another event that took place in Russia last week highlights a possible mismatch between the idea of public consultations floated by president Medvedev and a more opaque way to support modernization plans emphasized by Prime Minister Vladimir Putin. It concerns the €2.1 billion loan that the government is offering for a joint venture between the Russian automaker Sollers and the Italian car giant Fiat. The loan is questionable on two counts. Firstly, Putin does not explain the merits of this particular project relative to its alternatives. Secondly, the logic of singling out the car-making industry for state subsidies instead of other economic sectors is unclear. It is true that road vehicles constitute one of the largest items in the structure of Russian import, but import substitution should not be a national priority for a country that runs persistent trade surpluses. If the Kremlin decides to substitute a part of the imports, it is better advised to look at the development of the national petroleum services industry – the idea suggested in Tomsk by Lukoil’s president Vagit Alekperov – given Russia’s unique conditions under which its oil and gas industry operates.

In general, I find that the relationship between the state and business in Russia is currently deformed. On the one hand, the state doubts private interests as the latter has shown proclivity to misuse public support. On the other hand, big business is careful not to put all of its eggs in the Russia basket, mindful of Yukos’ fate. The resulting mutual distrust can be gradually healed if the two sides continue the dialogue that Medvedev seems to be determined to maintain, possibly with the help of independent mediators.

Ethan S. Burger, Adjunct Professor, Georgetown University Law Center, Washington, DC:

In the near future, the European Court of Human Rights will turn its attention to the cases of Mikhail Khodorkovsky and Yukos. The Russian government’s handling of this matter over the years has become a prism through which the country is judged by many business and political leaders. In 2002, then-president Putin’s actions toward the oligarchs can be summed up as “stay out of politics, behave patriotically, and I will let you keep the wealth you accumulated during the Boris Yeltsin years.”

Medvedev’s approach to Russia’s existing oligarchs seems more sophisticated than that of Putin. He has apparently said, through words and actions, “I am not so concerned with what you can do for me, and don’t ask what your government can do for you. Instead, tell me what you can do for our country.” President Medvedev’s success and future will ultimately depend on the health of the Russian economy. While human connections remain important, it seems as if Medvedev believes that policies must be based on well-designed programs and respect for the law/private property.

President Medvedev aims to implement industrial policies that rely primarily on market principles, rather than with some new form of a command economy (in the Putin as opposed to the Soviet sense). Medvedev is well aware of the fact that state-run enterprises tend not to operate efficiently. Fear of outright or creeping expropriation is unlikely to motivate domestic business leaders to invest in Russia as such policies are far more likely to make them think of the best way to transfer their wealth abroad, which will not strengthen the Russian economy.

Governments have plenty of tools to encourage businesses to pursue particular goals, particularly by altering tax policies. Giving favorable treatment for research and development as well as investment in human capital, increasing government procurement of products and services and providing incentives to create jobs in areas of high unemployment can be effective mechanisms for achieving policy goals. Creating tax disincentives for investing abroad can lead to positive economic outcomes. It is also reasonable for the state to pick out sectors to support. Taxing clean jobs at a lower rate (e.g. ones where recycled materials are used or generate less pollution than existing factories) is good public policy as well as good politics.

The oligarchs should not be coerced to undertake particular policies. At the same time, where the oligarchs see opportunities to adopt policies that are consistent with the state-created incentive system, they should not be excluded from participating if they do so lawfully. A statist industrial policy and government intervention in the economy are important when the market fails (as they have in many parts of the world), but Adam Smith did not blindly believe in laissez-faire economics. He had considerable faith in the invisible hand, but not in unregulated capitalism or excessive political interference in economic activity.

Vladimir Belaeff, President, Global Society Institute, San Francisco, CA:

Medvedev’s appeal to Russian business – to become more involved in economic and technological modernization – is neither surprising nor exotic. The proposal is contrary to deeply seated habits (vices) of corporate egotism, short-term planning and greed for the “quick buck.” In our present global crisis the pursuit of obscene short-term profits at the expense of society and reckless disregard for the long term are no longer seen as legitimate, quaint or endearing. Democratic governments serve the interests of large societies; when these are forced to rescue commercial corporations from the consequences of their folly and greed – the beneficiaries are required to reciprocate. So there is nothing wrong with Medvedev’s reasoning.

Russia’s government is now identifying one of the objectives of social responsibility for big businesses operating in Russia. Is this “force?” Every government everywhere has coercive power – this is the definition of government. In what way is the demand that businesses engage in innovation different from taxation, central bank interest rate policies, anti-trust regulation and many other aspects of economic governance?

It is the function of governments to define and implement national goals for a variety of purposes (the U.S. Great Society program is an example.) Part of the implementation of such programs is a suite of tools to incentivize and to coerce business when appropriate – to perform alignment with the greater goals. This is the interaction of the state with the private sector, ongoing everywhere in the world, even in this instant, and since time immemorial.

More fundamentally, the reported dichotomy between “state” and “private” sectors – in the economy of any country – is fictitious. The state and the private sectors are distinct, but they are in a symbiotic relationship and must collaborate to survive. Proponents of a divergence between the private and state sectors, or those who advocate the absorption of one sector by the other (socialists – 100 percent absorption by the state; liberals and libertarians – 100 percent absorption by the private sectors) are demonstrably utopists.

The history of innovation demonstrates that the state is very often the main sponsor and initiator of economic and technological modernization. This was true in the days when the inventions of Archimedes were sponsored by the city of Syracuse; in the Great Modernization by Russia’s Alexander II; in the era of the U.S. Apollo program, as well as the National Ignition Facility at the Lawrence Livermore Laboratories today. These programs are prime drivers of very diverse innovation. Nobody complains about statism when American military programs generate lucrative contracts for the vast American defense industry – so cross permeated with the rest of the economy that practically every major U.S. corporation has a Department of Defense subdivision.

Generally, established business is not strongly innovation-oriented. Technical innovation is most active in entrepreneurial start-ups, university labs and think tanks and in some (but not all) engineering firms. So it is not surprising that a special invocation was addressed to leaders of Russia’s extractive industries. Whether the head of RossNano was a target or only a witness of the recommendation depends on how one measures his effectiveness as head of one of the “premier” innovation resources of Russia.

Will Medvedev succeed in his appeal? That depends on his audience. The fact that Medvedev had to speak out is indicative; but he has other options – for example, to impose surtax on large business revenues and direct the funds toward venture financing, and to support academic research and development in basic and applied sciences. Would this approach “force” innovation on the private sector? Or would it simply be a method to direct tax revenue into socially-beneficial projects – like other tax revenue streams?

Professor Stephen Blank, the U.S. Army War College, Carlyle Barracks, PA:

It is so Russian to believe that the state can force private business to innovate and that it, rather than business, knows what to innovate and where to go for exports. And it is equally Russian that this gambit will fall flat on its face as it always has in the past. If insanity consists of doing the same thing over and over again and expecting a different result, then Russian policy is insane.

If indeed Medvedev has opted for a statist approach (and nothing I'd seen suggested opting for a truly liberal approach), then it is because he has signally failed to modernize his domestic political and economic structures along the paths he wants, so maybe he will try more coercion and/or go along with Putin's preferred course, which is to rely on import substitution, the energy and defense industries. 

These strategies have long been discredited and the resort to them merely indicates the bankruptcy of the current course which, however, has a lot of muscle and vested interests behind it. Russia's oligarchs, in any case, are not technological modernizers whatever other skills they possess, so this is not the audience for such sermons. 

But then there is no truly independent business class in Russia, as property rights are not secured and entrepreneurial ambitions are distorted into short-term actions or corruption, or stunted by government regulations. Even those who are true entrepreneurs cannot reach their full potential in such a system. 

While there are incentives that the regime can offer in terms of tax breaks, subsidies, etc., they don't get at the basic problems of this oligopolistic system. The main incentive he could give is the security to do as you will, with property rights under law and a truly free or at least freer market, but nobody should hold his breadth. 

Medvedev is no Mikhail Gorbachev, nor even an Alexander II, just another bureaucratic reformer in a long line of such who inevitably fall short before the accumulated obstacles of vested interests, autocracy, despotism, and the absence of the rule of law.

Washington Post: In Russia, summer homes have become a cause célèbre

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/20/AR2010022001234.html?hpid=topnews

By Philip P. PanSunday, February 21, 2010

When the demolition crews showed up in Rechnik, a quaint district of summer homes on the banks of the Moscow River, Sergei Bobyshev threatened to unleash his pet leopard on them. Alexander Navrodsky vowed to set fire to his house and go down with it in flames. Other residents set up a barricade, and when police broke through, some lay down in the snow to stop the bulldozers.

The government pressed ahead with plans to clear the area for a park, confident in its time-tested ability to crush the protests of ordinary citizens. But a month has passed and, in a surprise, not only is this little neighborhood still kicking, but its cause has been embraced by the country as a David-and-Goliath struggle, pitting desperate homeowners against one of the nation's most powerful politicians.

The drama in Rechnik presents a vivid illustration of Russia's incomplete transition to capitalism. Despite nearly two decades of U.S.-backed market reforms since the fall of Communism, including a crash course in privatization, individual ownership of land in the world's largest country remains a tenuous proposition. But if property rights are weak in Russia, the outpouring of support for Rechnik has underscored the nation's growing devotion to a particular kind of property, and delivered an unexpected warning to those who call the shots in Vladimir Putin's increasingly authoritarian state:

Don't come between Russians and their dachas.

Unlikely allies

In the weeks since the first house fell, an unlikely cast has rallied to defend Rechnik, including Putin loyalists in the parliament and the prime minister's most ardent foes in the pro-democracy opposition, as well as prominent lawyers, extreme right-wing nationalists and the leader of a leftist youth movement. Journalists across the country have filed sympathetic reports, and even the tightly controlled nightly news has broadcast images of Rechnik's tearful residents.

With polls showing only 10 percent of the public backing the city authorities, and nearly 50 percent taking the residents' side, President Dmitry Medvedev intervened, too, warning against any attempt to turn the situation "into a kind of campaign." But he also ordered prosecutors to investigate the demolitions.

Some analysts say the Kremlin may be trying to sideline Moscow's mayor, Yuri Luzhkov, who is leading the charge to bulldoze Rechnik. At 73, he has governed the capital since 1992 and is one of the few politicians in the country with a strong local power base. Previous attempts to unseat him have failed, but he has never been portrayed as an enemy of the dacha before.

More than half of all Russians and perhaps two-thirds of Muscovites own a dacha, giving Russia one of the world's highest rates of second-home ownership. Some are stately manors on city outskirts, others just shacks in distant exurbs without heat or plumbing. Most are built on land allocated to Soviet-era workers for household gardening, which provided a critical supply of food during the shortages of the planned economy.

But as construction soared during the past decade, the dacha has taken on an almost mythic significance in the Russian mind. It is a place to escape the pressures of modern life, a way to get closer to nature, a haven for growing one's own vegetables -- a symbol of freedom, self-reliance and middle-class achievement all in one.

So word spread quickly among the 200 or so families with dachas in Rechnik when bulldozers were spotted near the neighborhood in mid-December. City officials had been pressuring them to move for nearly three years, cutting off water and power and accusing them of illegally occupying environmentally protected parkland.

The charge infuriates residents, most of whom have lived in Rechnik for decades. The settlement was established in 1956, when the Soviet government set aside the land for employees of the Moscow Canal, which connects the Moscow and Volga rivers. Only the socialist state could own land back then, but its institutions often distributed garden plots to workers to use in perpetuity.

"It was kind of a reward, for doing a good job, because there was a long waiting list," said Maria Gurlynina, 79, who was a telephone operator for the canal when she was given her plot. It was just barren sand then, but her family carted in soil, planted trees and flowers, and built a simple house that four generations have used as a summer retreat.

Now she lives in Rechnik year-round because she can't manage the stairs to her 17th-floor apartment. "I've been here 53 years. What would I do if they took the house away?" she asked, huddling over a stove in a shed that residents are using as a headquarters for their resistance campaign.

Luzhkov argues that residents were given the plots only for gardening, and that the city rezoned the neighborhood into a national park in 1998. Other officials have insisted that the dachas pose a threat to the ecology of the Moscow River.

Many residents suspect that the mayor's real motive is commercial, in part because his billionaire wife, Yelena Baturina, is one of the city's most successful real estate developers. "Just come back in five years, and you won't see any park here," said Konstantin Chinsnovych, 70, a retired engineer loading furniture from his dacha into a moving truck. "Instead, you'll find a country club or cottages for the wealthy."

Such suspicions have been fueled by the fact that a nearby neighborhood of luxury estates has escaped the city's wrath, even though it is also in the park zone. Rechnik's defenders point out that the community, named Fantasy Island, is home to top government officials, security service generals and business titans.

Middle-class havens

Some of the dachas in Rechnik might be described as mansions, but most are modest, cabinlike structures built by middle-class professionals who have benefited from Russia's oil-fueled growth during the past decade.

Their conflict with the city reached a boiling point in late January, when riot police broke through the barricade in a pre-dawn raid. Dozens of residents were tear-gassed, roughed up and detained, said Galina Shorokhova, 49, an interior designer who was dragged from her car when she rushed to the scene.

Court bailiffs pulled families out of their homes in temperatures approaching 45 degrees below freezing as the bulldozers moved in. In the weeks since, more than 20 dachas have

been torn down. The first to fall was Boris Piskunov's, a wood-frame house built by his grandmother in the 1970s.

"It took just 10 minutes to destroy it," said Piskunov, 32, a manager at a gas-equipment firm, who watched as workers tossed his furniture out a window.

The laws governing land ownership in Russia are notoriously murky. While state factories were sold off in the 1990s, privatization of land was stymied by ideological debate. Today, though, bureaucrats who don't want to relinquish control of valuable real estate are the problem, said Dmitri Katayev, a former city legislator who helped draft the first post-Soviet property laws.

"I call it sabotage," he said, noting that Moscow residents have managed to claim ownership of only a tiny fraction of the city's land.

In 2006, Putin signed a "dacha amnesty" law that was supposed to make it easier for people to privatize garden plots allocated to them in the Soviet era. But the process has been so plagued by corruption that less than 10 percent of the land has been transferred, said Igor Yerdyakov, director of a national union of gardeners and dacha dwellers.

The Rechnik drama has resonated with people across the country fighting to save their own dachas from rapacious developers and officials, Yerdyakov said, adding, "We're getting 30 to 40 telegrams a day!"

BBC: Police battle illegal Russian gamblers http://news.bbc.co.uk/2/hi/europe/8524705.stm

Page last updated at 04:38 GMT, Saturday, 20 February 2010By Richard Galpin BBC News, Moscow

Illegal gambling has spread rapidly across Russia since a new law came into force last July banning casinos and slots machines in towns and cities, according to a senior police officer in an exclusive interview with the BBC.

Col Oleg Bolderov of the economic crimes department of the Russian police said they had carried out thousands of raids over the past eight months.

"We have closed down 70 casinos and 4,000 slot-machine arcades... and have brought 600 criminal cases against those trying to organise this (illegal gambling)," he said.

A police video of one of the raids given to the BBC shows heavily armed officers dressed in black, breaking into an illegal casino and catching the staff and punters red-handed.

Brandishing automatic weapons, two police officers stand over a poker table busy with startled gamblers.

But despite the crackdown, well-placed sources connected to the formerly legal gambling industry say underground gambling dens continue to flourish in the capital, Moscow, and in St Petersburg, while in more far-flung cities very little actually changed when the law came into force last July.

'Gambling rife'

There are also allegations that some senior police officers are actively offering to protect illegal casinos in return for huge pay-offs.

"We were approached by a police official who told us that for $400,000 per month we could stay open," said one source who wished to remain anonymous.

Even Col Bolderov admits that authorities are fighting a losing battle against the continuing huge demand for gambling as well as against corrupt officials.

"One of the most probable explanations for the rise of illegal gambling is corruption," he says.

"In our police department, we do our best to close down underground casinos and slot-machine halls and we have some success.

"But in parts of Russia, gambling remains rife. Why? Because of corruption."

In the centre of Moscow it is easy to find slot-machine arcades operating openly, although slightly more discreetly than before.

And it took just a few phone calls to arrange a visit to an illegal casino.

I was told to leave my bag behind to ensure I had no recording equipment or cameras with me.

Lucrative industry

The owner then led me through corridors and heavy doors, which could only be opened using special security codes, into the casino.

It was not large but it had pristine poker tables, a roulette wheel and hi-tech slot machines.

At the bar, a lone gambler, his back turned to me, nursed a drink.

According to industry sources the illegal casinos were up and running just four months after the ban came into force.

The new law, which should have put an end to gambling in Russia's towns and cities, was pushed through by the former president and now Prime Minister, Vladimir Putin.

Casinos and slot-machine arcades had come to dominate city centres with their gaudy neon entrances.

The gambling industry, which was resurrected after the collapse of the Soviet Union almost twenty years ago, had grown to be worth around $6bn (4.4bn euros, £3.9bn) a year.

And the number of addicts was also growing.

Too remote

The government's plan was to banish gambling to four specially-designated zones in the remotest regions of the country.

But the zones were so remote that none of the big casino operators was prepared to invest the huge sums of money required to have the slightest chance of attracting gamblers to travel so far.

So for the most part, they remain empty plots of land.

In a forlorn ceremony earlier this month however, one casino in one of the regions did finally open its doors.

It is at least a two hour drive from the nearest city and airport, in the middle of nowhere in the far south of the country.

No other casinos have been built so far in any of the regions.

Already there are calls for the law to be revised on the basis that it has simply driven gambling underground and provided corrupt officials with yet another opportunity to solicit bribes.

National Economic Trends

Itar-Tass: Putin allocates RUB 5 bln to encourage grain sales from intervention stock

http://www.itar-tass.com/eng/level2.html?NewsID=14846822&PageNum=0

20.02.2010, 16.44

ST. PEETERSBUR, February 20 (Itar-Tass) -- Russian Prime Minister Vladimir Putin decreed to allocate over five billion rubles to encourage grain sales from the country’s intervention stock, spokesman for the Russian head of government Dmitry Peskov told Itar-Tass on Saturday.

“Further to measures of support to domestic farmers, in particular grain producers, Putin signed a resolution allocating five billion and 36 million rubles in subsidies to encourage grain sales from the intervention stock,” Peskov said.

According to Peskov, this measure will “increase the share of Russian grain on the international market.”

Bloomberg: Ruble Bond Sales Poised for Record This Year as Yields Tumblehttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=awdV3.0QaMXY

By Denis Maternovsky

Feb. 19 (Bloomberg) -- Russian companies are likely to sell a record amount of ruble bonds this year after a drop in yields and reduced currency swings.

Domestic corporate bond sales will reach at least 1 trillion rubles ($33 billion), up from 814 billion rubles last year and 533 billion rubles in 2008, according to Trust Investment Bank in Moscow and ING Groep NV, the biggest Dutch financial-services company.

Yields on bonds sold by Russia’s biggest companies have fallen by half to an average 8 to 9 percent in the past year as the central bank cut its refinancing rate 11 times to a record low of 8.5 percent today, according to data compiled by Moscow- based VTB Capital, the investment-banking unit of Russia’s second-biggest lender. The central bank may lower its benchmark interest rate another 150 basis points by the middle of this year, according to UniCredit SpA.

“Companies with ruble-denominated revenue should now think twice before borrowing in foreign currency,” said Stanislav Ponomarenko, a fixed-income analyst at ING in Moscow.

Yields on benchmark government ruble bonds due 2036 dropped 4.5 percentage points since August 2009 to an 18-month low of 8.1 percent yesterday. That compares with a 2 percentage-point decline in the yield on Russia’s 2030 dollar bonds to 5.4 percent in the same period.

Ruble bonds due 2012 sold by OAO Gazprom, the country’s biggest company, yield 8.2 percent, down 5.4 percentage points from when they were issued in June. The yield on the company’s dollar bond due in 2013 fell 3 percentage points to 5.3 percent in the same period.

Hedging Costs

The cost of borrowing in dollars may be higher for companies looking to protect themselves against currency swings raising their repayment costs. Three-year non-deliverable forwards, or NDFs, show the ruble weakening by 6.86 percent a year against the dollar.

The central bank let the ruble depreciate 35 percent between August 2008 and January 2009, making it more expensive for companies reliant on ruble earnings to service foreign debt. The currency has since strengthened 20 percent against the dollar and its one-month volatility has halved, Bloomberg data show.

Bank Rossii helped to spur the ruble bond market since the credit crisis began by accepting a wider range of the securities as collateral for loans. That allowed commercial banks to borrow more cheaply from the central bank by using interest-paying bonds as collateral.

Bond Collateral

“This is the major reason why ruble debt is so popular at the moment,” said Denis Poryvai, a fixed-income analyst at UralSib Financial Corp., the Moscow-based lender owned by billionaire Nikolai Tsvetkov. “If the central bank stops accepting bonds as collateral we’d see the market collapse and yields surge 4 or 5 percentage points,” Poryvai said, adding that he expects the central bank to retain the program for the foreseeable future. “This will be a record year.”

While Russia is seeking to raise as much as $17.8 billion in its first sale of bonds to international investors in more than a decade, the government has cautioned companies against taking on too much foreign debt.

Companies led by state-run energy producers OAO Gazprom and OAO Rosneft raised more than $250 billion abroad in the three years before the collapse of Lehman Brothers Holdings Inc. in September 2008, according to Bloomberg data. Foreign borrowing fell to a five-year low of $35 billion last year, with almost all of it used for refinancing.

$11 Billion Bailout

VEB, the state development bank chaired by Prime Minister Vladimir Putin, stepped in at the height of the crisis in the fourth quarter of 2008 to lend $11 billion to companies deemed strategic to the economy. The government will monitor the foreign debt of state-run companies more closely to limit their exposure to exchange-rate swings, Finance Minister Alexei Kudrin said in December.

“The government is trying to limit foreign-currency borrowing for state-run entities,” ING’s Ponomarenko said.

OAO Mobile Telesystems, or MTS, the country’s biggest mobile operator, sold 15 billion rubles of 14.25 percent notes in July and is considering more ruble debt sales.

“Our policy has changed,” acting Chief Financial Officer Alexei Kornya said in an e-mailed response to questions from Bloomberg. “The company is now much more active raising debt on the ruble market and the significant part of our debt portfolio is now ruble-denominated.”

Biggest Issuer

OAO Russian Railways, the largest issuer of ruble notes last year, plans to sell 200 billion rubles of the securities this year. It last sold bonds on Feb. 4, when it raised 15 billion rubles of 9 percent notes maturing in 2025. Gazprom, the world’s biggest gas company, said Feb. 12 it plans to sell 300 billion rubles of domestic bonds over the next five years.

“Domestic liquidity is very good and there is good demand to both buy and issue at current levels,” said Eugene Belin, the head of fixed income at Citigroup Inc., who has helped manage bond sales for Gazprom, Russian Agricultural Bank and steelmaker OAO Severstal in the last year. “We’ve seen a lot of interest this year and there is more to come.”

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

Last Updated: February 19, 2010 03:59 EST

Business, Energy or Environmental regulations or discussions

Steel Guru: Crisis protectionism and China hinder Russian companieshttp://steelguru.com/news/russian_news/MTMzNzU0/Crisis_protectionism_and_China_hinder_Russian_companies.html

Monday, 22 Feb 2010Russian metallurgists managed to provide full capacities load in 2009 only due to export contracts. Despite the industry showed 13% fall Russia became the world third steel producer in 2009.

Mr Oleg Petropavlovskiy analyst of BrokCreditServis said Western and Eastern Europe, where the decrease amounted 30% averagely suffered most of all. At that some countries decreased steel output by 45% to 50% as compared with 2008. China managed to show 10% growth. Meanwhile export contracts and Russian ruble devaluation helped Russia to overcome small and big market players in whole South East Asia and in China in particular despite the import duties introduction on electrical steel.

He said that Novolipetsk Steel one of the world-largest manufacturers of these products

was not very much touched by this since the import duty for its products is rather low and the company can further the supplies to this country.

The experts said although the world leaders several times announced the necessity to reject the protectionism, the number of the bans is growing. Mr Victor Kovshevny CEO of Rusmet.ru said “Today the number of the bans in the world is ten times as many as for example 20 years ago.”

The survival of the industry is connected to metal products consumption in Russian domestic market and to further development of the industry in China. Mr Kovshevny said “If China can not keep its domestic steel consumption, Chinese steel will rush to global market and Russian metallurgists will loose the advantage they have comparing with other sectors. However, China is ready to Buy Russian semi products.”

The analysts said the competitive ability of Russian metallurgical companies depends on Western investments. But only players, transparent for the investors can attract the assets.

(Sourced from www.rusmet.com)

Bloomberg: Rusal to Increase Aluminum Output as Demand Rebounds (Update2)http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a5n.cOJ.VOog

By Bloomberg News

Feb. 22 (Bloomberg) -- United Co. Rusal, the world’s biggest aluminum producer, will increase output this year, having seen “the first signs of a recovery” after the global recession. Its shares rose the most since beginning trading.

Production will rise 3 percent this year compared with 2009, the Moscow-based company said today in a statement to the Hong Kong exchange. Output slumped 11 percent to 3.9 million metric tons last year.

Aluminum has gained 66 percent in London in the past 12 months as stimulus spending by the Chinese government spurred demand from automakers and builders. Aluminum Corp. of China Ltd., the nation’s biggest producer, said China’s demand may grow 23 percent this year, Citigroup Inc. reported Feb. 1.

“Global demand is healthy, reflected in an increasing amount of Chinese exports of aluminum products,” said Helen Lau, an analyst at OSK Asia Holdings Bhd. “Rusal’s targeted output, even below the 2008 level, reflects a reasonable increase.”

Rusal rose as much as 11 percent and traded 6 percent higher at HK$7.95 at 11:07 a.m. local time. The gain is the biggest since its shares began trading on Jan. 27. The stock has dropped 26 percent from its initial offering price of HK$10.80.

“We are seeing the first signs of a recovery in demand as more countries emerge from recession,” Oleg Deripaska, chief executive officer of Rusal, said in the statement. Orders from European and U.S. clients are rising, it said.

Rusal’s alumina output dropped 36 percent to 7.3 million tons in 2009, from a year earlier, and will rise 7 percent this year, the statement said. Alumina is a semi-finished material used to make aluminum for packaging, window frames and airplanes.

--Xiao Yu. Editors: Andrew Hobbs, Gavin Evans

To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net

Last Updated: February 21, 2010 22:34 EST

AFP: Rusal says aluminium output down 11 percent in 2009http://www.google.com/hostednews/afp/article/ALeqM5iTYnXmLXUokDgzz_d-UjLAgxExzA

(AFP) – 28 minutes ago

MOSCOW — Russian metals giant Rusal cut its annual aluminium output by 11 percent in 2009 but could increase it this year, the company said in its full year production results Monday.

The world's largest aluminium producer reduced its total aluminium output to 3.9 million tonnes, compared to 4.4 million tonnes in 2008, the report said, calling 2009 "one of the toughest years on record for the global economy."

In the same period, the company slashed its alumina production by 36 percent and bauxite production by 41 percent.

The company predicted an upturn in 2010, saying in a statement that if demand grows as forecast, it plans to produce three percent more aluminium and seven percent more alumina than in 2009.

The economic crisis has left Rusal billions of dollars in debt, which the company has been in complex talks with its creditor banks to restructure.

The heavily-indebted company, whose majority shareholder is Oleg Deripaska, last month listed on the Hong Kong and Paris bourses. It was the first Russian company to list on the Hong Kong stock exchange.

Earlier this month Rusal announced that it had paid Russian and international creditors 2.14 billion dollars from the proceeds of its share listings on the Hong Kong and Paris stock exchanges.

AFP: Ousted Russian investor wants to help finance Saabhttp://www.google.com/hostednews/afp/article/ALeqM5iCkX2cz7xjB_5xbgWuTqSHtuY3uQ

(AFP) – 1 day ago

STOCKHOLM — Russian billionaire Vladimir Antonov, forced out of Dutch carmaker Spyker before it bought Saab from General Motors, said in comments published Saturday that he wants to help finance the new company.

"There is unfortunately widespread economic crime in Russia but we don't take part in that, and are rather victims of it," Antonov told Swedish business daily Dagens Industri.

"If GM gives me that possibility, I will gladly invest (in Saab) both as an owner and as a lender," Antonov added, arguing GM was behind his exclusion from the Saab deal.

When Spyker announced its 400-million-dollar purchase of Saab from GM on January 26, it said its CEO Victor Muller would be taking up the whole of Antonov's 30 percent stake in Spyker, without giving a reason.

But on Friday, Antonov said he was taking part in financing the Saab deal despite no longer holding a stake in Spyker, through a loan from his Convers Group company to Muller's Tenaci holding.

"I can definitely confirm that I paid the first part (of the loan), that 25 million dollars were made available to Tenaci by Convers Group. That is totally true," he told Svenska Dagbladet newspaper.

On Saturday, the same newspaper quoted Antonov as saying he was open to offering more financing to Saab Spyker, which he said could enter the Russian market with his help.

He also said he wanted a Saab plant in Russia.

"It depends on GM changing its mind and letting me in. If so, we will plan on opening a plant in Russia and starting production."

General Motors announced on January 26 a "binding agreement" to sell its Saab division to Dutch luxury sports car maker Spyker as part of a restructuring of its business to cope with the impact of the global slump on the industry.

Bloomberg: RenCap Hires Merrill’s Sacks to Build African Equities Businesshttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1c3TR0W.f50

By Vernon Wessels

Feb. 21 (Bloomberg) -- Renaissance Capital, the Moscow- based investment bank expanding in Asia and sub-Saharan Africa, said it hired Clifford Sacks, the former joint-chief executive officer of Bank of America Merrill Lynch’s South African unit, to build an African equities business.

Sacks, who will be based in Johannesburg, will be CEO of the company’s South African business, Quinn Martin, a spokesman for RenCap, said in a mobile-phone interview today.

Last Updated: February 21, 2010 12:17 EST

Financial Times: RenCap sets up Johannesburg unit to focus on Africahttp://www.ft.com/cms/s/0/706f80d4-1f52-11df-9584-00144feab49a.html

By Megan Murphy in London

Published: February 22 2010 02:00 | Last updated: February 22 2010 02:00

Renaissance Capital, the Russian investment bank that nearly collapsed during the financial crisis, is launching an operation in Johannesburg as it looks to exploit a pan-African franchise to build one of the world's leading emerging markets banks.

RenCap is due to announce today that it has hired Clifford Sacks, a former senior banker at Merrill Lynch, to head its South African office as it continues to expand amid the nascent economic recovery.

The outpost will focus on four key industries - metals and mining, oil and gas, financials and telecoms -

It is intended to serve as a conduit for South Africa-based companies looking to invest in other parts of sub-Saharan Africa, where RenCap already has a strong presence.

Andy Lowe, chief executive of RenCap's African business said: "Our goal is not to be all things to all people.

"The focus on these four industries builds on our existing emerging markets platform in these sectors across research, sales and trading, capital markets and mergers and acquisitions. They are also where we see the strongest demand from clients."

The Johannesburg office is part of RenCap's ambitious strategy to rebrand itself as a leading force in emerging markets in the aftermath of the crisis, when the bank had to sell a 50 per cent stake to Mikhail Prokhorov, the Russian billionaire, as well as to slash 40 per cent of its workforce.

Stephen Jennings, the former Credit Suisse banker who set up RenCap in 1995 and who is known in Russia as the "Kiwi oligarch", has recently returned as chief executive to spearhead the group's expansion.

RenCap intends to hire more than 200 people this year, taking its headcount closer to pre-crisis levels.

In South Africa, the bank expects to build a team of about 25 under Mr Sacks.

Following the $2.2bn float by UC Rusal, the Russian aluminium group, in Hong Kong last month, RenCap - a joint bookrunner on the Rusal deal - is expected to do well should other Russian companies look to Asia to list.

The bank is more keen, however, to emphasise its business in places such as Nigeria, Kenya, Zimbabwe, Ghana and Zambia, where it expects to eventually have as many as 600 bankers.

Andrew Cornthwaite, deputy chief executive and head of investment banking, told the Financial Times that the bank's 2010 deal pipeline included 17 initial public offerings in nine different countries.

Activity in the Oil and Gas sector (including regulatory)

Itar-Tass: Energy minister calls for creation of national hydrocarbon monitoring system

http://www.itar-tass.com/eng/level2.html?NewsID=14847015&PageNum=0

20.02.2010, 19.21

MOSCOW, February 20 (Itar-Tass) -- Energy Minister Sergei Shmatko called for creating a national system that would monitor the movement of hydrocarbons in the country.

“Russia needs to create a unified state information system that will use modern means for monitoring the movement of hydrocarbons on all of the transport routs in the country,” he said on Saturday.

“In the past, only Transneft had a system of export schedules. Now we are considering the possibility of having a unified information system in order to get data on the movement of hydrocarbons by all means of transportation,” the minister said.

Shmatko said he was not ready to say that the system would be used for manual management of oil and petrol product flows. “The main task is to obtain exhaustive information in the country where almost half of he budget is generated by oil and petrol

products: where the oil goes, how it is used, how effectively it is used, and where petrol products go,” he said.

Bloomberg: Russia May Detail East Siberia Oil Tax Break, Shmatko Sayshttp://www.businessweek.com/news/2010-02-20/russia-may-detail-east-siberia-oil-tax-break-shmatko-says.html

February 20, 2010, 04:20 AM EST

By Anna Shiryaevskaya

Feb. 20 (Bloomberg) -- Russia may seek to specify exemptions on East Siberian oil exports depending on fields, while keeping the tax break as a “long-term measure” to stimulate investments, Energy Minister Sergei Shmatko said.

“We will work out more detailed instruments as part of the long-term policy,” Shmatko told reporters in Moscow yesterday. “Maybe we will assess the potential of every field, or evaluate the need to attract temporary measures such as setting up certain coefficients.”

Russian oil producers, such as OAO Rosneft and TNK-BP, have called for tax breaks as an incentive to develop remote, expensive resources in the Arctic and eastern Siberia. The energy officials, including Deputy Prime Minister Igor Sechin, supported the move. The Finance Ministry has criticized the zero-percent duty for eating into budget revenue after Russia’s first deficit in a decade last year and called for revision.

“If there is no incentive, there is no crude produced,” Shmatko said yesterday. The long-term policy to stimulate investments in the new region is aimed at applying exemptions on exports of crude from the new producing region, he said.

The finance and energy ministries are “closer” to agreeing on the fate of the tax break, and a decision will probably be made in March, Deputy Finance Minister Sergei Shatalov said in an interview on Feb. 17. The export duty exemptions for eastern Siberian fields will be kept through March, he said.

The government has yet to decide for how long the duties should apply, with Shmatko previously calling for tax breaks of as long as seven years for the fields.

“These export duties should be applied for the period of intensive development of the fields to create economic conditions for crude production,” Shmatko said yesterday.

--Editor: Sara Marley

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at +7-495-771-7729 or ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or wkennedy3@bloomberg.net

UpstreamOnline: Lukoil misses full reserve replacementhttp://www.upstreamonline.com/live/article207003.ece

Russia's second biggest oil company Lukoil replaced 95% of its 2009 production with new reserves, trailing behind its top rival Rosneft.

Upstream staff  19 February 2010 15:13 GMT

Analysts closely watch reserves replacement ratio as a sign the company can grow production in the future and maintain output year to year.

Lukoil, 20% owned by ConocoPhillips, said today its proved reserves rose by 782 million barrels of oil equivalent due to geological exploration, production drilling and acquisitions in 2009, slightly below the amount it produced, reported Reuters.

Its total stood at 17.5 billion barrels of oil equivalent by the end of last year, including 13.7 billion barrels of oil and 22.9 trillion cubic feet of gas.

The figure could have been 1.8 billion barrels of oil equivalent higher if Lukoil was not forced to transfer them from the category of proved reserves into lower categories citing new stricter rules by US Security and Exchange Commission.

"The company expects that these volumes will be returned into the proved reserves category as their development start date draws nearer or some new technologies are applied," it said.

Rosneft said earlier this month it had increased its reserves by 2.5% last year, or 163% by different reporting standards, maintaining its position as the biggest of the world's publicly traded oil companies.

Lukoil shares were up 1.1% by 1440 GMT, in line with the broader MICEX's oil and gas index.

Published: 19 February 2010 15:13 GMT  | Last updated: 19 February 2010 15:13 GMT

New Europe: BP, Rosneft give up on East Schmidt in Sakhalin-5 http://www.neurope.eu/articles/BP-Rosneft-give-up-on-East-Schmidt-in-Sakhalin5/99150.php

21 February 2010 - Issue : 874

UK oil major BP and its Russian partner Rosneft have given up the license for the East Shmidt Block, in the Sakhalin-5 development area, news agencies reported.After conducting more than 4,400 kilometers of seismic study, the two companies concluded at the end of 2009 that further exploration at the block wasn’t economically justified, Rosneft and BP said. “Based on collected data and analysis, the decision was taken not to proceed with exploration and to relinquish the East Shmidt license,” a BP spokesman said. The East-Schmidt block, with a total area of 9,400-square kilometers, is located on the north-eastern part of Sakhalin shelf in the Okhotsk Sea, to the North of Schmidt Peninsula.The two companies gave up a license for the West Shmidt block, which is part of the Sakhalin-4 development project, when it expired in November 2008. BP and Rosneft are still exploring the Kaigansky-Vasuykansky blocks off Sakhalin Island. Several discoveries have been made at that block, BP said, and in 2010 the companies plan to analyze seismic data collected last year in preparation for future drilling. The Kaigansko-Vasyukansky block, with a total area of 7,200-square kilometers, is located in the northeastern part of Sakhalin shelf. The sea depth in this area varies from 90 to 120 meters. To date, 13 prospective structures have been revealed within the block.In 2004, the first exploration well was drilled, which revealed the Pela Leich reservoir, according to information posted on the Rosneft website. In 2005, the Udachnaya exploration well was drilled, which also revealed a prospective reservoir. The obtained data confirmed high hydrocarbon potential of the Kaigansko-Vasyukansky block. In 2006, exploration wells were drilled at the South-Vasyukanskaya and Savitskaya structures.In March 2007, a discovery certificate to the Kaigansko-Vasyukanskoye-Sea field was received. The field’s recoverable ABC1 reserves amount to 16.14 million tonnes of crude oil and gas condensate. In 2008 2,100 linear km of 2D seismic shooting were carried out in the western part of the Kaigansko-Vasyukansky block. The license for the block was extended until 2013 with amendments to the license agreement.

OilVoice: Russia's Sistema Drills Way Into Oil industryhttp://www.oilvoice.com/n/Russias_Sistema_Drills_Way_Into_Oil_industry/99e9a0a8e.aspx

19 February 2010Moscow-based industrial conglomerate Sistema has taken a major step towards developing an integrated oil business after submitting a regulatory petition to the Russian Federal Anti-monopoly Service to acquire a 49% stake in Russneft, Russia's sixth largest crude producer. Sistema's deep pockets will no doubt help Russneft's founder Mikhail Gutseriyev, who regained control of the producer earlier this year, to put the company back on the oil map after several years of stagnated growth.

The submission of a petition to the Russian competition authorities signals the end of negotiations between Sistema and Gutseriyev, which are believed to have begun in December of last year. At the time, Sistema's then owner Vladimir Evtushenkov went public with his intention of acquiring a controlling stake in Russneft. However, he added

that the firm's bulging debt level on the balance sheet made such a move unattractive at the time.

The value of the 49% stake has not yet been disclosed but in January Gutseriyev reportedly bought out Russneft from its de-facto owner, high-profile Russian oligarch Oleg Deripaska, for $600 million in cash plus of course the assumption of $6 billion in corporate debt.

Following the Sistema farm-out, Gutseriyev is expected to remain in control of Russneft, although 1-2% could be offered to Sberbank, one of the oil company's main creditors.

Gutseriyev's return to the boardroom of Russneft and the subsequent re-employment of his management team should help serve to revive the European Russia-focused company's production, which fell by 11% between 2007 and 2009, to 252,000 barrels per day (bpd) with Deripaska at teh helm. For telecoms-focused Sistema, the deal fits perfectly with its recent push into the energy industry.

Evtushenkov entered the oil industry with a bang in the spring of last year, buying up six major companies in the Republic of Bashkortostan (Bashkiria), in the Urals region. The deal gave Sistema a 76.5% stake in Bashneft, plus majority holding stakes in five affiliated refining and marketing concerns.

At present, Bashneft produces around 230,000 bpd of crude oil from around 140 fields in Bashkiria and neighbouring Tatarstan and Udmurtia. However, Sistema's biggest oil revenue spinner is its large affiliated refining business, which accounts for around 10% of the total of Russia's refining capacity.

UpstreamOnline: Alliance rides oil price recoveryhttp://www.upstreamonline.com/live/article207055.ece

Russian-focused explorer Alliance Oil reported improved quarterly and full year results to the end of 2009 on the recovery in international oil prices.

Upstream staff  22 February 2010 07:23 GMT

Swedish-listed Alliance, which has assets in Russia and Kazakhstan, reported full year net earnings of $345 million, or $2.06 per share, up from $46 million, or 28 cents per share, in 2008.

Higher oil prices, plus an exceptional item offset a fall in revenues to $1.73 million from $2.72 million previously.

Alliance said it’s pre-tax earnings had benefited to the tune of $174.7 million from the partial reversal of a year ago impairment.

Earnings before income tax, debt and amortisation (Ebitda) fell to $387.9 million from $585 million previously.

For the year, Alliance reported it boosted proved and probable oil reserves to $525.9 million from $487.3 million previously, a replacement ratio of 342%.

Total oil production for the period fell to 16 million barrels from 17.4 million barrels previously.

For the final quarter of last year, Alliance reported net earnings of $188.3 million, or $1.09 per share, compared with a loss of $290.9 million, or a loss of $1.81 per share, in the same quarter last year.

Revenue rose to $544.7 million from $409.7 million previously.

Ebitda rose to $90.2 million from $6.2 million in the year-ago period.

The company produced 3.9 million barrels of oil in the quarter, down from 4.5 million barrel for the same period in 2008.

The integrated company said it benefited from the recovery in international and local markets and in its ability to balance the upstream and downstream sectors of its operations.

Alliance said it was targeting average daily production of 50,000 barrels per day in 2010, and total production this year of 17 million barrels.

Published: 22 February 2010 07:23 GMT  | Last updated: 22 February 2010 07:23 GMT

Gazprom

Bloomberg: Gazprom Should Be ‘Innovative’ in Gas Contracts, Shmatko Sayshttp://www.businessweek.com/news/2010-02-20/gazprom-should-be-innovative-in-gas-contracts-shmatko-says.html

February 20, 2010, 04:22 AM EST

By Anna Shiryaevskaya

Feb. 20 (Bloomberg) -- OAO Gazprom, the world’s biggest gas producer, should be “more innovative” and react quickly to market conditions without changing the system of long-term supply contracts, Russian Energy Minister Sergei Shmatko said.

“Gazprom is quite innovative and should be more innovative, and swiftly react to changed market conditions,” Shmatko told reporters in Moscow late yesterday. “But by no means should the system of long-term contracts that we have created be destroyed.”

European consumers of Russian gas, such as E.ON AG, Germany’s largest utility, have multiyear contracts linked to crude oil. Last year a drop in demand and an increase in supply cut spot prices to about half the level under long-term contracts, leading customers to discuss more flexible supplies with Gazprom, the Russian gas export monopoly.

E.ON’s gas unit has agreed with Gazprom on taking a “low double-digit” percentage of its supply at tariffs linked to spot market prices, Handelsblatt said yesterday, citing E.ON Ruhrgas AG chief Bernhard Reutersberg. The outcome of discussions with Gazprom may have been “more favorable than expected for E.ON,” Oppenheim Research GmbH analysts said in a note yesterday.

--With assistance from Nicholas Comfort in Frankfurt.

--Editors: Sara Marley, Jason Carey

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at +7-495-771-7729 or ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or wkennedy3@bloomberg.net

UpstreamOnline: Russia to adopt new price strategyhttp://www.upstreamonline.com/live/article207002.ece

Russia's Gazprom, which supplies Europe with a quarter of its gas needs, has agreed to add spot gas prices to its long-term contracts with customers, according tosources.

Upstream staff  19 February 2010 15:01 GMT

"The spot market is playing a certain role and we have taken this role into account in our contracts without changing fundamental principles," a Gazprom source, who asked not to be named because of the sensitivity of the issue, told Reuters.

"The agreements reached do not put into question the fundamental principles - the system of long-term contracts, the "take-or-pay" principle and the pricing system based on a peg to a basket of oil products," he added.

Published: 19 February 2010 15:01 GMT  | Last updated: 19 February 2010 15:58 GMT

Georgian Daily: Gazprom, Romania, and South Stream Routes in the Black Seahttp://georgiandaily.com/index.php?option=com_content&task=view&id=17197&Itemid=132

February 20, 2010

Vladimir Socor

On February 17 in Bucharest, Gazprom Vice-President Aleksandr Medvedev conferred with Romanian officials on a range of bilateral projects. Medvedev hinted at possible Romanian participation in Gazprom’s South Stream pipeline project, from Russia to Europe via the Black Sea. 

On the previous day in Sofia, Gazprom CEO Aleksei Miller had unsuccessfully tried to “reactivate” Bulgaria’s participation in South Stream (see EDM, February 18).

According to Medvedev’s concluding statement and a press release from Gazprom, the Romanian side confirmed its interest in the South Stream project and presented technical data, which Gazprom had requested earlier, toward a feasibility study for South Stream in Romania. The Russian side suggested that Romania’s state-owned gas transmission operator, Transgaz, join South Stream by entering into a venture with Gazprom (Interfax, February 17; Mediafax, February 18).

Those Romanian-delivered technical data pertain almost certainly to the seabed of the Black Sea in Romania's exclusive economic zone. Gazprom had indeed requested the seabed data last year and Bucharest was slow to respond. The Romanian Economics and Trade Ministry’s press release (February 17) listed “developing the [gas] transit network”--apparently, an allusion to South Stream--as one among the topics discussed with Medvedev. The ministry ruled out a joint venture of Romgaz, the state-owned gas producing company, with Gazprom.

Previewing the talks, Russian representatives in Bucharest had told the press that Romania has good chances to be included in South Stream due to the country’s location and the unfinished negotiations between Gazprom and Bulgaria (Adevarul, February 17).

Moscow has made several overtures to Romania in this regard since autumn 2009, just after the new Bulgarian government had halted its participation in South Stream for the time being and ordered a review of the project’s terms. Moscow is trying to impress Sofia that the South Stream pipeline can be routed through Romania, if Bulgaria stalls.

Gazprom’s overtures to Romania can also unsettle Turkey, if the government in Ankara truly believes South Stream to be a realistic project. Ankara has already agreed to allow the South Stream pipeline to pass from Russia through the Turkish exclusive economic zone in the Black Sea, en route to Europe. The Russian and Turkish prime ministers signed energy partnership agreements in August 2009 and January 2010, envisaging the Turkish seabed route for South Stream (Interfax, Anatolia news agency, January 13).

However, Gazprom’s use of the Romanian zone would rule out the use of the Turkish zone for the pipeline.

Bulgaria is the only country through which South Stream must necessarily pass in order to reach all the countries that have signed up to this project.

Theoretically, South Stream has two options for crossing the Black Sea from Russia to Bulgaria. One option is from the Russian through the Ukrainian, Romanian, and Bulgarian exclusive economic zones, to a landfall point in Bulgaria. The other option is through the Russian, Turkish, and Bulgarian zones, again to a Bulgarian landfall point. On the first option, Ukrainian permission seems unimaginable, as it would allow Gazprom to shift massive volumes of gas from Ukraine’s own transit pipelines into South Stream. The second option is convenient to Russia politically; but the Turkish seabed route is the longest, deepest, and the most expensive of all options.

Theoretically again, Gazprom has two bypass options against Bulgaria in the Black Sea. One option is from the Russian via the Ukrainian and Romanian zones to a Romanian landfall, then overland into central Europe. The other option is via the Russian and Turkish zones to a landfall on the European side of Turkey, then overland into southern Europe. These options, however, would imply bifurcating the South Stream pipeline in the middle of the Black Sea, then following two circuitous routes around Bulgaria toward southern Europe and central Europe, respectively. Russian planners can not consider these options seriously.

Thus, Bulgaria holds an unassailable position and its government is well placed to bargain hard with Russia over the terms of South Stream or other energy projects in Bulgaria.

South Stream can only reach the Romanian exclusive economic zone after crossing the Ukrainian zone in the Black Sea. Thus, Gazprom’s overture to Romania makes no practical sense, if it refers to the seabed route; unless, inconceivably, Ukraine sacrifices its own transit role by allowing South Stream on the seabed through the Ukrainian zone.

It is possible to speculate that Gazprom is offering to build an extension of South Stream into Romania overland, branching off from a neighboring transit country. This offer, however, would have to presuppose Bulgarian participation in South Stream. If a branch-off is laid, Romania would not be considered a transit country for South Stream, but an ordinary customer country, forfeiting transit revenue, among other advantages lost. This is the model that Moscow is currently offering to Croatia, in return for major concessions from Zagreb. In Romania's case, a branch-off line from South Stream could reduce Romania's reliance on Ukraine for the transit of Russian gas.

By all public evidence, Medvedev failed to mention any gas reserves that might be available in Russia or elsewhere for the South Stream pipeline. Nor did he mention financing. These omissions occur invariably when Russian government and Gazprom

officials discuss the South Stream project with countries that have joined or consider joining the project.

Compared with most countries in its region, Romania is less reliant on natural gas in its overall energy mix; and less dependent on Russian gas in the Romanian consumption of this fuel, thanks to internal production. Gazprom, however, is the sole external supplier. Romania is said to have imported 2.04 bcm of Russian gas in 2009 (Interfax, February 17).

Economics and Trade Minister Adriean Videanu led the Romanian team in these (and some previous) talks with Gazprom. The Romanians have three main objectives in these negotiations. The goals are:

1. Creating a joint venture between Romania’s state-owned gas producer Romgaz and Gazprom to build underground gas storage sites in Romania. The capacities would total 5 to 6 billion cubic meters (bcm), including one site at Margineni (northeastern Romania) for 2 or 2.5 bcm. The parity-based joint venture would market the gas in European Union member countries (Agerpres, February 17).

2. Eliminating trading companies that Gazprom has inserted in its supply relationship with Romania. The existing supply contracts will expire in 2012, at which point Romania wants the two intermediaries, WIIE and Imex Oil, removed, and new contracts signed with Gazprom directly. Medvedev showed some receptiveness to this proposal (Mediafax, February 18).

3. Negotiating the prolongation of transit agreements for Russian gas via Romania en route to Bulgaria, Greece, and Turkey, through existing pipelines. The transit agreements between Gazprom and Romanian state-owned transmission operator Transgaz will expire in 2011. Bucharest is now well placed to demand an increase in the transit fees, as Bulgaria demands and Ukraine has, as of January 2010, obtained (see EDM, February 18).

One day ahead of Medvedev’s visit, and apparently timed to it, Romania’s Chamber of Deputies (lower house of parliament) ratified the inter-governmental agreement on the Nabucco project. 

Russia Today: Nord Stream commencement has South Stream players looking to move quicklyhttp://rt.com/Business/2010-02-22/nord-stream-commencement-south.html/print

22 February, 2010, 11:07

The impending construction of the Nord Stream pipeline across the Baltic, is stoking interest in its Black Sea counterpart - the South Stream project.

Greece, Romania and Turkey have been among the nations talking up South Stream over the last week. Romania is expressing an interest in the project for the first time, while Greece is moving to create the joint venture – the South Stream Project company – with

Greek Prime Minister George Papandreou pushing to get things started.

“As for the South Stream, we are ready to sign an agreement to create a joint venture and we are ready to keep on working to make the project happen.”

The South Stream gas pipeline is to pass under the Black Sea from Russia to Bulgaria, bypassing Ukraine, and splitting into 2 European branches. Bulgarian officials that earlier had been mildly lukewarm about the project, were upbeat about it during a working visit by Gazprom CEO Alexei Miller to Bulgaria. They discussed the pre-investment stage of the project, meaning that Bulgaria is in, with Russian Energy Minister, Sergey Shmatko focussing on communications developments.

“Bulgaria is the most important partner for us in the realisation of the South Stream project. We already have a number of agreements and are working on creating a project entity, and we also have agreed that an inter governmental commission will create a special monitoring group to identify apparent gaps in communication and help to avoid them.”

The black sea waters might see the start of construction after the Turks give their approval – which is expected towards the end of the year. Meanwhile Russia and Turkey are deepening their energy links in other fields with officials from the two nations meeting almost monthly. Russia is bidding to construct nuclear power stations in Turkey, and Turkey is looking for oil supplies for its Sumsun-Ceyhan pipeline. The familiarity of key energy officials with each other is another factor increasing the likelihood of South Stream being built.