Russia 110526

Basic Political Developments China, RF should settle oil disagreements – Chinese FM: Chinese and Russian

companies should settle disagreements on oil supplies during the consultations, Chinese Foreign Ministry spokeswoman Zyan Yui told a news briefing on Thursday.

Medvedev, Obama to discuss visas, ABM, WTO, Middle East - “The package of documents includes those on cooperation in fighting terrorism, in the visa sphere, in cooperation in the Bering Strait,” he said. “Sergei Lavrov and Hilary Clinton prepare a joint report of the Presidential Commission on projects, including those in high technologies and innovations – from making regional intellectual electricity networks between Belgorod and San Diego and implementation of clean energy to training of new generation of managers.”

Medvedev to meet with Sarkozy and Cameron in Dovile - “We expect that over the meeting in Dovile, Medvedev and Cameron will exchange views on future development of trade, economic and investment cooperation,” Prikhodko said. “Great Britain remains our most important trade and economic partner and one of leading foreign investors in Russia’s economy.”

UK's Cameron to visit Moscow in September –Russia: Visit marks mending of ties after Kremlin critic's murder; Economy, trade on agenda for Cameron-Medvedev talks at G8

France and Russia to close Mistral dealo France, Russia to agree warship price within month: envoy - "The price

and other details will be finalised within a month," ambassador Alexander Orlov said at a news conference ahead of the G8 summit of major world powers in the northern French resort of Deauville.

France to Join Russia Caucasus Tourism Venture, Vedomosti Says - France and Russia may create a 2 billion-euro ($2.8 billion) joint venture to develop tourism in the North Causasus, Vedomosti reported.

Participants in RF-Canadian-Norwegian conference to discuss Arctic coop. - The conference will involve Russian ambassador at large and permanent representative to the Arctic Council Anton Vasilyev, Russian Ambassador to Canada Georgy Mamedov, Norwegian Deputy Foreign Minister Espen Barth Eide, Norwegian Ambassador to Canada Else Berit Eikeland and representatives of ingenous peoples of Canada.

Canada, Russia Arctic tensions thaw - "There are a lot of issues that can be dealt with on an international level," said Petr Plikhin, deputy chief of mission for the Russian embassy in Ottawa, who underscored the joint interests held by both countries, including sustainable economic development.

Valdai Club Supports Dialogue in the Arctic - A two day conference "Canada/Russia/Norway: Dialogue and Cooperation in the Arctic", is being held on May 26-27, 2011 at the Carleton University, Ottawa, Canada.

Airborne troops to protect RF’s continental shelf in Arctic - “I received the instructions from the General Staff to start this work. I instructed Assistant Commander of the Airborne Troops Maj. Gen. Alexander Lentsov to develop probable scenarios for joint missions of the Airborne Troops with the Ground Troops and the Navy,” Gen. Shamanov told reporters on Thursday.

Russia Is Invited to Join O.E.C.D. Anti-Bribery Pacto Russia Signs OECD Anti-Bribery Convention

US slams Russia over Khodorkovsky treatmento Businessman Prokhorov sorry for Khodorkovsky, politician Prokhorov

declines to comment Action plan of program on interregional Ukrainian-Russian cooperation to be

signed this June Ukrainian Navy and Russian Black Sea Fleet hold exercises of search and rescue

units Presence of Russian business in Morocco is growing - RF Ambassador. Motor ship with crew from RF, Malaysia, runs aground on Sakhalin. Government chief of staff appointed head of Putin coalition Medvedev appoints Vladimir Selin to head FSTEC. Patrushev to chair meeting on security in economy. Opposition Leader’s Wife Fights Drug Dealing Charges - Investigators say Osipova

was caught red-handed and may face up to 20 years in prison for selling heroin. But her supporters call the case a clumsy frame-up aimed at punishing her husband, an associate of outspoken Kremlin critic Eduard Limonov.

Female extremist cell foiled in Bashkortostan - A female cell of the Hizb ut-Tahrir international extremist organization has been exposed and crushed in Russia's internal republic of Bashkortostan, the Bashkir Interior Ministry reported.

2 die, one hurt as freight train rams motor car in Kostroma region. - According to the spokesman, following the collision 12 fuel tanks went off rails, six of them caught on fire. The accident took place at a railway crossing.

U.S. national kills Russian wife, commits suicide in Moscow Ministry reports normal radiation background in Russia's far east. Dozens of wild fires rage in Russia’s Far East Elena Skrynnik answered the questions of journalists of the regional media -

Yesterday, May 25 the Russian Agriculture Minister Elena Skrynnik held a video press conference with media representatives of some regions of Russia.

St. Petersburg OKs gay demo, Moscow bans Pride again Reuters PRESS DIGEST - Russia - May 26 RIA Russian Press at a Glance, Wednesday, May 26, 2011 The State of the Russian Military: An SLD Site Visit - by Richard Weitz They came, they saw… - What secrets foreign countries are trying to get out of

Russia By Ivan Shestakov All Tomorrow's Parties - When one fake opposition party stops effectively

distracting the Russian people, what's the Kremlin to do? Give them a new one, of course. BY JULIA IOFFE

National Economic Trends Central bank sticks to 6-7 pct inflation forecast Inflation not to exceed 1,5% in Russia in 2nd half of 2011. H1 inflation pegged at 5.5% Capital outflow from Russia reaches 30 bln dlrs since early 2011. Imports into Russia grow 40% in Jan-Apr - CB chairman Russia gold, currency reserves up on May 13-20. RF Central Bank concerned over high interests on deposits in some banks. Add'l Bank of Moscow capitalization not needed now – Kostin Gov't mulls lifting ban on grain exports Russia: the Government to announce the decision about the terms of grain

exports embargo Russia: United Grain Company singed the contracts for realization of 1.6 mln

tonne of feed grain More officials, higher salaries - The number of officials is rising, despite plans to

reduce the state apparatus By Svetlana Bocharova and Alena Pustovalova

Business, Energy or Environmental regulations or discussions Rosselkhozbank Eurobond yield guidance seen at 6 pct Sberbank inks binding agreement to buy Troika Dialog

o Sberbank of Russia and Troika Dialog sign the legally binding agreement on the two companies' landmark deal

VTB may buy $1.2 bln in mortgage loans UAC may revise long-term strategy ALROSA: WITH 1.28 BILLION CARATS OF DIAMONDS, RUSSIA HAS THE WORLD'S

LARGEST RESERVES Grocer X5 first quarter net profit up 23 pct to $97 mln Metso to supply minerals processing equipment and services to Russian Copper

Company in Russia

Activity in the Oil and Gas sector (including regulatory) Russian fuel shortages continue, big companies gain price advantage Bashneft seeks compensation after halting gasoline exports Shtokman to start production at end of 2016-deputy CEO UPDATE 1-TNK-BP eyes Brazil oil and gas, may pay $1 bln-report

o TNK-BP mulls Brazil oil field stake for $1 billion: report Shell, Rosneft Discuss Arctic, Black Sea With Putin Deputy

o Sechin, Shell discuss Arctic, Black Sea shelf exploration cooperation o Shell to board boat to Russian Arctic? - It is premature, in our view, to

conclude that BP will definitely be replaced by Shell as Rosneft's strategic partner. There are more projects in the Arctic, besides three Kara blocks, which could potentially be jointly developed with other international partners; in addition, the above meeting may put pressure on BP to try to

save the deal by finding a quicker solution to issues that have been raised by the Alfa-Access-Renova consortium of investors.

Surgutneftegas Sells East Siberian Crude Oil for July, August Lukoil satisfied with Caspian hazard-response trials LUKOIL sells share of Azerbaijani telecommunication assets BP-Rosneft Shows Russia Is 'Not Investable': Browder

Gazprom Gazprom Persuades Government to Reduce Potential MET Increase Gazprom raises gas exports to Europe by 30% - CEO Gazprom and Gasunie reinforce innovative potential of Sci-Tech Collaboration Serbia's NIS, Canada EWP in Romania oil well deal Gazprom gets connected with projects and participants EC opposes Gazprom monopoly in gas export from Russia Günther OETTINGER EU Commissioner for Energy Speech of Commissioner

Oettinger at the South Stream event Speech of Commissioner Oettinger at the South Stream event Brussels

Gazprom gets mixed response to South Stream presentation to EEC – RenCap Russia lobbies EU for special treatment on major pipeline – By VALENTINA POP On track: South Stream project making solid progress - By Thomas Gomart

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Full Text Articles

Basic Political Developments

12:18 26/05/2011ALL NEWS

China, RF should settle oil disagreements – Chinese FM. http://www.itar-tass.com/en/c154/150793.html

26/5 Tass 171

BEIJING, May 26 (Itar-Tass) — Chinese and Russian companies should settle disagreements on oil supplies during the consultations, Chinese Foreign Ministry spokeswoman Zyan Yui told a news briefing on Thursday.

Commenting on the conflict between Transneft and China National Petroleum Corporation, the spokeswoman said, “As for concrete problems that the companies of the two countries faced they are of technical nature.”

“The governments of the two states urged the corresponding companies to settle the existing disagreements in compliance with the principles of equality and mutual concessions,” Zyan Yui said.

An oil row between Russia and China escalated in March, industry sources said, as Moscow believes Beijing had underpaid it 100 million dollars for oil in 2011 under a landmark 20-year supply deal.

Analysts said the dispute around the deal, which was blessed by the countries' leadership, could jeopardise cooperation between the world's No.1 energy producer and consumer.

"Russia and China don't have a long history of trade and these (price) disagreements could influence the discussions on gas supplies in the future, and maybe even lead to a delay," said Valery Nesterov from Troika Dialog brokerage, referring to Russia's plans to sign a major gas deal with China this year.

Kommersant newspaper reported last week Russia's state oil major Rosneft and China's National Petroleum Corp disagreed over 38 million dollars in payment for January.

Industry sources told Reuters on Friday Moscow believed the sum had now risen to $100 million for January and February.

CNPC was not available for comment.

Russia's pipeline monopoly Transneft said the two sides had some disagreements but declined specific comment while Rosneft said it was delivering supplies according to the contract.

"We have certain disagreements (with China), but we expect that we will sort them out," said Transneft's spokesman Igor Dyomin. "We assume that we have contracts and both sides should adhere to them. We have fully met our obligations so far."

Rosneft and Transneft borrowed an unprecedented 25 billion dollars from China in 2009 to finish building Russia's first pipeline link to China as part of a broader deal to supply Beijing with 300 million tonnes of crude over 30 years.

The deal is worth 220 billion dollars under current prices.

Industry sources said the current dispute centres around the pricing formula with China saying Russia should give it a discount because it is cheaper to send crude to China than to the Pacific port of Kozmino, while Moscow insists it applies similar tariffs to both routes.

"On an annual basis the different could amount to a few billions of dollars," one industry source said.

Denis Borisov, oil analyst at Bank of Moscow, said he believed Russia would ultimately agree to a compromise because it badly needed to clinch a gas deal to China to diversify its exports away from saturated European gas markets.

"Talks may last long but the gas deal won't be sacrificed... I think gas cooperation is a top priority for Russia," he said.

02:15 26/05/2011ALL NEWS

Medvedev, Obama to discuss visas, ABM, WTO, Middle Easthttp://www.itar-tass.com/en/c154/150522.html

DOVILE, May 26 (Itar-Tass) —— The first in the current year meeting of presidents of Russia and of the United States of America Dmitry Medvedev and Barack Obama will be marked by adoption of a statement on simplification of the visa regimen. The two leaders, who have come to participate in the G8 summit, will also discuss vital international problems – the Middle East, Northern Africa as well as the START and ABM.

Earlier, Russia’s presidential aide, Sergei Prikhodko, who heads the inter-ministerial group on implementation of a visa-free regimen between Russia and the EU, said that a visa-free regimen between Russia and the USA might be an important step in development of relations between the two countries.

“In issues of possible lifting of visa requirements we use similar approaches both to the EU countries and to the USA,” he explained. “We realise perfectly well all difficulties of solving this issue both in the political and security aspect and in aspects of logistics.”

According to information he has, the two presidents will adopt several joint statements.

“The package of documents includes those on cooperation in fighting terrorism, in the visa sphere, in cooperation in the Bering Strait,” he said. “Sergei Lavrov and Hilary Clinton prepare a joint report of the Presidential Commission on projects, including those in high technologies and innovations – from making regional intellectual electricity networks between Belgorod and San Diego and implementation of clean energy to training of new generation of managers.”

Another joint statement, which France’s president Nicolas Sarkozy is expected to ink, too, is regarding the Nagorno-Karabakh settlement.

“Other issues on the bilateral agenda include: cooperation in transport security, international adoption, cultural exchange programmes,” Prikhodko continued. “The agenda will include further diversification of trade and economic cooperation, and a

detailed discussion on the WTO to speed up talks and formalities for Russia’s membership in the organisation before the year ends.”

“We are satisfied that the Russian-American relations, which are growing over the presidency of Barack Obama, develop smoothly and positively,” he said. “We have a very intensive, though sometimes, complicated dialogue on key international problems, regional crises.”

“Though sometimes our points of view differ, we see our counterparts are ready to hear reasons and they take them with attention,” he continued. “The level of trust enables us to discuss even unpleasant moments without the fear to threaten the positive dynamics of the relations.”

Last time, Medvedev and Obama met in November of 2010 in Yokohama on the fields of the G20 summit. In June of 2010, Russia’s president visited the Silicon Valley and had talks with Obama in Washington.

01:51 26/05/2011ALL NEWS

Medvedev to meet with Sarkozy and Cameron in Dovilehttp://www.itar-tass.com/en/c154/150518.html

DOVILE, May 26 (Itar-Tass) —— Russia’s President Dmitry Medvedev will have separate meetings on the fields of the G8 summit on Thursday with France’s president Nicolas Sarkozy and the United Kingdom’s Prime Minister David Cameron.

The French side expects that the participants in the meeting will discuss the contract on purchase and construction of four Mistral-class warships. Russia’s Ambassador to France Alexander Orlov said on Wednesday that the document may be signed over a month or two.

“The deal is moving,” he said. “Right on the eve of the G8 summit, experts from France came to Moscow and we may hope that over a month or two the final agreement may be reached and we shall sign a commercial contract.”

This issue is on the agenda of the two president’s meeting, the diplomat said.

Medvedev’s aide, Sergei Prikhodko, said that presidents of Russia and France “will discuss the present state and future of the Russia-France relations, which have reached the level of strategic partnership in various spheres of bilateral cooperation: in industry, investments, science and innovations, in humanitarian and cultural exchange programmes.”

“The focus in further development of cooperation in the economic sphere will be made on promotion of major and promising bilateral projects in high technologies,” he continued. “Traditionally, Russia-France meetings discuss cooperation in energy, and with the present situation – the accident at the Fukushima nuclear power plant – the leadership of Russia and France in further progr3ess of nuclear energy in the world is more vital than ever.”

“Our countries share similar approaches to future of this important sector,” he said. “Following Medvedev’s address to leaders of the G8, the CIS, BRICS and to the Director General of the IAEA of April 26, the sides will discuss participation of the two countries in upcoming international forums – the meeting of nuclear industry leaders and regulators in Paris on June 7-8 and in the IAEA conference on nuclear security in Vienna on June 20-24.”

Among priority directions of cooperation Prikhodko named “further simplification of mutual short-term visas procedures and temporary employment for Russian and French citizens, of legal aid in family and affairs and conflicts.”

“The agenda will include discussions of international issues where cooperation between Russia and France has become a major factor of the world and European policies,” he continued. “Medvedev and Sarkozy will discuss most vital international problems, and first of all the situation in the countries of the Arab world /Libya, Syria, the Middle East settlement/, issues of the European security, including further cooperation between Russia and NATO on anti-missile systems in Europe.”

In the afternoon, Medvedev will meet with the United Kingdom’s Prime Minister David Cameron to discuss “international policies, including most vital regional situations.”

At the same time, the most important question on the agenda of the meeting will be the bilateral relations between Moscow and London, Prikhodko forecasts.

“We cooperate openly and effectively in the framework of the G8 and G20, our trade and economic relations have become more active,” that is why the agenda will include “bilateral cooperation, first of all in the context of the upcoming visit of Cameron to Russia in the second half of this year, which will be the firs visit of the United Kingdom’s prime minister to Russia since 2005,” he said noting that he did not consider participation of the UK’s prime minister in the G8 summit in Russia in 2006 as a bilateral visit.

“With the latest understanding achieved by the leaders of our two countries that existing problems in the bilateral relations should not prevent from development of cooperation where it possible, the Russia-Britain relations have certain positive development and bilateral cooperation in various spheres have become more active,” he said.

“We expect that over the meeting in Dovile, Medvedev and Cameron will exchange views on future development of trade, economic and investment cooperation,” Prikhodko

said. “Great Britain remains our most important trade and economic partner and one of leading foreign investors in Russia’s economy.”

Great Britain ranked fifth in 2010 in accumulated investments in Russia’s economy, and the trade turnover grew by 25 percent to 15.9 billion dollars, he added.

Medvedev and Cameron will have a third meeting. The first one was on June 25, 2010 in Canada on the fields of the G8 summit, the second one – on November 11, 2010 on the fields of the G20 summit in Seoul.

UK's Cameron to visit Moscow in September –Russiahttp://www.reuters.com/article/2011/05/25/britain-russia-idUSLDE74O29C20110525

Wed, May 25 2011

* Visit marks mending of ties after Kremlin critic's murder

* Economy, trade on agenda for Cameron-Medvedev talks at G8

By Adrian Croft

LONDON, May 25 (Reuters) - British Prime Minister David Cameron will visit Moscow in September, a Russian diplomat said on Wednesday, in a sign that relations damaged by the murder of a Kremlin critic in London in 2006 are improving. Cameron said last November he had accepted an invitation from Russian President Dmitry Medvedev to visit Russia in 2011 but his office has not released any dates for the trip. Alexander Sternik, charge d'affaires or No. 2 in the Russian embassy in London, said Cameron would travel to Moscow in "early September". "We hope it will be a very significant step forward in improving our relationship," Sternik told reporters, adding that he expected Cameron to be accompanied by a high-powered business delegation.

"We are ready, as soon as London is ready, to re-establish full-fledged cooperation in all areas," he said.

Sternik said Cameron and Medvedev would meet on the sidelines of the summit of the Group of Eight leading industrialised nations in Deauville, France, on Thursday to discuss preparations for the visit.

It will be the first visit to Russia by a British prime minister since the 2006 murder in London of former Russian agent Alexander Litvinenko using the polonium-210 isotope.

Diplomatic ties between the two countries fell to a post-Cold War low after Moscow refused to extradite the man Britain wants to put on trial for the murder.

The row led to London and Moscow expelling diplomats in July 2007. Britain halted talks on easing visa rules and Russia stopped the British Council, the British government's cultural arm, from operating in two Russian cities.

Since Cameron took office a year ago at the head of a coalition government, the two countries have failed to resolve their differences over the Litvinenko affair but they have worked to build up economic ties and have exchanged visits by their foreign ministers.

Cameron has put a high priority on strengthening trade and business ties with emerging market economies such as Russia as he tries to boost Britain's anemic recovery from recession.

Sternik said talks between Cameron and Medvedev in Deauville would be "heavily dominated with economic, trade and investment cooperation issues" although they were also expected to discuss prospects for developing dialogue on political issues.

A major British-Russian business deal fell through this month when BP's (BP.L: Quote, Profile, Research, Stock Buzz) plan to gain a foothold in Russia's offshore Arctic oilfields through a deal with state-controlled Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) collapsed. [ID:nLDE74G0D9]

Cameron's Downing Street office declined to confirm the visit, and said it never discussed the prime minister's travel arrangements for security reasons.

France and Russia to close Mistral dealhttp://english.ruvr.ru/2011/05/26/50822675.html

May 26, 2011 00:45 Moscow Time

The contract between France and Russia for the purchase and construction of four Mistral helicopter carriers could be signed within two months according to the Russian Ambassador to France, Alexander Orlov. He was speaking at a briefing before the summit of the Group of Eight in Deauville, France.

According to him, the issue is on the agenda of the meeting that is to take place between the Russian and French presidents, Dmitry Medvedev and Nicolas Sarkozy before the summit of Group of Eight.

The first two Mistral carriers will be built at the shipyards of Saint-Nazaire in France and the other two in St. Petersburg Russia.

France, Russia to agree warship price within month: envoyhttp://www.expatica.com/fr/news/french-news/france-russia-to-agree-warship-price-within-month-envoy_151837.html

25/05/2011

France and Russia will agree the price for the sale of four powerful warships to Moscow within a month, the Russian ambassador to Paris told reporters Wednesday.

France has already agreed to sell Moscow four Mistral-class helicopter carriers, despite the concerns of some of its NATO allies, but the two powers have been wrangling over the price for months.

"The price and other details will be finalised within a month," ambassador Alexander Orlov said at a news conference ahead of the G8 summit of major world powers in the northern French resort of Deauville.

"At the moment, commercial discussions are under way to discuss the price that the Russian Federation will have to pay for the four ships, two of which will be built in France and two in Russia," he said.

It is understood that the negotiations have been held up by disagreements over how much sensitive military technology in the form of onboard electronic systems will be handed to Russia as part of the sale.

Moscow has estimated the total cost of the contract at around 1.5 billion euros ($2.11 billion), and hopes to take delivery of the first vessel in 2013.

Orlov said Russia's President Dmitry Medvedev and summit host President Nicolas Sarkozy of France would probably discuss the sale at a bilateral meeting on Thursday on the sidelines of the summit.

Mistral-class vessels are 30,000-tonne amphibious assault ships capable of carrying up to 16 helicopters, four landing craft, up to 59 armoured vehicles and a unit of 450 marine commandos.

The United States and France's NATO allies Poland and the Baltic states have expressed concern over what would be an unprecedented transfer of military technology from a Western power to the former Cold War foe.

But France has insisted Russia will only be a true security partner if the West can show it trust, and Sarkozy has invested much personal prestige in the negotiations, promising shipyard workers in western France the contract.

© 2011 AFP

France to Join Russia Caucasus Tourism Venture, Vedomosti Sayshttp://www.bloomberg.com/news/2011-05-26/france-to-join-russia-caucasus-tourism-venture-vedomosti-says.html

By Denis Maternovsky - May 26, 2011 6:25 AM GMT+0200

France and Russia may create a 2 billion-euro ($2.8 billion) joint venture to develop tourism in the North Causasus, Vedomosti reported.

President Dmitry Medvedev and his counterpart Nicolas Sarkozy will sign an accord to develop the Russian region during the G-8 meeting today, the Moscow-based newspaper reported, citing unidentified government officials. The joint venture to build hotels, infrastructure and ski resorts may have Russian state guarantees, according to Vedomosti.

To contact the editor responsible for this story: Denis Maternovsky at dmaternovsky@bloomberg.net

11:51 26/05/2011ALL NEWS

Participants in RF-Canadian-Norwegian conference to discuss Arctic coop. http://www.itar-tass.com/en/c154/150765.html

26/5 Tass 81

OTTAWA, May 26 (Itar-Tass) — Participants in the Russian-Canadian-Norwegian conference, which will open in Ottawa on Thursday, will discuss cooperation in the Arctic region.

The conference will involve Russian ambassador at large and permanent representative to the Arctic Council Anton Vasilyev, Russian Ambassador to Canada Georgy Mamedov, Norwegian Deputy Foreign Minister Espen Barth Eide, Norwegian Ambassador to Canada Else Berit Eikeland and representatives of ingenous peoples of Canada.

A session of one of the working groups will be devoted to possibilities to expand a dialogue between Arctic countries, as well as between representatives of ingenous peoples of the North. The second working group will discuss a wide range of issues, including the organization of transport routes in the Arctic region and the creation of a search and rescues service. Experts of the third working group will consider

environmental problems, including the consequences of the deglaciation of the frozen layer, and study possible environmental effects of oil and gas extraction on the Arctic shelf.

On the second day of the conference Russian and Canadian representatives will focus on bilateral relations, the role of businessmen and non-governmental organisations in strengthening cooperation in the Arctic region.

Canada, Russia Arctic tensions thawhttp://www.torontosun.com/2011/05/25/canada-russia-arctic-tensions-thaw

By Jessica Murphy ,Parliamentary Bureau

First posted: Wednesday, May 25, 2011 4:02:07 EDT PM

OTTAWA - Russia and Canada aren't gearing up for a tussle over the North, a top envoy from the Kremlin said Wednesday.

"There are a lot of issues that can be dealt with on an international level," said Petr Plikhin, deputy chief of mission for the Russian embassy in Ottawa, who underscored the joint interests held by both countries, including sustainable economic development.

"We are the biggest Arctic nations and we have a lot of common things to tackle."

Plikhin added officials from Ottawa and Moscow are seeking to boost co-operation on northern issues and have been sharing scientific research and information on the region.

"Of course there are problems," admitted the diplomat. "And the only way to solve the problems is to discuss (them)."

His comments suggest a thaw of tensions between Canada and Russia, which have gone head-to-head over Arctic sovereignty in the past.

Both nations have been working to assert jurisdiction over parts of the Arctic and claim the Lomonosov Ridge as an extension of their respective continental shelves.

Coastal countries, including Canada and Russia, are currently mapping the ocean floor to help assert those claims.

Sovereignty experts say once countries have made their individual submissions to the UN commission probing the concerns, science will ultimately be the judge.

With a quarter of the world's undiscovered gas and oil believed to be contained in the region, countries have been ramping up for a resource race in the north.

Valdai Club Supports Dialogue in the Arctichttp://en.rian.ru/valdai_context/20110526/164241857.html

11:16 26/05/2011

A two day conference "Canada/Russia/Norway: Dialogue and Cooperation in the Arctic", is being held on May 26-27, 2011 at the Carleton University, Ottawa, Canada.

"The conference will bring together key people from the three countries who can talk about solutions to real-world problems facing the Arctic, such as ecology, transportation and business-related issues. We need to decide on how we can co-operate and move forward on these issues before resolving the issue of Arctic sovereignty," says Piotr Dutkiewicz, conference chair, Professor of Political Science at Carleton and Member of the Valdai Club Advisory Board.

Leading international experts will be joined by businessmen and high-profile officials of the Canadian and Norwegian institutions, such as Mr. Espen Barth Eide, the Norwegian Deputy Minister of Foreign Affairs and Mrs. Janet King, assistant deputy minister, Northern Affairs Organization (NAO). Lewis Cardinal, national chair, Aboriginal Voices Radio Network and president of the Indigenous Media Institute of Canada, is delivering the keynote address at lunch.

The Russian delegation includes the representative of the RF to the Arctic Council, Ambassador at large Anton Vasiliev, Director of the Centre of Northern and Arctic economics, Ministry of Economic Development Alexander Pelyasov; Director of the World Ocean Centre, Ministry of Economic Development Alexey Konovalov and Deputy Director of the Severtsov Institute of the Ecological and Evolution Problems of the Russian Academy of Sciences Vyacheslav Rozhnov.

Among the issues raised at the conference will be working out platforms for dialogue and co-operation between the Arctic nations, ways for ensuring eco-system-based management in the Arctic, and developing best practices for circumarctic transportation.

The agenda of the conference presupposes common discussion, bilateral roundtables and several briefings for media.

The conference is organized by the Carleton University together with the Valdai Discussion Club and in cooperation with Indian and Northern Affairs Canada (INAC), Foreign Affairs and International Trade Canada (DFAIT) and National Defence and Canadian Forces (DND). It is supported by the Magna Fund for Russian Studies, Kinross Gold Corporation, Norwegian and Russian Embassies in Ottawa.

11:45 26/05/2011ALL NEWS

Airborne troops to protect RF’s continental shelf in Arctic(adds). http://www.itar-tass.com/en/c154/150757.html

26/5 Tass 153

MOSCOW, May 26 (Itar-Tass) —— The Airborne Troops jointly with the Ground Troops and the Navy will perform missions to protect Russia’s continental shelf in the Arctic region. The proposals to this effect will be passed to the General Staff of the Russian Armed Forces for approval, Commander of the Airborne Troops Lieut. Gen. Vladimir Shamanov said on Thursday.

“I received the instructions from the General Staff to start this work. I instructed Assistant Commander of the Airborne Troops Maj. Gen. Alexander Lentsov to develop probable scenarios for joint missions of the Airborne Troops with the Ground Troops and the Navy,” Gen. Shamanov told reporters on Thursday.

“We invited the command of marines and three air assault brigades (the Ground Troops) from the military districts for an urgent assembly with the Command of the Airborne Troops in Ryazan last week,” he went on to say.

The Command of the Airborne Troops is making a complex evaluation of the missions, which they will have to perform in the Arctic region “in order to pass our proposals in the General Staff for consideration and approval,” Shamanov noted.

In reply to an Itar-Tass journalist’s query about a probable formation of an armed group involving military units of the Airborne Troops, the Ground Troops and the Navy for the missions in the Arctic region, Gen. Shamanov said, “It is quite probable, but it is still discussed how it will be in practice.” Meanwhile, the commander of the Airborne Troops ruled out the separate use in action of the Airborne Troops in the Arctic zone. “This is not envisaged and is not needed,” he noted.

Shamanov also noted that military units of the Airborne Troops will not be dispatched to the Kuril Islands to reinforce the armed group on the islands. “This is not planned,” the commander underlined.

May 25, 2011

Russia Is Invited to Join O.E.C.D. Anti-Bribery Pacthttp://www.nytimes.com/2011/05/26/business/global/26bribery.html?_r=1

By ANDREW E. KRAMER

MOSCOW — A group of nations working to outlaw bribery in international trade invited Russia to join their pact at a ceremony Wednesday in Paris, after the Russian Parliament passed a law this spring prohibiting Russian companies from bribing foreign officials.

The ceremony was the beginning of Russia’s application process to join the Organization for Economic Cooperation and Development’s anti-bribery convention, which began as an initiative to ban kickbacks and corruption in transnational deals.

It was also a step toward full O.E.C.D. membership for Russia, because acceptance into the anti-bribery convention is a requirement for aspiring members. Russia first asked to join in 2007, along with Chile, Estonia, Slovenia and Israel. The other four are already members.

All 34 members of the O.E.C.D., as well as four nonmembers, have signed the anti-bribery convention. Secretary of State Hillary Clinton attended the ceremony at the organization’s headquarters in Paris, highlighting the convention’s importance to the United States.

“This is an important step for Russia and for all members and partners of the O.E.C.D.,” Mrs. Clinton said. “Russia has removed a major obstacle to doing business and advancing economic growth.”

She also spoke broadly about state-owned enterprises, without mentioning Russia specifically. “We recognize that countries will make different choices about how much of their economies to keep in the hands of government,” she said. “Still — whether they are owned by shareholders or states — all companies should operate on a level playing field.”

A working group will now gauge whether Russia’s new legislation adheres to its standards. Bribery and other forms of corruption are a scourge inside Russia. The new law, however, addresses bribery outside Russia’s borders. Similar to the Foreign Corrupt Practices Act in the United States, it criminalizes the payment of a bribe by a Russian to an official of a foreign government.

Russia has not committed to stricter measures against bribery at home. Transparency International, the anticorruption group, ranks Russia 154th in the world on its 2010 Corruption Perception index, tied with Papua New Guinea, Laos, Cambodia, a number of African countries and Tajikistan.

The United States encouraged other O.E.C.D. countries to adopt legislation similar to its own law as it became clear that however helpful it was in diminishing corruption in other countries, it was putting American companies at a disadvantage.

The O.E.C.D. convention took effect in 1999. Since then, governments have made headway in pursuing companies that pay bribes.

The new law in Russia raises the existing fines that can be levied on Russian companies that bribe foreign officials and imposes new criminal responsibility. But, recent cases have called into question Russia’s commitment to transnational prosecution of bribery infractions. Even in instances where Germany and the United States have prosecuted their own citizens or businesses for bribing Russian officials, Russian law enforcement agencies have not picked up the lead.

Steven Lee Myers contributed reporting from Paris.

Russia Signs OECD Anti-Bribery Convention http://www.themoscowtimes.com/business/article/russia-signs-oecd-anti-bribery-convention/437585.html

26 May 2011By Khristina Narizhnaya

Russia took a major step forward in its three-year effort to join the Organization of Economic Cooperation and Development, or OECD, on Wednesday when it signed onto the Western-dominated forum's anti-bribery convention at a ceremony in Paris on Wednesday.

Economic Development Minister Elvira Nabiullina looked on as First Deputy Minister of Foreign Affairs Andrei Denisov signed the convention, which outlaws bribery of foreign officials in international business transactions and provides enforcement measures. Thirty-eight countries have signed the convention, among them Brazil, South Africa, the United States and Britain. 

"We are looking forward to working with Russia as it continues to [move] toward full OECD membership," U.S. Secretary of State Hillary Clinton said after the ceremony.

"Meeting the high standards of the OECD will complement Russia's own goal of further modernizing and diversifying its economy and at the same time, Russia will enrich the OECD's efforts to drive economic and development cooperation around the world," she said.

This latest step in Russia's fight against corruption follows a long line of recently signed anti-bribery legislation. Last week President Dmitry Medvedev ordered the Justice Ministry to monitor how laws and court decisions are being enforced, and report on progress annually. Earlier this month, the president signed an anti-corruption law raising fines to as much as up to 100 times the amount of the bribe. 

However, the government so far has carried out just over a third of the  26 anti-corruption obligations set by the Council of Europe's Group of States Against Corruption, or GRECO, of which Russia is a member, according to the group's report published in December.

Meanwhile, the State Duma continues to delay ratification of Article 20 of the United Nations Convention Against Corruption, which deals with illicit enrichment of public officials. 

But while anti-corruption efforts overall appear to be increasing, so are bribery and fraud. Corrupt officials steal practically every fifth ruble from the country's defense budget through kickbacks and bogus contracts, chief military prosecutor Sergei Fridinsky told Rossiiskaya Gazeta on Tuesday. 

No less important is the perception that bribery and corporate fraud have increased in Russia over the last three years, as confirmed by 58 percent of respondents to a survey addressing perceptions of corruption released last week by consulting and audit company Ernst & Young.

"The perception of corruption has grown," Ernst & Young partner Ivan Ryutov said. "If it's inside their soul, they talk about it openly," he said.

Ninety-three percent of 108 employees and managers of large Russian companies said bribery is widespread in the country, while 49 percent said the problem is pervasive in their specific industry. More than one-third of employees believe that some kind of fraud occurred in their workplace. In Europe those numbers are 62 percent and 16 percent, respectively. 

More than half of Russian respondents said there are anti-bribery measures in place at their companies, while in Europe that number is 49 percent. Only 19 percent of respondents in Russia said their companies have measures to prevent fraud, versus 29 percent in Europe. 

Businessmen in Russia are more inclined to doctor their company's financial statements and participate in bribery than anywhere else in Europe, and the country ranked second for lavish gift giving and providing luxurious entertainment to get and retain business. 

Corruption in Russia is a $300 billion industry, said Kirill Kabanov, head of the nongovernmental National Anti-Corruption Committee. Transparency International ranked Russia 154th out of 183 countries on its annual corruption index.

Several recent surveys highlighted the problem. According to a European University in St. Petersburg report published earlier this month, bribery is partly to blame for high prices of food, housing and services in Russia. The study revealed that if the bureaucracy was less corrupt and more efficient, real estate could cost 25 to 30 percent less, food prices could go down 15 percent, and communication — 10 percent.

Corruption and fraud will continue to be a problem until society begins to take it seriously, Kabanov said. 

But a move to codify business ethics is under way in Russian companies. Most large companies have established some kind of anti-bribery measures in the last three years, and small ones are following suit.

"Russian companies are keen to find ways of reducing the risk of corruption, and … they find bribery quite shameful and economically debilitating," said International Business Leaders Forum director Brook Horowitz. "They may have to go along with it in order to operate."

US slams Russia over Khodorkovsky treatmenthttp://www.kyivpost.com/news/russia/detail/105288/

Today at 06:12 | Associated Press WASHINGTON (AP) — The United States has harshly criticized Russia for serious judicial failings after a Moscow court upheld a guilty verdict for oil magnate Mikhail Khodorkovsky.

State Department spokesman Mark Toner says Tuesday's decision against ex-Yukos chief Khodorkovsky and co-defendant Platon Lebedev affirmed U.S. concerns about serious due process violations.

He says Russia's legal system has been used for improper ends.

The 47-year-old Khodorkovsky was once Russia's richest man and seen as a political threat to Vladimir Putin.

He was arrested in 2003. His conviction for stealing billions of dollars' worth of oil and laundering the proceeds means he will now remain in prison until 2016.

Toner said Wednesday that Russia cannot become a modern economy without developing an independent judiciary that ensures equal treatment under the law.

Read more: http://www.kyivpost.com/news/russia/detail/105288/#ixzz1NR5mbF9b

Businessman Prokhorov sorry for Khodorkovsky, politician Prokhorov declines to commenthttp://rt.com/politics/news-line/2011-05-26/#id10901

RT News line, May 26

Business tycoon Mikhail Prokhorov, who has recently announced his decision to become an opposition party leader, says that as an individual and businessman he feels sorry for Mikhail Khodorkovsky, but as a politician he would rather not comment on the second verdict to jail the former Yukos CEO. "As an individual, I deeply regret that such processes take place in our country," Prokhorov told Ekho Moskvy radio station. "I am a businessman, and I must stay a businessman until I am confirmed as the leader of the party. So only after June 25, if the Right Cause party approves me as its leader, I’ll be able to start commenting on political issues," he observed.

Action plan of program on interregional Ukrainian-Russian cooperation to be signed this Junehttp://www.kyivpost.com/news/nation/detail/105303/

Today at 10:01 | Interfax-Ukraine An action plan for the program of interregional cooperation between Ukraine and Russia for 2011-2016 will be signed at a meeting of the committee for economic cooperation of the Russian-Ukrainian interstate commission, Ukraine's Vice Premier and Regional Development, Construction, Housing and Utility Minister Viktor Tykhonov has said.

"The Ukrainian Regional Development, Construction, Housing and Utility Ministry has already completed the drawing up of an action plan for this program," Tykhonov said at the Second Forum of the Regions of Ukraine and Russia's Ural Federal District in Kyiv on Wednesday.

"The document has been initialed by the sides and is ready for signing at the seventh meeting of the committee for economic cooperation of the Ukrainian-Russian interstate commission, which is to be held in Moscow on June 7, 2011."

Read more: http://www.kyivpost.com/news/nation/detail/105303/#ixzz1NRLmYuNT

Ukrainian Navy and Russian Black Sea Fleet hold exercises of search and rescue unitshttp://www.kyivpost.com/news/nation/detail/105312/

Today at 11:20 | Interfax-Ukraine

Joint search and rescue exercises by units of the Ukrainian Navy and the Russian Black Sea fleet were carried out on May 25, as part of the Russian-Ukrainian Fairway of Peace 2011 military drills, the press center of the Ukrainian fleet's command has told Interfax-Ukraine.

Sailors from the two states conducted a training exercise in rescuing crews from sinking ships.

Specialists from the search and rescue center of the Ukrainian Navy, crews of the Zaporizhia submarine, the Sokal sanitary cutter, and the Romny inshore boat, and agroup of medical employees of the military clinical center of Crimea's region were involved in the exercises from the Ukrainian side, and the Russian side was represented by employees of the search and rescue department of the Russian Black Sea fleet and a crew from the VM-125 diving boat.

Ukrainian Navy Commander Admiral Viktor Maksymov, the head of Fairway of Peace 2011 drills Black Sea Fleet Commander Vice Admiral Vladimir Koroliov, and the first deputy drills head and first deputy commander of the Ukrainian Navy, Vice Admiral Serhiy Yeliseyev, observed the training exercise.

As reported, the Russian-Ukrainian Fairway of Peace 2011 military exercises are held in Sevastopol and the northwest part of the Black Sea on May 23-27. The theme of the drills is carrying out international peacekeeping operations in a crisis area.

Read more: http://www.kyivpost.com/news/nation/detail/105312/#ixzz1NRjeC2fK

04:47 26/05/2011ALL NEWS

Presence of Russian business in Morocco is growing - RF Ambassador. http://www.itar-tass.com/en/c154/150549.html

26/5 Tass 31

CASABLANCA, May 26 (Itar-Tass) —— Russia’s business is coming to Morocco more and more actively, Russia’s Ambassador to the kingdom Boris Bolotin told the Russia-Morocco Business Council on Thursday.

“The two countries have achieved a high level of economic cooperation, including in trade,” the diplomat said adding that still “there is unused potential and much more may be done by either side.”

“It is complicated to overestimate importance of meetings like this of the business council in Casablanca, as direct contacts between businesses of the two countries are useful for joint work,” Bolotin said.

Russia’s several companies made their presentations to participants in the event.

11:04 26/05/2011ALL NEWS

Motor ship with crew from RF, Malaysia, runs aground on Sakhalin. http://www.itar-tass.com/en/c154/150716.html

26/5 Tass 61

VLADIVOSTOK, May 26 (Itar-Tass) —— The Cambodia-flagged motor ship Sanri ran aground on the western coast of Sakhalin, 15 kilometers north of the village of Ilyinskoye in the Tomari district on Thursday.

The firemen were dispatched to Tomari to make the situation clear. According to preliminary reports, the Sanri ran aground about 50-70 meters off the coast. No storm was reported in the incident area and it is raining in the district.

The motor ship is seen from the road along the western coast. The eyewitnesses claimed that it is a fishing schooner. The ship crew includes nine Russian citizens and four Malaysian citizens.

No sailors were injured, their lives are out of danger, no fuel leaked from the motor ship, the Yuzhno-Sakhalinsk maritime rescue coordination center reported on Thursday. The reasons for the motor ship to run aground are unclear yet, the crew are staying onboard the Sanri motor ship. The motor ship is registered at the Phnom Penh port.

Government chief of staff appointed head of Putin coalitionhttp://en.rian.ru/russia/20110526/164240947.html

10:10 26/05/2011

Vladimir Putin's chief of staff has been appointed acting head of a coalition launched by the prime minister.

Putin's spokesman Dmitry Peskov said Vyacheslav Volodin was "in charge of" the All-Russia People's Front, which includes the ruling United Russia party.

He said it was unclear whether Volodin will remain in the post or make way for somebody else.

In a shock move last week, Russian banking tycoon Alexander Lebedev, co-owner of Russia's leading opposition newspaper Novaya Gazeta, announced that his anti-corruption group Our Capital was joining Putin's latest initiative.

Analysts see the formation of the All-Russia People's Front as a sign that Putin is soliciting popular support ahead of parliamentary elections in December and presidential polls early next year.

MOSCOW, May 26 (RIA Novosti)

12:15 26/05/2011ALL NEWS

Medvedev appoints Vladimir Selin to head FSTEC. http://www.itar-tass.com/en/c154/150789.html

26/5 Tass 168

MOSCOW, May 26 (Itar-Tass) — President Dmitry Medvedev has issued decrees relieving Sergei Grigorov of the duties of Director of the Federal Service for Technical and Export Control (FSTEC) and appointing him an adviser to the President of the Russian Federation, the Kremlin press service announced.

The President appointed Vladimir Selin to head FSTEC, relieving him of his latest duties.

05:03 26/05/2011ALL NEWS

Patrushev to chair meeting on security in economy. http://www.itar-tass.com/en/c154/150553.html

26/5 Tass 11

MOSCOW, May 26 (Itar-Tass) —— Russia’s Secretary of the Security Council Nikolai Patrushev will chair on Thursday a meeting in Sochi.

“The agenda is related to the tasks the Security Council is facing in 2011, including development of labour potential as a major factor for modernisation and innovative development of the economy from the point of view of national security,” the council’s press service said.

Participants in the meeting will discuss “security over election campaigns and major public events in the Southern Federal District.”

In late April, Patrushev chaired a meeting in Tomsk, which was devoted to Russia’s migration policies.

Opposition Leader’s Wife Fights Drug Dealing Charges http://www.themoscowtimes.com/news/article/opposition-leaders-wife-fights-drug-dealing-charges/437539.html

26 May 2011By Alexander Bratersky

SMOLENSK — In 2003 teenager Taisia Osipova became an overnight celebrity in her hometown of Smolensk when she smacked the governor with a bouquet of carnations to protest his policies.

Fast-forward to this year, and Osipova, now 25 and the mother of a 5-year-old daughter, is on trial on charges of drug dealing.

Investigators say Osipova was caught red-handed and may face up to 20 years in prison for selling heroin. But her supporters call the case a clumsy frame-up aimed at punishing her husband, an associate of outspoken Kremlin critic Eduard Limonov.

Osipova was detained last November after police declared they had found a stash of heroin during a search of her home. Investigators said they received a tip from one of her customers and bought 3,000 rubles ($100) worth of heroin from her with marked bills in a string operation.

But Osipova said the cash and the heroin were planted in her house to pressure her husband, Sergei Fomchenkov, a senior member of Limonov's unregistered opposition Other Russia party.

Her belief appears bolstered by the fact that the officers from the police force's anti-narcotics department who searched her house were accompanied by an officer from the force's anti-extremism department, which monitors opposition groups.

Fomchenkov, 38, and his wife met through Limonov's previous organization, the National Bolshevik Party, at whose Smolensk branch Fomchenkov held a senior post until the group was banned as extremist in 2007.

"She was a restless young girl who was attracted by our ideas," Fomchenkov said of his wife in an interview in Moscow, where he works.

She acted on the ideas, too, striking then-Governor Viktor Maslov with flowers during a 2003 public meeting with local religious leaders. "You are getting fat at the expense of ordinary people!" Osipova shouted as she hit the stocky former Federal Security Service official in the face.

The fragrant demarche earned Osipova a one-year suspended sentence on charges of attacking a state official — a punishment that admittedly pales in comparison with what awaits her if she is convicted of drug dealing.

The search of Osipova's private house raises numerous questions.

Police officers moved around the house unmonitored during the November search, Fomchenkov wrote in an open letter posted online in November.

Under the law, police searches have to be conducted in the presence of independent witnesses. In this case, the two witnesses were members of pro-Kremlin youth groups, said Osipova's lawyer Natalya Shaposhnikova.

One witness, Svetlana Seministova, heads the Smolensk branch of Nashi, while the other is an activist with United Russia's youth branch, Young Guard, she said.

"Both belong to political movements, so you can't really call them independent witnesses," she said.

The anti-narcotics officers were accompanied by an officer with the local police force's anti-extremism department, according to a police statement released in November. The officer, Dmitry Savchenkov, in turn, supervised efforts by Seministova, the Nashi activist, to look out for "politically unreliable students" at a local university, Seministova testified at Osipova's trial earlier this month.

Judge Yevgeny Dvoryanchikov rejected a defense request to summon Savchenkov to testify at the trial.

The police statement did not elaborate on why an anti-extremism officer had participated in the search. A spokeswoman for the anti-narcotics department, reached by phone Monday, asked a reporter to call back the next day. On Wednesday she said she was waiting for permission from her superiors to comment on the case and would not put a reporter in contact with anyone else in the department.

Smolensk anti-extremist police did not return repeated calls this week.

Fomchenkov said the search was carried out after police tried to pressure a family friend into planting drugs and marked cash in the house. He only identified the friend by her first name, Marina, adding that she had rejected the request. Marina accused officers from the Moscow police's anti-extremism department of initiating the crackdown on Osipova, Fomchenkov said.

A spokesman for the Moscow department said he was unfamiliar with the specifics of Osipova's case Monday. He said Wednesday that he could not comment.

While investigators said Osipova accepted 3,000 rubles as payment, only 500 rubles in marked bills were found during the search. Investigators said Osipova ate the rest.

The identity of the purported customer who tipped off the police has not been released, and investigators say she has been placed in a witness protection program.

Fomchenkov said police officers took care to film every nook and cranny of his wife's house during the search, and he believes the footage was used to coach the purported customer on what the house looks like.

"Investigation of this case can be seen as a perfect example of multiple violations of the law," said Shaposhnikova, the lawyer.

A spokeswoman for the district prosecutor's office declined to comment on the case, citing the ongoing trial.

Limonov described Fomchenkov as a "brave man who has made a lot of enemies" and is a "key figure" in the Other Russia party.

"He knows enough about the situation in our organization, and so they want to neutralize him," he said by telephone, without elaborating.

On Limonov's behalf, Fomchenkov applied to the Justice Ministry in December to register the Other Russia as a party. The application was rejected.

Fomchenkov works in Moscow and wanted to bring Osipova to the capital to live with him. But she chose to stay in Smolensk, saying the living conditions were better for their daughter.

"The process reminds me of the theater of the absurd," said Leonid Nikolayev, an activist of the radical art group Voina who came to a May hearing to support Osipova.

Nikolayev himself faces jail time for overturning police cars, some with officers in them, in an anti-government protest in St. Petersburg last year. He and a fellow activist were released on bail of 300,000 rubles ($10,700) provided by British graffiti artist Banksy

in February. Banksy donated at total of £90,000 ($146,000) to Voina, and some of the leftover funds have been funneled to Osipova's defense.

Osipova, pale-faced and wearing a tracksuit, sat quietly though the May 3 court hearing. She only broke the silence at the end of the session, when she asked the judge to request the security services to present recordings of bugged phone conversations between her and her husband. She said the phone conversations included a discussion about a possible frame-up by the authorities.

The judge turned down the request, saying the recordings are a "state secret."

"What kind of state secret can a conversation be between a wife and a husband?" Osipova retorted.

The next hearing in the trial, which started in February, is scheduled for June 21 after the judge returns from a vacation. Osipova was refused bail and is staying in pretrial detention.

Her daughter, Katrina, is now in the care of a sister, though relatives say child protection workers have repeatedly threatened to take the child into state custody.

Fomchenkov tried to appear stoic while speaking about his wife's case to The Moscow Times. "I think she will become stronger by going through this," he said. "I know her trial will backfire on the authorities."

But after a pause, he lapsed into a more tender and vulnerable tone. "Even criminals didn't touch women and children," he said.

26 May 2011, 10:32

Female extremist cell foiled in Bashkortostan http://www.interfax-religion.com/?act=news&div=8485

Ufa, May 26, Interfax - A female cell of the Hizb ut-Tahrir international extremist organization has been exposed and crushed in Russia's internal republic of Bashkortostan, the Bashkir Interior Ministry reported.

The Main Investigative Department of the Bashkir Interior Ministry opened a criminal case on charges of organizing an extremist group.

The suspects in the case are three women whose husbands are active members of Hizb ut-Tahrir.

Searches were conducted at their places of residence on May 23, during which extremist literature was seized.

The three female extremists were put in custody.

10:59 26/05/2011ALL NEWS

2 die, one hurt as freight train rams motor car in Kostroma region. http://www.itar-tass.com/en/c154/150710.html

26/5 Tass 142

MOSCOW, May 26 (Itar-Tass) — Two persons were killed and one more injured as a freight trained rammed a motor car in central Russian Kostroma region, a spokesman for the Central regional emergencies centre told Itar-Tass on Thursday.

According to the spokesman, following the collision 12 fuel tanks went off rails, six of them caught on fire. The accident took place at a railway crossing.

Investigation is underway.

U.S. national kills Russian wife, commits suicide in Moscowhttp://en.rian.ru/crime/20110526/164235073.html

02:09 26/05/2011

A U.S. national killed his Russian wife and then committed suicide by jumping from a window on the 15th floor of the Izmailovskaya hotel in the northwest of Moscow, a police source said on Thursday.

"The man stabbed his wife with a knife and then jumped from a hotel window," he said.

The source declined to give more details, saying only that police are currently working at the scene.

MOSCOW, May 26 (RIA Novosti)

10:04 26/05/2011ALL NEWS

Ministry reports normal radiation background in Russia's far east. http://www.itar-tass.com/en/c154/150653.html

26/5 Tass 64

VLADIVOSTOK, May 26 (Itar-Tass) — The far-eastern regional department of Russia's Emergency Situations Ministry said the radiation background is normal, ranging between 10 to 18 milliroentgen per hour.

The report followed a monitoring by 630 stationary and mobile posts, including airborne and seaborne posts. The Nadezhda sailing-ship and the Pavel Gordiyenko research vessels ascertained standard radiation levels along their routes.

The operations headquarters under the Emergency Situations Ministry continues to gather and analyze the data on the situation in the region. It is interacting with regional bodies of the weather service, the state nuclear power corporation (Rosatom), the Federal Service for Supervision of Consumers Protection and Welfare, the Geophysical Service of the Russian Academy of Sciences, and Japan's consulate general in Khabarovsk.

Dozens of wild fires rage in Russia’s Far Easthttp://rt.com/news/line/2011-05-26/#id10883

RT News line, May 26

Russia’s Emergency Situations Ministry announced that some 70 wildfires are still raging in different regions of Russia’s Far East, with an estimated 287 hectares of woods on fire.

Emercom says 89 wildfires were registered in the region over the last 24 hours, of which 23 have already been put out. The firefighting operation involves nearly 4,000 firemen and over 400 vehicles, helicopters and planes.

Elena Skrynnik answered the questions of journalists of the regional media http://www.riadagestan.com/news/2011/05/26/6587/

26.05.2011 , 11:04Text: Bayram Abdullaev Makhachkala, May 26, 2011. Yesterday, May 25 the Russian Agriculture Minister Elena Skrynnik held a video press conference with media representatives of some regions of Russia. The event was attended by journalists from the eight Russia’s provinces: Dagestan, Chuvashia, Udmurtia, Krasnoyarsk, Orenburg, Kurgan and Stavropol Regions.The Minister of Agriculture RD Satmar Amirov and the head of department of the Ministry Sharip Sharipov gathered in the assembly hall of the Ministry along with the representatives of the leading republican mass media.

Before answering questions, Elena Skrynnik had spoken on the priorities for the development of agribusiness in Russia, the assistance rendered by the RF government to agricultural producers of the country, the general tendencies in the country's agricultural sector development, sowing of spring crops, fuel provision, land reclamation, the development of small-scale farming, improving rural livelihoods, etc.

Then the minister responded to reporters' questions. The first question was asked by the head of economic department of the Republican Informational Agency "Dagestan" Bayram Abdullaev:

- Dagestan as one of the major agricultural regions of Russia is experiencing difficulties in storage and sale of products. How the Ministry of Agriculture of Russia intends to help the republican agricultural producers with their problems?

Answering the question, the Minister of agriculture said: "We know that sale of products is one of the major problems for many farmers. The Russian Ministry of Agriculture solves the problem in different directions. In particular, we held a meeting with the company Ashan-Russia and intend to maintain small form of management in rural areas and to create additional conditions for agricultural goods market. In addition, to solve this problem will create a number of processing enterprises. In this direction regional programs will be adopted. In short, the state bodies will encourage the construction of storage facilities for goods produced by domestic farmers."

Among the other questions asked by colleagues from the regions, the most interesting were the questions related to agricultural insurance. The minister noted that the Government RF budgeted 5 billion rubles for this purpose.

"The common efforts of the Government and the business community contribute to the fact that the dairy industry is becoming more attractive for investments. In turn, this increases the availability of high-quality dairy products for our citizens"- Skrynnik pointed out. According to Skrynnik, the measures undertaken saved the average base price for raw milk.

Then Skrynnik, answering the question of a journalist, said that the Russian Government intended to allocate approximately 20 billion rubles for the development of beef cattle to

increase meat production by 250 thousand tons. “To achieve this goal it is necessary to create large farms, feedlots throughout the country”.

St. Petersburg OKs gay demo, Moscow bans Pride againhttp://www.pridesource.com/article.html?article=47220

by Rex Wockner

Originally printed 5/26/2011 (Issue 1921 - Between The Lines News)

INTERNATIONAL NEWS

With city approval, some 150 LGBT activists staged a "Rainbow Flashmob" in St. Petersburg, Russia, on May 17 in conjunction with the International Day Against Homophobia and Transphobia.

Organizers said it was the first time the city had "officially sanctioned" the event.

Anti-gay activists staged a smaller rally nearby. Police prevented them from making contact with the LGBT event.

Other IDAHO events were held in cities across Russia and worldwide.

In Moscow, meanwhile, city officials have rejected applications for the May 28 gay pride march, citing security concerns and a desire to protect minors.

Moscow Pride recently won a ruling from the European Court of Human Rights that previous years' bans by then-Mayor Yuri Luzhkov violated the European Convention on Human Rights in the areas of freedom of assembly and association, right to an effective remedy and prohibition of discrimination.

Gays have marched or staged other public actions yearly since 2005 despite the bans. The small gatherings were attacked by anti-gay hooligans, picketed by religious protesters and broken up by police.

PRESS DIGEST - Russia - May 26http://uk.reuters.com/article/2011/05/26/press-digest-russia-may-idUKLDE74P02D20110526

8:37am BST

MOSCOWN, May 26 (Reuters) - The following are some of the leading stories in Russia's newspapers on Thursday. Reuters has not verified these stories and does not vouch for their accuracy.

KOMMERSANT

www.kommersant.ru

- Russia's state-run company Resorts of the North Caucasus will set up a joint venture with France's Caisse des Depots et Consignations to develop tourism in the region.

- TNK-BP (TNBP.MM: Quote, Profile, Research), the Russian venture of BP (BP.L: Quote, Profile, Research), is prepared to spend $1 billion on buying a 45 percent stake in a Brazilian gas field, the newspaper reports.

VEDOMOSTI

www.vedomosti.ru

- Russia and France may sign a memorandum on joint development of the economy in Russia's North Caucasus, but only under Russian government guarantees.

- Russia's Rosneft (ROSN.MM: Quote, Profile, Research) could attract Shell (RDSa.L: Quote, Profile, Research) to developp jointly Arctic off shore fields, the daily says.

- Russian tycoon Alisher Usmanov has offered shareholders of British soccer club Arsenal 19 percent more than the other bidder.

ROSSIISKAYA GAZETA

www.rg.ru

- The government has decided to lower import taxes for food products and to release up to 150,000 tonnes of sugar from its reserves to support the domestic food market.

- April unemployment was highest in Ingushetia (48.6 percent) and Chechnya (37.1 percent), while nationwide it grew to 7.2 percent against 7.1 in March.

NEZAVISIMAYA GAZETA

www.ng.ru

- The daily doubts that reassuring reports on the high level of safety at Russia's nuclear power plants were true.

- Russia and Ukraine have resumed discussions on the potential revision of the transit gas price but final decision will be made in June when the presidents meet.

RBK DAILY

www.rbcdaily.ru

- Russians taking home loans are returning amounts three times the the size of the loan, the daily says adding that with mortgage rates of 11.5-15.5 percent, borrowers must pay back an average of 150,000 euros in excess of the amount borrowed.

Russian Press at a Glance, Wednesday, May 26, 2011http://en.rian.ru/papers/20110526/164240184.html

09:09 26/05/2011

 

POLITICS

Prime Minister Vladimir Putin said a new body, the Agency for Strategic Initiatives (ASI) could be a mediator between businesses and financial institutions

(Kommersant, Rossiiskaya Gazeta)

 

Sergei Mironov, who lost his position as speaker of the upper house of the Russian parliament, delivered his last speech to the Federation Council on May 25

(Rossiiskaya Gazeta)

 

The Russian Foreign Ministry denounced Amnesty International's labeling of former Yukos owners Mikhail Khodorkovsky and Platon Lebedev as prisoners of conscience - a decision that their supporters said should have been made seven years ago

(The Moscow Times)

 

Russian President Dmitry Medvedev met with high school graduates from orphanages. The president discussed with them the current state and perspectives of education in Russia

(Rossiiskaya Gazeta)

 

ECONOMY & BUSINESS

The European Bank for Reconstruction and Development (EBRD) has decided against providing financial support to the Belarusian central authorities, following negative political developments in the ex-Soviet republic after the recent presidential elections

(Nezavisimaya Gazeta)

 

The Russian Central Bank started the selection of banks which will act as financial consultants in the privatization of 7.58 percent minus one share in the country's largest lender Sberbank

(Vedomosti)

 

The Organization for Economic Cooperation and Development has increased Russia's gross domestic product growth forecast for 2011 to 4.9 percent from 4.2 percent, leaving 2012 GDP forecast unchanged at 4.5 percent

(Kommersant)

 

OIL & GAS

Russian state-run oil major Rosneft may discuss cooperation in development of the Arctic and Black Sea shelf deposits with Shell

(Vedomosti)

 

The European Union will not impose unreasonable limits on the South Stream pipeline project, designed to carry gas to Europe under the Black Sea, EU Energy Commissioner Gunther Oettinger said

(Kommersant)

 

TOURISM

French companies may become major investors in tourism development in Russia’s North Companies. Their main condition is Russia’s state guarantees on reimbursement of investments in case the security situation deteriorates in the region

(Vedomosti, Kommersant)

 

DEFENSE

Russia recalled some of its warships from the joint naval exercise with Ukraine so that they can join naval drills with NATO warships

(Nezavisimaya Gazeta)

 

SOCIETY

A college student who blogged about State Duma deputies playing cards and surfing the Internet during sessions has lost his Duma internship

(The Moscow Times)

 

Over 30 percent of the broadcasting time Russian television channels devote to entertainment programs. Russians also favor watching soap operas on television

(Vedomosti)

 

SPORTS

Russian mining magnate Usmanov, a major shareholder in London's Arsenal Football Club, continues his fight to acquire more stakes in the club

(Vedomosti)

The State of the Russian Military: An SLD Site Visithttp://www.sldinfo.com/?p=19145

05/26/2011 by Richard Weitz

I have had the opportunity to participate in the first Defense and Security section meeting of the Valdai International Discussion Club in Moscow from May 25-27. The discussions focus on the modernization of Russia’s Armed Forces and cooperation in international security. The meeting was co-organized by Russian government RIA Novosti news agency, the independent Council on Foreign and Defense Policy think tank, and the Center for Analysis of Strategies and Technology (CAST) research institute. According to its website, “the Valdai Discussion Club provides a global forum for the world’s leading and best-informed experts on Russia to engage in a sustained dialogue about the country’s political, economic, social and cultural development.”

The participants included about a dozen foreign military experts from Belarus, France, Germany, Norway, Turkey, and the United States. Almost a dozen other participants came from various Russian organizations.

On May 25, the first program day, we traveled an hour outside Moscow by bus to visit the 5th Guards Independent Motor Rifle Brigade. The acting commander led us on a tour of what was formerly known as the Division Tamanskaya. We first learned about the history of the unit through an hour-long tour of its museum. The unit was formed as the 127th Infantry Division in Kharkov on July 8, 1940. It achieved full combat readiness the following year, only two weeks after NAZI Germany launched its surprise attack on Stalin’s underprepared Red Army. The unit fought with distinction throughout the war. It also served in the North Caucasus in the late 1990s, helping to “restore constitutional order to Chechnya.” In line with the current Russian military reform program, the division was restructured as a brigade in the last few years.

After the museum tour, we then visited a barracks for the enlisted personnel. We also toured the gym and ate a decent meal in the canteen. Everything looked very nice though the question naturally arises how representative the facilities on display are of conditions in other parts of the Russian military. The brigade is special in at least one respect: the Russian Army uses the unit to test new tactics, techniques, and procedures.

The most interesting part of the tour was the live fire drill. The acting commander explained to us that new recruits undergo three stages of combat training. First, they study theoretical topics in the form of academic lectures. Then they go to the practicing ground near the dormitory to undertake small-scale simulated training. The final stage involves live-fire training in an open field.

We had the opportunity to watch them engage in the latter two stages of live-fire drills. It was quite a show, with loud explosions and fireworks simulating various combat conditions at the practicing ground. We saw units practice artillery attacks, small unit assaults, medical operations, and even nuclear, biological, and chemical decontamination of a tank with soldiers in personnel protection suits. All the soldiers were male conscripts except for a few male officers and technical specialists.

We then saw an exhibition of some of the most modern equipment of the Russian Army. For example, we were given a detailed briefing on the T-90 main battle tank. The commander said that the T-90 had no equivalent in the world. Unlike the M-1 Abrams, which uses a gas turbine engine, the T-90 uses a diesel engine, which is easier to upkeep and more suitable for Russian winters. The T-90 is also much smaller than the Abrams. We also saw the BTR-80 [GAZ 5903] Armored Personnel Carrier, the 2S6 Tunguska integrated air defense system (armed with cannons as well as surface to air missiles), and other combat systems as well as the Ural system of trucks. We also were able to handle a number of small arms and light weapons as well as uniforms and other military equipment.

We then went back to downtown Moscow to visit the RIA Novosti press club for a discussion on recent Russian military reforms, introduced by Sergey Karaganov, chairman of the “Valdai” Club. I had the opportunity to work with Sergey in the mid-1990s, when I was a post-doc at the Center for Science and International Affairs (CSIA) at Harvard University’s John F. Kennedy School of Government. The CSIA, then led by Graham Allison, collaborated with Karaganov’s Institute on several security projects, sometimes in collaboration with a European institution.

At RIA Novosti, Ruslan Ruslov, the head of CAST, reviewed some of the key Russian military reforms. According to his briefing, the Russian army before the reform process began a few years suffered from several major flaws.

These defects included excessively large command and administrative structures given the number of 100,000 combat-ready troops; a disproportionate number of officers and warrant officers, who comprised approximately half of Russia’s military personnel; less than 13 percent of units being fully manned and combat ready; and hardly any procurement of modern weapons. Several other contextual factors drove the reform process, including a radical transformation in Russia’s military-political situation due to the declining probability of large-scale wars and the growing prospects of Russian military involvement in regional conflicts, insurgencies, and counterterrorism operations.

In addition, modern warfare had evolved with network-centric operations and tactics replacing those for deep attacks, resulting in a rising relative importance of the Air Force and cyber systems and decreasing need for traditional conventional ground forces.

One of the main elements of the reform included transitioning from a mass-mobilization army to a smaller number of better trained and effective permanent combat readiness

forces, with the undermanned (“cadre”) units consolidated into a smaller number of fully manned and combat ready brigades. Most of the personnel cuts were directed against the officer corps, which was to be reduced by more than half, from 355,000 to 150,000, with all warrant officers eliminated and a new noncommissioned officer corps replaced. The main administrative unit was to change from divisions and regiments to smaller and more flexible brigades. The number of Army units was to decrease from 1,890 to 172 units, the number of Air Force units from 340 to 180, and the number of Navy units from 240 to 123.

The reform also envisaged an end to efforts to replace all conscripts with professional contract soldiers because conscript soldiers are cheaper, provided a large well-trained reserve component after they leave active service, and represent a practice more in harmony with Russian history and tradition.

The problem is that the length of the conscription, 12 months, does not provide sufficient time to train soldiers in modern combat operations. The reforms sought to improve the conditions of conscription by allowing them to serve close to their homes in some cases, by establishing a five-day work week (with two days off), and some less pleasant non-combat tasks (such as cleaning and cooking) outsourced to contractors.

Thus far, the reforms have achieved mixed results. Critics complain they have been proceeding too rapidly, with insufficient development and planning. The Russian government’s ability to provide adequate financial and other resources to the reform process has also been questioned. The transformation of the units has been criticized for having insufficient command, reconnaissance, logistics, and rear services components. The ability of civilians to replace so many military personnel is also uncertain. The Ministry of Defense has also not yet made clear how it plans to train and maintain the reserve component.

Konstantin Makienko of CAST delivered a report on “State Armament Program 2011-2020.” The reforms have sought to increase the large-scale acquisition and procurement of modern military equipment. Most of this equipment is Russian-made, but some foreign systems are being imported from foreign countries to help keep the Russian defense industries, not wishing to lose their domestic market, competitive. In contrast, the large size of the State Armament Program (SAP) 2011-2020 means that Russian defense industries will now give priority to providing weapons to the Russian military rather than manufacturing systems for exports.

The SAP aims to increase the proportion of modern weaponry in service with the Russian military to 30 per cent by 2015, and to 70 percent (up to 100 per cent for some types of weapons) by 2020. The Ministry of Defense (MOD) will spend 19.5 trillion roubles for its share of the program, with other security services paying smaller sums for their orders. The Ministry’s priority procurement areas will be strategic nuclear forces, high-precision conventional weapons, and command, control, computers, and Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) systems. Military research and development  spending will decrease considerably from

current levels to 10 per cent of overall spending, while 80 per cent of the MOD SAP will now go to buying new weapons, with the remaining 10 per cent paying for the repair and upgrade of existing equipment.

Under the SAP 2011-2020, the Air Force will procure up to 70 fifth-generation T-50 Fighters, 96 multirole Su-35S fighters, as many as 100 Su-34 frontline bombers, up to 20 An-124 heavy transports, 50-90 Il-476 transports, and as many as 120 Yak-130 advanced jet trainers. The Air Force will also order 900-1000 helicopters, which includes 250 Mi-28N attack helicopters, as many as 120 Ka-52A and Ka-52K attack helicopters, 22 Mi-35M attack helicopters, and as many as 200 air defense systems.

Meanwhile, the Navy will procure 6-8 Project 955A and 955U strategic ballistic missile submarines, 150 R-30 Bulava submarine-launched ballistic missiles (SLBMs), about 40 R-29RMU-2 Sineva SLBMs, 6 Project 885/885M nuclear-powered submarines, 2 Project 677 diesel-electric submarines, 3 Project 06363 diesel-electric submarines, and 2 foreign-made landing helicopter docks (perhaps France’s Mistral-class ships), 8 Project 22350 frigates, 6 Project 11356M frigates, 1 Project 11661K frigate, and 35 corvettes, including at least 4 of the advanced Project 20381/20385. The Navy will also receive 26 MiG-29K carrier-based fighter planes. The SAP will also finance the repair and upgrade of the Project 11435 heavy aircraft carrying cruiser and the Project 11442 heavy nuclear-powered guided missile cruiser.

The main threat to the fulfillment of the SAP is Russia’s uncertain macroeconomic situation. Another problem could be the persistent weaknesses in some elements of Russia’s military-industrial complex, which has yet to fully recover from the break-up of the integrated Soviet complex in which defense orders received priority resources. The problems with the development program for the Bulava SLBM are particularly indicative of the problem Russian defense firms have in integrating complex weapons systems when a number of small sub-contractors are responsible for developing and manufacturing key components.

They came, they saw…http://rt.com/politics/press/trud/foreign-intelligence-russia-military/en/

Published: 26 May, 2011, 02:13Edited: 26 May, 2011, 02:50

What secrets foreign countries are trying to get out of Russia By Ivan Shestakov

Recently, a military attaché at the Israeli embassy who was accused of espionage by Russian intelligence was detained and deported from Moscow. Russian intelligence

agents tell Trud-7 about the types of secrets representatives of foreign countries are trying to “sniff out” in Russia.

In recent years, espionage scandals have become commonplace: Russia is expelling enemy spies, putting traitors on trial, and exposing spy networks. Meanwhile, the general public does not understand what it is they could be looking for here when, in the age of the internet, social networking sites, and satellite communications, there is practically no more classified information.

The Federal Security Service (FSB) annually reports on the suppression of activity of dozens of foreign spies and their Russian agents. Most often, they are staff members of the US and British intelligence services, which have always conducted large-scale intelligence operations in our country. The question is: What is it that they are looking for here today?

“They are interested in information on the political and socioeconomic situation and the Russian leadership’s plans in the international arena,” explained Russian counterintelligence agents. “But they are especially concerned about the state of combat readiness, development of the defense-industrial complex, reorganization of our army, especially in the nuclear missiles sphere, and the latest models of weapons and military equipment.”  

A dossier on the officers

“The interest of all foreign military attaches – without exception – who are working in Moscow is today focused on the Bulava (a submarine-based ballistic missile),” Igor Korotchenko, a former career officer at the Russian foreign intelligence agency, the GRU, told Trud-7. “Intelligence agents are working in the same area. Moreover, information is gathered on high-ranking military officials. For example, the CIA definitely has a dossier for every Russian brigade commander (before, it was division commanders). Why? In order to understand what motivates high-ranking officers’ decision-making.”   

If you recall the high-profile trials against Russian traitors, they are all in one way or another connected to the army. A former staff member of the Institute for US and Canadian Studies of the Russian Academy of Sciences, Igor Sutyagin, was imprisoned for transferring information about the weapons on Russian new-generation submarines to US intelligence officers, who worked undercover at a British consulting company. His lawyers insisted that Sutyagin was using open sources, as he did not have access to any secret information.

“This is called analytical espionage,” explained Korotchenko. “If Sutyagin had published his research in some journal, no one would have paid any attention to him. But he was recruited by a foreign intelligence agency; he was working for the US for money. And that is treason.”  

Incidentally, the fact that the US swapped Sutyagin (and three other Russians who were serving time in prison for espionage) for 10 Russian intelligence agents who were exposed in the US did not leave any doubts about the fact that he was, indeed, spying for the US. In 2000, Sergey Avramenko, a staff member of the Defense Ministry’s Central Scientific Research Institute, was found guilty of trying to transfer information about one of the latest military aircraft developments to foreign intelligence. In 2007, Igor Arsentyev, who was transferring defense information to foreign intelligence agencies while working for one of the Scientific Research Institutes of the Defense Ministry, was charged with treason in 2007. Other than the Americans and the British, according to a source in counterintelligence, our defense is actively researched by the Pakistanis, who are adamantly trying to gain access to military and dual-purpose technologies (space, laser, bio-technologies, etc.).

Israeli intelligence is researching the field of Russia’s military-technical cooperation with a number of countries. According to the FSB, the deported Israeli attaché, V. Leiderman, without any sense of shame, was inquiring about Russia’s military supplies to Syria and other Middle Eastern states. However, it was also said that he had actively moved Israeli unmanned aerial vehicles to Russia, and his expulsion automatically eliminated a competitor for Russian-produced UAVs.

Last year, a staff member of the Romanian embassy in Moscow, Gabriel Grecu, was arrested and deported for using an agent to collect information on the situation of the Black Sea Fleet, the Russian military contingent in Transnistria, and Russian-Moldovan relations on the eve of the presidential election in Moldova.              

“Selling homeland over the phone”

In addition to military secrets, foreign intelligence agencies are conducting political intelligence in Russia. In this area, they are mainly interested in the funding sources of major political parties, relations between party leaders, and personal information about the key players on the Russian political scene. The data about the situation in Russia, our state leaders’ finances – particularly those of Vladimir Putin, Igor Sechin and Yury Luzhkov, which had been collected from various sources, including by US intelligence agencies – were published by the scandalous WikiLeaks website.

Turkish special services are actively working in our country. Their goal is to reinforce their country’s positions among the political elite and big business representatives in the densely-populated Muslim regions of Russia. According to a Russian counterintelligence source, Ukrainian intelligence agencies are actively working in Russia and recruiting agents in practically all spheres of activity – political, economic, military, etc. Perhaps Georgian spies are actively working with them.     

What are some of the methods used by modern spies? As it is known, only recruits are able to provide access to practically any source of information.

“Money, bribery, blackmail, exemption from punishment for committed crimes – these are the main methods of recruitment used by the British SIS,” a former head of the FSB, Nikolay Patrushev, said several years ago. Members of British intelligence who worked undercover in the British embassy and were unmasked four years ago were, among other things, engaged in recruiting agents by traveling across Russian regions as members of community organizations.  

But according to counterintelligence agents, recently there have emerged a great number of “initiators,” as they are called in the spy world – those in the intelligence agencies, Defense Ministry, scientists and civil servants who take the initiative to contact foreign intelligence agencies and offer their services. Communication with agents is perhaps one of the most vulnerable aspects of reconnaissance, which is often why intelligence agents are exposed.

Before dead drops were used to exchange information; today, it is modern electronic devices. In the past, there was the well-known unusual stone that exposed British spies frequented. In the stone there was a secret transmitting device, which transferred tasks and data to an agent who walked by with a personal computer. Today, mobile phones are used with codes, data storage and a transmitter. A spy can simply walk past his agent and, with the help of his or her phone, transfer and receive data.

No more illegals?

Everyone spies. Even the Vatican has its own intelligence service, which is interested in financial operations and is known for several orchestrated efforts in various states. Russia, of course, also has its intelligence agents in all countries. Incidentally, today only Russia, China and Israel implement the method of illegal reconnaissance – when a spy changes his name and life story, spends decades living in a foreign state, gathering contacts in political, economic and military circles.

“[The Russian spies who were exposed last summer in the US] are a part of a special service – that is, a service of illegal intelligence; it has its own tasks. These tasks usually become relevant in times of crisis, for example, in times of a break in diplomatic relations,” Russian Prime Minister Vladimir Putin said to well-known US television host Larry King, while explaining the mission of the expelled Russian spies. But in essence, no matter what type of a mission it is – legal or illegal – there will always be enough work, which is confirmed by the high-profile exposures and espionage scandals in recent years.

All Tomorrow's Partieshttp://www.foreignpolicy.com/articles/2011/05/25/all_tomorrows_parties

When one fake opposition party stops effectively distracting the Russian people, what's the Kremlin to do? Give them a new one, of course. BY JULIA IOFFE | MAY 25, 2011

I've just returned to Moscow after a two-week vacation to find that, true to the Gogolian model of Russian history, lots has happened, but nothing's changed. In my absence, the electoral campaign has swung into high gear: Heads have rolled, others were made into official heads, still others lost their precious marbles. And yet, at the end of the two-week bonanza of firings and the first press conference of President Dmitry Medvedev's three years in office, no one knows any more than they did before.

Let's recap. In mid April, we heard of the sacking of Alexey Chadaev, the young chief ideologist of United Russia, Vladimir Putin's party. Two weeks later, Gleb Pavlovsky, a "politilogist" who is often quoted here and who runs Fund for Effective Politics, a think tank that was widely seen as a Kremlin stand-in, was fired from his position as Medvedev's volunteer political advisor. Tit-for-tat? Maybe. Significance? Unclear.

Around the same time, Sergei Mironov, speaker of the Russian Senate (the Federation Council) and head of the dummy A Just Russia party, found himself in hot water, ostensibly for criticizing his native St. Petersburg. (He said it was the most corrupt city in Russia.) In May, he was removed from his government post, and talk of dissolving his party began to circulate. It was also around this time that Putin announced the formation of the new All-Russia People's Front, a strange amalgam of hail-Mary populism and Monty Python. Making way for a new Kremlin-made opposition party? Probably. End result? Comedy.

And then came the curve ball: On May 16, Mikhail Prokhorov, playboy billionaire and co-owner, with Jay-Z, of the New Jersey Nets, was trotted out as the man who would head another Kremlin dummy, the Just Cause Party. The names of the two parties sound similar because of an English translation glitch, and yet it's a telling one: Both were created by the Kremlin to funnel oppositionally-minded voters away from the actual opposition. The only difference is in target demographics. A Just Russia is aimed at people sympathetic to the parties that used to be the real threat to United Russia: the Communists and the nationalist-populist Liberal Democratic Party. More recently, however, United Russia has swallowed up some of their positions, and those two parties have become loyal vassals of the Kremlin, making A Just Russia somewhat superfluous.

These days, the people alienated by the Kremlin are the ones who have done well in the market economy, the young, economically liberal, well-off middle class and elite. Given Prokhorov's allure with this crowd -- he is an internationally successful businessman who has just clocked in as the third-richest man in Russia -- it seemed clear that his newly resurfaced Just Cause (a right-leaning, market-oriented party) was to be the replacement for Mironov's A Just Russia.

Fine. But what of Medvedev's first real presidential press conference, just two days after Prokhorov's big news? The presser, announced well in advance with great fanfare, was eagerly anticipated by journalists: What was Medvedev was planning to say? Would he finally put an end to the agonizing guessing game and declare his candidacy? Was he going to -- gasp -- fire Putin?

As it turned out, none of the above. When the big day came, Medvedev talked for just over two hours about, well, nothing. He talked about television, about parking, about reindeers. When asked the question that's been tormenting Moscow elites for months -- who, for God's sake, would "run"? -- Medvedev dodged. Awkwardly. "Finally, you asked this question," he joked, and then proceeded to discuss the nature of politics, very broadly speaking. "If I decide to make such a statement, I'll do it," he added, telling the journalists, confusingly, that a press conference was not the appropriate venue for such an announcement.

"This was a bit of an unfortunate performance," Pavlovsky told me afterward. "Everyone wanted to know one thing, and he didn't discuss it. You can't gather the press and not talk about what they want to talk about. It angers them." (A week out, the consensus seems to be that Medvedev wanted to show that he was not bent on confrontation with Putin. But who knows, really?)

As for his firing, Pavlovsky said he was let go because he was openly anti-tandem and had been publicly boosting Medvedev's candidacy for months. Says Pavlovsky: "It wracked a lot of nerves at the White House," where Putin has his office. Vladislav Surkov, the Russian Karl Rove currently serving as Medvedev's first deputy chief of staff, "suffered for this the most," says Pavlovsky. "I spoke with Surkov more than with anyone else, and all of my statements [about Medvedev being better for Russia than Putin] were attributed to Surkov's intrigues."

And Alexey Chadaev? Pavlovsky denies there's any connection between the two firings, but according to a high-ranking United Russia source, Chadaev, a White House (i.e., Putin) ally, was let go as a lamb sacrificed to the Kremlin (i.e., Medvedev), which was made to fire Pavlovsky for offending the White House. But this explanation is probably just an attempt at saving face. More likely, it was the other way around: Chadaev (who also has made numerous FP appearances) was let go for United Russia's relatively poor showing in the March regional elections, and Pavlovsky, long a thorn in someone's side, was thrown on the pyre with him.

That's all an aside, however. More important (that being a very relative term in this year of pointless uncertainty) is Sergei Mironov's ouster. Since 2006, when Surkov formed A Just Cause to offer an appearance of a two-party democracy, Mironov and his party had played the role of "system opposition" moderately well: garnering votes from people not willing to vote for United Russia and using them as a mandate to do whatever United Russia does in the Duma.

In the past year, however, pressure has built up in -- or, rather, around -- the system. The young, educated, globally minded urban middle class has become increasingly fed up with the corruption and empty rhetoric they see around them, paving the way for such massively successful projects like the KermlinRussia Twitter parody, or Alexey Navalny's anti-corruption work. A Just Russia failed to pacify this potentially combustible group, and so Mironov had to go. Though he continues to head the party (while it still exists), he has lost, along with his Federation Council seat (which he formally handed over today), an apartment provided by the state, a dacha, a private jet, personal security guards, and even the space where he housed his, yes, rock collection, accumulated while he worked as a geologist in the 1970s and '80s.

In his stead, we get Prokhorov, a man who is good at business, a man who, like his constituents, feels equally comfortable in Russia and in the West, a man who, in his acceptance, talked of changing things -- a clear appeal to those who would support people like Navalny. But let's be honest: Most likely, this was not Prokhorov's idea. "He wasn't in any party before," said Andrei Belyak, a spokesman for Prokhorov's Onexim Group. "He didn't touch politics before." According to Belyak, it was "a proposal from the party," proposals that, in Moscow, tend to be offers you can't refuse. As Russian sociologist Denis Volkov told the New York Times, "Major businessmen are under the authorities' control. If the government says you have to head a party, you head a party." (Prokhorov has been the subject of one such political offer before: his idea to build the first Russian-made hybrid car, the Ë-mobile. According to one Onexim insider, the idea wasn't his at all; it was a pitch from the Kremlin. The idea for the title -- which, to a Russian ear sounds like "F-mobile" would to an American one -- well, that was intentional, and another story altogether.)

So whose idea was it? A few weeks before the Prokhorov announcement, I went to visit a man named Leonid Gozman, a former professor of psychiatry who was long a fixture on the political scene as a political advisor, including to the two great reformers Yegor Gaidar and Anatoly Chubais. Now Gozman is the co-chair of Just Cause and has a spacious office paneled in dark wood overlooking one of Moscow's sprawling bedroom communities. It is, strangely enough, part of the offices of Rosnano, the nanotechnology corporation once owned by the Russian state and headed by his comrade-in-arms Chubais. (Chubais, Gozman told me, provides him with political cover.)

Sitting in a big leather armchair and munching on sweets, Gozman explained his vision for the future of Russian politics. "The heroic period of Russian politics is over," he said. "Now we need normal, boring political competition; 5 percent here, 5 percent there.... The most important task is institutionalize the schism in the ruling elite. Right now, we have people working in one government whose political views are more different than, say, Obama's and Sarah Palin's. Much more." That is, the government includes both people like the liberal finance minister Alexei Kudrin, and hardliner former spook Igor Sechin. "This is normally called a coalition government, except in a coalition government, each of these factions has a party behind it," Gozman continued. The point, then, would be to create a second party so that the liberals and the hawks don't have to join the same one -- in other words, more simulacra.

Was tapping Prokhorov a move to make Just Cause into such a party, I asked Gozman after the announcement? "Absolutely," he said. Prokhorov himself has since said that he'd like to see Just Cause come in second in the fall parliamentary elections: a prediction that, given the engineered nature of Russian elections, will probably come to pass.

With all this political fidgeting, the end result is that little has changed in Moscow except the mood: It is increasingly tense and increasingly toxic, as people become increasingly fed up with waiting for such a big decision while watching the grand shows of incremental maneuvering. (Yesterday's instantaneous dismissal of Mikhail Khodorkovsky's appeal, combined with a barely reduced sentence, is a perfect example of how little these little things mean.)

"These are big questions, and business can't wait half a year to get the answers," Pavlovsky said, noting that the stalled-out tandem has led the country into political crisis. "It's unbearable. For business, for society, even for Putin's circle, which is clearly starting to put pressure on him because he can't solve a simple question." Pavlovsky is understandably frustrated, but there's really nothing to be done except wait and keep playing the utterly fruitless, frustrating guessing game. Or just wait for August. There's always August.

National Economic Trends

Central bank sticks to 6-7 pct inflation forecasthttp://en.rian.ru/business/20110526/164242641.html

11:44 26/05/2011

ST. PETERSBURG, May 26 (RIA Novosti) - Russia's Central Bank is maintaining its inflation forecast of 5.5 percent for January-June 2011 and 1.5 percent in the second half of the year and is prioritizing measures to curb consumer price growth, Central Bank Chairman Sergei Ignatyev said on Thursday.

"Reducing inflation is a top priority of the Central Bank's monetary policy. Under the monetary policy guidelines, we must keep inflation within 6-7 percent this year. We have not changed our inflation forecast and are not going to do so," he said.

Cumulative inflation amounted to 4.6 percent as of May 23, 2011 as compared with 3.8 percent a year earlier, he said.

The Central Bank is gradually tightening its monetary policy and has raised its interest rates and obligatory reserve requirements several times since the beginning of this year to meet inflation targets, he said.

"But we are trying to do it very carefully so as not to do any serious harm to economic growth," he said.

Money supply growth in Russia has slowed to an annualized 23 percent as of May 20, 2011 from 31 percent as of January 1, 2011 and 36 percent as of September 1, 2010, he said.

"At the beginning of the year, we could speak about a large surplus of liquidity. Now we can hardly say so. There is no excessive liquidity in the banking sector," he said.

The Central Bank's exchange rate policy is playing a major role in money supply slowdown and lower inflation, he said.

"We are gradually making the ruble exchange rate more flexible, creating conditions for lower inflation," he said.

In 2010, annual inflation in Russia hit 8.8 percent, which was beyond all forecasts and equaled the figures for 2009, a year of global financial meltdown.

10:28 26/05/2011ALL NEWS

Inflation not to exceed 1,5% in Russia in 2nd half of 2011. http://www.itar-tass.com/en/c154/150682.html

26/5 Tass 120

ST. PETERSBURG, May 26 (Itar-Tass) —— The inflation rate will not exceed 1.5% in Russia in the second half of this year, President of the Central Bank of Russia (CBR) Sergei Ignatyev has made a forecast in his speech at the 20th International Banking Congress here on Thursday.

“In November 2010 we forecast an inflation rate at up to 6-7% in 2011. We did not change this forecast and are not going to do it,” Ignatyev said, noting that no unpleasant surprises, which could have affected the financial situation, took place since November 2010.

“I hope that from December to June 2011 the inflation rate will make less than 5.5% and less than 1.5% in case of a good harvest in the second half of the year,” the president of the Central Bank of Russia said.

He also noted about the CBR course for a tougher monetary policy to retain the inflation growth rate. Ignatyev also stated that any measures will be taken cautiously in order not to undermine the economic growth.

H1 inflation pegged at 5.5%

http://www.rbcnews.com/free/20110526110429.shtml

      RBC, 26.05.2011, St. Petersburg 11:04:29.Russia's inflation is not expected to exceed 5.5% in the first half of the year and 1.5% in the second half, Central Bank of Russia (CBR) Chairman Sergey Ignatyev said at the International Banking Congress in St. Petersburg today.

      Cumulative inflation totaled 4.6% as of May 23 since January 1, up from 3.8% in the same period of 2010. The CBR maintains its inflation forecast for 2011 at 6%-7%, he said.

10:27 26/05/2011ALL NEWS

Capital outflow from Russia reaches 30 bln dlrs since early 2011. http://www.itar-tass.com/en/c154/150681.html

26/5 Tass 123

ST PETERSBURG, May 26 (Itar-Tass) — Russian Central Bank governor Sergei Ignatyev said net capital outflow from the country reached 30 billion dollars in the first four months of this year.

Ignatyev was speaking at the 20th international banking congress in St Petersburg on Thursday.

"It is a rather large sum," he noted.

According to Ignatyev, it does not appear possible to give a simple and unequivocal explanation of the process.

"Perhaps, market participants doubt the stability of high oil prices and are expecting their decrease, which might weaken the rouble, or they are worried about growing imports as they increased by 40 percent in the first four months." It decreases the trade surplus, he said.

The Central Bank governor underlined that the main cause behind capital outflow is "the not-quite-favorable investment climate."

May 26, 2011 10:38

Imports into Russia grow 40% in Jan-Apr - CB chairmanhttp://www.interfax.com/newsinf.asp?id=246675

MOSCOW. May 26 (Interfax) - Russia's imports grew 40% year-on-year in the first four months of 2011, Central Bank of Russia Chairman Sergei Ignatyev said at a banking conference in St. Petersburg.

"Maybe currency market players are concerned about the rapid rise in imports. In the first four months, the importation of goods increased 40% compared with the same period of last year. That could also prompt a lower current accounts payment surplus and a drop of the ruble exchange rate," Ignatyev said.

Cf

11:08 26/05/2011ALL NEWS

Russia gold, currency reserves up on May 13-20. http://www.itar-tass.com/en/c154/150723.html

(adds)

26/5 Tass

MOSCOW, May 26 (Itar-Tass) Russia's gold and foreign exchange reserves climbed by 2.4 million US dollars from 514.4 billion dollars to 516.8 billion (or by 0.47 per cent) on May 13-20, the business news agency PRIME-TASS reported on Thursday with reference to the foreign and public relations department of the Central Bank of Russia (CBR).

The country's foreign exchange reserves record registered on August 8, 2008 was 598.1 billion US dollars.

Since January 1, when the gold and foreign exchange reserves amounted to 479.379 billion dollars, this index has been raised by 7.8 percent.

11:43 26/05/2011ALL NEWS

RF Central Bank concerned over high interests on deposits in some banks. http://www.itar-tass.com/en/c154/150753.html

26/5 Tass 144

ST. PETERSBURG, May 26 (Itar-Tass) —— Russia’s Central Bank (CBR) is concerned over overrated interests on deposits in a number of banks, whose assets give rise to questions as to their quality, Gennady Melikyan, the Central Banks’ first deputy chairman, said on Thursday at the 20th International Banking Congress.

According to Melikyan, a number of banks are offering unreasonably high interest rates on deposits in order to attract private clients. “The role of individuals’ deposits as source of resources for banks has visibly grown,” he said and added that banks with assets of dubious quality are showing the biggest activity on the market.

“Attracting short-term individuals’ deposits such banks are making semblance of wealth. It looks like some managers prefer not to think about the future,” he said.

Given this, Melikyan however called on the Central Bank’ s territorial bodies not to haste to employ restrictive measure to banks offering overrated interests and rather pay more attention to the quality of their assets.

May 26, 2011 12:27

Add'l Bank of Moscow capitalization not needed now – Kostinhttp://www.interfax.com/newsinf.asp?id=246721

ST. PETERSBURG. May 26 (Interfax) - Bank of Moscow's (RTS: MMBM) capitalization does not require an increase at this time, VTB (RTS: VTBR) chief Andrei Kosting said.

"It is too early to talk about it," Kostin told reporters. "I don't think it is required," he said.

The Central Bank of Russia has extended its review of Bank of Moscow until June 20, he said, and a more detailed evaluation will be forthcoming after it ends.

Cf

Gov't mulls lifting ban on grain exports

http://www.rbcnews.com/free/20110526120142.shtml

      RBC, 26.05.2011, Moscow 12:01:42.The government is expected to consider the matter of existing ban on grain exports within the next few days, First Deputy Prime Minister Viktor Zubkov announced in an interview with Rossiya 24 channel. He indicated that the government had to assess the amount of grain that would be left in the country by July 1, when the agricultural year is over. The decision will be based on this figure. According to Zubkov, the situation is generally good.

      When asked about the global market's reaction to the potential lifting of the ban, Zubkov noted, "Russia has always had great export potential, and if we open up exports, it is bound to affect the global market." At the same time, the official claimed that the quality of Russian grain had always been high, which resulted in consistent demand.

Russia: the Government to announce the decision about the terms of grain exports embargohttp://www.agrimarket.info/showart.php?id=108049

 05/26/2011 10:39  

According to the Vice-Prime Minister of the Russian Federation Victor Zubkov, during the nearest days the Government will accept the decision on the terms of grain exports embargo. It is necessary to calculate the volume of ending stocks as of June 1, 2011.

Grain exports embargo was imposed by the Government of Russia on August 15, 2010 after the Russian Federation lost about the third of the crop due to anomaly heat and droughts (the country harvested just 60.9 mln tonnes of grains as opposed to 97 mln tonnes during the previous year). Embargo was valid till December 31, 2010, but then the Government prolonged it till July 1, 2011. According to the forecast of the Ministry of Agriculture, this year grain production may total about 85-90 mln tonnes.

Russian grain exports embargo cancellation may affect the situation on the world market, due to Russian grains had always a good level of demand. At the same time the Government needs to develop the complex of the steps in order to prevent new jump in prices for grain.

If the ban will be canceled in July, then in August it is possible to expect the essential export supplies and the positive influence of the stated decision on the domestic market. According to the calculations of the General Director of “ProZerno” LLC Vladimir Petrichenko, the export potential of Russia for the 2011/12 MY totals at least 17.5 mln tonnes, which is rather sufficient volume for any limitations like quotas or duties.

Russia: United Grain Company singed the contracts for realization of 1.6 mln tonne of feed grainhttp://www.agrimarket.info/showart.php?id=108040

05/26/2011 08:39  

The representative of the United Grain Company announced that as of May 25, 2011 the company signed the contracts for realization of 1.6 mln tonnes of feed grain with the enterprises of 52 entities of Russia. The buyers provided the payment for 1.1 mln tonnes of feed grain, and received over 80% of grain.

According to the Decree of the Government of the Russian Federation the Company plans to realize 2.39 mln tonnes of feed grain from the stocks of the Government Investment Fund, including 1.4 mln tonnes of 5-grade wheat and 982 thsd tonnes of feed barley, purchased during the interventions in 2008-2009.

More officials, higher salarieshttp://rt.com/politics/press/gazeta-ru/salaries-officials-average-federal/en/

Published: 26 May, 2011, 07:04Edited: 26 May, 2011, 07:04

The number of officials is rising, despite plans to reduce the state apparatus By Svetlana Bocharova and Alena Pustovalova

Officials’ salaries are rising and their number continue to increase, despite the authorities’ promise to reduce both. According to a Rosstat (Russian Federal State Statistics Service) report, the salaries of the presidential administration have surpassed those of the government. Kremlin officials are earning more than anyone else – over 86,000 rubles. The incomes of Rosrezerv (Russian Agency for State Reserves) and Defense Ministry employees are closest to that earned by the people.

On Wednesday, Rosstat published a quarterly report on the wages and number of staff in the federal government. Despite the legislative prohibition of indexation of officials’ salaries, which was adopted by the State Duma in December 2009 and extended until 2014, wages continue to rise at most federal agencies.

The leaders in salary increases are: the Federal Financial Monitoring Service (comparing to the first quarter, wages increased by 138 percent, with the average salary reaching 50,500 rubles), the Federal Forestry Agency (almost 133 percent growth, average salary is 38,800 rubles), Ministry of Education (129 percent growth, average salary is 56,700 rubles), and the Ministry of Culture (133 percent growth, average salary is 47,000 rubles).

Rosstat noted a marked increase in wages at the Federal Service for Supervision of Health and Social Development (110 percent growth, 36,400 rubles) and the Federal Drug Control Service (110.2 percent, 52,400 rubles).

Now the highest salaries are paid within the presidential administration – on average, it is 86,000 rubles. Last year, the presidential administration came in second place, surpassed only by the Russian government apparatus.

However, in the last year, staff members of the Russian White House lost almost 2 percent of their wages; now their average income amounts to slightly under 68,000 rubles – that is only sixth among federal agencies.

The Audit Chamber now comes in second place (76,500 rubles), the Presidential Affairs Directorate is slightly behind (73,800 rubles), the Federal Arms Procurement Agency follows (73,100 rubles), and then the Constitutional Court (68,000 rubles). The wages of all of the staff members employed at these agencies had decreased in the previous year.

The closest to the people, at least by the level of income, are employees of the Federal Agency for State Reserves (there, employees earn an average of 27,100 rubles) and the Defense Ministry (officers get an average of 27,900 rubles) – their income slightly exceeds the average national salary rate which, according to Rosstat, amounted to 21,000 rubles a month in April 2011.

Almost all officials started earning less, but the rates of salary decreases also vary. Employees of the Federal Service for Defense Contracts have lost more than anyone else (30 percent); now they earn an average of 31,000 rubles. Salaries at the Ministry of Natural Resources have fallen by approximately the same rate – now employees are paid an average of 31,500 rubles. The wages of State Duma employees have been reduced by one-fifth.

Due to the reduction of wages within these agencies, in nine months, the average pay of a federal official has been reduced by almost 7,000 rubles – to up to 45,700 rubles. But when comparing the yearly income, paradoxically, the average salary has, to the contrary, increased by 2 percent.

In Rosstat’s report, it is indicated that officials’ wages have been calculated without taking benefits into account. Social benefits are additional payments from the fund that go toward personal time off and health care services, among other things, explains Pavel Kudyukin, an associate professor of public administration in theory and practice at the Higher School of Economics.

The salaries of civil servants consist of compensation that includes a payment per job and a payment per class ranking, as well as regular bonuses, such as for seniority or gaining access to state secrets. Moreover, civil servants have the so-called variable pay – bonuses for completion of critical assignments – and awards.

“The variable portion of the Russian officials’ salaries is substantially higher than their constant income. The higher the rank of an official, the higher his variable portion of income,” noted Kudyukin. According to him, a similar pay structure for state officials currently exists only in Hungary.

“In other countries, at least 70 percent of salary comes from constant payment. Here, we have the opposite situation,” said the expert.

Neither was the size of the government apparatus reduced as promised. President Dmitry Medvedev ordered in 2009 to reduce the number of officials by 20 percent by the year 2013. In January 2011, Prime Minister Vladimir Putin ordered to reduce the size of the government apparatus by 5 percent. However, according to the Rosstat report, the number of officials continues to rise.

In the first quarter of 2011, there were 38,700 federal officials which, albeit not by much, is nevertheless more than the 38,600 in 2010. At the same time, vacancies continue to exist: the average staffing level within the federal agencies is currently at 84.2 percent, while a year ago it was 84.7 percent, according to the Rosstat report.

Business, Energy or Environmental regulations or discussions

Rosselkhozbank Eurobond yield guidance seen at 6 pcthttp://www.reuters.com/article/2011/05/26/russia-agribank-eurobond-idUSLDE74P0A620110526

2:55am EDT

MOSCOW, May 26 (Reuters) - Rosselkhozbank, Russia's fourth largest lender by assets, is guiding investors towards a yield of around 6 percent for its Eurobond issue, a banking source told Reuters on Thursday.

Earlier in May, Rosselkhozbank decided to exercise a call option for a $500 million subordinated issue of loan participation notes (LPN) raised in September 2006. [ID:nLDE74B1NJ]

The lender started last week meetings with investors to see if there is a demand for its new subordinated debt issue, the size of which is subject to market conditions. [ID:nLDE74G0IA]

(Reporting by Katya Golubkova, editing by Lidia Kelly)

Sberbank inks binding agreement to buy Troika Dialog

http://www.rbcnews.com/free/20110526103643.shtml

      RBC, 26.05.2011, Moscow 10:36:43.Sberbank has signed a binding agreement to purchase 100% of investment company Troika Dialog, the bank said in a statement late Wednesday. The transaction requires the approval of regulators of Russia and other countries where Troika Dialog operates.

      As reported earlier, Sberbank agreed to pay $1bn in cash for the company. It will also pay 8% of the value that Troika Dialog will have gained as of late 2013.

Sberbank of Russia and Troika Dialog sign the legally binding agreement on the two companies' landmark deal

http://www.bne.eu/dispatch_text15426

Troika Dialog - press release May 25, 2011

Sberbank of Russia and Troika Dialog announce the signing of the legally binding agreement on Sberbank of Russia's purchase of a 100% shareholding in Troika Dialog. The signing of the agreement officially confirms the previously announced merger of Russia's largest commercial bank and the country's leading investment firm. The merger, which was first announced in March 2011, marks the appearance of a new player on the international arena - the first veritable universal Russian bank. With the combination of Russia's leading banking and investment businesses, a new undisputed leader of Russia's financial industry has emerged.

Herman Gref, CEO and Chairman of the Board at Sberbank of Russia, said: "Today's agreement marks an important step in the integration of two mutually complementary businesses. It also confirms our commitment to maximizing the full range of opportunities and synergy the deal creates. The merger potentially allows us to effect major changes in the makeup of the Russian financial industry. We will be uniquely able to provide major corporations with universal banking services, and mid-cap companies and retail clients with access to investment banking and wealth management services from the proven market leader."

Ruben Vardanian, Chairman of the Board of Directors and CEO at Troika Dialog, said: "Troika Dialog and Sberbank are longstanding partners with a relationship of mutual trust and confidence built over many years. This enduring partnership is what brought about our decision. Well before we signed the agreement, we made a full analysis and assessment of the opportunities opened to us by the merger of adjacent financial businesses based on our strong partnership, as well as Sberbank's balance sheet strength. The deal positions us as the clear partner of choice for clients in Russia and the CIS, providing unrivaled access to world financial markets and superior

professional competence."

Further implementation of the two companies' merger is subject to regulatory approval in Russia and the other countries where Troika Dialog operates.

VTB may buy $1.2 bln in mortgage loans

http://www.bne.eu/dispatch_text15426

Troika DialogMay 26, 2011

VTB 24 will buy R34 bln ($1.2 bln) in mortgage loans from KIT Finance, media sources report today. KIT Finance's BoD yesterday approved in general the sale of mortgage loans. The mortgage portfolio has a 181m maturity, according to Vedomosti's source, an average yield of 12% and is cleaned of NPLs, KIT Finance added. The purchase will add 16% to VTB Group's mortgage portfolio and increase its retail loan book by 6% (using 2010 IFRS).

Troika's view: With its recent acquisitions of TransCreditBank and Bank of Moscow, VTB is further strengthening its retail positions through inorganic growth and approaching its 2013 retail target of a R1,150-1,380 bln retail loan book (versus the current R542 bln under IFRS). Adding the new mortgage loan book, this would require an increase in retail loans with a CAGR of 26-34% over the next two and a half years (2010 IFRS results consolidated TransCreditBank numbers, but did not consolidate Bank of Moscow). If the portfolio is indeed of high quality, its yield looks attractive and we would view the purchase positively, although the price is obviously the key.

Andrew Keeley

UAC may revise long-term strategy

http://www.rbcnews.com/free/20110526121606.shtml

      RBC, 26.05.2011, Moscow 12:16:06.United Aircraft Corporation (UAC) intends to partially revise its development strategy until 2025, RBC Daily reported today, citing several sources close to UAC.

      The corporation would like to relocate the assembly of future MS-21 medium-range passenger aircraft from its Irkutsk-based plant Irkut to Ulyanovsk-based Aviastar. UAC originally planned to design the MS-21 from scratch, but now the MS-21 could become a longer version, with 130 seats, of SuperJet-100. Aviastar has no

orders for its Tu-204 plane and the future of the Tu-204SM plane is uncertain, the sources said.

      The MS-21 is intended to replace old Tu-154 planes in the fleets of Russian airlines. The plane is expected to make its maiden flight in 2014, while deliveries are expected to commence in 2016.

ALROSA: WITH 1.28 BILLION CARATS OF DIAMONDS, RUSSIA HAS THE WORLD'S LARGEST RESERVES http://www.israelidiamond.co.il/english/News.aspx?boneId=918&objid=9255

26.05.11, 09:27 / World An internal audit by Russia's state-owned diamond producer, Alrosa, has shown that the company possesses 1.28 billion carats of diamond reserves, making it the largest holder of diamonds in the world.

Alrosa CEO Fyodor Andreyev told news outlets that according to the audit, Russia had the largest diamond reserves in the world and added that at current extraction rates, Alrosa would be able to continue producing diamonds for another 40 years.  Some markets analysts question whether the diamond producer will go public given the strong recovery seen in the global diamond market. "The trends we are seeing in India and China are blowing everything away," Andreyev noted.  Alrosa's net profit for 2010 stood at $415 million. The company had a net debt of $3.5 billion, 13% lower than in 2009.  The Renaissance Capital investment firm reports that Alrosa's diamond sales in 2010 were up 45% compared to 2009 and that 64% of those sales were exports.

Grocer X5 first quarter net profit up 23 pct to $97 mlnhttp://en.rian.ru/business/20110526/164242945.html

12:01 26/05/2011

MOSCOW, May 26 (RIA Novosti) - Russia's largest grocery chain, X5 Retail Group, saw first quarter 2011 net profit rise 23 percent year-on-year to $96.9 million to IFRS, the company said in a statement on Thursday.

Analysts expected the grocer's Q1 net profit to fall 5 percent to $72 million.

The group's net sales in the first quarter of 2011 jumped 51 percent to $3.845 billion, the company said in a statement.

The firm's net sales growth is due to a 12 percent increase in like-for-like sales, a 17 percent growth from new stores and a 19 percent contribution from the recently acquired Kopeyka stores, X5 said.

X5's EBITDA amounted to $281 million, while EBITDA margin hit 7.3 percent. The company's gross profit reached $914 million, while gross margin totalled 23.8 percent.

"X5's results this quarter reflect three major priorities: profit margin improvement, stepped up organic growth and launch of the fast-tracked integration of Kopeyka," X5 Retail Group CEO Andrei Gusev said.

May 26, 2011 03:18 ET

Metso to supply minerals processing equipment and services to Russian Copper Company in Russia http://www.marketwire.com/press-release/metso-supply-minerals-processing-equipment-services-russian-copper-company-russia-pinksheets-mxcyy-1519201.htm

Metso Corporation's press release on May 26, 2011 at 10:00 a.m. local time

HELSINKI, FINLAND--(Marketwire - May 26, 2011) - Metso will supply minerals processing equipment and services to Russian Copper Company ZAO (RMK) for its copper operation in Chelyabinskya region in southwestern Russia. The service contract is for over 6 years and includes a team of more than 130 Metso on- site personnel and service parts supply. The complete value of the order is approximately EUR 200 million.

Under the equipment contract, Metso will supply a primary gyratory crusher, three cone crushers, two semiautogenous grinding mills, three screens and three ball mills for the new Mikheevsky GOK copper concentrator. The delivery also includes on-site supervisory services for the installation and commissioning, and on-site training for the Russian Copper Company's operating personnel.

Metso's life-cycle service contract includes maintenance, planning and operational assistance, process and product support services, as well as wear and spare parts and components for the comminution circuit. Metso will also maintain auxiliary equipment for the whole comminution circuit from the gyratory crusher to the hydro-cyclones.

The value of the equipment amounts to approximately EUR 75 million of the total order. The equipment deliveries will be completed within the third quarter of 2013. The total order will be included in Mining and Construction Technology Q2 orders received.

"The construction of Mikheevsky GOK is a project of federal significance and Russian Copper Company starts its implementation with full responsibility. We welcome participation of our old partner - Metso in this project", states Vsevolod V. Levin, President of Russian Copper Company.

According to Jerry Dubiansky, Vice President, Global Sales, Equipment & Systems business line, Metso "What makes this project so unique and really exciting for Metso, is that as we will not only be supplying the equipment but also maintaining it, assisting in the operations and being able to continuously monitor performance and efficiency. This arrangement offers maximum operating availability and minimizes operational risks, increasing the profitability of the project".

Mikheevsky GOK is a greenfield project by ZAO Russian Copper Company (RMK), which is Russia's third largest copper producer. The company was founded in 2004. It produces copper concentrate, copper cathodes and copper rods from mineral and secondary raw materials. The startup of Mikheevsky GOK is planned for the third quarter of 2013, and the planned annual production is 18 million tons of copper.

Technical information

The equipment package includes a primary gyratory crusher designed for a capacity of 4,000 tons per hour and two comminution lines, each with a design capacity of 1412 tons per hour. The comminution lines consist of two large semi- autogenous mills, two large ball mills, heavy duty cone crushers for pebble crushing and a pebble grinding ball mill as well as double deck screens.

With life-cycle services, Metso will draw from its vast global experience with similar operations and the technical expertise of their product lines to deliver a high level of service to Mikheevsky GOK. The planning will be performed during the next 2 years after which Metso will maintain and assist in the operation of their comminution circuit for 6,5 continuous years on cost-per-ton basis. From the moment the equipment begins to operate, Metso will supply a fully tooled and trained team of over 130 people to Mikheevsky GOK.

Metso is a global supplier of sustainable technology and services for mining, construction, power generation, automation, recycling and the pulp and paper industries. We have about 28,500 employees in more than 50 countries. www.metso.com

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Metso Corporation via Thomson Reuters ONE

[HUG#1518989]

Activity in the Oil and Gas sector (including regulatory)

Russian fuel shortages continue, big companies gain price advantage http://www.bne.eu/dispatch_text15426

Citi May 25, 2011

Russia's shortages of gasoline and diesel continue to plague the country in spite of the best efforts of the government to curb the problem. This morning Vedemosti reported that the situation has led to substantial differences in retail pricing between independent gasoline stations and those run by the large integrated refiners. In Moscow, average retail prices climbed by 0.5% w-o-w to 25.76 RUB/litre ($3.4/gal) for 92-octane gasoline. The range in prices was large, some 2.3 RUB/litre ($0.30/gal), with the cheaper fuel to be found at the stations of the major oil companies (LUKoil, TNK-BP, Rosneft, and the like). In the regions the picture is the same, with the difference running as high as 3 RUB/litre in Samara and as low as 1-1.5 RUB/litre in Rostov.

This follows reports we had seen earlier of prices rising on the wholesale market, as the major refiners supply less at wholesale to meet their own stations' needs, but are constrained on pricing somewhat by the various investigations of the Federal Antimonopoly Service.

Bashneft seeks compensation after halting gasoline exportshttp://en.rian.ru/business/20110526/164243487.html

12:37 26/05/2011

UFA, May 26 (RIA Novosti) - One of Russia's top 10 oil firms, Bashneft, has fully suspended gasoline exports to alleviate domestic fuel shortages, but expects compensation for doing so, Bashneft President Alexander Korsik said on Thursday.

"We have stopped all gasoline exports," Korsik said, adding the company expected the government to compensate it for its resulting losses. "We are expecting favorable treatment."

"The mineral extraction tax is the easiest way to do it," added Bashneft Chairman Alexander Goncharov.

The government boosted the gasoline export tariff to a nearly prohibitive 44 percent from May 1 to reduce the shortages that occurred in some regions in mid-April. The situation occurred because local oil companies preferred to sell gasoline abroad where prices are higher than in Russia. The government has said companies would be compensated with a lower mineral extraction or excise tax.

The Federal Antimonopoly Service, the government's competition watchdog, has accused large oil firms of operating a cartel.

Korsik said Bashneft had also postponed regular summer repairs at its refineries so as not to reduce local supplies.

Shtokman to start production at end of 2016-deputy CEOhttp://www.reuters.com/article/2011/05/26/shtokman-brief-idUSLDE74P0I020110526

3:55am EDT

(Corrects spelling of company name in headline)

PARIS, May 26 (Reuters) - Andre Goffart, Shtokman development's deputy CEO, says at an energy conference: * Shotkman's pipeline gas to start at the end of 2016 while LNG part would start in 2017

UPDATE 1-TNK-BP eyes Brazil oil and gas, may pay $1 bln-reporthttp://af.reuters.com/article/energyOilNews/idAFLDE74P0AJ20110526

Thu May 26, 2011 7:15am GMT

* Resources valued at 2 billion barrels of oil equivalent

* Stake sale is subject to discussion between partners

(Adds details)

MOSCOW, May 26 (Reuters) - Russia's TNK-BP (TNBP.MM), half owned by BP (BP.L), is ready to spend $1 billion to acquire a stake in oil and gas fields in Brazil as part of its foreign expansion, the daily Kommersant reported on Thursday.

Analysts say that due to BP's failure to secure a deal with Russia's top crude producer, Rosneft (ROSN.MM), after protests from BP's Russian partners -- much to the chagrin of the Kremlin -- TNK-BP has limited ability in acquiring new hydrocarbon licenses in Russia.

TNK-BP has already acquired assets in Venezuela and Vietnam from BP, which sold it to cover costs incurred after disastrous Gulf of Mexico oil spillage.

Kommersant, citing market sources, said on Thursday TNK-BP is in talks to buy up to 45 percent of oil and gas fields from Brazil's start-up state-run oil company HRT Participacoes (HRTP3.SA).

TNK-BP and consortium of Russia-connected businessmen in the company, AAR, declined to comment.

The paper said it wants to acquire fields, located in the far-flung Solimoes Basin of the Brazilian Amazon region and will be considered after HRT buys out the stake from its partner Petra Energia of Brazil.

It also said TNK-BP valued the fields' resources at 2 billion barrels of oil equivalent. (Writing by Lidia Kelly; editing by James Jukwey)

TNK-BP mulls Brazil oil field stake for $1 billion: reporthttp://in.reuters.com/article/2011/05/26/us-tnk-bp-brazil-idINTRE74P0U320110526

10:44am IST

MOSCOW (Reuters) - BP's (BP.L: Quote, Profile, Research) Russian oil venture, TNK-BP (TNBP.MM: Quote, Profile, Research), is ready to spend $1 billion to buy a 45 percent stake in a Brazil gas field developed by the start-up state-run oil company HRT Participacoes (HRTP3.SA: Quote, Profile, Research), the daily Kommersant reported on Thursday.

The paper, citing market sources, said the field is located in the Solimoes Basin of the Brazilian Amazon region and will be considered after HRT buys out the stake from its partner Petra Energia of Brazil.

(Writing by Lidia Kelly; Editing by Hans Peters)

Shell, Rosneft Discuss Arctic, Black Sea With Putin Deputyhttp://www.bloomberg.com/news/2011-05-25/shell-rosneft-ceos-discuss-arctic-black-sea-with-putin-deputy.html

By Anna Shiryaevskaya - May 25, 2011 6:40 PM GMT+0200

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, discussed possible projects to explore for oil and gas in Arctic and Black Sea waters with Russian Prime Minister Vladimir Putin’s deputy in charge of energy.

Shell Chief Executive Officer Peter Voser and Igor Sechin, who is also a board director at state-controlled OAO Rosneft, talked about possible projects outside Russia as well, the government said in a statement. Rosneft CEO Eduard Khudainatov attended the meeting.

The talks focused on “potential exploration co-operation with Rosneft in the Arctic, broader strategic cooperation and technology development for the Arctic and other areas as well as opportunities for Rosneft to join Shell in developments outside Russia,” Kirsten Smart, a London-based spokeswoman at Shell, said in an e-mail. “These discussions excluded any proposals to use Shell’s shares.”

Shell, Exxon Mobil Corp. and Chevron Corp. are potential candidates should Rosneft look for a new partner to explore the Arctic Ocean after its plan with BP Plc (BP/) to set up a joint venture and swap shares collapsed, said a person with knowledge of the company’s plans. The Hague-based Shell and Rosneft in 2007 signed a “strategic agreement” and would still need to agree on joint projects.

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

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

Sechin, Shell discuss Arctic, Black Sea shelf exploration cooperationhttp://en.rian.ru/business/20110526/164242509.html

11:41 26/05/2011

Russian Deputy Prime Minister Igor Sechin and Royal Dutch Shell CEO Peter Voser held talks on Arctic and Black Sea shelf exploration at a meeting where Rosneft head Eduard Khudainatov was also present, the government said late on Wednesday.

The parties discussed Shell's current projects in Russia, including Sakhalin-2 and Sakhalin-3 oil and gas projects in the country's Far East, the prospects for expanding cooperation with Russian partners locally and abroad, the government said in a statement.

The talks come a week after rival BP's plans for a tie-up with Rosneft on Arctic shelf development in Russia collapsed, following a dispute with BP's Russian partners in TNK-BP.

Sechin, who oversees energy issues in the government, presided over the signing of a $16 billion deal between Rosneft and BP, which included joint work in the Arctic and a share swap. After the deal collapsed last week, Rosneft has to find another partner to provide it with the offshore technologies it lacks.

Shell, Chevron, ExxonMobil, China National Petroleum Corp and Petrobras have approached Rosneft, according to media reports, while Vedomosti business daily quoted government sources and sources close to Rosneft as saying Rosneft was in talks only with Shell and did not plan negotiations with other companies in the near future.

MOSCOW, May 26 (RIA Novosti) 

Shell to board boat to Russian Arctic?

http://www.bne.eu/dispatch_text15426

bneMay 26, 2011

Russian officials including Igor Sechin met with the chief executive of Royal Dutch Shell on Wednesday to discuss several projects, including potential blocks in the Arctic, according to reports.

Recent reports have suggested that Shell is in prime position to replace BP in exploring Arctic fields after BP's deal with Rosneft broke down last week on the back of resistance from AAR - BP's partner in TNK-BP.

However, like other potential partners such as Exxon and Chevron, Shell is not thought to be ready to offer Rosneft a share swap. Wide-ranging exposure to international markets and assets through a deal with BP is thought to be as important for Rosneft as the offshore drilling experience that the British company offers for the Arctic adventures, and remains one of the main reasons that many still expect some form of deal with BP to go through eventually.

The talks between Shell CEO Peter Voser, deputy prime minister Sechin and Rosneft President Eduard Khudainatov focused on "potential exploration co-operation with Rosneft in the Arctic, broader strategic cooperation and technology development for the Arctic and other areas as well as opportunities for Rosneft to join Shell in developments outside Russia," Kirsten Smart, a London-based spokeswoman at Shell, told Bloomberg in an e-mail. "These discussions excluded any proposals to use Shell's shares," she added.

A Russian government statement said that alongside Shell's ongoing projects on Sakhalin in the far east, "the negotiations touched on prospective long-term cooperation in geological exploration and the development of oil and gas resources around the Arctic shelf and the Back Sea."

Rencap writes: It is premature, in our view, to conclude that BP will definitely be replaced by Shell as Rosneft's strategic partner. There are more projects in the Arctic, besides three Kara blocks, which could potentially be jointly developed with other international partners; in addition, the above meeting may put pressure on BP to try to save the deal by finding a quicker solution to issues that have been raised by the Alfa-Access-Renova consortium of investors. Even though the accelerating exploration of vast resources on the Russian shelf may seem an important catalyst for Rosneft, we think investors would like to see more clarity on future cooperation and exploration plans before assigning a higher value to Rosneft's exploration portfolio; hence we do not expect a strong price reaction to this news. Our base-case scenario remains that BP will find a solution to its recent problems and the deal with Rosneft will be completed, although we might have to review our assumptions. We expect to get some clarity on this matter in the near future.

Surgutneftegas Sells East Siberian Crude Oil for July, Augusthttp://www.bloomberg.com/news/2011-05-26/surgutneftegas-sells-east-siberian-crude-oil-for-july-august.html

By Christian Schmollinger - May 26, 2011 6:25 AM GMT+0200

OAO Surgutneftegas, a Russian oil producer, sold 500,000 metric tons of East Siberian Pacific Ocean pipeline crude for loading from July to early August, according to three traders who participate in the market. Royal Dutch Shell Plc (RDSA), GS-Caltex Corp., Itochu Corp. (8001), JX Nippon Oil & Energy Corp. and Mercuria Energy Trading SA bought the cargoes, the traders said.

Details of the sale are as follows:

Crude: East Siberian Pacific Ocean pipeline crudeQuantity: 100,000 metric tons (730,000 barrels) x 5 cargoesBuyers: Shell, Itochu, GS Caltex, Mercuria, JX-NipponLoading: July 7-11, 12-16, 18-22, 28-31, Aug. 1-5

Port: Kozmino Bay Terminal, Russia’s Far EastPrice: Premiums of between $4.90 and $4.15 a barrel to the price of Dubai published by Platts.

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

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

Lukoil satisfied with Caspian hazard-response trialshttp://www.pennenergy.com/index/petroleum/display/0347090481/articles/offshore/regional-reports/caspian-sea/2011/lukoil-satisfied_with.html

Offshore staff

MOSCOW -- LUKOIL has staged special tactical maneuvers in the Russian sector of the Caspian Sea. The program was designed to deal with the repercussions should a well control incident arise at the producing Yu Korchagin field.

Procedures were implemented to protect and evacuate personnel from the ice-resistant fixed platform. Scenarios were devised in near-real conditions with the use of special well-kill equipment.

Lukoil says the maneuvers demonstrated a high degree of coordination and cooperation, and the availability of all equipment and resources needed to promptly prevent or respond to emergencies on the platform.

Specialists participated from ??? LUKOIL-Nizhnevolzhskneft, ??? BKE-Shelf, the State Marine Rescue and Coordination Center, the North-Caspian Department for Emergency and Subsea Engineering Operations, representatives of the EMERCOM of the Russian Federation, and the RF Rostekhnadzor.

05/25/2011

LUKOIL sells share of Azerbaijani telecommunication assetshttp://vestnikkavkaza.net/news/economy/14213.html

The Ministry of Communication and Information Technologies has purchased a share of LUKoil Europe ltd in the package of Azeurotel shares and put the company under management of the Baku Telephone Communication Production Association, Turan reports.

Deputy Director General of theassociation Khankishi Kishiyev said that 100% or shares were purchased by the ministry. Director general of Azeurotel Nuru Ahmedov was replaced with Jabit Rasulov, who worked at the association.

There has been no information on the terms and cost of the deal.

The Azerbaijani-UK joint venture Azeurotel was founded in 1995 by the Ministry of Communication and Information Technologies and LUKoil Europe ltd. (UK) with equal shares. Azeurotel is a telephone operator of 492/497/437 and is an Internet-provider.

Press-secretary of the State Committee for Property management Gulu Halilov said that his structure was not involved.

Azerbaijani president signed a decree in March 2001, allowing privatization of enterprises, including joint ventures. Azercell and Bakcell were privatized, as well as the Internet-provider Ultel.

BP-Rosneft Shows Russia Is 'Not Investable': Browderhttp://www.cnbc.com/id/43153575

Published: Thursday, 26 May 2011 | 1:24 AM ETBy: Peter GuestWeb Producer, CNBC.com

The collapse of a BP share-swap deal with Russian state oil company Rosneft is just one of a string of failures which show that Russia is "uninvestable", according to William Browder, once the country’s largest portfolio investor.

BP’s [BP   44.71     0.34   (+0.77%)   ] proposed tie-up with Rosneft fell through after an agreement could not be reached with Alfa Access Renova (AAR) — a consortium of

local billionaires who had a pre-existing joint venture with the oil giant, TNK-BP – to break an earlier contract.

BP had been hoping to work with the state-owned company to explore and develop assets in Russia’s arctic regions.

"What this story shows is the long and sad tale of BP in Russia, and how they’ve basically encountered problems at every single turn in their quest to get Russian oil reserves," Browder told CNBC.com.

Citing the trail of western businesses which have encountered difficulties in Russia, including Ikea, Telenor and Shell [RDSA-LN   2118.00   ---   UNCH   ] , Browder said that investors should be aware of the risks of working with a country that has endemic corruption issues, no matter how attractive its assets may appear.

"If you ever go fishing in the lakes where you have to throw the fish back, you sometimes encounter fish whose memory is so short that after 30 seconds they’ll bite on the same hook again. That’s what BP looks like in this whole situation with Russia," Browder said.

After the deal fell through, some analysts, including TNK-BP’s largest shareholder, Mattias Westman of Prosperity Capital Management, told CNBC.com that the deal had fallen through because BP had misunderstood how much pressure the Russian government was able to put on AAR, and how strong the contracts would prove to be.

Westman said: "In many ways, this is a victory for the rule of law in Russia, rather than the opposite."

Browder rejected this. "There is basically no predictable course of action in Russia," he said. "The whole system is based on arbitrary, individual, generally criminal motives. And so you end up in a situation where you can’t make any kind of reliable plans for the future."

"Sometimes I tell people how dangerous it is to do business in Russia, and they say, ‘well, we’re staying away from strategic industries’. My answer to that is that every industry is strategic if it makes money. What happens there is that it becomes strategic the moment it’s profitable, the moment that someone wants to steal your cashflow or your assets," he added.

Corporate Corruption

An activist fund involved in the Russian market from the early days after communism, Hermitage ran into trouble when it openly talked about corporate corruption in the country.

In 2006, Browder was barred from entering Russia. In 2007, Hermitage’s offices were raided and several of its portfolio companies were appropriated.

Sergei Magnitsky, the company’s lawyer, investigated and uncovered evidence of tax fraud by the Russian officials who had seized the companies. This, Browder said, is a systematic feature of Russian government.

"The way it works is that if a Russian official has the power to arrest, fine, or in any way seize somebody’s assets, then they use that power for their own personal gain," he said.

"Different government ministers and law enforcement officials have that power, and they look around to see what assets there are to seize, people to arrest and businesses to extort, and then between themselves they make an agreement as to who has access to extort who," he said.

Tragically, Magnitsky found that there was little tolerance for those who uncover official corruption. After being held without trial and tortured for almost a year, Magnitsky died in custody in November 2009.

Since then, Browder has been pursuing those he believes are responsible through international legal mechanisms.

Ignoring the Bad?

On May 19, the US Senate introduced the Sergei Magnitsky Rule of Law and Accountability Act of 2011, which targets individuals believed to undermine the rule of law and human rights in Russia.

Swiss authorities have frozen assets linked to the alleged perpetrators of Magnitsky’s killing.

The European Parliament has asked European Union member states to impose asset freezes and visa bans, and a similar motion will go before Canada’s parliament.

"The Magnitsky case is… the clearest case study of how the whole system has been criminalized in Russia, of how officials steal from their own country, how they then murder people who stand in their way, and then how the whole system protects them when they get caught," Browder said.

“This goes on thousands of times a year. It’s just that in our case, several unusual things happened. First was that Sergei was so brave that he wrote it all down in the form of 450 complaints while he was incarcerated, so we have a full documentary record of everything that happened to him," he said.

“The second is that Sergei's friends and colleagues are outside the country, and we have been able to effectively publicize what happened to him in a way that the whole world now knows. Sergei Magnitsky's story is a window into all the terrible things that happen in Russia every day," Browder said.

Up until the end, Browder made good money in Russia, but his experiences have demonstrated to him that the country is not a safe place to invest.

"Our fund went up 35 times over ten years in Russia. But in the end, corrupt and politically motivated officials tried to steal our money, steal the taxes that we paid from their own government and then they killed my lawyer when he tried to stop them. So Russia is not just a place where you can lose money. People get killed. That’s just not investable," he said.

“The macroeconomic environment in Russia looks good because of oil, but the Russia story is like an onion with 16 layers. The outside looks good, but you don’t have to peel more than one layer down before you see the truly ugly problems. Anybody who says that the Russian investment climate is good right now is either unaware or deliberately ignoring the plain facts," Browder said.

© 2011 CNBC.com

Gazprom

Gazprom Persuades Government to Reduce Potential MET Increase http://www.bne.eu/dispatch_text15426

AtonMay 26, 2011

According to Vedomosti today (26 May) Gazprom believes that the government could receive RUB150bn in additional revenues without a significant increase in the gas MET rate. The company believes that European gas prices next year will reach around $450/mcm vs the government estimate of $395/mcm. According to Gazprom's estimates this would add an additional RUB65bn to the state budget, the report said.

According to the report, the Ministry of Energy agrees with Gazprom. Moreover, the ministry has reportedly proposed several alternatives aimed at increasing tax collections from the gas industry. For example, the volume of Central Asian gas purchases (about 30bcm currently), which are not subject to export duties, could be reduced.

Bottom line We believe the news is positive for Gazprom. The Russian government (and especially the Ministry of Finance) tries to introduce a sizeable gas MET increase every year, but Gazprom always manages to reduce the amount significantly. We believe this pattern will be seen again this year, as well.

Gazprom raises gas exports to Europe by 30% - CEOhttp://news.az/articles/economy/37157

Thu 26 May 2011 05:22 GMT | 7:22 Local Time

"In April we saw a growth of 20%, in May 30% and now daily supplies correspond to winter production rates," Alexei Miller said.

He said that exports increased partly due to a consumer desire to pump gas into underground facilities for low prices.

"Everyone has already noticed that Libya produces no gas and Japan is increasing imports," Miller said, adding that these however were not the main factors for the increase.

Libya has been rocked by violent clashes between government supporters and rebels since February. Japan suffered a serious nuclear accident caused by a powerful earthquake and tsunami in March.

RIA Novosti

Gazprom and Gasunie reinforce innovative potential of Sci-Tech Collaborationhttp://finchannel.com/news_flash/Oil_%26_Auto/87740_Gazprom_and_Gasunie_reinforce_innovative_potential_of_Sci-Tech_Collaboration/

25/05/2011 10:41 (15:58 minutes ago) The FINANCIAL -- MOSCOW hosted today a meeting of the Coordination Committee for Sci-Tech Collaboration between Gazprom and Gasunie. The meeting was chaired by Vlada Rusakova, Member of the Management Committee, Head of the Strategic Development Department of Gazprom and Pieter Trienekens, Member of the Executive Board, Director Participations and Business Development of Gasunie.

Heads of specialized subdivisions of Gazprom Administration and its subsidiaries – Gazprom promgaz, NIIgazeconomika and Gazprom razvitiye, as well as project managers of Gasunie took part in the work of the Coordination Committee.

The meeting participants delivered presentations on the progress of implementing the Program of Scientific and Technical Collaboration between Gazprom and Gasunie for 2010–2012. The parties expressed satisfaction with the currently achieved results.

It has been highlighted at the meeting that the establishment of the Pan European multilevel information and analytical system integrating the cooperation between dispatcher centers based on modern market relations in gas trade is a most important

vector of scientific and technical collaboration between the two companies.

The meeting participants paid attention to the application of energy-saving technologies and use of renewable energy sources as well as economic and legal aspects of biogas production and transportation. Besides the issues related to small-scale LNG production were considered.

Serbia's NIS, Canada EWP in Romania oil well dealhttp://af.reuters.com/article/energyOilNews/idAFLDE74O0GU20110525

Wed May 25, 2011 10:35am GMT

SARAJEVO May 25 (Reuters) - Serbian oil firm NIS, majority owned by Russia's Gazprom Neft (SIBN.MM), and Canada-based East West Petroleum Corporation (EWP) signed on Wednesday a deal to develop four oil and gas exploration blocks in Romania.

The agreement is subject to the approval of Romania's government, the companies said in a statement.

They said the exploration programme would include the collection and processing of approximately 900 square km of 2D and 600 square kilometres of 3D seismic data from a minimum of 12 wells to be drilled on the four blocks.

The new petroleum licences are located in the western Romania and the blocks have been little explored, they said.

The companies have identified a number of structural and stratigraphic veins in the deeper section and plan to focus exploration activities on the conventional oil and gas potential in addition to unconventional shale gas potential, they said.

Under the deal East West Petroleum Corp. will retain a 15 percent share of all production realised from four concession, they said.

Countries in the region are keen to tap new energy suppplies to reduce their dependence on Russian gas, highlighted by a pricing dispute between Moscow and Kiev in winter 2009 that cut gas supplies to much of Europe.

Romania has estimated oil reserves of 1.4 billion barrels. (Reporting by Maja Zuvela; Editing by Alison Birrane)

Gazprom gets connected with projects and participantshttp://pipelinesinternational.com/news/gazprom_gets_connected_with_projects_and_participants/060959/#

Tue, 24 May 2011

Gazprom has connected the offshore and onshore sections of the Dzhubga – Lazarevskoye – Sochi gas pipeline in Russia.

The Bigfoot 1 pipelaying vessel performed the tie-in operation near the Kudepsta settlement.

The Tuapse – Kudepsta section of the gas pipeline will be tested in the second half of 2011, and the test supply of gas to the automated gas distribution station in Kudepsta is scheduled for July 2011.

In addition, Gazprom Deputy Chairman Alexander Ananenkov has held a meeting of the Gazprom Management Committee to discuss the engineering and construction of the Ukhta – Torzhok, Pochinki – Gryazovets, Gryazovets – Vyborg and SRTO – Torzhok gas pipelines and main compressor stations in northwestern Russia, as well as expansion of the Gryazovets gas hub.

Experts from Gazprom’s specialised subdivisions, subsidiaries, engineering and contracting companies took part.

They reported that the dewatering and vacuum treatment operations in the Gryazovets – Vyborg gas pipeline are now complete, and its linear part is ready for operation.

Commissioning activities continue at the Gryazovetskaya compressor station as well as at the Elizavetinskaya and Babaevskaya compressor stations.

During the meeting, specialised subdivisions, subsidiaries and contracting agencies were given tasks including construction and installation activities at the Vyaznikovskaya compressor station and the commissioning of the Ivanovskaya and Lukoyanovskaya compressor stations.

Image caption: A map of the Gryazovets – Vyborg gas pipeline.

EC opposes Gazprom monopoly in gas export from Russia http://www.focus-fen.net/index.php?id=n250587

25 May 2011 | 17:59 | FOCUS News AgencyHome / European UnionBrussels. European Energy Commissioner Günther Oettinger has slammed Gazprom’s monopoly in natural gas export from Russia, the BBC reported.“I wish we turned to a world without border and barriers in which export monopolies would be excluded,” said Oettinger during a presentation of South Stream pipeline

project in Brussels.In Brussels Russia and European Commission have confirmed their intention to set up a joint consultative gas council, announced Russian Energy Minister Sergey Shmatko.The minister underlined there were no problems with the financing of the pipeline.

Günther OETTINGER EU Commissioner for Energy Speech of Commissioner Oettinger at the South Stream event Speech of Commissioner Oettinger at the South Stream event Brussels

http://www.iewy.com/27093-gunther-oettinger-eu-commissioner-for-energy-speech-of-commissioner-oettinger-at-the-south-stream-event-speech-of-commissioner-oettinger-at-the-south-stream-event-brussels.html/print/

Posted By Mariah Jen On 25, May 2011 @ 9:40 PM In Politics | No Comments

Brussels

Ladies and gentlemen:

Introduction

I should like to thank our Russian partners for inviting the European Commission to this event which I see as part of the wider Russia-EU dialogue. I accepted this invitation in particular to learn more about the feasibility and progress of the South Stream project which is taking clearer shape.

But first a few words about the indispensable partner for European energy security – Russia.

Russia

The Russian-European energy partnership is at the core of security of supply considerations in the EU, and of energy relations on the European continent. The Russian Federation is the most important energy partner of the European Union. This will remain so in the future. Russia in 2009 accounted for 36% of EU gas imports – around 6% of the EU’s gross energy consumption. On the other hand, the EU is by far the largest trading partner of Russia. 47% of all Russian imports are from the EU and the EU accounts for about 75% of foreign investment in Russia.

Our longstanding energy dialogue with the Russian Federation has been expanded and further developed over the past year. In November 2010, we celebrated the tenth

anniversary of the EU-Russia Energy Dialogue. In February 2011, we signed an updated Early Warning Mechanism to further improve our coordination in case of supply or demand emergencies. We agreed to set up a Gas Advisory Forum which should give input, including from industry, on developments in the Russian and European gas markets.

Europe must provide for sustainable, affordable, safe and secure energy to ensure the competitiveness of our industries and the well-being of our citizens.

Demand

The available scenarios and forecasts for gas demand in the European Union until 2030 vary between 370 and nearly 600 bcm, and may have to be adapted again after the tragic events in Japan. Notably in some EU Member States, natural gas could be an attractive back-up for electricity produced from renewable sources.

What is common however to all these scenarios, is that the imports from third countries will increase until 2030 or 2035 due to the depletion of the EU’s own reserves. This includes imports from the Russian Federation. If for example the part of Russian gas imports covers around 25% of the European gas consumption, Russia could in 2030 export more than 150 bcm of gas to the EU.

The demand side in the EU is only one side of the picture. It is equally important to know how the Russian market will develop, what will be the available production and export capacity for oil and gas, and whether the investment climate in Russia will improve to attract European companies. The more companies – including European ones – are active in the Russian market in future the more they will seek export opportunities to Europe relying on more flexible use of export routes.

EU Internal Market & Infrastructure Policy

For some years now, the European Union has pursued two key policies in the gas sector.

Firstly, a policy of diversification in the gas sector; that is, diversification of routes, sources and counterparties. Diversification is also part of the Russian policy – diversification of routes as in the South Stream project, diversification towards new customers in Asia and diversification towards the global market via grand LNG plans. Neither the EU’s diversification objectives nor Russia’s diversification efforts will influence the privileged energy relationship between the EU and Russia.

Secondly, we have developed an internal market with third party access and healthy competition; just as Russia has done internally. Just to illustrate an example: as Gazprom can ship gas round the EU, Novatek can do so in Russia. I would like to see Novatek in Europe, and EU gas companies in Russia. And pluralism between us. Now is the time to join these two internal markets, without barriers at the border among which I would also count export monopolies.

Coming back to diversificationNord Stream is a good example of diversification of routes; a wholly new route from an established supplier and an established counterparty, Gazprom.

On the other hand, the Southern Corridor is aimed at diversifying routes, sources and counterparties. In the Southern Corridor we look at new routes – pipelines such as Nabucco, ITGI, TAP and White Stream – and LNG projects. We have a series of possible supplier countries, with whom we will have direct contacts, for gas supply, such as Azerbaijan, Iraq and Turkmenistan, as well as the Gulf.

Europe clearly has preferences; we need to diversify to make sure that the risk of total gas cut-offs is avoided and the ongoing, persistent risk of dependence– is minimised. Price competition is good for everyone.

We support some projects more than others, that is clear. In this regard, I reaffirm again what I have said many times before: the EU wants direct contacts with Caspian producers through new supply routes and pipelines.

South Stream

Turning towards South Stream: it is not our top priority, but we recognise its value, in particular for Russia, for diversification of routes. We will support South Stream in its administrative processes in the EU, and we will not impose any unreasonable or unjustified level of administrative or regulatory requirements. We will act as fair partners.

Today, I have come to listen and to learn. For me, South Stream so far seemed more of a concept than a concrete project. What we know is that the gas in South Stream will leave Russia, cross the Black Sea and arrive in Europe. Beyond that, there are a number of questions. Where will the gas actually come from? Where will it arrive? How will it arrive, by ship or by pipeline? Will it divert gas from Ukraine? Once it gets to Europe, what will happen? Most importantly, who can ship gas in the project? Is it only Gazprom, or also other players?

Of course, if South Stream for example gives access to gas independents active in Russia, then South Stream would deliver on two essential criteria: namely diversification of routes and counterparties. That means a stronger contribution to European diversification efforts.

As you know I am also interested in a balanced trilateral EU-Russia-Ukraine solution on future gas flows to the EU.

This leads me to the subject of the legal framework; South Stream, when it is on EU territory, it will be subject to the 3rd package, and as a transmission pipeline, it will be subject to the internal market rules.

To name but the most important principles:

First, South Stream will normally have to allow all shippers to book, within the EU, capacity on the pipeline at non-discriminatory conditions;

Second, tariffs charged to shippers will normally be subject to regulation by the national regulators in the countries concerned;

Third, reverse flows must be technically feasible in case of emergencies.

I understand that certain EU Member States entered into bilateral agreements with the Russian Federation which may partially contradict these principles. If this is true, these Member States will nevertheless have to apply the internal market rules and they are under an obligation to bring their IGAs in line with the EU legislation. I want to come to fair solutions. One practical way to do this would be to do this directly on a European level.

Ladies and Gentlemen: as I said today, the Commission is here today in order to learn more about this important project. I am committed to closely cooperate with my Russian counterparts in the coming months and years.

I thank you for your attention, and wish you well with the rest of the conference.

Thank you.

Gazprom gets mixed response to South Stream presentation to EEChttp://www.bne.eu/dispatch_text15426

Renaissance CapitalMay 26, 2011

Event: Yesterday (25 May) Gazprom presented key details of its South Stream project to the European Energy Commission, announcing that total capex is planned at EUR15.5bn and that the official launch is scheduled for December 2015 (15.75bcm of annual gas transit), with full capacity (63bcm pa) to be reached in 2018. The project costs are preliminary, as not all technical and administrative issues have been resolved. Kommersant reported today that EU Energy Commissioner Gunter Ettinger noted that the South Stream project should comply with the rules of the third energy package, i.e., provide access to the pipeline for third parties. Even more interesting was a remark made regarding Europe's wish to see a greater variety of gas exporters from Russia, with Novatek being specifically mentioned. According to Interfax, two thirds of transit volumes through the south stream route will be redirected gas rather than new supply.

Action: We regard the news as slightly negative for Gazprom.

Rationale: Only 20bcm of additional annual supply to Europe means that the South Stream project is aimed at reducing the transit risk rather than bringing additional volumes to Europe, which makes it seem it is serving political and not business purposes.

Together with Nord Stream, South Stream would expand Russia's export capacity by about 50% (to over 300bcm pa), providing Gazprom with the opportunity to capture future demand in Europe. However, on our estimates, Gazprom is unlikely to use this capacity in the near future, which makes the economics of the South Stream project questionable. We currently do not include South Stream in our model, but if we did we would have to cut our FCF estimate by 15-20% in the next four years, with a respective cut in our TP.

Ildar Davletshin

Russia lobbies EU for special treatment on major pipelinehttp://euobserver.com/9/32399

VALENTINA POP

Today @ 09:29 CET

EUOBSERVER / BRUSSELS - Russian energy officials are lobbying the EU to grant the Gazprom-led South Stream exemptions from EU competition and gas market rules. Energy commissioner Gunther Oettinger says the rival, EU-backed Nabucco project remains a priority, but has indicated that some concessions are possible.

In an afternoon-long PR event at a Brussels hotel on Wednesday (25 May), the CEO of Gazprom, Alexei Miller, Russian energy minister Sergei Shmatko and the head of the South Stream project, Marcel Kramer made the case for the EU to throw its weight behind the pipeline, set to run through the Black Sea and to offer an alternative route to the Ukrainian gas network.

The final route, pending investment deicisons in 2012 and questions over Bulgaria's commitment, could still change. But in theory, the pipe is to go on the southern seabed of the Black Sea, then on land either through Romania or Bulgaria to Serbia and then branch off to Hungary, Slovenia and Croatia.

Despite claims that the €15.5 billion project is "purely commercial" and has no need for state subsidies, the line between government politics and gas selling interests is blurred, with Moscow seeking an "EU-Russia regulatory framework which encourages this investment," as Kramer put it.

Kramer explained that new rules for energy companies on the EU market - forcing the separation of production and transport assets - should be "softened" when it comes to strategic-level enterprises.

Energy minister Shmatko even alluded to potential gas disruptions if Gazprom and its associated EU companies are "deterred from initiating" the project or "face restrictions over the returns they can expect on their investments."

Speaking at the same event, EU energy commissioner Guenther Oettinger said the EU remains committed to the "southern corridor" - several gas pipeline projects including Nabucco which would grant the EU direct access to Caspian gas reserves.

If South Stream is built, Caspian gas would be bought up by Gazprom and shipped via Russia through the Black Sea pipeline, undermining the rationale of the Southern Corridor. It would also have an impact on Ukraine's economy and politics, as the country would see less gas transiting from Russia to Europe.

"We support some projects more than others, that is clear. In this regard, I reaffirm again what I have said many times before: the EU wants direct contacts with Caspian producers through new supply routes and pipelines," Oettinger said.

On South Stream, he said that "it is not our top priority" and pledged not to impose any "unreasonable" regulatory requirements. "We will act as fair partners," he pledged.

On the other hand, the German commissioner indicated that if "gas independents active in Russia" were allowed to have access to South Stream, then the project would "deliver on two essential criteria: namely diversification of routes and counterparties."

"That means a stronger contribution to European diversification efforts," Oettinger suggested.

As for EU internal market rules, he did not encourage any hopes that there will be exemptions for the project. When on EU territory, be it Bulgaria or Romania, South Stream would "normally have to allow all shippers to book, within the EU, capacity on the pipeline at non-discriminatory conditions", he said.

Also, tariffs charged to shippers will "normally be subject to regulation by the national regulators in the countries concerned." And thirdly, the Russian-owned pipeline would have to allow for reverse flows in case of disruptions.

"I understand that certain EU member states entered into bilateral agreements with the Russian Federation which may partially contradict these principles," Oettinger added. In case this turns out to be true, member states will still have to apply EU market rules and change the respective agreements so as to reflect that," he warned.

On track: South Stream project making solid progresshttp://en.rian.ru/valdai_op/20110526/164239794.html

08:42 26/05/2011

By Thomas Gomart

The first things that should be noted are the recent agreements between the presidents of EDF and Gazprom on the South Stream project. Also, there are some plans for

negotiations and discussions between EU representatives and Russian officials regarding the South Stream project. So the first point is that, apparently, a great deal of progress has been made in the timely implementation of the South Stream project. Second, it is very important to view this new progress within the context of a larger framework. As you know, there are always many obstacles to be faced and many positions to consider with regard to any big energy project, and, obviously, there is the issue of the relationship between the two main projects, which are, namely, South Stream and Nabucco.

Third, it is very important to remember that gas pipeline projects are like a chain, and they require every single link to be in place in order to work. That means that many different components of a pipeline project must be efficiently managed. So, I think that we should acknowledge this progress, but we must also keep in mind that any energy project, such as South Stream or Nabucco, is in its own right very complicated.

At this stage, I think that the initiative and the dynamism seem to be focused on the South Stream project, whereas the Nabucco project was postponed to 2017 and is therefore lagging behind its initial schedule. But, at the same time, I think it’s again important to understand that, while there are obviously some political considerations involved in any energy project, there are also business problems that need to be addressed – not only for Nabucco but also for South Stream. The financial arrangements in particular need to be discussed.

My conclusion is that although we can see, without a doubt, that some real progress has been made on the South Stream project recently – and I don’t think that the Nabucco project is over either – there is a certain degree of competition between the two projects, and each of them needs to be built up – certainly with a political program, but also with regard to deeper business considerations.

Thomas Gomart is Director of the Russia/Newly Independent States Centre at IFRI (French Institute of International Relations based in Paris and Brussels)