Russia 101207

Basic Political Developments Moscow, Washington have strong political support for economic cooperation –

ambassador Russia, NATO may start cooperation on ABM – Beyrle: Following several years

of tense relations over ABM, Russia and NATO may finally start cooperation in the area, says the US ambassador to Moscow John Beyrle.

RUSSIA, U.S. REACH COMPROMISE ON ALL OF OUTSTANDING ISSUES OF INTERNATIONAL ADOPTION - RUSSIAN EDUCATION AND SCIENCE MINISTRY

China, 18 others to miss Liu's Nobel gala - It said the countries were: Russia, Kazakhstan, Colombia, Tunisia, Saudi Arabia, Pakistan, Serbia, Iraq, Iran, Vietnam, Afghanistan, Venezuela, the Philippines, Egypt, Sudan, Ukraine, Cuba and Morocco.

WIKILEAKS ON RUSSIA o Moscow knew about NATO plans to protect Baltic States, Poland from

"Russian aggressor" – sourceo WikiLeaks: NATO Expanded Baltic Defense Plans After Georgia Conflict o NATO's E.Europe plans amid Russia fears: WikiLeakso Wikileaks: US-Nato plan to defend Baltics from Russiao Leaked memo describes Russia's security chiefs as maintaining 'a Cold

War mentality'o WikiLeaks Shows Intel Blackmailed Russian Govt.o Intel threatened to pull out of Russia

RUSSIA-EU SUMMIT o Medvedev to take part in 26th Russia-EU summit - The Russian leader’s

aide Sergei Prikhodko has voiced hope that the summit will complete the procedure of Russia’s joining the WTO… The Brussels summit agenda also features such important problems as climate change, energy security, economics, visa-granting, and also international and regional issues. The parties to the summit meeting will likewise take up Iran’s nuclear programme and some frozen conflicts. Sergei Prikhodko does not rule out that Russia and the European Union may sign a new framework agreement on cooperation some time next year.     

o RF-EU summit to deal with visa issues, WTO, energyo Medvedev to attend RF-EU summit in Brussels Tueo One step closer to the WTO – EU-Russia summit kicks off in Brusselso Medvedev Heads for Tough EU Talks in Brussels - By Nikolaus von

Twickelo Russia Moves Closer to WTO Membership With EU Breakthrough Deal o EU to sign trade document with Russia's 'lilliputian' - ANDREW

RETTMAN Kazakh govt approves documents on Common Economic Space - Minister for

Economic Development and Trade Zhanar Aitzhanova said at a government

session that 17 agreements had been drafted upon instructions of the heads of state of the Customs Union.

The first meeting with Vladimir Putin - Finnish Prime Minister Mari Kiviniemi will Friday go to Sankt Petersburg for her first meeting with Russia’s Vladimir Putin.

Russian General Staff chief visits India - The chief of the Russian General Staff, Army Gen. Nikolai Makarov, will visit India on December 7-9 to discuss bilateral military cooperation, the Russian Defense Ministry said on Tuesday.

Russian nuke power company to set up production units in India - Atomstroyexport, which is building two 1000 MW reactors at Kudankulam in Tamil Nadu, said it has decided to set up an equipment manufacturing unit in India considering the boom in the nuclear business and cut down timeframe for construction of atomic reactors. Germany halts plan to transport spent N-fuel rods to Russia - German Environment Minister Norbert Roettgen said that 951 spent fuel rods from an experimental reactor in former East Germany will remain at the present storage facility in Ahaus until further notice because safe reprocessing cannot be guaranteed at the Mayak nuclear facility in Russia.

Bulgaria: The EUR 6.3bn Belene deal a great success, says FinMin - Signing the memorandum with the Russian Rosatom only establishes the frame for the future negotiations on Belene. The real talks are still ahead, said Djankov.

Skolkovo plans to engage Swiss research companies - Russian research institutes - including the Bauman Moscow State Technical University and the All-Russian Scientific Research Institute of Aviation Materials, as well as Renova and Switzerland's Sulzer have already signed up for the project worth a total of $50m. According to RBC Daily, Renova's head and Skolkovo President Viktor Vekselberg is a minority shareholder in Sulzer.

Fuel overload blamed for Proton launch failure Russian Helicopters win Brazilian tender to operate in Amazon basin - The

Russian multi-role Mi-171A1, manufactured by the Ulan-Ude Aviation Plant, a subsidiary of the Russian Helicopters holding company, won the tender of Brazil national oil company Petrobras to operate in the Amazon Basin.

Russian Helicopters Holding acquires 24.66% stake in Kazan Helicopters Russia concerned about foot-dragging by International Tribunals - Russia is

concerned about foot-dragging by the International Tribunals for the former Yugoslavia and for Rwanda. This came in a statement by the First Deputy Russian Ambassador to the United Nations Alexander Pankin during the Security Council meeting on Monday.

Russia must exorcise Stalin's legacy - Kremlin aide: Mikhail Fedotov told Reuters that people's minds were still shaped by decades of oppressive Soviet rule which discouraged them from questioning authority and taking initiative.

Major auto station to open at RF-Poland border Tue - A Mamonovo-2 major permanent versatile border-crossing station for freight-and-passenger vehicles opens in the Kaliningrad Region at the border of the Russian Federation (RF) and the Republic of Poland on Tuesday, Alexander Koshlin, deputy head of the

Kaliningrad territorial department of the Rosgranitsa (Federal Agency for the Equipment of the State Border of the RF), has told Itar-Tass.

o Medvedev Eyes Polish Privatizations o Russia, Poland focus on energy, tradeo Beginning of meeting with Prime Minister of Poland Donald Tusko Speech at Russian-Polish Public Forum

Russian sailors kept in custody in Puerto Rico Putin to chair meeting of VEB Supervisory Board Tue - - Russian Prime Minister

Vladimir Putin on Tuesday will chair a meeting of the Supervisory Board of the "Bank for Development and Foreign Economic Activities" (popularly known as VEB) state corporation, the government press service announced.

Putin to meet with members of volunteer movement - Russian Prime Minister Vladimir Putin on Tuesday will take part in a ceremony marking the summing up of the results of an all-Russia competition among higher and secondary specialized educational establishments for the right to establish centers for the training of volunteers for the 2014 XXII Winter Olympic Games and XI Paralympic Games.

Another terrorist leader eliminated in Dagestan - The leader of a local terrorist group in Dagestan, Akhmed Abdulkemirov, has been killed, a source with the law enforcement bodies informs.

Russia must train experts on Islam in Caucasus - Kremlin envoy March 2000 attackers detained in Karachayevo-Cherkessia - The gunmen

involved in an attack on the federal forces in late February and early March, when 85 paratroopers were killed, were detained in Karachayevo-Cherkessia.

Khakassia governor holds emergency session on electricity failure All Dimitrovgrad nuclear reactors shut down due to bad weather Over 53,000 people in Ulyanovsk region left without electricity Lenin monument blown up in St Pete suburb Russia's Metro takes top spot - According to TNS Russia Data for the six months

up to October 2010, the Metro-Moscow and Metro-St Petersburg had a joint readership of 1,445,900 a day. This took them ahead of the previous leader, Rossiyskaya Gazeta, which had 1,393,400 readers. Moskovsky Komsomolets was third an average readership of 1,150,600 per issue.

Russian Internet providers may avoid responsibility for sketchy content Russian Man Indicted for 'Mega-D' Botnet Spam, FBI Says Russian Press at a Glance, Tuesday, December 7, 2010 Russia Tries to Exploit European Disunity - Pavel K. Baev Moscow Increases Its Focus on Solving the North Caucasus Riddle - Valery

Dzutsev MP's aide suspected of espionage confirmed as Russian citizen - source (Part 2)

o 'Spy' confirmed Russian o New rules on visas would not have stopped 'spy' entering country - Tighter

rules on student visas to be announced by the Coalition today would not have prevented the suspected Russian spy Ekaterina Zatuliveter entering the country.

o Russian spy-row researcher Katia Zatuliveter monitored Liam Fox defence talks - Ms Zatuliveter, 25, monitored his speeches and blasted the way he called her native Russia our No1 threat. Writing online in 2008 before Dr Fox was part of the Government, she bitterly claimed the West believed "Russia is always wrong".

o Russian spies: they can’t take their eyes off us - If Katia Zatuliveter was spying for Russia, she is proof that a new breed of agent is operating, and on a scale that exceeds the Cold War, says former KGB officer Oleg Gordievsky.

National Economic Trends Russia May Spend Up to $32 Billion on Irrigation After Drought Free Hand’ on Rates Means Best of Bonds Over: Russia Credit RUSSIA 2011: Growth but state-led recovery is bad news - While Western

Europe is once more staring into the abyss of sovereign default, Russia is expected to see economic growth pick up next year. But even Russia's leading officials admit that the state is carrying the can, while the private sector and consumers have yet to recover from the shock of 2008's collapse.

Business, Energy or Environmental regulations or discussions Norilsk Nickel, Polymetal, Rosneft: Russian Equity Preview Prokhorov Seeks to Create ‘Top 3’ Gold Producer in 2011 Merger Moscow Seeks $445 Million in 2011 Asset Sales, Vedomosti Says Aeroflot to Swap 6.3% Shares For 6 Air Carriers, Kommersant Says Usmanov May Seek $160 Million in IPO of TV Unit, RBC Daily Says Puget Ventures Signs Definitive Deal To Buy Cobalt Assets In Russia Two Russian Grocers Move to Thwart Wal-Mart Russia Box Office Sales Reach Record $1 Billion, Kommersant Says ‘Nutcracker’ Breaks Russian Movie Budget Record, Vedomosti Says VTB Capital bought Interros Holding’s 19.3 percent of Rosbank, which is

controlled by Societe Generale, VTB said Monday.(Bloomberg) A second trans-Siberian railway line may have to be built to handle increasing

freight traffic, Russian Railways said Monday, saying the proposed BAM-2 link may cost 448 billion rubles ($14.3 billion). (Bloomberg)

Aeroflot closed Monday at 83.94 rubles, up 1.9 percent, after the airline said it boosted net income 65 percent to $281 million in the first nine months, and revenue rose 28 percent to $3.16 billion. (Bloomberg)

Norilsk Nickel said Monday that it plans to restart its Lake Johnston nickel mine in Western Australia in the first half of 2011.(Bloomberg)

Activity in the Oil and Gas sector (including regulatory) Rosneft Sells Jan-Feb Sokol Crude To BP At High Premium -Trader $27Bln Yamal LNG Plan May Earn Tax Break INTERVIEW-Yamal region leads Russia's gas surge - Gas superpowers should

divide market share in the face of a global glut, the governor of the Arctic Yamal Nenets region told Reuters.

Bashneft reports neutral 3Q10 IFRS results

Bashneft Making Foray Into European Trade Joint Bid for Poland Refiner - Gazprom’s oil arm and Rosneft are interested in

acquiring Grupa Lotos, Poland’s second-biggest refiner, and may team up to make a competitive bid, Energy Minister Sergei Shmatko said Monday.

Gazprom Ukraine pays for November gas in full, Gazprom says Gazprom, Namcor to Take Piece of Tullow Kudu Stake Gazprom Neft seeking Arctic offshore assets Europe Can Lift CO2 Market From Gridlock, Gazprom Says (Update1) Gazprom to develop cleaner energy in Papa New Guinea

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Full Text Articles

Basic Political Developments

11:06Moscow, Washington have strong political support for economic cooperation – ambassadorhttp://www.interfax.com/news.asp

Russia, NATO may start cooperation on ABM – Beyrle http://english.ruvr.ru/2010/12/07/36348135.html

Dec 7, 2010 12:15 Moscow TimeFollowing several years of tense relations over ABM, Russia and NATO may finally start cooperation in the area, says the US ambassador to Moscow John Beyrle. He points out in an interview with the Komsomolskaya Pravda daily that in Lisbon NATO made it perfectly clear that it no longer sees Russia as an enemy and is prepared to jointly build a new ABM system in Europe. Ambassador Beyrle also confirmed President Barack Obama’s intention to press for the ratification of the new START treaty before the end of this year, adding that this is one of the US President’s priorities.

12/07 11:37   RUSSIA, U.S. REACH COMPROMISE ON ALL OF OUTSTANDING ISSUES OF INTERNATIONAL ADOPTION - RUSSIAN EDUCATION AND SCIENCE MINISTRYhttp://www.interfax.com/

 

China, 18 others to miss Liu's Nobel galahttp://www.reuters.com/article/idUSLDE6B60BT20101207

3:11am EST

OSLO, Dec 7 (Reuters) - China and 18 other countries have declined invitations to attend Friday's Nobel Peace Prize ceremony for Chinese dissident Liu Xiaobo, the Norwegian Nobel Committee said on Tuesday.

It said the countries were: Russia, Kazakhstan, Colombia, Tunisia, Saudi Arabia, Pakistan, Serbia, Iraq, Iran, Vietnam, Afghanistan, Venezuela, the Philippines, Egypt, Sudan, Ukraine, Cuba and Morocco. (Reporting by Oslo newsroom)

WIKILEAKS ON RUSSIA

12/07 11:41   Moscow knew about NATO plans to protect Baltic States, Poland from "Russian aggressor" – sourcehttp://www.interfax.com/

WikiLeaks: NATO Expanded Baltic Defense Plans After Georgia Conflict http://www.rferl.org/content/article/2241066.html

December 07, 2010 U.S. diplomatic messages newly released by WikiLeaks show that NATO decided to expand its plans to defend the Baltic states and Poland following the 2008 brief war between Russia and Georgia.

The leaked U.S.cables, revealed in Britain's "Guardian" newspaper, show that the NATO plan involved grouping Estonia, Latvia, Lithuania, and Poland into a new regional defense scheme code-named "Eagle Guardian."

NATO chiefs are reported to have endorsed the plan this year. The cables say the military plans should be not be discussed publicly as they might lead to an "unnecessary increase" in NATO-Russia tensions.

The U.S. messages say leaders in the Baltic states and Poland became increasingly concerned about a potential security threat from Russia following the Georgia conflict. In the Poland case, the cables say the United States offered to deploy special naval forces to Baltic ports in Poland and to put F-16 fighter aircraft into Poland.

The details are from some of the thousands of U.S. diplomatic cables that have been obtained by WikiLeaks and are now being made public.

compiled from agency reports

NATO's E.Europe plans amid Russia fears: WikiLeakshttp://www.google.com/hostednews/afp/article/ALeqM5gxpVY-KG-uayY-3INBYxbCFUmJ9A?docId=CNG.faa163142488d3c01327c0ffa2a40643.361

(AFP) – 4 hours ago

LONDON — Military alliance NATO has expanded defence plans in parts of eastern Europe amid fears that Russia poses an increasing threat, US diplomatic cables released Tuesday by WikiLeaks showed.

Contingency plans were drawn up for the three Baltic states -- Estonia, Latvia and Lithuania -- earlier this year after they lobbied for extra protection following the 2008 Russia-Georgia war, said the leaked cables.

The US has also offered to beef up Polish security amid fears of a resurgent Russia, said the cables, despite the policy of US President Barack Obama's administration to "reset" relations with Moscow.

Painful memories were stirred in the Baltic states -- all former Soviet republics -- as Russian troops poured into Georgia in August 2008, the cables show.

"Events in Georgia have dominated the news and discussion here like few other events in recent memory," said a cable from the American embassy in Riga, Latvia, cited in The New York Times.

Latvians, at least ethnic Latvians, "look at Georgia and think that this could easily be them," said the dispatch, one of some 250,000 US diplomatic cables leaked to whistleblower website WikiLeaks and now being slowly released in small batches.

US admiral James Stavridis, NATO's top commander in Europe, proposed drawing up defence plans for Lithuania, Latvia and Estonia, which had joined the military alliance in 2004, according to the leaked correspondence.

NATO military officials agreed in January this year to the policy, which groups the Baltic states with Poland in a new regional defence scheme codenamed Eagle Guardian, said the cables, according to Britain's Guardian daily.

Earlier calls by eastern Europe for more security guarantees had been stymied by opposition from western Europe, and in particular Germany, which feared any such moves could antagonise Russia.

With regard to Polish defences, the US offered various measures which included deploying special naval forces to Baltic ports in Poland and putting squadrons of F-16 fighter aircraft into the country, according to the cables.

However, US diplomats expressed fears that the moves were not consistent with NATO's official post-Cold War policy, which is not supposed to regard Russia as a threat.

An October 2009 cable, signed by the American ambassador to NATO, Ivo H. Daalder, highlighted the concerns.

"The Baltic states clearly believe that the Russian Federation represents a future security risk and desire a contingency plan to address that risk," said the cable.

"And therein lies the problem. Post-Cold War NATO has consistently said that it no longer views Russia as a threat."

7 December 2010 Last updated at 01:49 GMT

Wikileaks: US-Nato plan to defend Baltics from Russiahttp://www.bbc.co.uk/news/world-europe-11933089

The US and Nato have drawn up plans to defend the Baltic nations against Russia, latest US diplomatic cables disclosed by Wikileaks show.

The cables, published in the Guardian, reveal plans to expand an existing strategy to defend Poland to include Estonia, Latvia and Lithuania.

Wikileaks is releasing hundreds of diplomatic cables, angering the US.

Meanwhile, a warrant for the arrest of Wikileaks founder Julian Assange has reached UK authorities.

Mr Assange, who is believed to be in hiding somewhere in England, is preparing to talk to British police, his lawyer said.

Mr Assange is wanted for questioning in Sweden in connection with rape allegations which he denies.

The Swiss post office's bank, PostFinance, has also frozen his accounts.

The latest leaked documents show that in January this year, US Secretary of State Hillary Clinton apparently signed a confidential cable saying allies in Nato had agreed to expand the contingency plan to defend Poland, to include the Baltic states.

The nine Nato divisions involved would be American, British, German and Polish, the Guardian says, citing information leaked to Polish newspaper Gazeta Wyborcza.

The cables say the military plans should not be discussed publicly as it might lead to an unnecessary increase in Nato-Russia tensions.

BBC World Affairs correspondent Peter Biles says the documents should be seen against the background of Washington's efforts to "reset" its relations with Russia and improve co-operation.

One secret cable from the US mission to Nato in Brussels revealed that US Admiral James Stavridis, the alliance's top commander in Europe, had proposed in January expanding Nato's contingency plans for defending Poland - known as Eagle Guardian - to include Lithuania, Latvia, and Estonia.

The cable adds: "The expansion was formally submitted to Allies for decision under a silence procedure."

Call for secrecy

Another cable, signed by Mrs Clinton, instructs US embassies how to deal with the new Nato plan for the Baltic states, and stresses that the project must be kept secret.

"We see the expansion of Eagle Guardian as a step toward the possible expansion of Nato's other existing country-specific contingency plans into regional plans," it says.

Analysts say other cables show a degree of frustration between Warsaw and Washington over plans to deploy Patriot air defence missiles to Poland.

This had been the key price for a Polish decision to back the Bush administration's wider missile defence plans.

But rather than getting operational systems with their full crews, the Poles received only launchers minus their missiles and a token number of US troops.

One senior Polish official is quoted in a cable from February 2009 as telling the Americans that his country expected to get operational missiles and not what he called "potted plants".

Arrest warrant

Sources have told the BBC that the European Arrest Warrant for Mr Assange arrived on Monday afternoon.

Mr Assange's UK lawyer, Mark Stephens, told the BBC: "We are in the process of making arrangements to meet with the police by consent in order to facilitate the taking of the question and answer that is needed."

Sweden first issued an arrest warrant for Mr Assange on 18 November but it was invalidated by a procedural error. A new warrant was issued on 2 December.

PostFinance, in a statement on its website, said Mr Assange had "provided false information regarding his place of residence" during the account opening process.

"(Mr) Assange entered Geneva as his domicile. Upon inspection, this information was found to be incorrect.

"(Mr) Assange cannot provide proof of residence in Switzerland and thus does not meet the criteria for a customer relationship with PostFinance. For this reason, PostFinance is entitled to close his account."

Wikileaks says it and Mr Assange have lost 100,000 euros in assets in a week.

In one of its most controversial leaks so far, Wikileaks released on Monday a US State Department cable from February 2009 asking its officials around the world to update a list of key sites, the loss of which "could critically impact" the US.

The list includes undersea cables, key communications, ports, mineral resources and firms of strategic importance in countries all over the world.

Former UK Foreign Secretary Sir Malcolm Rifkind described Wikileaks' actions as "verging on the criminal".

Leaked memo describes Russia's security chiefs as maintaining 'a Cold War mentality'

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/06/AR2010120607241.html

Tuesday, December 7, 2010

New insights into Russia and its security services can be gained from a Nov. 5, 2009, confidential cable written to FBI Director Robert S. Mueller III before his visit to Moscow that month. The briefing was among the documents made public by WikiLeaks.

Written by U.S. Ambassador John Beyrle, an accomplished Russia expert, it not only describes the heads of Moscow's three senior security services, with whom Mueller was to meet, it also outlines the roles those services play within the Russian power structure.

Beyrle made clear that the three "represent institutions that feel threatened - ideologically and materially - by the 'reset' in [Russian-U.S.] relations." But, he added, they appreciate the benefits from cooperation with Washington.

Before describing the personalities of the directors, the U.S. ambassador briefly spelled out the broader background of what he called the "tandem" relationship between Russian President Dmitry Medvedev and Prime Minister Vladimir Putin. The two, he wrote, "reinforced long-standing elite divisions between the 'siloviki' [officials from the security and intelligence services] and the modernizers . . . [who] recognize that Russia's future depends on integration with the world economy and that confronting some of the country's most stubborn problems - such as corruption - requires transparency and the impartial application of the law."

Beyrle advised that "although there is evidence that their closest advisors spar privately over policies and personnel matters, the two leaders appear united and project complete ease with one another in the media." He pointed out that, as of a year ago, Putin remained more popular than Mevedev.

Mueller was preparing to meet with FSB Director Alexsandr Bortnikov, whose agency, like the FBI, handles domestic crime, terrorism and counterintelligence; SVR Director Mikhail Fradkov, whose agency is the equivalent of the CIA; and Internal Affairs Minister Rashid Nurgaliev, whose department controls police forces and has some similarities to the U.S. Justice Department.

Beyrle said all three "tend toward a Cold War mentality, which sees the U.S. and its allies intent on undermining Russia," making "public accusations to that effect." Their agencies, in turn "are skeptical about the West's motivations and are the most influential opponents of the engagement agenda."

However, the ambassador pointed out that "none of them is within the 'inner circle' of Kremlin decision-making, but instead enjoy the reflected power of their sponsors and allies." Fradkov, who worked for Putin years ago, and Bortnikov are economic specialists who work "behind the scenes to check the influence of Russia's powerful business magnates and advance the interests of their allies," Beyrle said. Only Fradkov had experience in foreign relations, working in the Foreign Trade Ministry in the 1990s and as ambassador to the European Union for a year beginning in 2002.

Still, only Nurgaliev has supported worldwide cooperative ventures, Beyrle said, and "openly lamented the culture of corruption with Russia's law enforcement system."

Unlike the FBI, the ambassador said "political factors determine the enthusiasm for pursuing investigations," and some elements of the security services were said to be linked to organized crime.

Noting that Russian security service directors play a more open role in politics than do their counterparts in the West, the ambassador said the three "accrue political power . . . by using the legal system against political enemies - turning the courts into weapons of political warfare rather than independent arbiters." But, he added, "Despite their similar outlook and background, they are also competitors for influence against each other, with shadowy conflicts occasionally bubbling to the surface."

Mueller was warned that the security services "maintain . . . active surveillance" against U.S. representatives and have "sought to stifle U.S. humanitarian programs in the North Caucasus." In addition, there have been investigations and trumped up charges against Western-supported, nongovernment organizations.

While the FSB had elements working cooperatively with U.S. law enforcement agencies in the areas of terrorism, narcotics, cybercrime, organized crime and nonproliferation, that agency's counterintelligence units have carried out "harassing activities against all embassy personnel [that] spiked in the past several months to a level not seen in many years," Beyrle wrote. These included false and slanderous attacks in the media, assertions that spouses had been killed accidentally and searches of homes.

Despite what Beyrle called "these challenges," he said Mueller's visit came with strong Kremlin backing and "a climate of renewed opportunity."

In fact, he said earlier visits to Moscow by President Obama and Secretary of State Hillary Rodham Clinton "have produced more positive momentum in our bilateral ties than I have seen in over a decade."

But he said it was "premature to say we have reached a turning point in overcoming security service suspicions about U.S. intentions," despite the "vigor" with which the FSB pushed for Mueller's visit, including Russian payment for his aircraft's overflight and landing fees.

WikiLeaks Shows Intel Blackmailed Russian Govt.http://www.tomshardware.com/news/Wikileaks-Intel-Wikileaks-Russian-Government-Julian-Assange,11749.html

7:00 PM - December 6, 2010 by Tuan Nguyen - source: Tom's Hardware US

It was somewhat apparent that the 250,000-or-so cables released by WikiLeaks could make the lives of many rather inconvenient, but it seems that the information goes much further than just diplomatic negotiations.

It was somewhat apparent that the 250,000-or-so cables released by WikiLeaks could make the lives of many rather inconvenient. However, it seems that the information goes much further than just diplomatic negotiations. A new document now shows how Intel was able to get a waiver from the Russian government to import software that usually

could not have been imported. If we read this right, then the information shown could be called bullying at best and blackmailing at worst. Some may call it business, though.

Intel apparently received approval to import 1000 encrypted platforms that would be used for the development of software. Intel, which was represented back then by CEO Craig Barrett, made it clear that it needed the hardware and software in the country and was able to leverage its intelligence, if you will, knowing that Russia wanted to become a "knowledge-based economy." Intel highlighted that it was employing more than 1000 Russian engineers and if it was not able to import those platforms, it would have to lay off over 200 engineers and R&D work would be moved to India or China. Apparently, the negotiations involved not only Barrett, but also American Chamber of Commerce President Andrew Somers on the American side, as well as Russian President Medvedev.

The cable described Intel's appearance as high-level lobbying: "Intel was able to demonstrate the reasonableness of its request and, as a result, by-passed the current extensive licensing requirement." The cable stated that the import limit was 1000 units and there was no waiver for commercial products. The American government described the activity as sign that the Russian government may be flexible in granting waivers for certain encryption products.  

Intel threatened to pull out of Russia http://www.theinquirer.net/inquirer/news/1930177/intel-threatened-pull-russia

Furious over Putin's encryption policy

By Nick Farrell Mon Dec 06 2010, 10:08

CHIPMAKER INTEL threatened to pull its research and development operations out of Russia and relocate them to India or China last year.

According to a US Department of State cable published by WikiLeaks, Chipzilla was furious that Putin was not allowing it to import software development platforms containing strong encryption.

The Russians have not streamlined procedures for importing items containing cryptographic information. Intel wanted to make sure that its software codes were safe.

The cables reveal that Chipzilla had to engage in some intense and high-level lobbying before it got a waiver allowing 1,000 encrypted workstations to be imported into Russia.

This effectively meant that Chipzilla was allowed to bypass the cumbersome licensing process.

Intel seems to have used a few threats, saying that if it could not import these development kits, there would be no programming work available.

Chipzilla threatened to lay off over 200 engineers and shift its R&D work in Russia to India or China.

The licensing process took six months and involved submitting samples for analysis to a laboratory, which meant that Intel could lose its IP through reverse engineering.

RUSSIA-EU SUMMIT

Medvedev to take part in 26th Russia-EU summithttp://english.ruvr.ru/2010/12/07/36347672.html

Dec 7, 2010 12:09 Moscow Time

Russian President Dmitry Medvedev is due to attend the 26th Russia-EU summit, which is getting under way in Brussels today. The Russian leader’s aide Sergei Prikhodko has voiced hope that the summit will complete the procedure of Russia’s joining the WTO. Prikhodko said that the parties to the talks on Russia’s joining the WTO reached the final stage of the discussion late last month. The Brussels summit agenda also features such important problems as climate change, energy security, economics, visa-granting, and also international and regional issues. The parties to the summit meeting will likewise take up Iran’s nuclear programme and some frozen conflicts. Sergei Prikhodko does not rule out that Russia and the European Union may sign a new framework agreement on cooperation some time next year.     

RF-EU summit to deal with visa issues, WTO, energy

http://www.itar-tass.com/eng/level2.html?NewsID=15752403&PageNum=0

07.12.2010, 00.51

MOSCOW, December 7 (Itar-Tass) - The Russia-European Union (EU) summit, which opens in Brussels on Tuesday will focus on matters aimed at abolishing the visa regime, on the Russian Federation's accession to the World Trade Organization (WTO), and on energy security.

President Dmitry Medvedev, who completes his visit to Poland on Tuesday and goes to Belgium, will lead a Russian delegation at the summit. The EU will be represented by its chairman Herman van Rompuy and European Commission president Jose Manuel Barroso.

When in Brussels, the Russian president will be accompanied by Foreign Minister Sergei Lavrov, presidential aide Arkady Dvorkovich, Justice Minister Alexander Konovalov,

Economic Development Minister Elvira Nabiullina, Russian permanent representative to the EU Vladimir Chizhov, and co-chairman of the Russia-EU Inter-parliamentary Cooperation Committee Andrei Klimov.

Medvedev to attend RF-EU summit in Brussels Tue

http://www.itar-tass.com/eng/level2.html?NewsID=15752498&PageNum=0

07.12.2010, 03.27

WARSAW, December 7 (Itar-Tass) - Russian President Dmitry Medvedev completes his official visit to Poland on Tuesday.

After taking part in a ceremony marking the laying of a wreath at the memorial to Soviet soldiers here on Tuesday morning, Medvedev will leave here by air for Brussels where a Russia-EU summit will take place. The Russian president will also pay an official visit to the Kingdom of Belgium.

The visit will begin with an official welcoming ceremony. The programme for the stay of the Russian Head of State provides for his meeting with King Albert II and talks with Prime Minister Yves Leterme.

RF presidential aide Sergei Prikhodko told journalists, "The forthcoming Russo-Belgian meeting at summit level is called upon to give a fresh impetus to the development of constructive political dialogue between our two countries, the dialogue which is an integral component of the process of Russia's and the EU's drawing closer together, and the strengthening of the climate of trust, cooperation and security in Europe".

One step closer to the WTO – EU-Russia summit kicks off in Brusselshttp://rt.com/news/russia-eu-summit-brussels/

Published: 07 December, 2010, 09:37

At the EU-Russia summit in Brussels on Tuesday the two sides are planning to discuss common challenges and review bilateral relations.

As Dmitry Rogozin, Russia’s ambassador to the EU, believes, no reset in relations with the EU is needed – just acceleration of the strong ties that already bind the two sides.

The main topic on the agenda is Russia’s long-desired accession to the World Trade Organization. Recently, there have been many signals from the international community that this could happen as soon as next year.

Another important issue is a new cooperation agreement between Moscow and Brussels, as relations have so far been based on the pact signed in 1997, which expired in 2008. It has been extended every year since then.

Russia and the EU are also to discuss security issues in the joint neighborhood. However, it is not clear whether Moscow’s proposal to build a unified anti-missile defense system between Russia, the EU and the US is going to be touched upon at the summit.

The so-called partnership for modernization agreement is also highly ranked on the agenda. The agreement was signed during the last summit in Russia’s Rostov-on-Don. It is aimed at modernizing bilateral relations and also getting the EU to help Russia modernize its economy, industry and social sector, through combining European experience and Russian resources.

The four main points in Russia-EU relations are called “common spaces”, namely: economy, which also includes the environment; freedom and justice; external issues such as security and crisis management; research and education.

The Russian side will be represented by President Dmitry Medvedev and Russia’s Foreign Minister Sergey Lavrov.

Medvedev Heads for Tough EU Talks in Brussels http://www.themoscowtimes.com/news/article/medvedev-heads-for-tough-eu-talks-in-brussels/425800.html

06 December 2010By Nikolaus von Twickel

After a groundbreaking summit in Poland, President Dmitry Medvedev will head to Brussels on Tuesday for much harder talks with European Union leaders.

Medvedev will push long-standing Russian demands at this year's second EU-Russia summit, the Kremlin said Monday, but analysts said it was unlikely that the talks would result in much substantial progress.

Many observers expect the main tangible outcome to be a memorandum sealing approval of Moscow's bid to join the World Trade Organization, while hopes for visa-free travel and common ground on foreign and security policy will be projected into a dim future.

"Russia sees the EU as a real strategic partner, linked by sizable economic interdependence and common approaches to international and regional issues," the Kremlin said in an e-mailed statement Monday.

But one key foreign policy issue identified earlier this year is unlikely to move forward, diplomats said.

In June, Medvedev and German Chancellor Angela Merkel pledged to found a joint Security Committee that would help resolve regional crises and conflicts.

Moscow has since been pushing for the committee, which would basically add Russia to the council of the bloc's 27 foreign ministers, saying the arrangement would give substance to its foreign policy cooperation with Brussels.

But the initiative immediately ran into trouble because both sides disagree on the conditions. Merkel said in June that the first issue to be tackled should be the conflict in Transdnestr, a separatist sliver of eastern Moldova where Russian troops have kept an uneasy peace for almost two decades.

Diplomats said Transdnestr was chosen as a test case for Russia's willingness to solve "frozen conflicts" in its neighborhood.

"It seemed the least insolvable of the insolvable conflicts," a senior EU diplomat told The Moscow Times on condition of anonymity.

But the Kremlin refuses the notion of conditionality.

"Transdnestr was never put forward as a precondition but as a pilot project," Moscow's EU ambassador, Vladimir Chizhov, told Interfax in an interview  last week.

Chizhov added that the impasse could not be solved without the two conflict parties: Moldova and the separatist leadership in Tiraspol.

A current political impasse in Moldova makes a fast solution to the conflict unlikely, he said.

That argument was supported by a second diplomatic source in the EU, who said the summit was too close to last month's parliamentary elections in Moldova to discuss Transdnestr in detail.

"It is just too early to talk about that," the source said on condition of anonymity because he was not authorized to speak to the media.

Analysts have argued that Moscow could do much more to solve the conflict.

"The EU expects Moscow to demonstrate good faith in Transdnestr — and so far there is no sign of that," said Frazer Cameron, director of the EU-Russia Center, a Brussels-based think tank.

But Konstantin Zatulin, a United Russia lawmaker who serves as first deputy chairman of the State Duma's Commonwealth of Independent States Committee, said the EU should not expect any concessions from Moscow over Transdnestr: "We have no obligation to Brussels here — our only obligation is to help our citizens who were left defenseless after the Soviet Union's dissolution," he said by telephone.

The issue also overshadowed last week's summit of the Organization for Security and Cooperation in the Kazakh capital, Astana, which failed to agree on an action plan to resolve future conflicts.

Another potentially slow-moving topic will be visa-free travel. The Kremlin jumped on an initiative revitalized by Spain earlier this year to abolish visa requirements for both

Europeans and Russians, but other EU members quickly countered that Russia should not get free-travel before a group of post-Soviet states including Belarus and Azerbaijan, which signed the EU's Eastern Partnership program.

On Monday, the Kremlin said the issue remained a test case. "This is an essential indicator of whether the EU is ready to build a bigger Europe — a unified economic and liberal [humanitarian] space," the Kremlin statement said.

Ambassador Fernando Valenzuela, head of the EU delegation to Moscow, said EU leaders would definitely set no deadline for when visas would be scrapped.

"Artificial deadlines do not help," he told Interfax on Monday.

Instead, Valenzuela said, both sides would probably agree to start new negotiations to ease visa regulations next year. They would be parallel to talks already under way on lifting visas altogether, he said.

The summit is the 26th top-level EU-Russia meeting. Both sides meet twice every year, once in Russia and once in an EU member country.  

After the Lisbon Treaty reforms abolished the rotating presidency's say over the EU's foreign policy, the European venue is set to be Brussels.

In a peculiar gaffe, the Kremlin's statement Monday failed to mention Herman van Rompuy, the European Union president, saying merely that EU Commission chief Jose Manuel Barroso would represent the European side.

Russia Moves Closer to WTO Membership With EU Breakthrough Deal http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aeejVX176eFs

By Jennifer M. Freedman

Dec. 7 (Bloomberg) -- Russia will move a step closer to membership in the World Trade Organization today when it signs an agreement with the European Union settling “key questions” that have hampered its accession bid for years.

Russian President Dmitry Medvedev and EU leaders including President Herman Van Rompuy and European Commission President Jose Barroso will sign a memorandum of understanding that sets the terms to resolve all EU-Russia bilateral issues. Russia, the largest economy outside the WTO, applied for membership of the Geneva-based trade arbiter in June 1993.

“We have finished our negotiations with Russia on those terms of Russia’s WTO accession which were not yet agreed previously and were of particular concern specifically to the EU,” said John Clancy, the commission’s trade spokesman in Brussels. “These aspects will be politically endorsed with the signing of the MoU. This bilateral deal resolves a number of key questions for the EU and brings the accession moment closer.”

Among the bigger EU concerns that have been settled are Russia’s pricing policies for lumber exports and railway fees. Finland and the Baltic countries complained that the policies unfairly aid Russian companies by overcharging European rivals. Russia has agreed to cut the timber export duty to about 15 percent of customs value from 25 percent, though the lower levy won’t be applied until it joins the WTO.

The 27-nation EU is Russia’s biggest trading partner, accounting for 50.4 percent of volume in the first nine months of this year, according to the Moscow-based Federal Customs Service. Trade in goods and services between the two economies climbed almost 35 percent in the first nine months of 2010 to $217.8 billion, according to data distributed by the Kremlin.

Natural Gas

The EU shipped about 66 billion euros ($87.8 billion) of products such as machinery, transport equipment, food and live animals to Russia last year and bought 115 billion euros of Russian goods. Energy and mineral-fuels products make up 77 percent of EU imports from Russia. The bloc relies on Russia for more than a quarter of its natural-gas demand, according to EU statistics office Eurostat.

The accord to be signed at the EU-Russia summit in Brussels doesn’t iron out all Russian WTO accession issues. The world’s biggest energy supplier must negotiate multilaterally on a slew of unresolved matters such as conditions for a trade-related investment regime and its application of health rules for food imports, some of which concern the EU, Clancy said.

Overflight Fees

“We will continue negotiations alongside other WTO members on technical regulations and will monitor that Russia implements the commitments it undertook in such areas as sanitary and veterinary conditions for agricultural imports, intellectual- property rights and other market-access-related non-tariff regulations,” he said.

Russia also agreed during discussions that ran parallel to its WTO accession talks to alter the way it imposes fees against European planes for the right to pass over Siberia. The changes will be made when Russia joins the WTO, Clancy said.

“Once all multilateral questions are resolved and negotiations in Geneva are finished, the EU countries will have to agree to the whole WTO accession package,” he said. “As Russia made the link to WTO accession, the implementation of the overflight agreement will be an important element to be considered at that stage, which could be in six to 12 months from now, if negotiations proceed in a good pace.”

Russia expects to complete negotiations to join the WTO in the first half of 2011, Deputy Economy Minister Andrei Klepach said in a Nov. 30 interview. While accession will initially have a negative impact on the auto and aircraft industries, it will be positive for Russia in the long term, he said.

U.S., Russia

Russia and the U.S. won’t complete accession talks this year because sticking points remain over issues including U.S. demands for greater access for agricultural products, mainly poultry and pork, legislation to protect intellectual property and Russian curbs on imports and exports, Myron Brilliant, senior vice president for international affairs at the U.S. Chamber of Commerce, said in September.

Russia also has yet to reach an agreement on its WTO accession with Georgia. The former Soviet republic has threatened to block Russia’s entry to the WTO if its northern neighbor doesn’t lift a four-year-old economic embargo.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

Last Updated: December 6, 2010 19:01 EST

EU to sign trade document with Russia's 'lilliputian'http://euobserver.com/9/31442

ANDREW RETTMANToday @ 09:29 CET

EUOBSERVER / BRUSSELS - The EU will partly lift its objections to Russia joining the World Trade Organisation (WTO) at a summit on Tuesday (7 December), eight days before Russian courts give their verdict in the Khodorkhovsky trial in a process described by the US as "lipstick on a political pig."

The bilateral memorandum on the WTO to be signed at the summit in Brussels comes after Russia in November agreed to phase out tariffs on lumber and other raw materials.

EU leaders are saying Russia could join the trade body in 2011. But other EU objections remain in the multilateral track of WTO talks, where Brussels wants Moscow to stop using phyto-sanitary rules to restrict imports and to improve intellectual property rights.

Brussels will on Tuesday also tell Russian President Dmitry Medvedev that he has a long way to go on improving technical standards, such as passport and border security, before any deal on visa-free travel.

Meanwhile, EU commission official Hugues Mingarelli and Russia's deputy minister for economic development Andrei Slepnev will put forward a draft "working programme" for the Partnership for Modernisation, a political initiative to improve the rule of law in Russia and to encourage high-tech foreign firms to invest in its petro-dominated economy.

The prospect of WTO entry comes amid a broader reconciliation between Russia and its historic enemies. Nato in November invited Russia to take part in its missile defence scheme. And President Medvedev on a rare visit to Poland on Monday promised to fully open archives on the Soviet Union's 1940 massacre of Polish officers and intellectuals in Katyn.

Speaking at a conference in Warsaw the same day, the EU's neighbourhood policy commissioner Stefan Fuele said: "The EU's overarching goal is to bind Russia into a rules-based international and multilateral order, including the WTO, because transparency and predictability are the key to good economic and political relations."

The Czech politician added: "We need to recognize that the psychological process of reconciliation following the Cold War has to run its course ... Recent Polish-Russian efforts in this respect are of crucial relevance here and I hope further progress will also be possible between Russia and its other neighbours."

The Brussels summit, a regular twice-yearly affair, falls just a few days before Russian judges on 15 December give their verdict in the trail of Russian oil tycoon Mikhail Khodorkhovsky.

A recently leaked cable by the US embassy in Moscow in 2009 described what most EU officials and diplomats dealing with Russia really think about the case. Entitled "Rule of law lipstick on a political pig," the cable said: "It shows the effort that the GOR [government of Russia] is willing to expend in order to save face, in this case by applying

a superficial rule-of-law gloss to a cynical system where political enemies are eliminated with impunity."

EU officials regularly ask questions about Mr Khodorkhovsky in the so-called EU-Russia human rights consultations which take place in Brussels two-weeks before each summit.

The Russian side gives boiler-plate answers and refuses to bring along interior ministry officials or to give access to the talks to NGOs, leaving the EU side deeply disappointed with the process.

"In his annual address Mdevedev stresses the modernisation partnership, in which they see visas and technology, but no rights. Russia is aiming at a modernisation parnership which has no clear legal framework," an EU diplomat said, referring to Mr Medvedev's speech on Russian TV last week.

The "lipstick on a pig" cable is one of several leaked US notes on Russia, which depict the country as a "mafia state" where businessmen bring suitcases of cash to the Kremlin and where the secret service, the FSB, kill non-compliant businessmen.

The US note which annoyed Russia the most so far depicted EU summiteer President Medvedev as an sidekick to Putin, calling him "Robin" after the Batman cartoons, and a "lilliputian." Another note said that Mr Putin during the 2008 Russia-Georgia war kept Mr Barroso out of key meetings and saw him as "a glorified international civil servant not worthy to be in the Czar's [presence]."

Fresh cables released on the morning of the EU summit also show the limits of the Nato-Russia and Poland-Russia detente. The cables say Nato in November approved a Contingency Plan for how to repel a Russian invasion from the Baltic States and Poland, involving nine Nato divisions to be deployed via Polish Baltic Sea ports.

The Kremlin's PR agency in Brussels, GPlus, is playing down the importance of the leaks.

"These allegations are nothing new and they contain no evidence. It's like putting old rumours in a dryer and pressing the button to spin them round again," a GPlus contact said.

Kazakh govt approves documents on Common Economic Space

http://www.itar-tass.com/eng/level2.html?NewsID=15752746

07.12.2010, 08.47

ASTANA, December 7 (Itar-Tass) - The Kazakh government approved on Tuesday a package of documents forming contractual legal framework of the Common Economic Space involving Kazakhstan, Russia and Belarus.

Minister for Economic Development and Trade Zhanar Aitzhanova said at a government session that 17 agreements had been drafted upon instructions of the heads of state of the Customs Union.

“They can be divided into four groups. The first one includes agreements aimed at ensuring coordinated economic policy,” she said. “The second package of agreements is aimed at ensuring the freedom of movement of capital and services. The third bloc is aimed at ensuring the freedom of workforce movement, and the fourth one – access to services of natural monopolies,” the minister added.

The first meeting with Vladimir Putinhttp://www.barentsobserver.com/the-first-meeting-with-vladimir-putin.4857697-116321.html

2010-12-06 Finnish Prime Minister Mari Kiviniemi will Friday go to Sankt Petersburg for her first meeting with Russia’s Vladimir Putin.

Kiviniemi, who took over the reigns as Finnish Prime Minister in June this year, will meet Putin in his home town of Sankt Petersburg.

According to the Finnish Government, commercial and economic relations and transport and mobility affairs will be top agenda issues. Also the world economy, EU-Russia cooperation and issues relating to the Baltic Sea will be discussed, a press release informs.

Finland is one of Russia’s closest partners in the EU, and the two countries hold bilateral top meetings every six months. As reported by BarentsObserver, Finland was one of the countries mentioned as partners in economic modernization by President Dmitry Medvedev in his last week address on the state of the nation.

The Finnish-Russian top meeting takes place only a month after President Tarja Halonen was on a three-day state visit to the country.

Text: Atle Staalesen

Russian General Staff chief visits Indiahttp://en.rian.ru/mlitary_news/20101207/161660127.html

03:37 07/12/2010

The chief of the Russian General Staff, Army Gen. Nikolai Makarov, will visit India on December 7-9 to discuss bilateral military cooperation, the Russian Defense Ministry said on Tuesday.

Makarov will meet with his Indian counterpart Air Chief Marshal Pradeep Vasant Naik and other top military commanders.

The sides will focus, in particular, on the preparation for the Indra 2011 joint military drills.

During his stay in India, Makarov will also visit the BrahMos Aerospace Ltd., a Russian-Indian joint venture manufacturing supersonic cruise missiles, and the headquarters of the 50th independent parachute brigade, the first Indian airborne unit formed in 1941.

The Indian and Russian military have conducted joint INDRA exercises since 2003.

The latest drills were held in October this year in the Indian Himalayas.

Russia sent more than 200 troops from its 34th mountain brigade, based in the North Caucasus, to join the Indian troops in the exercises.

 MOSCOW, December 7 (RIA Novosti)

7 Dec, 2010, 02.11PM IST,PTI

Russian nuke power company to set up production units in Indiahttp://economictimes.indiatimes.com/news/international-business/Russian-nuke-power-company-to-set-up-production-units-in-India/articleshow/7058660.cms

MOSCOW: Eyeing the over 100-billion-dollar civilian nuclear market in India, Russia's global nuclear project company Atomstroyexport is holding talks with Larsen and Toubro for setting up a joint venture to manufacture equipment required for construction of atomic power plants.

Atomstroyexport, which is building two 1000 MW reactors at Kudankulam in Tamil Nadu, said it has decided to set up an equipment manufacturing unit in India considering the boom in the nuclear business and cut down timeframe for construction of atomic reactors.

"We are going to set up a joint venture for production of equipment required for construction of nuclear power plants. We are currently holding negotiations with Larsen

and Toubro," said Georgy O Kumani, Vice President of Atomstroyexport, a subsidiary of Rosatom, the state-run nuclear corporation

At present, L&T manufactures reactor vessels for pressurised heavy water reactors and fast breeder reactors. It has also designed technology and critical equipment and systems for heavy water plants, fuel re-processing plants and plasma reactors.

Kumani said the proposed production unit will initially manufacture general equipment and at a later stage will make critical parts of nuclear power plants (NPP).

Asked about investment and share holding pattern of the joint venture, he refused to elaborate. "We are yet to firm up the deal."

Although commissioning of a nuclear power plant takes three to seven years, Kumani said the company will be able to operationalise one plant every year after setting up the manufacturing unit provided the company gets good number of contracts for building NPP.

Kumani said the manufacturing unit will be operationalise before Atomstroyexport starts construction of two more atomic power plants in Kudankulam.

Russia's concerns over some clauses of the nuclear liability law has led to delay in finalising contracts for building these two plants.

"We have already carried out extensive preparations for setting up unit three and unit four at Kudankulam. We hope to resolve the hurdles soon," Kumani said.

Atomstroyexport has already signed an agreement with Nuclear Power Corporation of India Limited (NPCIL) for carrying out the first priority design for the two reactors.

Kumani said the first unit of Kudankulam nuclear power plant will be operational by early next year as its construction has already been completed. The second unit is expected to be made operational within a year of commissioning of unit-1.

The Atomstroyexport official said he considers India as a very fast growing market for civilian nuclear power project. The company has already built 31 nuclear power units in seven countries, including China and Iran. 07/12/2010

Germany halts plan to transport spent N-fuel rods to Russiahttp://news.in.msn.com/international/article.aspx?cp-documentid=4669207

K Mammen MathewBerlin, Dec 7 (PTI) Germany has halted a controversial plan to transport highly radioactive reactor fuel rods to Russia for reprocessing and storage of nuclear waste

following strong protests from environmental groups and opposition parties.German Environment Minister Norbert Roettgen said that 951 spent fuel rods from an experimental reactor in former East Germany will remain at the present storage facility in Ahaus until further notice because safe reprocessing cannot be guaranteed at the Mayak nuclear facility in Russia.The nuclear fuel reprocessing and storage plant at Mayak in the Urals is not operating at present and therefore its safety cannot be established, he told reporters in Bonn yesterday.The Federal Office for Protection Against Radiation had already approved the plan to ship the fuel rods in 18 containers from a Baltic Sea port to Russia. The fuel rods were supplied by the former Soviet Union for the experimental reactor at Rossendorf, near Dresden.Following the German reunification 20 years ago, the state government of Saxony dismantled the spent fuel rods from the reactor and sent them to the Ahaus nuclear waste storage facility in the state of North Rhine Westphalia.Russia had expressed its readiness to reprocess the spent fuel and store the waste at its facility under an inter-governmental agreement signed recently.However, Russian environmental groups and scientists had warned against sending the radioactive material to Russia saying that the Mayak plant, which was one of the oldest nuclear research centres in the former Soviet Union, is very unsafe for reprocessing and storage of waste.Russian environmental organisations and anti-nuclear activists had in a letter to Chancellor Angela Merkel, urged her not to send the fuel rods to the Mayak plant, which had a series of accidents since the 1950s and is now one of the most radioactive contaminated places in the world.Germany''s anti-nuclear Green party claimed that the decision to stop the nuclear shipment to Russia was the result of its campaign against the export.Greenpeace also welcomed the decision and said it would have been "irresponsible" to send a nuclear transport to an "ecologically catastrophic region."The Mayak plant was one of the centres of the ex-Soviet Union''s nuclear weapons programme and it was kept secret for more than 30 years. A series of accidents in the plant led to the radioactive contamination of a large territory in the Ural region.It is estimated that over half a million people have been irradiated and some of them were exposed to 20 times more radiation levels than during the Chernobyl nuclear disaster.PTI KMM

Bulgaria: The EUR 6.3bn Belene deal a great success, says FinMinhttp://www.balkans.com/open-news.php?uniquenumber=83516

bne - 07.12.2010

The EUR 6.3bn deal for building the Belene Nuclear Power Plant is a great success, said Bulgaria's Finance Minister Simeon Djankov in an interview for the TV channel Nova Televizia, reports Novinite.

"The price of EUR 6.3 B is high and we will negotiate to lower it, but to fix it at this amount right now is still great success," said Djankov.

Signing the memorandum with the Russian Rosatom only establishes the frame for the future negotiations on Belene. The real talks are still ahead, said Djankov.

He added that there are four possible ways to finance Belene: to finance it through a loan granted to Bulgaria's National Electric Company (NEK), to use Russian financing, to find European or Chinese investors or to not build it at all. China has expressed a strong interest in the NPP project, Djankov confirmed.

"Bulgaria's biggest trump card is the fact the NPP is on EU territory. So "the battle" is not between 7 million Bulgarians and 150 million Russians, but between 450 Europeans against 150m Russians," Djakov said. bne.

Skolkovo plans to engage Swiss research companies

http://www.rbcnews.com/free/20101207105119.shtml

      RBC, 07.12.2010, Moscow 10:51:19.The Skolkovo Fund Management Company plans to open a research center for membrane, coating and surface modification - technologies that can be used in aircraft building to increase the lifetime of engines - within the innovation center. Russian research institutes - including the Bauman Moscow State Technical University and the All-Russian Scientific Research Institute of Aviation Materials, as well as Renova and Switzerland's Sulzer have already signed up for the project worth a total of $50m. According to RBC Daily, Renova's head and Skolkovo President Viktor Vekselberg is a minority shareholder in Sulzer.

      The premises for the project have not yet been determined, however, with the Kurchatov Institute slated as another possibility. Presumably, two subdivisions of Sulzer, Sulzer Innotec and Sulzer Metko, will contribute part of their research to the new center.

Fuel overload blamed for Proton launch failurehttp://english.ruvr.ru/2010/12/07/36348739.html

Dec 7, 2010 12:19 Moscow Time

Fuel overload has been singled out as the prime reason for  Sunday’s failed launch of  the Proton-M carrier rocket  that was  supposed to deliver satellites for the completion of Russia's GLONASS satellite navigation system.

This preliminary conclusion made by a government commission probing the matter explains why the carrier’s speed was about 100 meters per second below normal at  the moment the three satellites separated from the DM-3 booster.

Russian Helicopters win Brazilian tender to operate in Amazon basin http://www.shephard.co.uk/news/rotorhub/russian-helicopters-win-brazilian-tender-to-operate-in-amazon-basin/7865/

December 06, 2010

The Russian multi-role Mi-171A1, manufactured by the Ulan-Ude Aviation Plant, a subsidiary of the Russian Helicopters holding company, won the tender of Brazil national oil company Petrobras to operate in the Amazon Basin.

Brazilian operators bid in the tender and demonstrated rotorcraft of the leading global manufacturers to Petrobras: Sikorsky Aircraft, Eurocopter, and the Russian Helicopters holding company. The heavy Russian rotorcraft Mi-171A1 won the tender through its combined high characteristics and value for money. It was presented by Аtlas Taxi Aereo.

The first batch of two Mi-171A1 helicopters in transport configuration is scheduled for delivery to Brazil in 2011. At the moment the parties have confirmed the technical parameters and conditions of the delivery. Further deliveries and the creation of an MRO centre based on a Brazilian company can be reviewed in the future.

"Russian Helicopters holding company is ready to provide for the needs of our Brazilian partners in rotorcraft. With Petrobras plans to pump up its oil production in the Amazon Basin the use of Mi-171A1 helicopters in that off road region can become one for the key factors in preserving the ecology of the relic tropical forests of this unique region," Russian Helicopters CEO Dmitry Petrov said.

The Mi-171A1 became the first Russian civil rotorcraft to be delivered to the Brazilian aviation market. Earlier in 2008 the FSUE Rosoboronexport signed a contract with the Brazilian Ministry of Defence to deliver 12 military Mi-35M helicopters manufactured by Rostvertol, a subsidiary of Russian Helicopters. By this time 6 units have been delivered to the Brazilian side pursuant to that contract; according to the schedule, the final batch of Mi-35M helicopters may be delivered before end 2011.

The Mi-171A1 was certified in Brazil in 2005 and has a corresponding type certificate. It can perform night and day flights in adverse weather conditions. The Mi-171A1 can transport up to 26 passengers or 4 tons of load inside the cabin or 4 tons on an external sling. The helicopter can carry up to 12 injured with medical personnel; perform search & rescue and firefighting operations.

Source: Russian Helicopters

Russian Helicopters Holding acquires 24.66% stake in Kazan Helicopters

http://www.bne.eu/dispatch_text13834

Renaissance CapitalDecember 7, 2010

Event: Yesterday (6 Dec), Kazan Helicopters (KHEL) announced that its major shareholder, Oboronprom, had transferred a 24.66% stake in KHEL to Russian Helicopters Holding (100% controlled by Oboronprom). Oboronprom now owns 41.49% of KHEL, while Russian Helicopters Holdings owns 24.66% and 33.85% is in free float.

Action: The news is neutral for KHEL, in our view. Rationale: We believe that the transfer of the stake in KHEL from Oboronprom to Russian Helicopters Holding is part of the consolidation of the Russian helicopter industry and is related to Russian Helicopter Holding's preparations for an IPO.

Mikhail Safin

Russia concerned about foot-dragging by International Tribunalshttp://english.ruvr.ru/2010/12/07/36336020.html

Dec 7, 2010 09:47 Moscow Time

Russia is concerned about foot-dragging by the International Tribunals for the former Yugoslavia and for Rwanda. This came in a statement by the First Deputy Russian Ambassador to the United Nations Alexander Pankin during the Security Council meeting on Monday. The countries that have been formed in the area of the former Yugoslavia, as well as Rwanda are prepared to mete out justice on their own, he said. The Chief Prosecutor of the International Tribunal for the former Yugoslavia Serge Brammertz has said in New York that the Tribunal has failed to meet the deadline, set for the end of this year.   

Russia must exorcise Stalin's legacy - Kremlin aidehttp://in.reuters.com/article/idINIndia-53388420101206

1:39am IST

By Thomas Grove

MOSCOW (Reuters) - Russia has no future unless it can overcome its totalitarian mindset and understand the full scale of Soviet dictator Josef Stalin's repressions, the Kremlin's top human rights advisor said on Monday.

Mikhail Fedotov told Reuters that people's minds were still shaped by decades of oppressive Soviet rule which discouraged them from questioning authority and taking initiative.

"It is necessary to overcome the remnants of the totalitarian regime, because it is the most important aspect of the policy of modernisation," Fedotov said in an interview.

He said Russia's Soviet legacy was inextricably linked with its main problems such as corruption and lack of press freedom.

Criticising Stalin still causes outrage among some Russians but Medvedev has done so himself on various occasions, suggesting Fedotov's plans may not fall on deaf ears.

Fedotov, previously head of Russia's liberal-leaning Union of Journalists, was named by Medvedev as the head of the Kremlin council on human rights in October.

Last month, Russia's lower house of parliament backed a resolution that, for the first time in a public document, blamed Stalin for the 1940 massacre of 22,000 Polish officers.

Fedotov said he expected to present Medvedev with a package of proposals to eradicate "totalitarian thinking" in January.

It will contain concrete measures such as building more monuments to Stalin's victims -- which are very scarce -- and increased compensation payments for survivors.

Russia pays a minimum monthly compensation of 300 roubles ($10) to surviving victims of Stalin's repressions. Western historians say up to 60 million people died in Stalin's gulag labour camps, executions and forced farming collectivisation.

"For someone who spent months in a gulag ten dollars a month doesn't mean very much," Fedotov said.

SENSITIVE ISSUE

Chipping away at Stalin's legacy is a sensitive issue in Russia where some history textbooks still portray him in a positive light. Words of praise for the dictator have been recently restored to a Moscow metro station vestibule.

Rights groups say they have been alarmed by attempts by some officials -- especially during Vladimir Putin's 2000-2008 presidency -- to whitewash Stalin's crimes and play up his role in industrialising the country and defeating Nazi Germany.

Enraging some liberal-minded Russians, Moscow authorities put up posters portraying Stalin during celebrations of the 65th anniversary of the war victory in May.

Fedotov said only by coming to terms with the atrocities of the past can Russia deal with current problems like corruption.

Investors say corruption is one of the most serious barriers to doing business in Russia, which Transparency International rates as joint 154th out of 178 nations in its corruption perceptions index, along with Cambodia, Kenya and Laos.

Medvedev's push to modernise, which centres on using technology to diversify Russia's $1.2 trillion economy and wean it off reliance on oil and gas revenues, is a key part of his policy, without which he has said Russia has no future.

(Editing by Maria Golovnina)

Major auto station to open at RF-Poland border Tue

http://www.itar-tass.com/eng/level2.html?NewsID=15752623&PageNum=0

07.12.2010, 06.33

KALININGRAD, December 7 (Itar-Tass) - A Mamonovo-2 major permanent versatile border-crossing station for freight-and-passenger vehicles opens in the Kaliningrad Region at the border of the Russian Federation (RF) and the Republic of Poland on Tuesday, Alexander Koshlin, deputy head of the Kaliningrad territorial department of the Rosgranitsa (Federal Agency for the Equipment of the State Border of the RF), has told Itar-Tass.

The Rosgranitsa official specially pointed out that "the new automobile border-crossing station Mamonovo-2 is the largest one on the Russo-Polish border. By its characteristics and technical equipment it is up to all modern norms and requirements".

The Mamonovo-2 border-crossing station has been built under the Russo-Polish intergovernmental Treaty on the reconstruction of automobile roads and building of border-crossing stations at them to ensure automobile links between Russia's Kaliningrad Region and the Polish Elblag.

Medvedev Eyes Polish Privatizations http://www.themoscowtimes.com/news/article/medvedev-eyes-polish-privatizations/425745.html

06 December 2010Reuters

WARSAW — President Dmitry Medvedev said Monday that Russian firms wants to take part in the privatization of Polish companies and promised to cooperate with Poland in investigating a plane crash in the Smolensk region that killed Poland's president in April.

During a visit designed to draw a line under old disputes and highlight burgeoning economic ties, Medvedev also confirmed his readiness to work with NATO on missile defense.

"There are big energy projects in Poland with regard to privatization that would be of interest to Russian entities," Medvedev told a joint news conference with Polish President Bronislaw Komorowski.

In his remarks, he singled out Poland's second-largest refiner Lotos as a potential target. The Polish government has put up for sale a controlling 53 percent stake in Lotos and will be awaiting offers until early 2011.

Energy Minister Sergei Shmatko told reporters in Warsaw that a number of Russian companies had shown interest in buying the Lotos stake.

"Rosneft and Gazprom's oil arm, Gazpromneft, among other Russian companies, are eyeing the possibility," he said.

Medvedev, the first Russian president to visit the Polish capital in eight years, said some Russian firms might be interested in listing on the Warsaw bourse, emphasizing the role of small and medium-sized businesses.

Addressing Komorowski, Medvedev said Russia was committed to full transparency in investigating the April 10 plane crash that killed 96 people, mostly top Polish officials.

"This is a very sad page [in our history]. We must do all we can so that no practical questions remain, so we agreed [with Komorowski] to continue to work in this direction under our joint patronage," Medvedev said.

Some, mainly from Poland's right-wing opposition Law and Justice party, have accused Moscow of trying to cover up the crash. A small group of protesters waved Polish flags and banners reading, "We want the truth," near the presidential palace where Medvedev and Komorowski held their talks.

"I think Medvedev has a duty … to explain to the Polish people what happened there and why he and his master, Putin, have been lying since April 10 about what they did there," said one protester, Edward Mizikowski, referring to Prime Minister Vladimir Putin.

Russia won praise from Poland last month when the State Duma backed a resolution that for the first time blamed Soviet dictator Josef Stalin for the 1940 massacre of thousands of Polish officers in Katyn in the Smolensk region.

Medvedev also awarded a friendship medal to octogenarian Polish film director Andrzej Wajda, whose film "Katyn" was shown on Russian television earlier this year. Wajda's father was among those who perished at Katyn in 1940.

Also during the visit, Russian and Polish historians presented a joint history book covering sensitive episodes from their shared past. NATO-related issues were also on agenda.

In an interview published on Monday in the weekly Polish magazine Wprost, Medvedev said: "This should be a joint initiative of Russia and NATO to protect us against threats. [But] if Russia does not find a place for itself within that system, in 2020 it may be that an anti-missile defense umbrella will become a factor destabilizing the nuclear equilibrium and diminishing Russia's defense capacity, and this may lead to a new arms race."

Russia, Poland focus on energy, tradehttp://www.euractiv.com/en/print/global-europe/russia-poland-focus-energy-trade-news-500337

Published: 07 December 2010

Russia wants to take part in the privatisation of Polish companies, its president said yesterday (6 December) during a visit designed to draw a line under old disputes and highlight burgeoning economic ties. From Warsaw, Medvedev left for Brussels, where an EU-Russia summit is being held today.

Background

Polish-Russian relations, described by Polish President Bronislaw Komorowski as being a thousand years old, have had their ups and downs in the last 20 years, since Poland became the first Soviet satellite to overthrow communism.

This is an overview of some key events:

1992 - Russian President Boris Yeltsin released secret clauses of the 1939 Molotov-Ribbentrop pact between Nazi Germany and the Soviet Union that showed they agreed to carve up Poland at the outbreak of World War Two. Yeltsin also gave Poland documents showing Soviet leader Josef Stalin ordered the execution of thousands of Polish prisoners of war at the Katyn forest in the western Soviet Union.

1993 - Yeltsin visited Poland and was feted by the hero of the Polish anti-communist struggle, President Lech Walesa. Walesa obtained Yeltsin's declaration that Russia would not object to Polish NATO entry - which caused an outcry in Moscow. The Kremlin backtracked and launched a drive to warn the alliance against accepting its former satellites.

1999 - NATO admitted Poland, Hungary and the Czech Republic. 2004 - Poland joined the European Union. President Aleksander Kwasniewski

met Russian counterpart Vladimir Putin. Ties strained over Polish reluctance to allow Russian energy companies buy Polish peers.

Kwasniewski infuriated Putin by leading the EU mediation in Ukraine after the rigged presidential election there in December 2004. A re-run resulted in victory for pro-Western candidate, Viktor Yushchenko.

2005 - Conservative Law and Justice led by brothers Lech and Jaroslaw Kaczynski won power in Poland, taking a sharply anti-Russian course. Moscow imposed ban on Polish farm imports.

Russian gas monopoly Gazprom and its German partners agreed to build an undersea gas pipeline bypassing Poland. Radoslaw Sikorski, then defence minister, now foreign minister, compared the agreement to the Molotov-Ribbentrop Pact.

2007 - Poland declared it was ready to host a US missile defence system, sparking furious reaction from Putin. In May, Poland blocked talks on a new EU-Russia strategic partnership over the meat ban.

In October 2007, center-right Civic Platform party won a parliamentary election, with its leader and future prime minister Donald Tusk promising to improve ties with Russia. In November, Poland lifted a veto on Russia's talks to join the Organisation for Economic Cooperation and Development.

In February 2010, Poland approved a long-delayed gas deal with Russia ensuring higher deliveries until 2037, with the settlement still awaiting a final rubber stamp.

On April 10, Polish President Kaczynski, his wife and 94 officials were killed in a plane crash on their way to a ceremony in Russia's Katyn forest marking the anniversary of the killings. Relations between the neighbours improved.

On a trip rich in symbolism, President Dmitry Medvedev promised to cooperate with Poland to investigate a plane crash in Russia that killed Poland's president in April. He also confirmed his readiness to work with NATO on missile defence.

"There are big energy projects in Poland with regard to privatisation that would be of interest to Russian entities," Medvedev told a joint news conference with Poland's President Bronislaw Komorowski.

In his remarks, he singled out Poland's second-largest refiner Lotos as a potential target. The Polish government has put up for sale a controlling 53% stake in Lotos and will be awaiting offers until early 2011.

Russian Energy Minister Sergei Shmatko told reporters in Warsaw that a number of Russian companies had shown interest.

"Rosneft and Gazprom's oil arm Gazpromneft, among other Russian companies, are eyeing the possibility [of acquiring a stake in Lotos]," Shmatko said.

Although energy dominates trade, Moscow increasingly sees Poland, the only European Union member state to avoid recession last year, as a key trading partner in other areas as well.

Bilateral trade was $10 billion in the first six months of 2010, growing by up to 50% from same period in 2009.

Medvedev, the first Russian president to visit the Polish capital in eight years, said some Russian firms may be interested in listing on the Warsaw bourse, emphasising the role of small and medium-sized businesses.

Medvedev's visit to Warsaw comes amid a wider "reset" of relations between Russia and the West. Last month, he and NATO leaders, including from Poland, agreed to cooperate on missile defence, an issue long viewed by Moscow with deep distrust.

The NATO system will link existing European anti-missile systems to radars and interceptors the United States plans to deploy in the Mediterranean, Romania, Poland and maybe Turkey.

Crash probe

Addressing Komorowski, Medvedev said Russia was committed to full transparency in investigating the 10 April plane crash that killed 96 people, mostly top Polish officials.

"This is a very sad page [in our history]. We must do all we can so that no practical questions remain, so we agreed [with Komorowski] to continue to work in this direction under our joint patronage," Medvedev said.

Some, mainly from Poland's right-wing opposition Law and Justice party, have accused Moscow of trying to cover up the crash. A small group of protesters waved Polish flags and banners reading "We want the truth" near the presidential palace where Medvedev and Komorowski held their talks.

"I think Medvedev has a duty [...] to explain to the Polish people what happened there and why he and his master [Prime Minister Vladimir] Putin have been lying since 10 April about what they did there," said one protester, Edward Mizikowski.

Russia won praise from Poland last month when its lower house of parliament backed a resolution that for the first time blamed Soviet dictator Josef Stalin for the 1940 massacre of 22,000 Polish officers in Katyn, now in western Russia.

"I think it is important that we can again hear each other and are ready to discuss the most difficult, the gloomiest [...] pages of our common history," Medvedev said.

The Kremlin leader also awarded a friendship medal to octogenarian Polish film director Andrzej Wajda, whose film "Katyn" was shown on Russian television earlier this year. Wajda's father was among those who perished at Katyn in 1940.

Also during the visit, Russian and Polish historians presented a joint history book covering sensitive episodes from their shared past. NATO-related issues were also on the agenda.

(EurActiv with Reuters.)

Positions

A Polish diplomat told EurActiv that Warsaw was highly appreciative of the recent decision by the Duma, the lower chamber of the Russian parliament, to approve a resolution directly blaming Stalin for the 1940 massacre of 22,000 Polish officers at Katyn.

The resolution, adopted on 26 November in a 324-57 vote, calls the killings committed by Soviet secret police a "crime by the Stalinist regime and the Soviet Union, a totalitarian state". It adds that secret Kremlin documents show that the massacre was directly ordered by Stalin and other Soviet leaders.

The vote came seven months after Russian Prime Minister Vladimir Putin, previously wary of criticising Stalin, denounced the Soviet dictator's regime during a visit to Katyn on 7 April with his Polish counterpart, Donald Tusk.

Beginning of meeting with Prime Minister of Poland Donald Tuskhttp://eng.news.kremlin.ru/transcripts/1425

December 6, 2010, 20:30

PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Mr Prime Minister,

I am very glad to see you again. This year has been very rich in events for our relationship. Although it began with a tragedy, recently we have been able to significantly advance the development of Russian-Polish dialogue.

I am very pleased that the official visit of the President of Russia to Poland is taking place now, in early December. This has been a long-awaited visit, as there has been a gap of many years. I hope that the official part of my visit, informal contacts, our talks with the President and with the Prime Minister, and my other contacts, will significantly intensify our relations and take them to a new level, helping us review the most difficult issues of our history openly and without deception.

I would like to tell you that Russia is ready for this. As you know, I have taken some serious steps recently to ensure that the burden of the past which dominates our relations, including the Katyn tragedy, remains in the past forever and does not afflict the relations between our peoples in the present, in contemporary life.

There are a number of economic projects that I think we should focus on. That is primarily the responsibility of our governments but I am prepared to discuss these issues. A number of important documents will be signed today. We agreed to intensify our humanitarian ties and to organise youth exchanges. All these issues and much of the work will clearly fall within the competence of our governments. So today, I think we have launched a new development trend and that is very important.

Once again, I would like to say that I am very glad to see you.

Speech at Russian-Polish Public Forumhttp://eng.kremlin.ru/transcripts/1424

December 6, 2010, 19:00 Warsaw

PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Mr President, Mr Zanussi, Mr Drachevsky, ladies and gentlemen,

Today is a great day in our relations. Not only because the President of the Russian Federation has come to Poland on an official visit after many years, although this is important in and of itself. It is also great because the spirit of our relations, which has long been weighed down by our past, is changing.

This does not mean that the past has suddenly vanished, or that no questions remain. But I believe what’s important is that we are once again beginning to listen to one another, and to discuss the most difficult, morose, and tragic pages of our modern history. After all, often, it is not a problem of remembering the truth, but rather, of saying that truth and being ready to accept that truth.

Our nations suffered a great deal in the 20th century because of the wars that rattled Europe – first and foremost, World War II – and the totalitarian regimes that destroyed many of their own citizens. It is therefore our sacred duty to finish this work, so as not to have any more causes for mutual distrust and doubt between our nations, between our states, and most importantly, between our peoples. That, in my view, is precisely the purpose of the Russian-Polish Public Forum’s work.

You know, ambitions aside, it is much easier for politicians and public officials to reach agreement when a significant part of the trail has already been blazed by civil societies. Thus, it is the civil societies, the public, that sends the signal or request for states to be friendly, for people to hear one another, for them to understand history and, at the same time, for them to look toward the future, rather than let themselves be entrapped by stereotypes. And so, we must open precisely this kind of page – or rather, chapter, as Mr President says – in our relations.

I want to emphasise again: it is not about shielding our eyes from the past or refuting it; we must talk clearly about what happened, why, and what consequences it brought. That is the only way that we can build honest relations as partners, and therefore, build relations that are mutually beneficial.

Our nations know how to trade with one another. Everything is pretty good in this regard. Despite the deterioration of political relations, things in recent years have generally been fine. We have a multi-billion dollar turnover and we have investments – they may not be enormous, but we have them. Still, things have been much more complicated in terms of political contacts.

I very much count on this visit by the Russian delegation, and the Forum opening here, to serve as very important factors in the intensification of our relations in every sense of the word.

It is true that our nations have gone through a rough patch, but at the same time, our nations are still at a relatively early phase in transforming their economies and societies. It was only a few decades ago that we began building market economies, creating the foundations for full-fledged, beneficial exchanges of goods, building our own democracies, and developing our political systems. In this regard, we still have much work to do in both the Russian Federation and in Poland. And that is precisely why the modernisation we talked about with Mr President today, as well as the agreements on modernisation that we are signing with many EU nations, including Poland, are aimed at high-quality cooperation, mutual assistance, and the creation of a high-tech, modern, free society – a society that is not weighed down by spectres of the past, but is open to trusting and friendly, close relations between people. I hope that your Forum will address this very topic today. I am certain that, given the background that Mr President and I have tried to create, the Forum may have an easier time than it would have otherwise.

I also have another very pleasant mission. I would like to carry out my duty and present a state decoration to the great film director Andrzej Wajda for his enormous contribution to

the development not only of Polish, but world’s cinematography. And I think that this, too, serves as a certain symbol of our closeness and the very difficult pages in the history between Russia and Poland. I would like to say, Mr Wajda, that your work is very much appreciated and loved in our nation, and I am certain that this work, which draws heavily on the events of World War II, will continue to spur the greatest minds of our nations to strive for our countries, and therefore, our people, to be friends, to foster peace, to help us find in ourselves the strength to communicate openly and sincerely, without shielding our eyes from the difficulties of the past, but keeping them open toward the future.

I would like to wish you, Mr Wajda, good health, and I hope that everything you created in the past several decades will forever remain in the bank of world culture.

I want to once again welcome everyone gathered here and sincerely wish you great success. And let’s hear it for Mr Wajda. (Applause.)

Russian sailors kept in custody in Puerto Ricohttp://en.rian.ru/russia/20101207/161660702.html

04:33 07/12/2010

Russian crew of a tanker has been kept on board the ship for a month after the vessel was arrested in Puerto Rico for alleged violations of U.S. ecology legislation.

Carib Vision is a former oil tanker now carrying molasses only. It has a crew of 17 Russian sailors.

"The tanker with a Russian crew on board was detained in Puerto Rico in a course of a routine inspection for alleged violation of U.S. environmental laws ," Anastasia Kitsul, Russia's honorary consul in Puerto Rico, told RIA Novosti on Tuesday.

"The ship has been anchored in Puerto Rico since November 6, but we were informed of the current situation by a third party only on December 2," she said, adding that the crew cannot leave the ship because the sailors do not have U.S. visas.

Kitsul said that formal charges had not been pressed yet, but the Russian consulate in the United States had been preparing a defense team for stranded sailors.

Carib Vision sails under the flag of Saint Kitts and Nevis, a tiny island nation in the Caribbean.

 WASHINGTON, December 7 (RIA Novosti)

Putin to chair meeting of VEB Supervisory Board Tue

http://www.itar-tass.com/eng/level2.html?NewsID=15752574&PageNum=0

07.12.2010, 05.44

MOSCOW, December 7 (Itar-Tass) - Russian Prime Minister Vladimir Putin on Tuesday will chair a meeting of the Supervisory Board of the "Bank for Development and Foreign Economic Activities" (popularly known as VEB) state corporation, the government press service announced.

Those present at the Board meeting will examine a 2009 VEB development report. VEB will become the first state corporation to issue a certified report in accordance with the GRI (Global Reporting Initiative) international standard for non-fiscal reporting.

Other main items on the agenda include a decision on the launch of a VEB programme in 2011 to finance regional and urban development projects. Such projects, which are to be prepared by local administrations, concern the construction and modernization of infrastructure facilities for the solution of the problems of the environment, energy efficiency, the preparation of sites for comprehensive affordable-housing development or for technological clusters, the development of regional and municipal transport systems, IT development, and a rise in the quality of state and municipal management, and social development.

Putin to meet with members of volunteer movement

http://www.itar-tass.com/eng/level2.html?NewsID=15752454&PageNum=0

07.12.2010, 02.22

MOSCOW, December 7 (Itar-Tass) - Russian Prime Minister Vladimir Putin on Tuesday will take part in a ceremony marking the summing up of the results of an all-Russia competition among higher and secondary specialized educational establishments for the right to establish centers for the training of volunteers for the 2014 XXII Winter Olympic Games and XI Paralympic Games.

Sixty educational establishments (51 institutions of higher learning and eight secondary specialized schools) took part in the competition which was conducted by the "Sochi 2014" Organizing committee in conjunction with the Russian Ministry for Sports and Tourism and the Ministry of Education and Science. Twenty-six educational establishments representing 23 constituent entities of the Russian Federation (RF) were selected. Certificates will be presented to competition winners at the ceremony.

The notion "volunteer" has been sealed by legislation. It signifies a citizen of the RF taking part in arrangements for and holding of Olympic and Paralympic Games through the use of their experience, knowledge, skills, and abilities without a monetary reimbursement for their activities.

Volunteering is increasingly popular in Russia: More than 300,000 young people have been registered at the specialized website in the Internet. Programs for the development of volunteering movement have been adopted in a number of regions and measures in support of the volunteer activities are included in regional purpose-oriented programs.

Another terrorist leader eliminated in Dagestanhttp://english.ruvr.ru/2010/12/07/36331582.html

Dec 7, 2010 02:01 Moscow Time

The leader of a local terrorist group in Dagestan, Akhmed Abdulkemirov, has been killed, a source with the law enforcement bodies informs.

Akhmed Abdulkemirov was one of the most cruel and dangerous terrorist leaders, who was responsible for numerous terrorist attacks.

Russia must train experts on Islam in Caucasus - Kremlin envoyhttp://en.rian.ru/russia/20101207/161659039.html

01:25 07/12/2010

Russia should open a secular university in North Caucasus to train teachers and experts on Islam, the Kremlin's envoy to the region Alexander Khloponin said.

"We need this secular university on Islamic studies in Caucasus today...because we do not have experts to teach the basics of this religion," he told a meeting of children's rights ombudsmen in North Caucasus on Monday.

Khloponin believes that this measure would help prevent religious conflicts in the region.

"Today, when we see prayer rooms in dormitories of universities in Stavropol [southern Russia], for example, and do not understand the literature their students are reading - we then should not be surprised that we have [religious] clashes on the streets," he said.

North Caucasus Federal District is one of the eight federal districts of Russia, which includes the volatile republics of Chechnya, Dagestan and Ingushetia.

The majority of the population in Russia's North Caucasus are Muslims.

PYATIGORSK (Caucasus), December 7 (RIA Novosti)

March 2000 attackers detained in Karachayevo-Cherkessia

http://www.itar-tass.com/eng/level2.html?NewsID=15753056&PageNum=0

07.12.2010, 09.56

MOSCOW, December 7 (Itar-Tass) -- The gunmen involved in an attack on the federal forces in late February and early March, when 85 paratroopers were killed, were detained in Karachayevo-Cherkessia.

Chechen policemen and federal security officers carried out a detention operation. “On December 6, gunmen Ebzeyev and Atuov were detained in a search operation in the city of Karachayevsk and the settlement of Erkin-Shakhar in the Adyge-Khabl district of Karachayevo-Cherkessia,” a source in the republican law enforcement agencies said.

“From February 29 to March 1, 2000 the gunmen as members of Abdul-Samat’s gang were participating in the battle with the federal forces, when 85 paratroopers from the 104th air assault regiment of the Russian Airborne Troops were killed at the settlement of Ulus-Kert in the Shatoi district of Chechnya,” the source underlined.

Khakassia governor holds emergency session on electricity failure

http://www.itar-tass.com/eng/level2.html?NewsID=15752945&PageNum=0

07.12.2010, 09.25

GORNO-ALTAISK, December 7 (Itar-Tass) - The head of Russia’s republic of Khakassia, Viktor Zimin, chaired on Tuesday an emergency session of the commission for the restoration of electricity supply to the settlement of Vershina Tei, sources from the press service of the Russian Ministry for Emergency Situations’ regional department told Tass.

A total of 3,500 people, including over 1,000 children, were left without heat and electricity in the settlement because of power grid failures. The commission has given instructions to prepare everything necessary for a possible evacuation of the local population – organise hot meals and transport to bring people to facilities where they can be temporarily accommodated in case of necessity.

Temperatures in the houses of Vershina Tei are eight to ten degrees above zero. The social situation there is calm. Local authorities inform the residents on the situation and warn them about a possible evacuation. The reason of the failure is not yet clear.

The situation is aggravated by snowstorms in the region.

December 07, 2010 10:51

All Dimitrovgrad nuclear reactors shut down due to bad weatherhttp://www.interfax.com/newsinf.asp?id=207233

ULYANOVSK. Dec 7 (Interfax) - The Research Institute of Nuclear Reactors (NIIAR) based in Dimitrovgrad, Ulyanovsk region, has shut down all six of its reactors due to ice and rain and snow precipitation, the Institute told Interfax.

"We decided to switch off the reactors due to the unstable operation of electricity networks. There is no immediate danger for the reactors, but we decided to switch them off all the same. The situation is under control. There is no danger to the local population," the NIIAR said.

NIIAR was founded in the early 1960s as an enterprise for engineering and scientific research of various nuclear energy problems and is currently a large research center.

kk dp

Over 53,000 people in Ulyanovsk region left without electricity

http://www.itar-tass.com/eng/level2.html?NewsID=15752943&PageNum=0

07.12.2010, 09.46

ULYANOVSK, December 7 (Itar-Tass) - Over 53,000 residents of Russia’s Ulyanovsk region have been left without electricity supply because of power line breakage, sources from the regional department of the Russian Ministry for Emergency Situations told Tass on Tuesday.

“As for Tuesday morning, 92 settlements in which over 53,000 people live remain without electricity supply,” sources from the press service said. Ministry’s emergency

headquarters coordinates restoration work in those settlements. All in all 69 repair brigades work there.

Rain mixed with snow fell in the Ulyanovsk region on Sunday, and temperatures were between minus three and plus two degrees Celsius. As a result, ice coated local roads and wires. An emergency situation regime was imposed in four rural districts and the city of Dimitrovgrad.

Lenin monument blown up in St Pete suburb

http://www.itar-tass.com/eng/level2.html?NewsID=15752430&PageNum=0

07.12.2010, 01.20

ST PETERSBURG, December 7 (Itar-Tass) - A Lenin monument has been blown up in the town of Pushkin, a suburb of St Petersburg. No one was hurt.

The monument leaned but did not fall. Window panes in a nearby residential building were smashed by a blast wave. The details of the incident are being ascertained.

Russia's Metro takes top spothttp://www.guardian.co.uk/media/greenslade/2010/dec/07/freesheets-metroPosted by Roy Greenslade Tuesday 7 December 2010 08.02 GMT

Russia's two Metro titles have increased their joint readership to the point where they now claim to be the country's best-read daily newspaper.

According to TNS Russia Data for the six months up to October 2010, the Metro-Moscow and Metro-St Petersburg had a joint readership of 1,445,900 a day.

This took them ahead of the previous leader, Rossiyskaya Gazeta, which had 1,393,400 readers. Moskovsky Komsomolets was third an average readership of 1,150,600 per issue.

The Metro titles are published by the Swedish-based publisher Metro International. Metro Moscow's managing director, Boris Konoshenko, said: "According to our colleagues from Metro International, the Metro Moscow launch was one of the most successful projects in Metro history."

Source: Metro International press release

Russian Internet providers may avoid responsibility for sketchy contenthttp://en.rian.ru/russia/20101207/161663251.html

10:46 07/12/2010

Russian providers of Internet services may avoid responsibility for offensive or controversial content stored on their servers, according to amendments to the Russian Civil Code proposed by the presidential law codification council, a Russian business daily said on Tuesday.

A new draft Civil Code includes an article stipulating responsibility of Internet providers for their content. The presidential council drew up the amendments to the article following an order by President Dmitry Medvedev, an active Internet user, the Vedomosti paper said.

The bill relieves providers of responsibility for the content if three conditions are met: the controversial content was uploaded to the provider's server "by a client or on his order"; a provider "did not know or should not have known" about the contentiousness of the content; the provider took "prompt measures" to eliminate the consequences of the controversial content storage following a written request by a third party.

The measures to be taken will be specified in a special law on Internet providers, Vedomosti said. According to the proposed amendments, a provider is obligated to delete the content within three days, suspend the domain on a written police request and limit access to questionable information upon a prosecutor's request.

MOSCOW, December 7 (RIA Novosti)

Russian Man Indicted for 'Mega-D' Botnet Spam, FBI Sayshttp://www.pcmag.com/print_article2/0,1217,a=257741,00.asp?hidPrint=true

ARTICLE DATE:  12.06.10By  Chloe Albanesius

A 23-year-old Russian man was indicted last month for allegedly sending billions of spam messages via his "Mega-D" botnet, the FBI announced last week.

Oleg Nikolaenko, originally from Moscow, was arrested in Las Vegas on November 4 and arraigned in Milwaukee on November 16. Under the provisions of the Can-Spam Act, Nikolaenko could face up to three years in jail, a $250,000 fine, and another year of supervised release, if convicted.

According to the indictment, Nikolaenko sent billions of spam messages for people selling fake Rolex watches as well as non-FDA approved and fake prescription drugs. This was accomplished via his "Mega-D" botnet, which security experts estimated was capable of sending 10 billion spam e-mails per day; all with false header information. Nikolaenko earned hundreds of thousands of dollars for his efforts, the FBI said.

Nikolaenko is due in court on December 21 for a scheduling conference.

In other news, The Telegraph reports that two German hackers recently accessed the computers of more than 50 celebrities, including Justin Timberlake and Lady Gaga. The hackers reportedly wanted to steal unreleased material so they could blackmail the singers.

Copyright (c) 2010 Ziff Davis Inc. All Rights Reserved.

Russian Press at a Glance, Tuesday, December 7, 2010http://en.rian.ru/papers/20101207/161662682.html

09:18 07/12/2010

POLITICS

Breakthrough on the Polish front - Russian President Dmitry Medvedev pays two-day historic visit to Poland. (Rossiiskaya Gazeta, Vremya Novostei)

Georgian officials protest the deployment of Russian multiple-launch rocket systems in South Ossetia as a threat to Georgia’s national security. (Kommersant)

After a groundbreaking summit in Poland, President Dmitry Medvedev heads to Brussels on Tuesday for much harder talks with European Union leaders. (Moscow Times)

BUSINESS

Simplified work permit issuance procedures for highly skilled professionals, introduced in Russia this year, are a good sign for foreign investors. About 2,500 foreign specialists used the simplified procedures to enter Russia in the past five months. (Rossiiskaya Gazeta)

Russian Prime Minister Vladimir Putin unveils a draft development plan for Russia’s Far East at a meeting with local United Russia party officials. (Rossiiskaya Gazeta, Kommersant, Vremya Novostei)

Russia has one of the most efficient taxation systems in the world, according to BKR International, but bureaucracy and corruption prevent many potential foreign investors

from doing business in the country. (Rossiiskaya Gazeta)

Moscow government plans to start selling its local assets with companies in which it does not have a controlling stake. (Vedomosti) 

Cinema box office in Russia and other CIS countries grew 43 percent year-on-year to a record $1.05 billion in 2010 mainly because of the popular foreign-made 3D cartoons and movies. (Kommersant)

STOCKS

Russian markets on Monday traded TNK-BP shares for the first time in history. The first trading day revealed that the company capitalization is higher than expected - about $43 billion. (Vedomosti)

BANKING

Banks operating in Russia, including Sberbank and HSBC, are finding themselves in a rush to patent names for their products and services to protect their marketing campaigns during the holidays and beyond from lawsuits by rivals. (Moscow Times)

SPORTS

Russian football club Rubin faces Barcelona on Tuesday in a tough Group D play-off qualifying game in Champions League (Kommersant)

SOCIETY

Russia’s new Investigation Committee, which is being formed under orders of President Dmitry Medvedev, will not receive all promised powers. For instance, the investigators will not have the right to enter private property without proper authorization as part of an ongoing probe. (Vedomosti)

WikiLeaks whistleblower website continues to spawn mirror sites around the world despite strong efforts by the United States to stop its activities. (Rossiiskaya Gazeta)

TECHNOLOGY

Russia lost three Glonass satellites in a botched launch on Sunday. President Dmitry Medvedev ordered swift investigation into the incident - the future of Russia’s global positioning satellite network is at stake. (Rossiiskaya Gazeta, Kommersant, Vremya Novostei)

Russia Tries to Exploit European Disunity

http://georgiandaily.com/index.php?option=com_content&task=view&id=20592&Itemid=132

December 07, 2010

Pavel K. Baev

The big surprise that rejoiced the vast majority of Russians last Friday was the decision by the International Federation of Football Associations (FIFA) to hold the 2018 World Cup tournament in Russia. One person who did not appear surprised was Prime Minister, Vladimir Putin, who immediately arrived at the FIFA headquarters in Zurich, Switzerland to express his gratitude and give his assurance that the event will be staged “to the highest standards.”

The bid for the privilege of hosting the World Cup was Putin’s initiative and it did not appear very strong in comparison with the three competitors: England, Spain and Portugal, and Belgium and the Netherlands (Rossiyskaya Gazeta, December 3). Yet Putin, who also played a key role in securing the decision by the International Olympic Committee to award the 2014 Winter Olympic games to Sochi, was supremely confident in his talents for lobbying and “selling” the bid with the best packaging (Kommersant, December 3).

Indeed, what distinguished Russia’s presentation was the honest admission that nothing is ready for an event of such global scale so that 15 stadiums in 13 cities, except Luzhniki in Moscow, will be built from scratch (Moskovsky Komsomolets, December 4). Dozens of hotels must be constructed, but the most expensive part of the preparation is upgrading the transport infrastructure, consequently the total cost is expected to exceed $50 billion (Vedomosti, December 3). It might appear nonsensical to commit to such expenses when the federal budget is already stretched with the investments in the controversial Sochi extravaganza, but Putin asserted that Russian “oligarchs” would be happy to pay their share (www.gazeta.ru, December 3). Shameless graft will enrich hundreds of bureaucrats, but the unique opportunity to see the best teams in the supreme competition is certain to be hugely popular among tens of millions of football fans.

There is, however, a particular twist to this triumph in what Putin described as a “tough and fair fight,” and it concerns his current assessment of European discord and faltering integration. Russia may have been hit by the economic crisis harder in terms of lost volume to its GDP, but the political consequences are far more severe in debt-saddled Europe. Indeed, the Russian leadership does not have to deal with student demonstrations ransacking party offices or with strikes paralyzing airports and railroads, and the protest rallies in regions like Kaliningrad are subdued with little trouble (Novaya Gazeta, December 1). Russian experts argue that looming insolvency of several smaller economies like Greece or Ireland could seriously undermine the cohesion of the Euro-zone, but at the same time strengthen the influence of Germany, which happens to be Russia’s key European ally (Ekspert, November 29; www.newsru.com, December 3).

This economic centrifugal momentum overlaps with security disagreements caused first of all by the inability to sustain the joint effort in Afghanistan. The well-propagated effort at reviving NATO boiled down at the Lisbon summit to the initiative for building a common missile defense system, which most Europeans see as irrelevant to their real security concerns. Moscow has concluded that joining this initiative is a surer way to sabotage it than direct opposition, but last week Putin and Medvedev argued in unison that failure to take Russia’s demands into account would lead to a new “arms race” (www.gazeta.ru, December 2). This threat might appear ridiculous given the continued degradation of the Russian defense industry, but it is addressed not to the US Senate, where the prospect for the ratification of the Prague Treaty is seen as poor and worsening, but to European “partners,” who are slashing their defense expenditures as if “world peace” has already arrived.

Security matters only insofar as Moscow can play safe on trans-Atlantic differences, but the real priority in Russian policy is energy, and here Putin is firmly set on exploiting every opportunity provided by European disunity. Visiting Berlin two weeks ago, he attacked the diversification policy of the European Commission as “robbery,” and last Friday he embraced his old friend Italian Prime Minister, Silvio Berlusconi, seeking to end misunderstandings on the South Stream pipeline project, which has the new price-tag of 15.5 billion Euros (Nezavisimaya Gazeta, December 2). Medvedev followed-up by visiting Warsaw on December 6 prior to participating in the EU-Russia summit on December 7, while the deal on selling more volumes of gas to Poland would strengthen the argument that the EU policy of subsidizing renewable sources of energy amounts to unsustainable protectionism (RIA Novosti, December 1; Kommersant, November 22).

The EU might indeed experience an introverted moment when internal spasms prevent it from pursuing a consistent policy in the “near abroad” from Turkey to Belarus but it does not mean that Russia is able to impose itself as its most privileged partner. Putin has outplayed the Europeans in football intrigues, but that will hardly help in securing an inflow of investment (www.gazeta.ru, December 3). The investment climate, as the successful entrepreneur, Petr Aven, recently confirmed, keeps worsening despite all the pledges to create incentives for modernization (www.newsru.com, December 3). In his interview on CNN with Larry King, Putin resolutely dismissed well-documented opinions that Russia had become a thoroughly corrupt and criminalized state, but he cannot expect that next week when the judge starts reading the verdict in the crudely fabricated case against Mikhail Khodorkovsky and Platon Lebedev, that Western leaders would be too busy with Christmas preparations (Nezavisimaya Gazeta, December 2). 

One political consequence of the FIFA decision, driven probably by the best football intentions, is that Putin is now even more motivated to reclaim supreme power, so that his new presidential term will stretch from the Sochi Olympic Games to the World Cup in 2018. He expressed indignation over the “cynical” views of US diplomats who compared the Russian duumvirate to Batman and Robin. The comparison is indeed rather off-target: Medvedev could hardly qualify as a useful and ambitious side-kick, but Putin resembles not the crime-fighting superhero but rather his antagonist –the Joker. Such

characters could not tolerate power-sharing and despise their accomplices motivated by greed, but their ideas of having mega-fun are seriously dangerous.

Source:

http://www.jamestown.org/programs/edm/

Moscow Increases Its Focus on Solving the North Caucasus Riddlehttp://georgiandaily.com/index.php?option=com_content&task=view&id=20593&Itemid=132

December 07, 2010

Valery Dzutsev

On December 1, Russian Prime Minister Vladimir Putin appointed himself as the head of the Russian government’s commission for the socio-economic development of the North Caucasus. The existing head of the North Caucasus Federal District, Aleksandr Khloponin, became Putin’s deputy on the commission.

“Close coordination of the federal and regional government authorities is needed to develop the [North Caucasus Federal] district,” Putin explained in setting up the new commission. According to the Russian prime minister, significant resources of the government and the investors will be allocated to the region over the next few years, making the creation of the commission especially relevant (www.gazeta.ru, December 1).

By propping up Khloponin’s mission for the economic development of the North Caucasus with his authority, Vladimir Putin, Russia’s most influential politician, implied that Khloponin has largely failed to achieve significant accomplishments in the region. Khloponin’s appointment as head of the newly created North Caucasus Federal District in January 2010 was officially billed as an attempt to resolve the rising security issues in the region. Since his appointment, the economic situation in the North Caucasus has shown few signs of improvement, while the security situation has further deteriorated, with whole new territories, like Kabardino-Balkaria, joining the ranks of the other particularly volatile republics like Chechnya, Dagestan and Ingushetia.

Khloponin’s own assessment of his activities in the North Caucasus sheds light on Moscow’s perception of the economic development of this region, which is apparently viewed as cover for gaining more control over the economic and social life of this non-Russian region with separatist tendencies. During the same December 1 Russian government meeting, Khloponin stated that he was gradually creating a set of federal institutions in the district that would largely replace local branches of the federal agencies in the North Caucasus republics. The head of the North Caucasus Federal District divided his task into several stages: 1. making the federal agencies closer to the local population in the North Caucasus, 2. ensuring a more effective use of the federal money Moscow

disburses for the region, 3. improving coordination between the branches of the federal agencies (www.government.ru, December 1).

The system of governance in the North Caucasus, as elsewhere in Russia, includes local republican governments and branches of federal agencies. The local governments by definition have greater autonomy from Moscow than the branches of the federal agencies, which are supposed to be mere transmitters of Moscow’s policies. However, in practice, the federal agencies’ branches are manned with local staff which, in the small North Caucasian societies, becomes tightly intertwined with the local governments and societies. In some cases, the local governments even successfully oppose Moscow’s decisions to make appointments in federal agencies.

Perhaps the most spectacular examples of Moscow’s inability to appoint its people have occurred in Dagestan. Military judge Vladimir Danilov, who had won the competition to become the chairman of Dagestan’s Supreme Court, unexpectedly resigned from the position and, on October 25, the Russian judicial commission announced another competition for this position. While the Dagestani government did not make any statements about this, an unnamed source in the republican government grumbled that “no one consulted the republican authorities.” Pressure allegedly brought about Danilov’s premature departure from the republic and, a local, Dagestani candidate now is expected to win the chairmanship of the republic’s Supreme Court (Kommersant, November 2).

Even though we do not have similar cases in Chechnya recently, it is plausible to suggest that hardly anyone could work successfully in the republic without the consent of its absolute ruler, Ramzan Kadyrov. Less conspicuous cases can be also traced in other republics of the North Caucasus. Once the republican authorities are so effective in insisting upon candidates for the federal branches’ heads, they are highly likely to be even more effective in influencing these agencies’ day-to-day activities at lower levels.

The establishment of a special Russian government commission for the socio-economic development of the North Caucasus chaired by Putin may also reflect internal rumblings in Moscow. Putin made his name and career on the second Russo-Chechen war in 1999. The situation in the North Caucasus, therefore, has perceived or actual intimate links to Putin’s political present and future. He might regard improving the situation in the region or fighting another war as a sure way of regaining some of his legitimacy as an all-Russian leader, which has lately been eroded and may be further challenged in the run up to the presidential elections in 2012.

By appointing Khloponin as his deputy on the North Caucasus commission, Putin also insulated him from President Dmitry Medvedev’s criticism after Medvedev twice expressed disappointment over Khloponin’s progress in the North Caucasus. So the move could be an indication that Putin is further solidifying his powerbase among the bureaucrats in order to thwart any attempts to question his leadership.

In the absence of any democratic participation and change, this governance system inevitably becomes very awkward and unmanageable, even from Moscow. As the latter

has no intention of making the local governments answerable to the local population, it is trying to further centralize governance in the North Caucasus, essentially trying to make the local, republican governments redundant. Although this strategy may seem to be fully justified from Moscow’s standpoint, were it successfully implemented, the local North Caucasian population would in fact become even more estranged from the Russian government, because the representation of North Caucasians in governance would decline and locals would cease to have even a small stake in supporting it, something they currently have. There are also certain political risks for Putin if the situation in the North Caucasus remains volatile and, while not spinning into a full-scale war, results in terrorist attacks in Moscow. Still, given Putin’s grip on the Russian media, the risks for him appear to be negligible.

Source: http://www.jamestown.org/programs/edm/

December 07, 2010 12:17

MP's aide suspected of espionage confirmed as Russian citizen - source (Part 2)http://www.interfax.com/newsinf.asp?id=207276

MOSCOW/LONDON. Dec 7 (Interfax) - MP's aide Yekaterina Zatuliveter detained in the United Kingdom on suspicion of spying for Russia is a Russian citizen and will be provided with consular access, a Russian diplomatic source told Interfax.

"She is a Russian citizen. The Russian Embassy has already sent a request to the Foreign Office and the Home Office so that they formally provide information about what is going on with Zatuliveter," the source said.

The consular section of the Russian diplomatic mission is prepared to make every effort to provide necessary consular assistance to the Russian woman, should the authorities formally confirm her arrest, he said.

Russian Foreign Minister Sergei Lavrov commented on the situation a day earlier.

Asked whether the incident would hamper efforts to build the relations with the UK, the minister said: "Our [efforts] will not be hampered, someone clearly wants to hamper theirs."

"It's not the first time. As soon as positive changes begin to emerge, somebody steps in," Lavrov said.

Earlier, British media reported that a 25-year-old Russian citizen, Yekaterina Zatuliveter, an aide to Liberal Democratic Party MP for Portsmouth and member of the House of

Commons Defense Committee Michael Hancock, was arrested on Thursday on suspicion of spying for Russia.

She has been Hancock's aide for 2.5 years.

kk dp

Dec 7, 2010 BRITISH ESPIONAGE CASE

'Spy' confirmed Russian http://www.straitstimes.com/BreakingNews/World/Story/STIStory_611290.html

MOSCOW - RUSSIA has confirmed that a young woman detained in Britain on suspicion of spying for Moscow is one of its nationals, a foreign ministry source told the Interfax news agency on Tuesday.

British authorities detained 25-year-old Katya Zatuliveter last Thursday and she faces deportation on suspicions of espionage.

British domestic intelligence agency MI5 said she was working for the Russian intelligence service as a 'sleeper' agent, The Sunday Times newspaper reported.

'She is a Russian citizen. The Russian embassy (in London) has already requested that the Foreign Office provides information about what is happening,' the diplomatic source told Interfax.

Russian Foreign Minister Sergei Lavrov on Monday said that if Zatuliveter was Russian she would receive full consular support. He also added that it appeared 'someone' was trying to halt an improvement in ties with Britain.

Britain's diplomatic relations with Russia are only just emerging from an icy period after the murder by poisoning of the dissident Russian spy Alexander Litvinenko in London in 2006. -- AFP

New rules on visas would not have stopped 'spy' entering countryhttp://www.telegraph.co.uk/news/uknews/crime/8185037/New-rules-on-visas-would-not-have-stopped-spy-entering-country.html

Tighter rules on student visas to be announced by the Coalition today would not have prevented the suspected Russian spy Ekaterina Zatuliveter entering the country. By Gordon Rayner, Chief Reporter 8:00AM GMT 07 Dec 2010

Miss Zatuliveter, who is awaiting deportation after being arrested following a six-month investigation by MI5, got a job working as a parliamentary researcher after coming to the UK on a student visa to study a one-year postgraduate course.

The Home Office will today announce measures designed to cut the number of foreign students by 100,000 per year following a string of cases in which terrorists and spies have used student visas to get into the country.

Whitehall sources have said the new rules will be “more robust” and help to “stamp out abuse”, following a Coalition review of the system.

But because the changes will be targeted at those who want to come to the UK to study for courses below degree level, Miss Zatuliveter would not have been caught in the net.

The new rules would, however, have prevented Miss Zatuliveter staying in Britain because they would have denied her the chance to obtain a two-year post-study visa after finishing her course in Britain.

Under the Post Study Work Route, degree graduates are able to remain in the UK a further two years to find a job, which can then eventually lead to permanent settlement.

Some 38,000 migrants took advantage of the system last year but, on average, only half find skilled jobs while a fifth end up unemployed. At the same time some one in 10 UK graduates were unemployed in their first six months after graduating.

Damian Green, the immigration minister, will today announce the route is to be closed as part of a major review of student visas that will also prevent up to 100,000 fewer foreigners coming each to study every year.

The moves are designed to curb abuse in the system and help the Government meet its wider pledge of bring net migration down to the "tens of thousands".

Miss Zatuliveter, 25, came to Britain in 2006 on a student visa, completing a one-year MA course in peace studies at the University of Bradford before applying for a two-year post-study visa, giving her freedom to take any job she pleased.

She is understood to have successfully applied for a further extension to her working visa in 2009, and if she had managed to stay in the country for five years she would have been eligible to apply for citizenship.

Philip Davies, the Conservative MP for Shipley, said it had become “too easy” for students to stay in the UK once they had completed their studies.

“It definitely seems to be a case of once you’re in, you’re in,” he said.

“If people have got good jobs then I’m not averse to them staying, as long as they can support themselves, but that’s not always the case.”

In the past the student visa system has been open to widespread abuse, with bogus colleges being set up purely to provide documentation and references for foreign nationals who want to obtain student visas.

A number of terrorism suspects have used the system to claim to be English language students.

Yesterday William Hague, the Foreign Secretary, insisted the Government remained “vigilant” and defended the current visa system.

He said: “There is nothing wrong in itself with employing foreign-born people sometimes in the House of Commons or in the work of government, some of them do outstanding work, give great service to this country.

“But of course, we have to be vigilant for individuals where there may be something else involved.

“We are vigilant. I think the fact that we are attending to a case like this shows that where we have concerns we do take action and I think that is the right way of approaching it.”

Last year Gordon Brown became embroiled in a diplomatic row with Pakistan after he suggested it was not doing enough to root out terrorism suspects.

But Pakistan responded by pointing out that many of the suspects arrested in Britain in recent years have been in the country legally after being given student visas.

The Security Service has been concerned about Russian intelligence case officers arriving in Britain under “non-official” cover, using business or academic visits as a pretext for spying or recruiting others to spy.

More than 170,000 Russians visit Britain every year and around 2,000 are enrolled in universities.

Levels of activity are now said to be back to Cold War levels with up to 35 diplomats based in Britain who are working for the Russian intelligence agencies the SVR and the GRU, its military equivalent.

Jonathan Evans, the director general of MI5, has said the Russians “continue to devote considerable time and energy trying to steal our sensitive technology on civilian and military projects.”

Sources have told the Daily Telegraph that MI5 had already launched its investigation into Miss Zatuliveter before she was stopped at Gatwick airport in August on the way back from celebrating her birthday in Croatia with friends.

Russian spy-row researcher Katia Zatuliveter monitored Liam Fox defence talks http://www.mirror.co.uk/news/top-stories/2010/12/07/russian-spy-row-researcher-katia-zatuliveter-monitored-liam-fox-defence-talks-115875-22767421/

By Tom Mctague 7/12/2010

Commons spy row beauty Katia Zatuliveter wrote scathing reports on Defence Secretary Liam Fox.

Ms Zatuliveter, 25, monitored his speeches and blasted the way he called her native Russia our No1 threat. Writing online in 2008 before Dr Fox was part of the Government, she bitterly claimed the West believed "Russia is always wrong".

The aide to Lib Dem Portsmouth MP Mike Hancock, is awaiting deportation amid espionage claims. Her dad Andrei accused Britain of "dipping my daughter in dirt... why is everything happening in such an uncivilised way?"

She said she was "absolutely sure" she would win her deportation appeal "if there is justice". The Russian added: "I was arrested on Thursday and told I would be deported. Nobody explained why." She passed security vetting before landing her Commons job in 2008.

Foreign Secretary William Hague said: "The fact we are attending to a case like this shows that where we have concerns we take action."

Russian spies: they can’t take their eyes off us http://www.telegraph.co.uk/news/newstopics/politics/defence/8185810/Russian-spies-they-cant-take-their-eyes-off-us.html

If Katia Zatuliveter was spying for Russia, she is proof that a new breed of agent is operating, and on a scale that exceeds the Cold War, says former KGB officer Oleg Gordievsky.

By Oleg Gordievsky 8:17AM GMT 07 Dec 2010

There is little that changes in the world of espionage. The Russians have been spying on Britain since the days of Sidney Reilly, the “Ace of Spies”, who was executed for his part in attempting to overthrow the Bolshevik regime in 1918. Ever since then, the Russian secret services have hated their British counterparts. But if Katia Zatuliveter is a spy, the Russians appear to have had a new kind of star.

Once, the role of an attractive young woman in an espionage tale was simply to be the honeypot, but Zatuliveter is suspected of being a serious agent, and probably a very effective one. Many of the agents deployed now are far more dynamic than in my day: they speak foreign languages fluently, work in important companies and institutions, and move between countries and jobs with ease. They are often better than the officers they work for – and, working within Parliament, would be worth more to Moscow than the whole of the KGB’s London station.

In 1985, when I escaped from the Soviet Union, there were 25 KGB officers and 14 GRU officers – their military counterparts – working at the embassy in London. Twenty years after the end of the Cold War, there are exactly the same number there now.

The operation in London is nowhere near as big as in the US or Germany, largely because of the number of expulsions – in 1971, 105 “diplomats” were thrown out; then, in 1985, another 31 were expelled; and in 1989 11 went, followed by occasional expulsions ever since. But with a total of 39 officers, and at least 20,000 Russian students, along with numerous others working in banks and other companies, it is easier than ever to work and recruit here. If anything, the overall Russian espionage presence in Britain is now bigger and more active than in my time.

We viewed the golden age of spying for our country as having passed. We knew it was difficult to recruit agents in Britain and saw our job as just being an important department of state – albeit one as large as the rest of the embassy. The number of people actually working with contacts was no more than 28 and of those, only 10 were focused on political espionage, with the remainder working on industrial spying, and infiltrating the police and intelligence agencies.

In those days, Moscow demanded that each officer had about 10 contacts or acquaintances among British people. Not all were able to manage that – some were stupid, unsociable or just incapable, and it was a mistake to send them to London in the first place. One middle-ranking officer would take his money for operations but never left the office and never wrote a report. The agents they ran were just as bad, with some of them pretending to be helpful but doing nothing and not even bothering to report in.

A lot of the agents I inherited when I arrived in London in 1982 as “chief resident” at the embassy were ageing communists. Jack Jones, the union leader, was about the only one that did well. We had a couple of contacts in Parliament, but one of them was Scottish and I could never understand what he was saying, although I wrote up the reports anyway.

Recruiting British people has always been difficult because they are more careful by nature than other nationals – Italy and India were a different story. Italy must have had at least 50 agents and in India they would literally queue around the block offering themselves as spies. That is the way the Russians got their best agents – among them Aldrich Ames and Robert Hanssen (in the US), who came forward rather than being approached.

If Zatuliveter was a spy, it sounds as though she was recruited as a member of the public, rather than an employee of the SVR, the foreign intelligence agency that succeeded the KGB. That may well have taken place in St Petersburg, where she was a student and where it was once the job of Vladmir Putin, now the Russian prime minister, to recruit students just like her. This was real, systematic spy work that started with recruiting undergraduates aged 17 or 18 and may, in her case, have continued with sending her to work on a postgraduate course in Bradford.

The new generation of agents is not just asked to work for the KGB but to recruit for themselves from among their circle of friends, working for the “future of Europe”. By the time she arrived in Britain, she would have been well trained enough to launch a fantastic, but short-lived, career.

Zatuliveter was in a position where she had access to strategic, political and military secrets; where she was able to ask official questions of the British government, while working for a Member of Parliament; and all the time was meeting a string of influential and interesting people. No normal officer would be able to obtain such information, to go to the House of Commons or the European Parliament, or to meet such important contacts. She would have been a treasure for the London station.

It seems incredible that she was in this country for three years, dealing with potentially sensitive material, before MI5 stopped her. If she was a Russian officer, the Security Service’s concern would undoubtedly have been to identify who was running her. But that would have been hidden very thoroughly because she would have been vulnerable as soon as they knew the identity of her Russian case officer. MI5 cannot have constant surveillance of suspects such as Zatuliveter. Most of its resources are devoted to counter-terrorism operations and if she was careful about when and where she met the officer controlling her, she would have been able to get away with her activities for a long time.

On the holiday she is said to have taken to Croatia, she would almost certainly not have been under surveillance. She might as easily have gone to Brussels or Strasbourg. If she was in Belgium, she could be sure that no one was watching her, unless a team had been sent from London, although France is not as easy. But it is most likely that a controller was in London – someone who knew which parliamentary and Cabinet committees should be looked at; and what questions needed to be asked.

So how was she identified? The Russian section of MI5, whose job it is to catch such spies, is not as good as it was in my day – it is staffed by a handful of young officers who are kept very busy.

I suspect that while Zatuliveter was apparently becoming an important agent, she will have dropped her guard. She seems to have believed she was invisible; with her short skirt and long legs, she probably thought she could divert attention from her activities, and for a while she may well have done, until MI5 caught up with her. For her, at least, the game is over.

Oleg Gordievsky was a colonel in the KGB and head of station in London. He worked as a double agent for MI6. He was arrested in 1985 in Russia and escaped back to Britain.

National Economic Trends

Russia May Spend Up to $32 Billion on Irrigation After Drought http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aaCrDR.kmlWk

By Ilya Khrennikov

Dec. 7 (Bloomberg) -- Russia may spend as much as 1 trillion rubles ($32 billion) to repair and install irrigation systems by 2020 after a record drought this year, Rossiyskaya Gazeta said, citing a plan drafted by the Agriculture Ministry.

The plan would improve watering systems on about 12 million hectares of farmland, the government’s official newspaper said. The ministry is proposing an alternative program that would cost 851 billion rubles and cover 10.3 million hectares, Rossiyskaya Gazeta said.

The ministry is seeking to boost the harvest by 10.5 million metric tons of grains, including rice, on the irrigated land, the newspaper said.

To contact the reporter on this story: Ilya Khrennikov at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net

Last Updated: December 7, 2010 01:30 EST

Free Hand’ on Rates Means Best of Bonds Over: Russia Credit http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a.orGXfcc.PE

By Emma O’Brien

Dec. 7 (Bloomberg) -- Traders are increasing their bets on an increase in Russian interest rates, with forward contracts at their highest for two years as the central bank seeks to tackle accelerating inflation.

Benchmark rates will rise by 217 basis points over the next nine months, the largest increase priced in since October 2008, forward rate agreements tracked by Bloomberg showed on Nov. 29. The prospect of higher borrowing costs precipitated a decline in Russian ruble debt, with bonds due 2012 sliding the most for four months in November. An index of ruble corporate bonds traded on Russia’s Micex exchange dropped by the most since May.

“It’s never a good thing to have higher rates and the question is how much they are going to hike,” Eugene Belin, head of fixed income at Citigroup Inc. in Moscow, said in a telephone interview Dec. 2. “We’ve definitely seen the best of the bond run as everything will be affected.”

Bank Rossii lowered its key interest rates 14 times to revive a banking sector hobbled by recession and the global credit crisis. The central bank now has a “free hand” to start raising borrowing costs, First Deputy Chairman Alexei Ulyukayev said Nov. 29. The government expects the annual rate of inflation to exceed its 8 percent forecast this year.

Brazil has raised its benchmark interest rate three times since April 28, to a record 10.75 percent. The yield on 2012 sovereign real debt has risen 47 basis points since July 30 to 12.19 percent, according to data compiled by Bloomberg.

The yield on the comparable Russian Finance Ministry’s OFZ bond rose 28 basis points, or 0.28 percentage point, to 5.19 percent in the same period.

‘Definitely Negative’

Russia’s refinancing rate has been at a record-low 7.75 percent since June, along with the 5 percent rate charged on overnight repurchase loans and the 2.5 percent deposit rate, the cost of interest earned by banks that store money with the central bank overnight. Unlike Brazil, Russia doesn’t have a single benchmark rate.

“The risk of rate hikes is definitely there, especially after Ulyukayev’s comments,” Aleksandra Evtifyeva, an economist at VTB Capital, the investment banking arm of Russia’s second- largest lender, said by telephone in Moscow on Dec. 2. “The first effects will be felt in the bond market where prices will decline. For the bond market it’s definitely negative.”

Russian inflation was 7.5 percent in October, the highest rate since January’s 8 percent rise and versus 5.2 percent in Brazil and 4.4 percent in China, Bloomberg data show.

Ruble, Swaps

The ruble was little changed at 31.2950 yesterday, trading near its strongest level since Nov. 25. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against swings, showed the ruble at 31.5407 per dollar in three months.

The yield on Russia’s dollar bonds due in 2020 fell 6 basis points to 4.746 percent. The price of ruble notes due July 2015 was little changed, with the yield at 7.21 percent.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps rose 1 basis point to 149, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to pay.

Credit-default swaps for Russia, rated Baa1 by Moody’s Investors Service, its third-lowest investment grade, cost 17 basis points more than similar contracts for Turkey , which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.

Extra Yields

The extra yield investors demand to hold Russian debt rather than U.S. Treasuries rose 5 basis points to 215, JPMorgan Chase & Co. EMBI+ indexes show. The difference compares with 137 for debt of similarly rated Mexico and 174 for Brazil, which is rated two steps lower at Baa3 by Moody’s.

The yieldspread on Russian bonds is 31 basis points below the average for emerging markets, down from a 15-month high of 105 in February, according to JPMorgan indexes.

While analysts at UniCredit SpA and Credit Agricole SA said Bank Rossii may raise rates as soon as this month’s review, the government is concerned higher borrowing costs may slow the economic recovery.

The central bank shouldn’t raise rates yet even as inflation accelerates, Deputy Economy Minister Andrei Klepach said Nov. 30, according to Interfax. Economic growth is still “very fragile” and it’s not the right time to tighten monetary policy, the newswire reported him as saying.

Shrinking Economy

After contracting a record 7.9 percent last year, the economy of the world’s largest energy exporter grew at an annual rate of 2.7 percent in the three months to the end of September, the slowest quarter of growth this year.

Official borrowing costs will remain at record lows until at least the middle of next year, said Herbert Moos, deputy chairman of VTB Group, Russia’s second-largest bank.

“We don’t see a reason to forecast a rate hike before mid- 2011,” Moos told reporters in Moscow Dec. 2.

Hungary became the first country in the region to lift borrowing costs, raising its benchmark rate by 25 basis points, to 5.5 percent on Nov. 29, after 14 cuts since October 2008. The yield on the country’s five-year forint-denominated bonds has risen 3 basis points since the increase, hitting 15-month high of 8.34 percent on Nov. 30.

For the next three months, traders were pricing in 82 basis points of increases to Russia’s key rates at the beginning of last week, the most since November 2009, according to forward rate agreements.

The yield on government ruble bonds due August 2012 jumped 18 basis points in November, the most since July, and has gained 5 basis points since the Nov. 26 rates decision, according to data compiled by Bloomberg.

Two-year ruble debt of OAO Gazprom, Russia’s monopoly gas exporter, yielded 6.43 percent yesterday, up 8 basis points since Nov. 26. The Micex index of ruble corporate bonds lost half a percentage point last month, the most since May.

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Last Updated: December 6, 2010 16:29 EST

RUSSIA 2011: Growth but state-led recovery is bad news http://www.bne.eu/storyf2438/RUSSIA_2011_Growth_but_stateled_recovery_is_bad_news

Ben Aris in London December 7, 2010

While Western Europe is once more staring into the abyss of sovereign default, Russia is expected to see economic growth pick up next year. But even Russia's leading officials admit that the state is carrying the can, while the private sector and consumers have yet to recover from the shock of 2008's collapse.

This must change or Russia will be caught in a "period devaluation trap," argues Deputy Economy Minister Andrey Klepach. But so far, the state has been unable to come up with anything better than pumping more investment into the economy through the massive state-owned enterprises. The race is on: make deep qualitative changes in the nature of the economy or consign Russia to the boom-bust cycles of a commodity-dependent economy.

A troika of top Russian officials appeared at the Adam Smith annual Russian banking conference in London and laid out a set of encouraging macroeconomic results. On the face of it, the pace of economic growth is picking up, while the deficit has fallen further and faster than anyone

expected, and Russia's economy now appears to be amongst the healthiest in the world.

On closer inspection, however, the official numbers disappointed and the private sector appears to be moribund. The government's results paint a rosy picture in the European context of bailouts and spiking credit default swap (CDS) spreads, but it is the blanks in between that are the cause for worry.

The bottom line is the state and state-owned business have enough money and momentum to keep the economy climbing out of the deep hole it fell into in 2008, but everyone is still waiting for consumer and small business confidence to return to the point where Russians start to shop again and business start to invest again. "Russia enjoys a very low debt/GDP ratio of about 10%, so we can borrow and remain reluctant to cut spending. The deficit is projected to be 4.8% this year, 3.6% next year before falling to zero in 2015," Deputy Finance Minister Dmitry Pankin told delegates. "We are not under a lot of pressure and we can continue fiscal stimulation, as there is no danger of solvency problems."

Fragile: handle with care

Still, economic growth remains very fragile. Russia's economy bounced back in the last part of 2009 and this growth extended into the start of 2010, Klepach said. Then it began to falter and was slowing even before it was knocked sideways by the fires in Russia over the summer. More fundamental domestic-based, consumption-led growth only appeared in the last months of 2010. "The growth of the Russian economy was almost exhausted in the first quarter of 2010, but then it started to recover in September," Klepach said. "At the start of this year, the key drivers of the economy were all external and supported by the recovery of oil prices which goes hand in hand with [the growth in] Russia's GDP. So in September, we saw the start of a third wave of growth and expect that growth for the full year will be about 3.8%."

As he went on, a picture of a state-led recovery appeared from the statistics. "In the fourth quarter, we saw the start of a pick-up in investment, which was faster than expected: we were expecting 2.5% [increase in the rate of investment year-on-year], but in October saw 5.5-6%," said Klepach. "Much of this investment was going into energy and into the metal and engineering sectors. But it is hard to get a clear picture of what is happening in investment, as the state is also investing heavily under state programmes."

Looking at unemployment gives a clearer picture. Again the macro results were better than expected, but the numbers that give a better insight into what is happening on the ground were disappointing. "Unemployment dropped faster than expected, but in all in all the sectors are now employing less people even though those people are paid more than before the crisis," said Klepach. "The change in consumption is not reflected in these numbers and has remained more or less flat and well below the government forecasts: retail turnover growth won't reach the government's forecast of 5% this year."

Indeed, the latest forecast for consumption growth is closer to 2% for the year. But while before the crisis increases in income were multiplied in the retail turnover results, so that the approximate 5% increases in income turned into 15%-plus increases in buying, even though real

incomes have risen over the last two years – this year incomes are up some 5% - retail sales have multiplied down. This strongly suggests that Russian shoppers are still feeling shell shocked by the crisis and have changed they way they buy: instead of leveraging their ever-increasing incomes to buy on credit (which multiplies retail turnover up very fast), they are saving until they can buy goods in cash. In other words, Russian shopping habits have reverted to those of pre-2001 before retail credit first appeared.

Companies can't invest unless they have rising sales, as Russian private industry is now suffering from overcapacity, while the state is doing all the investment. Klepach admitted as much. "The key drivers for 2011 are all the natural monopolies' plans [for investment] – nothing is expected from the private or SME sectors – so the state is leading the recovery," Klepach said. "The investment plans by Gazprom alone will have a huge impact, while investment in other sectors is still minimal."

Structural problems

Klepach also pointed out some worrying changes in the structure of the economy. What sales increases there have been are mostly going to imports, which have been rising fast. That is bad news for domestic industry, as again badly needed sales aren't materialising. "The growth of the internal demand is mapped to imports," said Klepach. "Now the ratio of import/export production is worse than before the crisis. Food imports have fallen or remained stable due to the protectionist measures. However, in durables and investment sectors the sensitivity to imports is enormous and their gain is enormous. Joining the WTO will not help and won't slow the growth of imports – in fact it will do quite the opposite and exacerbate it."

He was also pretty negative on the outlook for the recovery of consumption and suggests that income growth now is below a level that can kick-start the pre-crisis virtuous circle of spending, profits, investment, wage rises. "The second key question for the growth in 2011 is what will the consumer do? Incomes are still rising, but they are rising half as fast as they did pre-crisis. However, we expect that lending will increase, but this is counteracted by the changes to the saving levels of the population," said Klepach. "Russians have traditionally been big savers with 20% of total income being saved. However, saving fell heavily in the crisis to 13% before rebounding to 19%. From here on, the level of saving will slowly fall to about 13% in 2013."

This is bad news because if this trend continues, then the value of the ruble will come under pressure. The ruble had been appreciating strongly for the years before the crisis, but has fallen in value in the last year. Indeed, Klepach said that if there is no change in the current trends, then Russia will face another bout of devaluation of the ruble to bring it into line with new structure of the economy. "In 2012, the ruble appreciation will stop and there will be a devaluation shake up. This happens every few years," said Klepach. "Or we will have to dramatically open our economy to foreign investors and get a steady flow of investment."

Will this happen? Alexei Ulyukaev, first deputy chairman of the Russian central bank and

the third member of the troika to speak at the conference, offered a bit more hope. Like the others, the picture he painted of the banking sector was positive. Non-performing loans, capital adequacy ratios and liquidity in the sector are all extremely strong. More importantly, he pointed to a recovery in lending, with consumer lending growing the fastest. "We expect lending to growth by 12% by the end of the year," said Ulyukaev, "which if you take out 8% inflation, is a real increase of 3%, but retail lending is growing faster than corporate."

He went on to say that the private banks are increasing lending faster than the state banks, which is also good news as they have been, "more realistic about the state of the economy than the state banks." He also said that banks were in robust health and that the lower-than-expected bad debt levels will give the bank sector a capital boost in the new year. "The need to increase bank capital will be solved organically as reserves [set aside to deal with bad debt] are at a historical high and next year some of this money will be transferred to boost the capital base," said Ulyukaev.

Ulyukaev comments that retail borrowing is growing give some cause for optimism. But the race is on: the main drag on Russia's growth is a lack of confidence amongst people and small business owners. And why shouldn't there be? After all, this is a population that has been hit by three major crises in the last 20 years. Typically, in the previous crises it has taken four years for confidence to fully return and we are still only two years into this one. Most analysts are expecting next year to be much stronger, but the current picture suggests that while the state-led recovery will bring improvements next year – essential to restoring confidence – the really strong growth led by investment, construction and spending like last time may not appear until 2012.

Vasily Vysokov, president of the Rostov-on-Don progressive Centre-Invest Bank, put his finger on the problem when he said: "We shouldn't increase the rate of growth of a bad economy, but use the crisis to change the nature of the economy and its direction. The state support takes money out of the pockets of those that work well and puts it in the pocket of those that work badly."

Happily, the government seems to get it, which is what President Dmitry Medvedev's modernisation drive is all about. Unhappily, the state is not doing very well at implementing this programme and the fact that all the plans for improving the economy in 2011 rest with the "surprises in store from Gazprom's investment programme," noted by Klepach, testifies to the government impotence in making a difference. Still, at least the Kremlin realises the scale of the problem and also what they need to do to avoid failure. "The economy is now starting a new phase of growth. Where there will be big qualitative changes otherwise the economy will not be competitive and we will not be able to escape this periodical devaluation trap," said Klepach.

Business, Energy or Environmental regulations or discussions

Norilsk Nickel, Polymetal, Rosneft: Russian Equity Preview http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a1PfcDPQPjYk

By Anastasia Ustinova

Dec. 7 (Bloomberg) -- The following companies may be active in Russian trading. Stock symbols are in parentheses and share prices are from the previous close in Moscow

The 30-stock Micex Index climbed 1.4 percent to 1,672.57.

VTB Group (VTB RX): VTB Capital acquired a stake in OAO Rosbank from Vladimir Potanin’s Interros Holding Co., saying it sees a “strong growth outlook” in the country’s banking industry. Russia’s second-biggest lender rose 1.3 percent to 10.27 kopeks in Moscow.

OAO GMK Norilsk Nickel (GMKN RX): Copper prices rose to a three-week high on speculation that a recovery in the global economy will boost demand for electrical wire and plumbing. Russia’s biggest mining company fell 0.2 percent to 6,656.52 rubles.

OAO Polymetal (PMTL RX): Gold rose near a record on concern the U.S. economy may need more stimulus, and Europe’s debt crisis will spread, boosting the appeal of the metal as an alternative to holding currency. Silver also gained. Russia’s biggest silver producer gained 3.8 percent to 622.69 rubles.

OAO Rosneft (ROSN RX): Crude oil for January delivery fell 0.1 percent to $89.07 a barrel on the New York Mercantile Exchange. Russia’s biggest oil producer rose 0.9 percent to 219.59 rubles.

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

To contact the editor responsible for this story: James M. Gomez in Prague jagomez@bloomberg.net

Last Updated: December 6, 2010 22:00 EST

Prokhorov Seeks to Create ‘Top 3’ Gold Producer in 2011 Merger http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aOq9L6wZ87qw

By Ryan Chilcote, Henry Meyer and Ilya Khrennikov

Dec. 7 (Bloomberg) -- OAO Polyus Gold, Russia’s largest producer of the metal, may merge with a global competitor as early as next year to form a “Top 3” gold miner, billionaire owner Mikhail Prokhorov said.

Polyus plans to get a primary listing in London next year by combining with its Jersey, U.K.-based unit KazakhGold Group Ltd., Prokhorov said in an interview with Bloomberg Television yesterday in Moscow. He then intends to “make a merger with one of the leading gold companies in the world,” he said, declining to name potential targets.

Russian gold producers are seeking to expand their global reach after prices for the precious metal soared 30 percent this year. OAO Polymetal, a Russian gold and silver miner, is seeking to change its domicile to Jersey to widen its investor base, while OAO Severstal’s Nord Gold unit plans an initial public offering in London.

Polyus’s market value will rise 20 percent after the U.K. listing, Prokhorov said. After a merger, “we’ll need to be in the world’s Top 3” gold miners, he said. The businessman, who controls Moscow-based Polyus with fellow billionaire Suleiman Kerimov, will have a minority stake in the combined company.

Barrick Gold Corp., Newmont Mining Corp. and AngloGold Ashanti Ltd. were the world’s largest gold miners last year, according to London-based researcher GFMS.

Target Any Rival

Polyus, which spent almost a decade buying mineral deposits to amass the world’s fifth-largest gold reserves, will be able to merge with any global competitor once it has a primary London listing, Prokhorov said.

The company had considered a merger with Canada’s Kinross Gold Corp. “several years ago,” Chief Executive Officer Evgeny Ivanov said in February. In 2004 Polyus, then a unit of OAO GMK Norilsk Nickel, planned to combine with South Africa’s Gold Fields Ltd., in which Norilsk had a 20 percent stake. The plan got scrapped and Norilsk sold the stake two years later.

Forbes magazine this year ranked Prokhorov, 45, as Russia’s second-richest man, with a $13.4 billion fortune. Last year he extended his interests into U.S. basketball, buying the New Jersey Nets.

To contact the reporters on this story: Ryan Chilcote in Moscow at rchilcote@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net; Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net.

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net.

Last Updated: December 7, 2010 02:57 EST

Moscow Seeks $445 Million in 2011 Asset Sales, Vedomosti Says http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aDqEfY5mM8ZM

By Ilya Khrennikov

Dec. 7 (Bloomberg) -- Moscow’s government plans to raise 13.9 billion rubles ($445 million) next year selling assets, including stakes in a Vnukovo Airport terminal and in Hilton, Holiday Inn and Marriott hotels, Vedomosti reported, citing city hall documents.

To contact the reporter on this story: Ilya Khrennikov at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net

Last Updated: December 7, 2010 01:02 EST

Aeroflot to Swap 6.3% Shares For 6 Air Carriers, Kommersant Says http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aGoFtqTE8aBc

By Ilya Khrennikov

Dec. 7 (Bloomberg) -- OAO Aeroflot is ready to swap 6.3 percent of its shares for six regional air carriers owned by Russian Technologies Corp., Kommersant reported, citing a management meeting with investment analysts.

Russian Technologies was earlier seeking to get 25.8 percent in Aeroflot, Russian largest air carrier, in exchange for its aviation assets, which have $819 million of debt, the newspaper said.

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net.

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net.

Last Updated: December 7, 2010 00:32 EST

Usmanov May Seek $160 Million in IPO of TV Unit, RBC Daily Says http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=ahYfFJG..U1s

By Ilya Khrennikov

Dec. 7 (Bloomberg) -- Russian billionaire Alisher Usmanov may seek to raise as much as $160 million selling shares in his television unit UTV next year, RBC Daily reported, citing unidentified people familiar with the matter.

UTV owns Media-1, 7TV and Muz-TV, the Moscow-based newspaper said today. The unit may be valued at about $400 million, RBC Daily said.

To contact the reporter on this story: Ilya Khrennikov at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net

Last Updated: December 7, 2010 00:36 EST

Puget Ventures Signs Definitive Deal To Buy Cobalt Assets In Russia http://www.rttnews.com/Content/CanadianNews.aspx?Id=1499198&SM=1

12/7/2010 12:28 AM ET(RTTNews) - Vancouver-based Puget Ventures Inc. (PVS.V: News ) announced that it has signed definitive deal to buy cobalt assets and other mineral assets in Russia and Mongolia with Imperial Mining Holding Ltd. The company also stated that it will change its name to Global Cobalt Corporation to reflect evolution to international cobalt exploration and development company.

The Proposed Transaction will be structured as an arm's-length reverse takeover of Puget Ventures by IMHL, which is domiciled in Isle of Man. Puget said that it will acquire all of the issued and outstanding securities of Pafra, a wholly-owned subsidiary of IMHL, incorporated in Cyprus.

Together with definitive deal, Puget Ventures also announced that it will be undertaking brokered financing of C$20 million to raise funds for Karakul cobalt project in Russia.

Werner Lake, Ontario, Canada located in Northwestern Ontario, Canada, will continue to be held and developed through Global Cobalt and will represent the Canadian cobalt operations division, the company added.

Pursuant to the transaction, Puget has engaged Mackie Research Capital Corporation to act as lead agent and sole bookrunner, in a syndicate of agents to be named, for a best-efforts financing of C$20 million in subscription receipts . Each receipt will be priced at C$1.05 and will be comprised of one common share and a half purchase warrant.

Two Russian Grocers Move to Thwart Wal-Marthttp://www.nytimes.com/2010/12/07/business/global/07ruble.html?_r=1&src=twrhp

By ANDREW E. KRAMER

Published: December 6, 2010MOSCOW — Two of Russia’s largest grocery store chains, Pyaterochka and Kopeika, said on Monday that they would merge their operations in a move that would better position them to compete with Wal-Mart, which is expected to enter the Russian market.

The deal, worth about $1.7 billion including the assumption of debt, was also a sign of renewed confidence in the Russian consumer market, which has been picking up because of rising prices for oil and other commodities that Russia exports.

Just last week, PepsiCo bought two-thirds of the Russian juice and dairy maker Wimm-Bill-Dann for $3.8 billion. The deal was the largest acquisition in Russia by a United States company, according to Thomson Reuters. And after the acquisition, Pepsi, which has been doing business in Russia and the former Soviet Union since the 1950s, became the largest food and beverage company in Russia.

Consumer goods companies have held a special appeal to foreign investors here because, in contrast to the oil and mining industries, the retail sector is fairly free of government meddling and open to foreign investment. And Russians, after decades of pent-up demand under communism, are free spenders.

“The trickle-down is real,” Hawk Sunshine, portfolio manager for Metropol, said of the investment interest in retailers in Russia. “Russians will have a steady flow of cash for years.”

Wal-Mart, the world’s largest retailer, has kept an office in Moscow for years but has not opened a store yet.

The Russian business daily Kommersant reported that Wal-Mart was in talks earlier this year with the company that was sold Monday, Kopeika, but did not reach agreement with the Russian owner. Wal-Mart, based in Bentonville, Ark., has said its efforts to enter Russia have so far broken down over disagreements about price.

Instead, the X5 Retail Group the parent company of Pyaterochka which is controlled by the Russian businessman Mikhail Fridman and is the leading retailer in the country, bought Kopeika. The deal, which X5 said in a statement had already been approved by regulators, added about 700 stores to its existing chain of Pyaterochka grocery outlets.

Over two years, X5 will convert the Kopeika stores to its Pyaterochka brand, the company said in a statement that also obliquely noted that it had beat out Wal-Mart in the acquisition.

“The quality of Kopeika’s assets was underlined by serious interest from international players,” Andrei Gusev, X5’s director for mergers and acquisitions, said.

Russia Box Office Sales Reach Record $1 Billion, Kommersant Says http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a6ntkLrbtn.M

By Ilya Khrennikov

Dec. 7 (Bloomberg) -- Russian box office sales reached a record $1 billion in the year to Nov. 28, led by Hollywood 3-D films “Avatar,” “Shrek Forever After” and “Alice in Wonderland,” Kommersant reported, citing Kinobusiness Today magazine, which tracks the industry.

Sales of movie tickets jumped 43 percent from $736 million the previous year, the Moscow-based newspaper said.

To contact the reporter on this story: Ilya Khrennikov at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net

Last Updated: December 7, 2010 00:46 EST

‘Nutcracker’ Breaks Russian Movie Budget Record, Vedomosti Sayshttp://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a8siJoG8Kzdk

By Ilya Khrennikov

Dec. 7 (Bloomberg) -- “Nutcracker and the Rat King,” a Russian movie that debuts Jan. 1, cost about $90 million to produce, making it the country’s most expensive film, Vedomosti reported, citing the director, Andrei Konchalovsky.

VEB, the state development bank overseen by Prime Minister Vladimir Putin, financed almost all of the budget, the Moscow- based newspaper reported today. Konchalovsky, a brother of Academy Award-winning director Nikita Mikhalkov, started shooting the film in 2007, Vedomosti said.

To contact the reporter on this story: Ilya Khrennikov at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net

Last Updated: December 7, 2010 00:57 EST

For the Record http://www.themoscowtimes.com/business/article/for-the-record/425789.html

07 December 2010

VTB Capital bought Interros Holding’s 19.3 percent of Rosbank, which is controlled by Societe Generale, VTB said Monday.(Bloomberg)

A second trans-Siberian railway line may have to be built to handle increasing freight traffic, Russian Railways said Monday, saying the proposed BAM-2 link may cost 448 billion rubles ($14.3 billion). (Bloomberg)

Aeroflot closed Monday at 83.94 rubles, up 1.9 percent, after the airline said it boosted net income 65 percent to $281 million in the first nine months, and revenue rose 28 percent to $3.16 billion. (Bloomberg)

Norilsk Nickel said Monday that it plans to restart its Lake Johnston nickel mine in Western Australia in the first half of 2011.(Bloomberg)

Russia Post is in talks with Poste Italiane on creating a postal bank in Russia, Vladimir Dmitriyev, head of VEB, told reporters Monday in Khabarovsk. (Bloomberg)

Activity in the Oil and Gas sector (including regulatory)

DECEMBER 6, 2010, 11:18 P.M. ET

Rosneft Sells Jan-Feb Sokol Crude To BP At High Premium -Trader http://online.wsj.com/article/BT-CO-20101206-716280.html

SINGAPORE (Dow Jones)--OAO Rosneft (ROSN.RS), a Russian oil producer, has sold 1.4 million barrels of light, sweet crude for January-February loading to oil major BP PLC (BP) at a high premium, reflecting stronger Asian demand for grades rich in gasoline and naphtha, a trader familiar with the matter said Tuesday.

The two 700,000-barrel cargoes of Sokol crude were sold at a premium of almost $6 a barrel to benchmark Dubai quotes on a cost-and-freight basis, the trader said.

Singapore's complex refining margin to Dubai crude rose 33 cents to $7.23 in the week to Dec. 2, Dow Jones Newswires calculations show. The increase was driven by stronger margins for gasoline and naphtha.

-By Wayne Ma, Dow Jones Newswires; +65 6415 4065; wayne.ma@dowjones.com

$27Bln Yamal LNG Plan May Earn Tax Break http://www.themoscowtimes.com/business/article/27bln-yamal-lng-plan-may-earn-tax-break/425759.html

06 December 2010By Howard Amos

The Finance Ministry on Monday published a bill that would introduce a tax holiday for companies that extract natural gas on the remote Yamal Peninsula and liquefy it for shipment by tanker.

If it becomes law, the bill will provide much-needed support to plans by Novatek to build a multibillion-dollar liquefied natural gas, or LNG, plant in Yamal in conjunction with foreign partners. Developers face a host of logistical problems, including freezing temperatures, in accessing Yamal's fossil fuel reserves.

In a statement released on the ministry's web site, it said LNG production in Yamal would involve capital expenditure of upward of 850 billion rubles, or $27.2 billion. Previous estimates by experts and officials were upward of $20 billion.

Posted on the ministry's web site, the bill stipulates for a zero rate of the gas extraction tax for 12 years for gas lifted from under the Yamalo-Nenets autonomous district and used for liquefaction. The tax holiday would cease if the cumulative amount of extracted gas at a field tops 250 billion cubic meters.

The law would come into force Jan. 1, 2012.

A Novatek spokesman, Denis Solovyov, said Monday that any comment was premature before the bill collects approvals from the parliament and the president.

“When there is a decision, then there will be something to comment on,” he said.

Novatek, the biggest independent gas producer in Russia, is preparing to develop its LNG project to exploit the giant South Tambei field, estimated to hold 1.3 trillion cubic meters of gas in proved reserves. If given the go-ahead, it would be Russia's second LNG plant, after Gazprom's Sakhalin-2 venture, which supplies 5 percent of the global market.

Novatek may start production at the plant as soon as 2016, chief executive Leonid Mikhelson said in October. The project aims to export 15 million tons of LNG, or 20.4 bcm of natural gas, a year to Asian and European markets.

Without the tax breaks, said Alexei Kokin, an analyst at the international investment group Metropol, “this would be a loss-making project.”

Under the bill, Novatek would save at least 59 billion rubles during the tax holiday at the tax rate of 237 rubles per 1,000 cubic meters of gas, which is set for next year.

Foreign companies such as France's Total and Britain's and Holland's Royal Dutch Shell have expressed interest in joining the project.

Prime Minister Vladimir Putin agreed to a proposal to introduce a tax holiday in Yamal when he held a meeting on the long-term development of the gas industry in October. He then instructed the Finance Ministry, the Economic Development Ministry and the Energy Ministry to work together on submitting the proposal to the Cabinet before the year's end.

The Finance Ministry's bill will also apply the tax holiday to natural gas condensate extracted in Yamal. The upper limit of extraction, which would mark the end of the tax holiday in the case of condensate, is 20 million tons.

INTERVIEW-Yamal region leads Russia's gas surgehttp://www.futurespros.com/news/futures-news/interview-yamal-region-leads-russia%27s-gas-surge-1000005151

2010-12-06 12:41:42 GMT (Reuters)

* Investment in Yamal Nenets to grow 20 percent per year

* Arctic oil link-up with east not to threaten flows to EU

* Govt backs foreign investment in Yamal LNG, other projects

By Jessica Bachman and Olesya Astakhova

MOSCOW, Dec 6 (Reuters) - Russia will have no problem doubling gas output by 2030 and extracting a third of of the world's production, the head of its top producing region said.

Gas superpowers should divide market share in the face of a global glut, the governor of the Arctic Yamal Nenets region told Reuters.

Yamal produces 85 percent of Russia's gas or one seventh of global output. Dmitry Kobylkin said his region could produce 1 trillion cubic metres annually and will also raise its game in the oil business.

"Only 15 percent (of Yamal's gas) has been extracted, so there is still huge potential," Kobylkin said in an interview at the region's embassy-like residence in Moscow.

"We have trillions and trillions of cubic metres left. (Prime Minister Vladimir) Putin is looking at 1 trillion a year and this is entirely do-able," he said.

Russia, the world's largest energy producer, has been hit by a global oversupply of gas due to lower industrial demand and a boom in production from unconventional sources, particularly shale gas.

The International Energy Agency sees the gas glut lasting another decade, but during a recent visit to Yamal Nenets, Putin said that Russia will stimulate the sector to double its annual gas production to 1 trillion cubic metres by 2030.

Weak demand has forced Gazprom, Russia's state-owned energy giant, to lower its 2010 output forecast, and with more European consumers preferring to buy cheaper liquified natural gas (LNG) on the spot market, the firm is banking on China to buy its exports.

In Yamal Nenets, Russia's No. 2 gas producer Novatek is preparing to start construction of Russia's second LNG plant that would produce 16 million tonnes of LNG per year.

Kobylkin said he supported foreign participation in the project and has spoken with representatives of Qatar, the world's largest LNG player, and France's Total, both of which are keen on partnering with Novatek.

"LNG, there is demand for this, and Qatar and Total see this . . . But talks (between Novatek, Qatar and Total) are about marketing, not because there is not enough money to build it. Banks will take care of that," he said.

"It's about marketing because they all produce the same product and want to properly, wisely divide the market."

Novatek bought into Yamal LNG last year, when it acquired 51 percent of the company, which holds the right to develop Yamal's South Tambey fields, with gas resources estimated at 1.3 trillion cubic metres.

NEW ARCTIC ENERGY FRONTIER

Yamal Nenets encompasses a 700-km (435 mile) peninsula surrounded by the Arctic Kara Sea and is home to 500,000 people and 700,000 reindeer. It is also one Russia's the most promising new oil frontiers, which will account for 15 percent of Russia's total oil production.

Its large, untapped deposits, such as the Trebs and Titov oil ields which mid-size firm, Bashneft, won the rights to develop on Thursday, will help compensate for a decline in production from ageing West Siberian fields.

"In Yamal oil production will grow by 5-10 percent in the next three years and overall investment in the region will increase 20 percent each year," said Kobylkin, who was appointed governor in March.

He also said that while the Arctic greenfields will serve Asia via a northern link-up to the East Siberian Pacific Ocean (ESPO) pipeline, one spur of which going directly to China, exports to Europe were not under threat.

"There won't be less oil going to our left. The (pipeline) capacity is good, and we will fill it just like always. Only oil from new deposits will go East. We are expanding our market and that's it," he said.

Oil majors LUKOIL, Gazprom Neft and TNK-BP, which are developing deposits in the remote region, will finance the construction of the Zapolyarnoye-Purpe pipeline to bring this oil to the market.

(Reporting by Jessica Bachman and Olesya Astakova; Writing by Jessica Bachman; editing by William Hardy)

Bashneft reports neutral 3Q10 IFRS results

http://www.bne.eu/dispatch_text13834

Renaissance CapitalDecember 7, 2010

Bashneft reported 3Q10 IFRS results and hosted a conference call yesterday (6 Dec). We note the progress made in the disclosure of quarterly results, although a full set of accounts has still not been provided. The results themselves came close to consensus estimates on the revenue and operating lines; however, net income was 15% below the consensus forecast. A YoY comparison provides little information, since 3Q09 numbers were not reported on a consolidated basis and a tolling scheme was still in place in 3Q09.

• Revenue increased 5% QoQ as a result of a higher share of exports of oil products and growth in other sales (Bashkirenergo).

• The key negative trend in costs was QoQ growth in lifting and refining costs per unit of 3.3% and 3.7%, respectively, in rouble terms. Bashneft remains the highest-cost producer among Russian integrated oil companies, with lifting costs rising to $8.3/bbl.

• The key positive trend was a 19% QoQ reduction in transportation costs due to optimised logistics.

• Net income was affected by several non-operating items, such as provisions for legal proceedings with Probusinessbank and an FX loss of $34mn.

• Bashneft continued to demonstrate low capex levels during 3Q of just $117mn ($60mn for upstream and $39mn for downstream). Low downstream capex was the result of

slower deliveries of key refining units and should accelerate towards year-end.

During the conference call, management provided some broad (and conservative, in our view) guidance for 2011, including crude output of at least 14.5mnt and refining volumes close to the 2010 level (subject to market conditions). The company plans to achieve a production level of 15mnt by 2013 and maintain this for four-to-five years. The company did not give any details on the development plans for the Titov and Trebs fields, noting that the government has not yet made an official decision.

Bashneft Making Foray Into European Trade http://www.themoscowtimes.com/business/article/bashneft-making-foray-into-european-trade/425749.html

06 December 2010Reuters

UFA — Fast-growing midsized oil company Bashneft is set to open its trading arm in Zurich in 2011 to carve a share of the lucrative European crude and oil product market, the company's head said.

Bashneft, which posted a 17.7 percent drop in third-quarter net profit on Monday due to a forex loss and maintenance works, also wants to beef up upstream business in Russia and abroad.

As part of its ambitious plans to strengthen its foothold in trading, president Viktor Khoroshavtsev expects third-party volumes to make up half of the total trade of crude oil, motor oil and lubricants.

"I believe that 2011 will be the year of this program's launch. We will have some results by the year-end, it's early to speak about the volumes," he told Reuters in an interview cleared for publication Monday.

The company follows in the footsteps of TNK-BP, which plans to open a trading office in Geneva.

Bashneft, owned by oil-to-telecoms holding Sistema, is set to produce more than 14 million tons this year, above the initial target of 13.4 million tons, as the firm has almost tripled flow rates at its wells, the president said.

But still, it will be less than 26 million tons of its refining capacity, and the company is looking into ways to balance its upstream and downstream business.

Last week, Bashneft won the rights to develop the huge Trebs and Titov oil fields in the Arctic, but Khoroshavtsev said Bashneft will continue its drive to increase its resource base by acquiring more Russian and foreign deposits.

"Sooner or later, we will go West [to acquire oil fields]. We had some initial offers from Latin America and the Middle East," he said in the company's headquarters in Ufa, adding that Bashneft will try to increase its assets base in Russia first. "We are looking at the Republic of Komi, Krasnoyarsk and Irkutsk regions. We are interested in Naulskoye deposit."

Earlier this year, Gazprom Neft, the oil arm of Gazprom, was the sole contender to develop Naulskoye with recoverable resources valued at 50 million tons in the Nenets autonomous district, but later decided to drop the bid, reportedly because of the high price tag set by the state.

According to Khoroshavtsev, Bashneft aims to start oil production Trebs and Titov in 2014, a year earlier than planned. He said the production there is set to peak at 7 million tons, while investments may total at least $3 billion to $3.5 billion. Last week, a Bashneft independent board member said the company will have to invest between $5 billion and $6 billion in the development of the fields.

The firm was the only contender in the bid for the fields, which contain an estimated 200 million tons of oil reserves, after rival bidders Surgutneftegaz and TNK-BP were disqualified.

Bashneft saw its third-quarter net profit after minority interest, decline to $278 million from $338 million in the previous three months due to a forex loss and the creation of a reserve to cover possible court case payments.

Refining output in the third quarter edged down by 0.3 percent to 5.56 million tons due to maintenance works. Khoroshavtsev said the oil products output will continue to fall in the fourth quarter on the back of a seasonal demand drop.

Bashneft has made provisions for legal proceedings involving lender Probusinessbank, which is reportedly seeking some 900 million rubles ($28.82 million) in damages related to a trader insolvency.

Operating income before depreciation and amortization, or OIBDA, dropped 2.3 percent to $680 million, while revenues increased by 5.3 percent to $3.51 billion.

According to Khoroshavtsev, the losses related to the ruble exchange rate amounted to about $34 million. The Bashkirenergo power generation unit also contributed to a lower profit because of some maintenance works before the winter season, he added.

Bashneft's total debt rose by $1.57 billion to $3.75 billion in the third quarter, as the company secured loans from Gazprombank and VTB, and is set to rise further.

"We enjoy a comfortable ratio of net debt to OIBDA, which is less than 1.5. Obviously, the debt will keep on rising, as when we get the license, as I hope, for Trebs and Titov deposits, we will need money for their development," Khoroshavtsev said.

Joint Bid for Poland Refiner http://www.themoscowtimes.com/business/article/joint-bid-for-poland-refiner/425787.html

07 December 2010

Gazprom’s oil arm and Rosneft are interested in acquiring Grupa Lotos, Poland’s second-biggest refiner, and may team up to make a competitive bid, Energy Minister Sergei Shmatko said Monday.

“It’s politically very important to signal that our companies are ready to come, and at least to hear from Poland that there won’t be any discrimination in decision making,” Shmatko said.

The Polish government is selling a majority stake in Grupa Lotos, which operates a refinery in Gdansk, as part of a $19 billion asset-sale plan, with preliminary bids due by Feb. 4, it said in  October.

(Bloomberg)

Gazprom

Ukraine pays for November gas in full, Gazprom says

http://www.rbcnews.com/free/20101207114848.shtml

      RBC, 07.12.2010, Moscow 11:48:48.Gazprom has confirmed that Naftogaz of Ukraine had made a full payment for the gas supplied to Ukraine in November 2010.

      Yesterday, Naftogaz's public relations department reported that the company had transferred $1.043bn to Gazprom for November's natural gas deliveries.

Gazprom, Namcor to Take Piece of Tullow Kudu Stakehttp://www.oilandgaseurasia.com/news/p/0/news/9848

Gazprom and Namibia’s Namcor, plan to buy part of Tullow Oil’s Kudu field off the coast of Namibia. The two firms will set up a JV company that will hold a 54% stake in the gas field, Boril Ivanov, the head of Gazprom’s international E&P operations said in the Russian company’s corporate magazine. Tullow will hold 31% and Itochu Corp. the remaining 15%, he said.

Kudu “reserves may increase several times over with additional exploration,” Ivanov said in the issue of Gazprom magazine e-mailed today by the company. He estimated the field holds 1.8 Tcf.

Gazprom is in talks with Namibian and South African authorities about plans to build an 800 MW power plant. Some electricity will be supplied to the domestic market with the rest to be exported other markets in the southern Africa region.  

There is also word that Namibia is pushing Tullow and Gazprom to fast track the power plant. “We are going to have problems” with electricity shortages by 2013, when power imports from Zimbabwe, Zambia and the Democratic of Congo start petering out, Siseho Simasiku, CEO of Namibia’s Electricity Control Board, said in an interview in Cape Town. Namibia would like a decision on the new plant to be taken “yesterday.”

Copyright 2010, Petroleum Africa. All rights reserved.

Gazprom Neft seeking Arctic offshore assetshttp://www.barentsobserver.com/gazprom-neft-seeking-arctic-offshore-assets.4857638-16178.html

2010-12-06 Russia’s fifth biggest oil company, Gazprom Neft, is preparing bids for four big fields in the Pechora Sea and the Kara Sea, the company confirms.

Company representative Viktor Savelyev told journal Neftegazovy Vertikal that Gazprom Neft has a high strategic focus on offshore fields in the Arctic. He also confirms that bids for four big fields in the Pechora and Kara Seas are under preparations.

In the interview, available at thecompany website, Savelyev also underlines that the Yamal Peninsula is given priority and reserves in the area are planned boosted with more than one billion tons of oil equivalents. A major mapping and exploration program for the area is under planning.

In the Yamal Peninsula, Gazprom Neft can potentially benefit from the major infrastructure development currently undertaken by mother company Gazprom.

Gazprom Neft is a 100 percent subsidiary of gas giant Gazprom. So far the company has not been much active offshore. Thus, it is the mother company Gazprom, which controls the licenses to offshore oil fields like the Prirazlomnoye in the Pechora Sea.

According to Oilru.com, Gazprom Neft is also planning investments in the Caspian Sea, the Black Sea, as well as in the Chukotka Sea.

Text: Atle Staalesen

Europe Can Lift CO2 Market From Gridlock, Gazprom Says (Update1) http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aNxse6afNdT0

By Ewa Krukowska

Dec. 6 (Bloomberg) -- Europe needs to reinvigorate the world’s second-biggest emissions market as global climate talks to reduce greenhouse gases stall, the head of a carbon-trading unit of Russia’s OAO Gazprom said.

United Nations carbon offsets for delivery in a year fell 4 percent last week amid signals that differences between 190 developing and industrial nations may preclude a binding treaty at the climate meeting that started Nov. 29 in Cancun, Mexico.

The $2.7 billion UN Clean Development Mechanism is an offspring of the 1997 Kyoto Protocol, which expires in 2012 unless governments decide to extend it. Carbon offsets generated by the CDM may be used for compliance in the European Union’s emissions-trading system, the world’s largest cap-and-trade program, also known as the EU ETS.

“Given that nothing is likely to fundamentally change between now and the next summit in South Africa in 2011, the EU ETS will continue to be the global driving force in the international carbon market,” Dan Barry, head of carbon trading at Gazprom Marketing & Trading, said in a interview from London.

The EU, whose carbon market was valued at $119 billion last year, could bolster investors’ confidence in the UN market by giving more “certainty and clarity” on what types of offsets it will accept in the next trading period, which runs from 2013 through 2020, Barry said.

The ETS is a cornerstone of European efforts to tackle the heat waves, storms and floods that scientists have linked to climate change. The system, started in 2005 with a three-year trading period, is now in a second phase, which ends in 2012.

European Demand

Demand from European emitters has helped the CDM expand to more than 2,500 registered projects that generate credits to investors for cutting greenhouse gases in developing nations. The UN program has issued 476 million credits so far and expects projects in the pipeline to generate 2.7 billion offsets by the end of 2012.

Gazprom Marketing & Trading’s carbon unit is involved in more than 100 UN emission-reduction projects globally and plans to add more, according to Barry. Gazprom and Trans Wonderland Ltd., a Papau New Guinea transport company with contracts to provide liquefied natural gas services there, will cooperate on projects with plans to win UN credits, they said today in an e- mailed statement.

The European Commission, the EU regulator, proposed last week to stop recognizing as of 2013 UN credits related to projects that cut nitrous dioxide from adipic acid production and hydrofluorocarbon-23, an industrial gas whose warming potential is 11,700 times bigger than carbon dioxide. The EU said it is concerned the projects create excessive credits and undermine the market’s integrity.

Insufficient Clarity

While HFC-23 projects represent less than 1 percent of all registered CDM projects, their credits account for more than half offsets issued so far.

“Clarity that HFC-23 credits won’t be eligible is useful, but the EU has failed to give clarity on what will be eligible for the next phase,” Barry said. “That’s a fundamental requirement that needs to be sorted out very soon.”

More than 11,000 operators in the European program can swap as many as 1.6 billion UN credits with EU permits on a one-for- one basis in the phase from 2008 through 2012. The bloc has signaled it wants the CDM to continue, but said the mechanism must be overhauled to improve its effectiveness and governance.

‘Quite Comfortable’

“The EU appears quite comfortable with credits from UN projects registered pre-2012 to continue generating credits eligible for the next phase,” he said. “We may start to see new mechanisms for future projects. The general consensus seems to be as much support as possible to as many different project types as possible in least developed countries.”

UN Certified Emission Reductions for December 2011 closed at 11.39 euros a metric ton on Dec. 3. EU allowances for delivery in December 2011 were at 15.03 euros.

The EU is unlikely to accept credits backed by forestry for compliance in its cap-and-trade system in the near future, Barry predicts. Even though deforestation may be one of the few areas where envoys reach a deal in Cancun, the program will work only if governments adopt emission-reduction commitments, he said.

“We need to see a meaningful price on carbon, otherwise forestry conservation just won’t be able to compete against palm oil,” he said.

Gazprom Marketing & Trading announced last month its method for generating carbon credits by voluntary forestry projects was approved by auditors. The method will

generate around 100,000 credits over the next 30 years in a project in the Rimba Raya Biodiversity Reserve in Borneo, southeast Asia.

First issuance of the credits should take place by the end of this year, and Gazprom Marketing & Trading has already brokered a sale of more than 5 million of the Rimba Raya offsets, Barry said.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net;

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

Last Updated: December 6, 2010 09:03 EST

Gazprom to develop cleaner energy in Papa New Guineahttp://af.reuters.com/article/energyOilNews/idAFLDE6B50PO20101206

Mon Dec 6, 2010 10:57am GMT

* Trans Wonderland looks to use more LNG than diesel

* GM&T to develop clean energy projects under CDM

LONDON, Dec 6 (Reuters) - Gazprom's (GAZP.MM) trading arm and logistics company Trans Wonderland Limited (TWL) have agreed to collaborate on clean energy projects in Papa New Guinea, the companies said on Monday.

Gazprom Marketing & Trading (GM&T) said it will act as a project developer and carbon offset buyer for TWL's plan to use more liquefied natural gas (LNG) than diesel in its transport and logistics operations in Papa New Guinea.

Under the U.N.'s Clean Development Mechanism (CDM), companies from rich nations can invest in clean energy projects in developing countries, and in return receive offset credits called certified emissions reductions (CERs), which can be used toward emissions targets or sold for profit.

TWL has been chosen to be the sole transport and logistics operator for Papa New Guinea's LNG facility due to come on stream in 2014, to allow gas exports to the Asia Pacific region.

TWL's planned fuel switch project study should be completed by early February 2011. Then the companies will look to finalise a gas sales and purchase agreement to initially produce around 50 to 100 tonnes a day of LNG.

TWL plans to install a Salof Mini LNG plant and infrastructure closer to the company's operations in Hides, which will reduce the amount of fuel the company must bring in from Lae, which is 800 kilometres away.

"GM&T will support the development of CDM projects by providing expertise and finance to reach U.N. registration of those projects as well as purchase the CERs generated as a result of emissions reductions through the switch to clean fuel," GM&T said in a statement. (Reporting by Nina Chestney; Editing by Alison Birrane)