Russia 090331

Basic Political Developments Sergei Lavrov to attend int'l conf on Afghnistan in the Hague Ukraine's Tymoshenko wants better relations with Russia Mohammad meets Medvedev - His Highness Shaikh Mohammad Bin Rashid Al

Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, on Monday met Russian President Dmitry Medvedev in Moscow

Moscow closely following murder of Russian citizen in Dubai – diplomat Georgia's actions may jeopardize OSCE activities in Southern Caucasus –Karasin Russia calls for OSCE monitoring on both sides of Georgia-SOssetia TBILISI BLAMES MOSCOW FOR DEADLY BLAST NEAR SOUTH

OSSETIA Russia invites China to join Sochi 2014 Olympic project Russia warns Finland against NATO membership G-20

o RIA: Russian, German leaders to meet in Berlin ahead of G20 summito Bloomberg: Obama, Medvedev to Focus on Issues, Not Souls, in London

Talkso The Washington Post: Building Russian-U.S. Bonds - By Dmitry A.

Medvedevo Itar-Tass: Russia hopes “resetting” of relations with US will produce

concrete resultso CBS News: Historic Opportunity For U.S.-Russia Relationso Reuters: Medvedev charts path to better Russian-U.S. tieso The Chicago Tribune: Hurdles ahead for U.S.-Russian relations 'reset'o CBC: Rebuffing Obama's outstretched hand - It's been a long time since

Moscow has had so many high-level visitors from Washington. Barely a week goes by without some senior American politician or ex-politician stopping by to give the Russians the kid-glove treatment, even as their hosts remain icily indifferent.

o The Guardian: From Moscow to Baghdad - what politicians want from the G20 / Russia

o Hurriyet: Medvedev seeks a top seat at G20

AZERBAIJAN: RUSSIA IS INCREASINGLY NERVOUS ABOUT ITS GRIP ON CASPIAN ENERGY

Admiral Vystosky at Sevmash shipyard Putin buys Russian car to save home industry from decline NAC to consider lifting counter-terrorist operation regime in Chechnya 67 militants killed, 233 detained in N. Caucasus in 2009 – FSB The number of unemployed people in Moscow ahs reached 43,500 Kemerovo Blogger Charged With Hate Speech for 2 Posts Vladimir Ryzhkov: A Bogus Anti-Crisis Plan

The Long Road to Russia - Despite the Existence of the Repatriation Program, Twice as Many “Compatriots” Seek Asylum Aboard than Chose to Move to Russia

Police Arrest Anti-Xenophobia Activists MT: Cracks in the Credibility of the Yukos Case - Former Yukos CEO Mikhail

Khodorkovsky will go on trial Tuesday on charges of secretly embezzling all the oil that his company pumped from 1998 to 2003, roughly 20 percent of the oil that Russia produced during those six years.

National Economic Trends Kudrin Says Russian Support for Banks May Reach 3% of GDP CIS countries need to spend 1-3% of GDP to support banks – Kudrin Govt to assign additionally RUB 300 bln financial aid to Russian regions Russia's Putin says govt won't reduce its reserves to "zero" Deputy CBR chairman believes crisis has peaked, but recovery will take a couple

of Years CBR on upcoming changes to monetary policy Russian agriculture looks for more state support Consumer blues - "The Russian economy has stabilised, but that is only because

the Central Bank of Russia is running a very tight monetary policy to support the ruble. I think that the underlying economy is not doing so well and the situation may actually be getting worse," says Ilkka Salonen the deputy chairman of Sberbank.

Business, Energy or Environmental regulations or discussions RSPP Slams Anti-Crisis Plan - The Russian Union of Industrialists and

Entrepreneurs said the government's plan for dealing with the financial crisis is too vague and shortsighted.

Russia Pledges $1 Bln to Auto Industry, Saves Jobs: WSJ Link Putin Promises Big Money on Visit to AvtoVAZ VTB-24 Gets EBRD Loan Deripaska's Decision - Oleg Deripaska has until December to decide whether he'll

keep his 25 percent stake in Austria's Strabag, Raiffeisen Zentralbank Oesterreich head Christian Konrad said, Vienna's Wirtschaftsblatt reported.

Russia's Chigirinsky leaves businesses – paper Alstom to Buy 25% of Russia’s Transmashholding, Figaro Says New Aeroflot CEO outlines primary objectives Capital Group agrees $400mn debt restructuring with Sberbank PIK Group Co-Owner Gives Stake to VTB Capital U.S. grain exporter comes to Russia - U.S. CHS Inc., one of the world's leading

energy and grain-based food companies, is in talks to buy Agromarket-Trade from the Russian Agrico Group.

UPDATE 1-Raven Russia to buy Raven Mount for 60 mln stg Home Building Increases YoY - The number of homes completed in the first two

months of this year surpassed the number in the same period last year, Regional Development Minister Viktor Basargin said Monday.

Ecologists Decry Arrival of Nuclear Waste - About 30 members of St. Petersburg’s ecological organizations protested the transportation of nuclear waste from other countries to Russia.

Activity in the Oil and Gas sector (including regulatory) Crude export duties to be cut to USD 15.1/bbl from 1 April – fully Shmatko's Ukraine Meeting - Energy Minister Sergei Shmatko met with his

Ukrainian counterpart, Yuriy Prodan, to discuss the modernization of Ukraine's gas pipelines and energy cooperation, the Russian Energy Ministry said Monday. EU, Russia, Ukraine should work on gas-Piebalgs

Russia primes $25bn China deal WSJ: Moscow Warns on Low Oil Prices - To many in the West, Russia's oil

wealth is an addiction that has warped its economy. Russian energy czar Igor Sechin considers that envious nonsense.

WSJ: Russian Deputy Prime Minister Igor Sechin on Oil, OPEC, Respect and More

NIS Management board over annual balance sheet soon - The negotiating team of Serbia that included members of the NIS management board appointed as per coalition agreement seems to have no chance against the Russian side.

Kremlin energy comes to Hungary - Surgutneftegas is to buy a stake in Hungarian oil and gas company Mol, in a move which is raising alarm bells about Russia's ambitions to expand into the downstream of Europe's energy sector and the fate of the EU's cherished Nabucco gas pipeline.

MT: Surgut Pays $1.8Bln for MOL Stake Mol says to continue to pursue own strategy despite OMV-Surgut deal Sistema Will Pay $2.5 Billion for Russian Oil Assets (Update4) Integra Group, Rosneft Subs. Ink $153 mln Deal Volga Gas Underscores Uzenskaya Wells' Crude Oil Reserves

Gazprom Gazprom sees 2009 gas exports falling to 140 bcm Russia Gazprom to place at least CHF 200 mln in notes Gazprom Sells Russia’s First Foreign Bonds Since Georgian War Gazprom employees investigated for corruption TURKMENISTAN: INTERNATIONAL TENDER FOR CASPIAN PIPELINE

SPUR OPENS, GAZPROM MUST COMPETE Gazprombank lends out 553 bln rubles amid crisis Gazprom to strip Europe of other gas sources No alternative to South Stream through Serbia – Gazprom

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Full Text Articles

Basic Political DevelopmentsSergei Lavrov to attend int'l conf on Afghnistan in the Hague

http://www.itar-tass.com/eng/level2.html?NewsID=13737046&PageNum=0

MOSCOW, March 31 (Itar-Tass) - Russian Minister of Foreign Affairs Sergei Lavrov will attend an international conference on Afghanistan to be held under the auspices of the United Nations. The conference opens in the Hague on Tuesday.

The widely representaive forum, in which over 80 countires will take part, including representatives of international organisations, among them UN Secretary-General Ban Ki-moon, will be in point of fact a follow-up on the Moscow conference of the Shanghai Cooperation Organisation on Afghanistan.

Speaking earlier, the Russian Minister emphasized, "We consider it a common task to achieve stabilisation of the situation in Afghanistan." "We shall work to promote success of the conference that will be held in Europe on the US initiative at the end of March," he said. Lavrov intends to tell those present in detail about the results of the Moscow forum.

It is tentatively known that the donor countries are planning to give important financial aid to Afghanistan. Thus, the European Union intends to assign 10,000 million euros to Afghanistan before the end of 2010, and India is to allocate $1,200 million. South Korea's contribution will near $66 million. The United States also announced an intention to give assistance to Afghanistan, although, according to analysts' estimates, the military stabilisation operation in Afghanistan has already cost the US $2,000 million a month and the amount may grow by 60 percent.

Ukraine's Tymoshenko wants better relations with Russiahttp://en.rian.ru/world/20090331/120830934.html

KIEV, March 31 (RIA Novosti) - Ukrainian Prime Minister Yulia Tymoshenko has said that she wants to see friendly relations between Kiev and Moscow that take into account the national interests of both countries.

"I want to build friendly, harmonious ties with Russia, but with national interests taken into account. You have seen how much effort I have put in to eliminate the confrontations in our relations," Tymoshenko said late on Monday in an interview with the Ukrainian TV channel ICTV.

In particular, Tymoshenko said that the independence of the country's gas transportation system, sealed in an agreement signed with the European Union, was important for Ukraine.

Ukraine and the European Union signed an agreement to modernize Ukraine's Soviet-era gas pipeline network last week, triggering an angry reaction from Russia, which exports most of its Europe-bound gas via the country.

Under the agreement, the EU endorsed Ukraine's plan to modernize its Soviet-era pipelines and underground storage facilities, and to build new gas metering stations. The

EU pledged 2.5 billion euros ($3.4 billion) on the condition Kiev reform the sector to make it more open and transparent.

Moscow said it had been deliberately excluded from the deal and subsequently delayed inter-government talks with Kiev. It also threatened to review energy ties with the European Union if its interests continued to be disregarded.

The spat has stirred fears of a repeat of January's gas dispute between Russia and Ukraine, when a number of European Union consumers were left without gas for some two weeks.

Mohammad meets Medvedevhttp://www.gulfnews.com/business/General/10299936.htmlWAMPublished: March 30, 2009, 23:52Moscow: His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, on Monday met Russian President Dmitry Medvedev in Moscow. Shaikh Mohammad arrived in the Russian capital on a two-day official visit, during which he will hold talks with the Russian President, and Prime Minister Vladimir Putin on bilateral relations and new avenues of co-operation in all fields, especially the economic, cultural, tourism and technological sectors. They will also discuss regional and international developments and other issues of mutual interest. Shaikh Mohammad expressed his hope that the visit would yield positive outcomes in all fields for the mutual interest of both countries and peoples.He also hoped the visit would contribute to injecting fresh blood into the global economy. "We are confident the visit will help us arrive at common views and new and creative ideas that pave the way for bilateral relations based on mutual respect and interests," Shaikh Mohammad said in a statement on his arrival in Russia. He also said the visit would contribute to activating the role of individual, government and private institutions to play a positive and effective role in cementing the historic ties between the two peoples, especially in culture, tourism, technology and other areas. "We rely on these spheres to pave the way to economic and investment partnerships based on human and cultural communication," Shaikh Mohammad said. "Our visit to Moscow at this level reflects the keenness of our leadership, government and people to extend new bridges and open new channels of broader avenues that lead to laying a strong basis for cooperation and economic and investment partnership between the UAE and Russia," he added. Shaikh Mohammad is accompanied by a high-level official and business delegation, including Shaikh Maktoum Bin Mohammad Bin Rashid Al Maktoum, Deputy Ruler of Dubai, Lieutenant General Shaikh Saif Bin Zayed Al Nahyan, Minister of Interior, Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority and Chairman of Emirates Group, Mohammad Abdullah Al Gergawi, Minister of Cabinet Affairs, Dr Anwar Mohammad Gargash, Minister of Foreign Affairs, and other ministers, senior officials and prominent businessmen.

Shaikh Mohammad earlier left Dubai and was seen off at the airport by Shaikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, Shaikh Majid Bin Mohammad Bin Rashid Al Maktoum, Chairman of Dubai Culture, and other shaikhs and officials.

Moscow closely following murder of Russian citizen in Dubai – diplomathttp://www.interfax.com/3/483622/news.aspx

MOSCOW. March 31 (Interfax) - Moscow is closely following theinvestigation into the attempted murder in the United Arab Emirates of aRussian citizen, presumably Sulim Yamadayev, Foreign Ministry spokesmanAndrei Nesterenko has announced. "Reports you have mentioned have been treated with the most seriousattention in Moscow. This could not have been otherwise, since a citizenof our country, moreover, a Hero of Russia, is involved here,"Nesterenko said on Tuesday, while commenting on reports aboutYamadayev's death. The diplomat said that the law enforcement agencies of the UAE havelaunched an investigation into the circumstances of that tragic event."We are closely following the results of the efforts, being made by theEmirates in coordination with the Russian Embassy in Abu Dhabi and withthe Russian Consulate General in Dubai," he said.

Georgia's actions may jeopardize OSCE activities in Southern Caucasus –Karasinhttp://www.interfax.com/3/483583/news.aspx

MOSCOW. March 31 (Interfax) - The attempts to create two OSCEmissions in Georgia and South Ossetia have failed as a result ofGeorgia's stance on the matter, said Russian Deputy Foreign MinisterGrigory Karasin. "All our attempts to organize the creation of two new OSCE missionsin Georgia and South Ossetia on a fair and equal basis with functionsindependent of each other have failed. Georgia has rejected thecompromise proposed by us that had active support from the Western OSCEcountries," Karasin told reporters. The text of his interview was posted on the Russian ForeignMinistry official website on Tuesday. "If the obstruction of our constructive compromise in the OSCEcontinues, any field activities by the OSCE in this troubled region willbe called into question, which we would hate to happen," he said. "Responsibility for such developments will fully rest with Tbilisiand its mentors, who are deliberately politicizing this issue and are

creating artificial tensions around it," said Karasin. Karasin called on the OSCE "to adopt a realistic approach to thesituation and make decisions that will promote stability and give peoplea chance to a calm life in this region."

Russia calls for OSCE monitoring on both sides of Georgia-SOssetiahttp://www.itar-tass.com/eng/level2.html?NewsID=13736289&PageNum=0

MOSCOW, March 30 (Itar-Tass) -- Russia calls for organising OSCE monitoring on both sides of the Georgian-South Ossetian border in order to have more complete information about the situation there, Deputy Foreign Minister Grigory Karasin said on Monday.

“We call for organising OSCE monitoring work on both sides of the border in order to form a more complete picture of events in the Georgian-South Ossetian border region,” he said.

“The Russian delegation to the OSCE has suggested setting up two groups of observers in the region,” the diplomat added.

“One consisting of 20 people or more would continue working in Georgia. The other one consisting of eight people, as before within the old OSCE Mission in Georgia, would operate in the regions adjacent to Georgia from the side of South Ossetia,” Karasin said.

He believes both groups should obtain consent for their work from Tbilisi and Tskhinval respectively.

“Our latest proposal has met strong resistance from some of the OSCE delegations, primarily the Georgian one, that seek to preserve former and now purely virtual realities of nonexistent territorial integrity of Georgia and placing any activity of the OSCE in South Ossetia under the control of the mission in Tbilisi [that has been virtually closed],” Karasin said.

“We should clearly understand that if our constructive compromises continue to be obstructed, any field work of the OSCE in this disquiet region will be called into question, which we would not like to happen,” the diplomat said.

“Responsibility for such scenario will rest entirely with Tbilisi and its mentors that intentionally politicise this issue and whip up tensions around it. One simply has to take a realistic look at things and make decisions that will have practical value for stability and clam life of people in the region,” Karasin said.

“The mandate of the group of OSCE observers approved by the Permanent Council in August of last year after the tragic events in South Ossetia will remain in force till June 30, 2009,” he said, adding, “This mandate covers their activity only in the areas that are adjacent to South Ossetia.”

TBILISI BLAMES MOSCOW FOR DEADLY BLAST NEAR SOUTH OSSETIA

http://www.eurasianet.org/departments/news/articles/eav033009.shtml

3/30/09

The Georgian government has blamed Russia for a March 29 car explosion near the border with breakaway South Ossetia that killed one police officer and injured four others. In March 30 statements, both the Organization for Security and Cooperation in Europe (OSCE) and the European Union Monitoring Mission (EUMM) stated that the attack appeared to be deliberate, and underlined the need for enhanced security measures.

Badri Jaoshvili, an officer with the Interior Ministry’s Special Task Force, died from his injuries shortly after his car hit a mine near the village of Dvani, in Georgian-controlled territory. The EUMM stated that a second explosion targeted "the people coming to help the victims of the first one."

EUMM head Ambassador HanjУЖrg Haber described the incident as an "unacceptable breach of the Sarkozy-Medvedev Agreements" and called for swift implementation of the Incident Prevention Mechanism approved at the last round of Geneva talks.

The Special Representative of the Greek Chairperson-in-Office of the OSCE, Ambassador Charalampos Christopoulos, has stated that the "deliberately targeted attack" underlines the "importance of the presence of the OSCE Military Observers who are able to monitor such incidents and credibly report on them."

The Georgian Foreign Affairs Ministry has called for the international community to respond to what it describes as a series of terrorist acts against Georgian policemen, Georgian television reported. Since October 2008 as many as 14 Georgians, including 12 policemen, have been killed in the border areas near South Ossetia and the breakaway region of Abkhazia, the ministry reports.

RBC Daily

Russia invites China to join Sochi 2014 Olympic project

http://en.rian.ru/analysis/20090330/120822831.html

The Russian business community is not prepared to invest in construction for the Winter Games in Sochi in 2014. This is probably why Deputy Prime Minister Alexander Zhukov said in Beijing last Friday that Russia was willing to expand investment cooperation with China.

He said preparations for the Sochi 2014 Games and the APEC 2012 summit were among its investment priorities.

Viktor Kolodyazhny, president of the Olympstroi state corporation in charge of the Sochi project, said $10 billion needs to be invested in the construction of Olympic facilities and infrastructure over the next four years.

Alexander Tkachev, governor of the Krasnodar Territory in southern Russia, where Sochi is located, put expenditures at $20 billion.Either way, this is too much for the Russian budget, which is why the authorities have been trying to attract private investors.

Russian companies, which have borrowed too much abroad, are unlikely to be able to invest in Sochi to the extent that they promised. They are also reviewing their investment programs because of the government's decision to cut budget planning to one from three years and uncertainty over the recoupment of the Olympic facilities.

Market players say the Chinese would be more interested in construction for the APEC summit in Vladivostok in 2012.

"The reason is geographic proximity, which explains China's economic and political interests in the Far East," said Nikolai Krainov, president of the Pokrov investment group.

Russia plans to allocate 280 billion rubles ($8.4 billion) for preparations for the APEC summit.

Valery Mironov, a leading analyst at the Development Center, said: "There are growing problems with the budget. At a time when the government may need to consider taking out foreign loans or dipping into the National Welfare Fund, it would be wise to finance projects with a short recoupment period."

Maxim Perov, a partner at 2K Audit Business Consulting, said the APEC summit was above all a political image project, and therefore the government was unlikely to cut allocations for it.

Russia warns Finland against NATO membershiphttp://www.barentsobserver.com/warns-finland-against-nato-membership.4574930-58932.html

2009-03-31 A Russian politician and international policy expert has warned Finland not to join the NATO alliance.

Yuly Kvitsinsky, First Deputy Chairman of the Committee on International Affairs, says such a move would damage bilateral relations.

He added Finnish NATO membership would lead to Russian responses in the military, political and economic fields.

Speaking in an interview given to YLE, Kvitsinsky pointed out that from the Russian standpoint, NATO is above all else an instrument of US foreign policy. For this reason, Finnish membership of the alliance would place the country in a standoff between superpowers, he said.

Russia’s reluctance to see NATO on its borders also extended to Finland, Kvitsinsky noted. A similar warning was issued last spring by Dmitry Rogozin, the Russian ambassador to NATO

G-20

Russian, German leaders to meet in Berlin ahead of G20 summithttp://en.rian.ru/russia/20090331/120827180.html

MOSCOW, March 31 (RIA Novosti) - Russian President Dmitry Medvedev will pay a one-day visit to Germany on Tuesday to meet with Chancellor Angela Merkel ahead of thiw week's G20 summit in London, a Kremlin source said.

The two leaders are expected to discuss Russian-EU relations, which have been disturbed by the fall of the government of the Czech Republic, which holds the European Union's rotating presidency, ahead of a biannual summit.

"A regular Russia-EU summit is scheduled for May," the source said. "The exchange of views with Germany as one of the engines of European integration becomes increasingly important in connection with the latest political turmoil in Czech Republic, which holds the EU presidency."

Russia earlier expressed hopes that the current political situation in the Czech Republic, where the government resigned after losing a vote of no confidence, will not affect the planned Russia-EU summit.

Medvedev and Merkel are also expected to address the idea of a new European security treaty to be drawn up at a pan-European conference, proposed by the Russian president last June.

The two leaders may also discuss the agreement on modernizing Ukraine's Soviet-era gas pipeline network signed by Ukraine and the EU last week. The document triggered an angry reaction from Russia, which exports most of its Europe-bound gas via Ukraine.

Economic and trade cooperation will also be on the agenda of the meeting.

Obama, Medvedev to Focus on Issues, Not Souls, in London Talkshttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=awVh7AFXHjqU

By Lyubov Pronina

March 31 (Bloomberg) -- When U.S. President Barack Obama and his Russian counterpart, Dmitry Medvedev, meet for the first time tomorrow, they probably won’t spend a lot of time gazing into each other’s eyes.

When their predecessors, George W. Bush and Vladimir Putin, met in 2001, Bush said he had looked Putin in the eye and got “a sense of his soul.” The two leaders enjoyed a friendly personal relationship, yet ties between their countries plunged to a post-Cold War low while they were in office.

Obama and Medvedev are “pragmatic and realistic men,” Mikhail Margelov, chairman of the Foreign Affairs Committee in Russia’s upper house of parliament, said by telephone. “They’ll talk the language of realpolitik. As for hearts and souls, they’ll leave that for their families.”

The U.S. and Russian leaders meet in London on April 1 amid expectations of an improvement in relations. U.S. Vice President Joe Biden said last month that it was time for the two countries to hit the “reset button” after a period of rising tensions caused in part by Bush’s promotion of a missile shield in Europe and Russia’s rout of Georgia’s U.S.-trained army in August.

Medvedev said in a British Broadcasting Corp. television interview that he had received a “very positive” letter on the international situation from Obama, and was “amazed that many of the positions laid out there coincided with my own feelings.” His comments were posted on the Kremlin’s Web site.

The question, Medvedev said, is “the extent to which we’re prepared to break with stereotypes, to accomplish the reset that everyone’s now talking about.”

G-20 Summit

The Russian leader meets German Chancellor Angela Merkel in Berlin today before the April 2 summit of the Group of 20 advanced and emerging economies in London on the global financial crisis.

In addition to his meeting with Obama in London, Medvedev will hold talks with U.K. Prime Minister Gordon Brown, Chinese President Hu Jintao and Australian Prime Minister Kevin Rudd, according to the Kremlin.

U.S. Secretary of State Hillary Clinton and Russian Foreign Minister Sergei Lavrov laid the groundwork for tomorrow’s talks in a March 6 meeting that focused on Iran’s nuclear program and nuclear arms reduction.

Preparations continued on March 20, when Medvedev, 43, met with ex-U.S. Secretary of State Henry Kissinger and other current and former U.S. officials. Kissinger said two

days of discussions in Moscow had shown that differences of opinion between the two sides aren’t insurmountable.

Two Lawyers

Obama, 47, is seeking to strengthen ties with Russia and to win Kremlin support for his policies on Afghanistan, Iran and nuclear arms reduction. Rapprochement between Russia and the U.S. has been most evident since Obama took office on the issue of supplying North Atlantic Treaty Organization forces in Afghanistan.

Andrew Somers, head of the American Chamber of Commerce in Russia, said the fact that the two presidents are close in age and are both lawyers should allow them to find a common language in London.

“Those are two mindsets, age-wise and profession-wise, that should help them hit it off,” Somers said. “They will understand each other, I think, really quickly.”

Such similarities may not translate into rapid progress on contentious issues such as U.S. plans for a missile-defense system in Europe and its support for the further eastward expansion of NATO to include the former Soviet republics Ukraine and Georgia. Russia opposes both initiatives as threats to its security.

Georgia War

Russia’s war with Georgia, and its subsequent recognition of two breakaway Georgian regions, South Ossetia and Abkhazia, as independent states, met with outrage in the U.S. and many European countries. Medvedev has said his decision to recognize the regions is final. Russia plans to deploy 3,700 soldiers in each region.

Obama and Medvedev will “hit it off perfectly” on the personal level, though “big, substantial announcements” shouldn’t be expected from their first meeting, largely because the Obama team hasn’t had enough time since he took office to prepare, Russian Deputy Prime Minister Sergei Ivanov said.

Russian and U.S. interests will never entirely coincide. “It’s just impossible,” Ivanov said. “But if it coincides 60 percent to 70 percent, we should get the most use of it.”

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

Last Updated: March 31, 2009 02:19 EDT

Building Russian-U.S. Bondshttp://www.washingtonpost.com/wp-dyn/content/article/2009/03/30/AR2009033002443.html?hpid=opinionsbox1

By Dmitry A. MedvedevTuesday, March 31, 2009; A17

MOSCOW -- It is hard to dispute the pessimistic assessments of the Russian-American relationship that prevailed at the end of last year. Unfortunately, relations soured because of the previous U.S. administration's plans -- specifically, deployment of the U.S. global missile defense system in Eastern Europe, efforts to push NATO's borders eastward and refusal to ratify the Treaty on Conventional Armed Forces in Europe. All of these positions undermined Russia's interests and, if implemented, would inevitably require a response on our part.

I believe that removing such obstacles to good relations would be beneficial to our countries -- essentially removing "toxic assets" to make good a negative balance sheet -- and beneficial to the world.

This will require joint efforts. The exchange of letters between myself and President Obama this year showed mutual readiness to build mature bilateral relations in a pragmatic and businesslike manner. For that we have a "road map" -- the Strategic Framework Declaration our countries signed in Sochi in 2008. It is essential that the positive ideas in that declaration be brought to life. We are ready for that.

Possible areas of cooperation abound. For instance, I agree with President Obama that resuming the disarmament process should become our immediate priority. The wish to ensure absolute security in a unilateral way is a dangerous illusion. I am encouraged that our new partners in Washington realize this.

It also appears that we all understand the need to search for collective solutions to the problems facing Afghanistan, with the involvement of all influential players. In this spirit, Moscow hosted a broad-based conference on Afghanistan under the auspices of the Shanghai Cooperation Organization. We welcome the U.S. initiative to convene a United Nations conference in the Netherlands. It is critical that Russia and the United States view these conferences as mutually reinforcing rather than competitive.

Neither Russia nor the United States can tolerate drift and indifference in our relations. I spoke in Washington last November about the need to put an end to the crisis of confidence. To begin with, we should agree that overcoming our common negative legacy is possible only by ensuring equality and mutual benefit and by taking into account our mutual interests. I am ready for such work with President Obama on the basis of these principles, and I hope to begin as early as tomorrow at our first meeting in London before the Group of 20 summit.

The state of the global economy is a great concern to all. We can ensure the sustainability of the global financial system only by making its architecture mutually complementary and reliant on a diversified system of regional reserve currencies and financial centers. During the summit, Russia and the United States can help lead the effort to establish universal rules and disciplines that would apply to all parties without exception. We should also think together of whether it might be expedient to introduce a world

supranational reserve currency, potentially under the aegis of the International Monetary Fund.

In bilateral relations, we need to see more successful investment projects, joint research and development by companies, and increased trade in high-tech products.

The end of the Cold War and subsequent globalization fundamentally altered the geopolitical context of our relations and vastly increased the importance of leadership. Today, effective leadership must be collective, based on the desire and ability to find common denominators for the interests of the international community and major groups of states. The G-20 summits are a major step toward this.

I am convinced that Russia and the United States can offer much to the world while maintaining our special responsibility in world affairs. These opportunities are most visible on the issues of strategic stability and nuclear security. The nature of the Russian-U.S. relationship to a large extent determines transatlantic politics, which could use trilateral cooperation among the European Union, Russia and the United States as its pillar.

The need to restart our cooperation is prompted in part by the history of our relations, which includes a number of highly emotional moments -- diplomatic support provided by Russia to the United States at critical points of America's development, our joint fight against fascism and the era of détente.

In his inaugural address, President Obama explicitly expressed his understanding that the United States needed to change together with the rest of the world. His speech deeply impressed me with its unbiased assessment of America's problems. I agree that greatness is never a given. It must be earned.

Long ago, Alexis de Tocqueville predicted a great future for our two nations. So far, each country has tried to prove the truth of those words to itself and the world by acting on its own. I firmly believe that at this turn of history, we should work together. The world expects Russia and the United States to take energetic steps to establish a climate of trust and goodwill in global politics, not to languish in inaction and disengagement. We cannot fail to meet those expectations.

The writer is president of the Russian Federation.

Russia hopes “resetting” of relations with US will produce concrete results

http://www.itar-tass.com/eng/level2.html?NewsID=13736326&PageNum=0

MOSCOW, March 30 (Itar-Tass) -- Russia hopes that the “resetting” of relations with the United States will produce concrete results, such as growing trade and investments, not just political signals, Russian presidential aide Arkady Dvorkovich said.

“We have a pragmatic agenda related to the economy, economic ties, trade, and investments, and we hope of course that the ‘resetting’ of relations will have specific results for our countries,” Dvorkovich told foreign journalists at a briefing on Monday, commenting on the upcoming first meeting between Russian President Dmitry Medvedev and U.S. President Barack Obama in London on April 1.

“We expect am influx of investments, the growth of trade, interaction in research and development in various areas,” the aide said.

“We also hope that the improvement of political relations will lead to improved relations between societies, that our people will have more opportunities to maintain closer contacts at all levels,” he said.

“We hope for concrete [results], not just political signals,” the official added.

Asked what concessions Russia is prepared to make in relations with the U.S., Dvorkovich said, “We should be talking not about concessions but about the search for mutually advantageous solutions.”

“No one should lose his face or try to sell or give something for something,” he said, adding that it was a matter of mutual trust.

“When you trust your partner, you can find a less expensive and more effective solution in any sphere. And this is what we count on in the first place,” he said.

“If the leaders and our political elites can build trust between themselves, and there is already trust between economic elites, or so we think, we can expect that decisions won’t be costly or our taxpayers and our citizens, and at the same time will serve common interests, including the interests of international security,” Dvorkovich said.

“We have so far received positive signals from the new American administration, and we hope therefore for proposals from our partners and will make our own proposals, too, regarding different issues on the agenda, which is quite big,” the Kremlin aide said.

Earlier, presidential aide Sergei Prikhodko said the first meeting between Medvedev and Obama would be “exploratory” but would give them an opportunity to start a new relationship.

“We understand that the first meeting of the presidents will be to some extent exploratory. Each side will come with its own priorities, accents and foreign policy vision for the partner,” Prikhodko said.

“While remaining realists, we are well aware of the contradictions that separate us and do not entertain illusions that they will be easily eliminated,” he said.

“Problems arise all the time between any states, let alone Russia and the United States. The question is not about the ‘sore spots’ but about the algorithm of interstate communication that would make it effective, civilised, constructive and progressive,” the aide said.

The first contact between the presidents of Russia and the U.S. will take place in London on April 1 as part of full-formal direct dialogue covering the entire bilateral agenda.

It will be “some sort of a start-up” meeting at a time when the new U.S. administration is beginning its work and the two countries are “resetting” their relations.

Prikhodko said Medvedev and Obama had already talked with each other by phone on November 8, 2008 and on January 26, 2009. They also exchanged messages. Medvedev’s message was delivered on January 29, and Obama replied ion February 9.

“The New American administration shows a constructive commitment to streamlining our relations and readiness to work together in a pragmatic way without ideological build-ups and with respect for ach other’s interests,” Prikhodko said.

“We have long been talking about the need to optimise the nature of our relations, the mechanism of their functioning and regulation to make them more stable and flexible, to make them able to correct themselves and fit not into virtual but real needs of each party,” the aide said.

“We understand that priorities in our political dialogue should not be limited only to security, but should cover the whole range of relations. This is why a great deal of attention at the meeting will be given to purely bilateral issues, including trade, economic and cultural issues. There are many promising areas that serve the interests of both sides,” he said.

“There is a common understanding that bilateral relations are getting a new chance that should not be missed,” Prikhodko said.

“We hope that London will become an important milestone on this road,” he added.

The first one-hour meeting between Medvedev and Obama is scheduled for April 1.

March 30, 2009 11:29 PMHistoric Opportunity For U.S.-Russia Relationshttp://www.cbsnews.com/blogs/2009/03/30/world/worldwatch/entry4905400.shtml

Posted by Alexsei Kuznetzov

The upcoming G20 summit in London, and the first face-to-face meeting between the U.S. and Russian presidents, will become Dmitry Medvedev’s most important foreign policy event yet, reports CBS News Associate Producer Alexsei Kuznetsov.

The Russian president is full of determination to pursue a wide diplomatic agenda – from coping with the global financial crisis to mending fences with the new us administration.Medvedev’s summit with Barack Obama is expected to provide a historic opportunity for the U.S. and Russia to re-establish trust and work toward a genuine strategic partnership on thorny issues like missile defense, non-proliferation and the war in Afghanistan.

"Without trust, no issues can be resolved. Especially issues as important as those that divide the two big nations," says Masha Lipman of the Carnegie Moscow Center. "So, I think that there is indeed a desire to show good will and at least rhetorically, at least on the surface to demonstrate that there is a desire to improve the relations."

But should Russia’s words be taken at face value? Is the man saying them capable of following through on his promises?

"What we have seen lately has been a series of friendly moves of friendly statements or signs, almost immediately followed by something not so friendly," Lipman says.Last November, President Medvedev was among the G20 leaders who signed a joint declaration in Washington, vowing to reject protectionist measures and not to create new barriers in trade.

Three weeks later, Russia’s cabinet issued a decree doing exactly what Medvedev promised not to do. In a move to protect the country’s struggling auto industry, the Russian government dramatically raised customs duties on imported cars. The Kremlin likes to repeat that Russia is a reliable energy partner. But three months ago – when negotiations with Ukraine broke down President Medvedev gave the order to shut off all gas supplies to Ukraine, including transit gas to Europe. As a result, thousands of households were left freezing in the middle of an unusually harsh winter.

Last February, Medvedev expressed optimism about the future of U.S.-Russia relations, signaling Moscow’s readiness for cooperation and dialog with Washington.

"The conversation should be open, honest, and I hope productive," Medvedev said. "Our colleagues have sent signals that they want to work together. We are also looking forward to doing that."

But at the same time, Russia appears to be seriously complicating the U.S. military effort in Afghanistan – a $2 billion Russian loan to Kyrgyzstan – likely influenced the decision to close an important U.S. air base there.

Medvedev may be bringing to London the Kremlin’s proposals on anything from boosting cooperation to introducing a new global reserve currency. But before going ahead and pressing the “reset” button on U.S.-Russia relations, President Obama should

carefully study his counterpart’s track record and remember that words – just as appearances – may be deceiving.

In 2001, President George W. Bush said that when he looked Vladimir Putin in the eye he “got a sense of his soul.” After that, U.S.-Russia relations proceeded to deteriorate to their lowest point since the collapse of the Soviet Union.

Today, the future of U.S.-Russia relations is in the hands of two new presidents. They won’t get a second chance to make a first impression on each other, and their first personal meeting may set the tone of these relations for years to come.

Medvedev charts path to better Russian-U.S. tieshttp://www.reuters.com/article/worldNews/idUSTRE52U10V20090331

Tue Mar 31, 2009 1:35am EDT

WASHINGTON (Reuters) - Russia and the United States should rebuild their relations and work together on key global issues, Russian President Dmitry Medvedev said in an article on Tuesday in the Washington Post.

Medvedev said neither Russia nor the United States can tolerate "drift and indifference" in their relationship.

Russian-U.S. relations came to a standstill last year amid disputes over U.S. plans to deploy elements of its anti-missile system in central Europe and Russia's war in ex-Soviet Georgia.

The United States remains suspicious of Russia's ties with Iran, while Moscow opposes Washington's drive to grant NATO membership to Ukraine and Georgia.

"I believe that removing such obstacles to good relations would be beneficial to our countries -- essentially removing 'toxic assets' to make good a negative balance sheet," Medvedev wrote.

Medvedev is scheduled to meet U.S. President Barack Obama in London on Wednesday at the G20 summit. He said he was ready to begin rebuilding the relationship at their first meeting.

He said letters he exchanged with Obama earlier this year showed a mutual readiness to build relations in a pragmatic and businesslike manner.

"To begin with, we should agree that overcoming our common negative legacy is possible only by ensuring equality and mutual benefit," Medvedev said.

He listed several areas for possible cooperation, including Afghanistan where a U.S.-led force is fighting a resurgent Taliban.

He said he agrees with Obama that disarmament should become an immediate priority. The 1991 Strategic Arms Reduction Treaty (START) expires in December. Differences have stalled work on a replacement deal.

Medvedev also said Russia and the United States could help lead the effort to establish universal rules and discipline in the financial system.

"The world expects Russia and the United States to take energetic steps to establish a climate of trust and good will in global politics, not to languish in inaction and disengagement," Medvedev said. "We cannot fail to meet those expectations."

(Reporting by Joanne Allen, Editing by Alan Elsner)

From the Chicago Tribune

Hurdles ahead for U.S.-Russian relations 'reset'

1st meeting between Obama, Medvedev just days awayhttp://www.courant.com/news/nationworld/chi-obama-medvedev_for_webmar31,0,2795555.story

By Alex Rodriguez | Tribune correspondent March 31, 2009

MOSCOW—With the crucial first sit-down between President Barack Obama and Russian President Dmitry Medvedev just days away, the dialogue between Washington and Moscow has been brimming with optimism about the potential for a far less chilly, far more productive relationship between the countries.

But standing in the way of the Obama administration's goal of "resetting" relations with Russia are issues that have bred deep mistrust between Washington and Moscow in recent years—Russia's lack of cooperation in reining in Iran's nuclear ambitions, potential NATO membership for former Soviet republics Georgia and Ukraine and U.S. plans for a missile defense system in Eastern Europe.

That lack of trust sank to new depths while George W. Bush was president and Vladimir Putin ran the Kremlin. It lingers today, reflected in the Kremlin's recently announced plans for a large-scale rearming of its military, an overhaul driven by Russian concerns over NATO enlargement and U.S. efforts to lay claim to energy reserves in former Soviet republics.

"The mistrust is not linked to Obama," says Alexander Konovalov, president of the Moscow-based Institute for Strategic Assessment. "It's an overall attitude that paints the U.S. as the enemy, always aggressive and always trying to undermine our sphere of influence."

Obama and Medvedev are slated to meet Wednesday , on the eve of an international economic summit in London. Whether Washington and Moscow can forge stronger ties will depend on how both sides deal with sinkholes in the relationship, such as Iran's nuclear weapons ambitions.

For years, Moscow has battled with Washington over how to address what the U.S. and many Western nations say is the threat posed by Iran's nuclear activity. Russia, which has a long-standing economic and strategic relationship with Iran, has always downplayed the threat and used its seat on the UN Security Council to water down sanctions imposed on Tehran.

Recently, however, signs have emerged that the Kremlin is growing warier of Iran's nuclear ambitions. After meeting with Medvedev in Moscow on March 10, members of a bipartisan commission on U.S.-Russian relations reported that Medvedev and his top aides "were very concerned" about Iran's nuclear activities as well as its recent test launch of a satellite.

"I've talked to Russian officials on a fairly regular basis over the years, and they never had such a clear and strong presentation of Russian concern of the Iranian nuclear program," the commission's director, Dimitri Simes, said at a recent news conference. Simes took part in the meeting with Medvedev.

"What they're going to do about it," Simes added, "and how fast they will move in the direction of cooperation with the U.S., that is something to be discussed and something to be negotiated."

Signaling a willingness to approach Iran diplomatically, Obama has asked Medvedev for help in convincing Tehran to curb its pursuit of a nuclear weapons program.

Whether Moscow will cooperate remains unclear. And analysts say Russia's influence over Iran is not as extensive as many in the West believe. Trade between Russia and Iran adds up to less than $3 billion a year, an amount outpaced by China and several European nations.

"I don't know any country that can strongly influence Iran," says Vladimir Yevseyev, an analyst with Institute for World Economy and International Relations in Moscow. "Whether we're talking about Russia or the U.S., it's impossible to have a lot of leverage on Iran because it relies on its own resources."

Obama and Medvedev are also expected to discuss Washington's plan to establish a missile defense system in the Czech Republic and Poland. While the Bush administration

pitched the plan as a means of guarding against potential strikes from Iran, the Kremlin remains convinced the system could one day provide the infrastructure for offensive weapons targeting Russia.

So far, the Kremlin has reacted with measured optimism to Obama's recent suggestion that the missile defense system could be reconsidered.

"What we are getting from our U.S. partners shows at least one thing—they are ready to discuss this issue," Medvedev said during a visit to Madrid Feb. 26. "That's good, because several months ago we were getting different signals: that the decision had been made, there is nothing to speak about, that we will do what we have decided to do."

Ultimately, Obama will have to balance Russia's strong opposition to a missile defense shield on its doorstep with the need to preserve Washington's alliance with former Soviet bloc nations like Poland, which have bristled at the president's cautionary stance on missile defense.

"We hope we don't regret our trust in the United States," Polish Foreign Minister Radek Sikorski told politicians and experts at a conference in Brussels this month.

A similar quandary confronts Obama on the issue of potential NATO membership for former Soviet republics Georgia and Ukraine. Both countries are staunch U.S. allies, and their admission into NATO would be seen by the Kremlin as a major threat.

Obama has been careful with the issue of NATO enlargement, saying he backs the desire of Georgia and Ukraine to join the alliance while cautioning that membership should be allowed only when both nations "are ready." Countries seeking NATO membership must meet a series of political, economic and military standards before being permitted to join.

Ukraine's accession to NATO appears less likely since most Ukrainians do not support the idea. In Georgia, however, support for NATO membership runs high, particularly after the country's brief war with Russia over the breakaway province of South Ossetia last summer.

"People need to step carefully with respect to the issue of Georgia," said Dmitry Trenin, director of the Carnegie Moscow Center.

Another pressing issue on the agenda is the need to renegotiate the Strategic Arms Reduction Treaty, which is set to expire in December.

The treaty, signed in 1991 by Soviet leader Mikhail Gorbachev and President George H.W. Bush, required each country to trim its nuclear warhead stocks by a fourth, to about 6,000. Both sides have made replacing the treaty a priority, but they differ on the type of weapons the treaty should apply to. The U.S. says it should apply only to nuclear warheads, while Russia insists that the pact should also involve the bombers, missiles and submarines that launch warheads.

ajrodriguez@tribune.com

Moscow file

Russia-U.S. relations

Rebuffing Obama's outstretched handhttp://www.cbc.ca/world/story/2009/03/30/f-rfa-szacka.html

Last Updated: Monday, March 30, 2009 | 3:45 PM ET

By Alexandra Szacka CBC News

It's been a long time since Moscow has had so many high-level visitors from Washington. Barely a week goes by without some senior American politician or ex-politician stopping by to give the Russians the kid-glove treatment, even as their hosts remain icily indifferent.

No sooner had Democrat Gary Hart and Republican Chuck Hagel (members of Barack Obama's bipartisan policy-making commission) left Moscow in early March than Henry Kissinger came calling. Richard Nixon's national security adviser is back as leader of a group of "wise men," which includes two former secretaries of state and an ex-secretary of defence.

The reason for this non-stop diplomatic ballet? U.S. Vice-President Joe Biden's recent pledge to reset relations with Russia.

In a world full of threats, a constructive and co-operative relationship with Russia is becoming increasingly important in Washington as the Obama administration knows it would be better off with Russia as a partner than as an enemy.

Hillary Clinton, Obama's new secretary of state, even went so far as to give her Russian counterpart, Foreign Minister Sergei Lavrov, a symbolic red " reset" button in front of the world's cameras at their first meeting in Geneva in early March.

But does this flurry of diplomatic activity really mark a turning point in U.S.-Russia relations after the near replay of the Cold War under George W. Bush? Can we expect a lasting thaw any time soon? Probably not.

The goody box

It takes two to tango, as they say. But Russian authorities are not showing much interest in a harmonious pas de deux at the moment. Indeed, there are signs of a growing anti-Americanism on a scale that hasn't been seen for some time.

The report that former senators Hart and Hagel presented to the Kremlin was full of goodies for Moscow.

In stark contrast to the Bush era, it advocated a cautious approach to criticizing human rights, support for Russia's membership in the World Trade Organization and a recognition of Moscow's foreign policy interests in the former USSR countries.

More importantly, it proposed shelving the notion of allowing Russia's neighbours, Ukraine and Georgia, to join NATO, as well as the anti-missile shield that was to be deployed in Poland and the Czech Republic, a project that had the Kremlin hot under the collar for years.

Adding to the package, NATO announced it would be resuming full cooperation with Moscow, frozen since the 2008 conflict with Georgia.

Moscow couldn't have asked for more.

Rearming Russia

So what does Russian President Dmitry Medvedev do two days after the report? At a meeting with his defence chief and other military officials, he announced that Russia would proceed with a large-scale rearmament of its army and navy, as well as its strategic nuclear force.

His rationale? That NATO was pursuing a drive to expand its presence near Russia's borders.

The Kremlin master's sally came as no real surprise. Despite Washington's efforts to reach out to Moscow, the reverse has not been the case.

In fact, since the financial crisis began, blaming America has become a habit for Russian Prime Minister Vladimir Putin, who many think is still the real power.

In addition, Defence Minister Anatoly Serdyukov has just declared that armed conflict is becoming more and more likely because of America's desire for dominance and its growing military presence around Russia.

He also accused the Americans of doing everything in their power to grab Central Asia's natural resources, particularly its energy resources, while simultaneously trying to oust Russia from its traditional spheres of interest around the world.

The Kremlin has been supportive of the American mission in Afghanistan. But at the same time, it has used its financial clout to get its former satellite, Kyrgyzstan, to close Manas, the sole U.S. military base left in Central Asia and an essential supply point for the Afghan operation.

Moscow is also in talks with Cuba and Venezuela to build a base for its strategic bombers, the same ones that resumed flights over the North Atlantic just over a year ago.

The end of America

At this juncture, it is not just Russia's politicians who are talking tough.

Surveys show that anti-Americanism is reaching new heights in Russia. According to an opinion poll published in early March by the Levada independent polling centre, nearly half of Russians believe that America's goal is to destroy their country.

At the same time, more and more of them believe that the end of America is drawing near.

On Barack Obama's inauguration day in January, I was approached by a man who had been listening in while I recorded part of my report near the Kremlin.

"Did you know that Obama will be the last president of the United States?" he asked. When I asked why is that, he said: "Because soon the United States will no longer exist as a country."

He's not alone in this belief. Igor Panarin, the dean of the prestigious diplomatic academy at Russia's ministry of foreign affairs, claims that the United States will not survive the year 2010. He believes the country will splinter into six separate parts — one of which, Alaska, will rejoin Russia, as is right and proper in his view.

This former KGB analyst who now trains future diplomats has held that belief for years. The difference now is that for the past few months, officials at state-controlled media have been giving him carte blanche to proclaim these views.

Washington's new guard seems to think that it can make common cause with Moscow by renegotiating the strategic arms agreements, which expire this year, or by jointly resolving the Iranian nuclear question, using a carrot rather than a stick.

But its dance partner doesn't seem so inclined.

According to Alexander Golts, one of the most astute observers of the Russian political and military scene, Moscow doesn't see any advantage in developing good relations with the U.S. at this point.

Instead, in the throes of a serious economic crisis, what Russian authorities really need is the threat of an "insidious enemy who is preparing an imminent attack." An enemy, Golts says, they can use to mobilize their people, who might otherwise turn against their own government.

How the world sees the G20 summit - fear, apathy and Barack Obamahttp://www.guardian.co.uk/world/2009/mar/31/g20-world-view-financial-crisis

From Moscow to Baghdad - what politicians want from the G20

The Guardian, Tuesday 31 March 2009

Russia

Russia has been eagerly looking forward to the G20 summit - not because of Gordon Brown, but for the first meeting between presidents Barack Obama and Dmitry Medvedev.

The encounter between two men widely seen as pragmatists is likely to see the beginning of a new, slightly improved era in US-Russian relations. Under their predecessors, George Bush and Vladimir Putin, ties sank to their most dismal level since the cold war.

Russian officials concede that Obama won't give Moscow everything it wants. The lengthy shopping list includes an end to Nato expansion, the scrapping of the US missile defence shield in Europe and a new strategic arms reduction treaty.

On the G20 agenda, Russia will side with the Germans and other Europeans who oppose US-British plans to drag the world out of recession by further spending. It supports German chancellor Angela Merkel's call for greater market regulation rather than a further co-ordinated stimulus package.

Moscow also backs China's idea of creating a new global reserve currency alongside the dollar - an idea the EU has rejected. Given the weakness of Russia's crisis-hit economy, though, the new man in the Kremlin isn't in much of a position to impose his ideas on others. Luke Harding in Moscow

Medvedev seeks a top seat at G20 http://www.hurriyet.com.tr/english/finance/11325201.asp?scr=1

Tuesday, March 31, 2009 09:48

MOSCOW - Russian President Dmitry Medvedev heads to the G20 summit promoting a makeover of the global economic order designed to win Russia respect.Ahead of Thursday's summit in London, Russia has come up with an ambitious plan to overhaul the entire global financial order and even introduce a new supra-national currency.

Medvedev even said the international community should have a say when the world's richest countries make decisions with global implications, as in the U.S. mortgage crisis.

But analysts doubt Russia's plans will get many backers among Group of 20 countries, be they established players or rising powerhouses such as Brazil, India and China.

"Global processes are under way to form new centers of economic power and it is clear Russia is not at the center of such processes," said Vladimir Osakovsky, an analyst at Moscow-based UniCredit Bank. "The Russian ideas are interesting to discuss, but hard to realize even in the mid-term perspective," he said.

Economists say that while some of Russia's ideas - such as a world currency - are unfeasible, others will fail more due to Moscow's lack of diplomatic heft. Russia is still not a member of the World Trade Organization and is sidelined at meetings of Group of Seven finance ministers.

And while Russia is among the top world energy producers, its economy is dwarfed by the United States and European Union. Part of Russia's proposals to the G20 include reform of institutions like the International Monetary Fund and the World Bank.

AZERBAIJAN: RUSSIA IS INCREASINGLY NERVOUS ABOUT ITS GRIP ON CASPIAN ENERGY

http://www.eurasianet.org/departments/insightb/articles/eav033009b.shtml

A EurasiaNet commentary by Stephen Blank 3/30/09

Russia is growing increasingly worried about losing its grip on Caspian Basin energy exports, and this fear is causing the Kremlin to take bold steps. The latest evidence of this is the memorandum of understanding signed between the Kremlin-controlled energy giant Gazprom and the State Oil Company of Azerbaijan (SOCAR).

The memorandum, signed March 27, paves the way for Russia to gain controlling influence over Azerbaijan’s natural gas exports. The two sides basically agreed to launch talks on export volume and price. If all goes according to the Kremlin’s wishes, Baku could be shipping the bulk of its gas via Russia by 2010. To get President Ilham Aliyev’s government to reorient its export expectations away from the US- and EU-backed Nabucco pipeline route, Russia is seemingly prepared to match whatever price Europe is willing to pay directly to Azerbaijan for the gas.

The signing of the memorandum was made possible by a combination of factors -- a diplomatic offensive carried out by Russia and prolonged dithering by the EU.

In early March, it became clear that Moscow was trying to reestablish its influence in Baku, but the initial returns did not seem promising for Moscow. Foreign Minister Sergei Lavrov’s March 11-12 visit to Baku, for instance, did not produce any noticeable warming of relations. [For background see the Eurasia Insight archive]. Bilateral ties in recent months had been strained not only by the lingering stalemate in the Nagorno-

Karabakh conflict, but by Russia’s reported transfer of arms to Armenia. [For background see the Eurasia Insight archive].

The arms transfer question remains a point of contention. Russia continues to deny that the alleged transfer occurred, and officials in Baku still refuse to believe Moscow’s profession of innocence.

But amid the worsening global economic climate, energy issues are taking precedence over all else. And it is here that Baku and Moscow have something to potentially offer each other.

It is growing increasingly apparent with each passing day that the Russian economy is in deep trouble. [For background see the Eurasia Insight archive]. And the only way the country can hope to stay economically afloat is if it can remain the EU’s chief purveyor of gas.

Conversely, Azerbaijan is increasingly eager to have a reliable outlet for its gas. Baku seems to prefer the long-planned Nabucco route, but the European Union has seemed ambivalent about building it. By reaching out to Russia, Azerbaijani leaders may be trying to take the best deal that they see as available at this time. Or, perhaps, they may be trying to send a signal to Brussels that it is time to get moving with Nabucco.

Beyond energy, there is a bevy of reasons for Russia to push for closer ties to Azerbaijan. First among the second-tier factors is the Gabala radar station. Russia currently is using the facility, but worries that if Baku ever decided to terminate the lease, the radar station could be turned against Moscow, becoming a cog in the US-envisioned missile defense network for Central Europe.

Russia also needs warmer ties if it is ever going to succeed in promoting its broader economic agenda in the Caspian Basin. Moscow, for example, wants to make a renewed push for a Caspian Sea territorial treaty. In addition, the Kremlin is hoping to create a new regional structure, The Caspian Economic Cooperation Organization (OKES), which theoretically would enhance Russia’s ability to curb US influence in the region.

Russian strategic planners are apparently convinced that wars over energy are becoming a growing possibility in world politics. Thus, the Kremlin seems to expect that struggles for access to energy sources will grow. The Caspian Basin is clearly one of the key areas in this struggle, along with the Middle East, the Arctic, and the Barents Sea shelf.

Keeping this perception in mind, it is likely that Russia will be prepared to go to extreme lengths to preclude Azeri gas from going directly to Europe and bypassing Russia. Likewise, the Kremlin seems ready to use all levers of influence at its disposal to ensure that neither Azerbaijan nor any other South Caucasian government joins NATO or the EU -- lest they become staging grounds for Western military installations.

Finally, for the same reasons, it is imperative for Russia that Iran not normalize relations with the United States. If Tehran ever reconciled with Washington, thus allowing Iranian gas to fill the Nabucco pipeline, Moscow would lose its trump card in world politics.

The Kremlin is now desperate, and has to act fast. By 2010, Russia may well lack the economic clout that it has relied upon in the recent past to bully its neighbors into going along with the Kremlin’s geopolitical wishes. The United States and the European Union have the ability to frustrate what is certain to be a furious political and economic offensive by Russia. All they have to do is build Nabucco, lock up Azerbaijan and watch the Kremlin’s energy aspirations go pop!

Editor's Note: Stephen Blank is a professor at the US Army War College. The views expressed this article do not in any way represent the views of the US Army, Defense Department or the US Government.

Admiral Vystosky at Sevmash shipyardhttp://www.barentsobserver.com/admiral-vystosky-at-sevmash-shipyard.4574905-58932.html

2009-03-31 Head of the Russian Navy admiral Vladimir Vysotsky visited Sevmash shipyard last week to inspect the nuclear submarine “Yury Dolgoruky”.

Admiral Vysotsky took part in a meeting which an interdepartmental coordination council on building of nuclear powered submarines held at the shipyard. He inspected the strategic submarine “Yury Dolgoruky” and met with its crew, a press release from Sevmash says.

The submarine is currently is undergoing dockside trials at the Sevmash shipyard in Severodvinsk, Murmansk, and should according to plan be delivered to the Russian Navy this year.

“Yury Dolgoruky” is Russia's first Borey-class strategic nuclear submarine, and the first to be equipped with Bulava missiles. It will have 16 Bulava ballistic missiles, each carrying up to 10 nuclear warheads and having a range of 8,000 kilometers.

As BarentsObserver earlier reported, two other Borey-class nuclear submarines, the "Alexander Nevsky" and the "Vladimir Monomakh", are currently under construction at the Sevmash plant.

Putin buys Russian car to save home industry from declinehttp://english.pravda.ru/society/stories/30-03-2009/107326-putin_russian_car-0

30.03.2009

Russia’s Prime Minister Vladimir Putin decided to personally support the Russian automobile production, Interfax reports. Putin told reporters that he had recently purchased a Niva vehicle of Russia’s AvtoVAZ giant.

When asked which Russian car he would like to own, Putin said that it would be Niva. “I have already bought it. I am working on the papers right now,” he said.

Putin is currently on a visit to the city of Togliatti, the center of the Russian automobile industry. He held a meeting with the workers of AvtoVAZ and promised them that the government would take serious measures to support the home car industry. “We have decided to assign 700 million rubles to maintain the jobs in the industry. About 300 million more have been assigned for the development of small and medium businesses,” Putin said during the meeting at AvtoVAZ.

The Russian government is currently considering an opportunity to give over 20 billion rubles to AvtoVAZ, Russia’s major car maker. The final decision on the matter will be made on March 30. AvtoVAZ asked for 26 billion rubles of bailout, Itar-Tass reports.

Putin said that the financial support of AvtoVAZ would let the company attract other credit resources in the amount of 90 billion rubles. The prime minister added that the enterprise would need first to solve all problems with its 40-billion-ruble debt.

Putin believes that the reduction of the ruble rate against the dollar would let the company make competitive products. “It considerably increases your competitive ability. The consequences of that can be preserved during the coming two or three years. The enterprise must use the situation during this period to achieve a new level of production,” he said.

NAC to consider lifting counter-terrorist operation regime in Chechnyahttp://www.interfax.com/3/483551/news.aspx

MOSCOW. March 31 (Interfax) - The National Anti-terrorist Committee(NAC) and other law enforcement agencies will consider lifting thecounter-terrorist operation (CTO) regime in Chechnya and will submit thematter for the president's consideration. "NAC, along with Russia's Interior Ministry, FSB, the DefenseMinistry and other concerned federal executive authorities werecommissioned to prepare and submit for the Russian president'sconsideration the proposals to bring the systems of organizing andmanaging special forces, in charge of detecting and thwarting criminalactivities in Chechnya, in line with the practice and currentregulations existing in other Russian federal constituent regions," theNAC said. Following the order by the Russian president, the NAC held asession on Tuesday, led by its chairman and FSB director Alexander

Bortnikov. The session focused on the current situation in Chechnya,Ingushetia and Dagestan and the measures to optimize the efforts by theauthorities and local governments to counter terrorism, the NAC said.

67 militants killed, 233 detained in N. Caucasus in 2009 – FSBhttp://www.interfax.com/3/483539/news.aspx

MOSCOW. March 31 (Interfax) - Sixty-seven militants have beenkilled in the North Caucasus region so far this year, FSB DirectorNikolai Bortnikov said. "Sixty-seven gunmen were killed and 233 were detained as a resultof counter-terrorist and combat operations held in North Caucasus in2009," Bortnikov said at a session of the National Anti-terroristCommittee on Tuesday.

The number of unemployed people in Moscow ahs reached 43,500http://www.itar-tass.com/eng/level2.html?NewsID=13736398&PageNum=0

MOSCOW, March 30 (Itar-Tass) -- The number of unemployed people in Moscow ahs reached 43,500, the city office of the federal employment service said on Monday.

A week ago, their number was 42,200.

From March 23 to March 27, a total of 119 organisations reported plans to dismiss 2,282 employees.

Kemerovo Blogger Charged With Hate Speech for 2 Postshttp://www.themoscowtimes.com/article/1010/42/375802.htm

31 March 2009By Natalya Krainova / The Moscow Times

An opposition activist from Kemerovo has been charged with hate speech for posting someone else's comments about law enforcement officials on his LiveJournal blog.

Dmitry Solovyov, head of the Kemerovo branch of the youth opposition group Oborona, faces up to two years in prison if convicted for two blog posts in which he accused officers from the Interior Ministry and the Federal Security Service, or FSB, of abuses, Oborona leader Oleg Kozlovsky told The Moscow Times on Monday.

Kozlovsky said Solovyov was unavailable for comment because he was studying the charges against him. The case will go to court sometime after April 11, Kozlovsky said.

Several bloggers have faced prosecution on hate speech charges in recent years, though usually for writings that they had themselves authored.

Solovyov did not write the contents of the blog post but instead quoted a piece by another blogger, citing the original. The post accused Interior Ministry and FSB officers of silencing opposition, delivering "unjust verdicts," "beating confessions out" of people, intimidation and committing dissidents to psychiatric asylums.

Kemerovo regional prosecutors opened a criminal investigation into Solovyov's activities in August, following allegations that he made offensive comments about law enforcement officers on a blog. The postings in question were made from December 2006 to June 2008 under the nickname "dimon77."

At the time, Kozlovsky called the case an attempt to intimidate members of Oborona, which has regularly participated in rallies staged by opposition coalition The Other Russia.

Officials at the Kemerovo regional branch of the Investigative Committee's could not be reached for comment Monday.

A Bogus Anti-Crisis Planhttp://www.themoscowtimes.com/article/1016/42/375808.htm

31 March 2009By Vladimir Ryzhkov

The government announced its revised anti-crisis measures on March 19, and its message was perfectly clear: Prime Minister Vladimir Putin and his cohorts refuse to make any structural reforms to the existing political and economic system. They believe that Russia can emerge from the crisis in exactly the same form as it entered -- with the same state monopolies, the same oligarchs and, most important, the same political leadership under the same power-vertical structure. While giving lip service to reforms -- such as creating an innovation economy, developing small businesses and a middle class, improving health care and education and implementing the bombastic "Four I's" program -- nothing has been done on these projects. And I am convinced that nothing will be done because it is all smoke and mirrors.

Despite the crisis, the country's top leaders are living very well, and their only "anti-crisis strategy" is to preserve their power and personal property until oil prices rise again. And since they feel that there are enough foreign currency reserves to tie them over until the next oil boom, there is no motivation whatsoever to implement the reform programs in any serious way.

Even after living high on the hog for eight years with petrodollars gushing into state coffers and access to inexpensive Western credit, Russia has failed to raise its global competitiveness and efficiency. One year ago, leading economists at Russia's Academy

of Science found that during those eight years the country failed to diversify its economy and to develop the high-tech sector. In fact, Russia's economic dependence on natural resource exports only increased during this period and its infrastructure fell into further decline.

According to the World Economic Forum's Global Competitiveness Index for 2008 and 2009, of the 134 countries listed in the rating, Russia came in at No. 51. This was worse than India (No. 50) and China (No. 30). Among the BRIC countries, Russia surpassed only Brazil (No. 64). Russia made a decent showing in only two categories -- macroeconomic stability and the size of its market (the ninth-largest in the world).

Most alarming is the quality of state institutions and regulatory mechanisms that deteriorated the most during the time that Putin was building his two key government institutions: the power vertical and sovereign democracy.

Russia's level of corruption also worsened markedly during that period; its corruption rating plummeted from No. 71 place in 2002 to No. 147 place in 2008 as the total amount of government kickbacks increased to $250 billion to $300 billion annually. What's more, the state's bureaucratic machinery increased by 80 percent over the past eight years.

There are no references to these harsh realities in the anti-crisis plan -- as if Russia lives a fairy-tale existence. Nor will you find any reference to the need to demonopolize the economy, improve transparency among state institutions or improve conditions for doing business and for attracting direct foreign investment.

If you compare Russia's sham anti-crisis measures to those developed in China, the European Union and the United States, it will be painfully clear how much the Kremlin lags behind other global centers of power, which are taking concrete steps to achieving higher levels of development. For example, the Chinese are taking advantage of crisis-induced bargain prices to buy up advanced technologies for its 10 priority economic sectors, and for the first time in its history it is providing pensions and medical care to 800 million Chinese peasants.

The EU has stepped up the implementation of the Lisbon Strategy for increasing the EU's competitiveness, and it has already approved an ambitious energy-saving program called "EU-2020."

U.S. President Barack Obama has made energy efficiency for the country and the raising of the U.S. economy to new technological and innovative levels top priorities and will implement major reforms in education and health care.

While Russia's largest economic and political competitors are taking concrete steps to come out of the crisis as stronger, more efficient and innovative countries, Moscow assumes a passive, inert position. Meanwhile, it gets giddy over every $1 rise in the price of oil and still hopes to return to the "safe harbor" of Russia's primitive, corrupt, oil- and gas-fueled authoritarianism.

Vladimir Ryzhkov, a State Duma deputy from 1993 to 2007, hosts a political talk show on Ekho Moskvy.

March 30, 2009The Long Road to Russiahttp://www.russiaprofile.org/page.php?pageid=Politics&articleid=a1238431993

By Dmitry BabichRussia Profile

Despite the Existence of the Repatriation Program, Twice as Many “Compatriots” Seek Asylum Aboard than Chose to Move to Russia

The Russian government has announced its intention to cut the financing of the state-run program meant to help “compatriots” (mostly foreign citizens of Russian origin) resettle in Russia by 75 percent. The program, conceived in 2006 and launched in 2007, was aimed at bringing 300,000 new settlers to the 12 most depopulated regions of Russia, mostly in Siberia and the Far East, during the next three years. Two years later, its achievements are somewhat more modest – 10,000 people.

Originally, 17 billion rubles ($508 million) were supposed to be spent on the program in 2006 to 2009. But as the program failed to meet the government’s expectations, this amount continued shrinking. The present cut is the most dramatic to date. Instead of the eight billion rubles earmarked for this year, the Federal Migration Service (FMS) will receive no more than two billion. “However, the program will not be stopped under any circumstances,” Konstantin Poltoranin, a spokesman for the FMS, said. “If this year the number of settlers exceeds 20,000 people, the program’s financing will be increased.”

So why did this program, humorously dubbed “Russian Zionism” in the nation’s tabloid press, fail to get off the ground? The good intentions of the idea’s masterminds and the need to help Russians living in the former Soviet republics, where discrimination against ethnic Russians is widespread, are indisputable. Besides, the program is not based on the “blood and soil” principle of the migration programs in Germany or Israel, which specifically target ethnic Germans and Jews.  “The term ‘compatriot’ in Russian does not necessarily mean someone whose ancestors were Russian,” said Valery Tishkov, a member of Russia’s Public Chamber. “It means anyone who is inextricably connected culturally and spiritually to Russia, and who feels as a part of the community of Russia’s citizens. A Kirgiz or a Kazakh, whose first language is Russian, can also be a part of this program.”

The FMS opened offices in Armenia, Turkmenistan, Kirgizstan, Tajikistan and Latvia. A list of special requirements for FMS officials working in these offices was introduced, which was supposed to protect the volunteering settlers from the infamous Russian bureaucracy. This list placed a limit on the time which an FMS official could take to

review a special form filled by a new applicant. “The public relations side of the program was very well done, it all looked nice on the surface,” said Lidiya Grafova, the chairman of the executive committee of the Federation of Migrants’ Organizations of Russia. “The problems started when things started to get closer to Russia. Most of the 12 regions where the migrants were supposed to go were located in depopulated areas in the Asian part of Russia, far from the European part where most of the Russian returnees have their roots and relatives.”

Obviously, the interests of the state do not chime very well with the interests of the individual migrants, since the state is primarily interested in developing Siberia and Far East, while migrants, especially those who have families, prefer city life and a developed infrastructure. The modest amount of money which the state was prepared to pay to each migrant (usually no more than $1,000) is obviously not enough to compensate for the inconveniences of living in poor regions. Besides, the regional governments that applied for participation in the program with the Federal Migration Service often failed to provide their new residents with adequate housing. “These economic problems led to a relatively small amount of returning families,” said Vladimir Mukomel, the head of the migration and xenophobia research department at the Institute of Sociology in the Russian Academy of Sciences. “What is even more troublesome, the structure of the returning families was very different from the one expected and desired by the Federal Migration Service. Instead of young families with two or three children, we got families with a single parent or some other troubled family units. Divorced mothers with single children or grandparents with a single grandson or granddaughter were more of a rule than an exception.”

By some kind of strange coincidence, one day before the announcement of the cut in the resettlement program was made, the office of the UN High Commissioner for Refugees (UNHCR) published its new data on the number of Russians seeking political asylum in other countries. The figure was 20,500, which means that Russian asylum seekers outnumber the returning compatriots by a ratio of more than two to one.

Police Arrest Anti-Xenophobia Activistshttp://www.sptimes.ru/index.php?action_id=2&story_id=28625

Issue #1461 (23), Tuesday, March 31, 2009

By Sergey ChernovStaff Writer

The 15-day Xenophobii.NET (No to Xenophobia) Campaign ended in arrests, when viewers leaving a film screening at Rodina film theater in the center of St. Petersburg were dispersed by the police on Sunday. But while the Russian media, from RTR television to Fontanka.ru news portal, reported a mass fight between Antifa activists and neo-Nazis, both the police and detained film-goers deny any fight took place.

“There was no fight, it was prevented,” police spokesman Vyacheslav Stepchenko said by phone on Monday.

“It seems to be a provocation; the Antifa activists and neo-Nazis never came into contact,” an anti-Nazi activist who only gave his first name, Denis, said by phone on Monday.

“We tried to walk to the metro in an organized way so as not to be attacked by neo-Nazis, when on Karavannaya Ulitsa we were jumped from behind by policemen with batons. They started to throw us to the ground and drag us into their vehicles.”

While the French documentary “Antifa — Chasseurs de skins” (Antifa: Skin Hunters), the final screening of the “Open Your Eyes! International Film Event Against Racism and Xenophobia” and the last event of the anti-xenophobia campaign, was being shown, a group of neo-Nazis reportedly attempted to attack the packed film theater, which drew more than 500 viewers.

The attempt failed when the police arrived and detained several attackers, according to Yevgeny Konovalov, chairman of the Russian Social-Democratic Union of Youth and one of the campaign’s organizers.

“Around 30 beefy young men looking like boneheads (Nazi skinheads) attempted to storm Rodina film theater with sticks and stones, but they were scared off by the policemen,” Konovalov said by phone on Monday.

“Having seen the police, [the attackers] retreated immediately to Nevsky Prospekt, but the police had time to detain three men. When I came out to see what was happening, I saw two handcuffed men being put into a police vehicle.”

According to Konovalov, Antifa scouts later reported that a large group of neo-Nazis had gathered on Nevsky.

“In my view, it’s very strange,” he said.

“On the one hand, thanks to the police for preventing a nationalist attack, but on the other hand, it’s not clear how they allowed them to come in a large group to the film theater, and then to gather in a large group, 40 or 50 men, on Nevsky Prospekt waiting to attack the people returning from the film theater.”

A group of film-goers, mostly anarchists and Antifa activists, formed a 80-to-100 people formation to walk to the nearest metro along Karavannaya Ulitsa to Nevsky, when the police attacked the group, detained around 20 and drove them to police precinct 79, while the rest ran away.

On Friday, a march held by anarchists in St. Petersburg in support of the workers who took control of their plant in Kherson, Ukraine on Feb. 2, was brutally dispersed by the police who detained dozens of participants. Some of the detained complained of being beaten, while two policemen at precinct 79 where the detained demonstrators were taken

allegedly made Nazi salutes and shouted “Slava Rossii!” (Glory to Russia!), the slogan used by neo-Nazis.

The police said 19 participants were detained and charged with violating the rules for holding a public event. No comment on the beatings was given.

But Konovalov denied early reports on Antifa web sites that said that the neo-Nazis and the police had acted in concert on Sunday.

“That’s not quite true, at least the police didn’t touch Antifa activists as they arrived or during the show,” he said.

“The thing is that there are several branches of the police,” he said. “There is the usual police, which is a patrol service that doesn’t get to the heart of anything; what they really do is protect public order; and then there is the former 18th Department of RUBOP (anti-organized crime police agency), which has been turned into the Anti-Extremism Department — it is often involved in unlawful activities and attacks on Antifa activists.

“I think they were instrumental in the detainments, because we saw some RUBOP men in police precinct 79, and among them one was recognized as the same policeman who made a Nazi salute and shouted ‘Glory to Russia’ on Friday.”

Konovalov said that he and other activists had visited the precinct and stayed there for some time to prevent possible beatings of Antifa activists by the police officers.

“I think we influenced the situation, because when we arrived, 20 Antifa representatives had already spent an hour standing with their faces to the wall and hands behind their heads, and we demanded that [the policemen] either start compiling reports or do something else, because people should not be treated like this.”

Most of those detained were released after 1 a.m., when the metro was no longer open, while three spent the night at the precinct. The police said 18 were detained and charged with “disorderly conduct.”

Nevertheless, Konovalov described the campaign against xenophobia as a “success.”

“Everything that happened [during the campaign] has only made our ranks closer, while society was been shown that boneheads are not an invention, these people do exist, they do have gangs and they are ready to go to absolute extremes.”

A two-person demonstration in defense of the Russian Constitution near Gostiny Dvor on Nevsky Prospekt only lasted for seven minutes before both the participants were detained and their posters with quotes from the Constitution and the Law on the Police were taken away and torn up by police officers on Sunday.

Local activists from Garry Kasparov’s United Civil Front (OGF) and the Yabloko Democratic Party attempted to hold a rally after it was not authorized by City Hall, despite an application having been submitted properly.

When the policemen, of whom there were many present on the site, approached, OGF activist Denis Vasilyev explained that the demonstrators were acting in accordance with the Russian law and Constitution, and said that they considered the authorities’ refusal to authorize the rally “illegitimate.” Both were detained, however, and after spending three hours at a police station, they were charged with violating the rules for holding public events.

Five minutes after the detentions, five activists held another demo on Malaya Sadovaya Ulitsa, close to Gostiny Dvor, where they held posters urging Prime Minister Vladimir Putin to pray for forgiveness, accusing Russia’s main television channels of Joseph Goebbels-style propaganda, and demanding freedom for imprisoned businessman and Putin’s political opponent Mikhail Khodorkovsky. The police were not present at the second demo.

Cracks in the Credibility of the Yukos Casehttp://www.moscowtimes.ru/article/600/42/375797.htm

31 March 2009By Alexandra Odynova / The Moscow Times

Former Yukos CEO Mikhail Khodorkovsky will go on trial Tuesday on charges of secretly embezzling all the oil that his company pumped from 1998 to 2003, roughly 20 percent of the oil that Russia produced during those six years.

State prosecutors say they have 4,000 pages of evidence to back up their claims in Moscow's Khamovnichesky District Court that Khodorkovsky is the biggest embezzler in Russian history.

Just what prosecutors will offer in court remains unclear, because only excerpts of their mammoth case have been released publicly, including an eight-page summary posted on the web site of the Prosecutor General's Office.

But an examination by The Moscow Times of the publicly available information and interviews with independent lawyers raise questions about the legal soundness of the case, including whether the state is violating double jeopardy rules by trying a defendant twice for the same crime.

"I don't really understand how it is possible to charge one person for the same thing twice," said lawyer Yury Gervis, who is not involved in the case. "But the Prosecutor General's Office often fulfills orders from above with the 'as you say' principle."

Khodorkovsky and his supporters say his legal troubles are punishment from the Kremlin for his political and commercial ambitions. The Kremlin denies this.

"Neither the president nor any one else has a right to interfere in that situation," President Dmitry Medvedev said in an interview aired by the BBC on Sunday.

He said Khodorkovsky's fate will hang completely on the court's decision.

Prosecutor General Yury Chaika has said the evidence collected by investigators for the new trial leaves no doubt about the guilt of Khodorkovsky and his business partner Platon Lebedev, who are being tried together. He said Khodorkovsky managed to steal more money than anyone in Russian history.

Khodorkovsky and Lebedev are accused of embezzling 350 million tons of oil valued at about 900 billion rubles ($25 billion) between 1998 and 2003 from three Yukos-controlled production units — Samaraneftegaz, Yuganskneftegaz and Tomskneft — and laundering 487.4 billion rubles and $7.5 billion between 1998 and 2004.

Prosecutors say Khodorkovsky and Lebedev committed embezzlement by bribing the shareholders and managers of the three units to allow Yukos to buy oil at production cost, 50 percent to 75 percent lower than market prices, and pocketing the profit.

The two are suspected of making fake deals with front companies in Russia and abroad to launder the stolen oil and money, prosecutors say in publicly available documents on the investigation.

The schemes helped Khodorkovsky avoid paying taxes, and Yukos did not profit, according to the documents.

Khodorkovsky and Lebedev were arrested on tax evasion and fraud charges in 2003, and the latest charges accuse them of laundering money through 2004, while they were in jail.

The two were convicted of the first set of charges in 2005 and sentenced to eight years in jail. Those charges covered the years 2000 to 2003.

Several lawyers interviewed for this article said prosecutors could not accuse Khodorkovsky of embezzlement at the production units.

"It can't be called embezzlement if both sides agree to a deal in which one buys from the other company at its production cost," said Pavel Smyslov, a lawyer specializing in corporate policy, who is not involved in the Yukos trial.

Such a deal is illegal, but it involves tax evasion, not stealing, Smyslov said.

"It can be called embezzlement if, for example, the seller was physically forced to agree to the deal or a signature was forged," he said.

Khodorkovsky, 45, had built Yukos into Russia's largest oil company by the time he was

jailed in October 2003. He was not charged with embezzlement upon his arrest.

Yukos subsequently was sold off at bargain prices to pay back tax claims in a series of controversial auctions won mostly by the state-owned Rosneft.

Investigators started working on the second case against Khodorkovsky in 2005, when the first trial was wrapping up. Now prosecutors say Khodorkovsky embezzled the money that he failed to pay taxes on.

Even Kremlin-loyal representatives of big business have questioned prosecutors' approach, cautioning that it looks like a possible violation of double jeopardy rights.

"I'm not a lawyer, but in my opinion, no laws in Russia or elsewhere allow [a defendant] to be tried twice for the same crime," said Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs.

"I don't understand why they are charging them [Khodorkovsky and Lebedev] twice for the same thing," he said in comments aired on Rossia state television on March 7.

Russia is barred from trying a person twice for the same crime under its obligations to the Council of Europe, Europe's top human rights watchdog, of which it is a member.

Gervis, the lawyer, said legally the charges just did not make sense.

"They considered Yukos' work legal and tried them for evading taxes in the first trial, but now prosecutors say that the work was illegal," he said.

For the new case to stand, prosecutors have to decriminalize the earlier tax charges, he said.

Repeated calls to the Prosecutor General's Office over the past two weeks for comment for this article went unanswered. The two prosecutors handling the case, Dmitry Shokhin and Valery Lakhtin, refused to discuss the charges when approached by a Moscow Times reporter as they left the court after preliminary hearings this month.

The court rejected about a dozen defense requests, including an appeal to change the state prosecutors, the judge and court, during the preliminary hearings.

An extraordinary amount of paperwork is involved in the second case. Prosecutors say they have prepared 182 volumes about their investigation, complete with copies of contracts from Yukos and its affiliates. The investigation was boiled down into 4,000 pages of charges, which are bound in 14 volumes.

An ordinary case usually fills about 100 pages, said Maxim Dbar, a spokesman for Khodorkovsky and Lebedev's defense team.

Khodorkovsky's lawyer Vadim Klyuvgant believes that prosecutors are trying to cover up their lack of evidence with the large number of pages.

"They don't have any evidence," Klyuvgant said. "There are only false charges filled with contradictions and masked with verbosity."

He said another problem with the charges is that they accuse Khodorkovsky and Lebedev of stealing the same amount of oil that Yukos produced from 1998 to 2003.

Prosecutors say Khodorkovsky organized the embezzlement of about 350 million tons of oil, an amount that roughly corresponds with how much oil Russia was pumping every year during that period. For instance, the Federal Anti-Monopoly Service reported in 2000 that Russia's oil output that year was 323 million tons.

Yukos produced 357.5 million tons from 1998 to 2003, according to reports from Standard & Poor's rating agency over that period.

Yukos saw its biggest production year in 2003, pumping 19 percent of all oil produced in Russia, RBK reported.

Prosecutors have not clarified how Khodorkovsky and Lebedev managed to steal all of Yukos' oil output for six years without being detected by any law enforcement agencies.

Khodorkovsky's and Lebedev's eight-year sentences end in 2011, but they face another 22 1/2 years in prison if found guilty in the new trial. A request by Khodorkovsky for parole was rejected last August.

"The system is quite common. As far as I have seen in other cases, first they need to put a person in jail, and then they start preparing a bigger case," Gervis said.

Khodorkovsky himself has said he doesn't understand what he is being accused of.

"Since the charges were filed in 2007, I've been trying to convince the investigators not to bring dishonor on themselves and the whole country with the absurd charges," Khodorkovsky said in a statement published on his press center's web site. "They wrote that I embezzled 350 million tons of oil — this is physically impossible."

Khodorkovsky's defense team said several regional arbitration courts have rejected claims that Khodorkovsky committed embezzlement. It was not possible to verify this claim immediately.

Khodorkovsky intends to personally take on the bulk of the defense work at his new trial, his mother, Marina Khodorkovskaya, said in an interview on Ekho Moskvy radio last week.

National Economic Trends

Kudrin Says Russian Support for Banks May Reach 3% of GDPhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYxB32r3GFwM

By Anastasia Ustinova

March 31 (Bloomberg) -- Russia’s government will spend as much as 3 percent of gross domestic product helping the country’s banking system weather the global financial crisis, Finance Minister Alexei Kudrin said.

Former Soviet countries, not including the Baltic states, will spend between 1 percent and 3 percent of their GDP each on supporting banks, Kudrin said during a meeting in Moscow today with his counterparts from members of the Commonwealth of Independent States, without being more specific.

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

Last Updated: March 31, 2009 01:42 EDT

CIS countries need to spend 1-3% of GDP to support banks – Kudrinhttp://en.rian.ru/russia/20090331/120828472.html

MOSCOW, March 31 (RIA Novosti) - Commonwealth of Independent States (CIS) members will need to spend 1-3% of their GDP to support the banking system of each country during the financial crisis, the Russian finance minister said on Tuesday.

"Our countries will need 1% to 3% of our GDP to support the banking system," Alexei Kudrin said at a meeting of financial ministers and heads of the central banks of the CIS, adding that he had made the conclusion after evaluating the situation in the CIS as a whole, including Russia.

Kudrin also said that by the end of the year in Russia alone 10% of loans issued by banks will not be repaid because of the global financial crisis.

The finance minister said the state had to support the banking system because "government cannot give loans for trillions of rubles, issue stocks and bonds, and take on the risks of the real sector of the economy."

Govt to assign additionally RUB 300 bln financial aid to Russian regionshttp://www.itar-tass.com/eng/level2.html?NewsID=13736419&PageNum=0

NIZHNY NOVGOROD, March 30 (Itar-Tass) -- The Russian government will assign additionally 300 billion roubles (USD 1 = RUB 34.01) for financial assistance to regions in 2009, Deputy Prime Minister Alexander Zhukov said on Monday.

He chaired a conference with the governors of the Volga Federal District’s regions in Nizhny Novgorod. The participants in the meeting discussed anti-crisis measures proposed by the government for 2009.

According to Zhukov, 150 billion roubles will be disbursed to the regions as transfers, and another 150 billion roubles as budget loans.

“The aforesaid funds should be used by regions for the full implementation of social liabilities they approved earlier,” he said.

“The regions should implement all their social liabilities to the residents in full,” the deputy prime minister repeated.

“In 2009, budget revenues decreased by 25 percent as compared to 2008. It is already clear, they will go down by another 4,000 billion roubles as a minimum,” Zhukov said, adding, “This impacts on the economic situation in general.”

At the same time, the Russian government is not going to reduce certain budget expenditures, and some will be increased.

“One of the most pressing problems is to keep the existing jobs and to create new ones for those who have lost theirs, Zhukov said.

“For our part, we will do our utmost to perform all social liabilities,” he said.

Russia's Putin says govt won't reduce its reserves to "zero"http://www.prime-tass.com/news/show.asp?topicid=68&id=454689

TOLYATTI, Samara Region, Mar 30 (Prime-Tass) -- Russian Prime Minister Vladimir Putin said Monday the government did not intend to reduce its financial reserves to "zero" and would soon start building them back up again.

"Our task is to use them in order to soft-land the economy, create an antidote to the existing problems, switch to a path of stable development and start accumulating these reserves again," he said at a meeting with employees of carmaker AvtoVAZ.

Putin said he believed the government should keep some of its reserves for next year.

Putin also said the government would spend its funds "carefully" and called for a balanced and responsible financial policy. He said that otherwise the government risked triggering inflation.

Deputy CBR chairman believes crisis has peaked, but recovery will take a couple of Yearshttp://businessneweurope.eu/users/subs.php

Alfa, RussiaMonday, March 30, 2009

Deputy CBR Chairman Alexei Ulyukaev recently said he believed that the worst of the crisis is over and that from now on uncertainty will decline. The CBR sees its main task as keeping the currency stability. Mr. Ulyukaev's comments suggest that the government believes the banking sector will be able to resolve its NPLs problem without any substantial state support. This runs counter to our expectation that because of the economic slowdown, NPLs may increase to as much as 15% of total loans. We believe that given the $200-220bn in local and foreign obligations owed by the Russian corporate sector, total NPLs are likely to reach $90bn. As Alfa Bank President Peter Aven suggested in the Financial Times last week, the high level of NPLs will likely lead to substantial consolidation in the banking sector. The key uncertainty, however, is the cost of this consolidation and the cost of resolving the NPLs problem. Though the CBR seems to be calling for a wait-and-see approach whereby banks will deal directly with borrowers, we believe the government will have to be involved.

CBR on upcoming changes to monetary policyhttp://businessneweurope.eu/users/subs.php

Rencap, RussiaMonday, March 30, 2009

Reuters reported on Friday 27 Mar) that Central Bank of Russia (CBR) First Deputy Chairman Alexei Ulyukaev said the CBR could decrease main interest rates (including the CBR's refinancing rate) as soon as April.

Ulyukaev said the main reasons for cutting interest rates will be: 1) a decline in inflation; and 2) lowers expectations of rouble devaluation. Ulyukaev also said that the CBR is not going to narrow the currency band, but will take measures to prevent exchange rate flexibility.

These measures are in line with our forecasts regarding the necessity to inject liquidity into the economy and provide a softer monetary policy with a relatively fixed exchange rate regime.

Russian agriculture looks for more state supporthttp://www.russiatoday.ru/Business/2009-03-31/Russian_agriculture_looks_for_more_state_support.html

31 March, 2009, 09:53

Russia's farming has seen a decade of strong growth, despite subsidy levels that are far below most Eastern European competitors. Now the agricultural sector is hoping for greater state support.

Record high harvests of wheat and rice. Last year agricultural production grew at a rate of 10%. Still it represents only 4 % of Russia's GDP – compared with up to 14% in developed countries. One reason is subsidies according to First Deputy Prime Minister Viktor Zubkov.

“Everybody just says give us more, more money, but then we count and see – the number of cattle livestock has shrunk. This year for agriculture we allocated $2.5 billion from our budget. Plus over $26 billion worth of loans. All together it’s almost $30 billion- enough to achieve great results!”

The government says, this year it will subsidize up to 100% of interest on loans to meat producers. Still, Sergey Lisovsky, from the Agroindustrial complex Mosselprom says – Russia’s state funding of the sector is one of the smallest in the world.

“A Russian Village gets just 1% from the budget for agricultural support. While EU direct investment into the sector amounts to 40% of budget spending, plus each country adds their own 20-30%. We get just the bare minimum and we even manage to compete.”

Producers say, to support the sector the country’s government should copy measures taken by the European Union. Some of them – like supplying fuel to the sector at discounted prices – will be implemented this year.

Consumer blues http://www.businessneweurope.eu/story1530/Consumer_blues

Ben Aris in Moscow March 30, 2009

"The Russian economy has stabilised, but that is only because the Central Bank of Russia is running a very tight monetary policy to support the ruble. I think that the underlying economy is not doing so well and the situation may actually be getting worse," says Ilkka Salonen the deputy chairman of Sberbank.

The first wave of the economic crisis to hit emerging Europe has receded, but the damage it has caused has started a rot that is eating into the fabric of economies across Central and Eastern Europe – consumer spending has evaporated and without sales no one can do business.

There is much talk about a possible second wave to the crisis – especially in Russia – as bad debts at banks across the region grow. But underlying the poor macro numbers and strains in the bank system are the empty markets; consumers right across the region are terrified of yet another economic collapse and are husbanding their resources. Unless

shoppers go back to the newly built malls that dot the region, the prospect of more economic shocks will turn into a self-fulfilling prophesy.

The collapse in consumer confidence started with the rapid devaluation of currencies across the region after trillions of dollars of wealth was destroyed over the last six months. However, as this process is now coming to an end, analysts are hoping that the cash still in the system will start looking for something more productive to do. Rising amounts of investment and acquisitions as businesses in the region are reshuffled to represent the winners and losers should drive a recovery that could arrive as soon as this autumn.

However, this ignores the plight of the consumer. If, in Russia's case, oil revenues have been the fodder that fed economic growth and reforms to the financial sector since 2004 the pitchfork that distributed the food, then the consumer has been the workhorse of economic growth for several years.

Once again the value of savings has been decimated (or worse), while unemployment soars everywhere. In Russia, the number of people out of work topped 6m in March, or 8.5% of the workforce, while almost everyone throughout new Europe has been forced to take a pay cut of some sort.

Consumer spending has dropped like a stone and this is where the real danger lies. Unless governments across the region can reassure their populations that the crisis won't be that bad, shops will remain empty and the belief that economies will collapse will become a self fulfilling prophesy.

Demand off a cliff

No one is shopping, or at least if they are, then they are buying big ticket items, as investing into a washing machine looks like a better currency hedge at the moment than buying dollars. "The January retail sales were pretty strong, but some of this was simply people trying to protect their money from devaluation by putting it into goods," says Anatoly Landsman, chairman of SDM Bank in Moscow, which deals with medium-sized enterprises. He says that his customers are in relatively good financial health, but everyone has seen sales tumble.

The same thing happened in the 1998 crisis. Russians rushed to buy cars or white goods as the surest way to park currency in something that would hold its value irrespective of what happened to currencies and could be readily converted back into cash later at any outdoor market.

Retail turnover numbers in January were still in positive territory, but bankers report this is being driven by people investing their free cash in "white-good convertibles" for want of a better term. However, in February Russian retail sales fell by 2.4%, according to the official statistics – the first fall since 1999 after nearly a decade of double-digit gains – and are expected to remain depressed for months.

The result has been to squeeze both companies and the banks. Probusinessbank was set up in the 1990s in anticipation of a coming boom amongst small and medium-sized enterprises and has since morphed into a financial group catering to all the needs of small business. Presciently, Sergei Leontiev, president of Probusinessbank, saw the international financial crisis coming in 2007 and cut all his foreign borrowing, rapidly building up domestic deposits, which provide all the funding the bank needs. "We have plenty of money, but we have no one to lend to," says Leontiev. "The small- and medium-sized enterprises we deal with have all seen sales collapse. No one is expanding, no one is seeing sales growth, so no one needs to borrow. We are being squeezed as a result."

Straw poll

The same phenomenon can be seen across the entire CEE region, although the degree to which countries have been affected varies widely.

In general, the further west you go the better the situation, as the economies are better balanced. But the fall in consumer spending is also a function of where the floods of incoming capital went in recent years. Part of the reason that places like Latvia are in so much trouble now is most of the investment went into speculative investments in things like real estate rather than productive sectors. However, even Slovenia, which is by far the most developed of all the socialist bloc countries, went into recession for the first time ever since independence as a result of the consumer blues.

The Austrian bank Erste Bank has invested heavily in CEE and took a straw poll of its country managers in March. The result was the same story repeated itself almost everywhere. Lucian Anghel who runs Erste bank's Banka Commerciala in Romania, reported retail sales were down 13.7% in January year on year. Orsolya Nyeste, who runs Erste Bank in Hungary, said retail sales grew by only 1.3% in January and expects sales to fall from here. And Jana Krajcova, who works at Ceska Sporitelna in Prague, said retail turnover fell 10.7% on year for the first two months of 2009. "Withdrawn deposits from the banking system are being exchanged for foreign currencies and consumer goods, as people are trying to protect themselves from inflation and the devaluing currency," Krajcova concluded.

Bad loans

The collapse of consumer confidence is already feeding through into the banking sector and threatens to bring the entire financial system down. The problem is partly due to the inability of consumers to pay off their loans, but just as damaging is the speed of the change, as banks were still in high growth mode until last September and have debt schedules to match.

The predictions for the level of non-performing loans (NPLs) by year-end range in Russia from Sberbank's 10% of the total loan book going bad (manageable) to chief economist at

Alfa Bank Natalia Orlova's prediction of 16% (big problem). The reason the spread in the estimates is so big is that the spending habits of the populations in all the countries in the region are completely unpredictable. It boils down to how depressed the people will be and how long the blues will last.

And this is just Russia. The situation in Ukraine is far worse where NPLs are already soaring; Russia probably has the wherewithal to avoid a systemic collapse of the banking sector, but the National Bank of Ukraine is being asked to bail out banks or take them under external administration on nearly a weekly basis. Likewise, in Kazakhstan the sector average NPLs hit 12.1% by the start of March -- well into the danger zone -- and in the case of market leader BTA already approaching 16%, which means it is fighting for its life.

Even if Russians cheer up and get their chequebooks out again, the up-tick in consumption will be limited by the lack of credit. In the white goods sector, for example, stores like M-Video report that between a quarter and third of their sales were made on

the never-never last year. Between 2007-2008, the nominal amount of credit in Russia increased to a peak of $167bn in October from $72bn in January 2007 – equivalent to about 10% of GDP. A very large amount of that spending will now disappear.

Against this, average retail borrowing in Russia is only 9% of GDP compared with about 25% in Western Europe, so the average Russian is much less exposed to consumer credits than his peer in say Paris or London; the recovery of consumption should come faster as a result.

Falling incomes and rising unemployment will also make it harder to climb out of the hole most countries find themselves in. In Russia, a poll conducted in March found more than half of the country's households had seen their incomes fall, while the official figures say that disposable incomes shrank by 7.2% between January and February year on year after growing by 11.2% in the same period a year earlier. More worryingly, Russians are now tapping savings to maintain their standard of living.

The Kremlin has hiked public sector incomes by a quarter (which affects about the third of the population) to offset the collapse in consumption, but analysts are still expecting private consumption to fall by 3.5% this year.

All these problems combine to form a gloomy prognosis. A raft of Russian officials predicted in March that the problems with NPLs will become acute in the second half of this year and could lead to another bout of instability, or even a full-blown bank crisis. According to First Deputy Prime Minister Igor Shuvalov, the current situation is relatively stable, but the state is ready to spend up to RUB200bn (€4.4bn) to support the banking system, should banks face a massive expansion in NPLs.

Deputy Prime Minister and Finance Minister Alexei Kudrin said in the middle of March: "We're expecting a second wave of problems in the financial system, due to the non-repayment of loans by the real sector. There are some who have waited until the last moment in the hope the market livens up," Kudrin said, adding that those hopes have not been justified and there aren't any serious grounds to expect demand for real sector goods to strengthen in the short term.

All the countries of CEE are in the same boat and many of them are worse off than Russia, where at least the state still has over $600bn in reserves to tackle the problem.

The mammoth changes in the structure of the global economy mean most countries will be forced to reengineer their economies. Russia needs to boost domestic demand and, happily, the Kremlin has already started down this path by using oil windfalls to subsidise the taxes on the rest of the economy. However, the crisis has shown that it didn't go far enough. "We need a different model – one that is oriented toward domestic demand," Shuvalov said, a bit belatedly.

China too has been following an export-led strategy, fuelled by keeping the currency undervalued. But domestic consumption is underdeveloped, as the vast majority of

people are so poor, and it must now reinvent its economy if it's to replace its export revenues, says a Sinologist at the university of Leiden, Dr Axel Schneider. Germany is in the same position; albeit the country has a much stronger consumer base to work with so is in a much better position to weather the storm. Most CEE countries find themselves somewhere between these two extremes and many – like Russia, Ukraine and Kazakhstan – are reliant on a single export, which makes their recovery dependant on the vagrancies of the commodity markets. Even so, re-engineering an economy towards more domestic consumption will take years to implement.

Just how fast the process goes will determine whether this crisis is one of the alphabet of options suggested. Clearly the 'V' version (fast collapse, fast recovery) is not going to happen. More popular are the 'U' variety (fast collapse, extended recession, strong recovery) and 'L' versions (fast collapse, very long recession). But the rise in NPLs means CEE is also facing a 'W' option (fast collapse, bounce back, second crisis later this year, then real recovery). It is still too early to say which way it will go, although we seem to be at or near the bottom of the first trough now, if it is going to be a W.

A survey of expectations by the Post-Crisis World Institute and the Public Opinion foundation in March found populations in the Commonwealth of Independent States are universally pessimistic about the next few months, ranging from the most pessimistic in Ukraine (61.1%) to the most sanguine in Kazakhstan (16.6%). Likewise, a similar poll conducted in Poland by the Pentor institute found the consumption climate indicator was down 6.2 points and still falling, which is indicative of the glum mood of consumers across Europe.

The author of the Hitchhiker's Guide to the Galaxy, Douglas Adams, had a joke about distressed economies. What do depressed consumers do? They tend to look down at their shoes. What do they do to cheer themselves up? Go and buy a new pair. Everyone is hoping that's exactly what they do.

Trading places - Russian discount supermarkets flourish

The silver lining in the black clouds of global recession is that Russians have traded down en masse from expensive imported goods to made-in-Russia products. The strength of the ruble used to make imports cheap, but after the currency lost a third of its value in recent months imports are expected to drop 20% this year.

The big winner has been low-end Russian supermarket chains; Russia imports about 40% of its processed foodstuffs (and Moscow about 60%), but suddenly everyone is buying homemade cheese and sausages. Food processing is one of the few really competitive sectors in the Russian economy and has flourished in recent years. The crisis is turning into a big fillip for already profitable local producers.

While almost all of Russia's companies have seen sales collapse, leading discount supermarket Dixy Group posted a 21% increase in sales between January and February to RUB8.6bn (€190m) and says it plans to open 100 new stores this year. Likewise, sales at

rival Seventh Continent were up 12%, but the biggest gains were in the regions where sales were up by almost a third.

Supermarket king Magnit is doing best of all. The company bypassed big cities like Moscow and St Petersburg to build up a business in Russia's 83 regions. While most companies have slashed investment plans, Magnit will continue to expand this year and said in February it was going ahead with $660m of investment to add 400 new discount stores, up from the 371 stores it opened in 2008, although it has axed plans to build six new hypermarkets.

Crises are good for food producers in general, as food is the last thing consumers cut if they need to save money. Indeed, sales often increase because although you can't afford to go out anymore, why not treat yourself to a good dinner at home instead? This is especially true in Russia where consumers still spend about three-quarters of their income on staples – more than in Thailand, India, Ukraine and even Belarus – while in the West consumers spend no more than 20% on food, say analysts at Renaissance Capital. And food producers are already feeling the benefits, as almost all February's gains in industrial production came from the food processing industry.

Business, Energy or Environmental regulations or discussions

RSPP Slams Anti-Crisis Planhttp://www.themoscowtimes.com/article/1010/42/375800.htm

31 March 2009Combined Reports

The Russian Union of Industrialists and Entrepreneurs said the government's plan for dealing with the financial crisis is too vague and shortsighted.

"The measures recommended by the government are for a sprint, when in fact we'll have to run a marathon," the union, known as RSPP, said in a paper prepared for a meeting with First Deputy Prime Minister Igor Shuvalov on Monday.

Billionaires including Vladimir Yevtushenkov and Vagit Alekperov sat down with Shuvalov for almost two hours to discuss their concerns after the government sought input from regional leaders and entrepreneurs last week. Shuvalov told the group that the government will review its anti-crisis plan in April.

Shokhin, the head of the big business lobby, said there were no significant differences with the government. The union will recommend no more than five priority areas to the government in the next two to three weeks, he said.

Interros head Vladimir Potanin, also an RSPP board member, urged President Dmitry Medvedev to think of long-term crisis mitigation policies at a separate meeting Monday, Interfax reported.

Russia Pledges $1 Bln to Auto Industry, Saves Jobs: WSJ Linkhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=avOfNYV1ONvI

By Chris Peterson

March 31 (Bloomberg) -- Russia pledged over $1 billion to the country's car and truckmakers in a bid to preserve jobs and avert social unrest, the Wall Street Journal reported.

The aid will be in the form of 25 billion rubles ($740.8 million) in state funding and a further 8 billion in loans from state banks; Industry Minister Viktor Khristenko said vehicle sales in Russia were forecast to fall 60 percent this year, the newspaper reported.

Last Updated: March 31, 2009 00:46 EDT

Putin Promises Big Money on Visit to AvtoVAZhttp://www.themoscowtimes.com/article/600/42/375795.htm

31 March 2009By Maria Antonova / The Moscow Times

Prime Minister Vladimir Putin showered AvtoVAZ with promises of cash, guarantees and loans worth more than $1 billion Monday as he met with Tolyatti plant workers on a visit aimed at boosting morale.

"I have some news: good and bad. What shall we start with?" Putin said, seated in the center of a group of AvtoVAZ employees circled by shiny Lada cars.

"The bad news? OK. The indexes of the global economy, which we are dependent on, are not offering us any reassurances yet," Putin said, according to a transcript posted on the government's web site.

The good news, he said, was that the government would provide the indebted car giant with an interest-free loan worth 25 billion rubles ($734 million) through Russian Technologies, which owns a stake of 25 percent plus one share in the company.

AvtoVAZ CEO Boris Alyoshin previously asked the government for 26 billion rubles to restructure debt to suppliers and creditors. Some 45 billion rubles of AvtoVAZ's 75 billion rubles in assets is being held as collateral, and the company can no longer take out loans with commercial banks, he said earlier this month.

The government previously discussed the possibility of increasing the government's stake in AvtoVAZ by boosting the capitalization of Russian Technologies.

Renault, which owns 25 percent plus one share of the company, opposed the possible dilution of its shares. Troika Dialog holds a similar amount, while the rest are traded on the open market.

Both Industry and Trade Minister Viktor Khristenko and Russian Technologies head Sergei Chemezov suggested at a separate meeting with Putin and industry leaders Monday that the money given to Russian Technologies be converted to AvtoVAZ shares.

Putin, however, said the government "will not insist on decreasing shareholder stakes, including minority ones."

Alyoshin asked for an 8 billion-ruble bridge loan so the company could "survive" the next two months as it waits for the state loan to come through.Putin said the bridge loan would be issued by Sberbank and VTB soon, Interfax reported. He also said several times that the 25 billion rubles needed to reach AvtoVAZ "quickly."

Alyoshin said Gazprombank, VTB and Sberbank were ready to lend an additional 90 billion rubles to finance AvtoVAZ's anti-crisis program, which aims to lower annual production costs by 19 billion rubles.

A VTB spokeswoman, however, said the deal for 90 billion rubles in financing is only a "framework" document signed by the three banks.

The promises of support came as Khristenko offered a grim picture of the car market. "January and February figures showed that the market might fall by as much as 60 percent in comparison with 2008," he said.

Faltering demand has led most Russian carmakers to suspend production lines. AvtoVAZ initially followed a different tactic with its labor force of more than 100,000 workers, keeping its lines open, but several component makers stopped deliveries when the company's funds ran dry.

Putin also said the government would hand out 13.6 billion rubles in state guarantees on loans to other carmakers, including 4.6 billion rubles to KamAZ, 5 billion rubles to Sollers to build a plant in the Far East and 4 billion rubles to GAZ.

To reassure AvtoVAZ workers, Putin also promised 621 million rubles to subsidize social programs that were traditionally paid for from AvtoVAZ's budget. "This is another gift to AvtoVAZ from the Russian government," Putin said in response to a question about funding for kindergartens.

Putin also told the workers that he had bought a Niva -- also known as a Lada 4x4 -- and was finalizing the ownership paperwork.

Putin previously has shown a fondness for armored Mercedes sedans and a collector's edition Volga, which he has showed off to guests like former President George W. Bush at his Novo-Ogaryovo residence outside Moscow.

"We all know what was happening in the country, in Tolyatti, in the '90s, what kind of owners and criminal plots surrounded AvtoVAZ," Putin told the workers, taking a jab at businessman Boris Berezovsky, who controlled the plant at the time.

Implying that times are different despite the difficulties, Putin said, "I am sure in the good future of your company."

VTB-24 Gets EBRD Loan

http://www.themoscowtimes.com/article/1009/42/375791.htmVTB-24 received a $150 million loan from the European Bank for Reconstruction and Development to increase lending to small businesses outside the country's biggest cities, the ERBD said in a statement Monday.

VTB-24 will use the five-year loan to offer longer-maturity credits of less than $200,000 to enterprises in cities of less than 1 million people, the EBRD said, without giving an interest rate for the loan. (Bloomberg)

Deripaska's Decision

http://www.themoscowtimes.com/article/1009/42/375791.htm

Oleg Deripaska has until December to decide whether he'll keep his 25 percent stake in Austria's Strabag, Raiffeisen Zentralbank Oesterreich head Christian Konrad said, Vienna's Wirtschaftsblatt reported.

Raiffeisen, which helped finance Deripaska's stake in the construction company, wants the Russian businessman to remain a shareholder and will have a scheduled conversation with him on April 3, the newspaper reported. (Bloomberg)

Russia's Chigirinsky leaves businesses – paperhttp://www.reuters.com/article/managementIssues/idUSLU20196320090330

Mon Mar 30, 2009 5:09am EDT

MOSCOW, March 30 (Reuters) - Russian oil and real estate development tycoon Shalva Chigirinsky has given up his main Russian businesses and left the country for the United States, Vedomosti newspaper reported on Monday.

Chigirinsky lost his post as president of the Moscow Oil & Gas Company (MNGK) to a nominee of the Moscow city government, which co-owns the Moscow refinery operator with Chigirinsky's Sibir Energy SBE.L, Vedomosti said quoting a source close to the refinery.

Vedomosti said that the Moscow government has nominated as his replacement Viktor Shevchuk, former general director of ChernomorNefteGaz, which is developing four oil and gas deposits on the Black Sea and Azov Sea shelf.

The Moscow mayor's spokesman Sergei Tsoi confirmed to Vedomosti that Chigirinsky was dismissed. Tsoi was not immediately available to comment on the report.

The newspaper quoted a source in the mayor's office as saying Chigirinsky was in the United States.

MNGK spokesman Nikolay Frolov told Reuters the city government had made no official announcements to the company.

"At the moment, we have got no official documents on an MNGK management change. Nobody introduced Shevchuk to the staff," he said.

Sibir declined immediate comment.

Vedomosti also quoted a source in the mayor's office as saying that Chigirinsky has handed over his development projects, which make up the majority of his asset portfolio, to his brother Alexander.

Chigirinsky's main development projects included construction of Russia Tower, a 6OO-metre (1,970 foot) skyscraper designed by UK architect Norman Foster to be Europe's tallest building. The construction was halted last year due to lack of funding. (Reporting by Tanya Mosolova; Editing by Erica Billingham)

Alstom to Buy 25% of Russia’s Transmashholding, Figaro Sayshttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=akfek0QRITT0

By David Whitehouse

March 31 (Bloomberg) -- Alstom SA will today announce the purchase of a 25 percent stake in Russian rail-equipment maker Transmashholding, French daily Le Figaro reported, without citing anyone.

Alstom declined to comment, the newspaper said.

Last Updated: March 31, 2009 00:52 EDT

New Aeroflot CEO outlines primary objectiveshttp://businessneweurope.eu/users/subs.php

Alfa, RussiaMonday, March 30, 2009

Aeroflot's new CEO Vitaly Savelyev outlined his primary objectives in an interview published in today's Vedomosti. According to the interview, he will concentrate on increasing Aeroflot's level of service, marketing and upgrading the firm's technology. The article noted that his technology initiative was a subject of dispute while he was at Svyazinvest. We are cautious as nothing was mentioned regarding cost control, which we believe should be one of the primary objectives for the company. However, it has only been four days since his appointment so we await the publication of a more in depth strategy from the airline.

Capital Group agrees $400mn debt restructuring with Sberbankhttp://businessneweurope.eu/users/subs.php

Rencap, RussiaMonday, March 30, 2009

Capital Group said on Friday (27 Mar) that it had agreed new terms with Sberbank on a $400mn loan. The companies said in a joint statement the deal would allow the developer to complete two major projects, including its Capital City development.

Progress on debt restructuring in the Russian real-estate sector is gathering momentum. Last week's announcement by Capital/Sberbank follows confirmation from Mirax that it

has been able to refinance around $500mn of its short-term debt. In the case of Mirax its new agreement involved a partial repayment of principal, new put-option date and higher interest rate. Though the terms of Capital's revised financial agreement were not disclosed, we would expect them to be broadly similar. In addition, last week Raven Russia concluded its GBP75mn debt-for-equity swap. There has also been unconfirmed press reports that PIK and Sistema-Hals will see changes in their equity ownership structure, that in part are designed to facilitate refinancing and ensure access to new capital in the future. Our view is that the majority of major Russian real-estate companies will successfully restructure their balance sheets, though this does not appear to be reflected in their current share prices. For the most part, we expect this to occur via debt-for-equity swaps, though if PIK and Hals are able to meet their debt obligations without having to issue new equity and the subsequent minority shareholder dilution this would be particularly positive.

PIK Group Co-Owner Gives Stake to VTB Capitalhttp://www.themoscowtimes.com/article/1009/42/375787.htm

31 March 2009 Vedomosti

PIK Group co-owner Kirill Pisarev has been forced to hand over part of his stake in the developer to VTB Capital in September, after using shares as collateral, one of PIK's foreign lenders and a banker close to VTB said.

A source close to PIK's shareholders said the stake was approximately 5 percent and that VTB Capital raised the loan for Pisarev on its own guarantee, accepting the PIK shares as collateral. When the tumbling stock price led to a margin call, VTB Capital paid its creditors and seized the shares.

PIK spokeswoman Natalya Konovalova declined to comment on the shareholder's actions, and Pisarev's office declined to put him on the line. Representatives of VTB Capital and VTB declined to comment on the topic.

PIK Group has a debt of 2.7 billion rubles ($79 million) to VTB which was due Dec. 26, and the state bank is currently trying to claim the sum in Moscow Arbitration Court. The developer is controlled by president Kirill Pisarev and board chairman Yury Zhukov, with 17.2 percent of the company's shares in free float.

It was not immediately clear how large the loan to Pisarev was. On the London Stock Exchange, 5 percent of PIK was worth $800 million on May 19, 2008, after which its valuation began to fall. On Sept. 8, the stake was worth $465 million, and on Sept. 29, when Pisarev might have lost the shares, they were worth $125 million. Typically, the value of shares held as collateral exceeds the size of the loan, said Yegor Fyodorov, an analyst at Bank of Moscow.

Pisarev and Zhukov are the co-founders of PIK Group, which in 2007 sold 15 percent in

an IPO, raising $1.85 billion. The PIK web site said Pisarev and Zhukov had 41.9 percent and 40.9 percent, respectively. After the margin call last fall, Pisarev's stake would have fallen to about 37 percent.

Kommersant

U.S. grain exporter comes to Russia

http://en.rian.ru/analysis/20090330/120822831.html

U.S. CHS Inc., one of the world's leading energy and grain-based food companies, is in talks to buy Agromarket-Trade from the Russian Agrico Group.

Last year CHS reported revenue of some $32 billion.

Russia plans to export around 20 million metric tons of grain in the 2008/2009 season, the third largest volume after the Untied States and the European Union. This is why nearly all of the world's grain giants have assets in Russia.

Top managers of the transnational grain company and a Russian grain trader said Cenex Harvest States (CHS, formed in 2003 through a merger between Cenex and Harvest States) had bought Agromarket-Trade. A source with close ties in Agromarket confirmed that talks were underway with CHS. The sources said the deal had been closed, or would be closed within days.

According to the sources, CHS is considering buying the whole of the Agrico Group.

Vladimir Bovin, director general of Agrico, said production would remain in the hands of former owners. He refused to give more information, saying that the media should wait for the official press release.

Annette Degnan, marketing communications director at CHS, said partnership with companies of the Black Sea had not been officially announced yet.

A source with close ties to Agromarket said CHS would take over Agromarket's main assets, notably its offices in Russia and Switzerland with the teams of traders, as well as a regional grain transportation and reloading network with assets in Krasnodar, Stavropol and Novorossiisk.

CHS may also gain access to the Russian company's grain storage infrastructure (the Grachevsky grain elevator) and over 100,000 hectares (247,100 acres) of farmland in the Krasnodar and Stavropol territories.

Agromarket-Trade, founded in 1998, is a part of the Agrico Group, one of Russia's biggest trading companies in the agricultural sector, and a member of the Russian Grain Association.

UPDATE 1-Raven Russia to buy Raven Mount for 60 mln stghttp://www.reuters.com/article/rbssRealEstateOperations/idUSBNG42989220090331

Tue Mar 31, 2009 4:08am EDT

* Offers 54.9p/shr, 34 pct premium to Monday's close

* Raven Mount posts wider FY pretax loss

* Raven Mount net assets fall 30 pct to 57.5 mln stg

* Raven Mount not to pay final dividend (Adds details)

March 31 (Reuters) - Raven Russia Ltd (RUS.L: Quote, Profile, Research, Stock Buzz), a property company focused on warehouses in Russia, agreed to acquire property developer Raven Mount Group Plc (RAV.L: Quote, Profile, Research, Stock Buzz) for 54.9 pence per share, or 60 million pounds, the companies said on Tuesday.

The offer represented a 34 percent premium to Raven Mount's closing mid price of 41 pence on Monday.

About 72.3 percent shareholders of Raven Mount have agreed to accept the offer, the companies said in a statement.

Raven Mount, which owns about 5.7 percent of Raven Russia, has seen its net assets falling to 57.5 million pounds in 2008 from 82.0 million pounds in the previous year.

Separately, Raven Mount posted wider full-year losses due to an impairment charge, a 14.5 million pounds ($20.58 million) loss on the sale of the Swan Hill Pension Scheme, and a 13.4 million pounds write-down in the value of its property stock.

Raven Mount said a significant increase in overheads also added to its loss for the year and that its prospects would continue to be governed by the weak UK economy.

It posted a pretax loss of 51.7 million pounds for 2008, compared with a pretax loss of 3.3 million pounds a year earlier, while revenue slumped to 13.8 million pounds from 59.5 million pounds.

Total administrative expenses rose to 30.2 million pounds from 6.7 million pounds a year ago.

Raven Mount said it would not pay a final dividend for the year. It had paid a final dividend of 1.4 pence in 2007.

Raven Mount shares were trading flat at 41 pence at 0804 GMT, while Raven Russia shares were down 1 percent at 17 pence in thin volume trade on the London Stock Exchange. ($1=.7047 Pound) (Reporting by Srikanth Srinivasa in Bangalore; Editing by Gopakumar Warrier)

Home Building Increases YoYhttp://www.themoscowtimes.com/article/1009/42/375786.htm

31 March 2009The Moscow Times

The number of homes completed in the first two months of this year surpassed the number in the same period last year, Regional Development Minister Viktor Basargin said Monday.

About 5.86 million square meters of housing were completed in January and February, he said, without citing an earlier figure.

"We have been able to completely maintain the positive dynamic of housing construction in Russia," he said, Prime-Tass news agency reported.

The situation varies around the country, however, and construction is only rising in 49 regions, he said.

The government has been pushing construction in the regions as a key way to spur development, with Basargin calling construction the "locomotive of positive economic growth" in Rossiiskaya Gazeta last week.

The government has allocated 55 billion rubles ($1.6 billion) this year for housing renovation and maintenance.

Ecologists Decry Arrival of Nuclear Wastehttp://www.times.spb.ru/index.php?action_id=2&story_id=28535

Issue #1458 (20), Friday, March 20, 2009By Irina TitovaSpecial to The St. Petersburg Times

About 30 members of St. Petersburg’s ecological organizations protested on Thursday the transportation of nuclear waste from other countries to Russia.

“No to the Import of Nuclear Waste!” read the slogan held by a group of ecologists in front of Avtovo metro station — the area of the city through which trains transporting nuclear waste from Europe usually pass.

“We are protesting nuclear transportation through St. Petersburg,” said Rashid Alimov, co-chairman of the ECOperestroika ecological organization at a press conference on Thursday. “We also declare the start of a public campaign against the construction of a terminal for receiving radioactive waste cargo in the port of Ust-Luga,” he said.

The protest was prompted by the arrival of the ship MV Schouwenbank loaded with 1,250 tons of depleted uranium hexafluoride from Germany to St. Petersburg on Thursday. It was the biggest transfer of German radioactive waste to Russia in history, ECOperestroika said.

“Another shipment of radioactive waste to Russia is arriving despite such activities being completely illegal, and in violation of the promises of the Russian Nuclear Energy State Corporation, or RosAtom, to stop the import of so-called uranium tailings,” Alimov wrote earlier on the organization’s web site.

“The transportation of such cargo is extremely dangerous. It is fraught with incidents in which containers have become depressurized, which can lead to the poisoning of a large number of people, and to the toxic and radioactive pollution of large areas, including Russia’s big cities,” he said.

Alimov said ecologists intend to measure radiation levels in the vicinity of the current cargo along its route through Russia.

At the end of the protest, police detained Alimov for what they called “the violation of fire safety rules and rules on holding public events,” said Vera Ponomaryova, representative of ECOperestroika.

Russia has already accumulated more than 700,000 tons of uranium hexafluoride.

The uranium tailings being sent to Russia belong to Urenco, a western European company, whose shareholders are the two major energy firms E.On and RWE. Urenco has a contract with RosAtom, during the term of which cargos of waste have already been shipped to Novouralsk in the Sverdlov Oblast, Seversk in the Tomsk Oblast, Angarsk in the Irkutsk Oblast and Zelenogorsk in the Krasnoyarsk region.

The annual reports of Russian Technical Watch for 2003-2007 showed that the safety norms for the storage of such waste were not met at any of the enterprises in the above cities. The tailings are kept outside, and there were also cases of containers becoming depressurized, ECOperestroika said.

The transportation of the tailings began on the night of March 12 from a uranium plant in Gronau, Germany. The shipment of the cargo from railway sidings to the ship took 36 hours, the environmental group said.

Vladimir Slyvnyak, co-chairman of the Ecozashchita (Ecological Defense) group, said that when sending its tailings to Russia, Urenco tries to find the cheapest way to get rid of the responsibility for radioactive and toxic waste.

“We demand a stop to this cynical and immoral business that contradicts the Russian legislation,” Slyvnyak said.

From St. Petersburg port, the train with the tailings will go to the city of Novouralsk. The train travels through St. Petersburg, passing by residential buildings, ECOperestroika said.

Last year a train carrying similar nuclear waste from Germany was discovered by ecologists near residential buildings in the city’s Avtovo district. The ecologists measured the radiation background near the containers and found that it exceeded the normal level of background radiation by 30 times, environmental groups said.

Oleg Bodrov, head of the Green World ecological organization based in the town of Sosnovy Bor in the Leningrad Oblast, said that the Ust-Luga port west of St. Petersburg is currently building new infrastructure for the import and export of nuclear materials. In two years cargos of nuclear waste will be transported via Ust-Luga, he said.

“This is a threat for the Kurgalsky peninsula,” Bodrov said.

Nuclear experts recognize the danger from the transportation of uranium tailings. The British nuclear company BNFL has said that “the sudden emission of a large quantity of uranium hexafluoride, if taken by the wind, may lead to a large number of victims. Theoretically, in certain weather conditions the deadly concentrations may spread over a radius of 32 kilometers from the place of emission.”

RosAtom’s press-service said on Thursday that deliveries of depleted uranium hexafluoride or OGFU is carried out on the basis of contracts signed by Technabexport in the mid 1990s, and that the ministry will end the agreement in 2009-2010, Interfax reported.

“In 2009-2010 the old contracts on the additional concentration of OGFU will run out, and we will not prolong them or sign new contracts,” said Igor Konyshyev, head of RosAtom’s public relations department. “We said it in 2007, and we will keep our word.”

Konyshev said the “various enterprises of RosAtom possess more effective technologies for the enrichment of uranium than European enterprises.” Russian technologies enable OGFU of European origin to be used as a raw material for producing U-235 — the isotope used for the production of fuel for nuclear power stations, he said.

Starting in 1996, under such contracts Russia has received more than 80,000 tons of uranium tailings from Europe. Ecologists say that by the end of 2009, another 20 tons of waste is to be delivered to Russia.

Russia and other countries have currently accumulated several million tons of OGFU. In the U.S. such waste officially became considered as radioactive waste in 2005. European countries do not consider the substance to be radioactive waste, and send it for burial to Russia.

RosAtom head Sergei Kiriyenko said earlier that after the OGFU is enriched in Russia, it is returned to its country of origin, Interfax reported.

Protests against the import of nuclear waste to Russia are also taking place in other Russian cities, including Yekaterinburg. On Monday ecologists plan to hold a protest action in front of RosAtom’s office in Moscow.

Activity in the Oil and Gas sector (including regulatory)

Crude export duties to be cut to USD 15.1/bbl from 1 April – fullyhttp://businessneweurope.eu/users/subs.php

VTB CapitalMarch 30, 2009

In line with the current system, export duty on crude in Russia will amount to USD 110 per tonne (USD 15.1 per bbl), starting from 1 April, down from the current USD 115 per tonne (USD 15.8 per bbl). Export duty will be set at USD 86 per tonne for light products and USD 47 per tonne for dark products.

Shmatko's Ukraine Meeting

http://www.themoscowtimes.com/article/1009/42/375791.htm

Energy Minister Sergei Shmatko met with his Ukrainian counterpart, Yuriy Prodan, to discuss the modernization of Ukraine's gas pipelines and energy cooperation, the Russian Energy Ministry said Monday.

Gazprom deputy chief executive Valery Golubev and Naftogaz Ukrainy's Ihor Didenko attended the meeting in Moscow, the ministry said in an e-mailed statement. (Bloomberg)

EU, Russia, Ukraine should work on gas-Piebalgshttp://in.reuters.com/article/oilRpt/idINLU60832820090330

Mon Mar 30, 2009 9:25pm IST

SARAJEVO, March 30 (Reuters) - The European Union, Russia and Ukraine should work together on securing the safe supply of gas to the 27-nation block, EU energy chief Andris Piebalgs said on Monday.

Brussels signed a cooperation agreement with Ukraine on modernising the system last week but Russia, which exports most of its gas through Ukraine's pipelines, was angry at being excluded from the talks.

"European companies together with Gazprom and Naftogaz should look for a viable model that guarantees safe supply of gas," Piebalgs said.

"I think all three sides, EU, Ukraine and Russia are interested in stable supplies from Russia via Ukraine."

"Russia has made it clear that they don't want to be excluded," Peibalgs told Reuters on the sidelines of the energy forum in Sarajevo.

EU financial institutions including the European Investment Bank and the European Bank for Reconstruction and Development will do due diligence for financing modernisation of the gas pipeline through Ukraine, he said.

The dispute over Ukraine's pipeline system has revived fears of a repeat of a January gas dispute between Moscow and Kiev, when major EU customers were left without gas for nearly two weeks in the dead of winter.

Russia's Gazprom (GAZP.MM: Quote, Profile, Research) supplies Europe with more than a quarter of its gas, and around 80 percent of that goes via pipelines that cross Ukraine.

Russia's Prime Minister Vladimir Putin has threatened to review ties with the EU if Moscow's interests are ignored.

"We are now in the spring and we should think more about next season not to have next winter like this one," Piebalgs said. (Reporting by Ivana Sekularac. Editing by William Hardy)

Russia primes $25bn China deal http://www.upstreamonline.com/live/article174980.ece

By Upstream staff 

Russia will sign a final deal with China guaranteeing crude supplies in exchange for $25 billion in loans within one or two weeks, Russia's Deputy Prime Minister Igor Sechin was quoted as saying today.

A report published by Russia's RIA news agency also said China is due to lend $15 billion to state-controlled Rosneft and another $10 billion to pipeline monopoly Transneft.

Monday, 30 March, 2009, 13:50 GMT  | last updated: Monday, 30 March, 2009, 13:50 GMT

MARCH 31, 2009

Moscow Warns on Low Oil Prices http://online.wsj.com/article/SB123843968759570601.html

By GREGORY L. WHITE

MOSCOW -- To many in the West, Russia's oil wealth is an addiction that has warped its economy. Russian energy czar Igor Sechin considers that envious nonsense.

Russia's resources "are a God-given good that should be used effectively," he said in his first major interview with a foreign media outlet. "Somebody is always wanting to take them away."

Widely considered the Kremlin's hard-liner-in-chief, Mr. Sechin is one of Russia's most powerful officials. He was a longtime aide and confidant to Vladimir Putin before Mr. Putin became president in 2000.

Last year, Mr. Sechin took over as deputy prime minister, responsible for the vast energy sector, when Mr. Putin became premier. Until recently, Mr. Sechin rarely spoke to the media, giving an aura of malevolent intrigue that was fueled by rivals who cast him as the author of the Kremlin's assault on oil giant OAO Yukos, among other things. In recent months, he has raised his public profile.

In a wide-ranging, 90-minute conversation, Mr. Sechin sought to play down differences between hard-liners and liberals in the Kremlin. But his views on energy policy, state ownership and other issues often differ significantly from those of more pro-market and pro-Western colleagues, highlighting tensions within the cabinet.

"One should be objective and judge by effectiveness," he said before leaving on a trip with Mr. Putin to an auto factory in southern Russia. "Let the senior comrades make the assessment. I have my management and it regularly corrects me."

He disagreed with Western economists and some liberal Russian officials, such as First Deputy Prime Minister Igor Shuvalov, who have suggested that Russia would be better off if oil prices don't go too high, arguing the surge in income in recent years has hampered needed efforts to diversify the economy. Mr. Sechin credited the oil boom with allowing Russia to build up the reserves it is now spending to support the economy.

And he was quick to point out that Russia became a major oil exporter in the 1970s in response to demand in the West amid the Arab oil embargo. "Now they tell us, 'You have Dutch disease, you're a resource economy.' But you yourselves asked us to be that way," he said.

Mr. Sechin is Moscow's point man for warming relations with the Organization of Petroleum Exporting Countries. But he said Russia, the largest oil producer outside the cartel, isn't ready to accept membership in the group, despite its pleas.

"It would be irresponsible for Russia to join OPEC because we can't directly regulate the activity of our companies," he said, as nearly all are privately owned.

Yet, he supports "coordinating actions" with the cartel because of the shared interest in lifting prices. He said Moscow isn't in a position to mandate lower production, but Russian oil companies will curb output this year as falling prices cut into their ability to produce.

He figured that if oil slides back under $40 a barrel, Russian output this year could fall twice the amount the government now forecasts, or about 300,000 barrels a day.

Russia, he added, wants to keep oil prices between $60 and $100 a barrel. To help ensure that, Moscow is considering building a reserve of crude to allow it to react to market shifts. In addition, Mr. Sechin said Russia has put off auctioning development rights for some big, new export-oriented fields.

At current prices, he said oil companies are starved for vital capital to invest in new projects. "If companies don't have access to stable financial resources for the long term, that could lead to a shortage and to a sharp increase in prices for oil and oil products," he said. "That might not alarm consumers very much now because demand is falling, but when the recovery begins...this situation could develop."

Mr. Sechin called for a gradual but major overhaul of the international oil trade, adding tight regulation and longer-term supply contracts, eliminating "economically unjustified intermediaries" and reducing speculation. Russia is the world's No. 2 crude exporter.

Mr. Sechin hailed BP PLC's TNK-BP Ltd. joint venture in Russia as a sign of Russia's openness to foreign investment in the sector. But he singled out secretive Siberian giant OAO Surgutneftegaz as "Russia's best private oil company."

Investors have criticized Surgut for refusing to release international-standard financial accounts or details of its ownership structure.

Speaking about the Russian economy as a whole, Mr. Sechin said the government isn't planning to take over troubled companies. "There is no goal of nationalizing," he said. "I remind you that in the West, this process is under way and it's much harsher. But not here."

Mr. Sechin said the government is supporting companies, but would consider nationalizing only "in exceptional cases, when shareholders ask or [when] it would have influence on systemically important companies."

The government early this year rejected offers from some heavily indebted tycoons to convert loans from state banks into minority equity stakes in their companies.

"Nobody is taking anything from anyone," he said. "They should drink the cup of their responsibility to the end."

Write to Gregory L. White at greg.white@wsj.com

MARCH 30, 2009, 5:55 P.M. ET

Excerpts: 'It's a God-Given Good That Should Be Used Effectively' http://online.wsj.com/article/SB123843671518370455.html?mod=article-outset-box

Russian Deputy Prime Minister Igor Sechin on Oil, OPEC, Respect and More

Russia's Deputy Prime Minister Igor Sechin gave his first major interview to a Western media outlet on Mar. 29. (See related article.) Below, see edited excerpts from the conversation between Mr. Sechin and The Wall Street Journal's Gregory White:

On Russia's oil dependence:

"I don't really understand when our Western partners, certain analysts and experts, talk about Russia's resource dependence. First of all, when did the Soviet economy start to become resource-oriented? In the 1970s. Why? We reacted to the situation in the world. In effect, this happened because Western countries, most of all the U.S., tried to break their link to OPEC."

"Now they tell us, 'you have Dutch disease, you're a resource economy.' But you yourselves asked us to be that way. We provided supplies for you. Now you're telling us, 'that was your mistake.' "

"In general, one should be calm about the presence of resources in Russia. For us, it's a God-given good that should be used effectively. There's nothing terrible in this. No one can tell that we should sit on these resources. Somebody is always wanting to take them away. It's good that we have resources, but we have a difficult climate, I remind you. Somebody else might have less resources but the sun shines and the bananas fall from the trees. They can just roll from side to side in the shade under the palms and wait for them to ripen. So there's no need to envy anyone."

"It was thanks to these resources, to Russian oil companies, that our foreign-currency reserves were accumulated, the safety cushion we talk about that allows us to provide state support (during the crisis)."

On the oil industry:

"If companies don't have access to stable financial resources for the long term, that of course could lead to a shortage and to a sharp increase in prices for oil and oil products. That might not alarm consumers very much now, since demand is falling, but when the recovery begins, and I hope we'll see that, this situation could develop.

You can write about my dream. I think that oil should be refined. Of course we can't do it all at once, but in 10, 15, 20 years, I would really like for Russian crude to be refined on Russian refining assets or those with Russian ownership…. If we're talking about Russian hydrocarbons, the maximum effectiveness will be attained when they're refined on our assets. "

On relations with OPEC:

"We propose closer coordination of our actions with OPEC. But there's a difference between the work of Russia's oil industry and that of OPEC members. It's well known that OPEC members generally have national oil companies…Our entire oil industry is privatized, these are private companies. Even if we talk about (state-controlled oil company) Rosneft, it's an international company whose shares are traded in London….We can't directly regulate these companies."

"(OPEC) says you should join right away….But we think we need to follow the path of coordinating our work….it would be irresponsible for Russia to decide to join OPEC because we can't directly regulate the activity of our companies."

"We're working on the possibility of pumping (crude) into reserves. That would help reduce some of the volume (on the world market). "

On prospects for nationalization of troubled companies:

"We've even become used to working in the situation of crisis, since we've been under pressure for half a year. And if you look at what's happened, nationalization isn't taking place. There is no goal of nationalizing. I remind you that in Western countries, this process is underway and it's much harsher. But not here. We're giving support to companies, but not demanding the obligatory sale of shares or state equity stakes. I don't exclude it, in exceptional cases, when shareholders ask or it would have influence on systemically important companies. But that's theoretical. The possibility is there, but it's not set as a task. I'd put the task the opposite way, it's the responsibility of the shareholders. Let them do something more (to save the company)."

(Referring to proposals from metals tycoons to convert their debts to state banks into equity): "They talked about converting debts into shares for the state, but you should understand and tell them that the state also needs to be effective. If they want to write off some debts, they should explain why that should be interesting for us. So far, no one has explained that to us. 'Take the debts and don't bother us;' No, they should try themselves. We don't need that."

"The foreign (creditors) also come to us and say, 'give us comfort letters or take some of the obligations on yourselves.' We ask them, 'Guys, three years ago, when you made these loans, you didn't come to us, you didn't ask.' 'No, we didn't,' (they say). 'So why are you now asking' and they say, 'Well…' "

"Why are state ownership and private ownership constantly set against each other? That's not the issue. Property is property. "

"The element that can be decisive is the effectiveness of management. … Whether an asset belongs to the state or a private company, it should be managed effectively. There's no big difference. A hired manager in Lukoil or TNK-BP is a hired manager and he could just as well work in Rosneft. "

On liberals and hardliners in the Kremlin:

"I think one should be relaxed about these labels. Life is much richer….One should be objective and judge based on effectiveness. If there are questions about effectiveness, I'm ready to answer. I'm trying. Let the senior comrades make the assessment. I have my management and it regularly corrects me."

"It's already unclear who's a liberal and who's a 'silovik' (hardliner). That's true…I haven't changed my approaches. "

On relations with the rest of the world:

"We work with everyone. We ask that our interests be treated with respect. That's all. There's no alternative, they must be respected."

NIS Management board over annual balance sheet soon

Serbia investing in NIS because of its own mistakehttp://www.blic.rs/economy.php?id=4156

Author: Vlada Spasić | 31.03.2009 - 09:25 The negotiating team of Serbia that included members of the NIS management board appointed as per coalition agreement seems to have no chance against the Russian side. Our side made a serious problem over NIS annual balance sheet. As ‘Blic’ learns even the Minister for extraordinary situation of the Russian Federation Sergei Shoigy is coming to help the Russians. He is to make additional pressure so that the annual

balance sheet is such to be in favor of the Russian side.

By purchase-sale agreement Serbia has given up NIS profit from previous years worth EUR 100 millions. When the Government realized what it had done, it took the money, but ‘Gazpromnjeft’ did not like it and sued NIS referring to the agreement. There are ongoing negotiations between the two sides. The DS staff consisting of Dusan Petrovic, Dusan Elezovic and Biserka Jevtimijevic and the SPS representative Nikola Martinovic will be helped in this most likely lost matter by Danica Draskovic as the fifth member of the Management board. To make the matter worse, the new NIS owner is entitled as per the agreement to request compensation of damage from Serbia for all unfulfilled obligations stipulated by the agreement. This is the first concrete example of bad provisions of the agreement on the sale of NIS. ‘Even investments in NIS are now brought in question and it may happen that they shall be made by our money. The question is who is responsible for the affected reputation of the company’, Zorana Mihajlovic-Milanovic says. And the list of the responsible is really long.

Kremlin energy comes to Hungary http://www.businessneweurope.eu/story1534/Kremlin_energy_comes_to_Hungary

Derek Brower in London March 31, 2009

Surgutneftegas is to buy a stake in Hungarian oil and gas company Mol, in a move which is raising alarm bells about Russia's ambitions to expand into the downstream of Europe's energy sector and the fate of the EU's cherished Nabucco gas pipeline.

The deal, which sees Austria's OMV sell its 21.2% holding in Mol to Kremlin-friendly Surgutneftegas, surprised the sector – not least because of the price, which at twice the market value suggests a political element, reckon analysts. The €1.4bn transaction is the first major foreign acquisition of Russia's fourth-largest oil producer, which accumulated around $20bn in cash during the recent oil-price bonanza. Surgutneftegas is run by Vladimir Bogdanov, who is thought to enjoy a good relationship with Russia's prime minister, Vladimir Putin, but its ownership structure is opaque, with shareholders thought to include senior Russian officials.

The deal will delight OMV, allowing the Austrian firm roughly to recoup the cost of its aborted attempt to buy Mol outright. The European Commission finally blocked the move in the summer of last year on competition grounds. OMV would not respond to requests for an interview.

Surgutneftegas said the stake was a "serious basis for the start of long-term, mutually beneficial co-operation between our companies and will serve to strengthen European

energy security."

But the move has annoyed Mol and the government, which had colluded to defeat OMV's hostile takeover attempt. In a statement, the company said it had, "always favoured partners providing stable, mutually advantageous cooperation. There have not been, nor are there, any strategic or operational relationships between Surgutneftegas and Mol. Therefore, the intentions of Surgutneftegas, formulated in its statement, are not clear." The company added that it only learned of the deal through press reports.

The official reaction from Brussels to the Surgutneftegas deal was muted. A spokesman for Energy Commissioner Andris Piebalgs told bne that the commission would not get involved. "They aren't buying control of Mol," said spokesman Ferran Tarradellas, indicating that there would be no competition worries from the deal. And he downplayed worries of growing Russian influence in the EU. "You can buy Lukoil oil in Brussels. Aeroflot can buy Ryanair tomorrow. Our market is open to every company that wants to invest."

Gas pipelines

However, that reaction sidesteps the wider implications of the agreement, which could affect Europe's broader energy strategy, say analysts. Given Surgutneftegas' close ties to the Kremlin, the deal will prompt worries about Hungary's position on two rival proposed natural gas pipelines projects in the region. Mol is one of the partners in the Nabucco pipeline consortium to import Central Asian gas to Europe – a project the European Commission says is a "strategic necessity" as the continent seeks to weaken Russia's hold on its gas supplies. But Russia has also courted Budapest to endorse its South Stream project, which would export Russian gas to the region in competition with Nabucco.

Indeed, Surgutneftegas' willingness to pay twice the market value for the stake has raised the spectre of the Kremlin's involvement in the deal. "It looks like there is something else involved," says Chris Weafer, an analyst at Uralsib, an investment bank based in Moscow. "In isolation, it does not make commercial sense." Weafer suggested the deal might be a "favour to OMV," with implications for the South Stream pipeline, which OMV has also endorsed despite heading the consortium to develop Nabucco. Although Surgutneftegas is unlikely to launch an aggressive campaign to secure control of Mol, it will probably seek a blocking minority stake of 25% plus one share, Weafer says. That could affect the company's participation in Nabucco or its attitude to South Stream.

Igor Sechin, head of Russia's oil sector, denied that Moscow had acted in the deal on behalf of Surgutneftegas, which he described as Russia's "best private oil company." Yet any blow to the Nabucco plans could be collateral damage from Russia's broader campaign to consolidate the country's oil exports in the hands of its biggest producers – and preferred traders. That strategy, in place since the Kremlin dismantled the country's once-largest oil firm Yukos in 2004, has seen oil exporters close to the Kremlin, including Surgutneftegas and state-controlled Rosneft, concentrate the bulk of seaborne and overland sales in the hands of favoured trading companies, such as secretive

Switzerland-based Gunvor.

Lukoil has also sought to gain control over crude sales into Germany through the 1.3m barrels-a-day Druzhba pipeline to Central Europe. And in recent weeks, changes made by the Russian energy ministry to the flows along the pipeline have favoured Russia's largest oil exporters, including Surgutneftegas and Lukoil, to the detriment of smaller companies, say observers. The arrival in Hungary of Surgutneftegas may now influence Mol's crude-oil purchasing policy from the pipeline, too.

It will also help meet Russia's ambition to broaden its portfolio of downstream assets in Europe's downstream. The Kremlin was disappointed not to win control of a refinery in Lithuania that once belonged to Yukos, and Lukoil was recently considering a bid for Spanish energy firm Repsol. Last year, it also added a joint venture with Italian refiner ERG to other European assets.

Yet any worries in the EU about the latest transaction – and what it signals about Russia's goals – will reveal, again, the inherent inconsistencies in the bloc's energy strategy. Brussels blocked OMV's bid for Mol, despite implicitly allowing the creation of other large corporate tie-ups in the bloc's utilities sector. Moreover, OMV warned last year that Brussels' move would force the company to sell its stake in Mol to another firm, possibly an expansion-minded Russian one. The EU can't claim that it wasn't warned.

Surgut Pays $1.8Bln for MOL Stakehttp://www.themoscowtimes.com/article/600/42/375798.htm

31 March 2009

By Anatoly Medetsky / The Moscow Times

Cash-flush oil producer Surgutneftegaz broke a self-imposed, decadelong expansion freeze by agreeing Monday to buy 21 percent of Hungarian refiner MOL for the equivalent of $1.8 billion.

OMV, Austria's oil and gas giant, announced that it would pocket 1.4 billion euros ($1.8 billion) — or double the stake's market value — from the sale, following a failed attempt to merge with its Hungarian rival. Surgut, whose cash stockpile has been estimated to exceed its market value, said in a separate statement that it would use the purchase to increase its refining capacity in closer proximity to end customers in Europe.

But the benefits for Surgut were an open question Monday. Just hours after the news broke, MOL poured cold water on Surgut's plan of expanding its reach in Europe. The Hungarian company said it considered Surgut a "financial investor" and that it wouldn't bother with a partnership.

Surgut will replace OMV as the biggest single shareholder in MOL. Even so, its voting rights will be limited to 10 percent under Hungarian law, which also gives the

government a "golden share," or preferential voting rights.

"The purchase of an interest in MOL will be a serious basis for the start of long-term, mutually beneficial cooperation between our companies," Surgut chief Vladimir Bogdanov said in the statement.

MOL rebuffed the offer, however, saying it was not consulted on the deal and learned about the sale from the media.

"There have not been, nor are there, any strategic or operational relationships between Surgutneftegaz and MOL," the Hungarian company said in an e-mailed statement. "Therefore, the intentions of Surgutneftegaz, formulated in its statement, are not clear.

"The board of directors of MOL considers Surgutneftegaz to be a financial investor and does not comment on transactions between ordinary shareholders."

MOL said it would maintain its focus on a partnership with the Croatian oil and gas company INA, in which it owns a blocking stake.

The market was also lukewarm about the deal. Surgut, which would stand to benefit from boosting its refining capacity, will have too little clout at MOL to count on sending any of its oil to the company's refineries, analysts said.

"It doesn't look like this holds any promise for Surgut," said Viktor Mishnyakov, an analyst at UralSib. "MOL always has the chance to say, 'We don't want your oil.'"

Surgut would have better prospects if it had secured the support of the Hungarian government, said Alexei Kokin, an analyst at Metropol.

Despite MOL's frosty reaction, its stock surged as much as 15 percent in Budapest, although it shed most of the gains to finish about 2 percent higher.

Surgutneftegaz shares dropped 3.5 percent at the end of trading on the MICEX, beating the exchange's fall of 6.4 percent. In London, which is the primary market for the stock, Surgut fell.

OMV said it would own no more shares in MOL after the deal, which was conducted by JPMorgan. The Austrian company called the sale a "logical step" after it dropped a takeover bid for MOL in August because of a rejection from MOL's board and objections from the European Union.

OMV called the price "good," saying it corresponded to 19.2 forints (8.2 cents) per share compared with Friday's closing price of 9.9 forints per share. OMV's shares were up almost 3 percent in Vienna.

Surgut, Russia's fourth-largest oil producer, struck the deal after a protracted abstention,

surprising the market. With the exception of licenses and minor assets, it had made almost no oil-industry purchases since 1999, when it announced that it had acquired a blocking stake in oil trader Nafta-Moskva. It has since sold the interest. The strategy set the company widely apart from Russia's other commodities producers, who — encouraged by the state — have been on a buying spree in recent years to convert their profits from a booming market into assets around the world.

"We believe Surgutneftegaz has behaved as if it were not authorized to dispose of its own money," Metropol's Kokin said in a research note released at about the same time that news of the deal broke. "We don't see any circumstances indicating that Surgutneftegaz is going to change that policy."

Kokin said later by phone that it was "the first time … Surgut has dipped into its purse."

Lack of appetite for acquisitions is more surprising given the company's wealth. Surgut held $13.6 billion in cash at the start of last year, according to the latest available company data. Its cash horde may have reached $18 billion at the end of last year, Kokin said in the note.

Metropol said Monday that Surgut's market value was $17 billion.

Surgut's money cushion is so thick that it gave rise to rumors that Russia's heavily indebted oil champion, state-controlled Rosneft, might seek a merger to clear its balance sheet. Both companies have denied such plans, and Energy Minister Sergei Shmatko said last week that a tie-up would not make sense.

It was not immediately clear whether Surgut, which has a notoriously murky ownership structure, would be required to make any disclosures to Hungarian or EU regulators. A Surgut spokeswoman said she was not aware of any potential disclosure requirements.

Although it has economized on industry assets, Surgut hasn't shied away from other interests. In 2007, the company bought 20 percent of the National Media Group, a company owned by businessmen considered loyal to Prime Minister Vladimir Putin.

Lately, however, the company has not been able to turn its healthy financial position into stronger production. After a period of sustained growth, its output began slumping last year, dropping by 4 percent, Kokin said. It will continue sliding at a slower pace through 2018, he said.

Surgut's sole refinery is the giant Kirishi facility outside St. Petersburg, which handles slightly more than one-third of Surgut's oil. It refined 447,000 barrels per day of the company's 1.2-million-bpd output in February, according to data from the Energy Ministry's statistics body.

MOL has a refining capacity of 336,000 bpd, with its own production of 85,700 barrels of

oil equivalent per day in 2008, the company said in a March investor presentation on its web site.

Mol says to continue to pursue own strategy despite OMV-Surgut deal

http://businessneweurope.eu/users/subs.php

bneMarch 31, 2009

Hungarian oil and gas company MOL intends to pursue its own strategy aimed at generating value for the company's shareholders and protecting the interests of other significant parties involved in the MOL Group's sustainable development following OMV's sale of its stake in MOL to Russian oil company Surgutneftegas, MOL announced in a statement published on the website of the Budapest Stock Exchange. MOL's management considers Surgutneftegas to be a financial investor and thus does not wish to comment on the transaction between the Russian company and its Austrian peer. OMV announced on Monday morning that it had sold its 21.2pc stake in MOL to Surgutneftegas for EUR 1.4bn, or HUF 19,212 per share.

Sistema Will Pay $2.5 Billion for Russian Oil Assets (Update4)http://www.bloomberg.com/apps/news?pid=newsarchive&sid=axhZCyonaR4k

By Brad Cook and Maria Ermakova

March 30 (Bloomberg) -- AFK Sistema, billionaire Vladimir Yevtushenkov’s holding company, agreed to pay $2.5 billion for control of Bashkortostan’s main oil producer, as well as three refineries, a petrochemicals plant and an oil-product trader in the Russian region.

Sistema will raise its stake in producer OAO Bashneft to 77 percent from 25 percent and take majority interests in the Ufaneftekhim, Ufimskiy NPZ and Novoil refineries, the company said today in a statement. Sistema will increase its holdings in trader Bashkirnefteprodukt and the Ufaorgsintez petrochemicals plant to 73 percent apiece.

Energy industry investors are considering acquisitions as tumbling crude prices and sliding equity values make assets more affordable. The number of global oil and gas mergers and takeovers climbed 51 percent to 2,134 last year, Freshfields Bruckhaus Deringer said earlier this month.

Bashneft, which accounts for 3 percent of Russian oil output, is “a mature asset, which generates serious cash flow,” said Evgeny Golossnoy, an analyst at Troika Dialog in Moscow who has a “buy” recommendation on Sistema shares. “Prices for assets are falling now, and it’s the most favorable time for acquisitions.”

Sistema rose 18.2 kopeks to close at 7.539 rubles in Moscow trading.

Loan Agreement

The Moscow-based company agreed to take a $2 billion, seven-year loan from VTB Group, backed by shares in the acquired companies and a 17 percent stake in Russia’s OAO Mobile TeleSystems, according to a Web site presentation. Sistema is in talks with local and foreign banks to borrow another $1 billion, spokeswoman Yulia Belous said today by telephone.

Sistema will raise its stakes in the Ufaneftekhim, Ufimskiy and Novoil refineries to 66 percent, 78 percent and 87 percent, respectively. The three plants make up 10 percent of Russia’s oil refining, while Ufaorgsintez is the nation’s largest producer of synthetic ethyl spirit, according to Sistema. Bashkirnefteprodukt supplies oil products in the Volga region.

Sistema will pay $2 billion when the transaction is completed and another $500 million on a “deferred basis” after 14 months, according to the statement. It will offer to buy out minority shareholders in the Bashkir energy companies.

Sistema’s debt will increase to $12.6 billion from $9.4 billion, the presentation shows.

The acquired companies will require funding of about $1 billion over five years, Sistema Chief Executive Officer Leonid Melamed said on a conference call.

Sistema doesn’t plan to buy or sell assets after completing the Bashkir transaction, owner Yevtushenkov said today in an interview. “Let’s sleep with one at a time,” he said after a meeting of the Russian Union of Industrialists and Entrepreneurs in Moscow.

To contact the reporters on this story: Brad Cook in Moscow at bcook7@bloomberg.net; Maria Ermakova in Moscow at mermakova@bloomberg.net

Last Updated: March 30, 2009 11:50 EDT

30.03.2009

Integra Group, Rosneft Subs. Ink $153 mln Dealhttp://www.oilandgaseurasia.com/news/p/0/news/4410(Integra) - Integra Group, a leading Russian independent provider of onshore oilfield services, announced that it has signed a one-year integrated project management (IPM) agreement with Vankorneft, a Rosneft subsidiary. The agreement covers construction of wells, as well as cementing, directional drilling and other technology services at the Vankorskoye field in Eastern Siberia. The contracts were signed by Integra Group’s subsidiary Smith Production Technology.

Integra Group has more than three year previous experience of working with Rosneft at the Vankorskoye field offering general contractor and integrated management solutions with total volume of provided services already exceeding RUB 5.2 billion (US$ 153

million).

Commenting on the deal Lev Goldenberg, Integra’s Executive Vice-president for Drilling, Workover and IPM, said:“We have a successful track record of working with Rosneft at the field since 2006. This particular contract, which amounts to over RUB 3.4 billion (US$101 million), would be considered a success in the past booming years, in the current challenging market environment it is a major achievement.”

“We appreciate Rosneft’s business and their high regard for the quality of our services and our facilities in general and will take every effort to execute this contract in the best possible manner.”

Volga Gas Underscores Uzenskaya Wells' Crude Oil Reserves Volga Gas PLC 3/30/2009URL: http://www.rigzone.com/news/article.asp?a_id=74499Volga Gas, which currently holds four subsoil licenses in the Volga Region of European Russia, has provided an update on supra-salt activities drilling in its Karpenskiy License Area.HighlightsC1 and C2 recoverable oil reserves of 14 million barrels approved on the Uzenskaya by the State Committee of Reserves.Well Uz#5 was hooked up to the facilities and produces ~400 bbls a day with 6 mm choke.Well Uz#6 is still drilling but the principal target reservoir appears to be absent.Well Uz#7 exploration spudded on the East Uzenskaya prospect.Uzenskaya Reserves ClassificationRussian category C1 and C2 recoverable reserves have been calculated following the results of Uz#3 and Uz#4 wells and approved at State Reserves Committee as follows:Crude Oil ReservesC1 Recoverable 0.983 million tonnes (7.37 million barrels)C2 Recoverable 0.886 million tonnes (6.51 million barrels)Total C1/C2 1.869 million tonnes (13.88 million barrels)Uzenskaya Drilling UpdateWell Uzenskaya#6 was spudded in February 2009 targeting the principal Cretaceous reservoir, which is productive in the Uz#3, Uz#4 and Uz#5 wells. The well has reached its target depth of 1,100 meters without encountering the anticipated reservoir. Testing of other layers is ongoing.Meanwhile the Uzenskaya#7 exploration well was spudded in March and is expected to complete during April. The well is being drilled on the East Uzenskaya prospect on a location approximately 7km east of the main Uzenskaya field processing facilities.Mikhail Ivanov, Chief Executive of Volga Gas commented, "Following three very successful well results on the Uzenskaya field, all of which are now in production and producing at a daily rate of 1,200 barrels of oil per day; Uz#6 was clearly a

disappointment, however, we do not expect the well result to have a significant impact on the reserves reported today."The Russian C1/C2 reserve classification we have been given reflect principally the success with the Uz#3 and Uz#4 wells. We are hopeful that the Uz#5 well will convert some of the C2 reserves into C1 reserves."

Gazprom

Gazprom sees 2009 gas exports falling to 140 bcmhttp://www.reuters.com/article/rbssOilGasExplorationProduction/idUSLV27507320090331

Tue Mar 31, 2009 4:35am EDT

ST PETERSBURG, Russia (March 31 ) - Russia's gas export monopoly Gazprom GAZP.MM said on Tuesday it expected its gas exports to fall to 140 billion cubic metres (bcm) in 2009, down from 179 bcm last year.

Gazprom's deputy chairman Alexander Medvedev also said that the average export price will be around $260 per 1,000 cubic metres (tcm), dowm from Gazprom's previous forecast of $280 per tcm.

"We forecast (exports) at 140 bcm, while th average price forecast is around $260 per 1,000 cubic metres," Medvedev told reporters. (Reporting by Denis Pinchuk, writing by Tanya Mosolova)

Russia Gazprom to place at least CHF 200 mln in noteshttp://uk.reuters.com/article/oilRpt/idUKLO16205220090331

Tue Mar 31, 2009 6:24am BST

MOSCOW, March 31 (Reuters) - Gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research) plans to place a eurobond with a minimum volume of 200 million Swiss francs with a yield of around 9 percent, a banking source told Reuters on Tuesday.

BNP Paribas is a bookrunner and books will be closed Thursday, the source said.

Gazprom, Russia's most indebted company with consolidated outstanding debt of $60 billion, most recently tapped the market in July 2008 with a $500 million five-year bond priced at 7.51 percent yield.

(Reporting by Dmitry Sergeyev, editing Alfred Kueppers)

Gazprom Sells Russia’s First Foreign Bonds Since Georgian War

http://www.bloomberg.com/apps/news?pid=20601095&sid=aIekgiaboulA

By Denis Maternovsky

March 31 (Bloomberg) -- OAO Gazprom, the world’s biggest gas company, is selling bonds in Swiss francs, becoming the first Russian company to offer debt to international investors since before the country’s war with Georgia last August.

State-run Gazprom hired BNP Paribas SA to raise at least 200 million Swiss francs ($174 million) selling two-year securities that yield about 9 percent, according to a banker involved in the deal, who decilned to be identified because the transaction is private. The sale is scheduled to close April 2.

Russian companies are seeking to refinance about $100 billion amid the country’s first economic contraction in more than a decade. The government halted a $50 billion bailout program in February after dispensing just $11 billion, saying companies should work with domestic commercial banks instead of the government to meet their international obligations.

Gazprom, which supplies a quarter of Europe’s gas, has $27 billion of bonds outstanding, including $1.2 billion due this year, according to Bloomberg data.

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

Last Updated: March 31, 2009 03:56 EDT

Gazprom employees investigated for corruptionhttp://businessneweurope.eu/users/subs.php

Alfa, RussiaMonday, March 30, 2009

Vedomosti this morning reports on a legal investigation into a gray scheme set up by a group of six employees of Gazprom and Novatek that allegedly funneled gas purchases by Gazprom from Novatek through an intermediate company. The reported cost to Gazprom was appraised at as much as R2bn (~$60m at today's exchange rates) over several years. While the amount by itself can be dismissed as immaterial for the overall company, it only reinforces the general perception of high corruption inside the monopoly. There is a silver lining here, however: Any serious cost savings efforts at the company would necessarily require a crackdown on corruption, among other measures, holding out some (small) hope that this action by the prosecutor's office is the first step of such a program.

TURKMENISTAN: INTERNATIONAL TENDER FOR CASPIAN PIPELINE SPUR OPENS, GAZPROM MUST COMPETE

http://www.eurasianet.org/departments/news/articles/eav033009c.shtml

3/30/09

Turkmenistan has launched an international tender for the construction of a pipeline that Gazprom had once considered a done deal. The move highlights increasing friction between Ashgabat and the Kremlin on energy issues.

The tender for the East-West spur, which should link Turkmenistan’s vast gas deposits with the Moscow-controlled Prikaspiiski pipeline network, had to date only been associated with the state-owned Russian gas giant. Now, Gazprom will have to place a bid and compete against other international companies.

The 600-kilometer spur is estimated to cost roughly $1.5 billion. In 2008, Gazprom pledged to finance the project using its own funds, but Russia’s economic woes have hit the gas giant especially hard. [For background see the Eurasia Insight archive].

Following the failure of Turkmenistan and Russia to ink a deal earlier in March during an official visit to Moscow by President Gurbanguly Berdymukhamedov, Russian media outlets have speculated that Russian officials are now worried that Ashgabat might try to double-cross the Kremlin.

A source in Ashgabat told the Vremya newspaper on March 30 that "the Turkmen leader did not want to give the Kremlin assurances that the infrastructure will be used only to increase exports to Russia through the planned [Prikaspiiski] gas pipeline. And Moscow did not want to sign [away] billions in investment, given the high risk of shifting some or even the entire volume of gas in the Trans-Caspian gas pipeline [outside of] Russia."

According to the tender, companies may compete to design and construct the spur which is being billed as between 800 and 1,000 kilometers in length. "This project will have significant positive impact on economic and political processes in different regions of the world, in addition to the obvious commercial benefits for participants as well as potential consumers," the Turkmen state news agency commented March 27.

Gazprombank lends out 553 bln rubles amid crisishttp://www.interfax.com/3/483527/news.aspx

MOSCOW. March 31 (Interfax) - Gazprombank has provided 553 billionrubles of support to other lenders and the real sector of the economyduring the economic crisis, the Audit Chamber said following an audit ofhow the bank used state funds, including money from the National Welfare

Fund, intended to bolster the banking system and real economy amid thecrisis in 2008 and the period since the start of 2009. Gazprombank received 543 billion rubles from the Central Bank andFinance Ministry in September-December 2008 as part of measures tosupport the financial system and real economy, the Audit Chamber said. Gazprombank, as one of the country's backbone lenders, providedsupport to a number of other banks in order to maintain sufficientliquidity for them to meet financial obligations to clients, using statefunds received under the government's anti-crisis measures, the watchdogsaid. The Audit Chamber board has decided to send an informational letteron its findings to the government and Central Bank, and a report on theaudit to the Federal Assembly.

Vedomosti

Gazprom to strip Europe of other gas sources

http://en.rian.ru/analysis/20090330/120822831.html

Russian energy giant Gazprom has dealt Europe a new blow: starting in 2010, the monopoly is ready to buy all available gas in former Soviet republics.

On Friday, Gazprom and Azerbaijan's state oil company signed a memorandum on talks to sell Azeri gas. Deliveries to the Azerbaijan-Russia border are to begin in January 2010. Starting this year, Gazprom has adopted the European price formula for Central Asia ($340 per 1000 cu m in the first quarter, according to Prime Minister Vladimir Putin; Gazprom sold it to Europe for $400).

This will be a long-term contract, with European-formula prices pegged to an oil product basket, says a Ministry of Energy official. He is confident that Europe will not offer Azerbaijan a better price: the 200-km Baku - Novo-Filya pipeline is sitting idle. It needs an upgrade, but this is no problem, he believes; Russia has serious intentions, the talks have been going on since last summer, so this is not a demarche against the joint Ukraine-EU declaration to modernize the Ukrainian gas transportation system, which Russia was not invited to sign.

Azerbaijan is the last gas exporter among the former Soviet Union countries, with which Russia has no contract (all Ukraine's output, or 20 billion cu m, is consumed domestically). The offer to Azerbaijan was made in June 2008: Gazprom said that it wanted to purchase gas from the second stage of the Shah Deniz project (design capacity 16 billion cu m a year).

The European Union had looked to Azerbaijan as an alternative to Russia to fill the future Nabucco gas pipeline (the Iranian option looks so far doubtful for political reasons).

The most expensive gas from Gazprom's new projects (Shtokman and Yamal) will be cheaper than that from Central Asia and Azerbaijan, even if its production costs are three times as high as now, said Mikhail Korchemkin, director of East European Gas. Gazprom sells 550 billion cu m annually, and if it continues to purchase 10% to 20% of its gas at this price, it will lack money for new projects.

No alternative to South Stream through Serbia – Gazpromhttp://bsanna-news.ukrinform.ua/newsitem.php?id=8692&lang=en

BELGRADE, Mar 30. (Tanjug). Deputy Chairman of the Board of Executive Directors of Russian energy company Gazprom and Director-General of Gazexport Alexander Medvedev has said that the route of the South Stream gas pipeline through Serbia is a priority for Russia and Gazprom and that a route through Romania is not being considered as an alternative.

Medvedev expects technical preparations for the project to be completed by the end of this year for all involved countries, and said that research has been requested for the section from Russia to Europe, to be followed by steps concerning the transit of gas to consumers.

South Stream will be completed by the end of 2015 and pipeline capacity will be increased from 30 to 47 billion cubic meters, he said in an interview to Novosti daily.