Russia expects EU to lift quotas on Russian grain

Russia expects the EU to lift quotas on Russian grain, Agriculture Minister Alexei Gordeyev said Thursday.

"There will be a grain deficit and they will have to make the grain market more liberal," Gordeyev said commenting on the drought in Europe that is threatening to ruin crops.

The EU quota on grain imports from Russia is currently 1 million tons. President of the Russian Grain Union Arkady Zlochevsky said Russia could export 4 million tons of grain to Europe.

Minimal exports of food wheat may total 1.2 million tons, forage wheat - 2 million tons and forage barley - 1 million tons, he said.

Minister Gordeyev said that Russia's total export potential in 2006 is 8-9 million tons of grain.

Source: RIA Novosti

Russia to Publish Data on Platinum Group Metals

Russian mining and metals giant Norilsk Nickel said on Thursday, June 30, that it had finally obtained long-awaited government approval to disclose data on its platinum group metals. “The government authorization has been granted,” Norilsk’s co-owner and chief executive Mikhail Prokhorov was quoted by Reuters as telling an annual shareholders meeting. He did not say when the disclosure would take place.

In March, as MosNews reported, Russia’s President Vladimir Putin signed a decree that authorized disclosure of data on output, sales, stocks and reserves of platinum group metals by private producers. Up until that point such information, as well as information on diamond reserves, was considered to be a state secret. After the publication of the decree several government ministries had to amend their own lists of classified information before authorizing disclosure.

Norilsk Nickel is the world’s top producer of platinum group metal palladium, used mainly in catalytic converters to clean auto exhaust gases, and an important player on the platinum market. In March, Norilsk said it might first unveil output, sales and stocks data, and disclose reserves at a later stage after completing an audit. Prokhorov told the meeting that the audit of the PGM reserves had already started.

Source: Mosnews

Ernst & Young: Russia is second most investment-attractive country in Europe

Russia is the second most attractive country in terms of direct investment in Europe, according to Ernst & Young's annual research measuring countries' attractiveness in terms of investment.

The company referred to Mark Jarvis, Managing Partner (CIS), who said China had undoubtedly influenced the overall amount of direct investment into Europe and the BRIC (Brazil, Russia, India, and China) markets, while Russia followed Poland, ranked number two in investment attractiveness in Europe.

Given Russia's huge capabilities and growing stability, the country could well outdo Poland, Jarvis said.

The company surveyed more than 650 members of the international business elite when it conducted research from March-April of this year.

It also referred to The Ernst & Young European Investment Monitor database, created in 1997 to monitor investment activities and regional development, and to Oxford Intelligence information source.

Source: RIA Novosti

Russian-U.S. cooperation necessary for combating international terrorism

It is impossible to counter international terrorism efficiently without the close cooperation of Russia and the United States, an expert said Thursday.

"The threat of terrorism is formidable, and our common achievements have so far been too small to provide an adequate response to this terrible problem. This is why there is still plenty of room for deepening and expanding our cooperation with the U.S. in this area, said Andrei Kokoshin, chairman of the Russian State Duma (parliament's lower house) Committee for CIS Affairs and Russian Diaspora Relations.

"I firmly believe that unless there is adequate Russian-U.S. interaction, the global community as a whole will not be able to cooperate effectively," he said. "There is ample evidence that terrorists in various countries are trying to obtain weapons of mass destruction. Preventing this must be a constant concern for international cooperation, particularly between Russia and the United States."

Kokoshin said that the Collective Security Treaty Organization (CSTO), which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan, proposed to develop cooperation with NATO on the fight against terrorism, but proposals still did not receive the necessary support in the West.

"Joint efforts by the U.S. and Russia, NATO and the CSTO are of paramount importance to deal with the situation in Afghanistan, which has again become a cause of growing concern for Russia and fellow CSTO members. I think that we in Russia and our CSTO partners have a better understanding of developments in that region than our Western partners in the international anti-terror coalition," Kokoshin said.

Source: RIA Novosti

Russian youth have more positive worldview than Europeans

A new poll by BBDO Moscow analyzing the worldview of youth from nations across Europe has found that Russian youth are more optimistic than their European counterparts, Rossiiskaya Gazeta, a government daily, reported.

The research focused on what young people from Russia, the Czech Republic, France, Germany, Spain, Britain, Italy and Sweden, aged 18-31, want from life.

Only 46% of young Europeans think their lives will be better than those of their parents, but 79% of young Russians expect their lives to improve over those of their parents.

The majority of Russian youth, 93%, say they have clear goals in life, which is a staggering percentage in Western Europe, where the biggest percentage of youth to answer the same was 80%.

Both 82% of Russians and 80% of Europeans are willing to fight for something in which they believe. Russian youth are almost twice as willing to take up arms to defend their country than European youth, with 64% of young Russians saying they would be willing to use weapons in comparison to 34% of European youth.

European youth are looking forward to retirement - 45% say that they would like to earn money and retire as early as possible, but only 13% in Russia say the same. This in part, could mean that a generation of workaholics is about to come into its own in Russia. It could also be attributed to Russia's actively developing market of goods and services that ensure comfortable work conditions.

Only 22% of Russian youth intend to live abroad within the next ten years, but 34% of young Europeans have the same intentions.

Source: RIA Novosti

Malaysian company to assemble cars in Russia

Malaysia's largest car manufacturer, Proton Holdings Bhd, plans to launch production on Russian territory, following other carmakers like Renault, General Motors, Daewoo, BMW and Toyota, Vremya Novostei, a daily, reported.

"We hope to open our office by the first quarter of 2006," said Haris Fadzilla Hassan, head of the company's strategic-planning department.

The company first plans to export its latest models, the Gen-2 and the Waja, one of the most popular Malaysian cars, to Russia. It will then subsequently assemble cars in Russia.

Russia will receive the first batch of cars as payment for the Sukhoi warplanes it is currently exporting to Malaysia.

The first several thousand Malaysian cars are to arrive in Russia this September. The main shipment will follow sometime in January or February, if initial sales prove successful.

Proton said it chose Russia for its economic stability and current forecasts for greater local car demand.

Proton turns out 380,000 cars per year, mostly selling them in Singapore, Britain and the Middle East. The company implements knock-down assembly programs at its several enterprises in Iran and Indonesia. It is also in the negotiating process with Beijing.

Russian experts explain Proton's active expansion by its reduced domestic-market share, due to foreign carmakers' aggressive policies.

The company's Malaysian-market share shrank from 60% to 44% last year.

Source: RIA Novosti

Heineken buys one of Russia's last independent breweries

Heineken recently filed a request with the Federal Antimonopoly Service on the acquisition of Stepan Razin brewery in St. Petersburg, an official at the service told Vedomosti, a leading business daily.

The talks between Heineken and Stepan Razin's owners have reached the final stage, said a source close to the deal.

The brewery is a highly attractive asset for strategic investors. "There are enterprises on the market that might be ready for sale, but their low production volumes do not interest big investors," said Vyacheslav Mamontov, chairman of the Executive Board of the Union of Russian Brewers.

Heineken started working on the Russian market in St. Petersburg three and a half years ago. In 2002, it bought a local brewery, Bravo, from two Icelandic businessmen for $400 million. In the past six months, it has bought Patra (Yekaterinburg), Shikhan (Sterlitamak), Volga (Nizhni Novgorod), and Sobol Beer (Novosibirsk), spending a total of about $170 million, analysts say.

Experts believe that Heineken wants to become firmly established on Russia's second most attractive market, St. Petersburg. Stepan Razin is the unquestionable leader of the city's beer market, where it holds about 31%. Even Baltika, Russia's biggest brewery, controls only 20% of the St. Petersburg market. The city accounts for 7% of the beer sales in Russia.

Vedomosti cites a research company, Biznes Analitika, as saying that Stepan Razin controls 2.8% of the nationwide beer market, and Heineken controls 8.6%.

Source: RIA Novosti

Central Bank Ruble Exchange Rates

1 Australian Dollar 21.8920
1 British Pound Sterling 51.8199
1000 Belorussian Rouble 13.3038
10 Danish Krone 46.5197
1 US Dollar 28.6282
1 EURO 34.6258
100 Iceland Krona 43.8881
100 Kazakh Tenge 21.2090
1 Canadian Dollar 23.2996
10 Norwegian Krone 43.7606
1 SDR 41.7726
1 Singapore Dollar 17.0112
1 New Turkey Lira 21.3325
10 Ukrainian Hryvnia 56.7558
10 Swedish Krona 36.6511
1 Swiss Franc 22.3815
100 Japanese Yen 25.9996

NASA to pull out of International Space Station?

The International Space Station seems set to become a purely Russian venture.

Despite declarations to the contrary, it seems that the United States is likely to pull out in the near future.

Europe may retain its interest, however, as the European Space Agency (ESA) plans to send its Jules Verne Automatic Transfer Vehicle (ATV) to the ISS.

In the two months since new NASA Administrator Michael Griffin was appointed, the United States has given virtually no assurances of its continued commitment to the ISS. On the contrary, Griffin told USA Today on June 22 that the NASA would not be able to fulfill all of its previous commitments on completing the program.

NASA is unlikely to withdraw from the ISS immediately, but it may do so more gradually. The long-awaited first space-shuttle flight since the Columbia disaster of February 1, 2003, is unlikely to change anything. Experts say shuttle flights will not help the ISS much, because 28 flights are not enough. In short, currently nothing is up for discussion.

Moreover, it seems that NASA has failed to meet all safety recommendations made since the Columbia tragedy, according to a 26-member task force headed by former astronauts Richard Covey and Thomas Stafford.

Only 12 out of 15 accident-avoidance modifications have been introduced into the Discovery shuttle's design. The orbiter itself is not yet strong enough, and NASA has been unable to eliminate the possibility of ice, foam and other materials breaking off from the main fuel tank and inflicting considerable damage. Finally, there is no system for making sophisticated in-orbit repairs.

For Russia, such circumstances are nothing new, and it seems that the country will have to fly ISS resupply missions once again.

Late last year, Federal Space Agency head Anatoly Perminov said the FSA was looking into ways to implement the program on its own. His deputy, Alexander Medvedchikov, said in early June that Russia could sustain the ISS using Kliper spacecraft, currently in development, if the United States quits the program.

"As you know, we are also looking into the future," he said. "Russia is developing the Kliper reusable spacecraft. This is why we will be ready, if something happens, and if the United States withdraws from the program."

Source: RIA Novosti

UES AGM results are a positive for portfolio investors

Power monopoly UES held its annual shareholders meeting (AGM) in Zelenograd, Moscow region, on June 29. The issues on the AGM agenda were to approve the 2004 annual financial statement, 2004 dividends, amend the holding’s charter and elect a new BoD.

According to Interfax, UES shareholders voted to install on the BoD 10 state nominees and one representative from each of the strategic investors: Gazprom, ESN, SUEC, Interros, and also a representative of portfolio investors – Seppo Remes, head of consulting firm KIURU Partners.

We believe that Remes took the BoD position thanks to joint support from aluminum giants – Sual, Basic Element and Gazprom.

It is noteworthy that last year the power monopoly’s board saw only representatives of strategic investors and portfolio investors were considered to have quite a meagre chance of gaining BoD seats in 2005. Thus, taking a spokesperson of portfolio investors on board is viewed as a positive, but not only for a large group of portfolio investors, but also for Western strategic investors.

The point is that earlier Seppo Remes worked at Finnish energy concern Fortum, the largest minority shareholder of Lenenergo (30%). At present, Fortum is virtually the only Western strategic investor in the Russian utility industry which has expressed its dissatisfaction with Lenenergo’s restructuring on numerous occasions.

We are of the opinion that the power holding’s new BoD could dispel downbeat sentiments on the part of foreign strategic investors, while the guaranteed investment mechanism approved by UES’ Board of Directors could be another incentive for drawing long-term investments into the domestic power industry.

At the June 29 AGM the power concern’ shareholders approved FY2004 dividends of $0.002 per common and $0.008 per preferred shares. Given the holding’s current stock quotes, the dividend yield came to 0.65% on common shares and 2.62% on preferred shares.

For the record, at an April meeting UES BoD approved the timeframe for dividend payouts: until December 1, 2005, with a cutoff date of May 10, 2005.

We reiterate our Hold recommendation on UES stocks with a fair price of $0.30 per common share.

Russian, Chinese leaders to discuss high-tech cooperation

The Russian and Chinese leaders will meet in Moscow on July 1 to discuss ways to step up cooperation in the high-tech sphere, particularly reciprocal equipment shipments, a Kremlin official said Thursday. "Russia is becoming an increasingly important market for China's equipment, telecommunications, consumer electronics, electrical appliances, cars, and industrial equipment," he said. Russia, for its part, is interested in increasing exports of equipment for nuclear and other power plants, civil aircraft, the mining industry and other kinds of equipment to China.

"Cooperation in the sphere of environment protection deserves particular attention," he said.

The official said monitoring water bodies, establishing nature reserves, protecting forests and other biological resources in border areas were among the top priority areas of cooperation for the two countries.

Economic cooperation remains a crucial issue in bilateral relations.

Last year, bilateral trade predictably exceeded the figure of $20 billion set by the presidents. This year, commodity turnover has also been dynamic.

The Kremlin official said Russia and China had advanced considerably in cooperation in the sphere of high technology and innovation, and in the banking sector. Russia and China's business communities have displayed growing interest in joint projects.

The two countries have begun drafting a medium-term program to intensify bilateral trade and economic cooperation for the period from 2006 to 2010.

Russia and China have embarked on a series of major projects to attract Chinese investment into the Russian economy that were outlined at a bilateral investment forum in Khabarovsk, Siberia, last year.

An investment forum in St. Petersburg on June 9-10 this year provided further incentives for investing in Russian regions, particularly, European ones.

Source: RIA Novosti

Russia's international reserves up $2.7 bln

Russia's international reserves set new record and equalled $149.6 bn. as of June 24, 2005, against $146.9 bn. as of June 17, 2005, announced The External and Public Relations Department of the Bank of Russia.

Russia rebuffs criticism on its nuclear cooperation with Iran

Russian Foreign Minister Sergei Lavrov Wednesday lashed out against assertions that Russia is helping Iran acquire nuclear weapons, the Interfax news agency reported.

"All assertions that Russia is facilitating the acquisition of nuclear weapons by Iran are absolutely unfounded," Lavrov said in an interview with the Lebanon-based al-Watan al-Arabi magazine.

"Russia and Iran so far have no other nuclear energy projects except the Bushehr nuclear power plant," Lavrov said, emphasizing that according to a fuel supply deal signed by Moscow and Tehran earlier this year, Iran must return the plant's spent nuclear fuel to Moscow.

"Our cooperation with Iran, which is under the supervision of the International Atomic Energy Agency, is absolutely transparent, " Lavrov said.

Asked whether Moscow agrees with allegations that Iran will acquire a nuclear bomb in the next few years, the top Russian diplomat answered: "The question is incorrect."

"If we knew that Iran had such a plan, we would never cooperate with them in the nuclear sector," he said.

The United States has accused Iran of using a civilian atomic energy program as a cover to seek nuclear weapons and pushed for Tehran's nuclear case to be referred to the UN Security Council.

Iran has categorically denied the charge, insisting that its nuclear research is only for peaceful purposes.

Being built with Russian help in Iran's southern port city of Bushehr, Iran's first nuclear power plant is slated to begin operations in late 2006 and will generate 1,000 megawatts of electricity.

Source: People's Daily Online

Russia increase oil output

Russia will increase oil output to 500 million metric tons a year in the near future, said Igor Shuvalov, a Russian presidential aide.

After Euro-Atlanticism

MOSCOW. (Vladimir Maximenko, for RIA Novosti.) - The recent meeting in Vladivostok of the foreign ministers of Russia, China, and India, and the appearance of Henry Kissinger's article "China: Containment Won't Work" in The Washington Post are linked by the approaching "decline of Europe" that they both symbolize.

Sergei Lavrov met with Li Zhaoxing and Natwar Singh in Russia's Far East, a strategically important geopolitical region of North East Asia. Singh's declaration at the meeting that the three countries could overhaul the world order more or less reflected the overall feelings of the three giants of the "Eurasian Triangle."

Since the disintegration of the Soviet Union as a Eurasian power in late 1991, all US administrations have followed Zbigniew Brzezinski's doctrine of the "Grand Chessboard" (1997). According to Brzezinski, whether the United States can prevent the emergence of a dominant and opposing Eurasian force will determine its ability to maintain global leadership. The administrations of Bill Clinton and George W. Bush both produced a U.S. geo-strategy for Eurasia that essentially stipulated the preventive disintegration of the Eurasian space. However, the United States has failed to assert its new style of hegemony, based on the doctrine of Euro-Atlanticism.

Washington has proposed pre-emptive strikes and subsequently implemented them in Afghanistan and Iraq, but the United States is now racing against time. Washington's neo-conservatives used the mythical "axis of evil" to link vital strategic points in southern Eurasia such as the area between the Tigris and the Euphrates rivers, the Iranian plateau and the Korean peninsula. Moreover, this geopolitical vector crossed the territory of two major nuclear powers, namely, India and China. Combined with the neo-conservative "global democratic revolution," this was a major mistake.

The doctrinal "axis-of-evil," the export of "global revolution", as well as clumsy attempts to discriminate against non-nuclear countries, have yielded diametrically opposite results to those anticipated by the current US Administration and promised to the people of America. North Korea officially announced in February 2005 that it possessed nuclear weapons. Iran's main political forces have rallied confidently around the national nuclear program, while Iran's main regional adversary, Israel, has an estimated 75 to 200 nuclear warheads, or as many as India and Pakistan combined. This only serves to bolster Iranian nuclear nationalism.

It seems that this neo-conservative (U.S.-Israeli) global project has failed. Consequently, some in the West are inclined to "brainwash" the public in line with George Soros' methods. Soros, writing recently in Der Standart (June 20, 2005), apparently believes that the world order has virtually ceased to exist. Other people, including Henry Kissinger, are trying to implement a more constructive line in the new post-Euro-Atlanticism era.

French President Jacques Chirac equated his country's rejection of the European constitution during the May 29 referendum with Europe's demise. It is unclear whether such parallels can be drawn, but one thing is obvious: The Bush Administration's neo-conservative line has resulted in the demise of Euro-Atlanticism, a geopolitical structure created by Anglo-Saxon elites for more than 60 years since the signing of the Atlantic Charter by Franklin Roosevelt and Winston Churchill on August 18, 1941.

In his January 2002 state of the nation address, Bush said that "time is not on our side." This phrase helps explain the behavior of Washington's neo-conservative lobby in the last few years. In his book "The End of the American Era," also published in 2002, Charles A. Kupchan shows that part of the U.S. establishment is inclined to discard that utopian uni-polar concept and instead to prepare the United States for a multi-polar world order with several centers of power in line with a new grand strategy. In fact, the United States has lacked such a strategy since the collapse of the Soviet Union.

Kissinger's article on China and containment says that "the center of gravity of world affairs is shifting from the Atlantic, where it has been lodged for the past three centuries, to the Pacific." A hundred years ago, after the Russian-Japanese war, Russian geographer A.I. Voyeikov also discussed this concept in his booklet "Will the Pacific Ocean Become the World's Main Trade Route?" Voyeikov had been academic supervisor of the 1890-1891 grand Oriental tour of Russian Crown Prince Nicholas, later Emperor Nicholas II.

Kissinger, who has a reputation for skilful behind-the-scenes negotiations, is discussing this old issue once again. The U.S. establishment is unanimous that China's rise as a superpower will decisively influence the future system of international relations. This dovetails with Kissinger's idea that the center of gravity of world affairs will shift to the Asia-Pacific region.

On December 2 last year, Henry J. Hyde, Chairman of the House International Relations Committee, delivered his report "Hong Kong, China and the World" at a luncheon organized by the Heritage Foundation in Hong Kong. Hyde's report shows that some US politicians are tempted to turn Hong Kong into a staging area for spreading yet another "color revolution" to China. Kissinger warns energetically that this should not be done.

In his article, Kissinger apparently wants to see whether the Eurasian Big Three meeting in Vladivostok can yield real, rather than symbolic, results. The answer to this question is still unclear. Kissinger, who shaped detente in the 1970s, is well aware that the answer to this question, and not U.S.-China relations, "may well determine whether our children will live in turmoil even worse than the 20th century's or will witness a new world order compatible with universal aspirations for peace and progress."

Vladimir Maximenko is senior research associate at the Russian Academy of Sciences' Institute of Oriental Studies.

Russia Vital to G8 for Economic Stability - Kremlin

A top Kremlin adviser has denied leaders of the Group of Eight objected to having Russia in their ranks, and said Moscow was vital to the other seven members for guaranteeing the stability of economic development.

Igor Shuvalov, President Vladimir Putin’s G8 liaison, said yesterday that although Russia was only the 16th largest economy in the world, its role as a top energy producer made it an “absolutely necessary partner”.

“We are as necessary to the G7 as they are to us,” Shuvalov said. Some members of the US Congress have proposed excluding Russia from the G8 for backtracking on democracy, but Shuvalov said G8 leaders were united in their desire to preserve Russia’s membership.

The leaders have their differences, he said, “but in general their attitude toward our country and our president are very positive.”

Source: Scotsman.com

Daily Review. 29th June, 2005

Wednesday’s trading session kicked off rather upbeat on a recovery of American markets which bolted up on easing crude oil prices (-4%). On the other hand, a growth deterrent for the domestic market was the Fed’s meeting (slated to last until June 30) at which the rate hike issue again tops the agenda. Given that the US Trade Department came out with Q105 economic growth figures above the market’s expectations, we are looking for interest rates to be upped by another quarter of a percentage point to 3.25%. However, investors will be mainly interested in hearing the Fed weigh in on the balance of the current tug-of-war between inflationary risks and a possible slowdown in the pace of economic growth.

Of the most notable corporate events, we note yesterday’s AGM of UES, at which the composition of the BoD was determined for the coming year. The main intrigue was the number of sets held by Gazprom, which owns 10.6% of the power holding’s shares. On the upside, the government submitted a draft document for setting a mechanism to guarantee investments in the power holding. UES shares were lackluster on the AGM and ended up slightly in the black.

The list of RTS decliners was as follows on Wednesday: Lukoil (-0.36%), Surgutneftegaz (-0.94%), Rostelecom (-0.99%). On the other side of the spectrum, UES (+0.17%), NorNickel (+0.17%) and Sibneft (+0.31%) closed in positive territory. The RTS Index finished down 0.08% to 698.40 with light volumes totaling $10.4 mln.

MICEX blue chips were more bullish yesterday. The list of advancers included NorNickel (+0.03%), Sberbank (+0.4%), Tatneft (+0.6%), Mosenergo (+0.9%) and Sibneft (+1.2%). The losers ended up within a band ranging from UES (-0.07% ) to -0.76% (Surgutneftegaz). The MICEX Index advanced by 0.16% to 630.27 on average volumes amounting to $885.44 mln.

Meanwhile, Gazprom continued to correct down on SPICEX, shedding 0.37% to Rub 82.67 with 8.1 mln shares changing hands.

Russian government intent on staged inflation reduction - finance minister

The Russian government aims to ensure the ruble's moderate appreciation, slow inflation to 8% in 2006 and 5.5% in 2008 (10% in 2005) and full foreign exchange liberalization, Russia's finance minister said today at a meeting with major international investment companies.

"Russia will maintain positive growth rates at 5.5%-6% per annum in the next three years," Alexei Kudrin told representatives of thirteen leading investment corporations who had arrived in Moscow on the invitation of state-run Vneshtorgbank.

Economic growth will contribute to a favorable investment environment and will come with stable and projected macro-economic indices, he said.

Russia's accession to the World Trade Organization (WTO) was also a priority, Kudrin said and added that this move was very important for investors. "We want any products made in Russia to have free access to global markets. Therefore, we will strictly observe WTO rules after we join the organization," Kudrin said.

The minister also said that the Russian Stabilization Fund established to accrue surplus revenues from oil exports was an appropriate instrument to pay early Russia's debts to the Paris Club of Creditor Nations to boost economic growth and save on expensive interest repayments. He said the Stabilization Fund currently had 950 billion rubles ($33.24 billion, or 27.39 billion euros).

The finance minister said that Russia's foreign debt stood at about $100 billion and had to be reduced. At the same time, the country could annually save from $1 billion to $1.5 billion on interest from early debt payment, he added.

The finance minister informed investment majors about social and economic reforms in the country, in particular, pension, banking and tax reforms, stock market regulation reformation and the replacement of benefits in-kind with cash payments.

Source: RIA Novosti

Siloviye Mashiny to deliver equipment for Swedish plant

Siloviye Mashiny, a leading Russian power equipment producer, and Fortum, a Finnish-Swedish power concern, concluded a contract worth almost 3 million euros to deliver equipment for the reconstruction of a hydropower plant in Sweden.

Siloviye Mashiny's press service said the contract had been signed after a tender, which also involved General Electric Hydro (U.S.) and VA TECH (Austria).

The contract stipulates the modernization of the working mechanisms of two hydro-turbines and stators in the hydropower plant's hydrogenerators. The capacity of hydro-units will increase to 48 megawatts, and the efficiency ratio will grow from 85% to 93.9%.

The Russian company, which is based in St. Petersburg, is expected to start delivering the equipment in May 2006, and the two power units are to be commissioned in November 2006 and November 2007.

Siloviye Mashiny is currently pursuing some other projects in Scandinavia with Fortum, including the modernization of a nuclear power plant, three hydropower plants in Finland and one in Sweden.

Siloviye Mashiny is a leading Russian equipment producer and supplier of hydraulic, heat, gas and nuclear power stations, which are used for the transfer and distribution of electric power, and transport and railroad networks. Its equipment is installed in 87 countries. Siloviye Mashiny shares are traded on the Russian Trading System.

Source: RIA Novosti

Russians want a well-provided life - survey

Russians want to live a well-provided life, bring up good children and have a good family, according to a survey conducted by the All-Russian Opinion Public Opinion Center (VTsIOM).

In all, 55% of respondents said their major goal in life was to achieve prosperity, whereas 40% wanted to bring up good children, and 39% wanted a good family.

Sociologists said family and children were among the top three goals for men and women alike. However, whereas men see these two goals as equally important, women saw children as being more important.

Other values include highly paid jobs (29%), living in harmony with oneself (27%), a healthy way of life (21%), and loving and being loved (19%).

Another 15% of the respondents said it was important to see the world (15%), to climb up the career ladder (14%), and to be intellectual (10%).

Seven percent said they would like a lot of spare time and minimal responsibilities.

Interestingly, the survey suggested that fame, power, and wealth were not a priority for Russian people (1-6%).

According to the survey, all the age groups of the respondents saw a well-provided life as a priority, followed by family and children among those under 60. Respondents aged 18-24 found it more important to have a good family, those aged 35-44 to bring up good children, and groups aged 45-59 to live in harmony with oneself. People over 60 said living in harmony with oneself was the most important intangible value, and put it second in the general list of values.

The survey was conducted on June 4-5, 2005, and covered 1,561 respondents in 153 towns and villages in 46 regions, territories and republics of Russia. The statistical error did not exceed 3.4%.

Source: RIA Novosti

Bush Administration Seeks New Law to Purchase Russian Space Equipment Legally

The U.S. presidential administration is going to ask Congress to amend a law that prevents the country from buying spacecraft and other services from Russia for the International Space Station (ISS), the New York Times reported Wednesday.

In testimony to the House Science Committee, Michael D. Griffin, administrator of the National Aeronautics and Space Administration, said the administration was working on language for an amendment that would allow the United States to purchase Russian equipment needed to assure a continued American presence on the orbiting station.

An agreement that requires Russia to supply Soyuz rescue ships for international crews on the station expires in April. The Iran Nonproliferation Act prohibits payments by the United States to Russia for goods and services for the space station because Russia helped Iran develop rocket and nuclear technology.

Source: Mosnews

Russian electricity monopoly's annual shareholders meeting opens

The annual general meeting of shareholders of Unified Energy Systems (RAO UES), Russia's electricity monopoly, opened Wednesday in Zelenograd, near Moscow.

Stockholders with an overall 90.27% of the company's shares have been registered for the AGM.

Several issues are on the agenda, including the approval of the company's annual budget and annual financial reports, including the profit and loss statement, as well as the distribution of profits and losses and dividends based on the financial year's results. The meeting will elect a Board of Directors and Audit Commission, and approve an auditor for 2005.

The government has a majority stake 52.68% in UES, and Gazprom, Russia's natural gas monopoly holds 10.6% of the shares in UES.

Anatoly Chubais, UES chief executive, said before the meeting that UES had improved its production and financial results in 2004.

"It is important that production growth was maintained in combination with falling growth rates for tariffs," Chubais said, adding that the tariffs in electric-power industry had risen below Russia's annual inflation rate.

According to Chubais, UES boosted electricity production in 2004 by 2.5% year on year, and its revenues and net profit for the same period were up 22% and 22% correspondingly. In 2004, UES continued intensive construction work. In particular, it commissioned the third generating unit of Bureya Hydroelectric Power Station (Amur region in East Siberia), and continued developing its electric city network.

Chubais said he was satisfied with company's results in 2004.

He has admitted that the national leadership had been critical of UES.

When answering a question about how long he intended to head UES, Chubais said: "I intend to do everything that was planned and see it through to the end."

Source: RIA Novosti

Moscow, Beijing to sign declaration on world order

Chinese leader Hu Jintao will arrive here Thursday to sign a joint declaration on world order in the 21st Century, a spokesman for the Russian Foreign Ministry wrote in an article published in the government daily Rossiiskaya Gazeta Wednesday.

"This is a crucial document that reflects the convergence of Russia and China's fundamental positions on key issues in modern world order - our common view for the outlook of the development of humankind," Alexander Yakovenko wrote.

According to Yakovenko, the declaration will affirm the parties' commitment to forming a new fair and rational world order and to increasing the role of the UN in international politics.

Russia and China will announce the unacceptability of monopolizing global affairs, dividing states into those who lead and those who are led, imposing models for social development from the outside and applying double standards, he wrote.

Yakovenko wrote the sides will urge the international community to combine efforts in order to create a new architecture of security by shaping a global strategy to counteract new threats and challenges under the UN aegis, the article reads.

Russia and China have launched work on a mid-term program for developing bilateral trade and economic relations for 2006-2010, he wrote.

According to Yakovenko, the document will provide a comprehensive analysis of the potential for bilateral cooperation and offer specific recommendations for solving the existing problems that in some cases stall the development of Russian-Chinese trade and economic cooperation. Economic cooperation remains the pivotal sphere of Russian-Chinese interaction, he wrote.

Source: RIA Novosti

Stabilization fund must not be used - Gaidar

Petrodollars will not flow into Russia forever, but the people who get them once will demand them more and more, Yegor Gaidar, the director of the Institute of the Transition Economy, told the weekly Itogi magazine.

Gaidar, who as Russia's acting prime minister also oversaw the "shock" economic therapy in the early 1990s, said the government believed that the money in the Stabilization Fund must not be spent. "It has no other models of a responsible policy," he said.

Until the end of 2004, the monetary and budget policy of Russia was highly commendable, and professionals admired the operation of the Central Bank and the Finance Ministry, which managed the growing inflow of petrodollars and kept inflation and the ruble within limits.

"The trend changed in 2004, and inflation is accelerating now," Gaidar said.

To solve this problem, the government should do what it did several years ago, which is repay the major foreign debt inherited from the Soviet Union for as long as it can. Gaidar said the reduction of the debt and interest payments would create genuine sources of income independent of oil revenues. These sources can be invested in health care, education and culture.

In addition, the government should give firm guarantees to business. Despite its general pragmatism and cynicism, business "will forget the offense" and continue working with a not very democratic regime, a highly specific judicial system and corrupt bureaucracy. But for this it "needs clear rules that are not changed every other day," the expert said.

Gaidar said that Russia's non-democratic political system was doomed in the long-term. He said nothing would change in the next few years, but such systems always crumbled unexpectedly due to their inflexibility.

Source: RIA Novosti

Central Bank Ruble Exchange Rates

1 Australian Dollar 21.8596
1 British Pound Sterling 52.0399
1000 Belorussian Rouble 13.3242
10 Danish Krone 46.3313
1 US Dollar 28.6721
1 EURO 34.5241
100 Iceland Krona 43.7608
100 Kazakh Tenge 21.2095
1 Canadian Dollar 23.2520
10 Norwegian Krone 43.3933
1 SDR 41.9539
1 Singapore Dollar 17.0120
1 New Turkey Lira 21.2229
10 Ukrainian Hryvnia 56.8395
10 Swedish Krona 36.6070
1 Swiss Franc 22.3442
100 Japanese Yen 26.0277

Sibneft’s AGM falls through

The annual shareholders meeting (AGM) at Sibneft scheduled for June 28 was cancelled due to the lack of a quorum. Initially slated for 10:30 am, the AGM was postponed for an hour to give shareholders the opportunity to reach a quorum, but the situation did not improve. The AGM was expected to approve amendments to the oil company’s charter which will protect it against takeover bids.

The AGM was not attended either by Yukos’ spokespersons that own 34.5% of Sibneft or the oil major’s majority shareholder Millhouse Capital. Later Interfax news agency reported that the reason for the cancellation of the AGM was the aspiration by major shareholders (allegedly Millhouse Capital) to receive dividends which Sibneft has not paid out since Q4 2003. We would like to point out that Sibneft’s BoD recommended that no dividends be paid for 2004.

This is not the first time Sibneft has put off its AGMs: the oil major held its 2003 AGM on December 27, 2004. We view a payout of dividends to Yukos as quite doubtful. In any case, we do not believe that investors should draw any serious conclusions at the present time, since no major events are in sight.

Moscow Rejects Bill to Fingerprint Foreigners

The Moscow City Duma has rejected a bill proposing mandatory fingerprinting for all foreigners arriving or living in Moscow, the newspaper Izvestia reported Tuesday. The law would be more likely to scare away foreign tourists rather than illegal immigrants, the Duma ruled.

Source: Mosnews

Russia, Europe building launching site in Kuru

Russia and Europe are collaborating on a project to build a space complex in Kuru, French Guinea, the head of Russia's Federal Space Agency said Wednesday.

Building a launch site in Kuru is Russia and the European Space Agency's main joint project, said Anatoly Perminov.

According to a contract, Russia will help construct the complex and supply it with Soyuz-2 type launch vehicles.

Perminov said construction has already begun.

"Joint ventures are being established both to build different purpose spacecraft and launch those vehicles from (Russia's( Plesetsk launching site," Perminov site.

Perminov is here for the Russian-Chinese Commission for Cooperation in Space.

Source: RIA Novosti

Daily Review. 28th June, 2005

Trading was moderately downbeat on Tuesday as the Russian equity market was still feeling the after-effects of Western bourses reeling under the influence of record-high oil prices. A key domestic driver was the release of Lukoil’s Q105 US GAAP financials, which fell short of market expectations. This touched off a wave of profit taking, which was consistent with yesterday’s trendline on the global petroleum market.

Other major market-moving events yesterday included the abortive AGM of Sibneft, which failed to materialize due to the lack of a quorum. The media wired that the holders of only 9% of the voting shares registered, whereas 34.5% of the shares listed on the balance sheet of the Yukos were frozen. According to another information source, the reason for the cancellation of the meeting was the aspiration of shareholders to receive dividends. The BoD of Sibneft previously announced at a May 23 meeting that it would recommend not to pay out FY2004 dividends. Meanwhile, the company topped the list of Tuesday’s stock market advancers.

Most RTS blue chips were moving to the downside on Tuesday. The list of decliners included NorNickel (-0.08%), bellwether UES (-0.37%) and Surgutneftegaz (-1.59%). The gainers featured Lukoil (+0.5%) and Sibneft (+0.94%). The RTS Index eased 0.15% to 698.93 on lighter-than-average volumes totaling $15 mln.

Trading on MICEX was slightly more upbeat with the band of gainers ranging from +0.18% (NorNickel) to +1.57% (Sibneft), while the decliners featured Sberbank (-0.16%), Rostelecom (-0.8%) and Surgutneftegaz (-1.26%). The MICEX Index edged up 0.14% to 629.27 on heavy trading volumes equal to $1,226.84 mln.

Meanwhile, Gazprom (-0.98%) continued to correct downward on SPICEX, with the last deal going for Rub 82.98 and 20 mln shares changing hands.

Russia Wants to Build More Nuclear Reactors for Tehran

Russia has expressed its intention to construct six new nuclear reactors for Iran, despite the concerns expressed by the international community after the election last week of the ultra conservative Mahmoud Ahmadinejad as the country's new president. '"When Iran announces new tenders to construct nuclear reactors, we'll take part in them," Alexander Rumyantsev, head of Russia's Atomic Energy Agency, told Itar-Tass news agency.

Moscow has already collaborated with Iran on the construction of its first nuclear centre in the port of Bushehr, which provoked criticism from Washington which believes that Tehran is using its nuclear programme to develop atomic weapons.

Iran says that its nuclear programme is for peaceful purposes and is to support its energy requirements.

After the election of Ahmadinejad as president of Iran, Russian President Vladimir Putin said Moscow would continue developing nuclear ties with Iran.

Source: AKI

Business tourism in Russia: Great Expectations

Business tourism in Russia is a young and promising industry.

Experts say that the best is yet to come, especially considering forecasts of an investment boom in the tourism industry as Russia continues its integration into the world economy.

Business tourism, which kicked off in the 1990s when foreign firms and joint ventures started up in Russia, is capital intensive but also highly profitable. Business tourists tend to spend three to four times as much as leisure tourists, or an average of $1,200 per day. A business-tourism trip combines market studies with more relaxed pursuits, including everything from air tickets and visa registration to negotiation sessions and cultural events, etc.

The number of firms catering to business clients is booming. These companies do everything including design of exhibition stands, the gathering of information on potential partners, provision of security and PR support, and advertising in various languages. Some even provide banking and consulting services, economic surveys and deal brokering.

However, not many companies yet deal exclusively with business tourism. Although promising, the industry is still unpredictable, and for most firms it currently remains a side-line.

Western experience has been important. In this respect established international companies showed the way, as the first to promote business tourism to Russia. Since then, business-tourism associations and centers have appeared, alongside competent specialists and publications. Seminars and conferences on the topic are held. Also following Western examples, Russian companies have started to offer business cruises that combine business concerns with entertainment.

International forums and fairs now have a noticeably broader agenda. New organizations and venues continue to appear, and business meetings are increasingly popular for sponsors.

In brief, Russia is aware of the benefits of business tourism, namely, that it stimulates economic growth and that major international conferences are good for the country's image and bring in investment. In addition, business tourism leads to promising deals and the establishment of new contacts.

However, at present only major cities with strong economies - Moscow, St. Petersburg, Yekaterinburg, Novosibirsk, Irkutsk, Vladivostok, Murmansk, Arkhangelsk, Samara, Toliatti, Sochi, etc. - have the necessary infrastructure. These cities are seeing a boom in 4- and 5-star hotels with the right resources for business tourism, and travel agencies are taking advantage with increasing confidence.

Still, more Russians visit exhibitions and conferences abroad than foreigners come to Russia. About 1.5 million Russians travel to Europe annually on business, while 1.4 million Europeans visit Russia; for the United States the figures are about 300,000 and 100,000, respectively. This is not surprising, given that visiting Russia is often more expensive than getting to other countries, while cost-quality ratio for services in the country are often unsatisfactory.

Internal business tourism is also growing, with some estimates putting the proportion of business tourism at as high as half of the total travel volume in the country. Abroad, Russians go everywhere to see exhibitions ranging from aviation to flowers and elite watches - although the most impressive delegations are usually seen at events dedicated to the raw-materials sector.

Three or four days of work at a conference are usually combined with one or two of rest and relaxation. During trips, Russians spend more money than their foreign colleagues: 58,000 Russian business tourists spent $83 million in Britain in 2003, for example. Russian delegations usually stick out in this respect among other participants at economic forums such as Davos and international film festivals like Cannes. Their previously notorious behavior, however, has improved: Business is becoming civilized and serious formal trips are coming into fashion.

Most popular destinations for Russian businesspeople are Germany, France, Italy, Scandinavian and Eastern European countries. With the exceptions of China and India, Asia comes bottom of the list. Specialists from across Russia go to India for exhibitions and conferences in areas such as aerospace, textiles, and construction materials. For example, Su and MiG producers visit Bangalore for its biennial air show.

Worldwide, business tourism accounts for 25-30% of the total figure, while in Russia the figure is under 20%. Of global business tourism, individual trips account for 70.8%, trips to conferences and seminars for 12.6%, and trips to exhibitions and fairs for 10.9%. Congresses and incentive tourism (rewards for good performance at work) account for about 3% each.

In Russia, the structure is somewhat different. Trips to exhibitions, conferences and congresses are very popular, while the share of incentive trips is negligent, but growing rapidly. Only the richest companies can afford expensive trips for their staff: Usually this is restricted to senior managers. Most commonly, these trips are one-off visits to countries where a firm has partner organizations.

And despite organizing stands at all major international tourism forums and producing commercials promoting Russian hospitality, the country has yet to see the desired results.

Experts say that by 2020 annual business-trip numbers will treble from 564 million to 1.6 billion as globalization continues, and that profits will increase five times over, from $399 billion to $2 trillion. It is hard to say what Russia's share by volume will be. It is hard to win the confidence of the business class, because it is conservative and mistrustful. But experts are quite optimistic about Russia's chances, considering its sustained economic growth and improving investment ratings. Russia is unlikely to become the world's tourism leader in the next few years, but it could well be in the top ten.

Source: RIA Novosti

RAO UES sells first quotas on Kyoto protocol to Denmark

Russia's electricity monopoly Unified Energy Systems Russia has sold first quotas on the Kyoto protocol to Denmark. The Danish National Forest and Nature Agency will reconstruct thermoelectric power stations in the Khabarovsk territory (the Far East) and the Orenburg region (the Southern Urals), UES said. Denmark will get quotas equal on reducing greenhouse gas emissions after the reconstruction.

Source: RIA Novosti

Central Bank Ruble Exchange Rates

1 US dollar 28.5840 rubles

1 Euro 34.6981 rubles

1 Australian dollar 21.9439 rubles

1 British pound sterling 52.1344 rubles

1,000 Belarussian rubles 13.2833 rubles

10 Danish krone 46.5591 rubles

100 Icelandic krones 43.8270 rubles

100 Kazakh tenge 21.1464 rubles

1 Canadian dollar 23.1844 rubles

10 Norwegian krones 43.6730 rubles

1 SDR 41.9650 rubles

1 Singapore dollar 17.0214 rubles

1 Turkish lira 21.1108 rubles

10 Ukrainian hryvnias 56.6222 rubles

10 Swedish kronas 36.8964 rubles

1 Swiss franc 22.4735 rubles

100 Japanese yen 26.0470 rubles

Gazprom, Total sign memorandum on Shtokman gas field development

The Russian gas giant Gazprom and the French oil and gas company Total signed a memorandum on the development of the Shtokman natural gas field in the Barents Sea, Total announced Tuesday, with confirmation from Gazprom.

"The signing of the memorandum means that Total will continue investing in Russian oil and natural gas fields," Total said.

The memorandum stipulates the development of the field's upper area and the production and development of liquefied natural gas.

The Shtokman gas condensate field was opened in 1988. It is located at a depth of 280-360 meters in the Barents Sea. Its geological gas reserves total 3.2 trillion cubic meters and its gas condensate reserves aggregate 30.98 million tons.

Source: RIA Novosti

Putin promises support for national hydrogen energy project

President Vladimir Putin has promised state support for a project to develop national hydrogen power engineering.

"I believe, it is very important, interesting, and promising," Putin said at a meeting with Vladimir Potanin, the chief executive of Interros, one of Russia's largest private investment companies.

"We are continuing to work with the Russian Academy of Sciences to create national power engineering. We are positive it is the technology of the future," said Potanin.
Potanin said they had achieved some "modest results" already and added over $100 million would have to be invested in the project.

"The main objective is to introduce the product on promising markets. Creating a product is not enough, we must be able to launch sales, above all, in developed countries," said Potanin.
Potanin added the developed markets were "closed" for Russian technology and asked the president for assistance. "We would appreciate your support and the government's support," he said.

"You can count on it," the president replied.

Russia's Academy of Sciences and Norilsk Nickel, a metallurgic plant whose controlling share block is owned by Interros, signed an unprecedented agreement on cooperation in hydrogen power engineering in late 2003. Norisk Nickel was the first private company in Russia to invest up to $40 million a year in the state program on hydrogen power and fuel elements for ten years. The program is designed, above all, to establish a series of hydrogen power units, including for cars.

Source: RIA Novosti

US sanctions could hurt Russian businesses

The US administration is currently drafting a new set of measures as part of the fight against the proliferation of weapons of mass destruction (WMD). In particular, the draft executive order compiled by the US administration contains provisions about freezing the assets of individuals and legal entities which cooperate with Iran, Syria and North Korea in the area of weapons and military technologies. Initially, the order would affect the transactions of eight entities, seven of which are suspected of participating in nuclear missile design operations. Three of the above companies are located in North Korea, the four other are based in Iran, including the Iranian energy agency, and the last one operates in Syria. In addition, the assets of the American banks which are involved in WMD programs are also to be frozen. The relevant order is expected to be signed by US President George Bush prior to the G8 summit to be held on July 2. The Washington Post wrote that the new sanctions would, first and foremost, affect Russian and Chinese companies which have cooperation ties with their Iranian and North Korean partners.

In our view, the likelihood of the US taking such measures is heightened by the negative results, for the United States, of the presidential elections in Iran as a result of which ultra-conservative, Islamist Mahmoud Ahmadinejad, an advocate of Iran's nuclear program, has come to power. Meanwhile, the notion of “cooperation” can be interpreted by the US unambiguously, since the technologies provided under the umbrella of cooperation ties are of dual nature and the Iranian nuclear power agency is not only in charge of the Iranian military and defense complex, but also controls a large slice of the utility sector. Last Saturday Russian President Vladimir Putin announced that Russia is prepared for further cooperation with Iran in the nuclear power sector taking into account international agreements on WMD non-proliferation. Earlier, the United States on numerous occasions has imposed sanctions on a number of Russian entities, but they were lifted at a later time.

Should the above executive order be signed into law by George Bush, we do not rule out that the United States could be subjective or indiscriminate in applying the sanctions against Russian businesses. This would not likely result in any major losses, since potential “violators”, entities which operate in the military industrial complex, probably have no large assets in the US which could be frozen. However, the imposition of sanctions against Russian legal entities (as a rule, under state control) for assistance in “proliferating WMD” could have indirect negative repercussions for Russia’s investment image.

New Tupolev Plane Makes First Non-Stop Vladivostok-Moscow Flight

A new Russian Tu-204-300 aircraft of the Vladivostok Avia airline has made the first passenger flight from Vladivostok to Moscow, Radio Russia reported Tuesday.

The Tupolev aircraft is the first Russian-made plane with two engines capable of performing long flights without refueling that makes it possible to get from Moscow to Vladivostok in just nine hours. An average journey between the two cities — taking into an account refueling or a change of aircraft — currently amounts to 15 hours.

The plane has a range of 9,000 kilometers (5,500 miles) and conforms to international noise and emissions standards. It has a capacity of up to 162 passengers and features amenities including seatback flat-screen video monitors.

Russian airlines have already ordered at least 60 Tu-204-300 planes. They will also use them for flights on western routes; new rules have forced carriers to use non-Russian planes since 2002 because most Russian-made aircraft do not meet international noise and emissions standards.

The Tu-204-300 will also fly on routes to Japan, South Korea, China and Vietnam.

Source: Mosnews

Fradkov meets with major investment companies' heads

Prime Minister Mikhail Fradkov met with the heads of major international investment companies in the Government House Tuesday.

"I am happy to meet with major international investors," Fradkov said, thanking his guests for their interest in socio-economic reforms underway in Russia.

"You are well aware of Russian realities and are involved in developments in this country," he said. "Accordingly, I would propose not to content ourselves with general statements and ideas, but to discuss the issues your are really interested in."

The delegation comprises heads of 20 leading investment companies, including Alliance Capital, Barclays Global Investors, JP Morgan Investment Management, Deutsche Asset Management, Capital Research, Morgan Stanley, Fidelity Investments and others. They were invited to Moscow by Russian bank Vneshtorgbank (the Bank of Foreign Trade) and Deutsche Bank.

These companies are among the most proactive foreign investors in securities of Russian emitters. They manage assets varying from $300 billion to more than $1 trillion.

They were invited to thoroughly examine and analyze the Russian market and evaluate opportunities for investments in the economy.

Source: RIA Novosti

International Thermonuclear Experimental Reactor will be built in France

The International Thermonuclear Experimental Reactor (ITER) will be built in France, according to a joint declaration issued at a today's meeting of project participants in Moscow.

Washington, Seoul and Tokyo voted for the ITER to be based in Japan. Moscow, Brussels and Beijing were in favor of constructing it in France.

The project is worth 10 bln Euro.

Minister reports to Putin on IT-parks in Russia

Russian Information Technologies Minister Leonid Reiman yesterday told President Vladimir Putin about how work was proceeding to establish special information technology parks in the country.

Reiman said such global technology leaders as Intel, IBM, Siemens and Boeing had opened offices in Russia in the six months since the president met influential figures from the scientific community in Novosibirsk (Siberia) to discuss the establishment of IT-parks in Russia.

"Therefore, one of the tasks set then has been accomplished," Reiman said.

The minister also said that one IT-park would be established in St. Petersburg at the Bonch-Bruevich Electro-Technical Institute.

Reiman also informed the president that St. Petersburg Governor Valentina Matvienko had allocated 54 hectares of land on the city limits, the design had been selected after a special competition and a tender for the construction contract was now being held. According to him, Western companies have also said they intend to invest in the creation of the IT-park and work there afterward.

The minister also said that the Moscow region Governor Boris Gromov had allocated land for the construction of an IT-park and that work to prepare the necessary documents was under way. According to Reiman, the IT-park will be constructed at a local institute in Dubna, which is in the north of the Moscow region.

Novosibirsk and the Nizhny Novgorod region (in the Volga Federal District) will build their own IT-parks as well, Reiman said.

Source: RIA Novosti

Daily Review. 27th June, 2005

The Russian equity trading market kicked off the week in the red. This came on the heels of Friday’s downturn on most global bourses as crude oil prices continue to test record highs.

By yesterday’s close, the benchmark was hovering around the 700 threshold while investors took profit on Gazprom after quite a few days of steady growth. The main drivers now impacting the market feature the Fed’s meeting on June 29 and 30, at which another quarter-percent rate hike is widely anticipated, giving another shot in the arm, enabling the American market to end Q2 with a bang despite surging global crude oil prices.

Most RTS blue chips pulled back Monday within a band ranging from -0.08% (Lukoil) to -0.98% (Surgutneftegaz). Sibneft (+0.79%) bucked the downturn and ended up in the black. The RTS Index was down 0.28% to 700 on average volumes totaling $20.4 mln.

MICEX was a bit more downbeat than MICEX, closing within a range varying from -0.68% (Sberbank) to -1.8% (NorNickel). On the other side of the spectrum, Lukoil (+0.12%) and Mosenergo (+0.6%) led the modest list of gainers. The MICEX Index shed 0.71% to finish at 628.38 on trading volumes amounting to $717.49 mln.

Meanwhile, Gazprom got hit with a wave of profit-taking on SPICEX, with the last deal going for Rub 83.8 and 16.5 mln shares changing hands.

Tidal power: the energy source for Russia's future?

Two unique tidal power plants will soon be built in Russia.

The plants, in the White Sea and the Sea of Okhotsk, are the first in Russia to be used for industrial purposes. The power plant at Mezehn in the White Sea will produce 10,000 kilowatts and have the potential for twice that amount, while its sister plant at Penzhin Bay in the Sea of Okhotsk, where tides reach 17 meters, will generate 20,000 to 90,000 kilowatts.

Potentially Russia could use tidal energy to cover its current energy production and consumption needs. The Kola Peninsula and the Sea of Okhotsk alone could produce about 100 gigawatts from tidal plants; the average settlement north of the Arctic Circle consumes about 2 megawatts.

The first tidal plant in Russia entered service in Kislaya Bay on the White Sea in 1968. The plant - 36 meters long, 18.3 meters wide, 15.35 meters high and made of reinforced concrete - was built in a dock near Murmansk, and then towed for 100 km to its final destination. It won a gold medal at the Expo world fair in Japan, and the technology used to build it is now used to build offshore oil platforms.

The plant at Kislaya Bay was mothballed due to a lack of funds for its modernization in the mid-1990s, but recently commissioned again after a hiatus of almost a decade. Tides at Kislaya Bay reach 5 meters, and the plant - considered to be experimental - has a capacity of 400 kilowatts.

The orthogonal turbine used to modernize the plant is a unique piece of engineering used nowhere else in the world. The main idea underlying it is that the turbine blades always rotate to one side, regardless of the direction of the water flow. This type of turbine has been used for many years in wind farms, and was adapted for aquatic use by the NII Energosooruzheniy research institute and built at the Sevmash facility, best known for building nuclear submarines. An orthogonal rotor means the blades do not have to be turned when the water flow changes, which reduces maintenance costs by about 30%.

With the recent coming into force of the Kyoto Protocol on greenhouse-gas emissions, EU countries plan to increase the share of renewable energy resources by 10% by 2010. The commissioning of the Kislaya Bay plant, which of course produces no carbon dioxide, is Russia's contribution to solving global environmental problems.

In addition to tidal power, Russia is constructing its first wind farm in the Kaliningrad Region, geothermal power is being developed in Kamchatka, an experimental testing area is being established for "small hydro-electric engineering" not far from Yaroslavl, and a federal law on renewable sources of energy is in the process of development.

Source: RIA Novosti

New satellites to provide digital broadcasting for remote Russia and CIS in ten years

Fifteen new communications satellites will be launched under a new Federal Space Program before 2015 to provide mobile communications for the president and the government, and digital TV and radio broadcasting for the majority of remote regions in Russia and the CIS, the acting head of state-owned Space Communications said Monday at a press conference.

Yuri Izmailov said his company would orbit 15 satellites, with four of them to be launched by the same carrier rocket.

The Express-AM-3 satellite was launched successfully on June 24, winding up the satellite updating effort and increasing the number of state spacecraft by more than 3.5 times.

He said the government had not approved the new space program yet, and, therefore the amount of federal allocations remained undetermined.

"However, we plan to replenish Russia's civil satellite group substantially," he said.

According to Izmailov, Space Communications will orbit one to two telecommunications satellites per year. The company also considered developing new generation spacecraft, special satellites for TV and radio broadcasting.

Izmailov said it was very expensive to use a carrier rocket for each satellite launch. Therefore, the big Express-AM satellite would be launched together with a small KazSat satellite jointly developed by Kazakhstan and Russia, he said. Italian-based Alenia-Espace is producing the electronic components of the satellite.

Izmailov also said Space Communications was going to expand cooperation with China.

"We have already signed a trade agreement with our Chinese partners - a very serious achievement, though we have not agreed on prices yet," he said.

Source: RIA Novosti

Foreign direct investment in Russia due to consumers - OECD

Russia's huge capacity for foreign direct investment (FDI) is mainly thanks to consumer spending, rather than friendly government policies, the Organization for Economic Cooperation and Development (OECD) said in a report, Trends and Recent Developments in Foreign Direct Investment.

Today's issue of Kommersant, a business daily, cited the report as saying FDI in Russia rose to $11.7 billion last year, overtaking India ($5.3 billion) but still hopelessly trailing China ($54.9 billion).

The OECD linked the investment boom to a similar boom in retail, which has been fueled by growing incomes and a surge in consumer loans. According to the organization, foreign producers who once preferred to work in Russia through their representatives are now moving their production assets closer to the sales market.

The report highlights the automotive industry as a target for massive investment in the last few years.

On the whole, the OECD report produces the impression that foreign direct investment in Russia only goes to those retail sectors where rapid growth is so high that red tape is not a major problem.

However, the OECD experts were concerned about the broader investment picture. Russian businessmen invested up to $9.6 billion outside the country in 2004, which the organization said was most likely due to state interference and problems with the practices of the taxation services.

Source: RIA Novosti

Ruhrgas to join Gazprom-BASF north European gas pipeline construction project

German gas company Ruhrgas intends to join Gazprom and BASF in the project to build a north European gas pipeline, Russian President Vladimir Putin said today at a meeting with German businessmen.

Putin said there were plans to build two threads of the gas pipeline and make the pumping volume of the system reach 55 billion cubic meters of gas annually. He added gas would be delivered to Europe in 2010 using one of the threads in the volume of 27 billion cubic meters a year.

"Specialists in economics know what it means for the continent's energy sector," the Russian president said.

Putin said Russian and German businessmen were entering a new level of cooperation, which meant that the two economies would render more reciprocal influence on each other.

Source: RIA Novosti

Wal-Mart Plans European Expansion

Lee Scott, the chief executive of Wal-Mart Stores Inc., said in an interview published on Sunday, that the world's largest retailer wants to expand in central and eastern Europe, including Russia.

Oil set new all time high

U.S. August crude oil futures was up 61 cents at $60.45 a barrel by 0216 GMT. Oil trading abobe $60 is the first time since it began trading on the New York Mercantile Exchange in 1983. London Brent crude was up 59 cents at $58.95 a barrel, also a new record.

Gazprom update

The gas monopoly's June 24 AGM addressed a wide range of interesting issues which concerned not only regular agenda items, but also the procedure for payment of the 10.74% interest acquired by the state, the removal of the ring fence around the gas holding's shares and the potential acquisition of strategic assets.

Alexei Miller and Alexander Medvedev reported that the transactions over Rosneftegaz's acquisition of Gazprom shares from its subsidiaries have essentially been wrapped up. Slightly less than 10.74% of Gazprom's shares is currently listed on state-owned Rosneftegaz's balance sheet. The 10.74% block of shares acquired by Rosneftegaz is to be paid out in three tranches, with the first to be wired within a month and the last transfer to be made by year-end 2005. Rosneftegaz will tap international debt markets to raise the amount needed to pay for this equity stake. The gas monopoly will pay less than $1 bln in taxes to the state on time. Miller also said that the ring fence around the gas producer's shares will be lifted along with the cancellation of all restrictions imposed on foreign participation in Gazprom's capital by the end of 2005. As regards possible acquisitions using the funds raised, the gas holding's executives reiterated that in the days to come Gazprom will raise the issue of acquiring Rosneft's assets, first and foremost, its Sakhalin projects.

We are of the opinion that this geyser of news will push up the gas holding's market capitalization, although we expect it to rise at a moderate pace until the first steps towards gas market liberalization are taken.

Russia to Continue Nuclear Cooperation with the New Iranian President

Russia is ready to continue cooperating with Iran in the atomic energy sector following the victory of hardliner Mahmood Ahmadinejad in presidential elections, but will meet obligations to prevent nuclear weapons proliferation, AFP reported Saturday citing President Vladimir Putin.

“We are ready to continue cooperation with Iran in the atomic energy sector, while taking into account our international obligations in the area of non-proliferation, (and) to cooperate on finding a mutually acceptable political solution to existing questions,” Putin said in a statement on Saturday.

Putin congratulated Ahmadinejad, saying his resounding win was an “expression of the will of the Iranian people” and that Russia looked forward to developing relations with the Islamic state.

Construction work on a new Russian nuclear power station at Bushehr in Iran is almost complete. Officials there said this week that the first deliveries of Russian nuclear fuel should be made within a few months, AFP adds.

In an attempt to allay U.S. and EU concerns that the civilian power station is part of a secret weapons development programme, Moscow and Tehran brokered a deal in which Iran must send spent fuel back to Russia.

However, analysts and diplomats in Tehran say that the victory of ultra-conservative Ahmadinejad could spell a new hardening in the country’s negotiating stance over Western demands that Iran curb its nuclear ambitions.

Russia maintains warm ties with Iran. Putin said in his statement that other potential growth areas in cooperation included oil and gas, transport, telecommunications, and civil aviation.

Source: Mosnews

Russia, China to develop space research cooperation

Prospects of Russian-Chinese cooperation for 2005-2006 would be discussed at the 6th session of the bilateral sub-commission on space research, the head of the Russian Federal Space Agency (Roskosmos) said.

Roskosmos head Anatoly Perminov, who arrived in Beijing on an official visit today, told Russian journalists that the sub-commission would approve "many new projects" from both countries.

Perminov, who heads the Roskosmos delegation, also comprising Russian space research and rocket industry representatives, is to meet with China National Space Administration head Sun Laiyan and the president of China Aerospace Science and Industry Corporation Yin Xingliang.

The space research sub-commission is part of the bilateral commission involved in preparing a regular meeting of the Russian and Chinese prime ministers.

Source: RIA Novosti

Russia Ready to Smash Terrorist Bases Abroad — Russian Air Forces Commander

Russia is prepared to use warplanes to destroy terrorist bases abroad, Reuters reported Saturday citing Air Force commander Vladimir Mikhailov. He also said the Cold War was not over on the U.S. part, Russian news agencies add.

“As for terrorists and our fighter jets, if we have high-precision weapons and know the whereabouts of a terrorist gang, why not smash it, even if it’s outside Russia?” Interfax news agency quoted him as saying.

“The Cold War is not over. We (Russia) no longer take part in the Cold War, we are in a very peaceful disposition. As for the Americans, considering what they are manufacturing, planning, arming themselves with etc, this Cold War has not been seized on their behalf,” General Mikhailov was quoted by RIA Novosti as saying.

Russia, which strongly opposed U.S.-led attacks on Iraq in 2003, has battled rebels in the Muslim province of Chechnya for over a decade.
Moscow says Chechen rebels receive support and funding from international extremist organizations, Reuters reports.

Mikhailov, on a visit to the Volga region town of Engels, said Russia’s need to strike terrorist bases abroad was linked to aspects of U.S. foreign policy, but did not go into details.

Russia threatened pre-emptive strikes on rebel bases anywhere in the world after Chechen separatists took a school hostage in the town of Beslan in September 2004. More than 300 people, half of them children, died in the siege.

Moscow has not specified where it thought these bases were, but has repeatedly accused Georgia of allowing Chechen rebels to operate from the Pankisi Gorge which borders Chechnya.

Source: Mosnews

MTS to embark upon rebranding

The media wired on June 24 that Russia's number one wireless operator MTS plans to launch a campaign this autumn aimed at rebranding its trademark and corporate symbols.

Rebranding rumors emerged on the market shortly after the rebranding campaign of its major rival – VimpelCom, the second-largest mobile company in Russia, VimpelCom pulled off its rebranding campaign in early April. The results of this move can be read as a positive since surveys conducted among focus groups vividly underscore the positive perception of the operator's new image, while name recognition and brand integrity have improved markedly.

While official representatives of MTS admitted that some sweeping image-related changes are on the way, they declined to disclose any specific details about the rebranding campaign. The reasons that have prompted the cellular operator to hone its advertising image are the same as those which induced VimpelCom to give its corporate logo a makeover three months ago: a fuzzy image, a wide range of corporate colors and a host of unconnected advertising solutions.

We are upbeat on this news, since a well-thought-out rebranding campaign has every chance of galvanizing the operator's image, thereby boosting customer loyalty and cutting the churn rate. By the same token, MTS has not always been careful enough in choosing advertising agencies (some time ago it was plain to see that MTS' advertising solutions were second-rate compared to VimpelCom's top-notch adverts). For this reason, the risk exists that MTS' rebranding results could produce softer results than those of its rival. However, it is fair to say that this risk is minimal, since MTS had the opportunity to carefully study all the solutions and decisions adopted by VimpelCom.

Russia Has Right for More Foreign Investment — Putin

Russia has a right to expect more foreign investment because of its strong economy, the country’s President Vladimir Putin said on Sunday, June 26, meeting with foreign businessmen in an attempt to reassure them of Russia’s investment climate.

Speaking to bosses from German companies which included E.ON-Ruhrgas and Siemens, a day after he held a similar forum with top executives from U.S. companies, Putin repeated a promise to create better conditions for business through extensive reform.

The Russian authorities have scared foreign investors by effectively destroying one of Russia’s most successful private oil firms Yukos, in what analysts say, was punishment for its founder Mikhail Khodorkovsky’s political aspirations. But despite the effect of the Yukos affair on investor confidence, the Russian president made no mention of it during the two days of meetings.

Instilling some new investor confidence was top of the agenda of Putin’s weekend at the baroque Konstantinovsky Palace near St. Petersburg, his home town and political stronghold. “We are preparing additional, highly essential steps for institutional reform and lessening bureaucracy, strengthening the rights of proprietors, breaking up monopolies and also a clearer regulation of the work of tax bodies,” Putin, quoted by the Reuters agency, said.

He pointed to Russia’s strong economic indicators such as an annual growth rate of around 5.5 percent, gold and foreign exchange reserves of $150 billion and a significant cut in external debt since 1999, as reasons why his country should appear attractive to investors. “This all creates conditions for developing cooperation and I think that we have a right to count on more investment,” he said.

Vladimir Putin reiterated an earlier promise that Russia was preparing for full liberalization of its currency markets in 2007. He also acknowledged the problem of the high inflation rate, saying: “I hope that the government manages to deal with the rate of inflation, although in the first half of the year it has been a bit higher than we expected.”

Source: Mosnews

Putin: Russia to continue talks on early repayment of state debt to Paris Club

Russia intends to continue talks on early repayment of part of its state debt to the Paris Club of creditor nations, Russian President Vladimir Putin said. "We are satisfied that we managed to agree with the Paris Club, first of all with the German partners, on repayment of part of the debt. We are interested in this work, if it is advantageous for both parties, and will continue conducting such talks," Putin said at a meeting with German businessmen in St. Petersburg.

Source: RIA Novosti

Daily Review. 24th June, 2005

Friday’s trading session kicked off in negative territory as market players opted for a round of profit-taking after several days of steady upside. The downtrend gained leverage as Western bourses grappled with oil prices testing $60 a barrel. But by noon, blue chips began to creep back up on the back of more positive news about the upcoming liberalization of Gazprom.

There was certainly no earth-shaking news at the gas monopoly’s long-awaited Friday AGM, as chairman of the BoD of the holding Dmitry Medvedev announced that the state has managed to gain a controlling stake in the gas giant. He pointed out that all transactions related to the purchase of equity from the balance sheets of Gazprom subsidiaries by Rosneftegaz have been wrapped up and “have been given the force of law”. Medvedev also said that liberalization is being targeted for year-end 2005, by which time the ring fence should come down.

Most RTS blue chips were either flat as a pancake or moderately in the red at Friday’s close. The band of timid gainers ranged from +0.07% (Surgutneftegaz) to +0.64% (Sibneft). In negative territory, the list of decliners featured bellwether UES (-0.33%) and NorNickel (-0.16%). The RTS Index posted a downtick (-0.04%), landing at 701.98 on average volumes totaling $25.34 mln.

MICEX blue chips closed out the week in a slightly more upbeat mood. The losers finished within a band ranging from -0.02% (Tatneft) to -0.66% (Mosenergo). The gainers spotlighted Lukoil (+0.1%), Sberbank (+0.4%) and Sibneft (+2.1%). The MICEX Index advanced by 0.08% to 632.9 on thin volumes amounting to just $651.00 mln.

Meanwhile, Gazprom extended its northward ascent on SPICEX, adding on 0.24% to Rub 84.8 on heavy volumes, with 35 mln shares changing hands.

Russia Loses $2.5Bln Annually From Anti-Dumping Measures

Every year Russia loses about $2.5 billion from the anti-dumping measures that are applied to it by other countries. This data was presented on Friday, June 24, by Vadim Zingman, an official from the Russian Economic Development and Trade Ministry.

Zingman was speaking to members of the Federation Council, the upper house of the Russian parliament, during sessions that were dedicated to state support of Russian exports.

“Annual losses of Russian exporters from anti-dumping measures are estimated by us at $2.5 billion,” the official was quoted by RIA Novosti.

The Economy Ministry’s representative said that Russia is interested in joining the World Trade Organization since accession will allow Russia to guarantee its producers more favorable conditions of access to world markets. “In addition accession to the WTO will allow Russian companies to resolve any trade disputes with the help of mechanisms accepted in the WTO member countries,” Zingman also said.

The government official said that at the present time Russia is among the most discriminated against countries in the world. Over the last years the number of anti-dumping measures against Russian exporters has grown from 13 to 100. Russia is second only to China in this aspect.

Source: Mosnews

Foreign direct investment in Russia grew in 2004 - OECD

Direct foreign investment in Russia grew last year and reached to $11.7 billion, according to an Organization for Economic Cooperation and Development (OECD) report published on Friday.

The document said that direct investment in Russia had exceeded its 2003 peak ($6.5 billion) to reach $11.7 billion in 2004.

According to the report, a sharp increase in investment in the production of consumer goods emerged as a new trend.

The OECD said the trend was due to a boom in retail sales, resulting from a sharp increase in household income and the extension of consumer loans.

In recent years, Russia's automotive industry has become a "leader" in terms of the level of direct investment it has received.

At the same time, the report did not produce any figures in this area, but it did provide some examples, including accelerated sales of Russian-made Ford, General Motor's plans to increase its capacities four times through further investment in its car-assembly plant in Vsevolozhsk (the Leningrad region), and some projects of foreign companies, including Renault, Volkswagen and Toyota.

Source: RIA Novosti

Gazprom shares to be liberalized this year

Dmitry Medvedev, the chairman of the Gazprom board, said at a Gazprom board meeting today that Gazprom shares will be liberalized by the end of this year.

BRIC in the UN Security Council

The growing economic influence and significance of BRIC countries (Brazil, Russia, India and China) is already being felt on the global arena and in politics.

For example, discussions are currently under way to increase the number of permanent members in the UN Security Council, the most significant body of this organization. The most likely candidates are India, Brazil, Germany and Japan.

Given that Russia, China, the US, Great Britain and France are already permanent UN Security Council members, we would like to see all BRIC countries on board if the above candidates are deemed eligible for membership. It is quite curious that the G7 will have only 5 seats on the Council.

This issue underscores that the rising economic power of Russia and other BRIC countries (a comparison of GDP figures of BRIC and the G7 can be found in my previous article “88,000 “dollar” millionaires in Russia”) is reflected in international politics. In my view, this will result in the establishment of a more peaceful and secure “multipolar world” which should in turn have a positive impact on the global economy.

Mikhail Aristakesyan
Expert, FINAM

Russia to tackle energy issues during G8 presidency - foreign minister

Russia intends to include energy issues in the G8 agenda during its G8 presidency, Foreign Minister Sergei Lavrov said Thursday.

According to Lavrov, the G8 partners agree with Russia's plan to include energy issues in the agenda taking into account Russian comparative advantages.

Russia will continue G8 traditions during its presidency, which begins in 2006, he said.

Each presidential period has its specific features. Russia, however, will focus on issues that are of global importance, Lavrov said.

Source: RIA Novosti

ITALY-RUSSIA: URSO, READY TO COOPERATE ON NUCLEAR

"The partnership with Russia in the nuclear sector will allow Italy to make up some handicaps that are under everyone's eyes," declared Deputy Industry Minister Adolfo Urso on the sidelines of the "Structural reforms, privatisations and investment opportunities in the Russian Federation" seminar, which today ended a three day period of economic, industrial, and financial cooperation between Italy and Russia.

Urso, who recalled that Russia is one of the main commercial partners of Italy, announced that Italy will soon accomplish privatisations in the Russian Federations in electricity, communications and infrastructure sectors, and will prepare to cooperate also in the nuclear field. Italy can count on Russia in these sectors, as Deputy Economic Development and Commerce Minister Andrei Vladimirovich Sharonov said. Sharonov highlighted on the nuclear issue, "considering the peculiarity of Italian legislation, Italy could be interested to cooperate with Russia in third party markets."

Urso highlighted the importance of these three days that reinforced the partnership with Russia, "a country in which for years now, our exports, our Italian products, continue to increase."

Urso also opened the door to "small and medium Italian enterprises which can use a financial and credit network that Italian banks together with public finance companies are accomplishing these days." Sharonov explained that "some projects have been started that were underwritten in this session," in the fields of transport, highways, infrastructure and energy.

Sharopov added that "Italians study opportunities to develop cooperation in gas, construction materials and farming vehicle sectors."

Source: Agenzia Giornalistica Italia

Russia, CIS members to build a new railroad from China to Europe

The CIS and Russia intend to build a "new Silky Way" to transport cargo via railroad from China to Europe, Russian Transport Minister Igor Levitin said Thursday.

Levitin said the project would be discussed at a CIS conference Friday.

Containers will be transported along the China-Kazakhstan-Russia-Ukraine route, with further redistribution through Poland, Germany, the Czech Republic, Hungary and Slovakia, and finally via further transit to Italy and Portugal.

Levitin called the tariff policy one of the main unresolved problems of transport projects in Russia and the CIS. The tariffs in some CIS countries are half as high as the tariff set by Russian Railways, he said.

This issue will be discussed at the conference. Levitin said there was understanding between Russia and the CIS in this regard.

Source: RIA Novosti

Daily Review. 23rd June, 2005

The Russian equity market stayed in the growth groove on Thursday, breaking back through the 700 mark. Investors are still focused on Gazprom’s AGM and although we do not expect to see any major developments, market players are hopeful that some details on the upcoming liberalization could be made public.

The highlight of yesterday’s news flow was a statement by German Gref that all the documents required for the state to buy back a 10.74% stake in Gazprom would be signed before the meeting, i.e. by the end of Thursday. Also, Moody’s rating upgrades for a number of companies (Gazprom, Alrosa, Russian Railways Company and Transneft) were read by the market as a positive. And after Russia’s May deal with the Paris Club on advance repayment of $15 bln of its sovereign debt, investors are now looking for an upgrade of Russia’s credit rating within the next few months.

We also note the rise in Sberbank, whose stock price headed north yesterday on speculative anticipation prior to the release of the bank’s FY04 IAS financials, robust performance of Russian Eurobonds and expectations of a softening in equity ownership by foreign investors.

Most RTS blue chips closed up within a band ranging from +0.25% (NorNickel) to +1.69% (Sberbank). On the other end of the spectrum, UES (-0.13%) and Sibneft (-0.16%) ended up in negative territory. The RTS Index advanced by 0.91% to 702.28 on trading volumes amounting to $27.6 mln.

MICEX was a little less bullish, with most blue chips falling within a band ranging from +0.1% (Sibneft) to +2.7% (Sberbank). Bellwether (-0.05%), NorNickel (-0.17%), Tatneft (-0.29%) and Mosenergo (-1.30%) topped the list of decliners. The MICEX Index was up 0.66% to 632.39 on volumes totaling $880.80 mln.

Gazprom saw a nice rally on Thursday, climbing 1.22% higher on SPICEX to close at Rub 84.6 with 20.4 mln shares changing hands.

China building container vessel for Russia

A ceremony to lay a container carrying ship for Russia's Far Eastern Maritime Steamship Company (FEMSC) took place at the shipyard in Nanjing, China.

According to FEMSC, the vessel is should be launched in November 2005 and registered with the company in March 2006.

It will be one of several vessels the steamship company has ordered from the Nanjing-based shipyard. Feeder container vessels are among the most advanced vessels of this kind today, and they are in great demand among west European ship owners.

The vessel will be equipped with the most recent automatic systems that will allow the engine compartment to be maintained without any rotating schemes for crewmen.

The container carrying ships will be fitted out with a large power plant, and their main engines and auxiliary machinery will consume heavy fuel oil, which is a further competitive advantage. The vessels, for example, will be able to transport cargoes in refrigerated containers.

This is FEMSC's first project with the Chinese ship maker. In April 2005, the company sent its experts to the shipyard to monitor the quality of work carried out there.

Source: RIA Novosti

Yukos shareholders choose not to pay dividends for 2004

Yukos shareholders decided not to pay dividends for 2004 Thursday at an annual shareholders' meeting.

"There is no money to pay," said Viktor Gerashchenko, the Chairman of the Yukos Board of Directors.

The board recommended that the shareholders use 2004 revenues to pay off the company's tax debts.

During the first nine months of 2003, Yukos paid $2 billion dollars in interim dividends. The company paid $0.9 per ordinary share.

Yukos shareholders lest year also decided not to pay dividends for 2003, heeding the board of directors' recommendation not to pay additional dividends for 2003 as considerable dividends had been paid for the first nine months of 2003 already.

Former Yukos CEO Mikhail Khodorkovsky was arrested in 2003 on suspicion of fraud and tax evasion, and the company was saddled with a multi-billion bill in back taxes. As of late 2004, Yukos' debt reached $11 billion.

Source: RIA Novosti

Russia moving in the right direction - senior European official

A Council of Europe (CE) official has said that Russia is moving in the right direction in its democratic development and that the Council has "positive relations with Russia."

"We are fully aware that it takes time to develop democracy in the European sense of the word," said Diogo Freitas do Amaral, the chairman-in-office of the Council of Europe Committee of Ministers. He is also foreign minister of Portugal, which holds the six-month CE rotating chairmanship until November.

He added in an exclusive interview with RIA Novosti, "since Russia is in the Council of Europe, it meets the norms and requirements of the organization."

However, he said there were "sensitive" areas in the Council of Europe's relations with Russia: "democracy, human rights and the supremacy of the law."

Amaral said his country had no special program for dealing with these problems. According to him, the Council of Europe is rather designed to explain some positions.

Yesterday, Russian Foreign Minister Sergei Lavrov invited Amaral to visit Russia in late September. "I accepted the invitation," said Amaral. "I would very much like to see Moscow."
Amaral said Portugal's chairmanship of the Council of Europe saw cultural issues as a priority. He said he was sure that in this area there would be a great deal to see in the Russian capital.

Source: RIA Novosti

Yukos will not file for bankruptcy

"We do not plan to initiate the bankruptcy of Yukos," Chairman of the Board Viktor Gerashchenko said at a AGM of Yukos stockholders today.

Russia could see AAA-rated Eurobonds on its bond market in 2005

In order to gain the highest possible rating Vneshtorgbank (VTB) intends to insure its default risk with the world’s leading insurance companies. In the interim, the bank is close to set another record following one by Gazprom when it floated 30-year bonds.

The lending institution’s bond appetite has been growing by leaps and bounds in recent months. At present, the bank’s external debt stands at about $4 bln which prompts it to adopt creative approaches to offer new instruments to investors in a bid to attract financial resources. At the beginning of 2005 VTB issued $750 mln subordinate Eurobond (taken into account for capital calculation). Nowadays, it is going to surprise investors by the maturity and yields of its new fixed income instruments.

Recently, VTB CEO Andrey Kostin reported that in June-July the bank will launch long-term bonds on Western markets. Yesterday, Deutsche Bank kicked off a road show for VTB’s 30-year Eurobond, several market participants reported. This bond placement totaling at least $500 mln could be another record after Gazprom launched this spring 30-year Eurobond worth $1.2 bln, the most long-term debt instruments, among Russian entities. Like those of Gazprom, the bank’s Eurobond will provide investors with the right to redeem debt instruments in 10 years. VTB and Deutsche Bank declined to comment.

VTB is participating in projects with long payback periods and it needs long-term resources, a source close to the bank explained why VTB opted to float Eurobond. Another source familiar with VTB’s plans added that the global fixed income market is currently thirsty for long-term debt instruments, as a result of which 30-year Eurobond could be placed at the same yield level as offered by short-term, for example, 5-year debt instruments.

Industrial output grew 3.6% in January - May

Industrial output in Russia was up 3.6% in January-May 2005 and 1.4% in May, the State Statistics Service said.

China welcomes cooperation with Russia

China hopes to expand cooperation with Russia in the energy sphere, a spokesman for the Chinese Foreign Ministry said today.

Liu Jianchao told a news conference that Chinese President Hu Jintao planned to discuss an increase in bilateral cooperation, including in the energy and investment sphere, during a trip to Russia that starts on June 30.

"Cooperation in the energy sphere is an important part of our partnership," the spokesman said in answer to a question about a potential agreement on building a branch of the Eastern Oil Pipeline to China.

The Chinese representative said that greater interaction in this field corresponded to both countries' interests. "China hopes that cooperation in this sphere will expand and develop in the future," he added.

Source: RIA Novosti

Amendments to the Federal Law “On the Securities Market”

Russian President Vladimir Putin has signed off on amendments to the Federal Law “On the Securities Market”, the Federal Law ”On the Protection of Rights and Legitimate Interests of Investors on the Securities Market” and the Federal Law ”On the Central Bank of the Russian Federation (Bank of Russia)”, the presidential press service reported.

The amendments were adopted by the State Duma on May 27, 2005 and approved by the Federation Council on June 8, 2005.

The amendments will allow the Central Bank of Russia to be more flexible in pursuing its monetary and credit policies. The document establishes a special procedure for the issue of short-term CBR bonds, without state registration of bond issues or additional issue of such bonds, without compiling prospectuses for such bonds and without state registration of bond placement reports or additional bond issues.

The law is to replace the procedure for state registration of bond issues under identification numbers (numeric, letter or other codes which identify specific bond issues which are not subject to state registration). Decisions on the placement of such debt instruments will be adopted by the CBR board.

GDP grew by 5.4% in January-May

Russia's GDP up 5.4% in January-May 2005 in comparison with the same period last year.

Source: Ministry of Economic Development and Trade

Federation Council endorses 2005 budget amendments

On Wednesday the Federation Council approved amendments to the Federal Law “On the 2005 Federal Budget”. The law provides financial resources for the budget’s new obligations which have arisen due to the adoption in late 2004 and early 2005 of federal laws, presidential decrees, specific presidential and governmental orders which have gradually been entered into force beginning 2005. The amendments will increase federal revenue and spending by Rub 271.6 bln ($9.7 bln) and Rub 348.3 bln ($12.4 bln), respectively.

Full Article

Lebedyansky to launch mineral water production

Lebedyansky Cannery plans to launch production of mineral water at Progress, its plant based in the Lipetsk region-based plant, in August-September 2005. The company intends to promote mineral water in the central, southern regions of Russia and probably all across Russia at a later time. The company’s financial director said that Lebedyansky has already spent €3 mln on purchasing equipment for mineral water production facilities.

In our view, rolling out mineral water facilities is a strategically important move, since this sector holds robust potential. The drinking and mineral water market is currently one of the most dynamically developing segments in the food industry. It has grown 20-25% a year in recent years. Nonetheless, the market is far from saturation. At present, Russia’s annual rate of mineral water consumption stands at 15 liters per capita, whereas this figure is equal to about 100 liters in Europe. Growth in mineral water consumption will be driven by rising disposable income of the public and a shift in consumer preferences towards more healthy food.

Russia to begin liquefied gas shipments to Mexico

The Russian ship-operating giant Sovkomflot is planning to start shipments of liquefied natural gas to Mexico in late 2007 or early 2008, Deputy chief executive Alexander Krasnenkov told RIA Novosti today.

"We are having two vessels built in Japan for the delivery of liquefied natural gas to Mexico, and we plan to carry out the first shipments in 2007," Krasnenkov said.

Russian President Vladimir Putin yesterday told his Mexican counterpart, Vicente Fox, that Russia would soon supply Mexico with liquefied gas from Sakhalin. "We are putting together a number of ambitious economic projects, including in the power industry," the Russian leader said. He added that he was pleased liquefied gas from Sakhalin would be supplied to the Mexican coast, and that some of it would be offered to the country.

Krasnenkov said Sovkomflot had been awarded the contract for the shipment of liquefied natural gas to Mexico in partnership with a shipping line operating in Russia's Far East.
Sovkomflot is one of Russia's largest ship operators, with a fleet of 47 vessels, whose deadweight capacity totals some 3.6 million metric tons. It is 100% state-owned.

Source: RIA Novosti

Daily Review. 22nd June, 2005

Wednesday’s trading session was subdued again on another round of thin volumes. Investors were still waiting for Rosneftegaz to compete the acquisition of Gazprom’s shares. The market mood was largely speculative on a statement by German Gref that the state could consolidate its controlling stake in Gazprom before the June 24 AGM

What’s more, Gazprom shareholders are expected to approve a $3 bln loan from Sberbank and Vneshtorgbank. This credit facility seems logical taking into account the onerous expenses ahead, all the more since the gas monopoly will receive cash from the state for its shares no earlier than year-end 2005.

Most RTS blue chips finished up within a band ranging from +0.13% (UES) to +1.69% (Surgutneftegaz). On the negative end of the spectrum was Mosenergo (-0.67%). The RTS Index advanced by 0.86% to 695.94 on above-average volumes totaling $25.4 mln.

MICEX blue chips also saw a fair amount of upside yesterday with the list of gainers ranging from +0.02% (Sberbank) to +2.26% (Surgutneftegaz). In negative territory were Rostelecom (-0.19%) and Mosenergo (-0.65%). The MICEX Index was up 1.17% to 628.26 on trading volumes amounting to $880.80 mln.

Meanwhile, Gazprom ended up 1.93% to Rub 83.58 on SPICEX with 12.4 mln shares changing hands.

Mexico seeks to boost mutual investment with Russia

MOSCOW, June 22 (RIA Novosti) - Russia and Mexico should join their efforts in promoting global economic development, Mexican President Vicente Fox told a forum of Russian and Mexican entrepreneurs Wednesday.

"The Russian and Mexican leaders should provide a proper environment for economic development," Fox said.

According to Fox, Europe's national economies are growing weary.

"Therefore, we must make moves to develop our relations on the international level. Russia and Mexico must promote global economic development."

Fox said his country sought investment cooperation with Russia and hoped "Mexican entrepreneurs can find partners and colleagues in Russia."

Russia's Chamber of Commerce and Industry and Mexico's Business Council of Foreign Trade Investment and Technology signed a cooperation agreement at the forum.

Chamber President Yevgeny Primakov said bilateral "economic relations have dragged behind political contacts between the two countries' senior officials, therefore more agreements in specific areas of cooperation must follow."

Valentin Morozov who heads the Foreign Ministry's Latin America department, said the ministry could open a "political umbrella over business entities."

"The success of economic cooperation with Mexico is largely contingent on the results of bilateral talks on Russia's accession to the WTO and on whether or not Mexico will recognize Russia as a market economy," Morozov said.

Russia's oil reserves to last 35-40 years

MOSCOW, June 22 (RIA Novosti) - Given current oil extraction volumes, Russia's oil reserves will last for at least 35-40 years, a ministry press release quoted an official as saying Wednesday. Deputy Minister of Natural Resources Anatoly Tyomkin said undeveloped deposits had exceeded 100 billion metric tons of standard fuel. According to Tyomkin, Russian oil companies will be able to use their oil reserves for an average of more than 30 years and some could last as long as 50 years. Reserves of foreign corporations amount to much less, Tyomkin said. BP and Amoco's reserves are expected to last about 10 years, while Exxon Mobil's could go for another 12.

"The dynamics of oil extraction and the increase in hydrocarbons reserves in 1999-2003 showed that the ratio between the increase in reserves and the extraction was 85%," Tyomkin said.

He said the major reason was a drop in prospecting and investment in the area, which Russia encountered in the 1990s.

According to Tyomkin, Russia would be able to reach Soviet levels of investment in prospecting, if the program to reproduce the raw material base is fully funded. (Investment in mineral wealth reproduction will aggregate 2,428,440 million rubles between 2005 and 2020.
"It will help reduce the gap between growing deposits and extraction. In 2010, the ratio will be about 90%, and in 2012 - 100% due to an increase in liquid hydrocarbons," Tyomkin said.

He also said Russia would actively explore and commission unique deposits on the continental shelf that contain about 87 billion metric tons of standard fuel, according to initial estimates.
"Therefore, Russia will remain a major oil and gas supplier in the world in the long term," Tyomkin. As for the short term, oil extraction in Russia may be increased to 520-530 million metric tons by 2020.

However, the volumes of extraction will above all depend on the domestic needs and the situation on the world markets."

Energy Dialogue

“The foreign ministry of Russia is actively participating in the development of energy dialogue with the United States and hopes to start this dialogue with China, India, Japan and Korea in the future,” Russian foreign minister Sergei Lavrov said on Tuesday.

Hu visits Russia

President Hu Jintao will visit Russia and meet President Vladimir Putin en route to the July 6-8 G8 meeting in Gleneagles, said Chinese Foreign Ministry spokesman Liu Jianchao

British retailer M&S to build biggest chain in Russia

MOSCOW, June 22 (RIA Novosti) - British retail network Marks & Spencer (M&S) may become one of the biggest retailers in Russia, a leading business daily, Kommersant, reported today.
The paper wrote that the retailer was planning to conclude a contract to lease extensive areas in five Mega shopping centers from the Swedish furniture giant, IKEA. If the contract is concluded, the British company, which has 375 stores in its homeland and another 155 shops franchises in 28 other countries, will build the biggest chain of department stores in Russia.

An M&S spokeswoman, Sue Sadler, said that the first store would open in Moscow this fall, and in 2006 M&S intended to do what no European store network had dared to do: enter the Russian regions.

At first glance, the move is something of a surprise: the M&S brand is considered quite expensive and respectable in Europe. In Russia, M&S may only be compared with Finnish retailer Stockmann. Petri Anttila, Stockmann's regional director, was surprised by the M&S plans. He said his company had not entered the regions because it do not want to alter its 'capital' format - 10,000 square meters, which he said Stockmann believed would simply not catch enough affluent buyers in the regions.

Paul Price, the managing director of the Delta Private Equity investment fund, said the arrival of M&S was predetermined. He said Russia's retail market was the sixth biggest in Europe, and was growing at 15-20% a year, compared with 3-4% in European market.

Marina Voloshchuk, the international director of Russkaya Torgovaya Gruppa, or the Russian Trade Group, said that M&S, apart from going to the regions, had few other options, as all the good premises in Moscow had already been taken.

Besides, market watchers pointed to other incentives that may have made the retailer rush to Russia. M&S is not performing well on its traditional markets: its pre-tax profits fell by 19% year on year in 2004. In fact, the paper wrote that other department store operators were also coming to Russia.

Poll: U.S. was Russia's chief ally in WWII

MOSCOW, June 22 (RIA Novosti) - A poll Tuesday found that 65% of Russians say The United States was Russia's chief ally in World War II. The poll was conducted by the Levada Center on the eve of the anniversary of Germany's attack on the Soviet Union on June 22, 1941.

But 2% of the respondents said that the United States had fought against Russia in that war.
According to the poll, 63% of the respondents said that Great Britain was Russia's ally and 36% of the respondents named France as an ally.

The poll says that only 6% of Russians feel hatred and vengeance towards the residents of axis-power countries.

The representative poll was held in 128 populated areas of 46 Russian regions and involved 1,600 respondents. It has a statistical error of 3%.

In 2006 Russia will join WTO - Jean Lemierre

Jean Lemierre, the president of the European Bank for Reconstruction and Development (EBRD), told RIA Novosti that Russia will probably join the World Trade Organization (WTO) next year.

Peru, Russia sign aircraft repair agreement

BUENOS AIRES, June 22 (RIA Novosti correspondent Yury Nikolayev) - Peru's president signed an agreement with Rosoboronexport, Russia's state arms dealer, on the repair of 13 Russian-made Mi-17 helicopters.

Local newspapers write the contract costs $13 million.

"Maintaining aircraft in operation readiness meets the country's national interests," President Alejandro Toledo said at the signing ceremony.

"The Russian helicopters in use in the Peruvian army serve the task of maintaining peace in the country," said the president.

Toledo said the contract would be prolonged, and another 13 helicopters and eight An-26 aircraft would be repaired in the second phase of contract works.

Peru is Russia's long-established partner in the military and technological sphere in Latin America. It was the first in the region to start military cooperation with the then Soviet Union. Mi-8, Mi-17 copters, Su-20, Su-22 assault aircraft, MiG-29 jet fighters, and An-26 planes are currently in use in the Peruvian armed forces.

Most of the aircraft require update and repair, while some of them will have to be replaced in the future.

Experts said the repair and update to prolong the aircraft's service life would cost around $250 million.

Daily Review. 21st June, 2005

Tuesday’s trading session was even more low-key than Monday’s. The lack of domestic drivers and the decline in Western indexes made investors shy away from buying. On the downside, energy stocks took a drop on recent pronouncements from UES CEO Anatoly Chubais that some high-voltage grid assets are to be handed over to the Federal Grid Company and a shift in priorities towards Russian investment projects.

Continuous revisions to UES strategy add even more uncertainty to the future track of the reform process, which has investors feeling quite uneasy. And the icing on the cake was another blackout in the South West of Moscow on Tuesday morning, which is the second such instance in the last month.

Most RTS blue chips were heading south on Tuesday. The list of decliners included NorNickel (-0.41%), and bellwether UES (-0.82%) while the top gainers were Rostelecom (+0.94%) and Lukoil (+0.03%). The RTS Index edged back 0.04% to 690.04 on average volumes amounting to $17.2 mln.

MICEX blue chips were a bit less upbeat, with the list of decliners ranging from -0.15% (Surgutneftegaz) -1.4% (Tatneft). On the other end of the spectrum, Rostelecom (+1.05%) finished in positive territory. The MICEX Index pulled back 0.58% to 621.02 on average trading volumes totaling $761.24 mln.

Meanwhile, Gazprom experienced a major correction on SPICEX, declining 1.28% to Rub 82 with 9.5 mln shares changing hands.

Putin: Russia cannot influence oil market

Moscow, June 21 (RIA Novosti) - President Vladimir Putin acknowledged today that the current high oil prices were creating difficulties for the Russian economy, but said Russia could not influence the oil market.

When speaking at a news conference after talks with the Mexican president, Putin said: "High oil prices and the substantial influx of petrodollars have caused certain difficulties for the Central Bank and the government from the standpoint of keeping inflation within the projected parameters."

According to him, this process could lead to the ruble making excessive gains, which will not help Russian exporters or manufacturers.

However, the president said prices, including oil prices, depended on supply and demand, i.e., the market, which Russia could not influence substantially.

The Russian leader said he and the Mexican president had not discussed efforts to eradicate poverty. "But I am very happy that the Mexican president has recently managed to reduce the number of poor people in the country by a third," said Putin. He added that the rate was approximately the same in Russia, and said he hoped the trend would continue.

When asked whether high oil prices helped solve the problem of poverty, he said they did in a way, as they replenished the budget.

88,000 “dollar” millionaires in Russia

In 2004 Russia saw the “birth” of 4,000 new millionaires which brought the total number to 88,000. The rise is due to growth in the Russian economy. This figure is given in the annual World Wealth Report released by Merrill Lynch investment bank and CapGemini consulting firm.

The results of this survey once again underscore some of my assumptions voiced in my previous article “Are Emerging Markets a Risk Venture?”.

Full Article

EBRD to increase investment in Russian Far East

VLADIVOSTOK, June 21 (RIA Novosti correspondent Anatoly Ilyukhov) - The European Bank of Reconstruction and Development (EBRD) plans to increase investment activities in the Russian Far East, bank officials announced at a meeting with presidential envoy in the Far Eastern federal district Konstantin Pulikovsky in Khabarovsk Tuesday.

According to Yevgeny Anoshin, the presidential envoy's press secretary, the EBRD has already invested in several large projects in the Russian Far East.

During the meeting, Pulikovsky emphasized that the 21st century is the century of the Asian-Pacific region.

"The Far East is the gate to Europe and the European part of Russia in the region. The development of the Far East will promote further development of the European economy," he said.

The Far East is becoming an attractive region for foreign investors. The volume of foreign investment in the region doubled in 2004 over 2003, exceeding $5 billion.

Pulikovsky showed the EBRD officials a list of large, nationally important investment projects. It contains 26 projects on development of transport and energy industry infrastructure in the Far East. Among them are two projects related to the construction of the East Siberia-Pacific Ocean oil pipeline.

Pulikovsky also invited European bankers to invest in the prospecting and exploration of oil and gas deposits on parts of the Okhotsk Sea shelf, known as Magadan-1 and 2.

Daily Review. 20th June, 2005

Monday’s equity trading session was sluggish on light volumes marked by mostly speculative deals. Most blue chips were leaning to the upside, though, predominantly on recording-setting global oil prices. WTI hit $58 per barrel, which is an all-time record since the 1983 opening of NYMEX, leaving the previous April 1 high of $58.27 behind and expectations that crude futures will likely break through the $60 mark later in the week.

Gazprom investors were moderately downbeat in the wake of a statement from Russian President Vladimir Putin that the gas giant should spend at least $ 1 bln on the gasification of remote areas in the country. Needless to say, this unexpected and onerous expenditure will hinder Gazprom from taking over some effective and highly capitalized asset(s), as investors had been hoping.

Most RTS blue chips fell within a range varying from +0.08% (NorNickel) to +1.33% (UES). The RTS Index advanced by 0.7% to 690.23 on thin volumes totaling $9.9 mln.

The mood was a bit more lackluster on MICEX with most blue chips closing within a band ranging from +0.06% (UES) to +1.15% (Mosenergo). The list of decliners included Tatneft (-0.19%), NorNickel (-0.35%) and Sberbank (-0.4%). The MICEX Index edged up 0.1% to 624.66 (+0.1%) on light trading volumes amounting to $532.28 mln.

On the SPICEX front, Gazprom gave up 0.35% on President Putin’s statement, finishing at Rub 83.06 with 4.4 mln shares changing hands.

Surgutneftegas lifts production targets

Yesterday the oil major’s general director Vladimir Bogdanov unveiled the company’s new operating targets: to extract 66.5 mln tons of oil in 2005 up from 63.7 mln tons announced earlier. In addition, Bogdanov reported that the drafting of the feasibility study for erection of a refinery in Primorsk (Leningrad region) will be finalized by mid-2006 and the construction of the Talakan – Ust-Kut crude oil pipeline is scheduled for completion by summer 2008.

Overall, this piece of news is a strong positive for the company. However, taking into account the contraction in the company’s recoverable reserves increment in 2004 and high capital intensity and uncertainty over its new projects, we reiterate our Hold recommendation on Surgut’s shares with a fair price of $0.74 per common share and $0.54 per preferred share, respectively.

Are emerging markets a risk venture?

The stock markets of developed countries are traditionally considered to be less risky than emerging equity markets. This means that they are a locomotive of global economic growth, supposedly less volatile, less exposed to various crises, more successful in safeguarding investor rights, operate more developed infrastructure, offer higher margins, etc.

This is actually the case if we take a look back at history. However, going by the current geo-economic trends, they will allow us to make reasonable assumptions that this situation will turn around in the near future. As a matter of fact, a paradigm shift is already in progress.

Nowadays many developing countries post economic growth rates which are higher than those in developed countries. A growing number of analysts speak about BRIC (which stands for Brazil, Russia, India and China) as the main global economy driver in the 21st century.

The United States has consistently posted the highest growth rates among developed nations. However, their growth model is currently based on a shaky footing which could evaporate at any given time. The point is that unlike the sustainable growth model which is based on savings which are invested in business the United States relies on borrowed funds which are mainly spent on or used for maintaining “bubbles” on capital markets. Suffice it to say, the US currently needs 80% of global savings to avoid a crisis.

The focus on a socially-oriented country is the main obstacle which prevents continental Europe from achieving economic growth. High taxes, rigid labor laws, etc., more often prompt companies to relocate their production facilities to developing countries. The most talented and ambitious Europeans leave their countries in order to set up businesses and live in jurisdictions with more favorable tax regimes. The intensification of these trends could result in lower tax revenues and, consequently, social unrest.

At the same time, developing nations use foreign investments to establish enterprises and, consequently, new jobs, thereby contributing to economic growth. The advantages of developing countries are plain to see from the vantage point of the layman. If the man on the street of a developed nation prefers to work less and buy more, then in developing countries the picture is quite the opposite: due to widespread poverty and unemployment people are eager to work 12 hours a day for low wages, by Western standards. This understandably has a beneficial impact on economic growth.

In our view, any investor who currently picks stocks for his portfolio should take a closer look at developing countries, Russia in particular. The Russian stock market has P/E equal to 6.3 and is one of the most undervalued worldwide by this metric.

Mikhail Aristakesyan
Expert, FINAM

Daily Review. 17th June, 2005

The Russian equity market saw sluggish trading on thin volumes Friday. Bullish global oil prices and strong ADRs were the only saving grace which came to the rescue of domestic stocks.

On a neutral news flow, players were pleased to see that the BoD of Gazprom finally endorsed the buyout price at which the state is to subsequently consolidate a controlling stake in the gas monopoly. Investors are mainly interested in seeing the ring fence lifted, which means that not much upside is to be expected until Gazprom’s shares are actually assigned to the state. The bulls are hopeful that this will happen before the gas monopoly’s June 24 AGM and if it does then a big stride on the road to liberalization will have been made.

The range of RTS blue chip gainers varied from +0.1% (Surgutneftegaz) to +1.42% (Lukoil). The RTS Index advanced 0.33% to 681.59 on average volumes totaling $17.5 mln.

MICEX was a little more bullish on Friday, with the list of advancers ranging from +0.09% (Sberbank) to +1.8% (UES). On the other end of the spectrum, Mosenergo (-0.73%) finished in negative territory. The MICEX Index added on 1.94% to close at 619.97 on thin volumes equal to $690.89 mln.

Gazprom was fractionally down on SPICEX, with a 0.1% downtick to Rub 83.35 and 6.5 mln shares changing hands.

BRIC – a force to be reckoned with

Although analysts tend to make more frequent use of the acronym BRIC (Brazil, Russia, India and China) to designate the countries which will likely become leading economic powers in the 21st century, this block has still not been officially formed, i.e. no meetings are held under the aegis of BRIC and no regulations exist to govern its activity, etc..
Nonetheless, BRIC should not be treated as something ephemeral. Bilateral and trilateral meetings of these countries have been conducted more often in recent months. They focus not only on economic cooperation, but also political issues.

This June the first trilateral meeting between the foreign ministers of Russia, India and China was held in Vladivostok. The ministers adopted a decision to set up an expert group and task it with preparing recommendations for cooperation in the area of hi-tech, energy, transport and agriculture. Moreover, Russia and China backed India’s application to obtain the status of a permanent member of the UN Security Council.

A little earlier, in mid-May, a visit to Moscow was paid by the delegation of high-ranking officials of the Common Market of the South America, Mercosur. The delegation was headed by the chairman of the Committee of Permanent Representatives of the Mercosur Eduardo Duhalde, ex-president of Argentina. In addition, there were 6 top-ranking officials from Brazil, Argentina and Uruguay in the delegation, and also 18 big businessmen from South America who represented food processing, hi-tech and biotech entities.

Russian PM Mikhail Fradkov, chairman of the Russian Security Council Igor Ivanov and Economic Development and Trade Minister German Gref, represented Russia at the meeting of the above delegation. One of the main issues discussed at the meeting was cooperation in the hi-tech and energy sectors.

As we can see, although these events are not covered by leading international news agencies, they are in full swing. Moreover, they are on solid footing since they are underpinned not by populist or Utopian aspirations of politicians, but by mutually beneficial economic cooperation.

In our view, investors should devote special attention to the Russian utility industry. Challenging opportunities can be provided by projects to export electricity from Russia to China and India, as well as the erection of new power generation facilities (HPPs, NPPs, etc.).

Those interested in utility news and research reports on power entities can visit this page.

Mikhail Aristakesyan
Expert, FINAM

Daily Review. 16th June, 2005

Trading kicked off to a strong start on Thursday on the back of rising Western stock indexes and bullish global crude oil prices. But dithering over the buyout price of the state’s 10.74% stake eventually encouraged most market participants to opt for another round of profit taking.

Meanwhile, the majority of blue chips, including Gazprom, were blissfully oblivious to news that the gas monopoly’s BoD apparently came to terms on the buyout price. The media wired yesterday that the BoD of the gas mammoth set the buyout price for the 10.74% stake at Rub 203.5 bln ($7.11 bln based on the June 16 forex rate). This price falls well short of the figures appraised by both DrKW and Morgan Stanley.

The list of RTS blue chip decliners was as follows yesterday: Lukoil (-2.68%), Sibneft (-1.77%) Rostelecom (-0.5%) and bellwether UES (-0.34%). On the other end of the equity spectrum, NorNickel (+2.31%), Surgutneftegaz (+1.11%) and Sberbank (+0.67%) finished in the black. The RTS Index pulled back 0.28% to 679.60 on average trading volumes equal to $23.3 mln.

MICEX was feeling a bit more chipper with the band of gainers ranging from +0.1% (Tatneft) to +1.7% (NorNickel).The top losers of the day on the ruble-denominated bourse turned out to be Lukoil (-0.79%) and Sibneft (-0.13%). The MICEX Index edged up 0.36% to 618.93 on average volumes totaling $869.53 mln.

Meanwhile, Gazprom headed north on hopes that the buyout transaction will eventually deliver the anticipated outcome. The gas monopoly notched up 0.55% to Rub 83.44 with 10.6 mln shares changing hands.

Daily Review. 15th June, 2005

Wednesday’s trading session kicked off with moderate growth across the board, but before long most blue chips began to contract. While awaiting the outcome of Gazprom’s BoD meeting investors opted for a bout of profit-taking. What dampened the mood was a newswire that the state is willing to pay only $7.15 bln for a 10.74% stake in the gas monopoly. This figure is well below the amount the concern was looking for, i.e. at least $8 bln.

It’s noteworthy that Dresdner Kleinwort Wasserstein investment bank appraised Gazprom at $93.27-107 bln ($3.94-4.52 per share). This valuation puts the 10.74% stake which the state needs in the gas monopoly to secure a controlling interest at $10.2-11.5 bln. The other official appraisal by Morgan Stanley was for $78.12-92.32 bln. ($3.3-3.9 per share), which would put the stake in question within the range of $8.39-9.92, which is still way above the state’s stingy proposal. As a matter of fact, the figure visibly undershoots the lower valuation plank set by the two expensive appraisers.

Against this backdrop, most RTS blue chips ended up in mildly negative territory on Wednesday within a band ranging from -0.14% (Surgutneftegaz) to -0.84% (Lukoil). The benchmark retreated by 0.54% and finished at 681.51 on trading volumes totaling $23.9 mln.

MICEX was in just about the same mood yesterday, with most blue chips ending up within a spread varying from -0.4% (Sberbank) to -4.2% (Mosenergo). On the other side of the spectrum were NorNickel (+0.75%) and Surgutneftegaz (+0.4%), which finished in the black. The MICEX Index settled at 616.69 (-0.53%) on trading volumes totaling $811.72 mln.

Meanwhile, Gazprom fell out of favor with investors over the soured appraisal deal, with the gas monopoly shedding 0.86% to Rub 82.98. A total of 14.3 mln shares changed hands on SPICEX.

Daily Review. 14th June, 2005

The late beginning of the trading week saw most blue chips in positive territory on Tuesday. The lackluster internal market was again driven by a positive global crude oil market. Global markets and Russian ADRs also combined to push up the market. What’s more, high hopes pinned on Gazprom’s Wednesday BoD meeting translated into a big positive which contributed to the overall bullish mood.

The gas monopoly’s board is widely expected to set the price of its assets to be sold to Rosneftegaz for subsequent consolidation of a controlling stake in the monopoly using Rosneft. According to the most recent statements by German Gref, the buyout price of the 10.74% stake will be $6-8.5 bln. The market continues to hope that the government will finally shift from words to deeds so as to muster a controlling stake in Gaprom and remove the ring fence.

Most RTS blue chips caught the updraft yesterday, finishing within a band ranging from +0.75% (Rostelecom) to +2.09% (NorNickel). The RTS Index advanced 1.25% to 685.23 on heavy volumes totaling $32.12 mln.

MICEX was a little more bullish on the whole than the benchmark, with most blue chips falling within a spread ranging from +0.4% (Sberbank) to +2.5% (NorNickel). Mosenergo (-0.53%) ended up in negative territory. The MICEX Index settled at 619.97 (+1.94%) on average volumes amounting to $692.23 mln.

Meanwhile, Gazprom kept plodding along and ended up 0.6% to Rub 83.7 on SPICEX, with 12.8 mln shares changing hands.

Gazprom and Royal Dutch/Shell come to terms on the Sakhalin-2 project

According to deputy chairman of Gazprom Alexandr Medvedev, Gazprom and Shell have coordinated the general terms for the Russian gas giant to enter the Sakhalin-2 project. Gazprom plans to acquire a blocking stake in the Sakhalin-2 project from Royal Dutch/Shell in exchange for the right of the latter to participate in the development of the Neocomian deposits of the Zapolyarnoye gas field. As a result, Gazprom will come on board the Sakhalin-2 project as Sakhalin Energy’s shareholder, while Shell will join the Zaolyarnoye- Neocomian project as a shareholder.

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Daily Review. 10th June, 2005

Russian blue chips got off on the right foot in early Friday morning trading and most stocks locked in some fairly solid gains due to the favorable foreign economic news flow. With oil prices heading north (+3%), the heavily oil-weighted Russian stock market easily gathered momentum. However, by mid-afternoon the market began to run out of steam and slipped into another drab side trend.

On the international economic front, Fed chairman Alan Greenspan’s testimony on Thursday before the US Congressional Joint Economic Committee pointed to the likelihood that the Fed will stick to its “measured” rate hike policy at least for a while longer. This dashed the hopes of emerging markets, which were looking for FOMC to be done with fiscal tightening.

By Friday’s close, most RTS blue chips fell within a growth band ranging from +0.86% (Lukoil) to +1.29% (Surgutneftegaz). The decliners included Sberbank (-0.15%) and Rostelecom (-0.25%). The RTS Index advanced 0.45% to 676.78 on an average turnover reaching $19.3 mln.

MICEX was slightly more upbeat on Friday, with the range of gainers varying from +0.27% (Sberbank) to +6.1% (Mosenergo). On the losing end of the equity spectrum was Tatneft (-0.39%). The MICEX Index climbed 0.95% to 611.19 on thin trading volumes amounting to just $664.71 mln.

Gazprom continued its winning streak, adding on a healthy 1.23% to close at Rub 83.2. A total of 13.6 mln share changed hands on SPICEX.

Altay Bread kicks off M&A

Agricultural company Altay Bread has finalized the acquisition of a 90% stake in Romanovskoye Grain Processing Plant and a 75% equity position in Romanovsky Agricultural Holding.

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Daily Review. 9th June, 2005

Russia’s equity market trading was again low key on Thursday with most stocks drifting off into a side trend. Volumes were soft on the absence of any pronounced drivers. Investors focused mainly on Lukoil and Surgut, which trended up on rising global oil prices. All eyes were also on NorNickel ahead of what investors believe will be robust FY04 financials.

Norilsk Nickel’s IAS financial statement is due out on Friday. Investors have high hopes on account of the high dividends payable on 2004 results. In line with the company’s dividend policy, 20-25% of IAS net is to be allocated to shareholders. And the icing on the cake was an announcement Thursday that NorNickel will be shelling out additional FY04 results to the tune of Rub 28/share. This way, given the previous interim dividend payout on 9M04 results equal to Rub 41.4, the metal maker will make a total payout of Rub 69.4 on last year’s financial performance.

RTS blue chips were a mixed bag on Thursday, with the list of losers including Rostelecom (-0.25%), Sberbank (-0.38%), Tatneft (-0.55%) and Mosenergo (-0.67%). The gainers included UES (+0.17%), Lukoil (+0.43%) and Surgutneftegaz (+1.01%). The RTS Index advanced 0.27% to 673.72 on slightly-less-than-average volumes that came to $15.2 mln.

This time MICEX was more downbeat that the benchmark with the decliners falling into a band ranging from -0.04% (Rostelecom) to -2% (Tatneft). On the other side of the spectrum, the gainers included Lukoil (+0.15%) and Surgutneftegaz (+0.9%). The MICEX Index pulled back 0.24% to 605.43 on average volumes totaling $735.89 mln.

Meanwhile, Gazprom (0.3%) continued to trend upward on SPICEX with the last deal going for Rub 82.19 and 8.6 mln shares changing hands.

MinFin to press for another round of advance debt repayments

On Wednesday, the government’s budget committee adopted a decision on the key parameters of the 2006 federal budget and draft financial plan for 2006-2008. The former will be addressed at the Cabinet meeting on June 16, while the budget will be submitted to the State Duma on August 26. However, Vedomosti business daily reported that Finance Minister Alexei Kudrin unveiled some of the key parameters of the budget. Russia’s 2006 budget will be pegged to the price of crude oil at $35/bbl. In addition, 2006 budget revenues are projected at Rub 4,429.8 bln ($156.1 bln) and spending at Rub 3,929.6 bln ($138.5 bln). The budget surplus is forecast at Rub 500.2 bln ($17.6 bln) in 2006, while the stabilization fund is expected to surge to Rub 1,739.8 bln ($61.3 bln) as of January 1, 2007. For the record, the stabilization fund amounted to Rub 954.5 bln ($33.5 bln) as of June 1, 2005.

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Daily Review. 8th June, 2005

Wednesday’s trading session was largely a repeat performance of the previous day’s mood. Most stocks were mixed on an average level of activity. The main movers and shakers of the day were bellwether UES and Tatneft, which saw some fairly heavy trading volumes. However, the overall mode was cautious as even news pointing to the upcoming liberalization of Gazprom failed to strike a responsive chord with skeptical traders.

According to a press released issued by the Federal Property Management Agency, Rosimushchestvo has assigned 100% of Rosneft’s shares to the balance sheet of Rosneftegaz. A newswire also reported that the BoD of Gazprom intends to table a discussion on selling the shares of its subsidiaries in the parent company to Rosneftegaz on June 15. It therefore looks as though the master plan is moving forward as scheduled, although we expect to see a flashier rally closer to the time when Rosneftegaz actually picks up the coveted 10.74% stake in Gazprom for the state.

The list of yesterday’s RTS decliners was as follows: Surgutneftegaz (-1.70%), Mosenergo (-1.32%) and Lukoil (-0.43%). On the other side of the spectrum, the advancers featured Tatneft (+1.95%), UES (+1.04%), Sberbank (+0.54%), NorNickel (+0.52%) and Rostelecom (+0.25%). The RTS Index pulled back slightly (-0.17%) to 671.91 on average volumes amounting to $22.8 mln.

MICEX again outperformed the benchmark with blue chips showing mixed results within a band ranging from -0.26% (Sibneft) to -2% (Surgutneftegaz). Looking northward were Tatneft (+2.9%) and UES (+1.28%). The MICEX Index was fractionally up (+0.02%) and settled at 606.89 on heavier-than-average trading volumes totaling $976.32 mln.

Meanwhile, Gazprom (+0.6%) was still on an upward track with the last deal closed at Rub 81.94 and 5 mln shares changing hands.

Lukoil looking to break onto the Turkish market

Reuters news agency reported citing the oil major’s vice president Nikolai Chyorny that Lukoil intends to gain 20% of the refined products market in Turkey in an attempt to boost sales from its Black Sea refineries and raise supplies bypassing Turkey’s Bosporus Strait. A Lukoil spokesperson said that Lukoil is currently in talks over the acquisition of several marine terminals on Turkey’s Black Sea coast which could import substantial volumes of petroleum products.

In reality, entry into the Turkish market would allow Lukoil to efficiently diversify supplies away from its refineries located in Ukraine, Bulgaria and Romania and get one step ahead of the perpetual traffic jams in the Bosporus Strait. In addition, according to the oil major’s estimates, 70% of the Turkish petroleum products market (with a total consumption of about 20 mln tons a year) consists of diesel fuel and fuel oil. Thus, Lukoil plans to bring to the Turkish market diesel fuel and dark oil products which are in low demand in Europe.

We reiterate our Buy recommendation on Lukoil shares with a fair price of $38.74 per share.

Sistema looking to pick up 49% of Indian ATVL and 10.15% of MTS

The media reported that AFK Sistema is in negotiations over the acquisition of a 49% block of shares in Indian wireless operator Aircel Televentures Ltd. (ATVL) for $450 mln. Moreover, the Russian investment holding intends to pick up a 10.15% equity stake in MTS from Deutsche Telekom.

Full article

Daily Review. 6th June, 2005

Monday’s trading session was dictated by a downbeat news flow that came in on Saturday. More harsh criticism by President Putin against the top management of Mosenergo was the tune the market kicked off to first thing on Monday morning.

Following a discussion at the Security Council in Moscow on the recent energy crisis, the Russian president made a harshly worded statement about the management of Mosenergo,, accusing it of negligence, cynicism and professional ineptitude, after which the CEO of Mosenergo stepped down. After sliding for the better part of the morning, power stocks corrected slightly only to flatline into a side trend, as was the case with most other chips.

Based on the results of yesterday’s session, the majority of RTS blue chips displayed mixed performance, with the top decliners including Sibneft (-1.13%), bellwether UES (-0.89%), and NorNickel (-0.85%). On the other side of the spectrum, Rostelecom (+0.25%), Tatneft (+0.57%) and Surgutneftegaz (+0.57%) ended up in positive territory. The RTS Index was flat compared to the previous session (676.18) on thin volumes totaling $14.3 mln.

A more negative mood set in on MICEX, with the spread of decliners ranging from -0.4% (Lukoil) to -3.2% (Mosenergo). In the black were Rostelecom (+0.05%) and Surgutneftegaz (+1%). The MICEX Index closed at 606.33 (-0.45%) on trading volumes equal to $554.68 mln.

Gazprom (+0.12%) was marginally up yesterday on SPICEX, with the last deal going for Rub 81.9, and 6.7 mln shares changing hands.

Selling price of Gazprom’s stake to be set in stone on June 15

According to Gazprom’s press release, the company’s regular AGM is scheduled for June 15 at which the coordination of transactions among Gazprom’s subsidiaries and Rosneftegaz and the selling price of Gazprom’s shares owned by its subsidiaries will be addressed. As reported previously, the transaction is slated for completion by Gazprom’s BoD meeting on June 24, 2005.

Full article

Daily Review. 3rd June, 2005

Friday’s trading session was largely an extension of the mood that prevailed in the previous session. In the absence of pronounced domestic drivers the dominant news flow came from external markets, although Western markets were a mixed bag. American stock indexes began to drop on news that the US May jobs report came in at less than half of the median forecast, fueling speculation that the Fed rate hikes could be coming to an end, with maybe one or two more hikes until year-end 2005.

Meanwhile, quite a few Russian blue chips were marking time in a side trend again. Surgutneftegaz showed fairly robust growth as the oil major was looking undervalued after a 3-month losing streak. The big mover and shaker on Friday was Gazprom, which caught the updraft on a newswire that the gas monopoly’s BoD is to review transactions between the subsidiaries of Gazprom and Rosneftegaz and set the price of shares in Gazprom subsidiaries which are to be sold to Rosneftegaz.

The list of decliners on benchmark RTS was as follows: Sberbank (-0.15%), UES (-0.21%), Lukoil (-0.34%) and NorNickel (-0.34%). On the other side of the spectrum, Tatneft (+0.75%), Sibneft (+0.82%) and Surgutneftegaz (+1.15%) closed in the black. The RTS Index was fractionally down (-0.02%), landing at 676.17 on run-of-the-mill trading volumes which came to $20 mln.

MICEX blue chips also ended up mixed: the gainers ranged within a band from +0.2% (Lukoil) to +1.4% (Tatneft); the list of losers featured NorNickel (-0.06%), Rostelecom (-0.5%) and Mosenergo (0.5%). The MICEX Index settled at 609.09 (+0.35%) on a lower-than-average turnover totaling $640.23 mln.

The top Russian blue chip on Friday was Gazprom, which traded up a healthy 1.65% to close at Rub 818.8 on SPICEX with a heavy turnover – 14.9 mln shares changing hands.

Lukoil and ConocoPhillips team up to tap the Yuzhnoye Khilchuyu field

Narianmarneftegaz, Lukoil’s subsidiary on the basis of which a JV with ConocoPhillips is being established to tap oilfields in the Timan-Pechora oil and gas province, is about to launch the development of the Yuzhnoye Khilchuyu field, a highly promising deposit. The project offers strong margins both in terms of financial and technological parameters. The occurrence depth is approximately 2,000 m, recoverable oil reserves are estimated at 80 mln tons and target well yield rates reach 300 tons per day. This project seems to be one of Lukoil’s most attractive new domestic ventures, especially taking into account possible exports through the Varandeisky oil loading terminal.

As for the JV with ConocoPhillips where the American oil major is supposed to own a 30% stake, according to the company’s President for Russia David Barrington the venture is expected to kick off by the end of June.

Daily Review. 2nd June, 2005

Thursday’s equity trading session was driven by a favorable environment on global stock and commodity markets, with Russian ADRs racking up sizeable gains abroad. But after a morning rally, blue chips ran out of steam and locked into a side trend until the close of the session. Russian oils led the way, with strong demand fueled by yesterday’s 5% crude spike on NYMEX.

High oil prices reflected forward-looking concerns that supply will outstrip demand for the crude and product sides in Q405 as well as output snags at ExxonMobil and Royal Dutch/Shell refineries in the US.

Most RTS blue chips traded up yesterday, with the band of advancers ranging from +0.5% (Rostelecom) to +3% (NorNickel). The RTS Index advanced 1.37% to 676.28 on average volumes totaling $24.8 mln.

MICEX blue chips ended up within a range varying from +0.4% (Lukoil) to +2.4% (NorNickel). On the other side of the spectrum, Sberbank (-0.27%) finished in mildly negative territory. The MICEX Index settled at 606.95 (+0.94%) on trading volumes equal to $653.47 mln.

Gazprom (0.58%) also moved up moderately along with the market. The last deal was closed at Rub 80.47 on SPICEX with 6.3 mln shares changing hands.

Daily Review. 1st June, 2005

On Wednesday, trading was low-key on the Russian equity market. Most blue chips eased back on the absence of the any major internal drivers after Tuesday’s landmark verdict in the Khodorkovsky trial. Rising Western indexes did nothing to breathe some life into the stock market.

A moderate negative came from speculation over oil shares on the back of an 8% hike in gas transportation tariffs for Transneft’s pipeline system. However, not all Russian oils receded on this news.

The majority of RTS blue chips ended up in negative territory on Wednesday, within a range varying from -0.3% (Sberbank) to -3.7% (Surgutneftegaz). The RTS Index pulled back 1.08%, landing at 666.13 on average trading volumes amounting to $20.6 mln.

The mood on MICEX was similarly downbeat with most blue chips closing down within a band ranging from -0.1% (Tatneft) to -3.3% (Mosenergo). The advancers included bellwether UES (+0.2%) and Lukoil (+0.5%). The MICEX Index finished at 601.29 (-0.4%) on trade volumes amounting to $560.3 mln.

Gazprom was also moving on a downward track yesterday, losing 0.79% to Rub 80.01 on SPICEX with 5 mln shares changing hands.

UES to join e7 Energy Forum

According to the power holding’s press service, a UES delegation chaired by deputy chairman Leonid Drachevsky will take part in the annual Energy Forum e7 summit. The power holding is to be recognized as a full-fledged member of e7 at the summit on June 1-2.

Full article

Daily Review. 31st May, 2005

Tuesday’s trading mood was set by the long-awaited verdict that was finally handed down by the Moscow Meschanky Court. Most blue chips were in the red yesterday morning as the market waited impatiently for the final judgment in the Yukos case. A rally got under way, however, after the verdict was made public. Cynically as it may seem, the drawn-out trial proceedings triggered uncertainty and any outcome at all came as a welcome relief to the jittery market.

The sentence served against Khodorkovsky, Lebedev and Krainov, which took 12 long tortuous days to read out, was nearly the harshest one possible, with Khodorkovsky and Lebedev each getting nine years in a medium security prison and co-defendant Krainov picking up a 5-year suspended sentence. Plans are already underway to launch a wave of appeals both in Russia and abroad and there is already conjecture that despite the heavy-handed sentence, Khodorkovsky and Lebedev could be free within 2-3 years in the wake of this “travesty of justice”.

The relief rally which followed the Khodorkovsky sentence saw most blue chips trending up comfortably within the black. The range of advancers varied from +0.12% (Rostelecom) to +1.92% (NorNickel). The RTS Index advanced 1.11% to 647.19 on heavier-than-usual volumes of $23.8 mln.

MICEX blue chips were also glad to see the verdict over and done with and the band of gainers ranged from +0.2% (Surgutneftegaz) to +3.6% (Sibneft). Mosenergo (-3.3%) ended up in the red. The MICEX Index settled at 603 (+1.3%) on volumes totaling $732.08 mln.

Meanwhile, Gazprom also got in on the action yesterday with the last deal going for Rub 80.65, which is 1.14% higher than the previous close and 7.7 mln shares changing hands.