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Economic News in Review June
9 July 2008
Economic News in Review June

Economic News in Review
for June, 2008

The following resource is meant to quickly introduce the reader to some of Russia's major business news for the month. Please note that we strive to focus on more specific, less-well-covered issues. This news review is developed in conjunction with The School of Russian and Asian Studies, which also produces several other reviews ("obzori") each month.

Please note that this month's edition is intended as as a supplement to the accompanying USRCCNE newsletter. To subscribe to this newsletter, input your email address on our homepage (in the bottom left corner).


Featured Stories

Russia's new government promises no change in resource concessions, yet.
The list of the new Russian government ministers, released by Prime Minister Vladimir Putin this afternoon, preserves most senior officials in their place.

Russia is not leaving the G-8
Russian President Dmitry Medvedev says suggestions that the country be thrown out of the Group of Eight can't be taken seriously.

"Businessmen, Rather Than Politicians, Will Provide for Rapprochement"
Ahead of the Russia-EU summit in Khanty-Mansiysk, in his article written for Kommersant exclusively, EU Trade Commissioner Peter Mandelson dwells on the causes for the difficulty in the relations between Moscow and Brussels.

Casinos Fight Putin's Crusade to Banish Gambling From Moscow
Russia's two biggest gambling companies are fighting back, saying they will move their casinos, and the taxes they generate, abroad if the rules aren't relaxed.

13 Russian Cos. in FT Top 500 List
Raw materials, especially oil, have displaced banking as the most valuable sector of the world economy.

Medvedev Calls U.S. Dollar Intl. Problem
According to Medvedev, the United States has to solve the problems of its currency, but other countries should strive to make the international financial system multicurrency.

Inflation Continues Its March
Data published yesterday by Rosstat indicate that inflation in May not only is not stopping, it is picking up the pace.


SMEs and Entrepreneurship

Russia Celebrates Day of the Entrepreneur
Russia's businessmen have now been given their own national day in honor of their fledgling profession.

Small Businesses Lack Confidence in Future
Small and medium-sized enterprises (SMEs) underinvest into development because entrepreneurs are not confident about their future.

Beginning of Meeting on Business Development
I want to sign a decree that will set out the measures for developing small business, above all measures to do away with excessive administrative barriers.

Russia's Medvedev tells govt to back small business
Small and medium-sized companies, harassed by mafia in the 90s and bureaucrats this decade, have failed to flourish.

Banks turn to small business lending
St. Petersburg's lending market for small businesses is projected to grow by 40-70 percent in 2008.


Foreign Investment and Trade

Putin orders new commission to regulate foreign investment
Russian Prime Minister Vladimir Putin Monday called for the creation of a government commission to decide on foreign requests to buy into key sectors such as oil and gas, media and telecoms.

Law, Moscow, Medvedev and Me
Due to the unique aspects of Russia/CIS legal environment, investors can dramatically increase their chances of success through rigorous implementation of legal and compliance best practices.

List of Russia's strategic industries may be shortened
"I believe that the current list [of 42 strategic industries] is a touch extensive and we may decide to shorten it in the future," said Kudrin.

Nonresidents Straightened Investments
The direct inflow of foreign money to Russia’s companies will double in the nearest three years with private equity funds gaining significance.

Another Round of WTO Negotiations Starts in Geneva
Another round of multilateral and bilateral talks on Russia’s admission to the World Trade Organization (WTO) starts in Geneva Monday.

The first meeting of the Presidium
Economic Development Minister Elvira Nabiullina and Industry and Trade Minister Viktor Khristenko are yet unable to agree on dividing control over foreign trade.

Investors see bright future for Russia
Foreign investors view Russia as the most promising investment market, showed an opinion poll conducted by Russia’s Consultative Council for Foreign Investment.

Paulson Says U.S. Welcomes Rubles
U.S. Treasury Secretary Henry Paulson appealed for Russia to invest its oil riches in the dampened U.S. economy.

Russian Investors Bow in Spain
Valores de Alor plans to make the Madrid and Barcelona stock market accessible to Russian investors and organize placements by Spanish companies on the Russian market.

Russia says foreign investment in Russia reaches $220 bln
"We expect investment in the construction of roads, railroads and airports will exceed $1 trillion."

Russia plans agency to run sovereign wealth fund
The proposal at a meeting in the Kremlin when Medvedev gave his blessing to a riskier investment strategy for Russia's first sovereign wealth fund.

Foreign investment drops but recovery in sight
Foreign investment in the Russian economy dropped by almost 30 percent in the first quarter of 2008.

Investors eye the resources and stability of Russia
Fund managers and analysts are beginning to sound a note of unanimity that Russia will become the growth story of 2008.



In Siberia, Shopping Malls Are Sprouting All Over
Malls in this area are even poaching managers from as far away as California.

The British Are Coming to Russian Retail
The old English department store Debenhams announced yesterday that it was making a second attempt to enter the Russian market.

Russia's retail revolution
Native wit and sharp mercantile instincts will remain core competencies for anyone wishing to set up shop in Russia in the foreseeable future.

Retail - Waking giant
Heather Connon visits Moscow to discover how investors can capitalise on Russia’s energy-fuelled boom and the impending consumer bonanza.

Tverskaya Retail Space 3rd Costliest
Colliers International has looked at Russian cities for the first time for its rating of the most expensive shop rentals.

Russia Falls into the Gap
The Turkish Fiba Holding A.S. will open Gap and Banana Republic stores on a franchise basis in Russia.


Real Estate and Development

Dacha Rental Prices Reach Record High
The cost of renting out-of-town cottages (dachas) in popular areas surrounding St. Petersburg for the summer has grown by between 50 and 100 percent this year.

The New Russia Houses
The dacha is a familiar and much-loved part of the Russian landscape but the Russian Design Show reflects a shift in taste among Russians towards a more contemporary style of living.

"Rents...Are Ridiculous"
There's the office market in most major European cities. And then there's Moscow.

Domodedovo Waited Until Off-Flight Weather
Russia’s federal property authority Rosimushchestvo has failed to grab back into the state ownership the Domodedovo air terminal building that belongs to the firms of East Line. 

Russia offers best foundations for builders
Russia's construction sector offers some of the world's best profits as the country embarks on a huge infrastructure reform.

Forum Seeks Solutions to Problems of Architecture
Ideas were exchanged, projects presented and problems and solutions discussed by representatives from architectural bureaus from all over the world.

Russians Expect Property Value Rise
The vast majority of Russians, 82 percent, think that prices for real estate in their town will grow, and 60 percent of them expect significant growth.

Turkey Sends Cement 
The import of cement to Russia this year is expected to reach 6.5 million tons, more than double the former amount, thanks to the cancellation of the 5-percent import duty.


Demographics and Wealth

Russia's middle class fears "apocalypse": poll
Half of Russia's emerging middle class do not believe in the stability delivered by former President Vladimir Putin, fear a crisis may loom and would like to emigrate.

Who benefits from the shower of petrodollars in Russia?
Only the state can help senior citizens, children and the disabled, and it has the opportunity to do this because the current Russian government earns $1 billion daily from hydrocarbons exports.

Russian Middle Class Feels Pinch
13 percent of those who consider themselves well-off say they cannot buy themselves clothes.

Russians Not Sold on Free Market Economy
41% still feel that an economy free of state control is wrong for Russia.

Poll Shows Russians Confident About Present, Less So About Future
Russians are fairly confident about their country’s present and future as well as their current personal situations, but they are less confident about their personal future.

Russia: poverty-line blues
A young journalist lived for a month spent living on what the state says is the official minimum required for subsistence.

Poverty Stays High as Inflation Rises
In 2007, the state statistics service recorded 18.9 million people living in poverty, or 13.4 percent of the population.

Medvedev says economic growth must bring better living standards
"To achieve this it is important that we provide support to small businesses, fight corruption and excessive administrative barriers; and of course, develop national science and culture."

Why Russia's wealthier women are still reluctant to go Dutch
Billboards across Moscow advertising a women's magazine are raising female consciousness by asking Russia's fairer sex: "Are you ready to pay half to be independent?"

Twelve Russians Ranked amid 25 Richest Europeans
Russia’s Oleg Deripaska has wealth of $28 billion, yielding only to Sweeden's Ingvar Kamprad in the Forbes rating.



Russian Firms Need More Workers, Demand Government Raise Quotas
Last week, the Federal Migration Service announced that Moscow and several other regions had already – in less than five months -- used up their immigrant quotas for 2008.

Labor Code as an Instrument of Social Revolution
For the first time since the collapse of the Soviet Union the Russian journalists are writing about strikes and workers’ protests on May 1, 2008.

Salary Lag Creates Govt. Personnel Drain
Although top state jobs pay twice the national average, the government is unable to compete with the private sector on the labor market.

Russia Has 5m Unemployed
The number of unemployed in Russia grew by 4.2 percent on year to 5 million in April, which accounts for 6.6 percent of the economically active population

Mandatory Medical Insurance
Prime Minister Vladimir Putin plans to bolster both public health and the health of the national pharmaceuticals industry with the introduction of mandatory insurance.

Fat Cats get Top Dollar in Russia
Russians have become accustomed to paying top ruble for most products and when it comes to attracting top executives, the rules are no different.


Technology and Communications

Google co-founder targets Russian homeland
"Now, we have incorporated far better morphology, which is very important in (the) Russian language."

Mail.ru More Profitable then Google
Banks with which Mail.ru has discussed the underwriting of an IPO estimate the value of the portal at $2 billion.

Biotechnology in the Investment Forefront
According to E&Y’s Dmitry Khalilov, Russia’s share in the world market for biotechnology production is less than 1 percent.

Mail.ru Targeted At Outpacing Yandex
Mail.ru, arranging an IPO on the London Stock Exchange, hopes to outpace Yandex which is getting ready for a NASDAQ IPO.

IT and Communications News
Hon Hai Precision Industry has entered into a joint project with Hewlett-Packard to build a $50-million computer assembly plant in St. Petersburg.

Virgin Expands to Russia Wideband
Yesterday, the WiMAZ net was put into motion in 32 regions of the country under the Virgin Connect brands.

Govt Sells Central Telegraph
Russia’s government intends to dispose of 21.78 percent in Central Telegraph and added it to this year’s privatization list. It won’t be the first time that the stake is put up for sale but a buyer is likely to be found this year.

MegaFon to Flow Into Persian Gulf
Russia’s MegaFon cellular operator is ready to funnel roughly ˆ3 billion in the cellular net construction in Iran.


Media and Advertising

Medvedev Opposes Law On Mass Media
These amendments, passed in their first reading, widen the concept of “slander” and provide further grounds for shutting publications down.

Rodnyansky Simplified Job Title
Alexander Rodnyansky, who has been head of television channel STS since 2002 and head of STS Media since 2004, is leaving the positions of general director of both companies.

Gazeta.ru Gets in the Soup
Kommersant Publishing House has received 50 percent of Sup, which owns the Russian-language LiveJournal service, while Sup has received 100 percent of gazeta.ru.

TV Losing Audience to Internet
Russians with access to the Internet watch 17 percent less television than those without access. In Moscow, that figure is 26 percent.

Illegal Heineken Ads at Soccer Match
In spite of the ban on beer ads at sporting events, League of Champions sponsor Heineken will place advertisements for its beer in Luzhniki Stadium tomorrow during the Chelsea vs. Manchester United match.


Agribusiness and Alcohol

Acquisitions And Expansion Help Russian Food Giant Fatten Up
Russian dairy giant Wimm-Bill-Dann keeps expanding to refrigerators and tables throughout Russia and its neighboring states.

Food Prices to Remain High
The growth in food prices will slow down for a few years, but the prices will remain very high.

Global Food Crisis Catches Up With Russia
Food prices will be the biggest single problem facing newly minted Russian President Dmitry Medvedev.

Grain Duties Didn’t Last Till Harvest
The banning duty on grain export and interventions lost validity yesterday.

Peculiarities of Russian Wheat Futures
Trade in wheat futures was begun on the National Commodities Exchange on April 9.

Food Prices to Remain High for Decade
Food prices will remain high in Russia and worldwide at least for the nearest ten years.

Sugar Prices Will Fall This Summer
The Russian sugar industry has doubled in the last four years.

The Bank of Moscow Mixes a Cocktail
The City of Moscow has approved the merger of the KiN wine and cognac plant, Moscow Interrepublican Wine Plant and Kornet champagne plant.

Nemiroff to Bottle 3 Brands in Russia
GK Nemiroff sealed an agreement to bottle three of its brands at Yaroslavsky distillery that is controlled by Rosspirtprom.


Banking and Credit

Russia's new revolution
Bankers were thought to be facing tough times after the credit crunch. But in Moscow, where business is booming, Brits are being attracted by soaring salaries.

Ukrainian Clients of Soviet Vneshekonombank Want Their Money Back
Ukrainian clients of Vneshekonombank USSR claim back some $500 million.

Sberbank Sinks in the Eyes of the Public
The PricewaterhouseCoopers auditing company and Senteo market research firm have completed their second annual joint review of Russian retail banking

Morgan Stanley Put Up For Sale Mortgage Bank in Russia
Morgan Stanley has put up for sale Gorodskoy Ipotechny Bank (City Mortgage Bank) that it acquired in Russia in 2006, Vedomosti reported.

Moody’s Assesses Crisis Risk in Europe
If the situation develops negatively, several Eastern European countries will have to turn to emergency refinancing of their debts, which amount to 2-30 percent of their GDP.

Credit Hysteria
The Central Bank of Russia is seriously worried about the high growth rate of the banking system.

100 Million Plastic Bank Cards in Russia
The number of bank cards in Russia increased 38.4 percent in 2007 and total over 100 million


Bank Expansions

RBS Moves In through ABN Amro
The Royal Bank of Scotland, the second-largest British bank and one of the ten largest in the world, has announced that it is entering the Russian market.

Is Sberbank poised to bag foreign banks?
The head of Sberbank has admitted that he faces a "massive challenge" in turning the corporation into one of the world’s biggest banks.

Credit Suisse Russia CEO Named
Fawzi Kyriakos-Saad will be responsible for operations with private capital, the investment banking business and asset management in Russia.

KEB Launched Office in Moscow
It looks like the banking sector of Russia has lured Korean credit institutions.

HSBC Stakes on Private Capital Inflow
One of the global bank giants, Britain's HSBC is approaching Russia’s market of private banking, which currently manifests the annual growth of 30 percent.


Finance, Stocks, etc.

Moscow to be major world financial centre
Highly liquid domestic markets, strong economic growth and a position at the heart of a booming region will make Moscow one of the world's top financial centres inside a decade.

Financial Supervisor Launders Black List
It emerged that Russia’s Federal Financial Monitoring Service is ready to release to public at large the black list of the persons and entities involved in terrorism.


Stocks and Funds

Bullish on the Bear's Markets
In 1992, Russia had more than 1,000 stock exchanges. Most of these existed in the form of wholesale operations similar to medieval markets.

The Honeymoon Continues
Equities have been enjoying the honeymoon period of the country's new leadership as last week's 8.5% rally brought the rise since the start of the month to 16.8%.

Gazprom Fell Ahead of Banks
Investors disposed heavily financial sector stocks, and VTB and Sberbank renewed this year’s minimal quotes as a result. Gazprom’s capitalization lost $14.2 billion yesterday.

The Russians Invest in Mutual Funds Again
The outflow from open mutual funds gave way to inflow by results of past week.

Mutual Funds Lose while West Invests
The influx of funds invested in Russia and the CIS last week, at $541.2 million, was the highest since the beginning of 2006.

Putin Breaks RTS Record
The stock market reacted to Russian Prime Minister Vladimir Putin’s announcement yesterday of tax breaks for oil companies with new growth. An hour before the end of trading, stock in the oil sector had risen 4.9-5.8 percent.



Bargaining Is Timely
Moscow Interbank Currency Exchange (MICEX) set another turnover record.

CBR Confirmed Fx Limits
Chief of the Central Bank of Russia (CBR) acknowledged yesterday the existence of foreign exchange corridor, within the limits of which CBR maintains the rate of Russia’s ruble to U.S. dollar and euro.

Russia Changes Currency Strategy to Deter Speculators
Russia's central bank said it will buy and sell foreign currencies like any other trader to deter speculators from seeking to drive up the value of the ruble.


Metal and Mining

Commodity boom lifts Russia's iron belt
Soviet geologists were looking for oil when exploring this region 500 km (315 miles) south of Moscow. Instead, they unearthed Europe's largest iron belt.

Mechel Places Preferred Stock
The Mechel mining and smelting company officially announced a placement of preferred stock in Russia and abroad.

Tycoons in Russia Want to Create World’s Largest Mining Concern
Norilsk shares shot up early Thursday, but closed with more modest gains.

Abramovich’s Millhouse Wins Deposits
Companies affiliated with Roman Abramovich’s Millhouse Capital company have won auctions for the rights to explore and develop three large polymetallic deposits in Chukotka, where Abramovich is governor.

Basic Element Eyes Udokan Copper
Basic Element will compete with Russkaya Med (Russian Copper) consortium and GMK Norilsk Nickel in the tender for development of world’s third Udokan cooper deposit.



Severstal and Nucor Make Peace
The yearlong court battle between the U.S. company Nucor Corp. and Severstal subsidiary SeverCorr over stolen technology has been settled out of court.

Severstal Gets Esmark
Severstal will buy Esmark after all. Yesterday, it raised its offer 13 percent to $775 million ($19.25 per share) for the American company.

Looking for Iron Ore, Severstal Reached Africa
The company is paying $37.5 million for Putu Range iron ore deposit in Liberia with estimated reserves of 500 million tons.

Severstal Buys American WCI Steel
Severstal is buying another American asset. This time, it is WCI Steel, for which it is paying a maximum of $140 million.

More Mining News (From Mineweb.com) 



Virgin Fought Its Way to Russia’s Air
The launch of its multiservice operator will be announced in Moscow this week.

Airlines Flew Past Fuel Crisis
Despite all expectations, the passenger air traffic in Russia grew by 22.6 percent on year in January through April.

Domodedovo Airlines to Change the Route
Domodedovo Airlines (DAL) declared bankruptsy after the majority stakes in DAL and in other companies of the AiRUnion alliance were transferred to the government-run Rostekhnologii. The receiver will be Eduard Rebgun, who had bankrupted Yukos.

Fuel Prices Cause Fear of Flying
Plane fares have been rising since the beginning of summer due to a continuing crisis on the aviation fuel market.

Kerosene Prices Grounded
Oil companies lowered wholesale prices for aviation fuel slightly in June. But the real price of kerosene will remain the same for airlines in July.

Russian Airlines Feel Fuel Costs
Aeroflot, Russia’s largest airline, has announced that it expected narrower profits this year, in spite of an 8-10 percent fare hike (5-6 percent had been originally planned).

Sukhoi Superjet 100 Takes Off
The Sukhoi Superjet 100 short-haul liner made its first flight on May 19. The test flight took place in Komsomolsk-on-Amur and lasted 40 minutes. 



Queues return to Russia
“For $2,000 more I got my car three months earlier. I know it's a kind of illegal business for many but for me it was just an opportunity to receive my wheels ahead of time. Why not?”

Cars in Russia
High oil prices may be causing pain for carmakers in America, but they have helped create a booming market in Russia.

AvtoVAZ Slowed Dn En Route to Stock Exchange
Russia’s automobile giant AvtoVAZ may put off placing the stocks on the exchange till 2009.

Carmakers Parked Close to Sechin
The government is staging a new campaign to bolster the national automobile industry and edge used cars out of the market.

GM Sales Up 70% in Russia This Year
Sales of cars made by the U.S. automaker General Motors were up 70 percent in the first four months of the year, totaling 117,135 vehicles.

Arcelor Mittal to Construct a Plant in Leningrad Region
World steel giant Arcelor Mittal intends to build in St. Petersburg’s Leningrad region a maker of car pressed parts.

AvtoVAZ to Acquire Carmaker in Kazakhstan
AvtoVAZ that is already holding due diligence for Izhavto, Udmurtia, will probably buy out the controlling stake in another assembling plant, Asia Auto, Kazakhstan.

Ford Will Build a Second Plant in Russia
Ford Motors plans to build a second auto plant in Russia, according to Reuters, citing Ford European vice president Jim Tetreault.

French-Japanese Alliance to Build a Carmaker in Russia
Another two car giants chose Russia for car assembly. French PSA Peugeot Citroen and Japan’s Mitsubishi Motors Co. have clinched a deal to set up a respective venture.

Goodyear May Build Plant in Yaroslavl
The U.S. company Goodyear is considering a $200-250-million project in Yaroslavl Region to produce up to 5 million car tires a year.


Energy, Refining, Emissions

Russia Could Save a Bundle by Conserving
By raising the effectiveness of its energy use, Russia could reduce consumption of primary energy by 45 percent.  

Russia wins new greenhouse gas emissions rights
Russia has won rights to emit or sell licences for extra greenhouse gases equivalent to France's total annual output.

RAO UES Ceases to Exist
RAO UES of Russia doesn’t exist starting from today. The farewell of its CEO Anatoly Chubais was really impressive. The top manager announced yesterday the sale of the last big energy company, OGK-1, for $5.3 billion. The buyer is the little known Roskommunenergo and the names of final beneficiaries haven't been disclosed.

Moscow Witnessed a Long Circuit
A big fire broke out Saturday at Chagino power sub-station of Moscow that is to replace the facilities that burnt in 2005.

Trading Halted on Mosenergo
The MICEX stock exchange halted trading in Mosenergo stock at 12:43 on Friday after it gained more than 10 percent in the course of the day.

Price of Fuel Oil Tied to Petro Price
The low efficiency of Russian oil refineries is one of the main reasons for the rise in the cost of fuel oil.

Atomenergoprom Set Power Machines Into Motion
The budget is a record for the industry, $1.7 billion.

Inflation to Halt Gas Reform
On apprehension of inflation growth, the government apparently attempts to slow down the surge in gas prices on domestic market.


Transport and Pipelines

Saudi Arabia Cancelled Results of Tender Won by RZD
“It isn’t the problem of technology or RZD. It is the problem of international relations.”

Sechin to Focus on Shipbuilding
Vice Premier Igor Sechin received yesterday the first project in new capacity. He chaired the BOD of United Shipbuilding Corp.

European Parliament Urged Gazprom to Find Another Route for Nord Stream
European Parliament’s PETI concluded that Nord Stream would threaten the environment and proposed to consider some other routes for this purpose.

Russia Outflanks EU's Pipeline Plan
The battlefield is Europe's energy market. The objective is pipeline proliferation. And Russia is winning.

Russia Has Own Ideas about Pipeline Income
Kommersant has learned the nature of the objections of KTK stockholders to the pipeline’s expansion from 32 million to 67 million tons of oil

Taxpayers May Finance Baltic Pipeline II
Transneft head Nikolay Tokarev is proposing that the construction of the second line of the Baltic Pipeline System be paid for from the federal budget.

Putin turns on the taps at new Baltic oil terminal
The terminus will handle Russia's growing production of value-added oil products, such as diesel fuel, jet fuel and kerosene


Energy Exports

This issue of the Russian Analytical Digest analyzes Gazprom’s strategy toward foreign markets. Additionally, it includes statistics on Gazprom sales and the Russian–Ukrainian natural gas trade.

Russia Hikes Crude Export Duty to Nearly $400
Russia hikes the duty on crude oil export by $58 to $398.1/ton from June 1. The respective ruling was inked by Prime Minister Vladimir Putin.

Gazprom Says "Energy NATO" Would Have "Dangerous" Consequences
Alexei Miller said the European Union faces "dangerous" consequences if it forms an "energy NATO" directed against the Russian natural-gas exporter.

Tatneft Claims $1bn from Ukraine
Tatneft has initiated international legal proceedings against Ukraine, claiming $1.13 billion from it in compensation for the loss of control over Ukrtatnafta.

China to Pay More for Gas than Europe
Each 1,000 cu meters of gas to be supplied via Altai pipeline to China’s border will cost $10 to $15 more than the gas supplied to Europe.

Israel Wants Russian Gas
By 2010, the Israeli government estimates, consumption of natural gas will rise to 8 billion cu. m. from 800 million cu. m. last year.

Russia to Help China Enrich Uranium for $1.5bn
Russia has inked an agreement with China on constructing the fourth stage of uranium enrichment facilities and on supplying the enriched uranium product.

Trade Deficit Reported with the U.S.
Russia has registered a trade deficit with the United States for the first time in seven years.

Gazprom Will Drill Viet Shelf
Gazprom has received four lots on the Vietnamese continental shelf for joint development with the national Petrovietnam company.


Oil and Gas

Putin pledges tax breaks to revive Russian oil growth
The tax breaks are planned to add over a tenth to current output levels by 2015.

Tax Holidays for Oil Fields to Be Discussed in the Fall
The issue of granting tax holidays under the severance tax for the Sea of Okhotsk and the Black Sea will be considered in the fall.

Tax Burden Reduction for Oils Not to Trim Budget Revenues 
The reduction in tax burden on the oil sector won’t effect budget revenues but curtail the receipts of National Welfare Fund

Vice Premier Inspects Production
Igor Sechin has debuted as the vice premier in charge of fuel and energy complex.

Chevron Didn’t Find Oil in Russia
The American oil company Chevron will stop operating on the Pyakutinsky and Aikhettinsky fields.

Oilmen Caught in Gasoline Collusion
The antimonopoly authorities of Russia have blamed the price collusion on oil companies, which hiked gasoline prices in the Far East and Siberia. The most frequent violators are Rosneft, LUKOIL and Gazprom Neft.

Medvedev Sees Oil Price at $150, Slower Global Growth
"This is a reality that everyone has to take into account."



Oil trade leaves no stain on Putin
Gennady Timchenko defends Gunvor from attack on the Russification of oil trading.

How Gunvor rose to the top of Russian oil trading
In a prime lakefront office on the edge of Geneva’s banking district, about 40 men and women are quietly selling Russian crude for one of the world’s fastest-growing – and most secretive – oil traders.

"Gunvor, Putin and me" - oil trader speaks out
The owner of Swiss-based oil trader Gunvor has denied Prime Minister Vladimir Putin's help was key to turning his firm into a global player.



LUKOIL to Spend $3.5bn for Assets
LUKOIL will spend $3.5 billion to acquire new assets in 2008, Interfax reported from Baku Thursday.

Alekperov, Fedun Bought More of LUKOIL
LUKOIL chief Vagit Alekperov and vice president Leonid Fedun spent $1.6 billion to widen their stakes in the company.

LUKOIL Buys into Italian Refinery
It is the first refinery in Western Europe to be owned by a Russian company and it increases LUKOIL’s capacity in Europe by 71 percent.



Medvedev Says Goodbye to Gazprom Board
"Nothing is over; everything is just beginning," he said.

Zubkov Subdued in Gazprom Debut
First Deputy Prime Minister Viktor Zubkov read from prepared notes while delivering a carefully worded maiden speech.

Gazprom Presented with 1/3 of Nation’s Gas Reserve
With no tender whatsoever, the monopoly obtained a third of gas fields of the federal reserve with the total resources of nearly 4 trillion cu meters.

Gazprom: endless price growth strategy
Gazprom, the world's biggest gas company, believes that there will be no alternative to hydrocarbon-based fuel in the foreseeable future and therefore gas prices will continue to soar.

Gazprom Gives Priority To Domestic Market
Miller made the statement against the background of a government decision to delay hiking domestic gas prices.

Gazprom Considers Oil, Power Assets Outside Russia
"In three or four years a market will be formed in Russia that will be twice as large in terms of revenue as the traditional European market."



Kasyanov Unveiled Target of New Charges against Khodorkovsky
The new charges brought in against Mikhail Khodorkovsky are aimed at preventing the consideration of pardoning him.

Khodorkovsky Defense to Ask for Parole
The defense for Mikhail Khodorkovsky has prepared a statement containing a request to free him on parole.

YUKOS Investigation Takes Three Days
The Investigative Committee of the Russian Prosecutor General’s Office has completed a three-day preliminary investigation of the case against Mikhail Khodorkovsky.

Khodorkovsky to Win Jail Release "Sooner or Later"
Khodorkovsky "sooner or later" will get his case reviewed, "given that Medvedev has repeatedly stressed that his priority in judicial matters is to ensure independence of the courts."


TNK-BP Scandal

BP faces $400m lawsuit over Russian venture
A minority shareholder filed a lawsuit to declare an employment contract between the two companies invalid.

FSB Searches BP Again
Sources inside BP said that the FSB showed interested in British citizens working for the company who could have been cooperating with bothers Alexander and Ilya Zaslavsky, Americans accused of spying for the US.

Kremlin Seeks TNK-BP Détente
Deputy Prime Minister Igor Sechin presided over face-to-face talks in Moscow between BP Chief Executive Tony Hayward and a key Russian shareholder.

BP in Russia -- Plagued From Start?
Putin says venture structured poorly, clear boss is needed.

TNK-BP CEO answers tax questions in Russia
Russian police spent more than five hours on Tuesday questioning the CEO of BP's local oil venture.

TNK-BP Shareholders’ Conflict Admitted
According to unofficial information, the Russian side sees the resolution of that conflict in the replacement of TNK-BP president Robert Dudley by shareholder Viktor Vekselberg.

Russian TNK-BP partners wanted 7.6% stake in BP
Four Russian billionaire shareholders in TNK-BP sought to swap their 50% in the joint oil venture for a 7.6% stake in the British oil major.

TNK-BP COO rebuffs inefficiency claims by co-owners
"In the last five years, since the formation of the company, we have on average 40-45 percent returned if you average market capitalisation (growth) and dividend yield."

BP accuses Russian joint venture partners of 'corporate raiding'
British oil major BP PLC yesterday accused the Russian partners in its TNK-BP joint venture of acting like corporate raiders, but the Russian shareholders countered that BP had insulted the Kremlin.

Crude tactics
The curious goings-on at TNK-BP are even stranger than they appear

Kremlin official warns against Gazprom stake in TNK-BP
"State companies have no place being there… talk of Gazprom buying a stake is the worst option."

Russia May Profit from Private Energy Dispute
Russia's latest struggle over control of a private energy company appears linked to state politics and differing views among foreign and domestic investors about profits and risk.


State Companies

State Oil Cos. Transcend Borders
They are faster to undertake risky investments, work together more successfully than private companies and are growing in value much faster than private companies.

Red Directors No More
It is my firm belief that having a Board made up of professional businessmen with a real power to influence decisions of the Executive Board would do Gazprom good.

Independent execs to replace govt. officials at Russian state firms
Kremlin administration chief, Sergei Naryshkin, who heads the anti-corruption council's board, presented on June 25 a draft national anti-corruption program.

"Open" Russian Economy Is Put to the Test
Russian Technologies is pressing the Kremlin to hand it hundreds of other government stakes in companies that have little to do with its core business of high technology and weapons.

Put the Brakes On Russian Technologies
It would signal that Vladimir Putin is indeed determined to keep his repeated promises to reduce the state's role in the economy.

At The Bear's Whim
An economy divided into two classes: massive, government controlled natural-resources companies and scrappy private-sector consumer-focused ones.


Raiders, Pirates, and Responsibility

RIAA Doesn’t Sue AllOfMP3.com
The Recording Industry Association of America (RIAA) has dropped charges to owners of Russia’s online store, AllOfMP3.

Duma To Pass Anti-raiding Laws Soon
The State Duma will pass a package of anti-raiding amendments to the Russian legislation in the near future, said Russian Deputy Prime Minister Igor Shuvalov.

Corporate Responsibility
Miramed, a US-based charity working in Russia, is seeking to promote Corporate Social Responsibility (CSR) and help society develop as successfully as the economy.

Russia's Raiders
Companies are paying public officials to raid the offices of business rivals and subject them to criminal investigations.

Legal Efforts Starting To Stamp Out Piracy
Fewer Russians now buy pirated computer software and cheap bootleg alcohol, but pirated goods on sale in the country still make several billions of dollars per year for counterfeiters.

Faked brands down in Russia, but still strong
The number of faked popular brands is decreasing in Russia due to tougher punishment.

Partnerships with corporate Russia are flourishing
Several of the world's leading industrial groups are meeting in Moscow with partners such as Gazprom to discuss sharing innovation and technology.


Corruption and Judiciary

Medvedev Receives War Plan On Graft
Naryshkin told Medvedev in televised comments that the draft strategy consisted of four stages.

Kremlin Publishes Letters on Corruption
The Kremlin web site has posted excerpts from letters written by Russians complaining about the problem and proposing solutions.

Kremlin to Cede Power to Fight Graft
President Dmitry Medvedev says Moscow must cede some of its powers to regional governments if it is to be successful in rooting out corruption.

Medvedev: Fighting Corruption Is the Matter of Honor
Fighting corrupt practices is a matter of honor for the state.

Companies Prefer Russia to China Even With Corruption
The study by the Foreign Investment Advisory Council was presented today before the start of the St. Petersburg International Economic Forum.

Corruption in Russia. Just say 'Nyet!'
President Dmitri Medvedev's decree to create and chair an anti-corruption committee, has stimulated a lively debate in Moscow on how government and business can tackle corruption.

Businessmen May Visit Prosecutor's Web Site To Ask For Protection
Russian businessmen will soon have a chance to contact the Prosecutor-General's Office to ask for protection of their rights online.

Russian Prosecutor General's Office Launches English-Language Version Of Web Site
"Foreign nationals, especially officials of foreign law-enforcement authorities, are particularly interested in the activities of Russian prosecution authorities."


Critical Analysis

Can Medvedev Find a "Systemic Solution" to Corruption?
It has become something of a tradition for post-Soviet Russian leaders to raise the problem of corruption in the early days of their tenure.

Skeptics highlight obstacles to anti-corruption drive
News review of Medvedev's new plan to combat graft.

Corruption Really 2000x Greater
The Investigative Committee spokesman said that experts estimate the incomes of corrupt Russian officials reach one-third of the country’s federal budget.

Critics Predict Medvedev's Anti-Corruption Drive Will Also Fall Short
Media review of criticism of new program.

Deaths of Corruption Fighters Overshadow AntiCorruption Campaign
“Thus I am reminding Mr. Medvedev so that … he’ll remember Shchekochikhin’s death and the case he [Shchekochikhin] did not see through to the end”


Anecdotal Stories of Corruption

Russian Entrepreneurs Face Choice of Bribes or Prison
Sofix was also victimized by corrupt narcotics agents after they refused to cooperate in a criminal scheme to manufacture a solvent needed for illicit drug production.

Traffic incident gives insight into Russia's corrupt legal system
Note: "Pavement" in British English is "Sidewalk" in American English; the author is referring to having driven his motorcycle on the sidewalk.

Red tape and bribes greet small business in Russia
Every morning staff at fashion jewelry chain Diva line up to bring their boss about 500 documents to sign, as he swims against a tide of bureaucracy and corruption in modern Russia.

Hopes for Court Reform Stir in Russia
Yelena Valyavina, a senior judge at the Federal Arbitration Court, electrified a Moscow courtroom last month when she stated openly what had long been unspoken.

Russian Orthodox Church discourages giving bribes
The fight against corruption should begin on a personal level, where each individual refuses to put up with this "sin."


Budgeting and Infrastructure

Russia Needs at Least Twice the Number of Roads It Has Now
More than 200 years ago, the great Russian writer Nicholai Gogol defined the two main woes of the Russian state¬fools and roads. Unfortunately, little has changed.

Putin promotes tax reform agenda
The Prime Minister urged new opportunities for private entrepreneurs and agricultural producers in using simplified tax schemes.

Putin Submits Economic Plan to Party
Salaries paid from the federal budget will be raised 30 percent on December 1 of this year.

State Duma Hit the Fiscal Target
The reduction in severance tax for oil companies that had been OKed in the first reading, was extended by tax holidays for new fields, while the encouragement of the company’s costs for education, medical aid and mortgage for the employees by trimming the profit tax was widened.

Two Weeks of Budgeting for Three Years
The basic sources of budget income and the structure of expenses have been outlined. 

Reserve Fund Speeds Along
By the end of the year, the oil and natural gas funds accumulating the federal budget runoff will contain 3.5 trillion rubles.

Medvedev Maintains Putin’s Budget
The text of Russian President Dmitry Medvedev’s budget message shows the succession of the budget policy of conservatism and stability.

Soccer Buoys Business, Not City
City officials were permitted to spend all of the city’s two-year sports budget of $227 million. So far, only the service sector is seeing a payoff from it.

Putin Agreed to Invest Pensions in Infrastructure
Development Bank manages over 350 billion rubles of roughly 40 million individuals that haven’t transferred their money to the private funds and asset management companies.

Profit Tax Pulls Its Budget Weight
Russian Federal Tax Service data on the structure of April tax revenue indicate continuing economic growth and the emergence of the economy from the shadows.


Commentary and Prognosis

World Bank president praises Russian economy
Mr. Zoellick was much more diplomatic than the authors of the World Bank's early June report on the Russian economy.

Russia Industrial Output Rises 9.2%, Nine-Month High
The rate was the highest since July 2007, when it peaked at 10.3 percent.

Russian official sets out economic challenges
A top Russian official gave international businessmen a sobering assessment of his country's economy, ranging from a declining skills base and poor public health to the government's inclination to meddle.

Russian Inflation Threatens Growth, World Bank Says
Russia must do more to check accelerating inflation if it wants to maintain the "strong" economic growth of the past decade, World Bank President Robert Zoellick said.

New government faces old economic problems
They include inflation, the judicial reform, de-monopolization and creation of market institutes.

Ex-World Bank chief throws cold water on Russia's growth plans
Former World Bank chief James Wolfensohn said on Friday that by 2050 Russia will be only the world's ninth largest economy, despite the leadership's goal of bringing the country into the top five in 12 years.

Russia's Growth Pace Might Be Too Fast
Russia's gross domestic product grew 8.5% in the first quarter from the same period last year, a rapid pace that is leading some politicians and economists to warn that the economy may be overheating.

Goldman's O'Neill Says Russia Economic Growth to Slow
Goldman Sachs predicts Russia’s economic expansion will slow after 2010 as gains in the oil price decelerate, a prediction that clashes with the government’s forecasts.

Russia's revival looks unstoppable
In 1998, a swing in commodity prices had Russia’s economy reeling. Ten years on, and with another global recession on the horizon, Russia’s markets are in rude health.

Russia Posts 10 Years Of Economic Expansion
Soaring oil, global demand for raw materials and a rising middle class have fueled Russia's decade-long economic boom.

Russia Looks to the Future
The conference entitled "Russia in the World" is the first of what is hoped will be an annual event to review and analyse Russian domestic and foreign policy issues and the economic situation in the country.

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