Basic Political Developments s4

Russia 101102

Basic Political Developments  Russia, Qatar sign memorandum of cooperation on peaceful nuclear use - The two countries agreed to cooperate in the development of Qatari laws regulating the use of nuclear energy, scientific research, as well as in the construction of nuclear reactors.  Russian President due in Seoul for talks - The two leaders will hold talks on Nov. 10 to discuss ways to substantiate their bilateral relations, upgraded to a so-called "strategic partnership" in 2008. o Medvedev to pay state visit to Korea next week - During the summit talks next Wednesday, Lee and Medvedev plan to discuss ways for substantial cooperation on the development of energy, natural resources, Siberia and modernization of the Russian economy to deepen the two countries’ strategic cooperative partnership.  Hong Kong: Business Forum To Discuss Attraction Of Asian Countries Investment To Russia - Their attention is drawn to the post-crisis recovery of the economy in Russia and in Asiatic countries, to Russian-Chinese cooperation, to legal aspects of doing business, to the role of banks, and the situation in commodity markets.  Russia, Norway hash out co-operation points - Russian Foreign Minister Sergey Lavrov is in Oslo to meet his Norwegian counterpart, Jonas Støre. The two diplomats are expected to seal new agreements on Tuesday, as Oslo hosts a forum of North European nations. o Russia FM to sign border agreement with Norway - This regional programme pursued on an equal basis by four partners - Russia, the European Union, Iceland and Norway - was launched in the new format at the quadripartite summit in Helsinki in 2006. The ND geographical territory covers a large area from the arctic and sub-arctic regions of Europe to the southern shores of the Baltic Sea and from northwest Russia in the east to Iceland and Greenland in the west.  No obstacles for Medvedev meeting with Japanese PM - Kremlin source: The Kremlin does not rule out the possibility for Russian President Dmitry Medvedev to meet with Japanese Prime Minister Naoto Kan at the upcoming APEC summit November 13-14 in Yokohama, a Kremlin source said on Tuesday. o Japan calls back Moscow envoy, summit door open - Still, Japan's top government spokesman told reporters Prime Minister Naoto Kan intended to go ahead with a meeting with Medvedev on the sidelines of a regional summit to be held in Japan on Nov. 13-14. o Japan ambassador temporarily leaves Moscow for consultations - “The ambassador will return temporarily in Japan to clarify all the details. It is unclear yet when he will come back to Moscow,” the diplomat said. o Japan to recall ambassador to Russia over island row (Update 1) o Japan to take measures against Russia following Medvedev's visit to disputed island - Measures against Russia may include the recall or temporary withdrawal of the Japanese ambassador to Moscow. However, some observers believe Japan is unlikely to take action beyond a formal protest in advance of the Asia-Pacific Economic Cooperation summit coming up Nov. 13 and 14 in Yokohama. o Japan PM hopes to meet Russia president at APEC summit -“I think that this meeting will take place,” he said answering a journalist question. o Japan says PM to meet Russian president despite row o Japan says Russia meeting is still on despite Kuril row o China calls for dialogue on Kuril islands row - "We hope that the sides will find a suitable solution to the territorial dispute through dialogue," Hong Lei said. o U.S. says backs Japan in dispute with Russia over Kuril Islands  US continues to back Russia's WTO bid - This statement was made by US deputy national security adviser for international economic affairs Michael Froman in the White house ahead of Barack Obama’s Asian tour.  U.S. reiterates readiness to sign child adoption deal with Russia by yearend  Russian oil tanker in distress in Sea of Okhotsk  Three vessels on the way to help Russian tanker in the Sea of Okhotsk  Russia rejects 655,000 liters of imported Moldovan wine in Oct. - Russia, previously the importer of 80 percent of all wine produced in Moldova, embargoed deliveries in March 2006. In 2007, over 40 Moldovan wine producing enterprises passed sanitation and epidemiological checks and supplies were resumed.  Tbilisi is ready to sign non-aggression pact only with Russia - Georgia is ready to sign non-aggression pact only with Russia, stated Temur Iakobashvili, the State Minister for Reintegration Issues of Georgia. He explained signing such treaties with Abkhazia and South Ossetia would be indirect recognition of their independency.  ISS is 10 - The International Space Station has turned 10 today.  Space blogger Suraev named Hero of Russia  Modernized Soyuz-2 carrier rocket lifts off from N Russian space center  Rocket with telecom satellite launched from Plesetsk  Moscow officials stripped of minister status, stay on posts  Armed masked men storm into National Reserve Bank in Moscow – source  Militant killed, policeman wounded in Dagestan shootout - A militant was killed and a policemen was wounded in a shootout in the city of Kaspiisk, in Russia's North Caucasus republic of Dagestan, a local police source said on Tuesday. o Leader of Kaspiisk terrorist group destroyed in Dagestan - “Shashayev was on the wanted list for the organization and commitment of 30 terrorist acts, including attempts on the life of law enforcers and servicemen, as well as a number of sabotages on the railway and extortion of money,” the ministry’s spokesman said.  2 border guards die, another 5 get injuries, as truck falls in Dagestan abyss  Imam of local mosque killed in North Caucasian town  Head of Karachayevo-Cherkessia pledges to stop church arsons - "There have not been any religious conflicts in Karachayevo-Cherkessia for centuries. Residents of our republic respect each other, and they respect religions, professed by their neighbors," Ebzeyev was quoted as saying.  WikiLeaks: Is Russia the Next Target? - By Simon Shuster / Moscow  Russian Press at a Glance, Tuesday, November 2, 2010 o Russian President Dmitry Medvedev's forthcoming visit to Japan next week will be interesting and full of surprises particularly after his visit to the disputed Kunashir Island, near Japan's northernmost Hokkaido Island, which it claims as its territory.(Vremya Novostei, Kommersant, Nezavisimaya Gazeta) o Georgian journalists released the names of four people, who were members of "suspected Russian spies." Last week, some media sources reported the detainment of 20 Russian spies in Georgia, but the Georgian Foreign Ministry refuses to comment on the issue. (Vremya Novostei) o Kazakh President Nursultan Nazarbayev speaks in an interview about the current state and perspectives of relations between Kazakhstan and Russia. (Rossiiskaya Gazeta) o The Russian Economics Development Ministry proposed companies with state participation to send their top managers to five special training programs, with one of them free of charge.(Vedomosti) o Turkey's National Security Council excluded the former Soviet states of Armenia and Georgia from its list of potential enemies in the region. Russia, however, remained in the list despite the recent positive development of relations between the two countries. (Nezavisimaya Gazeta) o Russian Prime Minister Vladimir Putin visited the village of Verkhnyaya Vereya in the Nizhny Novgorod Region, which was destroyed by wildfires this summer. The premier inspected the new houses built by the government. (Kommersant, Rossiiskaya Gazeta) o Authorities of Russia's Far Eastern city of Vladivostok intend to spend budget money allocated for restructuring of kindergartens to decorate the city for the upcoming New Year holidays. (Nezavisimaya Gazeta) o Russian officials may be summoned to court in case they refuse or fail to provide citizens with the necessary information. (Rossiiskaya Gazeta) o Export duties on oil and oil products may become a stumbling block in the formation of the Common Economic Space between Russia, Belarus and Kazakhstan, which asks to preserve its domestic export duties on oil. (Kommersant) o New Moscow Mayor Sergei Sobyanin continues to correct plans envisaged by his predecessor Yury Luzhkov; however, he is not yet ready to change the general plan completely for the development of the Russian capital until 2025. (Vremya Novostei) o Legendary rockers from Texas, ZZ Top, concluded their world tour with a performance at Moscow's Crocus City Hall. (Kommersant)  From red to green - Russia attempts to clean up its economy - Every year, Russia wastes enough energy to power the French economy and the Kremlin is determined to change this. Will it be too little too late or is Russia about to embark on a green energy revolution?  Russia turns out to be Turkey’s enemy - Ankara aims at regional leadership in the South Caucasus  Russian stowaway survives flight in landing gear - The stowaway crawled into a space above the wheel of the Soviet-built Antonov An-24 turboprop at small Siberian town's airfield on Saturday, a statement issued by the Investigative Committee of the General Prosecutor's Office said.  Russia to enter second biggest warship into the Caspian Sea this month - Russia is planning to enter its second biggest warship to the Caspian Sea in November, APA reports quoting Russian media. Within this month “Dagestan” guard ship projected in “Gepard” 11661 and produced in Zelenodolsk plant in Tatarstan will be launched into water.  Russia's new frigates to become one of world's best ships - First frigate of the new type was launched at the Northern Shipyard in St. Petersburg. The flagship of project 22350 Admiral Gorshkov has been built over a record short period of time - five years. By 2020, it is planned to launch five frigates of the project, whereas the need of the navy makes up 20-30 vessels.  Khodorkovsky verdict to be delivered Dec. 15

National Economic Trends  Rouble hits 2010 low on foreign currency demand  Russia may issue convertible bonds to sell state assets in 2011  Purchasing Index Expands - The Purchasing Managers’ Index rose to 51.8 from 51.2 in September, HSBC said in a report, citing data compiled by Markit Economics. The survey-based index indicates a contraction when it is below 50 and growth with a figure above 50.  Russian Manufacturing PMI Bounces From Low On Stronger Employment

Business, Energy or Environmental regulations or discussions  KamAZ, Sberbank, VTB Group, Rosneft: Russian Equity Preview  RTS to launch preparations for next year's IPO  KamAZ plans six exchange-bond issues totaling 6 bln rubles (Part 2)  Russia’s Mail.ru Said to Have Orders Close to Top End of IPO  Nanotechnology forum push on hi-tech - With hundreds of companies from around the world in Moscow to find out what Russia has to offer in terms of nanotechnology, Business RT spoke with Mikhail Lifshits, Director for Hi-Tech asset development at Renova.  Microsoft pledges support for Russian tech hub  Ballmer Vows Millions for Skolkovo - Microsoft will expand its program to support innovation startups, offering 100 new Russian companies anywhere from $50,000 to $500,000 to get off the ground, said Nikolai Pryanishnikov, head of Microsoft Russia.  Russian Raspadskaya coal mine halted for 20 days - The bailiff service referred to "deficiencies" to explain the latest closure, without describing them. "Currently, the deficiencies are being eliminated and the mine's management expects to obtain a licence to restart output," the service said.  Russian Grocer O'Key Prices IPO At $11/GDR  O'Key hits middle of pricing range - but unloads assets below balance sheet value  Sobyanin prohibits construction of 24k m2 office centre in central Moscow  Rostvertol plans to pay dividends with 25% yield for 9M10

Activity in the Oil and Gas sector (including regulatory)  UPDATE 1-Russia Oct oil output hits new record 10.26 mln bpd  Russia boosts Jan-Oct oil production 2 pct  Russia-China oil pipeline test  Russia begins oil pipeline shipments to China, part of Siberia-to-Pacific link  Transneft, Partners to Finance Arctic Pipe  Surgutneftegas cited as potential buyer of gov't stake in Rosneft  Surgutneftegas mentioned as potential buyer of 15% stake in Rosneft  Putin signs order banning access to pipelines for low-quality refineries  FAS ready to lower penalties for oil companies  Milton Financials: OPEC needs Russia’s help to control oil price-Iran: Milton Financials has learned that Iran’s OPEC governor was recently quoted as saying that the 12-member Organization of Petroleum Producing Countries needs the cooperation of Russia to help improve stability and increase low crude prices.

Gazprom  "Gazprom" is Ready for the Worse in Relations with Belarus - Russian gas monopolist "Gazprom" is preparing for possible difficulties in the negotiations with Belarus on a new gas supply contract. This was stated by the holding's spokesman Sergei Kupriyanov. According to him, it's hard to predict a possible variant of negotiations on a new contract."  Gazprom Turns to Dollars Amid Ruble Bond Limits: Russia Credit  Gazprom's dividends in focus  Bulgaria's Borisov Ruins Gazprom's Geopolitical Stand - Russian Expert: The geopolitical situation for Russia and its energy giant Gazprom in the Black Sea region deteriorated sharply after Boyko Borisov became Bulgaria's PM, according to a Russian paper. In a sizable article released Monday, the Russian "Nezavisimaya Gazeta" focuses on Bulgaria's importance for Russian energy projects in the Black Sea region.

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Full Text Articles Basic Political Developments

Russia, Qatar sign memorandum of cooperation on peaceful nuclear use http://en.rian.ru/russia/20101102/161176375.html

11:11 02/11/2010

MOSCOW, November 2 (RIA Novosti) - Russia and Qatar signed on Tuesday a memorandum of cooperation in the peaceful use of nuclear energy.

The document was signed in Moscow by Nikolai Spasski, the deputy director of the Russian state-run nuclear corporation Rosatom, and the Qatari ambassador to Russia, Ahmed Saif Al-Midhadi.

The two countries agreed to cooperate in the development of Qatari laws regulating the use of nuclear energy, scientific research, as well as in the construction of nuclear reactors.

The signing of the agreement comes as Moscow is preparing for a three-day visit by Qatari Emir Sheikh Hamad bin Khalifa Al Thani due to begin later in the day.

After the signing ceremony, Spasski said the memorandum contained a "roadmap for further moves" in the two countries' nuclear cooperation and is to be followed by an intergovernmental agreement on the issue.

Russia and Qatar already have active energy contracts, including through OPEC and the Gas Exporting Countries Forum (GECF).

Qatar, which has the third largest natural gas reserves in the world, behind Russia and Iran, moved to develop peaceful nuclear energy in cooperation with other Arab countries in 2006, which was supported by the International Atomic Energy Agency (IAEA).

Russian President due in Seoul for talks http://www.focus-fen.net/index.php?id=n234187

02 November 2010 | 05:47 | FOCUS News Agency Home / World Seoul. Russian President Dmitry Medvedev is set to visit South Korea this week at the invitation of his South Korean counterpart Lee Myung-bak, Lee's office said Tuesday, Xinhua informs. The Russian leader's visit, a return visit for Lee's trip to Moscow two years ago, will come prior to the forthcoming G-20 summit among the world's major economies, which he plans to attend. The two leaders will hold talks on Nov. 10 to discuss ways to substantiate their bilateral relations, upgraded to a so-called "strategic partnership" in 2008. Bolstering bilateral cooperation on energy, resources and modernization of the Russian economy will be part of the agenda on the table, according to Lee's office Cheong Wa Dae. Seoul and Moscow forged formal diplomatic relations in 1990.

Medvedev to pay state visit to Korea next week http://www.koreaherald.com/national/Detail.jsp?newsMLId=20101102000647

2010-11-02 18:05 Russian President Dmitry Medvedev will pay a state visit to Korea next week for summit talks with President Lee Myung-bak and to attend the G20 summit, Lee’s office said Tuesday.

During the summit talks next Wednesday, Lee and Medvedev plan to discuss ways for substantial cooperation on the development of energy, natural resources, Siberia and modernization of the Russian economy to deepen the two countries’ strategic cooperative partnership.

“The two leaders will also exchange views on the state of international affairs including situations in the Korean Peninsula and Northeast Asia, as well as the G20 summit,” Cheong Wa Dae said in a press release.

The three-day visit starting Nov. 10 will be Medvedev’s first trip to Korea since Lee took office in early 2008, and be reciprocal to Lee’s visit to Russia in September 2008.

The two leaders have held summit talks four times before on the sidelines of the G8 summit in Tokyo in July 2008, during Lee’s visit to Russia two months later, on the sidelines of the G8 summit in La Quilla in July 2009 and during Lee’s visit last September to attend a political forum in Russia.

By Kim So-hyun ([email protected])

November 02, 2010 17:46 PM

Business Forum To Discuss Attraction Of Asian Countries Investment To Russia. http://www.bernama.com/bernama/v5/newsindex.php?id=540247

HONG KONG, Nov 2 (Bernama) -- Opportunities for bringing investments from Asian countries to the Russian market is the main theme of an investment forum that opened here Tuesday, Russia's Itar-Tass news agency reported. It has brought together more than 150 businessmen from Russia, other countries of the Commonwealth of Independent States, Singapore, China, and Japan.

Participants in the conference organised by Russia's media group RBC are expected to meet at plenary sessions at the Grand Hyatt hotel.

Their attention is drawn to the post-crisis recovery of the economy in Russia and in Asiatic countries, to Russian-Chinese cooperation, to legal aspects of doing business, to the role of banks, and the situation in commodity markets.

As a separate issue, they will consider the prospects of Russian banks' being listed on the stock exchanges of Hong Kong and Singapore.

The organisers said holding the conference in Hong Kong was not at all a matter of random choice, saying that the local stock exchange became the world's largest trading floor last year in terms of the number of Initial Public Offerings (IPOs).

The Russian aluminum industry giant RUSAL became the first Russian company listed there in January this year.

-- BERNAMA

Russia, Norway hash out co-operation points http://rt.com/Top_News/2010-11-02/russia-norway-coopertion-arctic.html/print

02 November, 2010, 09:21

Russian Foreign Minister Sergey Lavrov is in Oslo to meet his Norwegian counterpart, Jonas Støre. The two diplomats are expected to seal new agreements on Tuesday, as Oslo hosts a forum of North European nations.

Relations between Russia and Norway have been progressing quite well since they managed to settle a long running territorial feud over an area in the Barents Sea, believed to hold massive oil and gas reserves.

In September, Moscow and Oslo signed a historic agreement, which split the area in two equal parts. The two parties also agreed on a joint exploration pact.

Lavrov and Støre are expected to decide on the practical aspects of implementing the agreement as well as the impact it can have on the region’s future.

The Arctic, with its huge energy potential and its high value as a transport route, is a lucrative pie of which many nations have tried to partake. There are still several unsettled territorial disputes between the Arctic nations. Amidst the scramble, Russia and Norway appear to be looking for a way to handle the sensitive issue to everyone’s advantage.

During their talks, Lavrov and Store are also expected to address NATO’s upcoming Lisbon Summit, where Russia and the alliance are expected to broaden their co-operation in Afghanistan.

The Norwegian Defense Minister has also stated that Norway supports Russia’s participation in the building of a joint missile defense system with NATO in Europe.

Minister Lavrov is also expected to take part in the “Northern dimension”, the second ministerial meeting, which would also prompt Iceland and the EU to synchronize watches on issues such as public health, transportation, and the environment.

Russia FM to sign border agreement with Norway http://www.itar-tass.com/eng/level2.html?NewsID=15645865

02.11.2010, 08.11

OSLO, November 2 (Itar-Tass) - Russian Foreign Minister Sergei Lavrov, currently on a visit to Oslo, on Tuesday will attend the second ministerial meeting of the renewed Northern Dimension (ND).

This regional programme pursued on an equal basis by four partners - Russia, the European Union, Iceland and Norway - was launched in the new format at the quadripartite summit in Helsinki in 2006. The ND geographical territory covers a large area from the arctic and sub-arctic regions of Europe to the southern shores of the Baltic Sea and from northwest Russia in the east to Iceland and Greenland in the west.

The meeting, which will be held at Oslo City Hall, in essence, will be a review of recent advances in four policy areas of cross-border cooperation and coordination of plans for the future. In particular, the conference participants will “synchronize watches” on the state of affairs in the Northern Dimension Environmental Partnership and cooperation in the field of health and social welfare. The debate will unfold also on a transition to earliest practical implementation of initiatives in transport, logistics and the sphere of culture. The sides will also address the process of formation of the ND Business Council and the Institute of the Northern Dimension.

According to Norwegian Foreign Minister Jonas Gahr Store, the Northern Dimension, though still very young structure, is becoming an increasingly important “platform” for dialogue and applied collaboration. “After the first ministerial conference in St. Petersburg two years ago, our interaction strengthened and has already yielded tangible results,” Store stressed in a welcoming address to the meeting participants at the forum’s official Internet portal.

By the way, the interests of Moscow and Oslo regarding the advancement of a multifaceted cooperation in northern Europe are very similar. Norway attaches great importance to them in the context of the priority approach to development of the Far North, while Russia believes that this cooperation mechanism provided good opportunities for modernisation.

The two countries’ desire to create favourable conditions for cooperation in the region is reflected in the preparation of the Intergovernmental Agreement on the facilitation of mutual trips of residents of border territories of the Russian Federation and the Kingdom of Norway. It is expected that the document will be signed on Tuesday, immediately after the conference. Lavrov and Store will also sign the Joint Declaration on strengthening cross-border cooperation, which aims to give a comprehensive and systematic nature to the joint work in this sphere and will become a foundation for specific steps.

On the forum’s sidelines the Russian diplomacy head will hold talks with his Icelandic counterpart Ossur Skarfedinsson. They will focus on implementing the summit-level agreements between Moscow and Reykjavik on “Cooperation in the field of innovation with a focus on geothermal energy and energy efficiency,” the RF Foreign Ministry said.

The foreign ministers of Russia, Iceland, Norway, Finland, Sweden and Estonia are planned to take part in the Northern Dimension conference. Denmark, Lithuania and Poland will be represented at the level of deputy foreign ministers.

The Northern Dimension was drawn up in 1999. The policy’s main objectives are to provide a common framework for the promotion of dialogue and concrete cooperation, to strengthen stability and well-being, intensify economic cooperation, and promote economic integration, competitiveness and sustainable development in Northern Europe. The renewed ND policy was launched at the Helsinki Summit in November 2006, which adopted an ND Political Declaration and ND Policy Framework Document. The renewed policy introduces a strong link between the ND and the EU-Russia common spaces. To facilitate project implementation within the framework of the ND policy, partnerships on the following issues were created: the environment (NDEP), public health and social well-being (NDPHS), culture (NDPC) and transport and logistics (NDPTL). An ND Institute (NDI) and ND Business Council (NDBC) have also been created, along with an ‘Arctic Window’ to focus attention on the Arctic region.

In addition to the four partners, the following are participants in the ND Policy: the Council of the Baltic Sea States (CBSS), the Barents Euro Arctic Council (BEAC), the Arctic Council (AC), the Nordic Council of Ministers (NCM), international financial institutions, such as the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the Nordic Investment Bank (NIB), regional and sub-regional organisations and authorities, NGOs and other civil society organisations. Canada and the United States perform the roles of the observers. No obstacles for Medvedev meeting with Japanese PM - Kremlin source http://en.rian.ru/world/20101102/161176145.html

11:02 02/11/2010

The Kremlin does not rule out the possibility for Russian President Dmitry Medvedev to meet with Japanese Prime Minister Naoto Kan at the upcoming APEC summit November 13-14 in Yokohama, a Kremlin source said on Tuesday.

The source said the issue of Russian-Japanese bilateral talks was being settled.

"We see no obstacles to the meeting with the Japanese prime minister [as a part of the talks]," the source said.

MOSCOW, November 2 (RIA Novosti)

Japan calls back Moscow envoy, summit door open http://www.washingtonpost.com/wp- dyn/content/article/2010/11/02/AR2010110200401.html

By ERIC TALMADGE The Associated Press Tuesday, November 2, 2010; 3:26 AM

TOKYO -- Japan temporarily called its ambassador back from Russia on Tuesday but said a meeting between the leaders of both countries would likely go ahead despite growing anger in Tokyo over President Dmitry Medvedev's visit to a disputed island off Japan's northern coast.

Medvedev's trip to the island on Monday - the first by a Russian leader - elicited angry protests from Tokyo and came as Japan is embroiled in another heated territorial dispute with China over islands in the south.

Tokyo on Tuesday said it was temporarily bringing its ambassador to Moscow back to Japan to discuss the issue. It did not say how long the ambassador would remain.

Still, Japan's top government spokesman told reporters Prime Minister Naoto Kan intended to go ahead with a meeting with Medvedev on the sidelines of a regional summit to be held in Japan on Nov. 13-14.

"We are trying to decide what is the most effective course of action," chief Cabinet spokesman Yoshito Sengoku said Tuesday. The dispute over the Russian-held islands has been a major sticking point behind the failure of the two Asian giants to conclude a peace treaty formally ending World War II.

Part of a larger chain of Russian-held islands, the disputed islands - known in Japan as the Northern Territories and in Russia as the southern Kurils - are surrounded by rich fishing waters and are believed to have promising offshore oil and natural gas reserves, plus gold and silver deposits.

But the islands - which were occupied by Soviet troops in the waning days of World War II - have suffered neglect and the population has plummeted since the fall of the Soviet Union.

During his visit, Medvedev vowed to build infrastructure on the islands and raise their standard of living to one commensurate with the rest of Russia.

Medvedev, in announcing his plan to visit the area in September, described the islands as "a very important region in our country."

That position has infuriated Japan, which claims Soviet troops took control of the islands illegally and has consistently called for their return as a precondition for fully improved ties.

On Monday, Foreign Minister Seiji Maehara summoned Russian Ambassador Mikhail Bely for about 20 minutes to lodge his formal protest. He said Japan "has no choice but to take appropriate action in response to President Medvedev's visit."

Bely responded that it was a domestic issue.

Maehara on Tuesday said that Japan's overall policy to strengthen economic ties with Russia has not changed.

But the visit put Japan's government in a difficult position, particularly with conservatives, as Moscow appeared to be taking a hard line.

In Moscow, Russian Foreign Minister Sergei Lavrov called Tokyo's reaction to Medvedev's visit to the island "unacceptable" and said he would call in Japan's ambassador to Russia, Masaharu Kono, to protest.

"This is our land, and the Russian president was visiting Russian land, Russian territories, a Russian region. We said so to our Japanese partners," Lavrov told a news conference.

Medvedev's visit came amid a high-level dispute between Japan and China over another set of islands in the East China Sea. Japan's coast guard detained the captain of a Chinese fishing boat that collided with its patrol vessels near the islands Sept. 7, sparking the diplomatic spat and setting off protests across China even after the captain was released.

That dispute and other tensions are believed to have been behind Chinese Premier Wen Jiabao's decision to cancel a full bilateral meeting with Kan at the recent East Asia Summit in Hanoi. Instead, the two met informally for about 10 minutes.

Associated Press writers David Nowak and Nataliya Vasilyeva in Moscow contributed to this report.

Japan ambassador temporarily leaves Moscow for consultations http://www.itar-tass.com/eng/level2.html?NewsID=15646343&PageNum=0

02.11.2010, 10.48

MOSCOW, November 2 (Itar-Tass) -- Japanese Ambassador to Russia Masaharu Kono will leave temporarily Moscow for consultations in Tokyo over Russian President Dmitry Medvedev’s visit to the Kuril Islands, Minister Plenipotentiary of the Japanese Embassy in Moscow Akira Imamura told Itar-Tass on Tuesday.

“The ambassador will return temporarily in Japan to clarify all the details. It is unclear yet when he will come back to Moscow,” the diplomat said.

The Japanese government has earlier voiced the protest and stated about pondering over retaliatory measures due to Russian President Dmitry Medvedev’s visit to the South Kuriles, which Tokyo considers its northern territories.

Russia resolutely rejected the Japanese protest and Russian Foreign Minister Sergei Lavrov called it “unacceptable.”

Japan to recall ambassador to Russia over island row (Update 1) http://en.rian.ru/world/20101102/161175227.html

09:43 02/11/2010

Japan will temporarily recall its ambassador to Russia in connection with Russian President Dmitry Medvedev's visit to a disputed Kuril island, Japan's Kyodo news agency quoted the country's foreign minister as saying. Japanese Foreign Minister Seiji Maehara made the announcement to recall the ambassador during a press conference in Tokyo, Kyodo reported.

Medvedev visited Kunashir Island, near Japan's northernmost Hokkaido Island, on Monday, sparking a diplomatic row with Tokyo. The visit was the first trip by a head of state of Russia or the former Soviet Union to the South Kuril Islands.

The Soviet Union seized four of the Kuril Islands (Iturup, Kunashir, Shikotan, and Habomai) from Japan at the end of World War II and Tokyo has demanded their return ever since. The dispute has prevented Russia and Japan from signing a formal peace treaty.

Japan said the move was "regrettable," and had "hurt the Japanese people's sentiments."

Moscow described Japan's reaction on Medvedev's visit as "unacceptable." Russian Foreign Minister Sergei Lavrov said on Monday "we are not going to make any steps that would hamper Russian-Japanese cooperation, but the Japanese side should certainly make conclusions."

The Russian Foreign Ministry said any "advice" concerning Russian leader's trips "inside his own country" is "inappropriate and unacceptable."

The United States has backed Japan in its claim over the disputed islands and has pushed for both countries to come to a compromise.

"We are quite aware of the dispute. We do back Japan regarding the Northern Territories. The United States for a number of years has encouraged Japan and Russia to negotiate an actual peace treaty, regarding these and other issues," Philip Crowley, a spokesman for the U.S. Department of State, told a daily press briefing on Monday.

Japan to take measures against Russia following Medvedev's visit to disputed island http://mdn.mainichi.jp/mdnnews/news/20101102p2a00m0na011000c.html

Prime Minister Naoto Kan has revealed his government is now considering measures against Russia after President Dmitry Medvedev's visit to the disputed Kunashiri Island on Nov. 1 despite warnings from Japan.

"We are considering what form our response will take," Kan stated during a news conference at his office on the night of Nov. 1. Meanwhile, Russian Foreign Minister Sergey Lavrov told reporters the same day that "It will be difficult to accept any Japanese response. The Russian president simply visited Russian territory." Japanese Ambassador to Russia Masaharu Kono also visited Russian Deputy Minister of Foreign Affairs Aleksey N. Borodavkin to communicate Japan's displeasure, but left without agreement on a common position. The Russian Foreign Ministry then announced that Russia "completely rejects Japan's protest" against Medvedev's trip to the island.

Measures against Russia may include the recall or temporary withdrawal of the Japanese ambassador to Moscow. However, some observers believe Japan is unlikely to take action beyond a formal protest in advance of the Asia-Pacific Economic Cooperation summit coming up Nov. 13 and 14 in Yokohama.

"We will take action appropriate to the (Russian) president's deeds and actions during his visit to the Northern Territories," Chief Cabinet Secretary Yoshito Sengoku told a news conference on Nov. 1 without going into any detail.

Medvedev spent about 3 1/2 hours in the community of Furukamappu, or Yuzhno- Kurilsk in Russian, on Kunashiri Island before heading back to Moscow.

Japan PM hopes to meet Russia president at APEC summit http://www.itar-tass.com/eng/level2.html?NewsID=15646023&PageNum=0

02.11.2010, 08.25

TOKYO, November 2 (Itar-Tass) - The Japanese government believes that the country’s Prime Minister Naoto Kan will hold a bilateral meeting with Russian President Dmitry Medvedev when he comes here to take part in the Asia-Pacific Economic Cooperation (APEC) summit, Chief Cabinet Secretary Yoshito Sengoku said at a press conference in Tokyo on Tuesday.

“I think that this meeting will take place,” he said answering a journalist question.

The Japanese government on Monday made a formal protest and expressed great regret over the visit of Dmitry Medvedev to the Southern Kuriles, which Tokyo considers its “northern territories.” This protest was strongly rejected by the Russian side.

The APEC summit will be held in the port city of Yokohama on 13-14 November. It will bring together leaders from 21 countries and territories included in the Asia-Pacific Economic Cooperation. Among them, in particular, will be senior leaders of Russia, China, USA, Japan, South Korea and South-East Asian states. According to the Kyodo news agency, Sengoku said he does not know what was behind Medvedev’s decision to visit Kunashir Island. But he said the government is considering what kind of “appropriate measures” to take over the visit by Medvedev, who became the first leader from Russia or the former Soviet Union to travel to any of the islands. Asked whether more weight will be given to tough measures or to calm negotiations, Sengoku said the government is not forced to choose between the two options.

The islands of Iturup (Etorofu), Kunashir (Kunashiri) and Shikotan, as well as the Habomai islet group were seized by the Soviet Union between August 28 and September 5, 1945, following Japan's surrender in World War II on August 15. Japan claims the islands, called the Northern Territories, were occupied illegally. They are known as the Southern Kurils in Russia. Medvedev’s visit to Kunashiri took place at a time when Kan’s government is embroiled in a serious diplomatic row with China over the sovereignty of the Senkaku Islands in the East China Sea, according to Kyodo. Sengoku said the visit had nothing to do with the government’s diplomatic skills, noting that talks between Japan and Russia regarding the islands had not been fruitful even before the Democratic Party of Japan swept to power in September 2009.

Japan says PM to meet Russian president despite row http://www.reuters.com/article/idUSTRE6A107G20101102

2:03am EDT

By Yoko Nishikawa

TOKYO (Reuters) - Leaders from Japan and Russia will likely hold talks at an Asia- Pacific summit in mid-November, Japan's top government spokesman said on Tuesday, despite a diplomatic row over disputed islands that both nations claim.

The flare-up of the feud over the islands, triggered by a visit by Russian President Dmitry Medvedev to one of the islands on Monday, adds to Japanese Prime Minister Naoto Kan's diplomatic headaches as he struggles to repair ties with Beijing, strained by another territorial row.

Medvedev visited one of four disputed islands known as the Southern Kuriles in Russia and the Northern Territories in Japan, a move that was likely to snarl ties between the two nations ahead of the November 13-14 Asia-Pacific Economic Cooperation (APEC) leaders summit that Japan will host.

"I think that bilateral talks will be held," Chief Cabinet Secretary told a news conference, adding that Tokyo would consider what would be an appropriate next step after lodging a protest with the Russian envoy on Monday. Japanese Economic Minister Banri Kaieda expressed worries that the Japan-Russia row could affect economic ties, but economists saw no substantial economic impact.

"Japan and Russia have deep ties when it comes to energy and natural resources development," Japanese Economics Minister Banri Kaieda told reporters after a cabinet meeting.

"I am worried about the impact on economic relations from the Russian president's visit to the Northern Territories."

Trade flows with Russia are relatively small compared with China, which became Japan's biggest trade partner last year.

Japan's exports to Russia totaled 306.5 billion yen ($3.81 billion) in 2009, about 2 percent of its exports to China and its imports from Russia came to 825.5 billion yen in 2009, accounting for 1.6 percent of Japan's total imports.

"Japan imports liquefied gas, but that can be imported from elsewhere as can oil. This is not an EU-Russia situation so the impact is very limited," said Martin Schulz, a senior economist at Fujitsu Research Institute.

(Reporting by Yoko Nishikawa and Linda Sieg; Editing by Nathan Layne)

2 November 2010 Last updated at 05:00 GMT

Japan says Russia meeting is still on despite Kuril row http://www.bbc.co.uk/news/world-asia-pacific-11671514

The Japanese Prime Minister Naoto Kan plans to meet the Russian President Dmitry Medvedev later this month, amid a territorial dispute.

Japan's chief spokespersion Yoshito Sengoku said he believed the meeting at an Asia Pacific summit would go ahead.

This is despite the sudden flaring of a long-standing row between Japan and Russia over the Kuril Islands.

Mr Medvedev visited one of the four disputed islands on Monday, a move Japan said was "regrettable".

The government says it is considering whether any further measures need to be taken over the visit. It summoned Russia's ambassador to Tokyo on Monday to express displeasure at the visit.

Summitry

The summit of the Asia-Pacific Economic Cooperation set for 13-14 November in Japan may offer a chance for talks however.

"I believe the bilateral meeting will be held," Mr Sengoku said.

The Japanese Economic Minister Banri Kaieda told reporters he was concerned about possible economic repercussions of the row with Russia, over islands located in rich fishing grounds.

"Japan and Russia have deep ties when it comes to energy and natural resources development," Mr Kaieda said.

"I am worried about the impact on economic relations from the Russian president's visit to the Northern Territories," he said, using the Japanese name for what Russia calls the Southern Kuriles.

Mr Medvedev met local residents in Kunashir, the second-largest of the four islands, and pledged more investment for the region.

Russia called Japan's reaction to the visit "unacceptable".

Russia took control of the islands at the end of World War II; before then, about 17,000 Japanese residents lived in the Kurils.

Mr Medvedev is the first Russian leader to set foot on the islands.

Japanese Foreign Minister Seiji Maehara warned that the visit would "hurt the feelings of the Japanese people".

But Russia's Foreign Minister Sergei Lavrov countered: "It is our land and the Russian president visited Russian land."

The dispute has strained relations between Tokyo and Moscow ever since World War II, preventing the signing of a formal peace treaty.

The islands have rich fishing grounds, mineral deposits and possibly oil and gas reserves.

Mr Medvedev's visit came with Japan locked in a separate territorial dispute with another of its powerful neighbours. Ties between China and Japan have been strained by a row over islands in the South China Sea - known as Senkaku in Japan and Diaoyu in China - that both claim.

China calls for dialogue on Kuril islands row http://en.rian.ru/world/20101102/161176757.html

11:22 02/11/2010

China called on Tuesday for a resolution through dialogue on the territorial dispute between Russian and Japan over the Kuril Islands.

Tokyo has said it will temporarily recall its ambassador to Moscow following Russian President Dmitry Medvedev's visit to one of the four disputed Kuril islands.

A spokesman for China's Foreign Ministry said the issue concerned Moscow and Tokyo only.

"We hope that the sides will find a suitable solution to the territorial dispute through dialogue," Hong Lei said.

Medvedev visited Kunashir Island, near Japan's northernmost Hokkaido Island, on Monday.

The Soviet Union seized the islands at the end of World War II.

Japan called Medvedev's visit "regrettable."

Moscow described Japan's reaction to the move as "unacceptable."

Relations between Tokyo and Beijing have also been strained by a territorial dispute over islands in the South China Sea.

BEIJING, November 2 (RIA Novosti)

U.S. says backs Japan in dispute with Russia over Kuril Islands http://en.rian.ru/russia/20101102/161173904.html

06:06 02/11/2010

The United States backs Japan in its dispute with Russia over the Kuril Islands and keeps on calling on both countries to reach a compromise, a spokesman for the U.S. Department of State said. "We are quite aware of the dispute. We do back Japan regarding the Northern Territories. The United States for a number of years has encouraged Japan and Russia to negotiate an actual peace treaty, regarding these and other issues," Philip Crowley told a daily press briefing.

Russian President Dmitry Medvedev sparked a diplomatic row with Japan when he visited Kunashir Island, near Japan's northernmost Hokkaido Island, on Monday.

The visit was the first trip by a head of state of Russia or the former Soviet Union to the South Kuril Islands. The Soviet Union seized four of the Kuril Islands (Iturup, Kunashir, Shikotan, and Habomai) from Japan at the end of World War II and Tokyo has demanded their return ever since. The dispute has prevented Russia and Japan from signing a formal peace treaty.

Japan said the move was "regrettable," and had "hurt the Japanese people's sentiments."

Russian Foreign Minister Sergei Lavrov said on Saturday that he saw "no connection" between the trip and Russian-Japanese relations.

WASHINGTON, November 2 (RIA Novosti)

US continues to back Russia's WTO bid http://english.ruvr.ru/2010/11/02/31019556.html

Nov 2, 2010 05:32 Moscow Time

The United States, together with the EU and other countries, will continue to help Russia enter the World Trade Organization ahead of schedule.

This statement was made by US deputy national security adviser for international economic affairs Michael Froman in the White house ahead of Barack Obama’s Asian tour.

Obama's tour agenda includes the G20 summit in South Korea and the APEC summit in Japan.

As part of his tour, the US leader will discuss Russia’s WTO bid with President Medvedev.

U.S. reiterates readiness to sign child adoption deal with Russia by yearend http://en.rian.ru/world/20101102/161173013.html 02:57 02/11/2010

The United States has reiterated its readiness to conclude a new child adoption agreement by the end of this year, a U.S. Department of State official said.

"The negotiations proceed and we think they're going very well, and we hope to have an agreement before the end of the year," Special Advisor for Children's Issues Ambassador Susan Jacobs told a briefing.

She added that Russia continues processing U.S. requests concerning adoption of Russian children.

Russia is one of the largest sources of adoptions for U.S. families, accounting for about 10 percent of foreign adoptions. The mistreatment of Russian children, adopted in the United States, has begun attracting public attention in recent months as a result of a number of highly publicized incidents.

In June, a 7-year-old boy who was placed alone on a one-way flight to Moscow by his U.S. adoptive mother with a note claiming he was "psychopathic."

Following the case, Russia threatened to prohibit child adoptions by U.S. citizens until the countries sign an intergovernmental agreement guaranteeing the rights of adoptive children.

WASHINGTON, November 2 (RIA Novosti)

Russian oil tanker in distress in Sea of Okhotsk http://english.ruvr.ru/2010/11/02/31022754.html

The Russian “Moneron Island” oil tanker is in distress in the Sea of Okhotsk.

The propulsion unit broke down on Sunday, with the crew have since trying to cope with the problem on their own.

It was not until early this Tuesday that the ship sent an SOS message.

Three rescue vessels are currently on their way to the tanker in distress.

Weather forecasters warn of stronger winds and the oncoming storm. According to experts, the 22 seamen on board the tanker are facing a very real threat to their lives.

http://www.vesti.ru/doc.html?id=404009&cid=7 GOOGLE TRANSLATION 02.11.2010 08:13 Three vessels on the way to help Russian tanker in the Sea of Okhotsk To help emergency tanker Moneron Island, drifting in the stormy sea of Okhotsk, there are three Russian vessel. The tanker is the third day at the mercy of wind and waves due to the fact that the transport is down the main engine. Tanker with a low rate of drift to the east coast of Sakhalin and the next day may be close to him. Before going to the aid of "The Island Moneron" three courts tasked to take the tanker in tow and take away from dangerous places. Offshore supply vessels, "Smit Sakhalin" to the tanker 70 miles, the research vessel "Diabase" - 50 miles, far removed from the tanker is still in the Marine Rescue Rubin. A strong headwind speed 25-30 knots and waves do not give it a go in full swing. Tanker Island Moneron "assigned to the port of Vladivostok, the length of the vessel 112 meters, carrying capacity for nearly five thousand tons, crew - 22 people. Weather in the troubled region is deteriorating, there is a raging cyclone, ITAR-TASS.

Russia rejects 655,000 liters of imported Moldovan wine in Oct. http://en.rian.ru/russia/20101102/161173395.html

04:09 02/11/2010

Russia's consumer rights watchdog Rospotrebnadzor rejected 655,000 liters of imported Moldovan wine in October due to safety reasons, the Russian chief sanitary doctor said.

"We have allowed 6.08 liters [of wine] and rejected as defective 655,000 liters," Gennady Onishchenko said.

Russia, previously the importer of 80 percent of all wine produced in Moldova, embargoed deliveries in March 2006. In 2007, over 40 Moldovan wine producing enterprises passed sanitation and epidemiological checks and supplies were resumed.

At the end of June, the agency declared the detection of pesticides and dibutilphthalates in Moldovan wine after Moldovan President Mihai Ghimpu declared June 28 the Day of Soviet Occupation. Onishchenko rejected any link between the department's actions and Moldovan authorities' policy. In August, Russia said the situation with the wine supplies' quality has changed and resumed deliveries from 53 Moldovan suppliers. In September, Onischenko said Russia would widen the list of importers and open a new customs checkpoint on its border.

Tbilisi is ready to sign non-aggression pact only with Russia http://www.news.az/articles/georgia/25792

Tue 02 November 2010 07:37 GMT | 8:37 Local Time

Georgia is ready to sign non-aggression pact only with Russia, stated Temur Iakobashvili, the State Minister for Reintegration Issues of Georgia.

He explained signing such treaties with Abkhazia and South Ossetia would be indirect recognition of their independency.

Not so long ago Iakobashvili underlined Nicolas Sarcozy meant signing non-aggression teary between Tbilisi and Moscow.

"Sarkozy said he would hail the fact if Georgian side takes responsibilities for non-use of force, - he noted. - Our position on the issue is already known, and we've already taken these responsibilities in the framework of Medvedev-Sarkozy agreement."

Previous messages said Nicolas Sarkozy considers necessary Georgia's signing an agreement on non-use of force towards Abkhazia and South Ossetia, and granting access to the territories of the aforesaid republics the EU monitors.

ISS is 10 http://english.ruvr.ru/2010/11/02/31040260.html

The International Space Station has turned 10 today.

It started active operation when the first crew of Sergei Krikalev and Yuri Gidzenko of Russia, and William Shepherd of the United States boarded it on November 2nd 2000.

189 cosmonauts and astronauts from 15 countries have since visited the ISS.

Today the space station is a comfortable many-room “flat” weighing some 400 tons. The current ISS crew are Russian cosmonauts Alexander Kaleri, Oleg Skripochka and Fyodor Yurchikhin, and also NASA astronauts Shannon Walker, Douglas Wheelock and Scott Kelly.

Space blogger Suraev named Hero of Russia http://rt.com/Top_News/2010-11-02/space-blogger-hero-russia.html/print

02 November, 2010, 11:07

Maksim Suraev, member of the ISS Expedition 21/22 and the first Russian to blog from the outer space, has been awarded the title of Hero of Russia, the highest state award.

The award was long overdue. Cosmonauts are traditionally awarded the title upon finishing their mission. However the Defense Ministry denied Suraev the honor twice.

The reason for this has never been revealed, although some media cited their sources familiar with the situation as saying that the delay was due to red tape. Apparently all the problems have now been resolved.

“The story is over. It was a procedural delay relating to the fact that some cosmonauts also serve in the defense ministry. Now we have an award order dated 30 October,” RIA Novosti cites Sergey Krikalev, head of the Cosmonaut Training Center as saying.

Maksim Suraev spent six months at the International Space Station starting in September 2009. He attracted much public attention by regularly posting pictures and through in his personal blog, telling amusing stories about “secret spy gadgets” and "smuggled" wheat grown in space.

Modernized Soyuz-2 carrier rocket lifts off from N Russian space center http://www.itar-tass.com/eng/level2.html?NewsID=15645668&PageNum=0

02.11.2010, 04.38

MOSCOW, November 2 (Itar-Tass) – A carrier rocket in the family of modernized Soyuz-2 carriers lifted off from the Plesetsk space center at 03:38 Moscow Standard Time /00:38 GMT/ to bring into space the Meridian probe.

The latter has been launched in the interests of the Russian Defense Ministry, Lieutenant Colonel Alexei Zolotukhin, an official spokesman for the Russian Space Troops said. November 02, 2010 09:16

Rocket with telecom satellite launched from Plesetsk http://www.interfax.com/newsinf.asp?id=199474

MOSCOW. Nov 2 (Interfax) - Russia's Space Forces have launched a Soyuz-2.1a carrier rocket with a Meridian new-generation telecommunications satellite from the northern launch pad Plesetsk in Arkhangelsk region, Space Forces spokesman Lt. Col. Alexei Zolotukhin has announced.

"The launch proceeded according to plan under the supervision of Space Forces Commander Lt. Gen. Oleg Ostapenko, who arrived in Plesetsk on Monday to prepare and carry out the launch," Zolotukhin told Interfax on Tuesday.

The upper stage Fregat has put the Meridian into orbit as scheduled. A stable telemetric contact is maintained with the satellite, whose systems are functioning smoothly. Control over the satellite will be exercised by the Space Forces' main testing center.

The previous Meridian was launched from Plesetsk in May 2009.

The dual-purpose Meridian provides communication services to ice reconnaissance ships and aircraft in the region of the Northern Sea Route with coastal and land stations. It has expanded the satellite communication network for the northern regions of Siberia and the Far East in the interests of Russia's economic development.

Moscow officials stripped of minister status, stay on posts-CORR. http://www.itar-tass.com/eng/level2.html?NewsID=15646256

02.11.2010, 10.51

MOSCOW, November 2 (Itar-Tass) -- Several Moscow officials were stripped of the status of ministers, but stayed on their posts. Several heads of the city departments were stripped of the status of ministers: head of the department of food resources – Alexander Baburin, the department of nature management and environmental protection – Leonid Bochin, the department for the support and development of small and medium businesses – Mikhail Vyshegorodtsev and the department of the consumer's market and services – Vladimir Malyshkov, a source in the Moscow Mayor’s Office said. “The mayor signed the decrees to strip these officials of the status of ministers, but they stayed at the posts of the heads of the departments,” the source said. A source in the city authorities earlier said that Vladimir Malyshkov was dismissed. Alongside, the committee of Moscow cultural heritage was transformed in the department of cultural heritage, the source said. On Monday, Sobyanin introduced a new chief of this agency – the former chief of the Federal Service of Supervision over the Legislation on Cultural Heritage Protection Alexander Kibovsky. Valery Shevchuk, who earlier headed the committee, was dismissed from the public service.

Sobyanin also signed the decree to appoint Viktor Damurchiyev as prefect of the North- Western District of Moscow and to appoint Artyom Yermolayev as chief of the committee of information technologies. The mayor dismissed Oleg Korostin from the post of the deputy chief of the Moscow department of city construction order.

November 02, 2010 12:04

Armed masked men storm into National Reserve Bank in Moscow – source http://www.interfax.com/newsinf.asp?id=199531

MOSCOW. Nov 2 (Interfax) - Armed masked men have entered the Moscow headquarters of the National Reserve Bank owned by Russian billionaire Alexander Lebedev.

"Several armed men wearing masks have entered the building at 10A on 60 Let Oktyabrya avenue in southwestern Moscow, where the Rosnano corporation and the National Reserve Bank are headquartered. There is one entrance in the building and we do not know yet what this action is about," Lebedev's aide Artyom Artyomov told Interfax.

Law enforcement services have not been available for comment and official confirmation of this report has not yet been obtained by Interfax. sd ap

Militant killed, policeman wounded in Dagestan shootout http://en.rian.ru/crime/20101102/161172761.html

02:23 02/11/2010

A militant was killed and a policemen was wounded in a shootout in the city of Kaspiisk, in Russia's North Caucasus republic of Dagestan, a local police source said on Tuesday.

The militant was killed in a result of a special police operation conducted by republic's Federal Security Service and the Interior Ministry. The source said the militant had a gun and a suicide bomber's belt, which was later demined by sappers. His identity is currently being established.

According to the National Anti-Terrorist Committee, more than half of all terrorist attacks in the North Caucasus in 2010 have occurred in Dagestan.

MAKHACHKALA, November 2 (RIA Novosti)

Leader of Kaspiisk terrorist group destroyed in Dagestan http://www.itar-tass.com/eng/level2.html?NewsID=15646181

02.11.2010, 10.10

MAKHACHKALA, November 2 (Itar-Tass) -- Leader of the Kaspiisk terrorist group 31- year-old Murad Shashayev was destroyed in Dagestan, ITAR-TASS learnt at the press service of the Interior Ministry for the republic.

“Shashayev was on the wanted list for the organization and commitment of 30 terrorist acts, including attempts on the life of law enforcers and servicemen, as well as a number of sabotages on the railway and extortion of money,” the ministry’s spokesman said.

According to the Interior Ministry, Shashayev was destroyed in one of the houses in Sovetskaya Street in the city of Kasiisk. While checking his documents, he opened pistol fire on police officers wounding one of them. The militant was killed in return fire. While examining him, a PM pistol with two magazines and a homemade grenade was found on him. According some data, a so-called suicide belt was also found on him. The explosive device was defused by FSB sappers.

2 border guards die, another 5 get injuries, as truck falls in Dagestan abyss http://www.itar-tass.com/eng/level2.html?NewsID=15646147&PageNum=0

02.11.2010, 09.56

MAKHACHKALA, November 2 (Itar-Tass) -- A truck Ural trafficking border guards of the Dagestani FSB Border Service fell in a 100-meter-deep abyss in the Dokuzpara district of the republic. The incident occurred at about the noon on Monday near Kaladzhukh, a source in the Dagestani law enforcement agencies told Itar-Tass on Tuesday. “Two border guards died, five more were hospitalized with various injuries,” the source said.

The investigation into the incident is underway.

Imam of local mosque killed in North Caucasian town http://www.itar-tass.com/eng/level2.html?NewsID=15645545&PageNum=0

02.11.2010, 00.49

MAKHACHKALA, November 2 (Itar-Tass) – Imam of a local mosque was killed Monday night in Khasavyurt, a town in the North Caucasian region of Dagestan, officials at the regional Interior Ministry said.

At around 22:30, unknown gunmen opened fire at Basir Salamgireyev, wounding him in the head. He died while being taken to hospital.

Operatives and investigators are clearing out the circumstances of the assassination.

At the same time, Interior officials say a militant having a suicide bomber’s belt was destroyed overnight to Tuesday in Kaspiysk, also in Dagestan.

In addition to the belt, the man had a handgun with munitions.

“Under the circumstances that are not year fully clear yet, the gunman opened fire at a street patrol policeman and wounded him,” a source said. “He was then blocked and killed and the demolition experts from the FSB security service defused the belt.”

02 November 2010, 10:37

Head of Karachayevo-Cherkessia pledges to stop church arsons http://www.interfax-religion.com/?act=news&div=7869

Cherkessk, November 2, Interfax - President of Russia's North Caucasus republic of Karachayevo-Cherkessia Boris Ebzeyev has ordered immediate measures to prevent the burning down of churches.

"The president said that the criminals who torched the churches cannot be considered truly religious people," the presidential press service said.

"There have not been any religious conflicts in Karachayevo-Cherkessia for centuries. Residents of our republic respect each other, and they respect religions, professed by their neighbors," Ebzeyev was quoted as saying.

"All measures will be taken in Karachayevo-Cherkessia to prevent such evil deeds and to restore the churches," he said.

WikiLeaks: Is Russia the Next Target? http://www.time.com/time/world/article/0,8599,2028283,00.html

By Simon Shuster / Moscow Monday, Nov. 01, 2010

Say what you will about Julian Assange, founder of the whistle-blowing website WikiLeaks, but his work has shown him to be pretty fearless. After his site published the biggest cache of secret files in U.S. history on Oct. 22, detailing some of the ugly truths about the war in Iraq, he continued to travel around Europe despite U.S. reprimands and warnings. He even told the global media that new leaks would expose more secrets not only about the U.S. military but about other "repressive regimes," such as Russia and China. The signals coming from Moscow, however, suggest that the Russian reaction will not be as reserved as America's. So is WikiLeaks really ready to take on the world's more callous states?

It's certainly talking the talk. In an interview published on Tuesday, Oct. 26, in Russia's leading daily newspaper, Kommersant, WikiLeaks spokesman Kristinn Hrafnsson said that "Russian readers will learn a lot about their country" after one of the site's upcoming document dumps. "We want to tell people the truth about the actions of their governments." (See the top 10 leaks in history.)

So far Russia has had no official response. But on Wednesday, an official at the Center for Information Security of the FSB, Russia's secret police, gave a warning to WikiLeaks that showed none of the tact of the U.S. reply to the Iraq revelations. "It's essential to remember that given the will and the relevant orders, [WikiLeaks] can be made inaccessible forever," the anonymous official told the independent Russian news website LifeNews.

When reached by TIME, the FSB, which is the main successor to the Soviet KGB, declined to elaborate on the comment or say whether it was the agency's official position. But history has shown that the FSB readily steps in to shut down Internet tattlers. In June, a Russian analog to WikiLeaks called Lubyanskaya Pravda published a series of documents it claimed to be top-secret FSB files detailing the agency's operations in the former Soviet Union and conflicts with other Russian security forces. (Watch WikiLeaks' Julian Assange discuss TIME's top 10 leaks.) The site stayed online for less than three weeks — during which time no Russian newspapers published the files — and then put up a notice saying it was under construction. With the site down and the people who anonymously ran it unreachable, the leak was apparently stopped. "The FSB could have easily found the people behind it and convinced them that this was not a good idea," says Andrei Soldatov, an expert on Russian security services. "It is also possible for the FSB to take down a site like WikiLeaks. They have the capacity for all of this."

In a far more gruesome case of leak patching, former FSB agent Alexander Litvinenko, who had published damning books about the agency and Russia's leadership, was poisoned with a rare and highly radioactive polonium isotope while living in London in 2006. British police suspect former Russian security agent Andrei Lugovoi of murdering Litvinenko. But the Russian government, which vehemently denies any connection to the murder, has refused to extradite Lugovoi, and a nationalist party has since made him a member of the Russian parliament. (See pictures of Russian police breaking up an anti- Kremlin rally.)

"If the FSB says it is capable [of taking out WikiLeaks], I believe them," says Gadi Evron, an expert on cybersecurity and counterespionage. It would not be necessary to crash the WikiLeaks site, says Evron, because "behind every Internet project, there are people." And people can be coerced — or worse. (Read TIME's 2007 piece on the launch of WikiLeaks.)

But other observers say WikiLeaks presents a far more serious challenge to Russia's security services than the sources of previous leaks. For one thing, WikiLeaks has established a reputation for publishing authentic documents, which means the Russian press would be more likely to cover the story and republish the files. It is also a diffuse and secretive organization that is technologically prepared to deal with cyberattacks. The kinds of hacker raids that took down Georgia's government websites during its war with Russia in 2008, for example, probably wouldn't keep WikiLeaks offline for long. (See pictures of Russian soldiers in Georgia.)

So the most likely Russian reaction, at least at first, would be to undermine the authenticity of the alleged secrets. "That is the main tool — to filter it through the state- controlled mass media, which would discredit WikiLeaks and put into question the reliability of its sources," says Nikolai Zlobin, director of the Russia and Eurasia Project at the World Security Institute in Washington, D.C. "This would limit any public debate of the leak to the Russian Internet forums and news websites, which reach a tiny fraction of the population."

Zlobin says it would also take something extremely damning to rattle Russia's political elite. "Russians already believe that their leaders steal, that they have offshore bank accounts and funnel money into them," he says. "It would have to give shocking details about the country's two leading figures [Prime Minister Vladimir Putin and President Dmitri Medvedev], and even then, the complete apathy toward politics in Russian society would absorb a lot of the shock waves at home." (See TIME's photo gallery "Vladimir Putin: Action Figure.")

Russia's reputation abroad, however, could be badly hit by the release of foreign-policy secrets. As the Kremlin pushes ahead with a drive to charm the West, its security agencies will be eager to prevent that kind of embarrassment. And there's no knowing how far they'll go to save face.

Russian Press at a Glance, Tuesday, November 2, 2010 http://en.rian.ru/papers/20101102/161174613.html

08:48 02/11/2010

POLITICS

Russian President Dmitry Medvedev's forthcoming visit to Japan next week will be interesting and full of surprises particularly after his visit to the disputed Kunashir Island, near Japan's northernmost Hokkaido Island, which it claims as its territory.

(Vremya Novostei, Kommersant, Nezavisimaya Gazeta)

Georgian journalists released the names of four people, who were members of "suspected Russian spies." Last week, some media sources reported the detainment of 20 Russian spies in Georgia, but the Georgian Foreign Ministry refuses to comment on the issue

(Vremya Novostei)

Kazakh President Nursultan Nazarbayev speaks in an interview about the current state and perspectives of relations between Kazakhstan and Russia

(Rossiiskaya Gazeta)

BUSINESS

The Russian Economics Development Ministry proposed companies with state participation to send their top managers to five special training programs, with one of them free of charge

(Vedomosti)

DEFENSE Turkey's National Security Council excluded the former Soviet states of Armenia and Georgia from its list of potential enemies in the region. Russia, however, remained in the list despite the recent positive development of relations between the two countries

(Nezavisimaya Gazeta)

SOCIETY

Russian Prime Minister Vladimir Putin visited the village of Verkhnyaya Vereya in the Nizhny Novgorod Region, which was destroyed by wildfires this summer. The premier inspected the new houses built by the government

(Kommersant, Rossiiskaya Gazeta)

Authorities of Russia's Far Eastern city of Vladivostok intend to spend budget money allocated for restructuring of kindergartens to decorate the city for the upcoming New Year holidays

(Nezavisimaya Gazeta)

Russian officials may be summoned to court in case they refuse or fail to provide citizens with the necessary information

(Rossiiskaya Gazeta)

OIL & GAS

Export duties on oil and oil products may become a stumbling block in the formation of the Common Economic Space between Russia, Belarus and Kazakhstan, which asks to preserve its domestic export duties on oil.

(Kommersant)

MOSCOW

New Moscow Mayor Sergei Sobyanin continues to correct plans envisaged by his predecessor Yury Luzhkov; however, he is not yet ready to change the general plan completely for the development of the Russian capital until 2025

(Vremya Novostei)

CULTURE

Legendary rockers from Texas, ZZ Top, concluded their world tour with a performance at Moscow's Crocus City Hall (Kommersant)

From red to green - Russia attempts to clean up its economy http://www.businessneweurope.eu/story2381/From_red_to_green__Russia_attempts_to_ clean_up_its_economy

Rachel Morarjee in Moscow November 2, 2010

Every year, Russia wastes enough energy to power the French economy and the Kremlin is determined to change this. Will it be too little too late or is Russia about to embark on a green energy revolution?

In October, the Russian government approved a RUB9.5-trillion (€221m) energy efficiency programme that will attempt to more efficient the way Soviet-era factories and buildings are run. "The political winds have changed at the top and there is a growing consensus that climate change is happening and a will to change and build a more efficient economy," says Kevin James of London-based Climate Change Capital.

He adds that the forest fires of the summer have led to a growing realisation that climate change will be a problem for Russia too; Prime Minister Vladmir Putin once famously quipped that global warming meant Russians would need to spend less on fur coats.

President Dmitry Medvedev, however, is taking a much tougher line on the environment, backed by a report from the World Bank which says that increasing energy efficiency will improve the country's productivity and competitiveness. "Investment in this sector could save almost 70m tonnes of oil equivalent a year," Medvedev said earlier this summer. At current market prices, 70m tonnes of oil is worth $38.5bn.

Russia is the world's biggest oil and gas producer and cheap, government-capped domestic energy prices have drained the motivation to conserve energy. Medvedev hopes that will change. He aims to make the country's economy 40% more energy efficient by 2020.

Medvedev has introduced political initiatives to reduce Russia's dependence on oil: from the decision to phase out the use of incandescent light bulbs to setting requirements on the share of electric power generated through the use of green technologies.

Russia lags far behind China, which is already the world's leading manufacturer of wind turbines and solar panels and is on track to produce the world's first totally battery- powered car. However, Russia has made moves in the right direction.

This summer the government announced plans to build eight plants that will produce energy-saving lamps. And the first Russian solar plant will likely break ground in the North Caucasus resort city of Kislovodsk next year, the Rostovteploelektroproekt, a Russian company specializing in the design of energy plants and equipment engineering said. The RUB3bn plant is small at 13 megawatts (MW), but more solar and wind plants are in the pipeline.

Rostovteploelektroproyekt, a Russian company specializing in the design of energy plants and equipment, said it also has plans to develop wind and solar power worth almost $300m in the Krasnodar region. "The wind project will be in two phases with a total capacity will be 100 MW in the end and work on the wind farm could start as early as next year pending necessary approvals. Siemens is also slated to cooperate in the project. In addition, Russian energy giant RusHydro already has plans to build a wind- power park in city of St Petersburg.

Meanwhile, hydropower has also gained ground. This June, Italian energy giant Enel and RusHydro signed a cooperation agreement to work on renewable power projects, including tidal and geothermal power projects, as well as in retail power sales.

Biofuel development is making similar progress. Russian natural gas producer Itera plans to build a methanol complex in the Urals Federal District. In June, presidential economic adviser Arkady Dvorkovich said the government should support small energy-generating projects that use biofuel by giving them tax breaks and subsidized interest rates.

Russia's Natural Resources and Environment Ministry drafted a bill in August to promote recycling. While the separation of tin cans and garden waste seen in Western European households is a long way off, under the bill factories will have to recycle the material they current through away. Pulp and paper factories could easily sell much of their waste to biofuel plants resulting in economic gains for them as well as reduced waste.

And finally, after a long slow start, this year Russia's carbon trading sector has also got off the ground with the government inking 15 projects worth $30m and more in the pipeline.

NGOs say these moves mark a shift in the right direction but it would not be the first time the Russian government has drafted laudable plans but failed to act on them. Vladimir Chouprov of Greenpeace said that there was "a big line of industrial companies wanting to modernise their operations and raise efficiency," but that many at the top including Putin remain sceptical of climate change. "The government is not green and many policies are anti-environmental," he says.

Russia turns out to be Turkey’s enemy http://rt.com/Top_News/Press/eng.html Ankara aims at regional leadership in the South Caucasus

Yury Simonyan

The National Security Council (NSC) of Turkey has introduced amendments to the National Security Strategy which will be in effect for the next five years. Among the countries that have been removed from the list of states that are considered to pose direct threat to Turkey are two former Soviet republics, Armenia and Georgia. Iran, Syria and Bulgaria were withdrawn from the list as well, while Israel was included in the “red list.” It was expected that Russia would be excluded from the list of Turkey’s potential enemies, especially considering the positive dynamic of the development of relations in the recent period. However, that did not happen.

Aleksey Malashenko, an expert with the Moscow Carnegie Center, does not see anything strange in Turkey’s latest corrections to the “red list” – it is a realistic approach that objectively reflects the geopolitical situation.

“With the current charisma in Russian-Turkish relations, and with all the good intentions, Turkey will be a serious competitor for Russia,” Aleksey Malashenko told Nezavisimaya Gazeta (NG). “And Turkey’s rising presence in the South Caucasus, which is already evident, will lead to fairly noticeable controversies – and not only in regard to Nagorno- Karabakh and natural gas, but also in general. Today, Turkey is a power that is, with the exception of nuclear weapons, comparable with Russia. And that is something we need to get used to.”

And on the other side, the inclusion of Georgia in the circle of Turkey’s foes looked like nonsense, especially considering the fact that Tbilisi had long included Ankara in the list of its strategic partners. Therefore, removal of Georgia from the list of potentially threatening states cannot be called anything other than logical. The head of the South Caucasus Institute for Regional Security (SCIRS), Aleksandr Rusetsky, told NG: “It’s strange that Turkey did this now, and not earlier. Georgia’s inclusion in Turkey’s ‘red list’ is the price of the past, the Soviet era.”

Georgia’s state minister for reintegration and deputy prime minister, Temuri Yakobashvili, said the amendments introduced by the NSC of Turkey correspond to the spirit of Turkish-Georgian relations.

“The relations between Turkey and Georgia could be referred to as ‘model relations,’ regardless of our complex history,” Yakobashvili told NG. “Today, our relations are developing dynamically in all areas: politics, economics and the humanitarian sphere. This is the format of relations that we would like to have with all countries, and most importantly with Russia.”

With Armenia, the situation is more complicated than with Georgia. In addition to the fact that diplomatic relations were broken between Erevan and Ankara, in the Military Doctrine of Armenia, Turkey is listed as a “potential threat,” which, in the course of an international examination of the document in 2008, led to criticism on behalf of NATO experts. It would be logical to assume that the changes to Turkey’s Security Strategy would have resulted in Armenia softening its position in response. However, things are not so simple.

A high-ranking official with Armenia’s Ministry of Internal Affairs told NG that one should probably not expect to see any changes in Erevan’s policies for as long as Ankara continues the anti-Armenian actions on the international arena, until it ratifies the Swiss protocols for the normalization of Turkish-Armenian relations, as well as starts taking practical action in accordance with these protocols.

“The amendments adopted by the Security Council of Turkey are the internal affairs of Ankara,” the source told NG. “We are, on the other hand, looking at the given state of affairs, which differs from Turkey’s declared goodwill toward it neighbors.”

Ankara’s changes to the “red list” are part of the sequential continuation of Turkey’s regional policies. This country has made it a goal to become the regional leader in the South Caucasus and be in the forefront of the world’s strongest players. Hence the slogan declared by Turkey’s authorities: “There are zero problems with our neighbors.”

The far-reaching ambitions of a state with a population of 100 million, a booming economy and one of the most powerful armies in the world simply do not allow including Armenia, a country under a partial blockade with a population of 3 million, in the list of its main enemies.

The director of the Institute of Oriental Studies at the Armenian National Academy of Sciences, Ruben Safrastyan, called Ankara’s actions logical.

“Armenia, based on its internal policy doctrine, does not pose a threat to anyone – we are not planning on attacking or threatening anyone. Turkey is perfectly aware of this, and in the 1990s, Turkish generals stressed that the only country in the region that somehow threatens Ankara’s interests is Russia. So, in that sense, exclusion of Armenia from the ‘red list’ could be regarded as a PR move,” Safrastyan told NG. “But what kind of improved relations could it lead to if the countries don’t even have an interstate agreement?! Yes, the Armenian society considers the Kars Treaty, which was imposed on Armenia and which determines the current borders of the two states, to be unjust – but officially, we are not disputing it. Armenia became part of the UN, and that is proof of recognition of the current territory of Turkey.”

According to Safrastyan, ctual relations between Ankara and Erevan will not change as a result of the exclusion of Armenia from the Turkish “red list.” The condition in which these relations are today includes Turkey’s continued pressure on Armenia in regard to the Nagorno-Karabakh issue and regarding the question of Armenia’s renunciation of the Armenian Genocide committed under the Ottoman Empire. Another source in Erevan, a former high-ranking staff member of the republic’s Defense Ministry, told NG: “If everything was indeed so simple and kind-hearted with Turkey, we would not have to prolong the deployment of the Russian military base in Armenia for another 49 years.”

The president of the Academy of Geopolitical Studies, General Colonel Leonid Ivashov, told NG: the base is one thing, but Armenia’s exclusion from the list of enemies, especially considering the fact that Russia remains in that list, looks like Turkey’s attempt to “get some strategic partners, and strengthen its positions in the South Caucasus down to the point of becoming its full-fledged master.”

“Unfortunately, with its indecisiveness on its southern borders, Russia makes this possible. And when seeing this indecisiveness, its allies lose confidence,” Ivashov told NG. According to him, in general, the fact that Russia was not removed from Ankara’s “red list” shows that our diplomats have failed to fully develop our policy on Turkey.

“It should also be taken into consideration that Turkey is a member of NATO. And, Turkey’s decision in regard to Russia was most likely influenced by enormous US pressure. It seems to me that a certain kind of an exchange took place: Ankara was allowed to include Israel in its list of enemies – the Turkish society truly sees Israel as an enemy – but in return, Russia will be left in the list of hostile states. Some sort of bargain took place here,” Ivashov told NG.

According to him, it should be considered that so far, in the South Caucasus as well as in the “entire great region,” Russia and Turkey are competitors. Ivashov also believes that the decision of Turkey’s NSC to keep Moscow in the list of enemies could have been promoted by the signing of a military cooperation agreement between Russia and Israel on September 6 – “it is not quite an alliance, but we are already working together against someone.”

“It is evident that Russia has already agreed to obtain information and provide something to Israel against the Islamic world… As a response, we got what we got,” Ivashov told NG.

At the same time, however, the president of the Academy of Geopolitical Studies does not exclude the possibility that Turkey’s next revision of the National Security Strategy, which will be held in five years, will differ.

“Russia will be excluded from the ‘red list,’ said Ivashov. “Turkey is in a transitional state. It is not completely ousted from Europe: It is still a member of NATO, but is not allowed to become part of the European Union. Turkey has marked a shift toward the Islamic world, with which it is, at the same time, not allied. It needs partners.”

Read the article on the newspaper's web site Russian stowaway survives flight in landing gear http://www.washingtonpost.com/wp- dyn/content/article/2010/11/02/AR2010110200509.html

The Associated Press Tuesday, November 2, 2010; 4:30 AM

MOSCOW -- A 17-year-old foster child survived a 50-minute flight hidden in a plane's landing gear in Siberia, Russian investigators said Tuesday.

The stowaway crawled into a space above the wheel of the Soviet-built Antonov An-24 turboprop at small Siberian town's airfield on Saturday, a statement issued by the Investigative Committee of the General Prosecutor's Office said.

Russian television said he survived the 50-minute flight to the regional center of Irkutsk in just a light coat. Investigators said the stowaway had fled a foster home, and the TV reports said he had robbed a nearby store before climbing inside the plane.

Earlier this year a 20-year-old Romanian man survived a flight from Vienna to London in the landing gear of a Boeing 747. In 2007, the body of a man was found near the runway of a Moscow airport. Officials said he had fallen when the landing gear was deployed.

Just before that incident a young man from the city of Perm in Russia's Ural Mountains flew into Moscow in another plane's landing gear niche. He survived the flight but was hospitalized with severe hypothermia.

Russia to enter second biggest warship into the Caspian Sea this month http://en.apa.az/news.php?id=133388

[ 02 Nov 2010 12:38 ]

Baku. Rashad Suleymanov – APA. Russia is planning to enter its second biggest warship to the Caspian Sea in November, APA reports quoting Russian media. Within this month “Dagestan” guard ship projected in “Gepard” 11661 and produced in Zelenodolsk plant in Tatarstan will be launched into water.

Caspian Fleet of the Russian Navy says that in such a way militant force in the Caspian Sea will increase. Note that, The Gepard frigate has been designed to perform the following missions: to patrol the exclusive economic zone (EEZ) and to fight enemy surface ships, submarines and aircraft. Project 1166.1 is the Russian entry in the international market for ships with 1,500-2,000 tons of displacement. Intended for export, the design is the successor to the smaller Koni, Parchim and Grisha corvettes. The Project 1166.1 escort ship is available in various modifications (Gepard-3.2, Gepard-3.9, Gepard-5.1, Gepard-5.3, etc.). The "Gepard-3.9" patrol ships are designed to seek, track, and knock out surface, submarine and air targets both independently or in squadron formation, for escort purposes, patrol missions, and defence of naval sea borders and economic zones. By 2008, the Zelenodolsk Design Office has developed a still more efficient version of this patrol ship for several foreign countries. It has a special aft hangar for a deck helicopter. A "Klab" complex and a Shtil-M type anti-aircraft missile complex can be installed on it instead of the "Uran" missile system. Design work on the missile ship (frigate class, codename Gepard) was conducted in 1983-1988. The construction of the series began in 1988. Two other units also subsequently started construction.

Russia's new frigates to become one of world's best ships http://english.pravda.ru/russia/economics/02-11-2010/115618-russia_new_frigate-0/

02.11.2010

First frigate of the new type was launched at the Northern Shipyard in St. Petersburg. The flagship of project 22350 Admiral Gorshkov has been built over a record short period of time - five years. By 2020, it is planned to launch five frigates of the project, whereas the need of the navy makes up 20-30 vessels.

The frigate of the project will make the basic class of oceanic zone surface vessels of the Russian Navy in the 21st century. The vessel is capable of executing tasks in both group navigation and single-handedly. The frigate can travel 4,000 nautical miles far from its base.

The Northern Shipyard also builds the first serial frigate of project 22350 "Admiral Kasatonov. The work on the vessels commenced in 2009; it is to be launched in 2011.

The level of equipment of the vessels will make them one of the best ships in the world. They will be outfitted with eight anti-ship cruise missiles 3M55 Onyx, A-192 130-mm artillery system, Medvedka-2 antisubmarine rocket weapon system, anti-aircraft missile complex Uragan, anti-ship and anti-torpedo arms, mine planting systems and anti-ship or rescue helicopters.

The frigate can be used in backup group for Mistral type assault landing ships, which Russia currently plans to purchase from France (most likely, one ship for each of all Russian navies). According to Russian Defense Minister Anatoly Serdyukov, Russia will purchase two universal assault landing ships with technological documentation for the production of other vessels of this class on domestic shipyards.

The imports of foreign arms in the Russian Federation may reach the level of tens of billions of dollars a year. It goes about ships, drones, armored vehicles and ammo. Russia currently buys electronic equipment for many types of domestic arms from abroad. It is not ruled out that Russia will reach the zero balance in the field of arms trade during the upcoming years: the amounts of what the country purchases and sells will be comparable.

This year, the exports of Russian arms will exceed the level of $10 billion, officials of Rosoboronexport said. Arms exports normally gain $500-600 million a year, but the deplorable situation in the national defense complex and China's increasing activity on the arms market will show a negative influence on the trend sooner or later.

SergeyNikolaev Pravda.Ru

Khodorkovsky verdict to be delivered Dec. 15 http://www.washingtonpost.com/wp- dyn/content/article/2010/11/02/AR2010110200916.html

The Associated Press Tuesday, November 2, 2010; 5:19 AM

MOSCOW -- Jailed oil tycoon Mikhail Khodorkovsky has given an impassioned final address to a Moscow court, telling the judge that the fate of the entire nation rests on the verdict he is expected to deliver Dec. 15.

Khodorkovsky, 47, was Russia's richest man when he was arrested in 2003 on charges of tax evasion by his now-defunct oil company, Yukos. His eight-year sentence was widely seen as punishment for Khodorkovsky's decision to challenge the Russian leader, Vladimir Putin.

Khodorkovsky is a year from release but is being tried on a second raft of fraud and embezzlement charges that could keep him behind bars until 2017.

Khodorkovsky told the judge Tuesday that "the fate of every citizen of our country is at stake" before the hearing was adjourned until Dec.15.

National Economic Trends

Rouble hits 2010 low on foreign currency demand http://uk.reuters.com/article/idUKTRE6A03JY20101101?type=GCA-ForeignExchange

Mon, Nov 1 2010 MOSCOW (Reuters) - The rouble touched fresh 2010 lows on Monday, hit by local demand for foreign currencies, but rebounded with support from the central bank, as well as on profit-taking and a rally in oil prices.

The short-term outlook for the rouble remains uncertain, but dealers say a rapid slide is unlikely as it would be capped by central bank interventions.

Versus the euro-dollar basket used by the central bank to track exchange rates, the rouble hit its lowest point this year at 36.42 but ended the day up 0.14 percent at 36.22, according to Reuters data.

Against the euro the rouble hit a new 2010 low of 43.18 before ending the session virtually unchanged at 42.89. It inched up 0.2 percent to 30.78 against the dollar.

Dealers say the rouble is being squeezed by rising imports, which leapt 32.3 percent in annual terms in September 2010. Exports rose a healthy 13.4 percent, but the bigger jump in imports ate into the current account surplus.

The obligation to redeem foreign debts also offsets the positive impact of external factors such as rebounding oil prices and rising equities.

The central bank's forex intervention policy, however, tempers Russia's currency weakness as the bank increases the amount of daily selling to $400-450 million from around $300 million if the rouble falls below 36.35 against the basket, dealers say.

Traders' interest to lock in profits from long positions in the basket also helped the rouble to regain ground on Monday.

"The basket looked overbought today. We didn't see massive foreign currency buying from Russia's importers and non-residents, while the activity of intraday speculators was elevated," said a dealer at a major Western bank in Moscow.

"The market is nervous, and speculators have enough power to bounce the exchange rate back and forth," he said.

An unexpected rally on the oil market that took futures for Brent crude to $85.5 per barrel from below $84 also boosted the rouble.

"The interest in buying foreign currencies has faded and the rouble immediately trimmed its losses," said Stanislav Yarushevichus, chief dealer at ING in Moscow.

He said market players are now wary of taking new long positions in foreign currencies since the basket may fall sharply once the lingering demand for dollars fades.

The rouble may remain under pressure from reduced currency risks before Russia's long weekend that runs from November 4 to 8. Dealers say the long weekend will deprive investors of a chance to react to the widely anticipated announcement of quantitative easing by the U.S. Federal Reserves due to come out after trading hours in Moscow on November 3.

"This business week will be short in Russia and, taking into account the cautiousness of market participants, we think the rouble's weakness may continue,"

Russia may issue convertible bonds to sell state assets in 2011 http://en.rian.ru/business/20101102/161176567.html

11:19 02/11/2010

The Russian government may sell stakes in state-owned companies in 2011 by issuing low-yield bonds convertible into the shares of businesses slated for privatization next year, Kommersant business daily reported on Tuesday.

The measure would help the government get up to 20 percent of revenues from privatization in 2011-2013, the paper said, quoting sources in the Economic Development Ministry and the government.

Investment Bank Credit Suisse approached the ministry with this proposal in October, sources told the paper, adding that presidential aide Arkady Dvorkovich, and the Finance and Economic Development Ministries held talks on that issue in October-November.

The government last discussed the possibility of placing exchangeable bonds in 2002- 2003. Five-year exchangeable bonds were considered as a way to privatize 10-20 percent of VTB's shares, following negotiations between Jean Lemierre, President of the European Bank for Reconstruction and Development (ERBD) and VTB, the country's second biggest lender, on investing up to $300 million in VTB's capital.

The deal did not go through as the Russian government decided to privatize the bank in the usual way.

A Kommersant source in the government confirmed that the concept of privatization with convertible bonds was discussed at a September meeting chaired by First Deputy Prime Minister Igor Shuvalov. However, the source said that the discussion had not resulted in any direct governmental orders.

Credit Suisse declined to comment on its interest in issuing exchangeable bonds, while Shuvalov's spokespersons said he had chaired no meetings on bond issues.

"There are lots of ways to privatize state-owned shares and we are ready to discuss any privatization techniques," the spokespersons told Kommersant. MOSCOW, November 2 (RIA Novosti)

Purchasing Index Expands http://www.themoscowtimes.com/business/article/purchasing-index- expands/421695.html

02 November 2010

Russia’s manufacturing expansion grew in October, HSBC Holdings said Monday.

The Purchasing Managers’ Index rose to 51.8 from 51.2 in September, HSBC said in a report, citing data compiled by Markit Economics. The survey-based index indicates a contraction when it is below 50 and growth with a figure above 50.

“HSBC survey data suggested that the recovery in Russia’s manufacturing sector remained lackluster in October, while inflationary pressures intensified,” it said in the report.

(Bloomberg)

Russian Manufacturing PMI Bounces From Low On Stronger Employment http://www.nasdaq.com/aspx/stock-market-news-story.aspx? storyid=201011010855dowjonesdjonline000129&title=russian-manufacturing-pmi- bounces-from-low-on-stronger-employment

MOSCOW -(Dow Jones)- The pace of growth in Russia's manufacturing sector accelerated in October, bouncing from lows set the previous month, data from HSBC showed Monday.

The HSBC Russia Manufacturing PMI rose to 51.8 in October from a six-month low of 51.2 in September.

Rising employment offset slower growth in output and new orders, as manufacturers resumed hiring after reducing jobs in September. Export orders continued to outperform domestic orders, the data showed.

"Even a moderate pace of growth in industry would be consistent with a stronger gross domestic product print for the fourth quarter, after a rapid deceleration in the third quarter brought by drought and softer consumer demand, " Goldman Sachs said in a research note.

Russia's economic recovery stumbled over the summer, as the country's worst drought in decades destroyed a third of its grain crop and led to a surge in inflation. -By Ira Iosebashvili, Dow Jones Newswires, +7 495 232 9195; ira.iosebashvili@ dowjones.com -0-

Business, Energy or Environmental regulations or discussions

KamAZ, Sberbank, VTB Group, Rosneft: Russian Equity Preview http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=agslK34ZzAX0

By Paul Abelsky

Nov. 2 (Bloomberg) -- The following companies may have unusual price changes in Russian trading. Stock symbols are in parentheses and share prices are from the previous close.

Russia’s ruble-based Micex Index advanced 0.7 percent to 1,533.70 in Moscow, its strongest level since July 24, 2008. The dollar-denominated RTS advanced 0.8 percent to 1,600.22, its biggest gain in more than a week.

OAO KamAZ (KMAZ RX): Russia’s largest truckmaker said its loss narrowed almost sevenfold in the first half from the same period a year earlier to 252 million rubles ($8.18 million). KamAZ gained 0.5 percent to 72.53 rubles.

OAO Sberbank (SBER03 RX) and VTB Group (VTBR RX): The ruble gained 0.2 percent against the dollar, strengthening for the first time since Oct. 25. Sberbank, Russia’s biggest lender and a firm which accounts for almost half of the country’s retail bank deposits, rose 0.5 percent to 101.87 rubles. VTB, the country’s second-largest bank, jumped 2.2 percent to 10.4 kopeks. A stronger ruble discourages Russians from converting local-currency deposits, banks’ main source of funding.

OAO Rosneft (ROSN RX): Crude oil increased to a two-week high after Chinese manufacturing expanded at the quickest pace in six months and on expectations the Federal Reserve will announce measures this week to stimulate the U.S. economy. Russia’s largest oil company gained 1 percent to 217.85 rubles.

To contact the reporter on this story: Paul Abelsky in Moscow at [email protected].

To contact the editor responsible for this story: Willy Morris at [email protected].

Last Updated: November 1, 2010 22:00 EDT

RTS to launch preparations for next year's IPO http://www.rbcnews.com/free/20101102112953.shtml

RBC, 02.11.2010, Moscow 11:29:53.The RTS stock exchange's board of directors has passed a decision to prepare the company for an IPO in 2011 as part of the implementation of its strategy, the stock exchange's press office announced today. According to the RTS, the main goal of the IPO is to secure monetary funds in order to boost capitalization, increase contingency funds for the depository and clearing infrastructure of the RTS group of companies in light of upcoming changes in the legislation, and greater trade volume. RTS also plans to apply the proceeds from the flotation to the expansion of business both in Russia and the CIS, as well as further project development in Ukraine and Kazakhstan. Meanwhile, as RTS's CEO Roman Goryunov noted, even though the precise IPO size has not yet been determined, the company does not consider it feasible to place less than 20 percent of its share capital. He also added that RTS would issue additional shares for the IPO.

November 02, 2010 12:20

KamAZ plans six exchange-bond issues totaling 6 bln rubles (Part 2) http://www.interfax.com/newsinf.asp?id=199541

MOSCOW. Nov 2 (Interfax) - The KamAZ (RTS: KMAZ) group plans to issue series BO-01 through BO-06 exchange bonds to the overall tune of 15 billion rubles altogether, the company said.

KamAZ plans to place three-year exchange bonds in open subscription on the MICEX Stock Exchange. Series BO-01, -03, and 05 are issues of 2 billion rubles each, and BO- 02, -04, and -06 are of 3 billion rubles apiece.

One bond has a face value of 1,000 rubles. The issue has six semiannual coupons and an option for preterm redemption on the request of the bondholders and the issuer's discretion.

KamAZ's debut bond issue worth 10 billion rubles was annulled in April.

The group's lowered total borrowing in the first half by 10% to 20.709 billion rubles from 22.985 billion rubles at the end of 2009.

Russia’s Mail.ru Said to Have Orders Close to Top End of IPO http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a_8ZSpzdfZPs By Zijing Wu and Jason Corcoran

Nov. 2 (Bloomberg) -- Mail.ru Group Ltd., a Russian investor in Facebook Inc., has buyers for all the stock in its $876 million London initial public offering close to the top of the price range, two people familiar with the IPO said.

The banks arranging the sale, including New York-based Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley and Russia’s VTB Capital, received orders for the shares toward the high end of the $23.70 to $27.70 range, according to the people, who declined to be identified because the information is private. The deadline for taking orders in the offering of 31.6 million global depositary receipts is Nov. 8, one of the people said.

The offering from Mail.ru, partly owned by billionaire Alisher Usmanov and South Africa’s Naspers Ltd., comes after share sales by emerging-market companies attracted more money than industrialized nations for the first time in at least a decade last quarter. Moscow-based Mail.ru’s revenue will climb 51 percent this year, while Russia’s economy will grow at almost twice the pace of the U.S. in 2011, estimates compiled by Goldman Sachs and Bloomberg show.

“It’s a bet on potential growth,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC, which oversees $3 billion. “First it’s an expanding internet company in a major emerging market; second, it has stakes in hot internet companies like Facebook.”

Leonid Solovyev, a spokesman for Mail.ru in Moscow, declined to comment.

Facebook, Zynga

The company owns 2.4 percent of Palo Alto, California-based Facebook, the world’s largest social networking service, according to an Oct. 11 statement. Mail.ru also has a 5.1 percent stake in Chicago-based Groupon Inc., the daily deal website with 20 million subscribers, and 1.5 percent of Zynga Game Network Inc. in San Francisco, the maker of the “FarmVille” and “FrontierVille” games.

Mail.ru’s revenue may increase 51 percent this year to $301 million, while earnings before interest, tax, depreciation and amortization are likely to rise 70 percent to $104 million, analysts at Goldman Sachs said in a note last month.

Russia’s economy will grow 4.3 percent next year, compared with 2.4 percent for the U.S., according to economists’ estimates compiled by Bloomberg.

Demand for the IPO is mostly from U.S. and European institutional investors, one of the people familiar with the IPO said. MakeMyTrip

“Mail.ru is especially attractive to foreign funds as you rarely see a good quality Russian internet company in the market,” Schuster said. “It’s scarcity value like what we saw in MakeMyTrip Ltd.’s IPO.”

MakeMyTrip of Gurgaon, India, the country’s largest online travel company, surged 89 percent on its first day of Nasdaq Stock Market trading in August after completing the first U.S. IPO by an Indian company since 2006.

Mail.ru’s IPO, if successful, will be the biggest in the U.K. since Nathaniel Rothschild’s mining fund, Vallar Plc, raised $1 billion in July. The sale would also be the largest overseas share offering by a Russian company since Moscow-based United Co. Rusal raised $2.24 billion in Hong Kong in January.

Companies in the MSCI Emerging Markets Index’s 21 countries raised $141 billion through IPOs and additional sales last quarter, more than double the amount in industrialized countries, data compiled by Bloomberg show.

To contact the reporters on this story: Zijing Wu in London at [email protected]; Jason Corcoran in Moscow at [email protected].

To contact the editors responsible for this story: Daniel Hauck at [email protected]; Gavin Serkin at [email protected].

Nanotechnology forum push on hi-tech http://rt.com/Business/2010-11-02/nanotechnology-forum-push-hi.html/print

02 November, 2010, 10:40

With hundreds of companies from around the world in Moscow to find out what Russia has to offer in terms of nanotechnology, Business RT spoke with Mikhail Lifshits, Director for Hi-Tech asset development at Renova.

RT: Which specific nanotechnology project will change peoples lives

ML: “The project which we are moving, as an example, is the centre of the coating solutions, it’s called by Renova. Much more important things we are trying to build now is the Skolkovo project, as you mentioned, and event we have now is not a good indicator that everything is going smooth and well, but at least government and business society have brought an attention to hi-end areas of the economy and its going from year to year." RT: You are one of the major builders of solar panels in Russia – it doesn’t seem the sunniest country in the world, it seems a bit strange to a foreigner.

ML: “When you are talking about such a product, it is not only the country oriented. Certainly if you see the insulation map of Russia, it is not the sunniest place, but don’t forget about neighbors from the south part, and don’t forget that technology – thin film technology, which is everything going behind – is a driver, and it’s a step forward, and in truth its more an export oriented product."

RT: What targets have you set for Renova, in renewables and new sorts of energy? Have you got a target in terms of position, in terms of turnover?

ML: “We already have some assets in Europe which are dealing in renewable energy. We are already operating, we are going to produce solar energy. Which means we are going to build more operational units, with all the business which is going behind.”

Microsoft pledges support for Russian tech hub http://in.reuters.com/article/idINIndia-52599420101101

Mon, Nov 1 2010

MOSCOW (Reuters) - Microsoft(MSFT.O: Quote, Profile, Research) on Monday pledged millions of dollars to support Russia's plan to create a Silicon Valley-style technology hub outside Moscow as it hunts growth opportunities in the underdeveloped market.

Skolkovo, set up as an environment to help fledgling companies in high-tech industries, was launched earlier this year as part of President Dmitry Medvedev's drive to modernise the oil and gas-dependent Russian economy.

Microsoft, now focused on providing software and computing power over the internet -- known as "cloud computing" -- sees Russia as a market of great strategic importance, chief executive Steve Ballmer told a news conference in Moscow.

"Russia is very well positioned to play a leading role in the changes in our industry ... and certainly Microsoft is pleased to participate in supporting companies coming into existence here in Russia and benefiting from the growth of the market," he said.

Ballmer and Viktor Vekselberg, an oil and mining tycoon who heads the Skolkovo foundation, on Monday signed a memorandum of understanding which foresees the creation of a research and development centre, among other areas of cooperation. "We are establishing a software development R&D centre in Skolkovo and it will be the focal point for managing the development of Microsoft's global products based upon expertise that we hire and people we employ here in Russia," Ballmer said.

"Microsoft is also planning to provide financial support to implement some of the most promising ideas at the early stages," he said.

Microsoft's Russia chief Nikolai Pryanishnikov also said the U.S. software giant was ready to support 100 start-up companies, with investment in each likely to range between $50,000 and $500,000.

Referring to Microsoft's planned investments in the Skolkovo project overall, Ballmer said they would amount to "tens of millions of dollars" a year.

U.S group Cisco(CSCO.O: Quote, Profile, Research) said in June it would invest $1 billion in Russia this decade and help to build the Skolkovo centre alongside Germany's Siemens(SIEGn.DE: Quote, Profile, Research).

Skolkovo aims to give state backing to companies to help them develop selected new products in five priority sectors -- energy, IT, telecommunications, biotech, and nuclear technologies.

(Reporting by Maria Kiselyova, Editing by John Bowker and David Cowell)

Ballmer Vows Millions for Skolkovo http://www.themoscowtimes.com/business/article/ballmer-vows-millions-for- skolkovo/421681.html

02 November 2010 By Olga Razumovskaya

Microsoft CEO Steve Ballmer signed off on a plan Monday to join the government's Skolkovo innovation hub, which could see the U.S. software giant investing "tens of millions of dollars" in the project and nascent Russian tech ventures.

Ballmer signed a memorandum of understanding with billionaire Viktor Vekselberg, whom President Dmitry Medvedev has tasked with overseeing the project and attracting big-name foreign investors. U.S. hardware giant Cisco Systems agreed in June to invest $1 billion over a decade in the project.

“The timing could not be better,” Ballmer told a room full of reporters, referring to Microsoft's decision to come to Skolkovo. “The opportunities are fantastic. That's why we're here.” Microsoft is aware of the skeptics who want to "look for the downside" and the obstacles to investing in Russia, but Ballmer said he was undeterred.

“Mostly I see the upside,” he said.

The Seattle-based IT giant intends to make five major contributions to Skolkovo, all of which will bring “tens of millions of dollars a year” to the project, Ballmer said.

Microsoft will expand its program to support innovation startups, offering 100 new Russian companies anywhere from $50,000 to $500,000 to get off the ground, said Nikolai Pryanishnikov, head of Microsoft Russia.

An expert committee from Microsoft and “representatives of various Russian seed investment funds” will select the startups, Ballmer said. Pryanishnikov said technology and the business plan would be the primary criteria in the selection process.

Ballmer promised not to take away from venture capitalists.

“We're not trying to pick winners and losers here. We're just trying to support people,” Ballmer said.

Microsoft will also start a research and development center at Skolkovo to work on mathematics-heavy technical computing. The company may use Russian firms as subcontractors and sell the end product outside of Russia.

"We are establishing a software development R&D center in Skolkovo and it will be the focal point for managing the development of Microsoft's global products based upon expertise that we hire and people we employ here in Russia," Ballmer said.

Under the agreement with Skolkovo, Microsoft will also do joint research with local universities, create a center for access to IT, and participate in the creation of a technological university at Skolkovo. Microsoft also promised to offer additional IT internships, including at Microsoft's research center in Cambridge, England.

The initiatives will require “tens of millions of dollars” over several years, Ballmer said.

“Skolkovo is really a clear sign that the Russian government understands that the future belongs to those countries that commit to building economies based on innovation and new ideas, which certainly is the heart and soul of Microsoft and of the information technology industry,” Ballmer said.

“The jeweled crown that we would want [Skolkovo] to be would have been impossible without Microsoft,” Vekselberg said.

The Skolkovo Development Foundation is planning to announce additional deals soon, including in energy efficiency, he said. “The IT sector arouses great interest for objective reasons,” Vekselberg said, noting in particular Russians' strong education in mathematics.

Microsoft's entry to Skolkovo comes only weeks after the departure of a Silicon Valley trade mission led by California Governor Arnold Schwarzenegger, who called the country a “gold mine” for foreign investment.

The software maker has faced its share of challenges in Russia, primarily involving rampant piracy.

Microsoft said in May that employees posing as customers found illegal software at 22 percent of 3,000 randomly selected stores in 53 cities across the country.

In September, the company announced that it was issuing a temporary license to pirated versions of its software — including the dominant Windows operating system and office staples such as Word and Excel — to Russian nongovernmental organizations and independent media to prevent politically motivated piracy crackdowns.

Microsoft also agreed this year to open more of its highly sensitive source code, including for Windows 7, to Russia's intelligence services over security concerns, Vedomosti reported. The business daily has also reported that the government is planning to develop a Russian-built operating system to run on state computers.

“Honestly speaking, when we're talking about software companies, these investments are artificial … since the money you're spending goes to give out salaries and purchase servers,” Alexei Krivoshapko, a director at Prosperity Capital Management, told The Moscow Times.

“When we're talking about purchasing startups, then, yes, this is serious money. As for the rest, this is kopeks, a drop in the bucket. Microsoft only does a small percentage of its business in Russia,” he said. “This is just another case of political yes-manship. You wanted innovations, you got it.”

Russian Raspadskaya coal mine halted for 20 days http://af.reuters.com/article/energyOilNews/idAFLDE6A10BD20101102

Tue Nov 2, 2010 8:45am GMT

MOSCOW Nov 2 (Reuters) - Court bailiffs have halted operations for 20 days at a mine that accounts for about a half of Russian coking coal miner Raspadskaya's (RASP.MM) reduced output, the bailiff service said, while its main min is closed. Raspadkaya's main mine suspended operations following explosions in May that killed more than 60 people. [ID:nLDE64B033] That mine had accounted for up to 75 percent of its total production.

The bailiff service referred to "deficiencies" to explain the latest closure, without describing them.

"Currently, the deficiencies are being eliminated and the mine's management expects to obtain a licence to restart output," the service said.

Raspadskaya could not be reached for comment.

UniCredit analyst Marat Gabitov said the halting of the mine, with an annual capacity of around 2 million tonnes, could result in the loss of 1.4 percent of output of the whole Raspadskaya group.

"It is not an important halt and we can expect that the company will eliminate (problems) without a delay," Gabitov said.

Its shares were down 1.17 percent by 0835 GMT against an 0.08 percent rise in the broad MICEX index . (Reporting by Polina Devitt; Writing by Aleksandras Budrys, editing by Jane Baird)

Russian Grocer O'Key Prices IPO At $11/GDR http://www.nasdaq.com/aspx/stock-market-news-story.aspx? storyid=201011020437dowjonesdjonline000103&title=russian-grocer-okey-prices-ipo- at-11/gdr

MOSCOW -(Dow Jones)- Russian grocery chain O'Key Group SA said Tuesday its initial public offering price would be $11 per global depositary receipt, allowing it to raise $161 million.

Most of the proceeds will go toward financing expansion of its hypermarket and supermarket system, with some going toward reducing outstanding short-term debt, it said.

Normal trading of O'Key's GDRs on the London Stock Exchange will begin Friday, with conditional trading expected to start Tuesday, it said.

-By William Mauldin, Dow Jones Newswires; +7 495 232-9192, william.mauldin@ dowjones.com O'Key hits middle of pricing range - but unloads assets below balance sheet value http://www.businessneweurope.eu/dispatch_text13349 bne November 2, 2010

According to sources close to the deal, O'Key Group is set to break the trend for Russian IPOs to struggle to whip up interest at their set prices. As the bid book closed on Monday, Russia's third-largest food retailer had received orders for all of the shares it tendered in its London listing, with most orders around the middle of the pricing range, two people familiar with the transaction said according to Bloomberg.

However, a report in Vedomosti claims that on the eve of the float, the company has unloaded real estate assets to the current shareholders at a significant discount.

The St Petersburg grocer was hoping to raise as much as $540m by floating as many as 41.9m shares, at a pricing range of $9.90-$12.90. Bloomberg reports that if all the shares are sold at the mid-point, the company will raise $478m.

If accurate, the news will offer encouragement to a posse of Russian companies that have announced plans to float within the next six months. Following poor results for the likes of Russia Sea and Protek in the spring, Russian IPOs dried, as the equities market stubbornly refused to follow surging debt markets.

Although Russia is now seeing fund inflows, the gap between the price expectations of listing companies and the value that investors put on their floats has seen the likes of IRC struggle. The non-precious metals unit of Petroplavosk slashed its IPO in Hing Kong in half in October in the face of low interest and pricing offers. Even internet holding Mail.ru - which reported it over-filled the bid book for its London listing within two days - is thought to have received most offers towards the bottom end of its range.

Meanwhile, Vedomosti reports that O'key has signed an agreement to sell several real estate assets to its current shareholders at a price significantly below their value. The stores and land plots, which O'Key Group, the management company for the O'Key chain, agreed to sell to firms controlled by its shareholders for RUB3bn, are valued at RUB5.66bn on the balance sheet.

The deal includes three empty plots of land, two unfinished shopping centers and three operating stores, as well as several companies with no assets but a debt to the group of RUB646m, the prospectus said.

The RUB3bn will not be paid in full immediately however, with RUB1.4bn of the price held back in lieu of rental payments, as the deal involves a leaseback on several O'key stores. Sobyanin prohibits construction of 24k m2 office centre in central Moscow http://www.businessneweurope.eu/dispatch_text13349

Renaissance Capital November 2, 2010

Event: Yesterday (1 Nov), Moscow's new mayor Sergei Sobyanin prohibited the construction of a 24k m2 office centre on Khilkov Pereulok, in central Moscow, in response to widespread opposition to ongoing development at historic sites. The right to build the project (estimated at $200mn by C&W) was previously owned by DON-Stroy, which is likely to be compensated for costs incurred. RGI currently plans a 27k m2 residential project on Khilkov Pereulok, with completion scheduled for 2012; the project is estimated at $66.2mn, or 5% of RGI's NAV. For RGI's shares, in our view, the completion and successful operation of Tsvetnoy Boulevard (33% of NAV), which is scheduled for November, remains the most imperative issue at this point, followed by the launch of construction and presales at Kingston (59% of NAV) in 2011. Shares in RGI currently trade at a 37% discount to their current NAV, vs the sector average of 33%.

David Ferguson

Rostvertol plans to pay dividends with 25% yield for 9M10 http://www.businessneweurope.eu/dispatch_text13349

Event: Yesterday (1 Nov) Rostvertol (RTVL), producer of Mi-26 and Mi-28 helicopters, announced that its board of directors had recommended that the EGM approve dividends of RUB0.5/share ($0.0165/share) for 9M10. The proposed dividends would amount to RUB1.15bn ($38mn), with a dividend yield of 25%, based on the current mid-market price of $0.067/share. This dividend would be a record for the company, and would be 9.1x greater than in FY09, when the company paid dividends of RUB0.055/share (RUB126.5mn total), including RUB0.03/share for 9M09. Net income in 2009 was RUB487.2mn. The EGM is scheduled for 14 Dec, and the record date is 8 Nov. The dividends would be paid by 31 Dec 2011.

Action: In our view, the high proposed dividend is related to the government's acquisition of the company.

Rationale: We believe the government intends to acquire control of RTVL in the course of the consolidation of Russia's helicopter sector, following the IPO of Russian Helicopters Holding, which is scheduled for 2012. In October, Oboronprom sold its 22.76% stake in RTVL to Russian Helicopters. At the same time, Oboronprom petitioned the Federal Antimonopoly Service (FAS) to approve the acquisition of a 30% stake in RTVL. FAS has already approved Oboronprom's acquisition of a 10% stake in RTVL. In our view, RTVL might issue additional shares in favour of Oboronprom to finance the dividend payment. We estimate that RTVL's net income will not be enough to cover the dividends; the company has current net debt of RUB4.9bn ($159mn).

Mikhail Safin

Activity in the Oil and Gas sector (including regulatory)

UPDATE 1-Russia Oct oil output hits new record 10.26 mln bpd http://in.reuters.com/article/idINLDE6A105V20101102

1:25pm IST

* New record of 10.26 mln bpd vs pvs 10.16 mln bpd

* Russia's gas production jumps 17 percent

* Oil export via Transneft rises 22 pct

* Gazprom increases daily gas production by 22 pct

(Adds details, comment)

MOSCOW, Nov 2 (Reuters) - Russian oil output rose almost 4 percent to a new record of 10.26 million barrels per day in October, as output at the island of Sakhalin ramped up due to new fields set on stream, the Energy Ministry said on Tuesday.

October oil output beat the last all-time high of 10.16 million bpd of the previous month, the data showed.

Oil output slumped to 10.06 million bpd in August, largely due to maintenance at the Sokol field in the Pacific oil province of Sakhalin.

But in September, the ExxonMobil-led (XOM.N: Quote, Profile, Research) Sakhalin-1 project, working under a production sharing agreement (PSA), commissioned a new field, Odoptu, which will produce 30,000 bpd in 2011. [ID:nLDE68R103] "The new record is purely due to the PSA projects, where production jumped 25 percent month-on-month," Bank of Moscow analyst Sergei Vakhrameyev told Reuters.

Oil exports via Russian pipeline monopoly Transneft (TRNF_p.MM: Quote, Profile, Research) jumped by 22 percent on the previous month to 4.97 bpd.

Overall Russia's daily gas output showed a seasonal recovery to 1.87 billion cubic metres (bcm) in October, up almost 17 percent from September output of 1.60 bcm per day, as daily production at energy giant Gazprom (GAZP.MM: Quote, Profile, Research) rose 22 percent to 1.49 bcm. (Reporting by Vladimir Soldatkin; Editing by Alison Birrane)

Russia boosts Jan-Oct oil production 2 pct http://en.rian.ru/business/20101102/161176916.html

11:30 02/11/2010

MOSCOW, November 2 (RIA Novosti) - Russia boosted oil production in January- October 2010 by two percent to 420.161 million tons, while oil exports fell 0.4 percent to 205.244 million tons, the Energy Ministry said on Tuesday.

Crude oil shipments for refining in Russia rose 5.5 percent to 206.348 million tons, while primary oil refining increased 5.7 percent to 206.165 million tons, the ministry said in a statement.

Russia's petroleum production rose 0.2 percent to 29.776 million tons.

Energy Minister Sergei Shmatko said in September that Russia's oil production would amount to 500 million tons in 2010.

According to the Economic Development Ministry, the volume of oil production, including gas condensate, will amount to 499 million tons in 2010, or 1.1 percent more year-on-year, while oil exports will increase 1.3 percent to 250.5 million tons.

Under the country's new oil field development strategy until 2020, oil production will stabilize at 500-505 million tons in 10 years.

Russia-China oil pipeline test http://english.ruvr.ru/2010/11/02/31024184.html

Nov 2, 2010 09:50 Moscow Time 250,000 tons of Russian oil will be pumped to China this month through a new pipeline that will be tested later in the day.

Commercial deliveries to the tune of 15 million tons a year will commence on January 1.

The offshoot from the East Siberia - Pacific Ocean pipeline has been built in keeping with a bilateral agreement signed by the two countries.

From The Associated Press, November 02, 2010 - 03:07 a.m.

Russia begins oil pipeline shipments to China, part of Siberia-to-Pacific link http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b5005456

By The Associated Press

SHANGHAI - Russia's largest oil company, Rosneft, says it has begun trial shipments of crude oil to northeast China via a pipeline that will eventually run 4,000 kilometres from East Siberia to the Pacific.

The oil is being shipped via a branch of the pipeline that runs from the Russian city of Skovorodino to Daqing, a Chinese oil production base, Rosneft said in a notice on its website. The first crude shipment was due to arrive early Tuesday in Mohe, the terminal at China's border.

The pipeline is expected to provide 15 million tons of crude oil a year, beginning next year, though it has the capacity to handle twice that amount, the official Xinhua News Agency reported. China will import 250,000 tons in November and 300,000 tons from Rosneft in December, it said.

Russia is the world's biggest energy producer and China is the world's largest energy consumer, having overtaken the United States last year. Although Europe remains Russia's largest export market for gas and oil, both Beijing and Moscow have been seeking to diversify their energy sources and markets, despite a long history of mutual suspicion and tensions.

During a visit by Russian Prime Minister Vladimir Putin to Beijing late last year, Russia signed dozens of commercial pacts worth US$3.5 billion. It also set the framework for a separate, multibillion-dollar agreement to build two natural gas pipelines to China from gas fields in Russia's Far East that would provide supplies almost matching China's current consumption. Transneft, Partners to Finance Arctic Pipe http://www.themoscowtimes.com/business/article/transneft-partners-to-finance-arctic- pipe/421669.html

02 November 2010 Combined Reports

Pipeline operator Transneft and its partners will finance design and construction of the Zapolyarye-Purpe oil pipeline until 2013, according to a government order published Monday.

The companies have formed a joint venture to build the pipe, according to the order. Transneft will foot half the bill, while TNK-BP, LUKoil and Gazprom Neft will provide the rest by purchasing shares in the joint venture.

Construction costs are expected to total 60 billion rubles, or $1.9 billion.

The pipe will have a state guarantee to help it raise funds to complete construction starting in 2013. Transneft will begin to buy back shares it sold to the oil producers in 2016, according to the document signed by Prime Minister Vladimir Putin.

The pipe — with the capacity of 12 million tons per year — will link Arctic fields to the Transneft system, enabling the crude to flow either west to Europe or east to Asian and Pacific markets through an East Siberian pipeline currently under construction.

In another decree published Monday, the government banned access to the country’s main oil pipelines for new refineries with the depth of less than 70 percent.

Putin, speaking at an oil industry meeting last week, called for the upgrade of about 250 refineries with the depth of 40 percent to 45 percent that now operate in Russia.

(Bloomberg, MT)

Surgutneftegas cited as potential buyer of gov't stake in Rosneft http://www.rbcnews.com/free/20101102105812.shtml

RBC, 02.11.2010, Moscow 10:58:12.Following the Russian government's announcement of its plans for Rosneft's privatization, rumors on the company's potential merger with Surgutneftegas that had been circulating on the market have strengthened again. According to the RBC Daily newspaper, the government is considering the sale of a 15-percent stake or even more in the state-owned oil company. Meanwhile, since Russia is not interested in the presence of foreign investors in Rosneft, Surgutneftegas and VTB are cited as the primary buyers. According to the publication's source from the government familiar with the situation, "Rosneft has an extensive debt burden, and any potential investor must have free funds to be able to pay off some of the oil company's debt." The official also stated that the scheme for the future deal was still unclear, adding that it could be either a merger or strategic partnership.

Surgutneftegas mentioned as potential buyer of 15% stake in Rosneft http://www.businessneweurope.eu/dispatch_text13349

Event: RBC Daily reported today (2 Nov) that according to its sources in the Russian Government, the state is considering selling a 15% stake in Rosneft to Surgutneftegas. According to RBC Daily, the government is less interested in a foreign strategic investor, as it is concerned about foreign influence on Rosneft's strategy. VTB was also mentioned in the article as a potential joint buyer of a 15% stake.

Action: We reiterate our BUY ratings on both companies and think that this news could cause strong share-price performance for both, but particularly for Surgutneftegas.

Rationale: Speculations about a potential merger of the two companies have been circulating on the market for a few years, and resurfaced last year when Surgutneftegas CEO Vladimir Bogdanov joined Rosneft's board of directors. In our view, Surgutneftegas's acquisition of a 15% stake in Rosneft could potentially be the first step in the future consolidation of the two companies. We have always regarded Surgutneftegas as an attractive consolidation play, not least because of its alleged $24bn cash pile. A potential combination with Rosneft, which has ambitious international plans and may need additional capital to fund growth, could yield substantial benefits in addition to operational and logistical synergies, in our view. We also note that the current opaque ownership structure of Surgutneftegas is unlikely to remain for an indefinite period, and this purchase could unlock the situation.

Ildar Davletshin

Putin signs order banning access to pipelines for low-quality refineries http://www.businessneweurope.eu/dispatch_text13349

Renaissance Capital November 2, 2010 Event: Yesterday (1 Nov) Prime Minister Vladimir Putin signed an order that prohibits access to crude and product pipelines for refineries with a refining depth of less than 70%. This measure was discussed at a meeting in Samara on 28 Oct.

Action: The news is marginally positive for integrated oil companies, in our view.

Rationale: This measure should limit the supply of low-quality oil products and reduce overall refining capacity for simple oil products, such as fuel oil (mazut). Consequently, it should improve the pricing situation for heavy oil products, both domestically and in some export markets, potentially counteracting the negative effect of rising export duties on heavy products. However, we do not expect this measure to materially improve the profitability of downstream operations, as low-quality refineries have not enjoyed full access to pipeline infrastructure before, and the impact from higher export duties will be more material, in our view. We also note that among the companies under our coverage, all except for Alliance Oil (AOIL) have a refining depth above 70%. However, AOIL receives crude for its Khabarovsk refinery by rail and ships some products by pipeline, which potentially could be replaced with trucking, in our view.

Ildar Davletshin

FAS ready to lower penalties for oil companies http://www.businessneweurope.eu/dispatch_text13349

Event: A few newspapers reported this morning (2 Nov) that following an amicable resolution on 29 Oct of a dispute over oil product pricing between the Federal Antimonopoly Service (FAS) and TNK-BP, the FAS is close to signing a similar agreement with Rosneft and potentially other oil majors. The agreement with TNK-BP envisages reducing the total fines for market abuse in the oil product market to RUB1.17bn ($39mn) from RUB4.2bn ($120mn), but TNK-BP is still recognised as having breached regulations. According to business media sources, Rosneft's fine of RUB5.28bn ($180mn) could be lowered to just RUB1.47bn ($50mn) if Rosneft accepts its guilt in upcoming court hearings and agrees to sell 15% of its refining volumes at local exchanges.

Action: We view the news as marginally positive for Russian oil companies.

Rationale: Over the past few years, the Russian government has expressed increasing displeasure with the progressive growth of domestic gasoline and diesel prices, which at times has run counter to the trend in global oil prices. This has led to a debate on the best approach to regulating the industry. It seems that the regulator is close to reaching a consensus with the industry on the future rules of the game for the sector, as we expected (click here to read our article "Russian oil majors may sign amicable agreement with FAS over imposed fines" in the CIS Morning Monitor dated 6 Sep 2010). This could include a higher share of products sold at local exchanges (around 15%) and clearly defined international benchmark prices, which could limit deviations on domestic markets. We welcome the successive attempts by the government to create clear rules for the oil sector, and especially in combination with modified taxation we think this should increase the attractiveness of the Russian oil sector to investors.

Ildar Davletshin

Milton Financials: OPEC needs Russia’s help to control oil price-Iran. http://www.openpr.com/news/150226/Milton-Financials-OPEC-needs-Russia-s-help-to- control-oil-price-Iran.html

Press release from: Milton Financials (openPR) - OPEC output quotas are inefficient without the support of non-OPEC producers.

Milton Financials has learned that Iran’s OPEC governor was recently quoted as saying that the 12-member Organization of Petroleum Producing Countries needs the cooperation of Russia to help improve stability and increase low crude prices.

The comment comes after a number of OPEC nations voiced concerns that the impact of their oil production quotas, aimed at supporting and stabilizing the oil price, was being eroded by non-OPEC producers who are not obliged to control their output.

“We expect major oil producers, such as Russia, to cooperate with OPEC members in the management of the oil market to restore market stability,” Milton Financials believes Mohammad Ali Khatibi told reporters, adding that while oil prices this year had remained relatively stable, in the $70 to $80 range, he felt that “they are not good.” Iran, which is to take over presidency of the organisation in 2011, is the world’s fifth largest oil producer.

Khatibi went on to say that Russia had achieved its ranking as the globes biggest oil producer at the expense of Saudi Arabia. “Russia has turned into the greatest oil producer in the world, when Saudi Arabia’s oil production has dropped in compliance with OPEC quotas.”

Milton Financials believes he also pointed out that his nation’s stance towards its neighbour and traditional rival Iraq was that it should return to the OPEC quota system as soon as possible. Iraq has been exempt from quotas as its oil industry struggles to recover from several years of war. Milton Financials is a dedicated, independent broker providing the market insight and investment advice that corporate, institutional and private clients trust.

1006 - 1011 Alexandra House 18 Chater Road Central Hong Kong

Tel: +852 81 20 54 56

Gazprom

"Gazprom" is Ready for the Worse in Relations with Belarus http://telegraf.by/2010/11/gazprom-is-ready-for-the-worse-in-relations-with-belarus.html

Russian gas monopolist "Gazprom" is preparing for possible difficulties in the negotiations with Belarus on a new gas supply contract. This was stated by the holding's spokesman Sergei Kupriyanov. According to him, it's hard to predict a possible variant of negotiations on a new contract." said: "Well, we all know the saying: hope for the best, but get ready for the worst", RIA Novosti news agency.

However, "Gazprom" spokesman said that "having passed a series of crises, Russia and Belarus reached an acceptable level of interaction for both sides," television channel Russia Today reports.

Gazprom Turns to Dollars Amid Ruble Bond Limits: Russia Credit http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aBnRzHo6uEJU

By Anna Shiryaevskaya and Denis Maternovsky

Nov. 2 (Bloomberg) -- OAO Gazprom’s Chief Financial Officer Andrey Kruglov says Russia’s largest company may turn to foreign investors for its first bond sale in 16 months because of limitations in the ruble debt market.

The state-owned company may issue Eurobonds as soon as this year and sell dollar debt to investors in Asia because Russia’s bond market offers less attractive terms, Kruglov said in an e- mailed response to questions. The yield on Gazprom’s 2014 ruble bonds has increased to 273 basis points more than its dollar debt due the same year, more than double the difference of 115 in June, according to data compiled by Bloomberg.

“Gazprom considers the international debt market a priority,” Kruglov said.

While President Dmitry Medvedev is advocating the ruble as a global reserve currency, Russia’s $220 billion domestic bond market is 28 percent of the size of Brazil’s, according to data on outstanding debt compiled by Bloomberg. Companies including OAO Sberbank and OAO Russian Railways have increased overseas bond sales by 57 percent from the same period last year, compared with 19 percent growth in ruble debt, the data show.

Companies are tapping international investors to take advantage of the cheapest borrowing costs on record as near-zero interest rates in the U.S. and Europe drive demand for higher- yielding assets in emerging markets. Average yields on Russian corporate dollar bonds fell to 5.26 percent on Oct. 13, the lowest since JPMorgan Chase & Co. began tracking the securities in May 2002, down from 7.35 percent on May 25. The yield was 5.62 percent on Oct. 29.

“We don’t rule out potential Eurobond sales before the end of 2010 and plan to borrow from international capital markets in 2011,” Kruglov said.

Matching Revenue

Most of the borrowing by the world’s biggest gas producer is in dollars to match its earnings, as gas prices are linked to oil products denominated in the U.S. currency, Kruglov said. The company and its units have $12.6 billion of dollar bonds, according to data compiled by Bloomberg. Bonds issued by Gazprom units in rubles total 94.9 billion rubles ($3 billion), the data show.

“This is logical from the standpoint of avoiding currency risk, plus it is cheaper in the current conditions” to borrow abroad, said Dmitry Dudkin, the head of fixed-income research at UralSib Financial Corp. in Moscow. “Their primary goal is not to skew currency exposure versus revenues.”

Falling Yields

The yield on Gazprom’s 8.125 percent dollar notes sold in July 2009, its last bond offer, reached a low of 4.034 percent on Oct. 15 after falling from this year’s high of 7.1 percent on May 25. That compares with a yield of 7.03 percent on Gazprom’s 2014 bonds in rubles, its longest maturity domestic debt. Gazprom 10-year dollar bonds yield 6.09 percent and dollar debt due in 2037 yields 7.15 percent, data compiled by Bloomberg show.

Gazprom could raise “long-term financing” at a yield of “no more than 5 to 6 percent,” compared with interest of more than 7 percent for shorter-dated ruble bonds, Dudkin said. Russia’s biggest international corporate borrower relies on export revenue to finance investment as prices in Europe are as much as 10 times higher than in Russia, Chief Executive Officer Alexei Miller said last month. Revenue from domestic gas sales was 494.9 billion rubles in 2009, or a quarter of the total, according to Gazprom’s annual report posted on its website.

The share of revenue from Russia may increase as the government plans to bring domestic gas prices in line with those for European customers, excluding transportation costs, by 2014. Gas prices in Russia climbed 34 percent in the first quarter, according to Gazprom.

Ruble Constraints

Kruglov said the company is targeting selling as much as 300 billion rubles of bonds in the coming years as the earnings in its home currency increase.

As the share of ruble-denominated revenue rises so will Gazprom’s need to sell ruble debt, although its ability to issue domestic bonds is “limited” because the market isn’t deep enough, Kruglov said in the e-mailed comments last week.

Russian government ruble bonds due August 2016 fell yesterday, lifting the yield to 7.28 percent. Gains in Russia dollar bonds due in 2020 reduced the yield by 13 basis points, or 0.13 percentage point, to 4.377 percent, its first decline since Oct. 13.

The ruble climbed 0.2 percent to 30.7750 per dollar yesterday, its first advance in a week. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, show the ruble at 31.0460 per dollar in three months.

Extra Yield

The cost of protecting Russian debt against non-payment for five years using credit- default swaps fell 2 basis points to 142, down from this year’s peak of 217, according to CMA prices. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Credit-default swaps for Russia, rated Baa1 by Moody’s Investors Service, its third- lowest investment grade rating, cost 11 basis points more than contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.

The extra yield investors demand to hold Russian debt rather than U.S. Treasuries fell 10 basis points to 205, according to JPMorgan EMBI+ indexes. The difference compares with 121 for debt of similarly rated Mexico and 169 for Brazil, which is rated two steps lower at Baa3 by Moody’s. The yieldspread on Russian bonds is 30 basis points below the average for emerging markets, the smallest difference since September 2009 and down from a 15-month high of 105 in February, according to JPMorgan Indexes.

Bigger Issue

Gazprom sold seven-year ruble bonds in February 2007, its longest-ever maturity in the domestic market. The Moscow-based company’s outstanding ruble debt includes three securities of 5 billion rubles and one 10 billion-ruble bond, data compiled by Bloomberg show. Gazprom’s June 2012 ruble notes yielded 6.19 percent yesterday, down from 13.12 percent when they were sold in June 2009.

The company may be “overestimating” the problems in issuing ruble bonds as the market is ready to absorb bigger securities than it currently has outstanding, Dudkin said.

“The issue size creates liquidity if you place one bond worth 30 billion rubles,” Dudkin said. “This one bond will surely be very liquid and this is what they should do.”

The average maturity of ruble bonds is 23 1/2 months, half the 46 month-term for Eurobonds sold by Russian issuers, according to data compiled by UralSib.

Government Competition

Ruble debt issuance climbed to a record 699 billion rubles this year, data compiled by Bloomberg show. The total is higher than the $21.1 billion of foreign-currency bonds issued.

OAO Lukoil, Russia’s biggest non-state oil company, sold $800 million of 10-year bonds that were priced to yield 6.25 percent on Oct. 29. The Moscow-based company is rated Baa2 by Moody’s, one step below Gazprom and the Russian government. Sberbank said last week it will pay 150 basis points more than benchmark rates for a $2 billion, three- year loan.

It may be “more interesting” for Gazprom to sell foreign debt because in Russia it will be competing with government auctions, according to Elena Kolchina, the head of fixed income products at Renaissance Asset Managers in Moscow, which has $1.5 billion in assets under management.

The Finance Ministry is seeking to cover its budget deficit by boosting bond sales from 839 billion rubles this year to 1.3 trillion rubles next year, 1.5 trillion rubles in 2012 and 1.49 trillion rubles in 2013, according to a draft 2011-2013 budget published on the ministry’s website. The government will offer 180 billion rubles of OFZ bonds in weekly auctions by yearend, according to the ministry’s borrowing plan. “Currently there is big supply of local government securities and it’s easier for investors to buy them than corporate first tier,” said Kolchina. “It means that Gazprom should offer a higher premium to OFZ to attract investors in the local market.”

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at [email protected]

To contact the editor responsible for this story: Will Kennedy at [email protected]

Gazprom's dividends in focus http://www.businessneweurope.eu/dispatch_text13349

Event: Following the approval by Gazprom's board of directors of a new dividend policy on 27 Oct, Vedomosti published more details today (2 Nov) on likely dividends for 2010. The newspaper, referring to Gazprom's results under Russian Accounting Standards (RAS), quotes net income for 9M10 at RUB322.5bn, which is equal to the net income for FY09, suggesting that the dividends for 2010 will not be less than last year's.

Action: We retain our BUY rating on Gazprom.

Rationale: We think a higher dividend is one potential trigger for a re-rating of the company's stock, which currently trades at about 3.9x forward P/E. Historically, Gazprom has paid out about 17.5% of its earnings under RAS, and the total dividend payment each year was capped at 2% of market cap for the previous year. While we do not forecast earnings under RAS, we tentatively assume that the per share dividend range could reach RUB6-12, which represents a 4-7% dividend yield.

Ildar Davletshin

Bulgaria's Borisov Ruins Gazprom's Geopolitical Stand - Russian Expert http://www.novinite.com/view_news.php?id=121741

Energy | November 1, 2010, Monday

The geopolitical situation for Russia and its energy giant Gazprom in the Black Sea region deteriorated sharply after Boyko Borisov became Bulgaria's PM, according to a Russian paper. In a sizable article released Monday, the Russian "Nezavisimaya Gazeta" focuses on Bulgaria's importance for Russian energy projects in the Black Sea region.

The paper emphasizes the view that "none of the Black Sea countries could be deemed a reliable ally of Russia in the energy sphere in the long run."

It declares that if the South Stream gas transit pipeline gets bogged down by unreliable partners, Gazprom might have to opt for construction a terminal for liquefied natural gas (LNG) on the Russian Black Sea coast that could prove to be a good alternative of the much more expensive pipe.

Bulgaria's stand is seen as the main factor threatening the realization of South Stream.

"Even though the official statements report about the successful settlement of all issues on South Stream after the visit of the first Russian Deputy PM in Sofia in July this year, it is hard to believe that Bulgaria will become a full-fledged partner in the Russian project," writes the Nezavisimaya Gazeta.

It mentions several reason for doubting Bulgaria's honesty with respect to South Stream: first, Bulgaria agreed to go ahead with South Stream only after Gazprom started mulling an alternative route through Romania; second, Bulgaria is one of the most active participants in the competitive project Nabucco; third, the lack of perspective for construction of pipelines became clear from the Bulgarian stand against the construction of the Burgas-Alexandroupolis oil pipeline.

"All this on top of the fact that the previous Bulgarian government (i.e. the Stanishev government – editor's note) could not be called anti-Russian and that the oil pipeline is economically feasible for Sofia. So Bulgaria, the most important unit of the South Stream project, also remains its weakest unit," the author, Stanislav Pritchin, an independent expert, says.

He believes that despite all difficulties with Bulgaria on South Stream, Russia has no alternative because its ties with Romania are not close and are complicated by the geopolitical rivalry between Moscow and Bucharest in Moldova. He is convinced that Romania will not replace Bulgaria as part South Stream. At the same time, Gazprom would not consider Ukraine as a possible route for the pipe.

Turkey is also no better option for Russia, according to expert because, in spite of some similar positions at the moment, the two countries are geopolitical rivals, says the NG article.

"If the Russian monopoly is trying to penetrate the markets of Southern Europe by going around the traditional transit countries Ukraine and Turkey, Ankara is just trying to become a key gas hub for the EU, locking in on all exports from Russian, the Caspian states, Iran and Iraq. On top of that, Moscow has a bad experience in its relations with Turkey for another underwater pipeline, Blue Stream, which has been used at half of its capacity because of price conflicts among the partners," the author says.

He is convinced that South Stream, which might cost as much as EUR 25 B, is a risky investment, and cites estimates of RWE Supply & Trading predicting low returns on the investment.

The author is therefore a proponent of the construction of a LNG terminal on the Black Sea coast despite the strong international competition. This is supposed to allow Gazprom to enter new markers in Western Europe and even Japan, India, China, and the USA.

He believes that South Stream should not be compared to North Stream, which links Russia to Germany, because of the latter's several major advantages such as avoiding all transit countries.

The conclusion of the NG article seem to run counter to a recent statement by Russian "energy tsar", Deputy PM Igor Sechin.

The South Stream gas transit pipeline is supposed to be ready by 2015. Its construction is expected to cost between EUR 19 B and EUR 24 B. It will be transporting 63 billion cubic meters of natural gas annually, or 35% of Russia's total annual natural gas export to Europe.

The South Stream pipe will start near Novorosiysk on the Russian Black Sea coast, and will go to Bulgaria's Varna; the underwater section will be 900 km long.

In Bulgaria, the pipe is supposed to split in two - one pipeline going to Greece and Southern Italy, and another one going to Austria and Northern Italy through Serbia, Croatia and Slovenia.

The project was initiated by Gazprom and the Italian company Eni, and the French company EdF is also planned to join as a shareholder. It is seen as a competitor to the EU-sponsored project Nabucco seeking to bring non-Russian gas to Europe.

As early as April 2010, Russian Prime Minister Vladimir Putin announced that the French company EDF will also become a partner in the South Stream project. Back then he said that EDF asked for a 20% share, which, if granted, will probably leave Gazprom and Eni with 40% each.

As early as April 2010, Russian Prime Minister Vladimir Putin announced that the French company EDF will also become a partner in the South Stream project. Back then he said that EDF asked for a 20% share, which, if granted, will probably leave Gazprom and Eni with 40% each. At a recent meeting in St. Petersburg, Berlusconi and Putin welcomed the idea of having German companies join in as shareholders. There is no indication as to how the joining of RWE or some other German company would re-apportion the stakes.

The ownership of the Russian-Bulgarian joint company to build and manage the Bulgarian South Stream section will be split 50-50%.