NovemberMay 27, 1, 20112009

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TOP STORY INVESTMENT 1. Number of Russian SME falls 2. CORRUPTION WATCH: State Officials' bank accounts to be opened for inspection 3. COMMENT: Majestic brands 4. CORRUPTION WATCH: Moscow slashes red tape for construction permits 5. CORRUPTION WATCH: Federal funds watchdog barks at accusations of corruption 6. Russian regions suffer from petrol shortages 7. Integration of Russia and EU essential for development says Putin 8. Nuclear fallout in Emerging Europe 9. Putin Orders a Downward Revision of Tariffs: Limited Negative Impact on Gas, Utilities; Positive for Fertilizers 10. Putin's friend may join Rosneft board - paper 11. Russia needs 'social revolution' to modernize - minister 12. Government to raise export duty on gasoline 13. Russia to raise export duties on gasoline exports in May to boost domestic stocks 14. Small Businesses Feel the Pain 15. Talakan, Verkhnechonsk fields may soon lose export duty preferences 16. Turkish PM unveils plans for another water channel through Istanbul 17. Tymoshenko to sue Firtash and RosUkrEnergo as political shenanigans continue 18. Ukraine finally persuades Russia to talk about gas prices - but how? 19. Ukraine's President pushes forward reforms agenda SECTOR Gas 20. European gas prices to top $500bcm 21. Gazprom agrees another LNG plant to feed Japan 22. Gazprom, Itochu to build Vladivostok LNG Plant 23. Gazprom: exports surging, expecting $500/mcm European price by December 24. Russian-Japanese LNG JV output to reach 10m tonnes per year 25. Russian domestic gas consumption was 6% up YoY in March SECTOR Oil 26. Gasoline shortages persist in Russia, prices rise 27. Lukoil buys half of Vietnamese shelf project 28. Rosneft: Pulling the Rabbit out of the Hat 29. Rosneft and LUKoil to explore Arctic together 30. Rosneft: The government cannot agree on a candidate for Chairman of the Board 31. Russian–Serbian oil JV seen launching 10 mln tn oil field 32. Total to invest in Russian Arctic and Caspian 33. Vankor, Talakan and Verkhnechonsk export duty breaks removed from May 1 SECTOR High Tech 34. Ericsson commits to Russia's Skolkovo Innovation Center 35. Putin calls development of space industry Russia's top priority 36. Sitronics to build intelligent transport system for Moscow

SECTOR Metals and Natural Resources 37. Russia introduces progressive taxation for nickel 38. Russian Steel and Bulks Watch: April 2011 SECTOR Nuclear 39. Medvedev to propose G8 blueprint for greater nuclear safety SECTOR Power 40. Bashkirenergo holds conference call to discuss FY10 IFRS results 41. Federal Tariff Service revises gencos' forced mode capacity tariffs 42. Fortum's CEO Tapio Kuula gives interview to Vedomosti; comments on investments in Russia 43. RusHydro holds analysts meeting - no breaking news SECTOR Retail, FMCG 44. Alcohol sector - Not without issues, but cheap 45. Retailer O'Key's net profit up over 300% in 2010 46. Synergy reports spirits sales volume growing 15% YoY in 1Q11 SECTOR Telecom, Internet 47. AC&M releases Russian mobile market figures for March - confirms competition is easing 48. Rostelecom: 2.3-2.4 GHz frequency issuance suspended 49. Russian internet March audiences picks up on stronger seasonality 50. VimpelCom gets eight licences in the Russian Far East SECTOR Agriculture 51. INTERVIEW: Kazakhstan tries to beef up exports 52. Miratorg announces aggressive expansion plans; competition in meat production intensifies 53. Putin pushes for spring sowing 'catch-up' SECTOR Automotive 54. Stable outlook for European auto suppliers after strong rebound 55. KAMAZ ups 2011 targets 56. VEB helps carmaker Sollers' JV with $1bn loan SECTOR Aviation, shipbuilding and defence 57. Armavia airline starts flights to Venice on Russia's Superjet-100 58. The Russian MiG-35 was not selected for India's USD 10bn fighter jet contract - negative for UAC SECTOR Media 59. April audience share of CTC Media's flagship picks up in Russia on new 'family for adults' content SECTOR Coal 60. Raspadskaya Coal - whither from here? SECTOR Infrastructure, Construction & Real Estate 61. Aeroflot: Passenger growth will demand additional terminal capacity 62. Mostotrest subsidiary Transstroymekhanizatsiya wins USD272mn contract to overhaul Vnukovo runway 63. Will Sheremetyevo get a management company soon? SECTOR Chemicals, Fertliser 64. Acron: Conference Call Takeaways 65. India ready to buy potash at $450/tonne 66. Sistema to enter chemicals business? 67. Uralkali to close Berezniki 1 plant SECTOR Pharmaceutical 68. St Pete to build nine new pharmaceutical plants in 2012-2013 69. Pharmstandard: 20% of revenue at risk? GOVT REFORMS, REGULATIONS, ECONOMICS, REGIONS 70. CORRUPTION WATCH: New bill requires officials to declare incomes 71. Russia may join WTO without Georgia consent - FM Lavrov 72. Russia needs skills boost to improve investment climate - Medvedev 73. Russia to create scientific center on Svalbard - Chilingarov UKRAINE INVESTMENT 74. American Chamber of Commerce Meeting with Mr. Mykola Prysiazhniuk, Minister of Agricultural Policy and Food of Ukraine 75. Astarta targets 76% growth in 2011 sugar output 76. Cabinet votes to annul corn export quotas 77. Energy sector priority of economic reform action plan for 2011 78. Fresh round of protests to kick off on May 14 79. Khlib Investbud buys 155,000 ton of grain over past ten days 80. Kyiv Economic Court returns over 86 ha of land to capital 81. Leading American Fashion Brand GAP Enters Ukrainian market 82. Luhanskteplovoz nears large state order 83. Naftogaz returns 12.1 bcm of gas to RosUkrEnergo 84. Nalyvaichenko: Ukraine should offer gas alliance to Russia 85. Presidential decree orders household electricity tariff hike in May and approval of gas price increase schedule in November 86. Prosecutor: Kyiv lost tens of millions of hryvnias due to Pylypyshyn 87. Residential housing prices may have bottomed out 88. Steel makers report negative results for 1Q11 89. Stirol plans UAH 600 mln in CapEx in 2011 90. Ukraine urges global efforts to tackle man-made disasters 91. Ukraine's agriculture ministry initiating cancelation of corn export quotas 92. Ukrnafta will pay more for oil & gas production 93. Ukrnafta: Oil price up 16% to $104.3/bbl 94. US court summons Firtash 95. Yanukovych pushes diversification of Ukraine's energy transit once more 96. Yanukovych: Ukraine to make every effort for young people to stay working in 97. YASK to boost coke production by 6.4% Y-o-Y KAZAKH INVESTMENT 98. KazRosGas to develop Imashevskoye field 99. Oil Minister Mynbayev hopes for Karachaganak resolution in 1H2011 100. Tele2 starts operating under its own brand in Aktobe CENTRAL ASIA INVESTMENT 101. New railway to link Central Asia and Persian Gulf 102. Tajikistan to increase gold production 103. Turkmenistan: Belarusian Potash Company to export fertilisers from Turkmenistan 104. Turkmenistan: China lends $4.1bn to Turkmengaz 105. Uzbekistan and China create gas pipeline joint venture BELARUS INVESTMENT 106. Belarus' average wage up 6.8% on month in Mar 2011 to Br1,537,200 107. UFS Investment Company values Belarus government stake in MTS at $700- 800m EURASIA INVESTMENT 108. Armenia postpones construction of new copper smelter 109. Armenia: Microsoft to open innovation centre in Yerevan 110. Azerbaijan increases production of machinery and equipment by 19% 111. Azerbaijans insurance market expected to double during next 2 years 112. Max hires Saipem for deep drilling SOUTHEAST INVESTMENT 113. Turkey plans a Black Sea canal, bigger than Suez canal 114. Bulgaria approves a new law on renewable energy 115. Bulgaria: Neochim posted BGN 17.7 million non-consolidated net profit for the 1Q 2011 116. Bulgaria: Privatization of Bulgartabac Holding attracted attention again 117. Bulgaria's capital, Sofia, has the lowest office space rent prices in Europe 118. Bulgaria's residential property prices fell by 2.3 per cent in the first quarter of 2011 119. Bulgaria's state cigarette producer Bulgartabac Holding will privatize soon 120. Croatia has plans to go alone to speed up building LNG terminal with possible EU backing 121. Croatia will get 150m Euro loan from World Bank 122. Czech interested in investment opportunities in Montenegro, especially in the areas of energy, trade and tourism 123. Golden Touch to expand its current drill program at Rubik gold project in Albania 124. New energy efficiency credit line for Bulgaria 125. Warranty Fund to support SMEs in Albania established CENTRAL EUROPE INVESTMENT 126. Czech govt sets up anti-corruption committee to be headed by John 127. Czech truck maker Tatra faces tunnelling and tax evasion allegations 128. Estonia Plans to Retain Green Energy Subsidies 129. Hungary oil firm MOL to target new projects in upstream and downstream 130. Kubilius PM says Lithuania won't buy energy from Belarus, Kaliningrad plants 131. Mobis to build new brake hallin Slovakia 132. Nexen buys into Marathon's Polish shale gas play 133. Poland PKN Orlen said close to US shale gas swap deal 134. Poland says considering nuclear energy referendum 135. Signs of a thaw in Gazprom-Lithuania gas price relations 136. US car repair network said to enter the Czech market OTHER COUNTRIES 137. Mongolia: EBRD Supports Petrol Distribution Industry In Mongolia 138. Mongolia: Power plant to be built at Mogoin Gol mine 139. Mongolia: Prophecy Submits Formal Request to Mongolian Government to Build Chandgana Power Plant 140. Mongolia: Ulusnet expands 4G network 141. Mongolia: Work Started to Link Tavan Tolgoi with the National Railway Network

TOP STORY INVESTMENT 1. Number of Russian SME falls bne April 30, 2011

The number of small- and medium-sized enterprise registered in Russia fell slightly as of the first of January to 219,700 reports the National Institute for System Research of Entrepreneurship Problems (NISIPP).

NISIPP says the average number of persons employed by small businesses fell 2.9%, total investments in fixed assets (inflation-adjusted) dropped 6%. As of the end of 2010 compared with 2009, the growth is seen only in the turnover of small businesses (micro-businesses excluded) - by 16.4% (7% if adjusted for the consumer price index).

The experts say the overall state of small business as "stagnating", but changing for the better: the number of small businesses and employment in the sector didn't fall as rapidly in 2010 as the year before.

2. CORRUPTION WATCH: State Officials' bank accounts to be opened for inspection bne April 30, 2011

Unprecedented new rules will force banks to make information on the contents of state officials bank accounts including transactions for candidates for state jobs.

Russian president Dmitry Medvedev anticorruption drive has already forced state officials to declare their salaries, but looking into their bank accounts takes the Kremlin's transparency drive to a new level.

The bill introduced to the Duma last week comes directly from Medvedev's office.

Banks will be obliged to provide all information on officials' (and potential officials) property and that of their families at the request of state agencies examining the background of candidates, Medvedev said at a meeting with United Russia members at his Gorki residence outside Moscow, reports the Moscow Times.

Which agency is in charge has not been decided yet.

The bill also lays out punishments for officials who get involved in business and civil servants who fail to prevent graft by colleagues, Medvedev said, without elaborating.

3. COMMENT: Majestic brands Plamen Monovski of Renaissance Asset Managers April 29, 2011

"...long to reign over us" British National Anthem

The big day is upon us and few places are more abuzz in London than Fortnum & Mason, one of the longest standing purveyors to Her Majesty and the Windsor family.

Established in 1707, Fortnum's has built an extraordinary reputation for quality and service. It is famous for inventing the Scotch egg, for stocking the first cans of that English culinary classic "baked beans", supplying the team that conquered Everest in 1922 with 60 tins of quail and foie gras and a dozen bottles of champagne, and for providing empty wine boxes to Lord Carter's Tutankhamun expedition to store the antiquities, including the famous golden bust of the boy-king himself. What better place then than Fortnum's to stock up on the essentials for the upcoming celebrations - Royal Wedding Pekoe Tea, a Royal Derby porcelain Commemorative Welsh Dragon, the mandatory Royal Wedding plate, or the world-famous Royal Wicker picnic hamper?

A Royal Warrant is a treasured brand for this nation of shopkeepers. However, that allegiance pales in comparison to the loyalty that true Brits have for their most respected brand, the monarchy - a brand that has an outstanding global reach and whose current manager, Queen Elizabeth II, has stewarded with remarkable consistency, longevity and professionalism since she became queen at the age of 25 in 1952.

It would seem, though, that the British monarchy based on the hereditary principle is an offence to the nation's obsession about fair play. It is also unclear why the holder of the job - which is mainly about "blessing chrysanthemums", to quote De Gaulle, shepherding over a bunch of related eccentrics - would be a candidate for global jubilation. Yet more than 2bn people are likely to tune into what is to be the most watched event in the world.

For the British, the monarchy embodies the history and continuity of the state to a degree impossible in an elected leadership. Politicians come and go, promise and disappoint, but the monarch reigns. To the globe, in a world of uncertainty, change and diminishing trust in institutions, it is immensely reassuring to see the personification of continuity and stability.

Like the British monarchy, some brands have demonstrated an astonishing durability. The world's most valuable brand, Coca Cola, is more than 118 years old. The majority of the world's most valuable brands have been around for more than 60 years; this compares with an average 25-year lifespan of most corporations. The value of the brand, therefore, can be a disproportionate part of the overall value of an enterprise. Interbrand, the consultancy, estimates that while on average the brand accounts for 30% of the valuation, for Coca Cola the brand is more than 50% of the total. In the case of McDonalds, the brand accounts for a whopping 70%. But the value of brands is explicitly recorded on very few corporate balance sheets.

The benefits of branding are well understood. They not only act as a signal of quality and reduce search costs, but are an indication of status affiliation - a statement about one's personality. They also provide a fallback mechanism in times of uncertainty. During the crisis, the purveyors of luxury - Cartier, Armani, Gucci, Tiffany - did remarkably well due their heritage and legendary status. The reign of brands became particularly visible in Asia where Louis Vuitton, Häagen-Dazs, Johnnie Walker and Burberry are extraordinarily popular. Who thought that the path to the inexorable rise of the new Empires of the East would be covered with Hermes handbags?

Nowhere is the relevance of brands greater than in emerging markets. The rapidly rising middle class is unashamedly aspirational and very interested in the "badge value" of brands. Whereas in the West brands tell a story and express a personality, in the buoyant emerging world brands are tasked with displaying newly found wealth and confidence. As successful individuals in developing countries desire to become members of the developed club, they gain their entry ticket by buying the most celebrated brands of the West.

Countries of the former Soviet Union have taken this trend to an extreme. The lack of access to luxury was replaced with rampant consumerism and a sense of urgency to participate in the international market. In the West, the pictures in Vogue are an ideal designed to inspire; in Moscow, they are a blueprint of what to wear for fashionable women. "We are like children who have been looking through the windows of a sweet shop for years", says a well known minigarch. "Now we are allowed to go inside, and although we know it is not good for us in the end, we can't stop eating and trying all the sweets in there".

In China, branding has another dimension. In a country of more than 1.2bn, standing out can be tough. Intense pressure to put group before self discourages setting yourself apart from the crowd. However, brands give professional Chinese the ability to express themselves even without speaking a word. They customise their mobile phones, create elaborate online alter-egos, or blend local and global fashion in a highly individual, albeit edgy manner.

In all of the countries of the BRICS brand, individuals aspire to consume brands created in the West. In one sense, this is understandable. A brand needs time to be created and established. The youth of the emerging consumer means that there are very few local brands to aspire to. Emerging markets follow two routes to brand creation. The first one is the domestic, whereby they benefit from a growing home market, oftentimes copying the business models of companies in the West, oftentimes in staples, discretionary items and finance. The second is the export model, which relates to companies with small domestic markets who are backed as champions by their governments, usually in resource extraction.

Home is where heart is

Despite their youth, emerging-market brands are winning fans domestically. According to WPP, the most respected local brand in India is Good Knight, a maker of mosquito repellent; in Turkey, the Istanbul football club Galatasaray; and in Argentina, the dairy company La Serenisima.

As the emerging economies grow wealthier and more confident, the interest in national brands has been rising steadily. Brazil is getting rid of its inferiority complex and drawing on its substantial cultural, musical and architectural heritage. While local brands were extremely unpopular in Russia during the 1990s, pre-revolutionary transport, liquor, and confectionary brands are now being resurrected with gusto. In South Africa, where the "first world" sits cheek by jowl with the third world, domestic brands rub shoulders confidently with foreign ones. In India, the brands sold in more than 7m kiosks are local to such an extent that middle-class Indians still ask their storekeeper to keep their brands and have them delivered to their door. Li Ning competes head-to-head in China with Nike and Adidas. Baidu has handsomely outmanoeuvred Google in the Middle Kingdom, while Facebook seems to have lost the battle in Russia to Mail.ru. The acquisition of the Russian Wimm-Bill-Dann by Pepsi or the South African Massmart by Walmart shows how significant this domestic value added is.

Wolff Olins, the agency behind London Olympics logo, has tipped the following emerging-market brands to attain reach well beyond their home turf: Juan Valdez Cafe of Columbia, the Saudi dairy and fruit juice company Almarai, the Lebanese chocolate chain Patchi, China's biggest wine producer ChangYu and India's largest liquor group United Spirits.

Today, emerging-market brands hold valuable lessons for the brand portfolios of many global consumer behemoths. The juice drink "Pulpy", developed in China by Minute Maid, topped $1bn in sales in only five years to become one of the fastest growing branded products in the world.

The rise of emerging markets can be also seen in the companies that make it into the top-100 global brands. In 2010, 13 of the top 100 brands came from emerging markets; five years ago, there was only one, China Mobile.

The different way that brands are perceived in developed and emerging markets is not only due to their different consumption patterns. The most obvious difference between mature and emerging markets is demographic: the median age in Japan, Germany and Italy is 43; in China it is 34, in Brazil 29, in India 25. In many emerging markets, more than 50% of the population are in their teens. It is of the utmost interest to find out how the most populous consumer force of the future responds to brands ("Teenagers and Brand Engagement in Emerging Markets", L Namiranian).

Like their peers in the West, emerging-market teenagers tend to be connected via broadband to the world. It is not only an essential communication tool, but also a way to customise the world to their needs. They browse the news they want to read, listen to the music they want to listen, visit the websites they want to visit. To them, their computer and phone simplify life and serve as a status indicator, as a means to present self to others. Vocal in their opinions, they demand brands that are easy to access, where quality can be ascertained before purchasing and where it is easy to upgrade, replace or renew. Brand experience happens on their, not the brand's, terms.

It should not surprise us then that a brand that seems to have currently achieved the ultimate in personalisation and customisation, Apple, is one of the highest capitalised companies in the world. To remain relevant - and to conquer the future global consumer pool that's the emerging-market youth - brands across the world should try to emulate Apple's example. It is the only way to achieve that coveted longevity and brand equity value.

As the naves of Westminster Abbey fill with the solemn "...long to reign over us...", the Fortnum & Mason clock will chime cheerfully on Piccadilly. As bunting flutters on the streets of London, as fairy cakes and scotch eggs get eaten aplenty, we will be reminded about the secrets of a successful brand. The royal brand is seeking an extension for the future via this most memorable Royal Wedding and we are reminded of the words of Jeff Bezos, CEO of Amazon: "A brand for a company is like a reputation for a person. You earn a reputation by trying to do hard things well".

Emerging brands of the world, cheers!

Plamen Monovski is CIO of Renaissance Asset Managers

4. CORRUPTION WATCH: Moscow slashes red tape for construction permits bne April 26, 2011 Moscow authorities are to slash the permissions process for real estate projects, cutting the time it takes to win approval to as little as six months, reports Vedomosti. Not only should the new system speed up development, but it should also increase transparency and reduce corruption by slashing the number of documents developers need to submit, and most crucially, cut out the myriad of government agencies from whom they need to secure permission. The real estate sector is notoriously open to corruption around the world due to the huge array of permits needed to build a project. The process in Russia has been more complex than most, and has regularly delayed construction by years. "It was a long and arduous process, more terrifying than you can imagine," Barkli president Leonid Kazinets said, referring to the system of agreements that then-Mayor Yury Luzhkov introduced in Moscow in 2000. A state examination of blueprints (after which a construction permit is issued and work is authorized) currently requires 30 agreements not required by federal law, Mayor Sergei Sobyanin said. Now there is only one permission that needs to be obtained, and you can get it via a window at Moskomexpertiza - the capital's Committee for Reviewing Construction Projects - he added.

"Project documentation had to be agreed on with the Natural Resources and Environment Department, Moscow Ring Road administration, Design and Road Studies Institute, Moscow River Shipping and Canal Management Department, Fish and Water Resources Department, Moscow Railways, Moscow Metropolitan Tunnel Development Service, Moscow Gas Main Department and others. Often a developer would have to obtain double permissions and authorizations," said Oleg Shakhov, head of Moskomexpertiza.

The committee will oversee quality control of project documentation, Shakhov said, claiming that the whole process should now take 45 days. "There are projects for which the permit can be obtained in 30 days, such as typical kindergartens and schools. Local road projects are planned to take only 10 days." The list of documents required for evaluation will also be reduced to 13, from the 40 currently required, he added. After documents are approved, the agreement process should be cut by at least three-quarters, and last not more than six months, Kazinets said. Now the process takes 1 1/2 to three years, regardless of the complexity of the project.

Sobyanin said he will also reduce fines for builders that miss deadlines. In the future, the fine will be 0.5% of the area in natural terms or 0.5% of the market value of the completed project for the first six months of delay, and then 1% per year after that. Such fines are levied because the city government retains control of land in the capital, and makes a large lump of its income from the rent it receives from operating projects.

5. CORRUPTION WATCH: Federal funds watchdog barks at accusations of corruption bne April 28, 2011

Russia's top government spending watchdog, the Audit Chamber, is threatening to sue an activist over a report which implicates its chief Sergei Stepashin and his family may benefit from corruption, reports The Moscow Times.

In a report entitled "Power of Families. The Government. Part 1." issued on Friday on the web site Election2012.ru, Marina Litvinovich targets the families of 18 senior officials, including that of the Audit Chamber head. The activist said on Tuesday that she sticks by her findings, saying she relied on various media reports that had never been challenged in court -implying that they were true.

The Audit Chamber is officially the country's top overseer of federal funds, but rarely if ever appears to discover any major issues in the billions upon billions spent by the government each year, despite consistent calls from the president down through society to tame corruption.

Recent cases in which it has appeared to side with vested interests include an investigation into the Bank of Moscow, followed by the announcement earlier this week of a $1bn lawsuit against major shareholders, as the bank tried to ward off the efforts of state giant VTB to take it over. The Audit Chamber also ran an investigation into Transneft last year to look into claims that $4bn in funds had been stolen during the construction of the ESPO pipeline. However, the watchdog has refused to release the results publicly.

Litvinovich's report never directly accuses anyone of corruption but claims that officials along with friends and families "are controlling cash flows that go from the state budget to private, mainly offshore, coffers."

As for Stepashin, his family is involved in businesses that have benefited from the activities of the Audit Chamber, the report says. It points out, for instance, that Stepashin's wife Tamara is a senior vice president at VTB, which has now nearly completed its takeover of Bank of Moscow.

Meanwhile, Stepashin's son Viktor allegedly received a stake in unspecified Cyprus- based companies affiliated with East Line group, which owns Moscow's Domodedovo Airport. The report says he acquired the stake after the Audit Chamber opened a check into East Line in 2001.

It also says a longtime associate of Tamara Stepashina, Moscow Metrostroi head Vladimir Kogan, had a business dispute with former Moscow metro chief Dmitry Gayev in 2010. Gayev was fired in February and is under investigation following a check by the Audit Chamber.

Another bank linked to Tamara Stepashina, Promstroibank, received cut-rate leases on three buildings on Ulitsa Bolshaya Lubyanka in downtown Moscow in 1999, when her husband became prime minister, the report says.

The Audit Chamber admitted in a statement Tuesday that Stepashin's family members have business interests, but denied nepotism. "No proof is presented that Stepashin's wife, her mother and his son are owners of active commercial structures that play any significant role in the economy and enjoy state preferences," the Audit Chamber said in a vaguely worded statement on its web site.

The statement provides a step-by-step rebuttal of every accusation, including the link between Tamara Stepashina and Vladimir Kogan, who was 11 at the time Stepashina first came to Promstroibank in 1974, the Audit Chamber said.

But it does not comment on an allegation that Stepashin's "support" of the production of Eclipse 500 small jets in the Ulyanovsk region in 2008 "may have contributed" to Svyaz-bank's decision to invest $150 million into Eclipse Aviation, which later declared bankruptcy and failed to return the money.

Litvinovich must either back her accusations with solid evidence or apologize to Stepashin's family to avoid a defamation lawsuit, the statement said. But Litvinovich said on her LiveJournal blog late Tuesday that the report was based exclusively on open sources. The online version of "Power of Families" provides links to the web pages with original publications referred to in the text. None of those publications were ever contested in court, Litvinovich added.

She said she would send a formal refusal to apologize to the Audit Chamber and release a new report about Stepashin and his family. No one else mentioned in her report has commented on it.

"Power of Families" offers a list of government members thought to be most involved in business activities, including those involving corruption. The top three spots are filled by former Federal Security Service head and current Security Council Secretary Nikolai Patrushev; Finance Minister Alexei Kudrin; and Transportation Minister Igor Levitin.

6. Russian regions suffer from petrol shortages VTB Capital April 27, 2011

News: Prime Minister Vladimir Putin has ordered the respective government agencies to check why a number of Russian regions are facing shortages of fuel at petrol stations. The deficit is particularly acute in Altai Region (2.5mn people). According to the Russian Fuel Union, fuel shortages are also emerging in St Petersburg (4.6mn people), Voronezh (2.2mn people), Novosibirsk (2.6mn people), and Sakhalin (0.5mn people).

The Federal Anti-Monopoly Service has accused Rosneft and Gazprom Neft of a cartel agreement limiting fuel supply in the region. In response, the companies agreed to increase fuel supply 15% YoY in April-May.

Our View: The fuel shortage at petrol stations has probably arisen because of the government's attempts to limit petrol prices inflation. In January, petrol prices jumped 4.1% MoM and the government resorted to the common practice of price caps. As a result of these administrative measures, petrol prices declined 1.5% MoM in February and 0.8% MoM in March, despite the continued surge in crude oil prices.

It appears that petrol price caps have become binding and oil companies are looking for ways to protect their margins (we estimate that major oil companies lost USD 1.0bn in 1Q11 due to price controls). Hence, petrol prices are likely to rise, fuelling headline inflation. We are reiterating our view that inflation risks are high: we expect it to reach 9.0% YoY in 2011.

7. Integration of Russia and EU essential for development says Putin RIA Novosti April 27, 2011

Russia and the EU have no prospects for future development without close mutual cooperation and Russia's integration with the European Union, Prime Minister Vladimir Putin said on Wednesday.

"The future of Russia and the future of European countries can not be ensured without cooperation and integration," he said after a meeting with his Swedish counterpart Fredrik Reinfeldt.

"The question is the pace and form of this integration." Putin reiterated his idea of "a holistic economic organism - from Lisbon to the Far East." Asked why Russia is not part of the European Union, he said that "this is one of the fundamental, very important questions." "I would like to assure you that Russia is ready for close cooperation along these lines," Putin said.

8. Nuclear fallout in Emerging Europe bne April 27, 2011

Perhaps the starkest sign of how Emerging Europe's response to the nuclear disaster in Japan will be markedly different to that of Western Europe is that even though Latvian President Valdis Zatlers witnessed firsthand the horrors of Chernobyl while a young Red Army medic, he still insists his Baltic nation will press ahead with its nuclear plans. "It will take some time, but people will trust nuclear power again," Zatlers told reporters while on a visit to the US in April.

Contrast this with German Chancellor Angela Merkel, who was forced into an embarrassing about-face as the full scale of the problems at the Fukushima Daiichi power plant became apparent, reversing a plan she had forced through six months earlier to delay the closure of nuclear power plants to 2036 by ordering that all 17 reactors should close within a little over a decade. '"We all want to get out of nuclear power as soon as possible," said a chastened Merkel.

Most of Western Europe's leaders find themselves in a similar position, and regardless of the final outcome at the Fukushima plant - on April 12, Japanese authorities raised the severity rating of the nuclear crisis at the Fukushima plant to the highest level, on a par with the 1986 Chernobyl disaster - analysts like those at Frost & Sullivan say the future of nuclear in much of Western Europe "is once again in significant doubt."

Not so in the former Soviet Union and Eastern Bloc. While new stringent safety features and design will probably speed up the decommissioning of existing older plants and kill the less-economically viable projects on the drawing board, those that are being built for more strategic reasons will still go ahead - albeit perhaps with some delays.

Nuclear family

Take the Czech Republic, for example. The giant state utility CEZ is currently in the process of tendering for two new reactors at its nuclear power plant of Temelin. CEZ is supposed to pick the winner of the tender in 2013 - out of Areva, Westinghouse, and a Russian-Czech consortium of Atomstroyexport, Gidropress and Skoda - in order for the project to be completed in 2025. However, that date is itself five years later than first planned and few analysts expect the tender to be competed before 2016, if at all.

Then there's Bulgaria, whose attempt to build a second nuclear plant at Belene has been a tortuous affair, even by the nuclear industry's standards. The latest move in this saga was the Bulgaria's government hiring of the UK bank HSBC in mid-April to advise it on the feasibility of the project. Although HSBC will reportedly receive €2m in consultancy fees and an additional 0.95% on any external funding raised for the project, raising concerns about the bank's vested interest in concluding it's a goer, it's hard to see how the bank can economically justify the plant's construction.

Razvan Grecu of Candole Partners cites a report by the Institute for Market Economics (IME), one of the oldest and most reputable think-tanks in Bulgaria, which shows that the plant will be profitable only if it sells electricity at €0.140-0.147 per kilowatt hour (kWh), because the total price of the plant will not be €6.3bn, as suggested by Rosatom, Russia's state nuclear holding whose subsidiary Atomstroyexport has been chosen to build the plant, but €11bn when insurance and infrastructure are added. The report also refutes the conventional wisdom that electricity demand will grow, predicting that demand will be flat over the years despite GDP growth, because the energy intensity of the economy will improve. Demand from abroad will also decline, IME says, because Serbia will start minimising imports after 2015 and Romania is expected to continue with the expansion at its Cernavoda plant.

However, that Romanian plant is also now in doubt because of government incompetence and the global economic crisis. The €4bn project was initially planned to be financed mainly by foreign players, but driven by economic nationalism, the government finally decided in 2008 to keep a majority stake (51%) in the newly created special purposed vehicle, EnergoNuclear, while the remaining 49% would be divided among Enel, CEZ, GDF Suez, RWE, Iberdrola and ArcelorMittal. However, the crisis made this financial scheme unsustainable and the delay and confusion has now forced first CEZ, then GDF Suez and Iberdrola and RWE to withdraw from the project. In March, the economy ministry drafted a decision to reduce its shares in the project to 40% and call for a feasibility study to be completed by 2013. But "the government's indecision means that the project is blocked and construction of the reactors postponed. It is unlikely that the stalemate will be resolved any time soon," reckons Grecu of Candole Partners.

So much for the waverers; others, though, insist they are pressing ahead with their nuclear plans.

Bearing up

Chief amongst those is, of course, Russia, which has a huge nuclear industry and is set to be one of the principal beneficiaries of the region's nuclear renaissance.

Russia is among Europe's most reliant on nuclear power. Nuclear energy already accounts for 16% of the country's produced power, and Russia is planning to double its nuclear capacity over the next 20 years.

Outside of the country, Russia's nuclear industry is in the process of building five nuclear power units and another 10 or so such projects are close to getting off the drawing board. Rosatom has a total portfolio of 30 orders for constructing reactors in different countries. According to a source close to the Russian Energy Ministry, the ministry doesn't foresee much impact from Japan on the implementation of those export projects scheduled through 2030.

Public opinion in Western Europe remains wary of Russian-made nuclear power stations following the Chernobyl meltdown, but Russia abandoned the Soviet-era RMBK class of reactors following that disaster and claims that the next generation of nuclear power plants are safer than ever. "We now have a whole arsenal of progressive technological means to ensure the stable and accident-free operation of nuclear power plants," Russian Prime Minister Vladimir Putin said in the middle of March.

Russia has the youngest fleet of nuclear reactors in the world - they have an average age of 19 years, compared with 26 years in Western Europe and 30 years in the US, reports Bloomberg. The Fukushima reactor is 38 years old, making it one of the oldest reactors in the world that's still in operation. "Until now, countries in emerging markets were well out in front of the nuclear industry revival, accounting for a disproportionate share of the expected growth in nuclear energy use. Out of the 62 reactors currently under construction, 48 - or 77% of the total - are being built in China, Russia, India and South Korea," says Sergei Bubnov, who heads Renaissance Asset Managers' utilities fund.

One of the Russian overseas projects is Turkey, which says it remains steadfastly committed to its nuclear programme.

Speaking to bne recently, Turkish Energy Minister Taner Yildiz confirmed that with power demand growing at between 8-9% a year, his government sees no alternative to developing nuclear power in Turkey and its plans for having three operational nuclear power plants by 2023 remain unchanged. "As with every country, we have to ensure security of supply, and we have decided as a government that this is the best solution," he says.

According to the energy policy of the Justice and Development Party (AKP) government of which Yildiz is a prominent member, Turkey's reliance on imported natural gas, which already generates more than half of the country's electricity, represents a serious threat to the country's energy security. They have a point. Three times in the past five years Turkey has suffered gas shortages after Iran, with which Turkey has a contract supplying up to 10bn cubic metres a year (cm/y), cut supplies without warning, with similar shortages experienced twice in the past 12 years due to spats between Russia and Ukraine, through which Turkey receives around half of the 30bn cm/y of Russian gas it has contracts to import.

But critics of Turkey's nuclear programme point out that as current plans for a Russian built 4.8-gigawatt nuclear plant at Akkuyu on the country's east Mediterranean coast involve Russia supplying uranium fuel, together with the gas imports from Japan, it would leave the country dependent on Russia for the primary fuel for half the country's power generation.

And as Turkey has uranium of its own, the planned second nuclear plant of around 5,000 MW at Sinop on Turkey's Black Sea coast for which talks are already underway with Japan's Tepco would also involve imported fuel, as would a third planned plant for which a site has yet to be chosen.

According to Turkey's main political opposition party the Republican Peoples' Party (CHP), alternatives to nuclear power exist that can meet Turkey's growing demand without compromising supply security. "Demand is expected to double by 2023 and we calculate that we can more than meet the increase largely from indigenous resources," says Necdet Pamir head of the CHP's energy commission.

In addition to existing plans for major new gas- and coal-fired plants that have already been licensed, Pamir identifies scope for expanding Turkey's hydroelectric power programme - albeit without causing undue environmental damage, as well as the largely untapped potential for wind and solar power and a huge potential for improving industrial and residential energy efficiency as offering the chance to more than double the volume of power generated. But he stresses that the CHP is not opposed to Turkey's nuclear programme per se, only to the way the current AKP government is developing it, which he says is too expensive and raises too many questions. "We're looking to the coming fourth generation of nuclear plant being developed, which will cost less and be safer to operate," he says.

Not surprisingly given the upcoming elections in June, safety is high on the public agenda with Yildiz having recently been forced to deny reports that a site for the planned third nuclear plant had been chosen at Igneada, close to Turkey's border with Bulgaria. According to Okan Zabunoglu, head of the Department of Nuclear Studies at Ankara's Hacetepe University, fears over the two confirmed sites at Akkuyu and Sinop have been overplayed and both are safe. "There have been some questions over the Akkuyu site," he says pointing to its location 160 kilometres from a minor inactive earthquake fault line. "But it has been studied extensively and there seems to be no good reason for concern."

9. Putin Orders a Downward Revision of Tariffs: Limited Negative Impact on Gas, Utilities; Positive for Fertilizers UralSib May 1, 2011

Monopolies' tariffs if capped at 6% may cut 2012 inflation by 270 bps. Last week, Prime Minister Vladimir Putin ordered to the Ministry of Economic Development to study the potential impact of regulated tariffs rising in line with officially projected inflation, or 5- 6% in 2012. If the new 6% tariff cap is introduced, we believe that 2012 consumer inflation may be down to 8.2% from our current projection of 10.9% - still well above the government projections of 5-6% with varying effect across sectors.

2012E EBITDA impact limited to negative 3-9% in most cases, fertilizers' case may improve further. We estimate a limited potential negative impact on 2012E EBITDA of 3-9% for gas producers and most electricity generating companies, confirming strong investment cases of Gazprom, OGK-4, OGK-5, Mosenergo and TGK-1 among others. Acron and Dorogobuzh may increase their investment appeal further, with 2012 EBITDA rising by a respective 5% and 9%. The negative effect may be the most pronounced for the electricity distribution sector.

Capped Tariff Growth to Lower Inflation Tariffs of natural monopolies to slow. The move may end the multi-year history of tariff growth outpacing CPI by 5-10%.

Inflation expectations will still exceed official targets. 2012 consumer inflation may be down to 8.2% from our current projection of 10.9% - still above the 5-6% target.

Utilities and Gas Under Pressure, Fertilizers Set To Win Utilities - negative impact across the sector. 2012E EBITDA for generators may drop 2%-17%, while distribution companies can see a 46% downgrade, with Federal Grid Company at minus 22%.

Oil & Gas - NOVATEK may lose 7% of EBITDA; Gazprom 3%.

The gas companies would lose with independent producers suffering more than Gazprom due to larger exposure to the domestic market.

Fertilizers set to benefit. Nitrogen and compound fertilizer producers, including Acron and Dorogobuzh, would win from the lower pace in gas price increase.

Neutral impact on financial forecasts for Globaltrans. For the railcar operators, the capped increase in tariffs is a benefit rather than a threat, although the impact appears fairly small compared to other industries.

10. Putin's friend may join Rosneft board - paper RIA Novosti April 28, 2011

Matthias Warning, an old friend of Russian Prime Minister Vladimir Putin, may join the board of directors of oil giant Rosneft as an independent member, Kommersant business daily quoted government sources as saying on Thursday.

Warning is a former officer of the Stasi, East Germany's Ministry for State Security, and is known to be Putin's friend since the late 1980s when Putin worked as a KGB officer in East Germany. Currently, Warning is a managing director of the Nord Stream pipeline, a project led by Russia's gas giant Gazprom, and member of the supervisory board of Russia's second largest bank VTB.

Warning will replace the head of the Federal Property Management Agency, Yury Petrov, on the Rosneft board following a recent initiative by President Dmitry Medvedev to remove government officials from the boards of state-run companies. Putin signed the order to replace Petrov with Warning on April 14, two government sources told Kommersant.

Earlier in April, Rosneft shareholders approved the replacement of Igor Sechin, another Putin's close ally, with Sergei Shishin, VTB bank senior vice president. Sechin, who has supported a now-frozen $16 billion share swap and shelf exploration deal between Rosneft and BP, is known as Russia's energy tsar as he is responsible the country's huge energy sector.

11. Russia needs 'social revolution' to modernize - minister RIA Novosti April 26, 2011

Russia will need a dramatic social upturn if it is to modernize its energy-export dependent economy, Deputy Economy Minister Andrei Klepach said on Tuesday.

"An economy cannot be innovative if the intellectual class is poor by definition," Klepach said during an economic conference in Moscow.

"When we talk of innovations, it's not about how much is spent on Research & Development and how active our businesses are in introducing it," he went on. "It's about a certain revolution in society." "Modernization" - building innovation parks and diversifying away from the country's reliance upon oil and gas exports - has become the byword of Dmitry Medvedev's presidency, ideas markedly at odds with Prime Minister Vladimir Putin's populist hardman image.

In a bold address to parliament last week, Putin warned against "unjustified liberalism" and "social demagogy," fueling speculation of a growing rift within Russia's ruling tandem ahead of the 2012 presidential election.

Last month, Medvedev ordered government ministers, most of them Putin's allies, to give up their seats on the boards of state firms.

12. Government to raise export duty on gasoline Troika Dialog April 29, 2011

The government will set the export duty on gasoline at 90% of the duty on crude oil from May 1, compared with 67% now, Interfax reported. The ad-hoc measure may last until year end. Prime Minister Vladimir Putin has also asked the ministries to consider lowering the mineral extraction tax (MET) or the recently doubled excise taxes on domestically-sold product.

Troika's view: The rather knee-jerk emergency measure to raise export duties (Putin asked for a draft decree by day end) comes in response to shortages on the domestic market. The shortages, in turn, were provoked by the government's insistence in February that oil companies freeze prices at the pump, which incentivized them to export more of their gasoline. Russian companies normally send little gasoline abroad (about 8% of total gasoline production in 2010), so the direct effect will be small, but higher export duties should depress domestic prices as well, which are oriented on the export netback parity, though with large deviations in either direction.

The modeled effect on companies will be commensurate to their reliance on the downstream. In a textbook scenario (higher export duties = lower domestic prices), oil majors such as Rosneft and LUKoil could lose around 1.5-3.0% of their EBITDA. But Gazprom Neft, Alliance Oil Company and Bashneft could lose 7-9% of their projected EBITDA for the year unless the government cuts the excise taxes relatively soon to mitigate this. The clear relative winner is Tatneft, which produces no gasoline or much of any other product, and could benefit from the possible MET cuts.

We question, however, whether the government could cap domestic gasoline prices effectively, as, unlike with diesel, they are not necessarily an efficient function of an export netback. Therefore, at this point, it is not clear whether oil companies will lose money on this measure.

In any case, the state has no one but itself to blame for the fiasco - it coupled a doubling of the excise tax in January with arbitrary demand for gasoline price cuts in February, and then was shocked, shocked to learn that shortages have sprouted. The havoc at the pumps in some regions shows that the current taxation system, heavily reliant on export duties and other revenue-based sources, is a spectacular failure. Furthermore, we believe that the so-called "66-60" system that the state is trying to implement may also have severe unintended consequences, and we would not be surprised if the state abandons its efforts.

Oleg Maximov

13. Russia to raise export duties on gasoline exports in May to boost domestic stocks RIA Novosti April 28, 2011

Prime Minister Vladimir Putin ordered Deputy Energy Minister Sergei Kudryashov to prepare proposals by the end of the day on Thursday for raising export duties on oil products, in a bid to avert shortages of gasoline in Russia.

Several regions have been badly hit by gasoline shortages since last weekend, as producers exported fuel to take advantage of rising prices.

The higher export duties will be compensated by lower mineral extraction tax or excise duties.

Putin also said that the introduction of the Euro-3 fuel standard for this year should be postponed, in coordination with Belarus and Kazakhstan, Russia's partners in the customs union.

"This is movement. We are not going to turn left or right but deadlines should be matched with our agreements with neighbors and coordinated with repair works at leading refineries," he said.

Earlier on Thursday, Kudryashov said Russia would suspend exports of gasoline in May to meet domestic demand, after almost a week of dire shortages in some regions of the world's top oil producer.

"I think we must satisfy the need at the expense of cutting exports," Kudryashov said. "We have agreed now that oil companies will supply all their oil products to the domestic market." Fuel shortages began over the weekend, when most filling stations not belonging to major oil companies ceased trading because of a lack of fuel in the Altai region in southern Siberia. The deficit later spread further, to the Siberian cities of Tomsk, Irkutsk and Novosibirsk, where filling stations are either closed or sell limited amounts of gasoline.

Shortages were also felt in Murmansk, in the north-west of Russia.

Analysts said oil companies had switched fuel supplies abroad where prices are rising, while in Russia the government has kept a tight lid on fuel prices ahead of parliamentary elections in December and the presidential poll in March. The Federal Antimonopoly Service says it suspects a cartel agreement between large oil firms, while the Prosecutor's Office launched several cases against producers.

Kudryashov said Russia had exported about 1 million tons of oil products in the first four months of 2011 compared with 3 million tons in the whole of 2010.

A source close to Rosneft said the company had dismissed Igor Romashov, its vice president in charge of oil product supplies, over the disruptions in regional deliveries.

Gasoline price rises were reported across the country at between 2 and 20 percent this week. Kudryashov said he expected a further 5 percent rise. "Some price adjustment is possible," he said.

Kudryashov said earlier he did not see state regulation of prices as a solution.

"We believe there is no such necessity because we have enough (oil product) reserves," he said.

14. Small Businesses Feel the Pain BYUT April 27, 2011

According to Kommersant Ukraina, the new Tax Code railroaded through parliament by the Party of Regions has resulted in a dramatic reduction in the number of small businesses using the simplified taxation system.

In the first quarter of 2011, the number of businesses cancelling their registration leapt by 57% compared to the same period in the prior year. Experts believe that growing fiscal pressure will lead to more small companies going out of business. Statistics appear to back up this analysis as the number of new businesses in the period shrunk by 30%.

"The new Tax Code is hurting small business," said a BYuT-Batkivshchyna spokesperson, "changes to the code are vital."

The government points to an economic recovery in Ukraine. Whilst macro-economic indicators do show signs of improvement, this has nothing to do with government policy. "World demand for commodities is growing and this is resulting in greater demand for Ukrainian steel, chemicals, fertilizers, coal, grains and raw materials. This has nothing to do with government policy," said Martin Nunn of the People First democracy foundation at the recent Oxford Model Ukraine Conference.

"Small and medium-sized businesses are being crushed under the weight of an onerous tax system that preserves tax loopholes for big business," said Ivan Kyrylenko, leader of BYuT-Batkivshchyna in parliament.

"By penalising small and medium-sized businesses the government is turning off the tap of wealth creation," said Hryhoriy Nemyria, Yulia Tymoshenko's foreign policy advisor. He points out that this sector contributes an average 57.4% of GDP in Europe. By contrast, the figure in Ukraine in 2008 was a mere 17%.

"As a result of recent punitive changes to the tax law some 44% of SMEs have literally disappeared from the tax register," Mr Nunn told students in Oxford, "That's 800,000 companies and as a result we can expect to see the level of small and medium-sized enterprises' contribution to GDP to fall to around 11% which is potentially catastrophic."

What We Say: BYuT-Batkivshchyna believes that the Tax Code must be revised to help nurture this important wealth creating sector. Revisions to the code and concessions need to be made to assist small businesses and banks encouraged to make credit more available. The growth of this sector will make the economy less susceptible to economic shock and represents a vital source for job creation. We appreciate the need for tax revenue collection, but it is unfair for the burden to fall on small and medium-sized businesses. Larger businesses need to pay their fair share. The government should redress this imbalance by closing loopholes that enable billions of dollars to be sheltered off-shore and denied to the exchequer.

15. Talakan, Verkhnechonsk fields may soon lose export duty preferences Troika Dialog April 26, 2011

Surgutneftegaz's Talakan and TNK-BP Holding's Verkhnechonsk fields may lose their preferential export duty status as soon as June 1, Vedomosti reports. The newspaper's sources say this was done at the behest of Rosneft and its erstwhile chairman Igor Sechin once the company found out that it was to pay the full export duties starting May 1. The final decision, though, has not yet been made, according to a source in the Energy Ministry.

Troika's view: Verkhnechonsk (25% owned by Rosneft and 68% by TNK-BP Holding and consolidated by the latter) and Talakan currently pay export duties at 45% of the difference between the per-barrel oil price at $50. Verkhnechonsk was supposed to start paying full duties from January 1, while Talakan was scheduled to do so from 2013. Paying full export duties from June 1 would cause TNK-BP Holding to lose about $540 mln this year, or 5% of TNK-BP Holding's projected 2011 EBITDA (though actual losses would be lower due to minority interest), while Surgutneftegaz would stand to lose $560 mln this year and $1.0 bln in 2012, or 6% and 13% of Surgutneftegaz's EBITDA, respectively.

We expect both companies to fight the cancellations. TNK-BP Holding, in particular, may start having second thoughts about launching its Yamal greenfields if it cannot trust the government's tax commitments.

Oleg Maximov

16. Turkish PM unveils plans for another water channel through Istanbul RIA Novosti April 27, 2011

A new water artery, the Istanbul Channel, will be dug through the European part of the Turkish capital to link the Black and Marmara seas, Prime Minister Recep Tayyip Erdogan announced on Wednesday.

Speaking in Istanbul ahead of parliamentary elections scheduled for June 12, Erdogan said the construction of the 150-meter-wide water channel will become one of the largest projects of the 21st century, which will help solve the problem of the overloaded Bosporus Strait.

"Istanbul will become a city with two seas passing through it," the prime minister said. "This is an energy, transport, city-planning and scientific project at the same time, as well as a project for employment and environmental protection. It will help protect the nature of Istanbul, the environment, sea, water resources, flora and fauna," he said. The largest ships will be able to pass through the 25-meter deep channel, he added.

The cost of the project, which is expected to be completed within two years, is being kept secret, Erdogan said, adding that a new airport to become the largest in Turkey will also be built close to the channel. Turkish media have reported that the estimated construction cost may reach $20 billion.

Erdogan's announcement caused a controversial reaction in Turkish society, raising questions whether the construction of the channel may result in the violation by Turkey of a 1936 international convention regulating ship navigation through the Black Sea straits.

17. Tymoshenko to sue Firtash and RosUkrEnergo as political shenanigans continue bne April 28, 2011 Former Prime Minister Yulia Tymoshenko is suing businessman Dmitry Firtash and Swiss-based gas-trader RosUkrEnergo in the US courts, alleging fraud, human rights violations and racketeering. The lawsuit is part of Tymoshenko's response to the opening of a case against her earlier this month regarding the gas contract she signed with Russian in January 2009 - an agreement which included a move to push RosUkrEnergo out of its role as a middle man in Russian gas exports to Ukraine. However, when it comes down to it, it does little more than illustrate once more that the country is at the mercy of political shenanigans directed by the country's major economic clans.

According to papers filed on Tuesday in the US District Court in Manhattan, Tymoshenko accuses the defendants, who include 100 unidentified "John Doe" individuals and companies, of defrauding Ukraine's citizenry by manipulating an arbitration court ruling, "undermining the rule of law in Ukraine," reports Reuters. An international arbitration court ruling in Stockholm last year ordered Ukraine's state energy company Naftogaz to transfer RosUkrEnergo 11bcm of gas to compensate for fuel it had expropriated, plus 1.1bcm as a penalty. Naftogaz took the gas from RosUkrEnergo, a company jointly owned by Gazprom and Firtash, after agreeing a complex arrangement with Gazprom to end the gas war that saw European customers cut off in late 2008/2009. The deal saw the two state companies swapping gas and debts to cut RosUkrEnergo from the trade.

Naftogaz and Gazprom said in November that they had agreed to a settlement under which Naftogaz would return 12.1 bcm of gas — worth almost $3bn — to RosUkrEnergo, while RosUkrEnergo would redeem $1.7bn of debt to Naftogaz and $810m to Gazprom. Without the necessary volumes in storage to transfer to the trader, Naftogaz had to buy gas from Gazprom at $230 per 1,000cm to make up the shortfall. The lawsuit, a class action on behalf of the Ukrainian people, was filed in US federal court under the Alien Torts Statute, which accommodates actions in US courts to uphold international law, as well as the Racketeering Influenced and Corrupt Practices Act. Reports offer no hints as to the suit's explanation of how the defendants were able to manipulate the arbitration panel, but quotes include much of the rhetoric that Tymoshenko is widely known for. "The Stockholm arbitration ruling in favor of Firtash's company has been widely perceived as a means of generating huge sums of cash with which Firtash and his associates could continue to illegally fund the pervasive system of corruption that encompasses every level of government, while at the same time suppressing political dissent through intimidation, racketeering and other violations of fundamental human and political rights," the lawsuit reads, according to Interfax. Tymoshenko was joined in the suit by 10 unidentified John Does who it alleged "have all been subjected to politically motivated investigations and selective prosecutions" by Ukraine's current leaders. The Security Service of Ukraine has completed its pre- trial investigation into a criminal case against officials of Naftogaz and the State Customs Service on the unlawful seizure of the gas and its illegal customs clearance as it travelled to Russia and back in February and March of 2009. Former First Deputy CEO of Naftogaz Ihor Didenko, former Head of the State Customs Service Anatoliy Makarenko, and Deputy Head of the Energy Regional Customs Taras Shepitko are in custody in connection with the case.

Earlier this month, the prosecutor general's office opened a criminal case against Tymoshenko over the gas contract she signed with Russia in January 2009. The case is the third brought against the former PM since rival Viktor Yanukovych came to power in February 2010, whilst several other members of her government are also facing prosecution on corruption charges pertaining to government deals struck in 2009. Tymoshenko and her allies claim that the government is conducting a witch hunt in order to decimate the political opposition. The government says it is conducting a wide-ranging fight against corruption, irrespective of political persuasion, and has pointed to cases against members of the ruling Party of Regions, as well as former president - and Yanukovych's mentor - Leonid Kuchma, as proof. All of which looks to be little more than a continuation of the political machinations and fighting that Ukraine's political class has been engaging in for years now, which have done much to paralyze the country, stymying reform and leaving the country dependent on bail outs to prop up an inefficient and corrupt economy. The lawsuit, which seeks unspecified damages, hints at the real issue when it points to Firtash's close association with Yanukovych - that Ukraine's political sphere is dominated by warring business tycoons. 18. Ukraine finally persuades Russia to talk about gas prices - but how? bne April 29, 2011

Ukraine claims it has finally managed to get Russia to sit down and talk about gas prices without handing Moscow strategic assets or positions, according to reports, although Gazprom played down the meeting. According to a report in Platts, the two countries began formal negotiations on Thursday over amending the 10-year natural gas supply agreement signed in 2009 - an agreement that Kiev has been persistently pressing to renegotiate for the last year or more. Ukraine's Energy and Coal Industry Minister Yuriy Boiko was in Moscow for a meeting with Gazprom CEO Alexei Miller to begin the talks, Boyko's ministry said. The gas contract, signed by former prime minister Yulia Tymoshenko to end the last gas war between the two in January 2009, connects the price Ukraine pays to European oil-linked rates. That saw Ukraine paying $264 per 1,000 cu m in the first quarter of the year. The contract came into the spotlight once more last week as Ukraine's prosecutor general opened a criminal case against Tymoshenko, accusing her of costing the state billions. Facing tough economic times, Kiev began looking for ways to decrease the cost of Russian gas imports as soon as Viktor Yanukovych took the presidency in February 2010. One of his first acts in office was to sign the Black Sea Accords, which granted Ukraine a $100 discount per 1,000 cu m of gas in return for extending the stay of the Russian navy in Sevastopol port by 25 years. However, Moscow has kept a tight grip on the lever since then. For most of the year it has refused to discuss replacing the contract unless Kiev agrees to a merger between Gazprom and Naftogaz - a union which would give Russia control over Ukraine's gas transportation system, through which 80% of Russian gas exports to Europe flow. Earlier this month, a Gazprom official said that Ukraine could benefit from the same prices as Russian domestic customers ($50 - $80) should Kiev agree to join the customs union Russia is establishing with Belarus and Kazakhstan. Kiev rejected the idea as it would block its road towards eventual EU membership, but did try to suggest a looser arrangement with the customs union could be entered. Little has been heard from either side for the past couple of weeks. Has some sort of backroom deal been reached? With the government in Kiev facing political pressure at home from the austerity cuts it has been forced to introduce since an IMF bailout in summer 2010 - with subsidized gas prices front and centre - Moscow has been demanding huge concessions in return for lowering the price of the gas. No deals have been announced, so what has persuaded Russia to open discussions? Platts reports that the development comes days after Russian President Dmitry Medvedev apparently agreed to look into the issue at a meeting with Yanukovych in Kiev on April 26. However, neither side was ready to discuss the results of the talks just yet. Boiko's ministry did not report on the progress of the talks, but would only say that he and Miller will hold another round of discussions in mid-May. Gazprom was more obtuse, commenting only on the effectiveness of the current contract. "We have created an effective, long-term contract basis for delivering gas to Ukraine. The contract is market-based and meets all international requirements for conducting the gas business," Gazprom spokesman Sergei Kuprianov said after the meeting, according to RIA Novosti. One detail that has emerged is that Ukraine is now seeking to tie the contract price to the prices paid by Germany, Platts reports, referring to an unnamed source. The idea is to take the German gas price as the base, and to deduct the cost of transit -- because Ukraine is closer to Russia -- and also to deduct the $100 for the fleet-for- gas agreement in April 2010, the source said. Ukraine has been also seeking to include some other seasonal and volume discounts, the source added, without elaborating. 19. Ukraine's President pushes forward reforms agenda Phoenix Capital April 29, 2011

On April 27 Ukraine's President Viktor Yanukovych signed a decree "On a national action Plan for implementing the program of economic reforms for 2010-2014". The Plan details a vast array of specific regulations and actions to be adopted this year in different areas of Ukrainian economy. The new decree effectively pushes forward previously developed comprehensive plan of reforms, detailing action plan, specifying responsible officials and setting time schedule. According to the Deputy Head of Presidential Administration Iryna Akimova, the highest priority is given to privatization and reforms in power generating sector. Particularly, the document calls to eliminate cross-subsidies, gradually increase all retail electricity tariffs to cost- efficient levels, reform electricity market and privatize at least two GenCos and five DistCos.

Other energy sectors to be reformed as well. According to the Plan, the government should gradually reduce subsidies to loss-making state coal mines while privatizing attractive coal companies.

The Plan for reforms in oil and gas sector calls for improvements in royalty regime and easing of licensing procedures. Special attention is given to reforming the state gas monopoly "Naftogaz of Ukraine" and modernization of gas transit system.

The Plan also includes certain provisions on much-awaited land reform. Specifically, the state land cadastre, needed for opening the land market, should be established by the end of this year. Notably, the Plan stipulates that the government should eliminate price regulation on agricultural market and lift export restrictions.

Oleksandr Lozovyi

SECTOR Gas 20. European gas prices to top $500bcm bne April 30, 2011

Russia's state-owned Gazprom says European gas prices would average $500 per 1,000 cubic meters by December, above planned levels, chief executive Alexei Miller told reporters Monday.

21. Gazprom agrees another LNG plant to feed Japan bne April 27, 2011

Gazprom announced on Tuesday a deal with a Japanese consortium to conduct a feasibility study on construction of a liquefied natural gas plant and a gas chemical complex in Vladivostok.

Gazprom Deputy Chairman Alexander Ananenkov met with Yoshio Matsukawa, president and chief executive of Japan Far East Gas Co. Ltd., in Moscow to discuss building an LNG plant in the far east of Russia, reports UPI, as Japan faces a shortfall of energy following the shutdown of its nuclear power facilities. With Prime Minister Vladimir Putin at the forefront, Moscow has been hoping to see the Fukushima disaster help raise global gas prices.

"The feasibility study will make an important contribution in building up natural gas deliveries from Russia to Asia-Pacific countries by Gazprom in future as well as in reliable energy supply to Japan," Ananenkov said in a statement. An agreement to construct an LNG plant in Russia's Primorye territory was reached in May 2010, reports RIA Novosti, but construction depends on the launch of gas supplies from the republic of Yakutia in northeast Siberia. With a feasibility study underway, Gazprom plans to start construction of the Yakutia-Khabarovsk-Vladivostok pipeline next year. Japan is the world's fourth largest energy consumer, but has almost no hydrocarbon energy resources. Japan imports 100% of its liquefied natural

Gazprom's sales of liquefied natural gas (LNG) increased 34% on the year to 2.47 billion cubic meters in 2010, the company said Thursday in its financial report under International Financial Reporting Standards (IFRS).

In 2010, Gazprom supplied LNG to Japan, South Korea, China, the U.K., and Taiwan, the company said.

The company's total gas exports amounted to 148.1 billion cubic meters in 2010. Of the total, gas supplies to Europe were at 138.6 billion cubic meters, the company said. gas, topping the world's list of LNG importers.

22. Gazprom, Itochu to build Vladivostok LNG Plant bne April 30, 2011

Russia's Gazprom is in talks with Japans Itochu Corp.-led group of company to build a new LNG plant in Russia's Far East.

A feasibility study will be done first for a plant with capacity to produce 10 million tons a year of liquefied natural gas in Vladivostok, Osaka-based Itochu said reports Bloomberg, which would double Russia's LNG capacity.

Itochu's competitors Mitsubishi and Mitsui hold minority stakes in the Sakhalin-2 facility, which was designed to meet about 7 percent of Japan's fuel imports. Royal Dutch Shell, the fourth partner in Sakhalin-2, has been seeking to expand the plant's capacity by about 50 percent.

23. Gazprom: exports surging, expecting $500/mcm European price by December Citi April 26, 2011

Gazprom CEO Alexei Miller was quoted in the press yesterday stating that he expects European contract gas prices to hit $500/mcm by December. This is not news, as it is merely a direct read-off of the current oil price as applied to the contract formulas. If oil prices (Brent) stay around $120-$125, then in 6-9 months contract gas prices will indeed be around $500/mcm. The better question is not what the contract prices will be, but what the European and UK spot prices will be.

With a cold winter and surging Asian demand, spot prices this last year closed the gap with Gazprom's contract price. This coming winter, with another year of growth in Asian demand (particularly in South Korea) and the extra demand from Japan needed to help plug the lost nuclear generation capacity, strong spot prices for LNG (and thereby European spot gas prices) should again be possible. However, LNG is still oversupplied for the time being, and hitting $500/mcm ($14/mcf) is substantially harder than achieving the $350/mcm ($10/mcf) seen this past winter. If that gap does not close, Gazprom will reap strong margins on its European contract sales this winter, but will likely struggle with volumes again.

Mr. Miller also stated that current European exports are "breaking all records," and that April exports are running on par with some winter months. We think the strength is most likely due to European customers taking Gazprom gas now to meet as much of their take-or-pay minimum volumes now, while prices are at near parity, rather than leaving them to later in the year when a gap might open up between spot and contract prices again, especially with Gazprom prices increasing with certainty in the near future. Therefore, while we are encouraged by the volume indications, we think optimism should be tempered a bit in this case.

24. Russian-Japanese LNG JV output to reach 10m tonnes per year bne April 28, 2011

A Russian-Japanese joint venture for liquefied natural gas (LNG) production in Russia's Vladivostok Region is expected to produce up to 10m tonnes of LNG annually, double the previously projected capacity, PRIME-TASS reported.

The JV includes Russian gas giant Gazprom and a Japanese consortium (Itochu, Marubeni, Inpex, and Japan Petroleum Exploration).

The parties are in talks to estimate the feasibility of constructing two facilities, each with an annual production capacity of 5m tonnes of LNG. The estimation is expected to be completed by the end of this year.

25. Russian domestic gas consumption was 6% up YoY in March Citi April 26, 2011

Interfax reported yesterday that the domestic gas consumption increased by 6%YoY in March. Given that the average temperature during the period was nearly flat YoY, on our estimates, the increase points at stronger demand for gas from industrial consumers. To remind, in February domestic gas consumption was 3% higher YoY but this was partially driven by lower temperatures (by about 1.8 degrees Celsius). We view the news as positive for Gazprom and Novatek.

SECTOR Oil 26. Gasoline shortages persist in Russia, prices rise RIA Novosti April 27, 2011

The shortage of gasoline that started in Russia over the weekend persisted across the country on Wednesday with prices rising in regions where fuel is still left, business and government officials said.

In the Siberian city of Tomsk a fifth of buses failed to run for lack of fuel or its high cost.

"On Tuesday evening many minibuses could not get fuel," a transport firm official told RIA Novosti. "In the morning there were long lines at filling stations and only 25 liters per bus were sold, while a PAZ bus needs 80-100 liters a day. This is why the morning schedules were disrupted." On Wednesday, prices for gasoline at Tomsk filling stations rose 16 percent compared to the previous day. In Irkutsk, also in Siberia, prices increased up to 50 kopecks per liter of gasoline (around 2%).

Gasoline shortages started in the Altai region in southern Siberia last weekend, where most filling stations not belonging to major oil companies ceased working because of a lack of fuel.

The Prosecutor's Office started three court cases against Russia's top oil firm Rosneft and Gazprom Neft, Gazprom's oil division, because some of their Altai filling stations did not sell fuel, while others only sold it to holders of special cards.

Gazprom Neft said it had sent an additional 5,000 tons of fuel to the Altai region, exceeding last April's supplies by almost 35 percent.

Novosibirsk region Governor Vasily Yurchenko said there were disruptions in supplies to the region because Rosneft had failed to fulfil all its obligations. He said the region's core supplier Gazprom Neft had agreed to deliver an additional 30,000 tons.

In Murmansk, in the north-west of Russia, Rosneft stopped selling gasoline to individuals and the regional administration sent a telegram to Energy Minister Sergei Shmatko to ensure supplies of fuel for governmental needs.

Analysts say oil companies are reluctant to sell fuel locally, because international prices are rising whilst the government keeps a tight lid on fuel prices ahead of parliamentary elections in December and the presidential poll in March. The Federal Antimonopoly Service says it suspects a cartel agreement between the big oil firms. Prime Minister Vladimir Putin ordered the government on Tuesday to report on the reasons for the deficit.

The situation has been exacerbated by the fact that the sowing season is near, prompting strong demand for diesel for agricultural vehicles like tractors. Russia desperately needs a good harvest this year if it wants to hit the government's inflation target of 6-7 percent and lift the grain export ban it introduced after last year's unprecedented drought.

Finance Minister Alexei Kudrin, who represents the liberal wing of the government, said the root of the problem was in regulating the industry.

"The factors ... in some regions are exclusively tied to administration and regulation of business," he said.

27. Lukoil buys half of Vietnamese shelf project bne April 30, 2011

Lukoil Overseas says it has bought 50% in a product-sharing contract to develop the Hanoi Trough-02 block on the Vietnamese shelf from oil company Quad Energy S.A., Lukoil said in a statement reports wires.

No financial details were provided.

28. Rosneft: Pulling the Rabbit out of the Hat VTB Capital April 28, 2011

Heads up on Rosneft. We reiterate our preference for Rosneft and highlight the company's vast greenfield potential, which further strengthens our Buy rating for the stock. We believe that the changes in taxation that have taken place over the past year, in particular the establishment of return-linked taxation of greenfield projects, are likely to unlock the value of the company's untapped East Siberian and offshore acreage, something that is largely ignored in the current valuations.

New project development in Russia is likely to accelerate. The government's ability to guarantee returns on greenfields could result in the renewed interest of global majors in the Russian E&P business. Rosneft's recent agreements with BP, Exxon and LUKOIL are not accidental and we expect more similar deals to materialise. This, in turn, would speed up the development of the vast greenfields, boosting the long- term value of the Russian upstream business.

Implicit value of untapped reserves is due to re-rate. The Russian oil and gas sector is up for a major re-rating of the market-implied valuation of reserves. We believe that every barrel of undeveloped reserves is to become more precious. This is likely to help the whole sector gradually re-rate toward higher reserve multiples, with Rosneft as the most exposed name due to its first-class greenfield potential.

Rosneft's value potential crystallised. We estimate Rosneft's greenfield potential at USD 110-215bn in current value terms. However, we do not currently account for this in our model, but rather highlight it as one of the potential catalysts for the company's further accelerated growth.

Russian policy making is the key risk: The government is yet to finalise the upstream taxation reform, which would replace the current system of case-by-case tax exemptions with a uniform profit-based mechanism. Until this is done, sustainability of the reform momentum is the key risk to Rosneft's investment case, in our view.

29. Rosneft and LUKoil to explore Arctic together bne April 30, 2011

Russian oil majors Rosneft and LUKoil say they will explore and develop Russia's Arctic regions together. A structure will be created by August 1, Bloomber reports.

Vagit Alekperov, LUKoil's chief executive officer and his counterpart at Rosneft, Eduard Khudainatov, agreed last week to share export infrastructure in the northern Nenets region and cooperate on natural-gas transportation from Rosneft's Vankor deposit and LUKoil's Bolshekhetskaya Depression fields, according to an April 21 statement.

"For now it seems they are just looking at infrastructure, but in reality LUKoil is looking to gain access to reserves," Lev Snykov, an oil and gas analyst at VTB Capital in Moscow, said by telephone Monday.

30. Rosneft: The government cannot agree on a candidate for Chairman of the Board Citi April 26, 2011

Kommersant reported this morning that the Economy and Energy Ministries are divided in their opinions in regards to the candidate for the company's Chairman of the Board. The Economy Ministry reportedly doesn't support the Energy Minstry's idea to appoint Vice President of the Russian Academy of Sciences Alexander Nekipelov, currently an independent director and acting Chairman of Rosneft's Board. According to Kommersant Deputy PM Igor Sechin, the Energy Ministry and Rosimuschestvo all supported Nekipelov but Economy Minister Elvira Nabiullina said in her letter to Igor Sechin that the ministry cannot approve his appointment as Nekipleov doesn't have a status of a "professional trustee". We believe that this appointment, if takes place, will likely keep Igor Sechin's influence in the company unchanged.

Ron Smith

31. Russian–Serbian oil JV seen launching 10 mln tn oil field bne March 25, 2011 Jadran-Naftagas, a joint venture of Russian oil company Zarubezhneft and Serbian oil company Naftna Industrija Srbije (NIS), could launch operations at a field containing 10 million tonnes of oil in Republika Srpska, a constituent republic of Bosnia and Herzegovina, following initial geological exploration operations at the site, Prime-Tass reports, citing Russia’s Energy Ministry.

The total value of investments once operations at the field commence is estimated at $300m, the agency says, and full oil production at the field is expected to be achieved by 2020 amounting to 1 million tonnes annually. 32. Total to invest in Russian Arctic and Caspian bne April 30, 2011

Total hopes to boost output in Russia more than 30-fold over the next decade with exploration in Russia's Arctic projects, reports Bloomberg.

Total plans to produce between 300,000 to 400,000 barrels of oil equivalent a day by 2020, Pierre Nerguararian, head of Total E&P Russie, said in a presentation in Moscow on Friday.

Europe's third-biggest oil producer is working on five exploration and production projects with Russian partners and holds about 12 percent in Novatek under an agreement signed last month at a ceremony attended by Prime Minister Vladimir Putin.

Total's output in Russia is now limited to its 40 percent share of the Kharyaga project.

France's Total is looking to increase its output in Russia in significant fashion over the next decade, aiming to ratchet up its production there by more than 30-fold to 300,000-400,000 barrels of oil equivalent per day by 2020, according to Bloomberg News.

The French company, which has been doing business in Russia since 1989, is counting on projects in Russia's area of the Arctic Circle to help achieve the increased output. Total is working on five exploration and production projects with Russian partners, Bloomberg reported.

33. Vankor, Talakan and Verkhnechonsk export duty breaks removed from May 1 Citi April 27, 2011

Export duty breaks for three key East Siberian fields will all be removed as of May 1st. The order, signed by PM Vladimir Putin on April 25th, was officially published yesterday. While this was largely expected for Rosneft's Vankor field, and there had been speculation this would be the case for Verkhnechonsk (TNK-BP and Rosneft) and Talakan (Surgutneftegaz), according to local press reports the latter two fields were expected to keep their breaks for longer, potentially as much as a year longer in the case of Talakan.

Meanwhile, Vedomosti reports, Rosneft internal documents obtained by the paper indicate that the company is in danger of losing local tax breaks on Vankor, as well. This stems from the field not hitting the cumulative production targets set out in its agreement with local officials at the field's inception.

Our take: Equity investors should take both pieces of news relating to Vankor in their stride. First, while Rosneft is negotiating to alter the agreement with local tax officials, the numbers at stake appear to be relatively modest and not material to equity investors (some $50mn over two years). Second, while the numbers are much larger for the export duty subsidy, it has been clear for some time that the length of the duty breaks for East Siberian fields will be regulated to keep returns on the fields within some prescribed range - 15-20% IRR, say. With the oil price running rampant, it was only to be expected that the holidays should be cut short.

However, the news is negative for the companies owning Verkhnechonsk and Talakan, particularly the latter, as that break could have run as much as a year longer. With production at Talakan currently running at some 3.5mtpa, and with the East Siberian special export duty currently some $150/ton lower than the standard export duty, Surgutneftegaz could lose as much as $750mn from what the market may have been expecting, or c2% of the company's current market cap. The impact on the expected cash flows from Verkhnechonsk should be substantially lower, as the government had already been signalling that this field would lose its privileges sooner rather than later. For the record, lower export duty results in an extra c$80mn per month in cash flows for its partners.

Ron Smith

SECTOR High Tech 34. Ericsson commits to Russia's Skolkovo Innovation Center Ericsson - Press release April 27, 2011

- Ericsson's participation in Russia's Skolkovo Innovation Center formally announced after meeting between Swedish and Russian prime ministers - Draws on the company's 120 years of collaboration with Russia on ICT modernization - Press briefing April 27, 1.30pm CET at Sheraton Hotel in Stockholm

A strategic agreement has been reached in Russia that will help drive innovation and development in the country's science and technology sectors. Under the agreement, Ericsson (NASDAQ:ERIC) will play a key partner role with the non-profit Skolkovo Foundation in the development of the Skolkovo Innovation Center, a high-technology business park aimed at promoting the development of science and technology companies.

Russian Prime Minister Vladimir Putin announced the strategic agreement during an official visit to Sweden, where he held talks with Swedish Prime Minister Fredrik Reinfeldt and representatives of the Swedish business community.

Victor Vekselberg, President of the Skolkovo Foundation, says Ericsson's decision to play a key role in the future of Skolkovo is a major milestone for the project. "We are delighted the Skolkovo Innovation Center will have the opportunity to benefit from the tremendous industry leadership and expertise Ericsson brings to this very important project," Vekselberg says.

Ericsson CEO and President Hans Vestberg says: "This agreement is a continuation and expansion of what has historically been a partnership based on collaboration, a shared spirit of technological enthusiasm and one that emphasizes a localized presence of our combined efforts in Russia. We find the Skolkovo environment suits us very well in our development needs and by joining the Skolkovo initiative, we are taking another step in our 130-year relationship with Russia."

Ericsson's primary contributions to Skolkovo include:

- The creation of a project-oriented Ericsson research and development (R&D) center - Support for further development of Skolkovo's R&D infrastructure through the establishment of an Ericsson Networked Society Lab - Support for the development of Skolkovo University of Technology programs focusing on broadband-based cloud applications, intelligent transport solutions, machine-to-machine (M2M) and other technologies - Support for the development of an efficient regulatory environment, institutions and management principles based on advanced solutions in corporate compliance, technical support, efficiency and safety.

35. Putin calls development of space industry Russia's top priority Ria Novosti May 1, 2011

Development and advancement of the national rocket and space industry is a priority for Russia, Prime Minister Vladimir Putin said on Saturday.

"From the perspective of the country's defensive capacity the rocket and space industry...is an absolute priority along with the nuclear industry and its military branch," Putin said during a meeting with scientists from Penza's Research Institute of Physical Measurements.

About 153 billion rubles will be allocated to the national rocket and space industry this year, which is 30 percent higher than in 2010, Putin said, adding that the branch has shown a 18 percent growth even despite the consequences of the global financial crisis.

"We have the absolute competitive advantage in rocket engineering, many of our partners lag behind us, but in several spheres we have to catch up."

On the whole, the Russian defense industry complex is globally competitive, the premier added.

PENZA, April 30 (RIA Novosti)

36. Sitronics to build intelligent transport system for Moscow Aton April 27, 2011

Sitronics confirmed yesterday (26 Apr) that it will participate in creating an intelligent transport system for Moscow. The project should be implemented by the end of 2011 and we expect it to be prolonged thereafter. The Moscow city government plans to spend RUB6.2bn in 2011 on the programme. The news is positive for Sitronics as the project's value equals about 20% of its FY10 revenues. However, the terms of Sitronics' potential consolidation with Sistema's RTI Systems remains the key determinant for the stock price, in our view.

SECTOR Metals and Natural Resources 37. Russia introduces progressive taxation for nickel UralSib April 27, 2011

Export duty on nickel will be set on a quarterly basis. According to a government decree yesterday, progressive taxation will be introduced for nickel producers (Norilsk Nickel; GMKN - Buy), who will pay export du- ties based on a new formula linked to LME prices. The change comes into effect in a month. The tariff will be revised quarterly and will be based on average LME nickel prices for the last quarter. Currently, the export duty for nickel, as well as for copper, is fixed at 10%. The change in the ex- port duty was previously discussed by the government and generally expected by the market.

New formula to raise incremental export duty to 30%. Based on the new formula, the export duty will apply if the average nickel price is above $12,000/ton. If the price ranges between $12,000/ton and $15,000/ton, the tariff will be equal to 5% of the average quarterly price. If the price is above $20,000/ton, the duty will be calculated by the formula: $20,000 will be de- ducted from the average quarterly price, the difference will be multiplied by 30% and $1,500 will be added to the result. At the current spot nickel price of $26,460/ton, the tariff would be equal to $3,438/ton - the existing tariff is $2,640/ton.

Neutral impact on Norilsk; export duty on copper may follow. Given the average nickel price in 1Q11 of $26,905/ton, we expect the export nickel duty in 2Q11 (staring from May) to be set at $3,572/ton, or around 13%, versus the current 10% flat export duty. We note that new formula for the nickel export duty comes as no surprise for the market and may result in an addi- tional $150 mln in taxes for Norilsk in 2011 or around 2% of Norilsk's 2011E EBITDA of $8.0 bln, which is insignificant for the company. In our Norilsk financial model we have already incorporated an average 12% export duty for nickel in 2011 and, thus, do not expect any major changes to estimates. In our view, the government could raise the export duty on copper (currently fixed at 10%) in 2011 in order to provide additional revenues for the budget, while the introduction of an export duty on aluminium (currently none) is unlikely.

38. Russian Steel and Bulks Watch: April 2011 VTB Capital April 29, 2011

In this issue we are taking a closer look at the recent domestic steel price performance which, after a strong start in January-February, has lately been somewhat mixed.

Early 2011 has seen a strong performance in steel prices that have advanced some 10-35% in a matter of two months. Such growth was primarily driven by both the increase in raw material prices and demand growth. In particular, domestic coal and iron ore advanced more than 20% and 35%, respectively, causing steel producers to hike product prices to offset higher costs.

The cross product performance was different, however, with slab/HRC prices enjoying high demand coupled with a supply squeeze (due to the lack of Brazilian exports) while billet/longs underperformed due to pressure from external factors in the MENA region.

However, since the strong performance in January-February there has been a change as prices were flat in March-April, followed by mild weakness in the second half of April. The latter has been reflected in CIS billet exports declining some USD 30-50/t (or 5-8%), with similar levels of decline seen in HRC prices.

The ongoing weakness is temporary in our view as it is largely attributable to the inevitable consolidation in prices after they went up so rapidly and given that the outlook for 2H11 remains positive. Meanwhile, downside in steel prices is limited as raw material prices remain high and domestic demand is seeing a seasonal pickup.

Earnings-wise, the ongoing consolidation in steel prices is to inevitably have implications for top-line performance in 2Q11. However, these effects are not likely to be significant given that prices remain high and 2Q11 averages will be supported by March highs due to the production/export sales lag.

Domestic prices have been less vulnerable to this weakness so domestically exposed producers like MMK, Evraz and Mechel are better-positioned. The latter two in particular continue to be more integrated and remain our top picks in the sector.

SECTOR Nuclear 39. Medvedev to propose G8 blueprint for greater nuclear safety RIA Novosti April 26, 2011

Russian President Dmitry Medvedev will present proposals for increased safeguards for nuclear power generation at the G8 summit of world leaders in France next month.

"The proposals will concern the responsibility of the countries using nuclear power, including the timeliness of measures in case of emergency," Medvedev said in a special address to mark the 25th anniversary of the world's worst nuclear accident at the Chernobyl nuclear power plant in the Soviet Union in 1986.

"Additional safety requirements are needed for the construction and use of nuclear facilities," he said. The Russian president also called for greater transparency during nuclear emergencies.

Medvedev is visiting Chernobyl on Tuesday, along with a number of Ukrainian officials including President Viktor Yanukovych. "Chernobyl became a lesson for all mankind and made us reconsider the safety and security of nuclear power generation," Russian Prime Minister Vladimir Putin said in a statement.

On April 26, 1986, an explosion at the No 4 reactor at the Chernobyl power plant sent a cloud of radiation over large areas of Europe. At least 30 people died in its immediate aftermath. More than 350,000 people were evacuated from contaminated areas. A 30 kilometer exclusion zone remains in force around the plant.

"Today we mourn for those who died and lived through that tragedy," Medvedev said. The anniversary comes amid the ongoing emergency at Japan's damaged Fukushima Daiichi nuclear plant following the March 11 earthquake and tsunami.

Ukraine, along with the European Union and the European Bank for Reconstruction and Development, is building a new shelter above the ruins of Chernobyl's No 4 reactor and the existing concrete and steel sarcophagus.

An international conference in Kiev last week raised 550 million euros of the 740 million euros needed to finance the new radiation shield. Medvedev said Russia would allocate 45 million euros for the shield's construction in the next two years.

SECTOR Power 40. Bashkirenergo holds conference call to discuss FY10 IFRS results VTB Capital April 26, 2011

News: Bashkirenergo held a conference call yesterday, having released its FY10 IFRS accounts last Thursday. The key takeaways from the call are as follows.

_ Management sees a low risk of Bashkirenergo's tariff being materially reconsidered this year.

_ Bashkirenergo continues to invest in its CHP-5 capex project and management believes that the IRR will be close to 18%, even without the DPM contract.

_ Management intends to be more open and report monthly operating data and quarterly IFRS.

_ The grids are expected to be spun off from Bashkirenergo by the end of this year.

Our View: We welcome the company's intention to be more open and believe that such developments might increase interest from the investor community. At this stage, the news is neutral to slightly positive.

41. Federal Tariff Service revises gencos' forced mode capacity tariffs VTB Capital April 26, 2011

News: The Federal Tariff Service has published a decree with revised capacity tariffs for forced mode assets in 2011. In most cases, tariffs were cut to levels close to market prices (at KOM).

Our View: Among the gencos that we cover, the effect on OGKs is quite marginal, and therefore the decision has only a limited effect. The most significant revision was for TGK 1, which lost about 20% of its average capacity tariff, after it received extremely favourable tariff decisions in December last year. Still, we think that the tariff cuts for this year have been already priced in by the market and it is now the 2012 tariff campaign that is of key interest. Additionally, in our models we assume this tariffs at KOM levels and therefore this news has no effect on our valuation.

42. Fortum's CEO Tapio Kuula gives interview to Vedomosti; comments on investments in Russia VTB Capital April 27, 2011

News: Fortum's CEO Tapio Kuula has given an interview to Vedomosti. The company's main investments in Russia are a controlling stake in TGK 10 and a blocking share in TGK 1. Talking about the regulatory environment, he pointed out that the regulator and political society were listening for Fortum's position and its intention to bring an efficient framework to the electricity market. He also added that they were generally satisfied with their investments in Russia, but pointed out that long-term visibility over reform is highly important. Talking about TGK 1, Fortum is quite satisfied with joint ownership with Gazprom.

On the heating business, Kuula said that despite this market currently not being that profitable, he sees the sector being attractive for investment in the future. One of the reasons is the huge potential to improve efficiency. The company is now in discussion with the government and finding support for the need to invest into the heating segment and to bring the economic stimulus to do so.

Our View: We think Kuula's comments emphasise the importance of visibility over reform for the sector's long-term attractiveness. We welcome the company's dialogue with the government and that it is satisfied with its investments in Russia. Meanwhile, we believe focusing on the changes required to the heating market regulation will add to TGKs' attractiveness and welcome any steps towards introducing more efficient regulation. His comments are also in line with our view that improving efficiency will uncover the big potential and bring greater profitability to heat producers (i.e. TGKs). Overall, we think Kuula's comments are generally supportive for the utilities sector and the fact that Fortum has a strong position on the market is likely to help the sector outlook.

Dmitry Skryabin

43. RusHydro holds analysts meeting - no breaking news VTB Capital April 29, 2011

News: RusHydro's CEO Evgeny Dod held a meeting with analysts yesterday, subsequent to the publication of the FY10 IFRS report on Wednesday (see our RusHydro reports mixed FY10 IFRS results in yesterday's Russia Morning Comment). The main takeaways are below.

- The1Q11RASresultsaretobepublishedtoday.Wethinkthat,ontheone hand, the numbers might be supported by the material increase in production (it almost quadrupled) at Sayano HPP, which is recovering after the accident. On the other hand, we note that the high-yielding European- based generation fleet showed an 11% decline in production over the quarter.

- As concerns the acquisition of UES of Far East (VRAO RX), which is likely to be done under the new share issue planned for summer, we understand that the Far East Energy System is currently poorly regulated, with tariffs and inefficiency both high. For example, RusHydro's power plants are underutilised, thus a rational re- shuffle of the load might already be positive, while increasing operating efficiency is a way to get more benefits in the region.

Our View: Overall, no breaking news. However, it was a good meeting that revealed mixed trends and concerns over water flows and electricity production. The company also gave its outlook on upcoming M&A deals. While we are cautious on the tariff outlook for 2012, we still believe that RusHydro is one of the best long-term exposures to the electricity market and we are therefore reiterating our Buy recommendation for the stock.

Dmitry Skryabin

SECTOR Retail, FMCG 44. Alcohol sector - Not without issues, but cheap Renaissance Capital April 28, 2011

2011 vodka market outlook Regardless of recent government discussions about a sharp excise tax increase in Russia, a more stringent licensing process and general anti-alcoholisation sentiment, we expect a further 5.2% legal vodka market volume increase in Russia this year, on the back of a shrinking illegal market and moderate economic growth. In Poland, the market seems more saturated, and we expect a 2.5% market decline over 2011.

Investment view Both CEDC and Synergy seem undervalued vs their international peers, in our view. CEDC is trading at a 45% discount on 2011E P/E and a 22% discount on 2011E EV/EBITDA, vs its emerging markets (EM) peers, reflecting poor operating performance over the past six quarters and issues with management's credibility and ability to execute. We think Synergy, although delivering a much more convincing operating performance in 2010, and looking cheap on multiples, seems overcapitalised after its last SPO (October 2010), with unclear use of proceeds, although its free float has increased to10.5mn.

We rate Synergy and CEDC BUY, with respective target prices of $57.6 and $17.6 (the latter down slightly, from $18), based on their market consolidation opportunities in Russia and low valuations vs peers and sector M&A multiples.

Synergy: Aggressive growth in alcohol. We think Synergy will continue to add market share, and that in 2012-2014 it could become the biggest vodka producer in Russia. Its new premium spirits distribution contract with William Grant & Sons should be positive for margins, and the re-licensing of its seven production plants in 2011 should not be an issue. We are concerned that Synergy will use its SPO proceeds for the food division ($15mn of proposed 2011 capex), and $35mn of proposed 2011 capex in the alcohol division seems high to us.

We expect CEDC to show signs of recovery no earlier than 3Q11. CEDC remains the biggest vodka producer in the world, and number one and two in Russia and Poland, two of the four biggest vodka-consuming countries. It has a strong brand portfolio covering all segments, and an effective route-to-market structure, which in 2010 was not properly utilised. However, we will look closely at 1Q performance for any signs of a lack of progress.

45. Retailer O'Key's net profit up over 300% in 2010 bne April 30, 2011

Retailer O'Key's IFRS net profit increased by 320% to RUB3bn for 2010, the company said in a statement.

The final result was above a consensus of analyst forecasts earlier compiled by Interfax. Analysts expected O'Key's net profit to increase to 2.766 billion rubles for last year.

46. Synergy reports spirits sales volume growing 15% YoY in 1Q11 VTB Capital April 26, 2011

News: Synergy's spirits sales volumes increased to 2.4mn dal in 1Q11, implying 15% YoY growth.

Our View: We are pleased to see another strong quarter for Synergy in terms of volume growth, as this fully supports our bullish view on the story. We remind investors that the company's volume growth accelerated throughout 2010, posting a strong 15% YoY rise in FY10. We are reiterating our Buy recommendation on the stock and our 12-month Target Price of USD 51.4.

Ivan Kushch

SECTOR Telecom, Internet 47. AC&M releases Russian mobile market figures for March - confirms competition is easing VTB Capital April 27, 2011

News: AC&M has released its mobile subscriber data for March. VimpelCom showed 0.3mn net adds while MTS and MegaFon posted net churns of 0.4mn and 0.03mn subscribers, respectively. Alexander Popovsky, Head of Business Unit MTS Russia, commented that MTS's churn figure was partly related to the cancellation of partnerships with some alternative and regional sales channels.

Our View: The monthly results confirm our view that competition in the Russian mobile market is easing.

We do not think that the decrease in net adds (or the net churn shown by MTS and MegaFon) will significantly affect revenues as the operators will probably concentrate on attracting higher quality customers. However, in our view, VimpelCom will be able to regain part of its share in subscribers (which is very important for the company's management).

We expect that MTS will be able to decrease its dealer commissions slightly in 1Q11 (with a more pronounced drop in 2Q11-4Q11), mainly due to lower payments to regional dealers. VimpelCom, for its part, will have to keep high sales and marketing costs to regain at least part of its revenue market share in 2012.

48. Rostelecom: 2.3-2.4 GHz frequency issuance suspended Renaissance Capital April 26, 2011

Event: Today (26 April), Vedomosti reported that a Moscow court has suspended the issuance of 2.3-2.4 GHz frequencies to Rostelecom and Osnova Telecom, as Yevgeny Roitman has claimed these frequencies. Separately, Kommersant reported that Roitman plans to build a 4G network for APEC and the Kazan Student Games on the 1,900- 1,920 MHz frequencies, the ownership of which he has recently challenged.

Action: Although Roitman has a track record of challenging the ownership of 4G frequencies, we think state-owned Rostelecom is unlikely, ultimately, to be deprived of the 2.3-2.4 GHz frequencies.

Rationale: We cannot predict the court's decision, but we think Rostelecom will likely hold onto the frequencies it won in March 2010.

Ivan Kim

49. Russian internet March audiences picks up on stronger seasonality VTB Capital April 27, 2011

News: TNS-Gallup has released its Russian internet audience estimates for March for the 12-54 year old age bracket according to which the Russian internet audience expanded 14% YoY and 1% MoM in March. The Russian monthly internet audience saw a share improvement to 60% in March, up from 53% a year ago and 45% two years ago. About 36.2mn Russian internet users used the internet at least once a month in March, with 4.3mn monthly users having been added over the past twelve months.

Our View: Mail.ru Group's 33 websites have remained some of the largest contributors to the Russian internet market growth. Together, they attracted 64.3% of monthly internet users, with a combined audience of 27.8mn. Their 15% YoY growth was a slight outperformance compared with the overall pick-up in the Russian internet audience. March's monthly audience for Russia's three largest social networks, Odnoklassniki (100%-owned by Mail.ru Group), My World (100%-owned by Mail.ru Group) and Vkontakte (32.5%-owned by Mail.ru Group) jumped to 18.3mn (+17% YoY), 20.0mn (+8% YoY) and 23.3mn (+22% YoY), respectively.

The impressive audience numbers for the business websites confirm the competitiveness of RBC's exposure to the premium and high-income audience. Over the past year, RBC has increased the business audience of its two flagships. RBC.ru (a business news website) grew more than 19% YoY (to 9.9mn) and RBC-Daily (a daily business newspaper) grew 37% YoY (to 2.4mn), thus accounting for 22.8% and 5.5% of internet users. RBC's 25 websites generated 20.4mn unique monthly users (+13% YoY) with a combined share of over 47%.

Anastasia Obukhova

50. VimpelCom gets eight licences in the Russian Far East VTB Capital April 28, 2011

News: According to RosComNadzor, VimpelCom has obtained 1800 MHz licenses in eight regions of Russia (mainly in the far east of the country).

Our View: Although obtaining the licences is, in itself, a win for VimpelCom after a long battle for the limited resource in the Russian Far East, we think that with mobile penetration in the Russian regions (excluding Moscow and St Petersburg) exceeding 140%, the construction of 2G networks will not have any significant impact on the company's financials. Together, these eight regions accounts for approximately 2.4% of the Russian population.

We note that one of the eight regions is the Primorsk region (1.4% of the Russian population) where NTK operates. The latter, which is the tenth largest Russian mobile operator, is currently up for sale by the Korea Telecom Group (Reuters has reported a preliminary valuation of USD 0.5bn). Thus, in our view, VimpelCom (as the only potential bidder after the Federal Anti-Monopoly Service did not approve the appeals of MTS and MegaFon) will have much greater bargaining power in negotiation with the seller.

We also note that VimpelCom now lacks 2G licences for only two small Russian regions (the Republic of Buryatia and the Zabaikalsk region) which account for 1.5% of the Russian population.

Victor Klimovich

SECTOR Agriculture 51. INTERVIEW: Kazakhstan tries to beef up exports bne April 26, 2011

Kazakhstan wants to take advantage of its proximity to the world's largest beef importers. The country's abundance of pastureland and history of nomadic herding is a good start, but investment in modern technologies and good breeding stock are going to be equally important.

Speaking to bne shortly before his promotion from chairman of KazAgro to minister of agriculture, Asylzhan Mamytbekov likens Kazakh meat to a flavoursome wild apple, rather than one ripened in an orchard. "The product is organic, there are no growth hormones, unlike in many meat-exporting countries. We have not produced genetically modified plants for cattle fodder, our animals graze where they choose on the steppe," he says.

In 21st century Kazakhstan, few people still take their animals to the high summer pastures, living in yurts while they fatten their herds. But meat is still at the heart of Kazakh cuisine and culture. At banquets and family gatherings, the centrepiece is the huge platter with meat piled high on a bed of noodles. Beshbarmak - the national dish - is usually made with mutton or horsemeat, but can be beef, camel or even fish in the areas near the Caspian Sea. It is washed down with fermented mare's or camel's milk. "Kazakhs are the second-highest consumers of meat in the world," they like to tell foreigners. "The first are wolves!"

Herd mentality

In the Soviet times, Kazakh meat was sent elsewhere in the union, justifying the 3.5m heads of cattle in the country. But since then, the number of cattle has fallen to under 2m and herds of other animals dwindled as well. The 16m-strong population was catered for, but there was little incentive to produce more due to the restrictions on meat and dairy product transport between Kazakhstan and Russia.

That has all changed with the launch last year of the Customs Union between Russia, Kazakhstan and Belarus. "Thanks to the Customs Union, we have not only a single customs area, but a single veterinary space. It has opened a market of 170m people," says Mamytbekov.

In March, Kazakh First Deputy Prime Minister Umirzak Shukeyev announced plans for a massive increase in beef exports - to 60,000 tonnes a year by 2015. KazAgro, which has the dual role of ensuring domestic food security and increasing exports, will be the main player supporting with the project from the government side.

Part of the rationale for the attempt to boost beef production is that Kazakhstan is surrounded by some of the world's largest beef importers. According to Mamytbekov, Russia imports 1m tonnes of beef a year, China 200,000 tonnes and South Korea around 300,000 tonnes. "Being near to these countries and with favourable conditions to increase production, it would be a sin not to take advantage of the situation," Mamytbekov tells bne.

However, sufficient grazing space won't be enough. Local cattle don't meet international standards for genetic quality and internationally popular breeds of cattle such as Hereford, Angus and Charolais haven't been bred in the country. "We need to improve the gene pool of cattle," says Mamytbekov.

As such, Kazakhstan kicked off an import programme in October by flying in some 2,040 Angus and Hereford cattle from North Dakota. This was part of a $50m deal between North Dakota's Global Beef Consultants and the Kazakh government, which will also includes building breeding facilities and a feedlot.

Over the next five years, Kazakhstan will import nearly 70,000 head of cattle, mainly from the US, Canada, Australia, and north European countries including the UK, Ireland and Scandinavia. But while the North Dakotan cattle are already accustomed to harsh winters and severe wind chill like that on Kazakhstan's northern steppes, extra investment will be needed for animals imported from more temperate climates. Building special barns for some cattle will add further to the costs of the project.

Beef buzzword

KazAgro is also looking into more effective refrigeration for its meat products. According to Mamytbekov, locally manufactured refrigerators keep products fresh for just three days; introduction of newer technologies will increase this to two to three weeks. This, combined with completion of the Western China-Western Europe highway, will make it possible to increase exports to Europe in refrigerated lorries. This is a common theme across Kazakhstan's infrastructure for products from grain to wool - a need for investment into modern farming techniques, storage facilities and transportation infrastructure.

Beef is the current buzzword in government agricultural circles, but demand for lamb and mutton is also high, and in the foothills of the mountain ranges of south and east Kazakhstan there are good conditions for production of fine wool. Kazakhstan also has its own particular delicacies. While the opportunities for exporting camel steaks or fermented mare's milk may be low, Mamytbekov considers there are good prospects for exporting horsemeat, especially to Europe. "France imports more than 40,000 tonnes of horsemeat a year and Italy also imports a lot. They are very interested," says Mamytbekov. "Investment is needed to make sure our meat will comply with the standards of the importing countries, and this will require some effort. However, horsemeat is on the menus of France and Italy, and globally consumption is growing. The demand is there, and in principle, we can satisfy it."

52. Miratorg announces aggressive expansion plans; competition in meat production intensifies Renaissance Capital April 27, 2011

Event: Yesterday (26 April), Reuters interviewed Victor Lynnik, co-owner of Miratorg (Russia's largest privately owned pork producer), who indicated that he plans to invest RUB60bn ($2.16bn) through to 2013 in expanding the company's production facilities. This will include capex of RUB24bn on beef production (48,000 tpa capacity), RUB20bn on pork (11 new pork farms in the Belgorod region, alongside its 12 existing farms; doubling production to 210,000 tpa) and RUB15bn on poultry (105,000 tpa capacity in the Bryansk region). Estimated capex/tonne of production is $15,245 for beef, $5,805 for pork and $3,200 for poultry. The projects will be financed through government-subsidised debt from VEB, Sberbank and Gazprombank. In addition, Miratorg will invest about $80mn in vegetable production in the Krasnodar region (30,000 tpa, mainly sold frozen and packaged through the same distribution channels as its meat production). Miratorg remains McDonalds' biggest meat supplier in Russia (5-10% of Miratorg's revenue) and is planning further investment in its meat processing facilities. Miratorg is targeting revenue of RUB38bn (+10% YoY) and net income of RUB4bn (+25% YoY, 10.5% net margin) in 2011, and is eyeing an IPO in three-to-five years.

Action: The announcement indicates there will be growing competition and consolidation in the Russian meat industry. Rationale: We observe that all the major meat producers in Russia - Miratorg, Cherkizovo, Rusagro, Agro-Belogorie - are actively using government-subsidised debt to invest in pork and poultry production, with new capacity launching in 2011- 2015. This could result in meat overproduction, leading to a price correction and squeezed margins. We think the announcement justifies our assumed gradual reduction in meat producers' margins.

Ulyana Lenvalskaya

53. Putin pushes for spring sowing 'catch-up' RIA Novosti April 29, 2011

Russian Premier Vladimir Putin on Thursday ordered the pace of spring sowing to increase. Speaking at a government meeting, Putin said only 4 million hectares had so far been sown, half as much as last year's spring sowing.

"This is the result of the late spring," the premier said. "We should catch up on the lost time in the weeks to come." He said 150 billion rubles ($5.4 billion) had been earmarked to finance spring sowing this year.

Russia, one of the world's largest producers of wheat, barley and rye, banned grain exports last year following a drought and wildfires. The 2010 crop was 60.9 million tons, 37 percent less than in 2009. President Dmitry Medvedev said the ban would be lifted after 2011's harvest was gathered in.

SECTOR Automotive 54. Stable outlook for European auto suppliers after strong rebound in 2010 Moody's May 1, 2011

Frankfurt am Main, April 28, 2011 -- The rebound in 2010 car production volumes and a significantly reduced cost base have allowed European automotive suppliers to enter 2011 with very solid credit metrics, says Moody's Investors Service in its annual report on the sector. While the rating agency does not expect further material improvement in profit margins, it expects earnings to remain stable year on year. The outlook for the sector is also stable.

Moody's expects car production volumes in Europe to be slightly up in 2011 and believes overseas markets should allow Europe-based suppliers to achieve mid-single digit revenue growth in 2011.

The rating agency anticipates that the earthquake and tsunami in Japan will impact revenues and earnings in Q2 2011 because of ripple effects in the automotive supply chain. However, the rating agency does not expect a substantial negative impact from the sovereign debt crisis in Europe.

In its report, Moody's notes that raw material prices are back on the agenda and pose a threat to profit margins in 2011. Despite rating agency estimates that auto suppliers can pass on around 50% of increased commodity costs to customers, suppliers will still retain an estimated 50% share of the commodity-related price risks.

Moody's believes M&A activity will pick up in 2011-2012 as potential buyers have left the financial crisis behind and now have healthy balance sheets. Credit markets are again willing to provide the required financing, whereas sellers have the opportunity to exit based on multiples calculated on strong current earnings.

Moody's notes that, despite the excitement about electric cars, combustion engines together with hybrid vehicles will probably dominate the market beyond 2030. Until pure play electric vehicles become the norm, the focus of the auto industry will be to reduce fuel consumption and emissions of combustion engines. This requires investments in R&D but also offers opportunities for the supplier sector.

The report entitled "European Automotive Parts Manufacturers: Moderate Revenue Growth Expected Despite Flat Car Sales in Europe" is now available on www.moodys.com.

55. KAMAZ ups 2011 targets Renaissance Capital April 27, 2011

Event: Today (27 April), RBC Daily reported that the management of KAMAZ plans to revise its 2011 targets and business strategy through 2020. According to the head of KAMAZ, Sergey Kogogin, the company will increase its 2011 production target to 38,300 from 31,000, and plans to raise its 2011 revenue and EBITDA forecasts. KAMAZ targets a 40% market share in 2011.

Action: Positive for KAMAZ, in our view.

Rationale: The company's previous sales forecast implied just 10% YoY growth, which management now views as too conservative. The upward revision (with 36% YoY growth) does not seem too bullish to us, given a solid heavy commercial vehicle sales performance (our forecast is 23% YoY growth in 2011, which we think is conservative), and KAMAZ's strong performance in 1Q11 (sales up 34% YoY). We expect changes to the company's long-term strategy to account for sales under the forthcoming cash-for-clunkers programme for trucks, which will be supportive for volumes.

Ivan Kim

56. VEB helps carmaker Sollers' JV with $1bn loan bne April 30, 2011

Russia's VEB bank says it will help new carmakers get going with a RUB39bn ($1.39bn) credit line to carmaker Sollers for its joint venture with Ford, Prime Minister Vladimir Putin.

Sollers has pulled out of talks to create a joint venture project with Italy's Fiat and instead would team up with America's Ford.

Ford agreed Feb. 18 to set up a 50-50 venture with Moscow-based Sollers to assemble and distribute vehicles in Russia with plants near St. Petersburg and in Tatarstan.

SECTOR Aviation, shipbuilding and defence 57. Armavia airline starts flights to Venice on Russia's Superjet-100 Ria Novosti May 1, 2011

The Armenian airline Armavia opens on Sunday regular passenger flights from Yerevan to Venice and back using Russia's newest commercial plane, the Sukhoi Superjet 100, company's press service said.

The flights will be made regularly once a week on Sundays, the company said.

The newest Russian aircraft was delivered to Armavia at a ceremony in Armenia on April 27. Next day it completed its first passenger flight from the capital of Armenia to Moscow carrying 90 passengers.

The Superjet 100 is a family of medium-haul passenger aircraft developed by Sukhoi in cooperation with U.S. and European aviation corporations, including Boeing, Snecma, Thales, Messier Dowty, Liebherr Aerospace and Honeywell.

The aircraft is capable of carrying 75-95 passengers up to 4,500 kilometers.

Armavia, which bought four of the planes in 2007, plans to use the aircraft to conduct flights to Moscow, St Petersburg, Sochi and Ukraine.

Currently, there are 17 models in production at different stages of completion.

The company plans to manufacture at least 14 Superjet 100s this year, and 25 in 2012, and intends to sell 35% of them to the United States, 25% to Europe, 10% to Latin America, and 7% to Russia and China.

YEREVAN, May 1 (RIA Novosti)

58. The Russian MiG-35 was not selected for India's USD 10bn fighter jet contract - negative for UAC Metropol April 29, 2011

India's Defense Ministry has shortlisted France's Dassault Aviation SA and the European Aeronautic, Defense & Space Co. to build 126 fighters valued at more than USD 10bn, which is the biggest fighter-jet aircraft order in 15 years. US Boeing and Lockheed Martin, as well as Russia's United Aircraft Corporation, were not selected for procurement. UAC nominated its MiG-35 fighter for the Indian tender.

The news is negative for UAC, since India could be a base customer for the aircraft, which resulted in a lower price for the aircraft to the Russian Defense Ministry and traditional customers worldwide. However, we believe the impact on the stock will be short-lived as UAC was not expected to win the contract.

We did not include this contract in our model, anticipating that UAC will sell 37 MiG- 35 aircraft between 2013-2025. Therefore, we will not update our model, and reiterate our BUY recommendation for the stock and fair price of USD 0.023.

Andrey Rozhkov

SECTOR Media 59. April audience share of CTC Media's flagship picks up in Russia on new 'family for adults' content VTB Capital April 28, 2011

News: Based on TNS data, CTC Media's combined audience share for its three Russian networks in the week 11-17 April reached 12%. This is close to 4Q10 levels (12.1%) and above the 1Q11 audience share performance of 11.7%.

Our View: CTC and Domashny were the key contributors to the improvement in audience share. CTC's audience share reached 7.9% (vs. 7.2%-7.4% in March- early April) on the back of the strong performance from the original Russian content launched in the new format in early April: Closed School (a mystery thriller series aired daily at 9pm), Traffic Light (a new comedy series aired daily at 8pm) and a new season of the popular Daddy's Girls (aired at 7pm). In the reported week, these generated audience shares of 10.8%, 7.7% and 8.8% respectively. The next season of The Voronins also cushioned the flagship's overall audience share (8.6%).

The Moscow audience share numbers for the past week (18-24 April) reveal an even stronger audience share recovery for CTC: 7.3% vs. 7.0% in the week 11-17 April and 6.3% in 1Q11. We also attribute the strong audience ratings to CTC gradually shifting the content focus from reaching 'families for kids' to 'families for adults', in line with the strategy announced last autumn and reiterated in March.

We remain bullish on the stock (Buy, 12-month Target Price of USD 33) which trades at 9.9x 2011F EBITDA. This suggests a 24% discount to the average of Eastern European peers.

SECTOR Coal 60. Raspadskaya Coal - whither from here? Troika Dialog April 29, 2011

We reduce our target price for Raspadskaya Coal to $8.20 per share but reiterate our BUY recommendation on the stock, as the additional risks arising from a possible change in ownership are outweighed by the stock's undemanding valuation.

The stock has significantly underperformed the sector since news about a possible change of control in the company hit the market in February. In our view, investor concerns are well justified, as the new owner may not have incentives to adhere to high standards of informational disclosure and corporate governance demonstrated by the company now. The result of this could be a certain de__rating caused by an exodus of large institutional investors, as happened under similar circumstances with another coalminer, Belon.

That said, we do not see the picture all in dark hues. We believe that four main options should be considered, including the sale to another Russian miner or steelmaker, a foreign player, a financial investor of Russian origin, or, finally, consolidation of the 80% stake by Evraz Group in case the competition reveals no satisfactory bids. At this point, all of these outcomes seem possible, but only one of them (the first) looks ominous for portfolio investors.

The stock trades at a reasonable 2011EEV/EBITDA of 7.4 and looks rather cheap on 2012E multiples. Offering a 30__40% discount to global peers, we think most of the risks are already in the price and valuations are beginning to look attractive. In our view, the current share valuation offers positive optionality, which should appeal to investors with a positive view on coking coal.

SECTOR Infrastructure, Construction & Real Estate 61. Aeroflot: Passenger growth will demand additional terminal capacity UralSib April 26, 2011

Terminal D capacity at Sheremetievo might not be sufficient to satisfy aggressive passenger traffic targets. Today Vedomosti re- ported that Aeroflot (AFLT RX - Buy) expects passenger traffic at Termi- nal D at Sheremetievo airport (which is owned by the airline) to reach maximum capacity of 14 mln passengers already in 2011. Therefore, further expansion of the company's business is possible only through utilization of other terminals. Earlier the company announced it expects its overall traffic to be up 23% YoY to 17.3 mln passengers in 2011, and we estimate it to increase 30% between 2010 and 2015.

Sheremetievo airport's capacity is sufficient to meet Aeroflot's medium-term needs. Sheremetievo airport has six terminals: A (con- struction to be completed in August 2011), B, C, D (owned by Aeroflot), E and F, with the total annual passenger traffic capacity of 35 mln pas- sengers. Therefore, we do not see any potential shortage of terminal capacity for Aeroflot in the medium term, as it has access to all Sheremetievo terminals. We also think a bigger problem for the company might be the limited runway capacity of Sheremetievo airport, which stands at 25 mln passengers only (versus total airport carrying passenger capacity of 35 mln passengers). But that is to be resolved through the construction of a third runway and modernization of dispatch control equipment, to improve coordination of the two existing runways and increase the number of landings/take-offs per hour - a decision recently approved by Prime Minister Vladimir Putin. Finally, recently a decision was made to consolidate terminals at Sheremetievo and Vnukovo airports to make a single airport with a single servicing company under state control; which we assume should ease Aeroflot's access to both airports' terminal capacity.

News neutral for the stock. We view the news as of minor importance for Aeroflot's stock, as the company has access to other Sheremetievo terminals and, hence, is unlikely to meet any shortage of terminal capacity. Also, the forthcoming consolidation of Sheremetievo and Vnukovo terminals under a single umbrella should ease access to the terminal capacity for the airline carrier. We maintain our Buy recommendation in the name.

Anna Kupriyanova

62. Mostotrest subsidiary Transstroymekhanizatsiya wins USD272mn contract to overhaul Vnukovo runway VTB Capital April 26, 2011

News: Transstroymekhanizatsiya (TSM, a subsidiary of Mostotrest) has won the contract to overhaul and extend Vnukovo airport's runway #1 for RUB 7.6bn (USD 272mn). Construction works are due to be completed in 2012.

Our View: TSM has already started construction works to overhaul the intersection of Vnukovo's two runways, for RUB 900mn (USD 32mn), due 1 July 2011. The latest contract, however, is much more significant: as at 31 December 2010, TSM's entire pipeline was RUB 15.9bn (USD 568mn) while Mostotrest's consolidated pipeline was USD 7.7bn. With TSM's production forces already on the spot, this contract is all the more profitable.

We are therefore reiterating our positive view on Mostotrest as well-positioned to benefit from Russia's urgent need to upgrade and develop its transport infrastructure, along with the state promoting the swift implementation of its projects.

Elena Sakhnova

63. Will Sheremetyevo get a management company soon? Renaissance Capital April 28, 2011

Event: Today (28 April), Kommersant reported that Credit Suisse and Troika Dialog have prepared future development scenarios for Sheremetyevo airport. They reportedly suggest choosing from two possible plans: 1) to first find a foreign management company for the merged Sheremetyevo terminals (including Terminal D), and then merge Sheremetyevo with Vnukovo; or 2) first merge Sheremetyevo with Vnukovo, then appoint a foreign company to operate the airport. The investment banks suggest three alternative compensation plans for the management company: 1) a contract with compensation equal to the EBITDA share; 2) a contract with a call option for a share in a 2013-2014 IPO; and 3) making the management company a minority shareholder.

Action: We think the best option for the airports and Aeroflot would be to appoint a management team for Sheremetyevo before the merger with Vnukovo, and give the management company a stake in Sheremetyevo.

Rationale: We think finding a professional management team for Sheremetyevo as soon as possible should be Aeroflot's first priority, in order to improve airport operations, boost the customer experience, and attract additional traffic, in our view. The alternative would be more time-consuming and would delay these benefits. Credit Suisse and Troika suggest providing the airport management company with a minority stake through a $200mn additional share issue. On Ernst & Young's estimates for Sheremetyevo, this would give the management company an 8.7% stake in the airport, while Aeroflot would get 8.1%, taking into account its 52.82% stake in Terminal D.

Ivan Kim

SECTOR Chemicals, Fertliser 64. Acron: Conference Call Takeaways VTB Capital April 28, 2011

Yesterday, Acron held a conference call. As well as providing a positive view on the market trends in 2011, it also commented on its strategy towards financial investments and potential M&A activities. We believe that Acron is likely to improve its financial performance in 2011 on the back of the positive market environment, but still see the stock as fairly valued. We are reiterating our Hold recommendation.

Positive market outlook Acron believes that 2011 will be another good year, especially 2H11. The company sees high oil prices, instability in the Middle East (which could reduce supplies and delay the launch of new capacity), rising grain prices and the uncertain outlook for Russia's harvest as supportive. We also have quite a positive view on the market for this year, and forecast Acron's EBITDA rising 18% YoY in 2011 to USD 404mn. Still, this environment might prove unsustainable and we expect the company to face serious challenges during the market's cyclical downturn thereafter.

Financial investments Acron does not rule out the sale of its holding in Apatit once the conflict with Yara has been resolved (10.3% in Apatit is held by Nordic Rus, a joint venture between Acron and Yara). The company also said that it had no plans to sell its 8.1% stake in Silvinit, but if these shares were to be converted into Uralkali stock (Acron is challenging the swap terms in courts), it might sell the shares on the market.

M&A and capex Acron confirmed that it was looking at potential M&A opportunities. In particular, it wants to acquire gas assets as a hedge against gas price increases, but also does not rule out business combinations with other fertilizer assets. At the same time, Acron is targeting a net debt/EBITDA below the 2010 level of 2.7x (its loan covenants put the ceiling at 4x). We believe that this might be challenging in M&A deals, as the company also has significant capex. In particular, its 2011 capex is planned at USD 313mn (including USD 197mn for the phosphate project to be launched in mid- 2012). We also believe that capex requirements and potential M&A activities make a stronger case for the sale of financial assets.

Elena Sakhnova

65. India ready to buy potash at $450/tonne Renaissance Capital April 28, 2011

Event: Yesterday (27 April), Reuters published an interview with Udai Shanker Awasthi, managing director of Indian Farmers Fertiliser Co-operative Ltd (IFFCO). IFFCO negotiates import deals on behalf of the fertiliser industry and is backed by the government. Awasthi said that Indian fertiliser companies will not import potash in the current financial year if they cannot get a 10% discount on the spot price. According to Awasthi, current spot prices are around $500/tonne, and Indian companies expect at least a $50/tonne discount, or a price of around $450/tonne. He added that firms in the country are negotiating with suppliers, and could reach a deal within two weeks.

Action: The news is positive for potash producers, including Uralkali and Silvinit, in our view.

Rationale: Previously the Fertiliser Association of India announced that the industry would halt potash imports because of excessive price growth, and that it was ready to pay no more than $420/tonne. Currently, Indian firms are ready to buy potash at $450/tonne, and expect to sign contracts in May. Some discount to the spot market is reasonable, in our view, due to high volumes: India consumes about 10% of global potash production. However, the size of the discount will be subject to negotiation between consumers and producers. Mikhail Safin

66. Sistema to enter chemicals business? Renaissance Capital April 29, 2011

Event: Sistema CEO Mikhail Shamolin said yesterday (28 April) that the holding plans to add a third major business unit within its "base assets," alongside telecoms (MTS) and oil and gas (Bashneft). According to Vedomosti, Sistema is looking to buy assets in the chemicals industry. Currently, Sistema manages Bashkiria's 17.5% stake in Polief, but according to the article, it plans to increase its stake to the controlling level. Vedomosti also reports that Sistema is interested in buying Tolyattiazot, Sibur-Minudobreniya and Minudobreniya.

Action: Chemicals is a new industry for Sistema. We think the impact on the stock would depend on the purchase prices of the assets, timely investor education on the merits of the acquisitions, and efficient target-seeking at the holding level.

Rationale: If Sistema takes this leap into the chemicals industry, investors might be cautious, as they were when Sistema entered the oil and gas business. It took time for Bashneft's value to be reflected in Sistema's share price, and we reckon it has not yet revalued in full. Competition for chemicals assets might be quite high (Acron, Phosagro and Norway-based Yara are also reportedly targeting Sibur- Minudobreniya), creating a price risk. Otherwise, the purchase of these assets fits Sistema's new private-equity-like approach to investments, in our view.

Ivan Kim

67. Uralkali to close Berezniki 1 plant Renaissance Capital April 28, 2011

Event: Yesterday (27 April), Uralkali announced that its board of directors had resolved to end potash and carnallite production at the Berezniki 1 plant and mothball the facility. Production at the plant will cease in 1H12. The current capacity of Berezniki 1 is 270k tpa of potash. To compensate for this reduction in capacity, Uralkali plans to optimise production at its other plants (Berezniki 2, Berezniki 3 and Berezniki 4), without increasing investment costs. Uralkali estimates the cost of closing Berezniki 1 at RUB1.7bn ($60mn). Also, in 1H12, the company plans to increase its capacity by 1.5mn tpa to 7mn tpa.

The board of directors also approved new regulations for the appointments and remuneration committee, the incentivisation of top management and the annual report. The incentivisation system will last for three calendar years starting from the quarter when Uralkali completes its combination with Silvinit. Remuneration will depend on total shareholder returns relative to the company's peers, and will be adjusted to account for the volatility of the Russian stock market vs the US market. The absolute risk-adjusted stock performance will also influence remuneration.

Action: The news is neutral for the company, in our view.

Rationale: The Berezniki 1 plant is located near the flooded Mine 1, and currently processes ore from the company's other mines, which has to be trucked in, at relatively high cost. Uralkali intends to achieve lower costs and higher profitability by shuttering the plant, which should not decrease production, as the company will boost production elsewhere. After the Uralkali and Silvinit consolidation, carnallite will only be produced at former Silvinit facilities.

Mikhail Safin

SECTOR Pharmaceutical 68. St Pete to build nine new pharmaceutical plants in 2012-2013 bne April 30, 2011

St. Petersburg will get nine new pharmaceutical plants worth RUB25bn in the next two years. St. Petersburg Governor Valentina Matviyenko said at a forum Tuesday.

"Today, the creation of a pharmaceutical cluster (in St. Petersburg) is well under way," Matviyenko said.

The volume of investments into pharmaceutical projects in Russia currently amounts to RUB40 billion, Industry and Trade Minister Viktor Khristenko said at the same forum. Of the total, foreign investments amount to RUB25 billion, Khristenko said.

The share of Russian pharmaceutical producers on the domestic market is expected to increase up to 50% by 2020 from the current 24%-25%, Khristenko also said.

69. Pharmstandard: 20% of revenue at risk? Renaissance Capital April 27, 2011

Event: President Dmitry Medvedev addressed the issue of drug use among Russia's youth on 18 April, and has asked the Ministry of Health to prepare a study on codeine-containing medications (1.2% of drug addicts use codeine, according to Russian officials). The Federal Drug Control Service has proposed that medications containing codeine be moved to the prescription list (from the OTC list) from 1 May. The government has also received proposals to ban codeine. Codeine is used in painkillers, as well as cough and chest congestion medications. According to the Ministry of Health, medicines containing codeine are sold without a prescription in the UK, Israel, Canada, Poland and Australia.

Action: Negative for Pharmstandard shares, in our view.

Rationale: If approved, a ban or Rx classification could affect Pharmstandard's sales of Pentalgin, Codelac and Therpincod, which contain codeine (19.7% of FY10 revenue, combined). The company is trying to mitigate these risks by developing variants of these medicines without codeine (it already sells non-codeine Codelac), but we think 20% of revenue is at risk. Media criticism (Nezavisimaya Gazeta) of Pharmstandard for profiting from drug addicts - coinciding with a presidential statement on the abuse of drugs containing codeine, which are sourced in retail stores at low prices - together imply high regulatory risks and negative sentiment for Pharmstandard, we believe. The fact that Pharmstandard has distributed the cash it had on its balance sheet at the beginning of FY11 to buy local shares, including from its founder and controlling shareholder, Victor Kharitonin (39.2% stake), adds to the negative sentiment, in our view.

Natasha Zagvozdina

GOVT REFORMS, REGULATIONS, ECONOMICS, REGIONS 70. CORRUPTION WATCH: New bill requires officials to declare incomes RIA Novosti April 28, 2011

Russian President Dmitry Medvedev submitted to parliament on Thursday a bill requiring government officials to disclose their incomes.

Medvedev has made the fight against widespread Russian corruption a key policy, although the results of the policy have so far been slim.

"Now it will no longer be an act of good will to disclose or not to disclose this information, it will be a requirement," Medvedev said at a meeting with senior members of the ruling United Russia party.

The bill also requires banks and registration agencies dealing with property transfers to disclose information on anyone seeking a government position.

The new provision will also apply to officials' family members and civil servants.

71. Russia may join WTO without Georgia consent - FM Lavrov RIA Novosti April 26, 2011

Russia may join the World Trade Organization without getting any approval from Georgia, Foreign Minister Sergei Lavrov said on Tuesday.

"I do not want to go into details on how it could be done without Georgia's consent," Lavrov said during his current visit to Abkhazia. "All I can say is these opportunities are stipulated under the WTO statute." Georgian-Russian WTO talks resumed on March 10 in Switzerland after being suspended for almost three years following Russia's decision to lift economic sanctions against Georgia's breakaway republics of Abkhazia and South Ossetia in April 2008.

The second round of talks is expected to start by the end of April.

Russia has been in membership talks with the 153-nation WTO for 17 years and remains the only major economy still outside the organization. The European Union gave its formal backing to the country's entry bid in December last year after Russia agreed to trim timber export duties and rail freight tariffs.

However, Georgia says it will not allow Russia to join the global free trade club unless it cedes control of customs in the breakaway Georgian regions of South Ossetia and Abkhazia.

Tbilisi earlier admitted that Russia could in theory join the WTO without Georgia's consent but said it would be unprecedented.

Georgia severed diplomatic relations with Russia in August 2008 when Moscow recognized the independence of the two former Georgian republics following a five- day war, which started when Georgia attacked South Ossetia in an attempt to bring it back under central control.

72. Russia needs skills boost to improve investment climate - Medvedev RIA Novosti April 27, 2011

Russia must improve the skills of its labor force to boost its investment climate, President Dmitry Medvedev said on Wednesday.

"No matter what is done to attract capital to Russia, it will not come to us at all if ... investment is not backed by a skilled labor force," Medvedev told a meeting after visiting a Moscow region technical school.

His economic aide Arkady Dvorkovich said last month that the investment climate in the country was very poor. Russia suffered a $22.7 billion capital outflow in the fourth quarter of last year.

73. Russia to create scientific center on Svalbard - Chilingarov RIA Novosti April 26, 2011

Russia will create a scientific center in Barentsburg in the Svalbard Archipelago, polar explorer parliament member Artur Chilingarov said on Tuesday.

"A decision is being discussed on building a Russian research center on the base of the existing observatory," Chilingarov said. "This will be in Barentsburg," he continued adding that the construction may begin next year.

Svalbard belongs to Norway, however, the archipelago was established as a free economic and demilitarized zone.

Chilingarov said that he met with Svalbard authorities to discuss the construction of the research center and they fully understand the need to comply with the agreement on the Russian presence on the archipelago.

A Russian floating research station near the North Pole could open its doors for annual tourist trips by April 1, Chilingarov said last month.

The Barneo Research Station, just 150 km from the North Pole, has been in operation for 10 years. It is converted into a tour base for about a month each year.

Chilingarov made headlines in 2007 when he led a Russian expedition that planted a flag on a contested portion of the Arctic seafloor.

Russia will submit a well substantiated claim to oil- and gas-rich Arctic territories at the UN in 2013, Chilingarov said last year.

The previous bid was rejected because the evidence Russia presented was based on what was deemed to be "somewhat inaccurate" data, he said.

In 2001, Russia was the first of the five Arctic states to file a request to extend its continental shelf border beyond the standard 200-mile limit. The UN turned down the request, citing a lack of evidence to support the claim.

Under the Convention on the Law of the Sea, UN member states can submit claims to extend their boundaries beyond a 200-mile exclusive economic zone. A country has to provide conclusive evidence that its continental shelf extends beyond that point.

UKRAINE INVESTMENT 74. American Chamber of Commerce Meeting with Mr. Mykola Prysiazhniuk, Minister of Agricultural Policy and Food of Ukraine American Chamber of Commerce in Ukraine April 28, 2011

Today the American Chamber of Commerce held a meeting with Mr. Mykola Prysiazhniuk, Minister for Agricultural Policy and Food of Ukraine.

The purpose of the meeting was to discuss recommended solutions to the issues of major concern to the international business community that are stifling additional investment into this important sector of Ukraine's economy. The following points were clearly presented to Minister Prysiazhniuk regarding the grain trade:

The industry welcomes the release of corn for free export although it was unfortunate it took so much time to take this correct decision. The Minister was asked to recommend the Cabinet of Ministers to introduce free exports for barley and wheat around May 15 when the preliminary grain harvest forecasts for 2011 should be available, allowing old stocks to be exported in order to empty grain storage facilities from the previous harvest and to prepare for the new crop.

It was discussed during the meeting that the VAT refund period that expires on July 1st according to the new Tax Code could be extended until the existing stocks from the 2010 harvest are exported from the country. Moreover, Minister Prysiazhniuk encouraged the participants to provide contributions into the improvement of the new Tax Code that would benefit the development of the agricultural industry pledging his support.

The Minister was urged to introduce free market principles without preferences to certain players through introduction of regulations and legislation that provide predictability and stability in the system of agricultural policy which will enable new domestic and foreign investment to support the new harvest and sowing campaign.

The Minister clearly stated he did not support draft law #8163 and suggested to grain trading companies to work jointly with the Ministry to develop new legislation that would prevent monopolization trends in the grain market.

A consensus was reached between grain trading companies and the Ministry that the grain market would function on the principles of transparency, predictability and stability and the government would provide at least a 2-months notice before taking any decisions that would influence core activities of grain trading companies.

Agricultural industry representatives stated that they were against forced crop rotation and stated there were other ways to further develop agricultural sector of Ukraine and to reach 80 million tonnes of crop utput by 2016. At the meeting grain trading companies supported Minister Prysiazhniuk's initiative to organize training sessions for farmers in order to educate them in international grain market operations.

Addressing the introduction of grain export duties, the grain trading companies clearly stated that they opposed any restrictions of free market operations, especially export quotas. However, introduction of export duties was considered as a second best option in order to ensure price stability and food security in a global environment with high grain process but should only be a temporary solution.

Addressing the introduction of grain export duties, the grain trading companies clearly stated that they opposed any restrictions of free market operations, especially export quotas. However, introduction of export duties was considered as the preferred second best option once the government has decided to interfere in the market in order to ensure price stability and food security in a global environment with high grain prices but should only be a temporary solution.

The grain trading companies strongly opposed the idea of controlling crop rotation by the government. Grain traders are convinced that it is the farmer who knows best what to plant on their field in order to maximize his revenues and in the same time maintain the value of the soil and there is no need to have government involvement into this process.

The American Chamber of Commerce strongly believes that free market functioning provides the best answer to creating a competitive agricultural industry that has the potential to expand production significantly, guarantee food security for the population, and ensure Ukraine is able to play a vital role in feeding an increasing global population.

International businesses have also discussed with Minister Prysiazhniuk and his colleagues a very serious issue of counterfeit chemicals on the Ukrainian market, as a large amount of grain is jeopardized due to counterfeit pesticides. The situation in the seeds market, including artificial problems with the import and poor quality of domestic seeds leading to poor harvests and increased prices, was also discussed. These issues could be tackled within the framework of the Working Group between the Ministry and business community representatives.

75. Astarta targets 76% growth in 2011 sugar output BG Capital April 28, 2011

In a conference call yesterday CEO Viktor Ivanchyk revealed that Astarta (AST PW) secured a 348,000t quota for internal beet sugar production in 2011 and said the company plans to fully use the quota. He further noted that all of Astarta's sugar beet was sown in optimal conditions and that he expects the company's beet yield to grow to 48t/ha this year from 35t/ha in 2010. Astarta sees a balanced domestic sugar market this year with aggregate production at 1.85-1.95mmt and consumption at near 2.0mmt, and therefore no significant changes in the currently high domestic sugar price (US$ 1,100/t, including VAT).

Alexander Paraschiy: Management's 2011 operational guidance implies sugar output growth of 76% y/y. We conservatively project 50% y/y growth, which will nonetheless be the main driver of sales and earnings in 2H11. We note that Astarta's outlook for Ukraine's beet sugar output is in-line with the government's quota for internal sugar production of 1.86mmt. Based on the early production outlook we are also upbeat on sugar prices and we remain bullish on AST PW.

76. Cabinet votes to annul corn export quotas Concorde Capital April 28, 2011

The Cabinet of Ministers voted to discontinue corn export quotas at a meeting yesterday, according to its website. Quotas for corn exports were introduced in October 2010 at 2 mln mt and increased to 5 mln mt in late March 2011. Quotas for other grains are being kept as planned until the end of June, though the government could consider their abolition in mid-May if domestic grain stocks satisfy the Cabinet, according to the Ministry of Agricultural Policy.

Yegor Samusenko: We expect most of the companies sitting on corn stocks to export immediately, as the government has proposed introducing duties on corn exports of up to a maximum of between 12% or EUR 20 per mt, effective a month following passage of the relevant law (currently a draft has passed in the first reading of three in parliament). We see Industrial Milk Company (trading expected to begin on WSE in May) focusing more on the corn and thus likely to benefit from quota abolition (corn amounted for 60% of inventories as of end-2010, 1/5 of 2010 revenue). Overall, we continue seeing the government's agricultural policy as sporadic and driven by short-term stimulus.

77. Energy sector priority of economic reform action plan for 2011 Kyiv Post April 28, 2011

The national action plan for 2011 on the implementation of reforms in Ukraine outlines the priorities of the energy sector, Head of the Presidential Administration Iryna Akimova has said.

"At the national level, the adoption of the state program of privatization is designated a priority for 2011, as are the amendments to the law on privatization. It concerns a group of facilities that are subject to privatization in 2011, and the reduction of the number of facilities that are not subject to privatization. This primarily concerns the energy sector," she said at a briefing on Wednesday.

Read more: http://www.kyivpost.com/news/politics/detail/103050/#ixzz1KnrueEbo

78. Fresh round of protests to kick off on May 14 Kyiv Post April 29, 2011

The organizers of last autumn's protests against controversial tax changes are planning to kick off a new round of demonstrations on May 14.

Speaking with the Kyiv Post, Oleksandr Danylyuk said he and other pro-democracy and business rights activists plan to gather big crowds and could set up tents again on what they describe as "anger day."

It will be an attempt, Danylyuk said, for all Ukrainians to express their dissatisfaction with the rollback on democratic and media freedoms one year under the presidency of Viktor Yanukovych, as well as the worsening social-economic situation in the country.

Read more: http://www.kyivpost.com/news/nation/detail/103196/#ixzz1KtdT2h00

79. Khlib Investbud buys 155,000 ton of grain over past ten days Kyiv Post April 26, 2011

Khlib Investbud Ltd., the trade agent of the State Food and Grain Corporation of Ukraine, from April 11 to April 21 signed forward contracts worth UAH 267.8 million to buy 155,000 tonnes of grain.

"The pace of the realization of the [forward purchase] program is expanding," reads a Thursday press release of the State Food and Grain Corporation.

As reported, earlier Prime Minister Mykola Azarov demanded that Minister of Agrarian Policy and Food Mykola Prysiazhniuk invigorate the use of funds allocated for forward grain purchases.

Read more: http://www.kyivpost.com/news/business/bus_general/detail/102713/#ixzz1KcFnIwr U

80. Kyiv Economic Court returns over 86 ha of land to capital Kyiv Post April 27, 2011

The Prosecutor General's Office (PGO) of Ukraine has uncovered numerous violations of the legislation by the Zhytlobud Cooperative while taking control over a land plot 86 hectares in area in Holosiivsky district of Kyiv

Kyiv Economic Court has now returned this land plot to state ownership.

The PGO's public liaisons department reported on April 26 that an instruction of Kyiv City Council dated October 1, 2007 that transferred a land plot 86.63 hectares in area was in violation of the Land Code of Ukraine, the Housing Code of Ukraine, and the law of Ukraine on the preservation of cultural heritage.

Read more: http://www.kyivpost.com/news/city/detail/102984/#ixzz1KhvjaX6B

81. Leading American Fashion Brand GAP Enters Ukrainian market Jones Lang LaSalle - Press release April 29, 2011

Jones Lang LaSalle Advised on Flagship Store in Ukraine

Leading American fashion brand Gap will open their first flagship store in Kiev in June 2011. Located at 50 St. Khreschatyk, Gap will occupy three levels of the property with floor space totaling 1200 sq m.

Anna Chubotina, Head of Retail in the Ukraine at Jones Lang LaSalle, said: "This deal marks the leading transaction of the year for high street retail in Kiev and emphasizes the recovery of this segment of the market. The entrance of such a well- known international retailer to the Ukrainian market demonstrates the rising interest of international operators. Following on from UK entrants Topshop, New Look and River Island in 2010, the German brand New Yorker and Spanish Oysho (Inditex Group) have opened their first stores in Kiev this year with other well-known retail chains actively monitoring opportunities."

82. Luhanskteplovoz nears large state order BG Capital April 26, 2011

Ukraine's state-run railway monopoly Ukrzaliznytsya announced plans to place a 40- locomotive order with Luhanskteplovoz (LTPL) in 2012. Ukrzaliznytsya is also considering the possibility of a 3-5 year fixed-price order for at least 20 locomotives annually from Luhanskteplovoz.

Alexander Paraschiy: The news definitely looks encouraging for Luhanskteplovoz's mid-term production outlook, but we note that Ukrzaliznytsya's wagon and locomotive purchase plans often fall flat owing to perennial financing problems.

83. Naftogaz returns 12.1 bcm of gas to RosUkrEnergo Dragon Capital April 29, 2011

News: The state oil and gas monopoly Naftogaz Ukrainy has reportedly returned all of 12.1 bcm of gas it owed to RosUkrEnergo pursuant to a Stockholm arbitration court ruling. (Energobusiness)

Dragon view: It is yet unclear if RosUkrEnergo will sell this gas volume in Ukraine or export to Europe. In the latter case, Naftogaz will have to continue to import high gas volumes in the coming months to meet domestic demand which we estimate at around 40 bcm this year (imported part). This may bring Naftogaz's 2011 gas imports to 52 bcm, or 11% above our current forecast.

84. Nalyvaichenko: Ukraine should offer gas alliance to Russia Kyiv Post April 28, 2011

The chairman of the political council of the Our Ukraine Party, Valentyn Nalyvaichenko, has said he believes that instead of the Customs Union, Ukraine should offer a gas alliance to Russia.

"If we talk about friendship with Russia, then we should start as a beginner, as was done by Belgium, Luxembourg and the other three countries that created the European Union, and they formed the Coal and Steel Community, rather than a customs union. Well, let's create a gas alliance. This will be Ukrainians developing gas fields in Surgut - and we do have experts who would be ready to work on wells, even in Iraq. We can work in Russia and receive a friendly price, rather than a customs, tariff and political price, which means that [the friendly price] will be many times lower than that Ukraine is currently obliged to pay," he said live on Channel 5.

Read more: http://www.kyivpost.com/news/business/bus_general/detail/103094/#ixzz1KnsD80q R

85. Presidential decree orders household electricity tariff hike in May and approval of gas price increase schedule in November Dragon Capital April 29, 2011

News: President Viktor Yanukovych's economic reform action plan for 2011 released earlier this week calls for the National Energy Regulating Commission (NERC) to approve further household electricity tariff hikes in April and December and finalize a schedule of gas price increases in November. (Interfax)

Dragon view: The news implies two unspecified electricity tariff hikes in May 2011 and January 2012. The previously announced schedule provided for increases of 15% in April (already enacted) and 15-20% in June. An earlier tariff hike would be positive for GenCos, entailing higher tariffs for power producers already in 2Q11 rather than in 2H11. However, it remains unclear if the NERC will act quickly in the remaining days of April to comply with the presidential decree.

The decree on bringing gas prices to an economically justified level is expected to be issued in November. Ukraine's earlier agreement with the IMF stipulated a 50% gas price hike in April, which was later revised to 20% for April and another 10% for June. Still, even those tariff increases were postponed, which led the IMF to suspend its lending program among other reasons.

86. Prosecutor: Kyiv lost tens of millions of hryvnias due to Pylypyshyn Kyiv Post April 28, 2011

Criminal cases opened against former head of the Shevchenkivska district state administration Viktor Pylypyshyn regarding the illegal transfer of property have been combined into one case, Kyiv Prosecutor Anatoliy Melnyk has said. "These criminal cases have been combined into one case," he told journalists in Kyiv on Wednesday.

He recalled that one criminal case concerned the transfer of a 1,500-square-meter building on Peremohy Avenue. "In fact, a private firm took possession of the building for Hr 240,000," Melnyk said. He also noted that the minimum value of this facility was Hr 10 million and that the building had not been included in a privatization program.

Read more: http://www.kyivpost.com/news/city/detail/103089/#ixzz1KnqQsrgM

87. Residential housing prices may have bottomed out Kyiv Post April 29, 2011

Hit hard by the 2009 global recession, Ukraine's residential real estate market remains among the world's weakest performers, but there are signs of recovery in the premium segment.

Ukraine scored among countries with the sharpest price decline, according to the latest Global Housing Price Index, which is published by Knight Frank, a London- based property consultancy.

According to the report, residential property prices continued to fall in 2010, by about 8 percent.

Read more: http://www.kyivpost.com/news/business/bus_focus/detail/103181/#ixzz1KtdgbSmn

88. Steel makers report negative results for 1Q11 Phoenix Capital April 26, 2011

Event: Ukrainian steel companies reported their financial statements for the 1Q11 on Friday April 22nd, which turned out to be much worse than we expected. Enakievo Steel (ENMZ) posted negative EBITDA of $45 mln, which increased 1.5x Y-o-Y, net losses almost doubled to $52 mln. Ilyich Iron and Steel Works' (MMKI) net losses increased by a factor of 11.6 Y-o-Y to $62 mln. Azovstal's (AZST) net losses decreased twofold Y-o-Y to $31 mln, and negative EBITDA declined by 32x Y-o-Y to - $1.9 mln.

Impact: The news is negative for AZST, ENMZ, MMKI.

Rationale: Massive losses by these quoted steel companies during 1Q11 were disappointing.

Though we partly attribute of such results to the increasing costs, rising prices for finished products should have partly made up for these costs. We think that transfer pricing practices caused these results. As the differences between prices for inputs and outputs are going to worsen in 2Q11, we don't anticipate any triggers from the operating performance of steelmakers in the short term.

Roman Topolyuk

89. Stirol plans UAH 600 mln in CapEx in 2011 Concorde Capital April 26, 2011

Stirol plans to invest UAH 600 mln in CapEx in 2011, Interfax reported on Friday, citing Chairman of the Board Sergey Pavlyuchuk. The majority of the investment will be channeled to decreasing consumption of natural gas, targeting a decrease in gas usage by 30-40 cubic meters per 1 mt of ammonia. Major repair works are scheduled for summer, with full production to be restarted in September. Pavlyuchuk also announced plans in 2011 to increase ammonia output by 2x y-o-y to 1.27 mln mt, urea output by 2.4x y-o-y to 922 ths mt and to produce 640 ths mt of ammonia nitrate, which was not produced in 2010.

Antonina Davydenko: We view the announced plans are achievable given that 1Q11 sales grew by 2.6 times y-o-y. The management's announcement to load the plant at close to its full capacity indicates the availability of cheap gas. However, it is still questionable whether such output growth will result in an earnings increase considering Stirol's history of transfer pricing.

90. Ukraine urges global efforts to tackle man-made disasters RIA Novosti April 26, 2011

Ukraine, which has been dealing with the aftermath of the Chernobyl nuclear accident alone for many years, has called on the global community to consolidate efforts to tackle similar disasters.

The ex-Soviet state marks on Tuesday the 25th anniversary of an explosion at the No 4 reactor at the Chernobyl Nuclear Power Plant on April 26, 1986, which sent a cloud of radiation over large areas of Europe and affected about 9 million people.

"Chernobyl has become a global challenge, which can be dealt with successfully only through consolidated efforts by the global community," Ukrainian President Viktor Yanukovych said in an address posted on his official website.

Yanukovych lamented the fact that Ukraine had to tackle the aftermath of the Chernobyl accident alone for two decades, and said that no country is immune to similar disasters, as Japan's nuclear crisis following the March 11 earthquake and tsunami clearly shows.

Ukraine, along with the European Union and the European Bank for Reconstruction and Development, is building a new shelter to cover the ruins of Chernobyl's No 4 reactor and the existing concrete and steel sarcophagus.

An international conference in Kiev last week raised 550 million euros of the 740 million euros needed to finance the new radiation shield. The president said the donations would allow Ukraine to build the new sarcophagus by 2015.

91. Ukraine's agriculture ministry initiating cancelation of corn export quotas Kyiv Post April 27, 2011

The Ukrainian Agricultural Policy and Food Ministry has proposed that the Ukrainian government cancel the corn export quotas that were to be in place in the country until June 30, 2011.

The ministry's press service reported that after analyzing balance sheets of grain stocks, the ministry came to the conclusion that Ukraine can supply two million tonnes of corn to foreign markets by the end of the current marketing year (July 2010-June 2011).

"After the analysis, there are ending stocks of two million tonnes of corn by the end of 2010/2011 marketing year, which allows the canceling of corn export quotas in the near term," reads the press release.

Read more: http://www.kyivpost.com/news/business/bus_general/detail/102917/#ixzz1KhwHA1 1s

92. Ukrnafta will pay more for oil & gas production Art Capital April 26, 2011

In April 21, Verhovna Rada adopted changes to the Tax Code. According the changes, payments for using mineral resources were increased by 1.5 times, particularly for oil extraction - from $18.6 to $27.9 per tonne, royalty for oil and gas extraction - by 7.1%.

Stanislav Zelenetskiy: The news is moderately NEGATIVE for Ukrnafta stocks. The increase in payments for using mineral resources and oil & gas royalty will cut Ukrnafta's sales by about $65-70mn in 2011 (less than 3% of the company's sales in 2010).

93. Ukrnafta: Oil price up 16% to $104.3/bbl Dragon Capital April 26, 2011

News: Ukrainian oil averaged $104.3/bbl at the latest domestic auction held on Apr. 22, up 16% from the auction in March, bringing the YTD average price to $91.3/bbl (+89% y-o-y and +52% YTD). Volume sales stood at 1.35 MMbbl (+4% m-o-m), with Ukrnafta accounting for 97% of total supply. (Interfax)

Dragon view: The latest auction price values Ukrainian crude at a 12% discount to Urals FOB Novorossiysk (up from -18% at the previous auction). Current domestic oil price dynamics is in line with full-year forecast for Ukrnafta of $100/bbl.

94. US court summons Firtash Kyiv Post April 29, 2011

The United States District Court in Manhattan, New York, has summoned Ukrainian billionaire Dmytro Firtash and Swiss-registered gas trading company RosUkrEnergo in connection with a lawsuit that was filed against them this month by ex-Prime Minister Yulia Tymoshenko.

According to court documents obtained by the Kyiv Post, both Firtash and RosUkrEnergo - along with 100 unamed defendents - have 21 days after service of the summons to "serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure."

Read more: http://www.kyivpost.com/news/politics/detail/103168/#ixzz1Ktcv4awW

95. Yanukovych pushes diversification of Ukraine's energy transit once more bne April 29, 2011 President Viktor Yanukovych has reiterated Ukraine's strategy to diversify its role in European energy transit. Speaking on a trip to Azerbaijan on Thursday, he said Ukraine wants to take an active part in the implementation of the Euro-Asian Oil Transport Corridor (EAOTC) project, reports Interfax.

"Ukraine also wants to actively participate in this project, particularly through the provision of transit services. As for European consumers, they will get the shortest route, and therefore a cost-effective way to deliver Caspian oil to make full use of their oil refining capacity," he said in an interview with Azerbaijan's Trend news agency published on Thursday.

Yanukovych noted that during the World Economic Forum in Davos this January, Ukraine had signed bilateral agreements on the transportation of oil and liquefied natural gas, and that this created the necessary basis for the further development of cooperation.

Yanukovych pointed out that Azerbaijan has been delivering oil to the Kremenchuk oil refinery in central Ukraine for one-and-a-half years, and that it is planned to increase these deliveries. He also noted that Ukraine began transiting Azerbaijani oil via the Odesa-Brody pipeline to Belarusian consumers this year. That route was started as Ukraine's interest in diversifying its transit routes away from near total reliance on Russian oil and gas exports to Europe matched the mood in Minsk, which saw the cost of Russian crude imports rocket in 2010. However, with Belarus having secured cheaper Russian oil as part of the customs union with Russia and Kazakhstan that began operating at the start of the year, as well as Moscow's position as a last port of call for a bail out for cash-strapped Minsk, reports surfaced recently that Belarus has stopped taking crude from Odessa-Brody already.

The opening of the Odessa-Brody route has also seen interest from Azerbaijan at one end, and Poland at the other, to start an oil trade bypassing Russia. "I want to mention that regular supplies of Caspian oil via the Odesa-Brody pipeline not only increase the capacity of the oil transport system, but also strengthen the energy security of the region and Europe as a whole, confirming Ukraine's role as a reliable transit country," Yanukovych said.

He said that at a time when the world oil prices are steadily rising, Europe could consider the EAOTC project in a new light.

Yanukovych said this year Ukraine could supplement the current contracts for the transit of four million tonnes of Azerbaijani oil to Belarus with the transit of at least three million tonnes of oil to European refineries.

"In particular, we plan to substantively discuss with Poland the transportation of Caspian oil to Slovakia, the Czech Republic, Hungary and other consumers in Central and Eastern Europe as part of the first stage of the EAOTC project," Yanukovych said.

96. Yanukovych: Ukraine to make every effort for young people to stay working in Kyiv Post April 26, 2011

Ukraine will make every effort for young people to stay working in villages, President of Ukraine Viktor Yanukovych said at a meeting with the community of the Sharnopol village when visiting Cherkasy region.

According to the presidential Web site, when talking with the residents of the village the president asked them about the most pressing problems. It turned out that among such problems is the state of roads in the region.

Yanukovych assured that the government would focus on the construction and repair of roads. "We will settle the issue this year," said the president.

Another issue that troubles the local community is the prospect of rural youth. The president noted that the state would make every effort to create programs for young people for them to stay working in villages.

Read more: http://www.kyivpost.com/news/nation/detail/102892/#ixzz1KcEb6SrU

97. YASK to boost coke production by 6.4% Y-o-Y Phoenix Capital April 28, 2011 z Event: The management of Yasynivka Coke disclosed during its AGM, held on Apr. 27, its current expectations of coke output in 2011, expecting 1.65 MT, which is 6.4% higher Y-o-Y. The incremental increase in production will be provided by coke battery No. 4, which YASK plans to commission in September-October, achieving full capacity load for this battery by the end of the year. Currently the coke plant is continuing pre-commission works at the facility. YASK also plans to spend more than $9 mln in 2011 for other capital spending, including maintenance.

Impact: The news is positive for YASK.

Rationale: The fact that Yasynivka Coke has not skipped plans to launch coke battery No. 4 in 2011, thus increasing coke capacities by a third, is positive. The current expected total coke production is not largely different from our latest forecast of 1.7 MT. YASK enjoys stable demand for its product, which will enable it to report a solid performance for 2011.

Roman Topolyuk

KAZAKH INVESTMENT 98. KazRosGas to develop Imashevskoye field Visor Capital April 29, 2011

The CEO of GazProm, Alexei Miller and his counterpart at National Company KazMunayGas, Kairgeldy Kabyldin, have signed an agreement, for KazRosGas to operate and develop the Imashevskoye gas and condensate field in Kazakhstan. The explored reserves of the Imashevskoye field are estimated at 128.7bcm of gas and 20.7m tonnes (ca 165m bbls) of gas condensate.

99. Oil Minister Mynbayev hopes for Karachaganak resolution in 1H2011 Visor Capital April 26, 2011

Kazakhstans Minister of Oil and Gas, Sauat Mynbayev, yesterday announced during an online conference, that Kazakhstan hopes to reach agreement with the Karachaganak Petroleum Operating consortium on mutual claims in 1H2011. The next meeting with consortium members is scheduled for 10 May. Owners of KPO (Karachaganak Petroleum Operating include BG (BG/ LN), Lukoil (LKOD LI)(LKOH RU), Eni SpA (ENI IM)(E US), and Chevron (CVX US). Resolution of the various claims which have delayed the projects Phase III expansion would likely have a positive share impact on the consortium members. We currently do not have BG, Lukoil, Eni or Chevron under formal research coverage.

100. Tele2 starts operating under its own brand in Aktobe Visor Capital April 26, 2011

Tele2 AB (TEL2B SS)(TEL2A SS), which owns local mobile operator Mobile Telecom- Service, yesterday announced that it has started providing services in the Aktobe region. Coverage will include the major settlements in the region, including its administrative centre Aktobe, which holds approximately 70% of the regions population. By the end of 2012, the Company plans to achieve 100% coverage across the Aktobe region.

The announcement is in line with the Companys previous comments on starting operations under its own brand in Aktobe, Astana, Almaty, Kokshetau, Taldykorgan, Uralsk, Ust-Kamenogorsk, Pavlodar, Karaganda and few other cities of Kazakhstan in 2Q2011. We therefore do not expect any share price impact for Kazakhtelecoms (KZTK KZ)(KZTKp KZ)(KZTA GR). We currently have Kazakhtelecom under formal research coverage, available to our clients.

CENTRAL ASIA INVESTMENT 101. New railway to link Central Asia and Persian Gulf bne April 28, 2011

A new railway is to link Central Asia and the Persian Gulf, under an agreement signed by four states in the region.

The line will run from Uzbekistan via Turkmenistan and Iran to Qatar, bypassing Afghanistan.

The agreement was signed by Foreign Ministry officials from the four countries in Ashgabat on April 25.

"This is a legally binding agreement... which allows us to start creating a new geo- economic space," Reuters quotes Turkmenistan’s Foreign Minister Rashid Meredov as saying.

His Uzbek counterpart Elyor Ganiyev said the deal was “in the interests of the Central Asian region and the Gulf."

No information has been disclosed on the cost of the project or when the line will be built.

102. Tajikistan to increase gold production bne April 26, 2011

Tajikistan plans to increase gold production from 2.25 tons in 2010 to 3 tons in 2011, Energy and Industries Minister Gul Sherali said April 22, Asia Plus reported.

Tajikistans largest gold producer, Chinese-Tajik joint venture Zeravshan Gold Company (ZGC), is currently being modernised. This will allow the company to boost production to 1.5 tons this year, Sherali told a Dushanbe press conference.

103. Turkmenistan: Belarusian Potash Company to export fertilisers from Turkmenistan bne April 29, 2011

Belarusian Potash Company plans to start exporting fertilisers from Turkmenistan after the plant it is building is completed, Turkmenistan.ru reports.

BPC is currently building an ore-dressing and processing plant in Turkmenistan which is due to be commissioned in 2013.

“Given that our experts are participating in construction of this plant and the whole engineering pool of our company works here, we would like to see exports of potash fertilizers going through one company – BPC,” the company’s CEO Vladimir Nikolaenko told BelTA news agency.

"We see the construction of the plant in Turkmenistan, we understand that in two or three years it will come into operation, and management of Turkmenchemistry, just like us, is interested to work together in the export market,” he added.

104. Turkmenistan: China lends $4.1bn to Turkmengaz bne April 27, 2011

The China Development Bank is to lend Turkmenistan $4.1bn to develop the Ioujno- Elotenshoie field and increase exports.

Turkmengaz chief executive officer Amanaly Khanalyev signed the loan agreement in Ashgabat yesterday April 26, AFP reported.

Ioujno-Elotenshoie is Turkmenistans largest gas field. Located in the east of the country, it contains around 21,000 billion cubic metres of natural gas.

Turkmengaz also signed a second agreement with the China Development Bank and PetroChina to guarantee deliveries of Turkmen gas to China, Turkmengaz executive Achir Aliev said during the signing ceremony.

105. Uzbekistan and China create gas pipeline joint venture bne April 29, 2011

A new joint venture has been set up to design, build and operate the third stage of the Uzbekistan section of the Turkmenistan–China gas pipeline.

The Chinese and Uzbek governments have signed an agreement on the creation of Asia Trans Gas, Uzreport writes.

The company will be responsible for building a spur pipeline to supply the main pipeline - which opened in 2009 - with an additional 25 billion cubic metres of gas a year.

BELARUS INVESTMENT 106. Belarus' average wage up 6.8% on month in Mar 2011 to Br1,537,200 bne April 30, 2011

Belarus' average wage in nominal terms reached 1,537,200 Belarusian rubles (Br) [$508.2] in March 2011, up 6.8% month-on-month, an official with the National Statistics Committee told Prime-Tass.

107. UFS Investment Company values Belarus government stake in MTS at $700-800m bne April 28, 2011

UFS Investment Company says that the stake held by the Belarusian government in the Belarusian-Russian MTS mobile phone company is worth between $700m and $800m, Pavel Vasiliadi with UFS told reporters in Minsk last week.

"Russian MTS mentioned $600m, but we include a faster increase in profits per user and broadband figures in Belarus," he said.

UFS is in "active talks" to buy the cash-strapped Belarusian stake.

UFS Investment Company is an international investment company managing private, corporate and sovereign portfolios with subsidiaries in Russia, the United States, Cyprus, the Cayman Islands and offices in England and Singapore.

EURASIA INVESTMENT 108. Armenia postpones construction of new copper smelter bne April 28, 2011

Plans to build a new copper smelter in Armenia have been put on hold for several years, PanArmenian reports.

According to the director of the Zangezur Copper-Molybdenum Combine, Maxim Hakobyan, the volume of copper currently produced in Armenia is insufficient to supply the planned new smelter.

“We came to the conclusion that it is necessary to postpone establishment of the smelter for several years and increase volumes of copper production in the republic,” PanArmenian quotes Hakobyan as saying.

Armenia needs to produce between 60,000 and 80,000 tonnes of copper a year for the smelter to be viable, he added.

109. Armenia: Microsoft to open innovation centre in Yerevan bne April 26, 2011

Microsoft plans to open an innovation centre in Yerevan on May 11, News.am reports.

The centre, which will be based at the State Architectural University, is the first in the South Caucasus.

Worldwide, Microsoft operates over 80 innovation centres, which are intended to encourage innovation and local software development.

The Yerevan centre is being supported by the Armenian government, USAID, the Armenias Enterprise Incubator Foundation and Microsoft Armenia.

110. Azerbaijan increases production of machinery and equipment by 19% APA-Economics April 26, 2011

In January-March, 2011, production of machinery and equipment, vehicles, cars and production of cars and trailers made AZN 33.2 mln, up 19.3% from a year ago.

State Statistical Committee says that 208 MAZ truck, 89 Lifan cars were produced in Azerbaijan. All of trucks and cars have been handed over to clients.

Note that, as of April 1, 2011, there was AZN 23.6 mln-finished goods or 10.4% of finished goods on country industry at warehouses of enterprises, down 8.2% from a year ago.

111. Azerbaijans insurance market expected to double during next 2 years APA-Economics April 27, 2011

AZN 180 mln insurance premium is expected to be collected in Azerbaijans insurance market during the first quarter, Executive Director of Azerbaijan Insurers Association Azer Aliyev told APA.

According to him, if the draft law on compulsory insurance is affirmed, the potential of market may be increased by AZN 50-60 mln: This draft law is considered as important social protection instrument for the population. Because these compulsory insurances purpose to compensate for the damages of properties of legal and individual persons.

He noted that, total premiums were forecasted to be reached AZN 300 mln in 2012, up 2 times from 2010.

Remind that, AIA has been in operation since 2006.

112. Max hires Saipem for deep drilling Visor Capital April 27, 2011

The Company commences the spudding of an appraisal well at Zhana Makat and enters into contract with Saipem for a deep well planned to begin in August 2011. We do not expect any share impact from this news.

Max Petroleum PLC (MXP LN) yesterday announced it had started drilling its next appraisal well at the Zhana Makat field, ZMA-ET2. The well is planned for 1,500m depth into the recently discovered Triassic reservoir at the field.

The Company also reported signing a contract with Saipem, for a National 1625 DE deep drilling rig. As previously reported, the Company plans to begin drilling its first pre-salt exploration well, NUR-1, with the rig in August 2011.

We do not expect any significant share impact from the news. We currently have Max Petroleum under formal research coverage, available to our clients.

SOUTHEAST INVESTMENT 113. Turkey plans a Black Sea canal, bigger than Suez canal bne April 30, 2011

Turkey's prime minister on Wednesday announced what he called a "crazy and magnificent" plan to build a new waterway to the Black Sea, promising that the tanker-clogged Bosporus through Istanbul would soon be used for sports and boat trips, the Moscow Times reports.

The waterway, to be named "Canal Istanbul," would link the Black Sea to the Sea of Marmara, which leads to the Aegean Sea. It would be 40 to 45 kilometers long, some 25 meters deep and about 150 meters wide, Recep Tayyip Erdogan said during campaigning ahead of elections on June 12.

114. Bulgaria approves a new law on renewable energy Balkans.com

April 27, 2011

Bulgaria approved a new law on renewable energy on Thursday that aims to cool a surge in solar and wind power projects that threatens to overwhelm its ageing power grid and boost electricity prices.

The law changes the government's obligatory purchase of electricity produced from renewable energy generators at high, fixed prices, which has led to a jump in projects totalling over 6,000 megawatts -- well above the country's grid capacity.

The centre-right government says that Bulgaria needs only 2,000 MW of new green energy generation to meet a target, which it committed to the European Union, of supplying 16 percent of its energy consumption from renewable energy sources by 2020.

The government aims to put a cap on wind and solar projects to keep electricity prices in the EU's poorest country at affordable levels and avoid public discontent. Power and heating bills eat up much of Bulgarians' incomes.

In a bid to unclog the system, the new law demands that investors pay a connection fee of 50,000 levs ($36,820) per planned megawatt when signing a preliminary contract.

It also calls for the preferential price to be fixed at the time that the wind or solar energy park is built, and not when a preliminary contract is signed, as the initial law draft envisioned.

It also decreases the obligatory long-term purchase power contracts to 20 from 25 years for solar energy and to 12 from 15 for wind.

Under the new law, the energy regulator will set annual preferential feed-in tariffs, which pay per unit of electricity produced from low-carbon energy by the end of June each year.

The government said the measures would scare away speculators and also encourage investors to speed up projects and not wait for solar panels and wind turbine prices to drop.

"CLOSING DOORS"

Wind and solar energy associations criticised the changes, some of which were made in the last minute in parliament, saying they will effectively block the growth in renewable energy and will put at risk projects that have already been started.

Dozens of Austrian, Spanish, U.S. and German companies have rushed to build new wind and solar energy plants, raising the wind farm capacity to 336 MW last year from 103 MW in 2008 and solar to 10 MW from 1.4 MW two years ago.

"We have lost two years, hoping that this government will support renewable energy development. What we see now is that the new law is closing the door for new projects," said Nikola Gazdov, chairman of the Bulgarian Photoltaic Association.

A senior official from the ruling GERB party indicated that the preferential price for electricity from photovoltaic installations is likely to be cut by 30 percent in June, while the cut for wind will be smaller.

Gazdov said investors do not oppose the cut in the feed-in tariffs, but the lack of predictability and the fact they would have to build an installation before they know at what price the power will be purchased.

The new law establishes better incentives for green energy from biomass and waste disposal, which unlike solar and wind will create more jobs, officials say.

There are no biomass energy plants in Bulgaria at present.

115. Bulgaria: Neochim posted BGN 17.7 million non-consolidated net profit for the 1Q 2011 ELANA

April 29, 2011

Neochim posted BGN 17.7 million non-consolidated net profit for the 1Q 2011, which is far above the 1Q 2010 result of BGN 2.4 mil- lion. The period is seasonally strong for the company. The sales improved by 27.5% y-o-y to BGN 88.9 mil- lion. The share of the Natural Gas costs in the total costs of the company decreased to 93% as compared to 95% a year ago.

The share of the fertilizer producer solidly improved after the news in good volumes and it's probable to see some profit taking next session. The position add- ed 60% y-o-y and 50% since the beginning of the year .

116. Bulgaria: Privatization of Bulgartabac Holding attracted attention again ELANA

April 28, 2011

The privatization of Bulgartabac Holding attracted attention again. The Government will offer 5.88 million shares for sale (79.83%) and is looking for strategic investor . The Privatization Agency announced the requirements toward the candidates. The company should:

- has minimum EUR 1 billion sales during last 3 years,

- has production capacity to process minimum 12 000 tones tobacco per year,

- produce at least 35 billion cigarettes per year,

- processminimum10000tonestobaccoandto produce minimum 20 billion cigarettes last financial year - etc.

117. Bulgaria's capital, Sofia, has the lowest office space rent prices in Europe Balkans.com

April 28, 2011

The Bulgarian capital Sofia has the lowest office space rent prices in Europe but the supply continues to increase, according to a survey of Forton International. The rental prices of office space in Sofia declined by 2% in the first quarter of 2011 compared with the last quarter of 2010, and saw a drop of 7.7% compared with the first quarter of 2010. In downtown Sofia, average office space rent is about EUR 12/square meter, while the offices in the outskirts cost about EUR 8/square meter. Thus, the prices have gone back to the 2004 level when downtown offices cost EUR 12-16 per square meter, and in the outskirts – EUR 8-10 per square meter.

118. Bulgaria's residential property prices fell by 2.3 per cent in the first quarter of 2011 Balkans.com

April 26, 2011

Bulgaria's residential property prices fell by 2.3 per cent in the first quarter of 2011 compared with the final three months of the previous year, National Statistics Institute (NSI) data shows. On an annual basis, housing prices decreased by 5.6 per cent in the period.

119. Bulgaria's state cigarette producer Bulgartabac Holding will privatize soon Balkans.com

April 27, 2011

Bulgaria's state cigarette producer Bulgartabac Holding, whose management has been harshly criticized in recent years, will be declared for privatization on Tuesday after years of procrastination. The long-delayed procedure will be given the go-ahead by the agency for privatization and post-privatization control. The sale of Bulgartabac Holding AD, Sopot-based Vazovski Mashinostroitelni Zavodi or VMZ, and the minority stakes in the electricity distributors have been said to be a must-do task in 2011 due to the sorry performance of the state-owned companies reports Sofia News Agency.

120. Croatia has plans to go alone to speed up building LNG terminal with possible EU backing Balkans.com

April 28, 2011

Croatia has plans to go alone to speed up building a major liquefied natural gas (LNG) terminal with possible EU backing, unhappy about a delay of an investment decision by its international partners.

State-owned gas pipeline operator Plinacro and oil pipeline operator Janaf would be the main drivers for the terminal to supply international markets from the northern Adriatic island of Krk, a senior energy official was quoted as saying on Tuesday.

"Plinacro, Janaf and the economy ministry are considering plans for building the LNG terminal on Krk which could be co-financed by the European Union," Darko Horvat from the economy ministry told the Vjesnik daily.

Economy ministry officials were not available for an immediate comment.

An international consortium of four energy firms last year pushed back until 2013 the final investment decision for building an LNG terminal on Krk amid a lower demand for gas on the European markets. Originally, the decision was to be taken this year.

The companies in the Adria LNG consortium are Germany's E.ON-Ruhrgas EONG.DE, Austria's OMV (OMVV.VI: Quote), France's Total (TOTF.PA: Quote) and Slovenia's Geoplin. Plinacro and Croatia's state power board HEP were due to join the consortium.

Unhappy about the decision Croatian officials first started considering a temporary, smaller floating terminal off the coast of Krk while awaiting the final investment decision for the land-based terminal with a capacity of 15 billion cubic metres of gas per year.

According to the Vjesnik daily, Croatian officials have already initiated contacts with partners in Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Romania and Bulgaria to test their interest for using gas from the potential future terminal on Krk.

Horvat said that the EU, which Croatia hopes to join in 2013 or early 2014, could finance 50 percent of the Krk terminal which may become a part of one of the major EU gas transport corridors linking the Baltic Sea and the Adriatic.

The value of the original Krk terminal was estimated at some 800 million euros ($1.16 billion).

Croatia consumes close to 3 bcm of gas per year, from its own fields and from Russian imports, but wants to diversify energy supplies.

121. Croatia will get 150m Euro loan from World Bank bne

April 26, 2011

Croatia will receive 250m euros from the World Bank, reports Croatian daily Jutarnji List.

The World Bank approved the loan after Croatia implemented measures aimed at reducing state spending.

122. Czech interested in investment opportunities in Montenegro, especially in the areas of energy, trade and tourism Balkans.com

April 29, 2011

Czech President Vaclav Klaus paid a visit to Montenegro's Prime Minister Igor Luksic on Wednesday, April 27. The two officials discussed a wide range of issues ranging from investment opportunities in Montenegro to Czech support for Montenegro's EU integration. PM Luksic said that Czech support is very important for Montenegro's EU bid and familiarised his guest with Montenegro's economic reforms aimed at encouraging an investment-friendly environment in Montenegro.

President Klaus praised the Government's recent economic efforts, underlining the growing interest among Czech companies in investment opportunities in Montenegro, especially in the areas of energy, trade and tourism.

Klaus and Luksic agreed that Montenegro should give preference to the quality of reform over speed, with the view to meeting both EU membership requirements and citizens' needs for better living standards.

123. Golden Touch to expand its current drill program at Rubik gold project in Albania Balkans.com

April 29, 2011

Golden Touch Resources Corp . announces the expansion of its current drill program at the Company's Rubik gold project in Albania.

The Rubik gold project covers 68 km2 and is situated about 100 kilometers north of the Albanian capital, Tirana.

In March Golden Touch commenced a 2,000 meter verification diamond drilling program in the Gjazuj Area, located towards the northern end of the project area. At Gjazuj previous drilling and recent surface trenching has defined significant gold grades over a strike distance of 1300 meters.

To date six holes have been completed for approximately 600 meters. Several new trenches have also been sampled along the breccia zone. The company's geologists are encouraged by the geology encountered and an initial batch of samples has been shipped to ALS Laboratory in Romania for analysis. ALS is an ISO Certified Facility.

Mr. Aly B. Mawji, President of Golden Touch stated: "We are very pleased with the progress to date on the current drill program and as a result the company now plans to expand the 2011 drill program to around 4,000 meters. We will continue to drill test new targets and define the Gjazuj deposit."

Golden Touch's principal assets are the three 100-per-cent-owned Albanian Exploration Projects, totalling approximately 140 sq. km, located in Northern Albania. The Company's subsidiary has already spent in excess of US$5 million on exploration within the permit areas, which has resulted in the outlining of significant gold, platinum group elements (PGE) and chromite mineralization.

124. New energy efficiency credit line for Bulgaria EBRD

April 29, 2011

The EBRD is continuing to promote energy efficiency and renewable energy projects in Bulgaria with a €10 million credit line to DSK Bank for on-lending to local private companies investing in sustainable energy projects.

The financing to DSK Bank, a leading bank in Bulgaria, wholly-owned by Hungary's OTP Bank, is extended under the EBRD's Bulgarian Energy Efficiency and Renewable Energy Credit Line Framework (BEERECL).

The proceeds of the loan will be used to support companies investing in industrial energy efficiency and small renewable energy production projects. The EBRD loan is supported by grant financing provided by the Kozloduy International Decommissioning Support Fund.

This will be used to encourage Bulgarian enterprises to implement energy efficiency and renewable energy projects, as well as to provide technical assistance in preparing investment projects.

“Improving energy efficiency is one of the EBRD's key priorities. The project will encourage Bulgarian businesses to invest in rationalisation of energy use, thus helping them to improve their efficiency and overall competitiveness”, said Daniel Berg, Director Bulgaria, EBRD.

Violina Marinova, DSK Bank's CEO, added: “Our positive experience with the EBRD-granted credit facilities designed to encourage energy efficiency projects for households gives us grounds to believe that our future joint work will be very fruitful. Lending for projects in the corporate client segment is yet another step towards maintaining the country's economic sustainability.”

Previously the EBRD provided DSK Bank with a similar €10 million BEERECL credit line as well as a €10 million credit line for energy efficiency projects in the residential sector both of them successfully implemented.

Overall the EBRD has offered €137.5 million in credit lines to Bulgarian banks under the BEERECL. The funds have supported the implementation of over 140 small energy efficiency and renewable energy projects that helped Bulgarian companies save over 1 million MWh per year.

Since the beginning of its operations in Bulgaria the EBRD has invested over €2 billion in various sectors of the country's economy, mobilising additional investment in excess of €5 billion.

125. Warranty Fund to support SMEs in Albania established Balkans.com

April 28, 2011

The Albanian Minister of Economy Nasip Naco and the Italian Ambassador to Tirana Saba D'Elia signed an agreement Tuesday for the establishment of the Albanian Warranty Fund, which will help provide a line of credit for Small and Medium Enterprises in Albania. The agreement, which is meant to support Albanian SMEs through soft loans, was also signed by representatives of seven commercial banks operating in Albania.

CENTRAL EUROPE INVESTMENT 126. Czech govt sets up anti-corruption committee to be headed by John bne April 28, 2011

The Czech government decided Wednesday to set up a Government Committee to Coordinate the Struggle Against Corruption, Prime Minister Petr Necas (Civic Democrats, ODS) has told journalists, CTK reported.

The committee is to be headed by deputy prime minister Radek John (Public Affairs, VV).

John is to get 21.5 million crowns for his committee's work this year.

The budget is to be about 25 million crowns in the next years.

The Government Office counts with John's body having 13 employees.

John has become deputy prime minister to fight corruption on the basis of a recently concluded government coalition agreement when he was dismissed as interior minister.

He is to prepare a draft status and order of procedure of the new body by end-May.

Necas said he has no reason to change anything about his rejection of Michal Moroz, former deputy interior minister, becoming an employee of John's new office.

127. Czech truck maker Tatra faces tunnelling and tax evasion allegations bne April 28, 2011

The management and a major shareholder in the iconic Czech truck producer Tatra face a criminal complaint for allegedly failing to ensure proper oversight of assets, with an anonymous plaintiff alleging the sale of truck parts at knock-down prices to India via an intermediary British company has damaged the company, reports Czech Position.

Václav Láska, a former high-ranking police investigator, lawyer and one-time head of the local branch of watchdog Transparency International, has lodged a criminal complaint against the management of Tatra trucks and one of the firm's major shareholders, Indian businessman Ravinder Kumar Rishi, on behalf of plaintiffs who wish to remain anonymous due to fears of "labor persecution," the daily Právo reported on Wednesday.

Since 2005, Tatra has supplied so-called complete knock-down kits (CKD), containing all the components of haulage Láska claims that between 2005 and 2010 Tatra lost profits of around K_ 270 milliontrucks to the Indian state-owned firm Beml Limited, which then assembles the vehicles in India. The transactions have been conducted through British-registered intermediary firm Vectra Limited, which, according to the charges, has frequently purchased the CKD kits at below production cost, thus causing losses to the Czech company running into millions of crowns.

"The Tatra company sells kits to the British company Vectra Limited without a profit margin, and even at prices lower than the cost of manufacturing. All margins from this business, i.e. all profits from these transactions, go only to the accounts of the British company," Láska told Právo. "The fact that the representatives of Tatra allow these transactions clearly contradicts the principles of sound economic governance."

Láska claims that between 2005 and 2010 Tatra lost around K_ 270 million in potential profit. The calculation is based on a profit margin of 10 percent per kit, which he says the management intentionally forfeited in order to sell the goods to Vectra Limited at a knock-down price. Láska also says that through the transactions the company also avoided paying tens of millions of crowns in tax.

"By transferring the considerable profits to the British company, the Tatra company reduced its income tax payments by tens of millions of crowns," Láska said. Alleged misuse of information

Ravinder Kumar Rishi, deputy chairman of Tatra's supervisory board, is also the owner of Vectra Limited and thus de facto represents both Tatra and Vectra in business negotiations - and the transactions in question. According to Láska, Ravinder Kumar Rishi may have misused information in these business relations.

In 2010, Tatra supplied 600 CKD kits to the Indian company Beml - which assembles the trucks and has large orders with the Indian army - and according to Láska, Tatra has committed to deliver a further 460 kits this year. "If the criminal complaint is deemed to be justified, steps could be taken which will curtail further losses and also stop additional tax evasion," Láska told Právo.

Tatra's CEO Ronald Adams told the daily that he was unaware of the criminal complaint but claims that Láska's information about the company's transactions and finances are incorrect. "If he had asked us before filing the complaint, we could have given it [financial information] to him.... We'll wait until the investigators ask us and will provide them with the information," he told Právo. "We believe that it will show that the deliveries in question are advantageous for Tatra and that they positively influence our overall profitability." Favors for Indian saviors?

Adams, a US national who is currently president of the American Chamber of Commerce in the Czech Republic (AmCham), 'It's the Indian deliveries which helped keep production going and cover Tatra's basic fixed costs'previously justified the questionable deliveries to the Indian army on the ground that the orders saved Tatra during the depths of the economic crisis. "It's the Indian deliveries which helped keep production going and cover Tatra's basic fixed costs," Právo quoted him as saying in an earlier interview.

Tatra is the subject of an on-going police investigation into a delivery of trucks to the Czech Ministry of Defense in 2006 worth K_ 2.7 billion. Tatra won the contract without a public tender being held.

Former US ambassador to the Czech Republic and current chairman of the Tatra board, William J. Cabannis, together with Adams claim that in 2008 then-deputy defense minister Martin Barták (Civic Democrats, ODS), tried to elicit a bribe from Cabannis to resolve issues with a subcontractor involved in the defense ministry order.

128. Estonia Plans to Retain Green Energy Subsidies bne April 27, 2011

Estonia's government plans to keep its subsidies for renewable energy producers to enable the country to meet green energy targets, reversing a pledge by Economy Minister Juhan Parts to reduce the support, Bloomberg reported.

The Economy Ministry will analyse the effects of the subsidy system, introduced in 2007, to decide on an optimal level of support, the state chancellery said yesterday in an e- mailed draft plan for the new government's four-year term. The draft is due to be formally approved tomorrow.

Continuing the support arrangement would enable Estonia to meet its target of raising the share of renewable energy in final consumption to 23.6 percent in 2015 and 25 percent in 2020, from 19.5 percent in 2009, and possibly even exceed those targets, mainly through growing use of wind energy, according to the draft "Estonia 2020" competitiveness strategy, also e- mailed by the chancellery.

129. Hungary oil firm MOL to target new projects in upstream and downstream Equilor April 29, 2011

MOL held its AGM yesterday where it was approved that the oil company would pay no dividend in from 2010 profit. Two interesting projects were unveiled at the AGM by the company's CEO. The first one regards the INA share purchases, as the head of the company stressed, MOL did not buy shares of INA on the stock exchange during a recently closed purchase offer, but it did buy shares from private investors after the offer ended.

MOL's transactions were always in compliance with the local regulations, the CEO added.

In the meantime, trading in INA shares was suspended again on the Zagreb Stock Exchange until 6 May. The other project regards new investments in the upstream and downstream segments, although MOL did not disclose further details on it.

What we can actually know about MOL's future targets is that according to a report last month, MOL is also among those companies that are interested in purchasing 53.2% of Poland's largest refinery, Grupa Lotos SA. Considering the upstreas segment, MOL sees also a big potential in Iraq, but the company is seeking new E&P locations also in Russia. MOL said that it regards the Syrian uprising as a major threat but it will do everything to maintain safe operation at INA's local unit.

Russian Surgutneftegaz, which holds a 21.2% stake in MOL, was again excluded from exercising its ownership rights.

130. Kubilius PM says Lithuania won't buy energy from Belarus, Kaliningrad plants bne April 29, 2011

Lithuanian Prime Minister Andrius Kubilius has said that the country will not buy energy from either of the proposed nuclear power plants in Belarus and Kaliningrad over safety concerns, Baltic Times reported.

"In our opinion, the nuclear power plant projects being newly developed both in Kaliningrad and in Belarus are not being developed in line with the international nuclear safety conventions," Kubilius told Lithuanian radio.

"Such restrictions could also be applied if a third country fails to comply with the international climate change conventions, or when we have to protect the energy generation capacities being built on our market against unfair competition, when we have to safeguard our energy independence," he said.

The prime minister's comments come as the region marks the 25th anniversary of the nuclear meltdown at Chernobyl.

He said in Kiev earlier that all three Baltic states were looking at implementing legislation that would ban trading on "electricity produced by unsafe nuclear plants in the market of the Baltic States."

The comments also coincide with a major

131. Mobis to build new brake hallin Slovakia bne April 28, 2011

Mobis Slovakia, the main supplier of Kia's regional operations, will build a new €18m (US$26.4m) brake hall outside the town of Zilina, Automotive World reported. Towards this end the supplier will take on 321 additional workers. Construction will begin in May 2012 and finish in December of that year, head of the project, Slavomír Zbín, informed local daily Hospodárské noviny.

Mobis currently employs 1,200 people in the country, making radiator covers and axles for Kia. The South Korean OEM has also attracted other suppliers to Zilina, including Grupo Antolin.

132. Nexen buys into Marathon's Polish shale gas play bne April 27, 2011

Marathon Oil and Nexen said on Tuesday they will jointly explore shale gas concessions in Poland, seen as one of Europe's most prospective natural gas regions, Reuters reported.

The companies did not give financial terms of the deal, but Marathon said Nexen will acquire a 40 percent working interest in 10 of its concessions in Poland's Paleozoic shale play, where the company has 2.3 million acres. "This partnership provides not only financial risk mitigation but combines the extensive unconventional drilling and completion experience of Marathon and Nexen to fully evaluate the potential of these concessions," Annell Bay, Marathon's vice-president worldwide exploration, said.

The U.S. Energy Information Administration has pegged technically recoverable shale gas reserves in Poland at 5.3 trillion cubic metres, making them Europe's largest.

133. Poland PKN Orlen said close to US shale gas swap deal bne April 29, 2011

Poland's largest oil and gas firm PKN Orlen is close to signing a deal that will see it receive a stake in a substantial US shale gasfield in exchange for access to its own concessions in Poland, the daily Rzeczpospolita said Friday, Platts reported.

The daily did not name PKN's potential American partner saying the company planned to release the details after the deal is finalised, perhaps in June. "We've said for a long time that we're going to look for partners to search for and exploit shale gas deposits in Poland and we want a company with experience in this field. Most of these companies are active in the US, which is the leader in shale gas production," Wieslaw Prugar, chief executive of PKN's upstream subsidiary, ORLEN Upstream, told the daily.

The daily said PKN has offered potential partners a 20%-30% interest in its Polish shale gas concessions in which it plans to remain the operator.

PKN is expanding its business from its core refining interests and has six shale gas exploration concessions in Lubelskie province, south east Poland.

The company plans to drill its first exploration wells in the second half of this year.

134. Poland says considering nuclear energy referendum bne April 27, 2011

The Polish government is considering holding a referendum regarding the planned construction of the country's first nuclear power plant, ct24.cz reported Polish PM Donald Tusk as saying. The Polish government plans to invest in the most modern technology for its construction. The power plant should be one of the safest in the world. According to the server three possible locations are planned for the future power plant. One is in central-west Poland and two are in the north near the Baltic Sea.

135. Signs of a thaw in Gazprom-Lithuania gas price relations bne April 26, 2011

Relations between the government of Lithuania and Russian gas export giant Gazprom appear to have begun to improve, following a meeting in Moscow earlier this month, HIS Global Insight reported.

Gazprom described the talks as "a constructive dialogue" on a wide range of issues and said it was determined to maintain the "friendly negotiations". Equally, Lithuanian energy minister Arvydas Sekmokas said that he expects the talks to yield an agreement on gas prices. The two parties have been locked in debate over the price of gas (Lithuania is essentially seeking the same 15% discount that Estonia and Latvia each secured at the end of 2010) as well as attempts to unbundle Lithuania's gas transmission system (see Lithuania: 5 April 2011: ).Significance: Lithuania is pressing ahead with the construction of a 3.3GW nuclear power plant in Visaginas, despite the rise in anti-nuclear sentiment in other states across the EU.

Whereas in other states such as Sweden or the Netherlands, nuclear power is favoured as a means of generating electricity without emitting carbon dioxide, in Lithuania nuclear power is seen primarily in terms of reducing energy dependency on Russia. The shutdown of the Ignalina nuclear power plant in 2004 as part of the Baltic state's accession to the EU was unpopular with the Lithuanian electorate, not least because it increased reliance on Russian gas and oil for power and heating. The 2009 Russia-Ukraine gas dispute (and the perception among Lithuanians that Western EU member states simply ignored the plight of their Eastern allies) reinforced this attitude and the current dispute will do the same. Although the debate is formally concerned with gas prices and unbundling, the underlying dispute centres upon Russia's influence over Lithuania, so although the superficial issues may be resolved soon, Lithuanian determination to build the new NPP will remain.

136. US car repair network said to enter the Czech market bne April 26, 2011

According to the daily Lidove noviny, the American car repair chain Precision Tune Auto Care is preparing to enter the Czech market, CIA reported. The American company believes that there is space for forty to sixty new service shops in the Czech Republic. The company has currently begun to negotiate with local investors about sale of a franchise licence and is looking for a partner on the market. According to the general manager of the company, Robert Falconi, the franchise concept is very popular in the Czech Republic and the number of car owners has been increasing, too.

OTHER COUNTRIES 137. Mongolia: EBRD Supports Petrol Distribution Industry In Mongolia Monet/EBRD April 28, 2011

US$ 40 million to an independent private petrol retailer

The European Bank for Reconstruction and Development (EBRD) is providing a credit of up to US$ 40 million to Mongolia’s Magnai Trade petrol stations group to support the country’s petroleum sector with investments in energy-efficient technology and fund the company’s expansion.

The EBRD’s senior loan will finance the second phase of Magnai Trade’s development, as well as the construction of 18 new petrol filling stations across Mongolia.

It will also help Magnai Trade expand its depot stores network and, thus, improve the company’s distribution system. In addition, new petrol filling stations and depot stores will be fitted with the modern equipment utilising the modern energy efficiency technologies.

EBRD Managing Director for Energy and Natural Resources Riccardo Puliti, signing the project in Ulaanbaatar, said that the new project was part of the EBRD’s strategy for the sustainable development of the entire petroleum distribution sector in Mongolia.

In line with our strategy, we pay particular attention to the promotion of the local private sector and the adoption of best environmental practices. This new project will ensure that Mongolian customers continue receiving high-standard services and better products, especially, in the country’s remote areas and newly-developing regions,” Mr Puliti added.

In addition, as part of the project, over half of the company’s staff and their franchisees will benefit from an advanced training course in Environmental, Health and Safety management, conducted by international experts.

The domestic Magnai Trade is a leading independent private Mongolian importer and distributor of petroleum products and has developed a large fuel wholesale and retail network with a significant market share in the local Mongolian market.

The EBRD investment will also enable the company to introduce advanced management information systems, offer new services and products and improve its environment and health and safety standards.

In Mongolia the EBRD focuses on developing a sustainable mining sector with sufficient mining supply chain, food processing industry, financial, manufacturing and retail sectors.

Since the beginning of its operations in Mongolia in October 2006, the EBRD has committed about €317 million (US$ 425 million) to 36 projects in various sectors of Mongolia’s economy, with 100 per cent of the projects’ being related to private sector debt and equity investments.

138. Mongolia: Power plant to be built at Mogoin Gol mine Monet/News.mn April 26, 2011

The Government meeting yesterday approved a concession agreement between the State Property Committee and New Asia Mining Group LLC to build a power plant based on coal from the Mogoin Gol mine. Concerned Ministries will now prepare the papers to grant the permission. The Governors of Zavkhan and Khuvsgul aimags have been asked to give land for the power plant, and to raise the capacity of the mine so that the plant has enough coal.

According to the agreement New Asia Mining will spend USD110 million to build a plant with capacity to produce 60 mw of power. The plant should be ready in two years and its ownership will vest in the state after 20 years of operation, when the term of the concession agreement ends.

The power generated will be used by people in Zavkhan and Gobi-Altai aimags. Some of them would also get jobs at the plant and acquire experience.

139. Mongolia: Prophecy Submits Formal Request to Mongolian Government to Build Chandgana Power Plant Monet/MarketWire April 26, 2011

Prophecy Resource Corp. ("Prophecy" or the "Company") (TSX VENTURE:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to report that after 8 months of due diligence, research and study, the Company has submitted the formal request with the Ministry of Natural Resources and Energy ("Ministry") to build the Chandgana Power Plant.

In August 2010, Prophecy engaged local Mongolian experts to initiate a Feasibility Study for the Chandgana mine mouth power plant with capacity of 600 MW, based on Prophecy's Chandgana coal deposit located in Khentii province, central Mongolia. With further assistance from Evonik Industries of Germany, the Prophecy team completed the necessary technical and financial analysis, including an Environmental Impact Assessment which was approved by the Mongolian Ministry of Nature and the Environment in November 2010 (see Prophecy news release dated November 15, 2010) and a Feasibility Study completed in accordance with Mongolia policies for the granting of a permit to construct and operate a power plant in Mongolia.

Prophecy's objective is to supply Mongolia with cleaner and affordable energy and to eliminate expensive and growing foreign electricity import. A number of antiquated Mongolian coal power plants are due to be decommissioned and Prophecy intends to build a modern 600MW thermal power plant complex at Chandgana and connect the power plant with Mongolia's existing Central and Eastern energy systems. This integration is critical to fuel Mongolia's growth and is part of the long term energy development policy of Mongolia. As the project scales up to 4,200MW, there is potential to export surplus power to China, with its capital Beijing located approximately 1,000km (600 miles) to the south. An independent transmission line study to connect Chandgana to China commenced in February. Prophecy has been in discussion with various investment banks interested in providing Chandgana with project financing.

140. Mongolia: Ulusnet expands 4G network bne April 29, 2011

Mongolian telecoms company Ulusnet has expanded its 4G broadband network. The network currently covers parts of Ulan Bataar; it is now being expanded to cover additional areas of the capital and some rural areas. "Mongolia is one of the fastest growing economies in Asia and with a growing economy comes a higher demand for high-speed connectivity,” said Ulusnet CEO Byambatseren Davaakhuu in a press release.

141. Mongolia: Work Started to Link Tavan Tolgoi with the National Railway Network Monet/UB Post April 28, 2011

Together with the first rain, the construction work that unfolded across the country has come to Dornogobi Province too. The construction began with the laying of the foundation stone for the 1100 km railway in the direction Saynshand-Dalanzadgad.

The ceremony was held in “Khar toirom” located 10 km from the Sainshand Soum, where the “zero point” of railway of horizontal axis, last Friday signifying the start of laying the railway lines.

The ceremony was attended by the minister and vice minister of Transport Kh.Battulga and A. Gansukh, MP J. Batsuuri, State Secretary of Transport Ministry and chairman of the Board of Directors of State-Owned “Mongolian Railway” Company J.Bat-Erdene, Dornogobi Province Governor P.Gankhuyag and other dignintaries.

During the ceremony, the managements of state-owned “Mongolian Railway” Company and “Eastern Railway” Company was given a special permit by the Government of Mongolia to build the basic structure of the railway, which will connect the largest coal deposit in Tavan Tolgoi to the railway network.

A tender to build a 100 km railroad in the direction Sayshand - Baruun-Uurt, was awarded to the state company “Mongolian Railway” and a tender for the execution of laying 100 kilometers of rails from Sainshand to Tavan Tolgoi Deposit went to the Eastern Railway Company.

According to the Transport Minister Kh. Battulga, at the moment a U.S. company carries costs calculations associated with the construction of the railway. “Documents relating to financial sources will be ready in late June and early July. Today, all costs for the laying are paid by both companies” he said.