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Home , Alfa Group, Alisher Usmanov, Altimo, Andrey Klishas, Inter RAO, Iskander Makhmudov

N°75 - April 10 2008 Published every two weeks / International Edition CONTENTS DIPLOMACY P. 1-3 Politics & Government c Some grist for the mill between and Washington DIPLOMACY c Some grist for the mill The farewell meeting between George Bush and in , just after the NATO sum- between Moscow and mit in Bucharest, confirmed what we had already noticed on several occasions in the past : the two men Washington never really understood each other. Although they deny it, they are both “products” of the cold war.Their BEHIND THE SCENE two Foreign ministers, Condi Rice and Sergey Lavrov, are also both derived products and the very sub- c Toward a Pax russica in jects raised in Sochi – NATO, anti-missile systems – would not have been out of place in one of the good old US-Soviet summits from the 1970s or 1980s. “It was a remarkable relationship” George Bush felt ap- FOCUS propriate to conclude, remarkable in fact since it leaves the United States and at a sort of “square c Putin puts a marker on Medvedev one” after the feverish hugs of the 1990s and the aborted grand designs of the 2001-2003 period. ENERGY c TNK-BP : Moscow blows In a few days, will establish himself in the Kremlin and will become the new inter- hot and cold locutor for George Bush until next January. There is little chance that significant changes will take place ALERT by then. Then in January, it will be the unknown for Russian diplomacy, with the only certainty being at c Suez /Gaz de this stage : that none of the three candidates for the presidency of the United States has been seen as being particularly amicable toward Russia, with Senator McCain appearing the most outspoken since he P. 4-8 Business & Networks has called for a withdrawal of Russia from the G8. INDUSTRY c Abyzov, the rising star of the This does not necessarily mean that everything is frozen on all the most sensitive issues that will reap- Russian electricity sector pear with the new American administation. Concerning the enlargement of NATO and the delay in the ALERTS inclusion of and in the “Membership Action Plan”, Russia earned a precious point. The c Voloshin / Inter RAO most moderate reaction by Moscow to the proclamation of independence by Kosovo was probaly worth PROFILE c Skorobogatko and a type of recognition on the part of a certain number of European member countries of the Alliance. But Ponomarenko, the strong Russian diplomacy is not the only one to have been able to claim the credit for the rejection of the Geor- men on the port of gian and Ukrainian candidacy. Even in the United States, and more so in Europe, there exist some doubts Novorossiysk on the interests that NATO can have to recruit those two countries. During a seminar co-organised by the ALERTS Brookings Institution in Tbilisi the day after the Bucharest summit, certain American experts, reputed c Nord Stream / close to the two democratic candidates for the nomination, questioned the justification for Georgia’s in- FOCUS tegration. As for Ukraine, it is known that the consensus on the subject even within the population does c Norilsk : under pressure not exist, and it can be guessed by the recent statements from Vladimir Putin (provocation or awkward- TELECOM ness?) suggesting a possible partition of the country and a return of the Russian territories to the “mo- c pursues its competi- therland”, that the case of Ukraine is probably the most sensitive of all for Moscow. tion with and aims at the Turkish market Concerning the anti-missile systems to be deployed in Poland and the Czech Republic, the situation ALERTS is clearer. Several former Clinton administration officials close to Hillary, such as Richard Holbrooke, c c Kamaz Chigirinsky or General Wesley Clark, cast into doubt privately the utility of this initiative by the Bush administration FOCUS c Behind the Atomenergo- which set fire to the powder in the Kremlin. In case of a victory for Senators Clinton or Obama, a nego- prom / Toshiba accord tiating space would open on this question. SHIPBUILDING FLK on a spree in Ukraine In fact, it was on Afghanistan that American and Russian positions drew the closest together in re- and in cent weeks. The fact that Russia accepted the transit on its territory of “non-military” products and equip- ment from NATO countries toward Afghanistan is not anodyne. The establishment of a “corridor” bet- SUBSCRIPTION Print Edition ween Europe and the Afghan territory, by Russia and and the construction of the railway (23 issues, airmailed overseas) bridge over the Amu Daria will facilitate the transfer of equipment and materiel toward Afghan cities e770 TTC and would especially make them less expensive. By helping NATO in Afghanistan, Russia is helping itself The Web Pack in combatting religious fundamentalism in Central Asia and the Caucasus. Even if the support is provi- (Print Edition ded without excessive enthusiasm on the part of Moscow, it is a sign addressed in the direction of the + PDF + archives acess) member countries of the Alliance so that they do not weaken their efforts to re-establish peace in Afgha- e 880 TTC nistan. In counterpart, Russia could assist in a more convincing way with the negotiation with on The Premium its uranium enrichment programme, which even in the United States, some feel would be very desirable. Subscription (Print Edition + PDF + access Even if Bush and Putin separated in aknowledging failure, their successors will nevertheless dispose to all the website contents) of an essential resource for negotiation and diplomacy : some grist for the mill...d e 1200 TTC

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BEHIND THE SCENE cc FOCUS Toward a Pax russica Putin puts a marker on Medvedev in Transnistria A slightly better picture is emerging about the political sequence for the coming As Russia Intelligence had let it be un- weeks in Moscow. As Russia Intelligence explained in its previous edition, the first derstood in its edition of January 31, the sit- major episode will be the convention of , brought forward to April 14 uation around the “frozen conflict” in and 15 (instead of the 19th of May as originally planned). Vladimir Putin should be Transnistria is on the way toward some offered the party presidency. This was confirmed April 7 by Boris Gryzlov, the cur- movement. On April 7, the President of rent officeholder of the presidency. He also added — in the most se- Moldova, Vladimir Voronin, and the head rious manner possible — that the “ideal” would be for Vladimir Putin to accept. The of he secessionist province, Igor Smirnov, takeover of United Russia should allow the future Prime minister to better control held a telephone conversation. It repre- deputies, governors and, more generally, the senior bureaucracy, always efficient in sented an event in itself since the two men adjusting to changes in the balance of power in Moscow. Vladimir Putin is progres- had not spoken since 2001. According to a sing toward a “double lock” system perfectly in tune with KGB norms. communiqué published by the authorities in Tiraspol, they should even meet in a The second phase of this political sequencing to come will be the investiture of delay.This possibility of a conclusion to the Vladimir Putin to the office of head of government. It will take place May 8, the day lengthy crisis has been made possible by after the assumption of office by Dmitry Medvedev to the Kremlin. Contrary to tra- the closer relations between Chisinau and dition, the vote of the State Duma will take place without prior consultation. It will Moscow. It must be remembered that the not have been only for pure form, but this acceleration of the calendar displays a last-minute rejection by Vladimir Voronin of certain nervousness on the part of a segment of Vladimir Putin’s inner circle. Not the “Kozak Plan”, at the end of November to leave Dmitry Medvedev alone in power even for 24 hours — above all before the 2003, and the introduction of new border Victory day celebration May 9, which should have a particular aura this year since controls toward Transdnistr — with the sup- the tanks will once again roll on Red Square — was apparently absolutely impera- port of Ukraine — in March 2006, put a chill tive. on Russo-Moldovan relations. Things changed after the Poutine-Voronin meeting In anticipation, the war of the clans continues unabated in the structures of po- on June 27 2007. The embargo decreed by wer. The most spectacular developments emerged from the General prosecutor’s of- Moscow on Moldovan agricultural products fice, the theatre, since last summer, of constant tension between Yuri Chaika and (especially wine) was lifted in exchange for his deputy, Alexandre Bastyrkin, an old companion of Vladimir Putin named at political guarantees whose scope can now the head of the Investigating committee who distinguished himself since then es- be evaluated. At the same time, Moscow fo- pecially by playing an active role in the Bulbov and Storchak affairs (Russia Intel- cused the pressure on Igor Smirnov and ligence n°63 of october 11 2007 and n°64 of october 25 2007). Put forward by Igor favoured the emergence of a new pole of Sechin and Nikolay Patrushev, Alexandre Bastyrkin had hoped to take control of influence around the young president of the a possible Russian “FBI”. The choice of Dmitry Medvedev as Vladimir Putin’s suc- local parliament, Yevgeny Shevchuk (Rus- cessor in the Kremlin has, however, compromised his chances. Since the end of sia Intelligence n°45 of December 2006). March, Alexandre Bastyrkin is even frankly on the defensive, which is nothing but On a daily basis, it was Yuri Zubakov, the bad news for his protectors. n°2 of the Russian national security council, and ambassador Valery Nesterushkin, a On March 28, he had to suspend one of his closest collaborators, Dmitry Dovgy, rather francophile diplomat who retains an as well as three other members of the Investigating committee — Alexey Novikov, emotional memory of his stay in Mauritius, Sergey Glukhikh and Yuri Ermakov. A decision not gladly taken which followed a who have followed the Moldova-Transdnistr letter of denunciation addressed by two other investigators on the Committee — issue since 2004. The deterioration of rela- Sergey Chernyshev and Zigmund Lozhis — to the presidential administration. They tions between Chisinau and Bucharest accused Dovgy, Novikov, Glukhikh, Ermakov of corruption. According to Chernys- (Russia Intelligence n°50 of March 2 2007), hev, Dovgy had received 2 million dollars in exchange for the liberation of a suspect, as well as the imminence of general elec- a deal all the more disgraceful in that it concerned an affair linked to . Erma- tions in Moldova also played a role in the kov and Glukhikh for their part may have worked for the transfer of Vladimir Bar- more conciliatory attitude by Vladimir sukov — the “godfather” of the Tambov mafia in Saint Petersburg arrested last au- Voronin. tumn (Russia Intelligence n°61 of september 13 2007) — from his high-security Russia is therefore preparing to make a cell in the notorious “Matroskaya Tishina” to Saint Petersburg, where he was able diplomatic splash of the first order by this to regain his freedom thanks to other connections. summer. In this matter, it intends to send a very strong signal to the West, by showing To sort out all these developments is obviously not easy, but one thing is certain : that it holds the keys to the “frozen con- Yuri Chaika is rubbing his hands. The contest between him against Bastyrkin appears flicts” in the former USSR. Georgia and as won. But, as is well-known, behind Chaika are profiled the loyal supporters of Dmi- Ukraine are also in sight. Among the con- try Medvedev, notably the boss of the Federal anti-narcotics service, Viktor Cherke- cessions that Chisinau is preparing to make sov. Suddenly, the latter believes more than ever in his chances to replace Nikolay Pa- to recover its territorial integrity are in- trushev in the Lubyanka after mid-May. The current boss of the FSB could well see cluded in effect a renunciation of NATO and being offered a post as vice Prime minister in charge of power structures, according the exit from GUAM. A position, which, it is to information collected in Moscow by Russia Intelligence. Our sources indicate ne- hoped in Moscow, would be a cause for re- vertheless that a “decent delay” could be observed and that the shifts awaited in the flection for Vladimir Yushchenko and midst of the power structure could then be delayed until the autumn. d 2 Mikhail Saakashvili. d Russia Intelligence N°75 j April 10 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks

ENERGY c TNK-BP : Moscow blows hot and cold Even as the president of its supervisory board prepared to en- cesco Guargualini (Finmeccanica), Fulvio Conti (ENEL), ter the Kremlin, launched a vast spring offensive. In- Gianfelice Rocca (Techint), or also Luisa Todini (former tense discussions are being pursued with TNK-BP on the Ko- European deputy for Forza Italia, president of the Todini Fi- vytka issue, but also — despite the denials — over the purchase nanziara holding company). In addition to the accord bet- of 51% of the interest in the Russo-British joint venture. Things ween Gazprom and ENI, it was also noted that this meeting are also well underway with Italy’s ENI, which is ready to asso- was marked by the proposal by Intesa to create a Russo-Ita- ciate Gazprom in some of its projects in Libya or even Egypt. On lian investment bank whose objective will be to operate in the internal front, Gazprom has won an important victory by ob- the former USSR, but also in and India. Officers of taining from the government that it will not increase the gas side ENEL, for their part, confirmed that they were ready to co- of the tax on extraction of raw materials as the Finance minis- operate with Rosatom (whose boss, Sergey Kirienko, was ter, Alexey Kudrin, wanted. present in Novo-Ogaryovo) on projects in central Europe, no- tably in Slovenia. Can not sell ? Intervening two weeks af- ter the disruptive searches in the Moscow offices of TNK-BP and LNG, Gazprom’s new priority. Developments at Gaz- the “recall” of 148 British expatriates of the group (Russia Intel- prom are also quite intense within Russia itself. On March ligence n°74 of March 27 2008), the discussions that took place 26, the group’s board adopted its strategy in the sector — he- April 3 in Moscow between Alexey Miller, Tony Hayward (the retofore embryonic in Gazprom — of liquidified natural gas boss of BP) and Viktor Vekselberg (head of the Russian share- (LNG). It foresees a spread of investments situated between holders in TNK-BP and in charge of the group’s gas projects) was 45 and 60 billion dollars by 2030 and an annual LNG produc- much awaited. They appear by all accounts to have gone rather tion somewhere between 39 and 63 Mt by a horizon of 2030 well. According to Robert Dudley, the president of TNK-BP, an (essentially Shtokman and Sakhalin). accord about Kovytka should be signed before May 1st (sources close to the matter nevertheless indicated to Russia Intelligence Also, Gazprom achieved a major victory on the fiscal level. that the two parties did not narrow their differences over the The interministerial meeting held on March 25 around the price of the transaction. Gazprom would not want to spend more Prime minister Viktor Zubkov adopted a decision favourable than 800 million dollars, while TNK-BP evaluates the investments to the gas giant. The gas chapter of the MET, the mineral ex- achieved on the deposit since 1994 at 1 billion dollars). Another traction tax, remains set at 147 rubles/1000m3, an amount un- sign of improvement between TNK-BP and Gazprom is that a com- changed since 2006, although Alexey Kudrin proposed an in- promise has been found between two of their subsidiaries, Mezh- crease to 735 rubles/1000m3≥ by 2010. According to Gazprom, regiongaz and Rospan (the latter obtained expanded access to an increase in the tax would deprive it of funds necessary for the internal Russian gas pipelines and as a result could double investments in exploration. its production, which will be sold by Gazprom). This victory, however, could be only a momentary one. A Nothing, on the other hand, filtered out regarding the evolu- possible reduction in the VAT to 12% – strenuously advocated tion of the TNK-BP shareholdings. Officially, the question was not by the Economic development minister Elvira Nabiullina, on the agenda. Robert Dudley underlined this during his press but opposed by Alexey Kudrin – would in effect force the go- conference. According to information gathered by Russia Intel- vernment to look for other means of financing. So much so ligence in Moscow, the reality is nevertheless a bit different. Gaz- that most economists (such as those gathered for the annual prom has not given up on buying the shares of the Russian ow- High School of Economics colloquium in Moscow in early ners. Viktor Vekselberg (Renova), (Access April) consider that public financing will encounter serious Industries) and (Alfa-Group) have denied, in difficulties beginning in 2009 resulting from the combined February, wanting to sell, but recent history — in Sakhalin no- effect of increases in public spending and an erosion in the tably — demonstrates that this need not be a insurmountable country’s commercial surpluses. d obstacle.

According to our sources, Alexey Miller’s forces would also like the British to sell them 1% of TNK-BP in case the Russian share- holders decide to sell their interests to Gazprom. The question ALERT of price is still open. 51% of TNK-BP would represent an invest- 3 Electricity : Suez puts a brake ment of more than 20 billion dollars. A possibility that does not to Gaz de France’s appetite figure in the memorandum made public by Gazprom in late March on the occasion of a new Eurobond emission. The cooperation between Suez and Gaz de France has some quite unexpected collateral impact in Russia. According to infor- The Russo-Italian honeymoon still underway. Things are mation collected by Russia Intelligence from sources close to the much simpler for Gazprom with its “strategic partner” ENI. The matter, the Gaz de France management has not been able to boss of the Italian group, Paolo Scaroni, confirmed April 2 that convince SUEZ of the interest in investing in the Russian electricity his group was ready to sell it a third of its involvement in the Li- sector. It is known that last autumn on the margins of the 20th byan Elephant oil deposit (proven reserves of 68 Mt). This an- world energy congress, Gaz de France had expressed its interest nouncement was made on the occasion of a meeting between Vla- for TGK-10, finally acquired in early March by Fortum (Russia In- dimir Putin, Dmitry Medvedev and an impressive delegation of telligence n°73 of March 14 2008). d Italian businessmen, which included, among others, Pier Fran- 3 Russia Intelligence N°75 j April 10 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks

INDUSTRY c Mikhail Abyzov, the rising star of the Russian electricity sector

While the reforms of the electricity sector conceived and applied by collected subcontracting deals for RAO EES are entering the final stretch (Russia Intelligence in the engineering and maintenance sector. n°74 of March 27 2008), a name is raised more and more frequently in To this day, the E4 holding company unites Moscow conversations — of Mikhail Abyzov. The boss of the E4 hol- some fifty companies throughout the country ding company has in fact established himself, at only 35, as a more and and is expanding its field of operations in more inescapable actor in this sector. other sectors (notably the agro-food sector through the Rukon investment firm, but also The meteoric career of Mikhail Abyzov began in 1993. At the time, Mikhail Abyzov several companies in the Urals, and he joined the small team of deputy Ivan Starikov, elected on the “Choice the Far-east specialised in the repair of road infrastructure). of Russia” list headed by Igor Gaydar. A native of Novosibirsk, Stari- kov presented Abyzov to the governor of the region, Vitaly Mukha. A But it is in the field of power generation that Mikhail Aby- decisive meeting since it permitted Abyzov in 1996 to make his first big zov is on the way to achieving his most successful operations. play in the business world. The firm ORTEK he created a year earlier During the course of an interview, Viktor Vekselberg, revea- supplied various equipment and fuel to the regional authorities; a mo- led that Mikhail Abyzov held an option for the 25% of KES dest transaction — 500,000 dollars — accompanied by serious guaran- (Kompleksnye energeticheskie systemy), the Renova affiliate tees. In this case, 19.5% of the electricity, a stake in charge of managing assets in the electricity sector. Rather evaluated then at... 40 million dollars. The regional authorities revea- evasive about the origins and outlines of this partnership, Vik- led themselves to be incapable of managing ORTEK’s expenses, and tor Vekselberg limited his explanation by saying that it dated Mikhail Abyzov becomes a shareholder in Novosibirskenergo and takes back to the autumn of 2006 and that it was “linked to other his first steps in the Russian energy sector. It should be noted in pas- operations with Renova”. It concerned a major asset since KES sing that this episode led to charges against Vasily Mukha, who was fi- holds shares in numerous electricity generation units privati- nally amnestied in 2001. sed in recent months (TGK-5, TGK-7, TGK-9 and TGK-10).

In 1998, Anatoly Chubais — who was named at the head of the na- Last but not least, Mikhail Abyzov has just taken a stake of tional electricity company RAO EES Rossii — noticed the young Aby- at least 25% in Transneftservice-S. Controlled by the business- zov (who at the time was 26 years old) and offered him the direction man Alexandre Rubanov, a trader historically linked with of the investment department. A year later, Mikhail Abyzov joined the , where he was the main supplier of electricity. The board of directors of RAO EES Rossii, which he would not leave until departure of Semyon Vainshtok and the nomination of new April 2005. He was notably charged with the supply of , gas and fuel teams around Nikolay Tokarev (Russia Intelligence n°70 of oil to regional affiliates. A strategic post that allowed him to weave pro- January 31 2008) nevertheless changed things. Transneftser- ductive relations at the time of the privatisation of the group’s power vice-S lost its contract with Transneft – which represented stations. close to 80% of its turnover. A vulnerability that immediately profited Abyzov by entering into its capital. But in all likeli- By coincidence or not, it was in Kuzbasrazrezugol — the main mi- hood, it is precisely Transneftservice-S which should buy OGK- ning asset of SUEK — where Mikhail Abyzov landed in the fall of 2005. 1, the main production unit for RAO EES Rossii which will be Collaboration with and his partners proved to sold at auction on April 17 for about 6 billion dollars ( a price be in any case complicated (he will definitely leave the group in 2007). which forced Electricité de France, as well as ’s For- In parallel, Mikhail Abyzov had created his own organisation, E4, which tum to drop out). d

ALERT 3 Alexandre Voloshin makes his entry in Inter RAO

The former boss of the presidential administration and head of the to now, the group was managed by Yevgeny Dod (director general) supervisory board of the national electricity company, RAO EES Ros- and Andrey Rappoport (president of the supervisory council and sii is actively preparing his return to the front lines of power in Rus- right-hand man to Anatoly Chubais. But the internal balance of po- sia. Observed at the side of Dmitry Medvedev on the evening of wer is in the process of changing. Andrey Rappoport will not be the elections, Alexandre Voroshin is part of that small circle of reappointed to head the supervisory council.The Energy and indus- high officials to which the new president should refer to fill his team try minister, Viktor Krishenko, should replace him. Temporarily, at after May 7. If his future elevation is not yet confirmed, one thing is least, since it is doubtful that he will be retained in the government nevertheless clear : Alexandre Voroshin will continue to play an im- after May 8. The most likely possibility is that the presidency of the portant role in the sector — being completely reorganised — of elec- supervisory council of Inter RAO will go to Alexandre Voloshin. He tricity.He has just been named to the supervisory council of Inter should be, along with Vladimir Dmitriev, the boss of Vnesheko- RAO, the international subsidiary of RAO EES Rossii, which is the ex- nombank, the new shareholder of Inter Rao (Russia Intelligence clusive operator for import-export of power in Russia and which n°74 of March 27 2008), the strong man of the group. His actions in possesses or operates a certain number of assets in Georgia, in Ar- any case should be followed closely in Paris, where it is still hoped menia, in and in Moldova (Inter RAO will also soon that EDF will be able to take a 25% share of Inter RAO in the co- d 4 inherit stations in Russia, notably in Sochi and in Kaliningrad). Up ming few months. Russia Intelligence N°75 j April 10 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks

PROFILE c Alexandre Skorobogatko and Alexandre Ponomarenko, the strong men on the port of Novorossiysk Names can create a destiny. This is possibly what Alexandre of , Vagit Alexperov) to sell its share to the Skorobo- Skorobogatko (“soon rich”) thinks. He only counts for 1.4 bil- gatko-Ponomarenko team for 530 million dollars. This trans- lion dollars in the latest Forbes ranking, placing him far be- action was essentially financed by the sale of Investberbank hind Deripaska (28 billion), Abramovich (23 billion), Frid- — RGB’s new name — to the Hungarian bank OTP in Au- man (22 billion) or Mordashov (22 billion). With his colleague gust 2006. Up to then not really known for the transparency Alexandr Ponomarenko, Alexandre Skorobogatko, has never- of their management, Skorobogatko and Ponomarenko lif- theless the merit of not being at the head of an oil, or ted the veil on the shareholding of the commercial port of metal company, but a commercial port. Not just any port since Novorossiysk in the autumn of 2007, just as they were pre- it involves Novorossiysk (NMTP), the 1st in Russia in terms of paring to launch an IPO in . It is learned that they volume (80Mt last year), a strategic asset which should profit have consolidated close to 63,36% of the capital, notably fully from the economic fallout from the winter olympic games through the Kadina firm, registered in the Virgin Islands. of 2014 in Sochi. The state holds 20%, the remainder in the hands of uniden- tified minority shareholders, some of whom may be acting Skorobogatko, 40, and Ponomarenko, 43, are both natives of on behalf of Skorobogatko and Ponomarenko. Organised by Ukraine. It was in Simferopol in Crimea that they met at the , the IPO — covering a bit less than 20% of end of the 1980s. There they created a small firm specialised in the capital — is an honest success. 980 million dollars are perfume production. After the collapse of the USSR, they set up raised, which brings the value of NMTP to close to 5 billion in Moscow, where they founded the Russian general bank (RGB). dollars. On that occasion, the Railway (RZhD) take over 5% Skorobogatko obtained an economics degree from the presti- of the port capital. gious Plekhanov Academy and began to frequent political cir- cles. In 1996, he became the assistant to the Communist deputy According to information gathered by Russia Intelligence, Alexandre Korovnikov, a close associate of Sergey Stepashin Skorobogatko and Ponomarenko have been able to establish who had numerous contacts in the Academy of the Interior mi- sound relations with Vladimir Yakunin, one of whose objec- nistry in Saint Petersburg (which in fact awarded Skorobo- tives, as is known, is to reinforce the presence of RZhD in gatko the title of “doctor of law” in 1998. We also recall that Sko- the country’s ports. robogatko remains one of the sponsors of the ice hockey team of the Interior ministry). In August 2002, he was named to the Already flourishing, business for Skorobogatko and Pono- Federation Council, where he represented the Kaliningrad re- marenko should continue to develop during the course of gion. Then in 2003, Skorobogatko was elected to the State Duma the coming years. A good share of the material to be impor- on the list of the liberal-democratic party of Vladimir Zhiri- ted in view of the construction of the infrastructure in So- novsky. Feeling the changing, he finally joined United Rus- chi would in fact transit through the port of Novorossiysk. sia in 2007. Its activity should also benefit from the launching of major projects — South Stream, the underwater gas pipeline that Skorobogatko and Ponomarenko became interested in the will link Novorossiysk to Bulgaria in about 2013, and the port of Novorossiysk as early as 1994. The Russian general bank Bourgas-Alexandroupolis oil pipeline to be built by Trans- patiently acquired shares in NMPT and thereby reached 13% of neft. In the meantime, Skorobogatko and Ponomarenko have the capital in the early 2000s. Skorobogatko and Ponomarenko decided to take advantage of their networks in Saint Peters- took over control of the commercial port of Novorossiysk in two bug and Kaliningrad to develop their activities on the Bal- phases. In 2005, they first bought the interest held by the de- tic. NMTP announced in early March that it would take 50% puty Sergey Shishkaryov and his partner Mikhail Bashin (about of the freight terminal under construction near Lomonosov, 20%). Then in 2006, it was the turn of the investment firm Ural- a project up to now operated by Mediterranean Shipping sib owned by Nikolay Tsvetkov (a close associate of the boss Company. d

ALERT 3 Venezuela : new arms contracts in sight

Venezuelan president Hugo Chavez truly intends to profit from his in Moscow. The Venezuelan shopping list also includes a dozen Il-76 presence in Moscow in early May — where he will assist at the inau- transport aircraft, as well as Mi-28 combat helicopters. According to guration of Dmitry Medvedev — to sign new arms contracts with sources close to the boss of the Rostvertol plant in Rostov on Don, Rosoboronexport. The most advanced deal concerns the sale of 4 Boris Slyusar, the deliveries could take place as early as the summer conventionally-powered Kilo (“project 636”) class submarines. A of 2009. Finally, Sukhoi — which will complete deliveries of the 24 decision in principle was reached early this year by the Venezuelan Su-MK2-V ordered by Caracas in the summer of 2006 — has hopes military. Moscow and Caracas are currently discussing the grant of a for the Su-35 (to be presented shortly at the FIDAE air show in San- loan for 800 million dollars by Vneshkonombank that would allow tiago de Chile). Obviously the technical problems encountered by for the financing of the bulk of the transaction evaluated at close to a some of the helicopters delivered to the Venezuelan air force by billion dollars. Dmitry Pankin — the new Finance vice minister who Russia in 2006, no more than the fiasco over the Algerian MiGs (Rus- succeeded Sergey Storchak, in prison since last autumn (Russia In- sia Intelligence n°72 of February 29 2008), have killed Hugo Cha- telligence n°66 of november 21 2007) — is charged with the matter vez’s appetite for Russian armaments.d 5 Russia Intelligence N°75 j April 10 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks

ALERTS cc FOCUS 3Nord Stream : the consortium retreats in the Norilsk : Oleg Deripaska under pressure face of Swedish reservations The strange ballet being played since several weeks by four of the most impor- Nord Stream AG, the operator of the fu- tant oligarchs of the Russian metals sector, Oleg Deripaska, , ture northern European gas pipeline oper- and Alsiher Usmanov, has an outcome that appears less and ated by Gazprom, BASF, E.ON and less certain. We indicated in our last editions (Russia Intelligence n∞73 of March Gasunie, has finally abandoned construc- 13 and 74 of March 27) that the chances of Oleg Deripaska to become the leading tion of a maintenance platform close to shareholder in Norilsk by buying the shares of Mikhail Prokhorov were se- the island of Gotland in Swedish waters. riously eroding since several weeks. The latest events have tended to confirm this Other technical solutions are being con- possibility. The “closure” of the Deripaska/Prokhorov operations has been delayed sidered, according to the consortium. It is until the end of April. Some last-minute difficulties have appeared in the provi- known that Stockholm was concerned sions of the accord concluded between the two men. It is known that the agreed about the projects by Nord Stream AG, price for 25% or 28% of Norilsk held by Prokhorov is 12,7 billion dollars, of which with some experts believing that a plat- a certain part in Rusal “paper” (about 11% of the capital), one part in cash (4,5 form could possibly be used for intelli- billion dollars) and another part in defered payments (about 3 billion dollars). gence purposes by Russia. Gazprom and its European partners, who want to follow In addition, Prokhorov may have obtained a guarantee of being able to freely the initial calendar for the project launch resell his shares to Rusal in 2010. But the international banks that will assure the (the end of 2010 for the first pipeline, 2013 financing of the 4.5 billion dollars of the cash portion of the transaction are as- for the second), have therefore decided to king, apparently, an early repyment of the same amount if Rusal does not list on withdraw their plans, which should also an exchange by November 1 2009, a clause that hardly pleases Mikhail Prokho- reduce the concertation procedures with rov, who is said to have requested to revise the conditions for the operation. the Swedish side. In keeping with the 1982 convention on the law of the sea, Stock- The other element that troubles the game is naturally the projected merger holm, just like Copenhagen and Helsinki) between and the group of . During will give its opinion after examining the the extraordinary general assembly that was held on April 8, the Norilsk share- ecological impact of the project, but can- holders gave themselves one month to complete an accord with Alisher Usmanov, not in principle prevent construction of discussions to focus essentially on the value of the Metalloinvest assets as well the pipeline. It should also be noted in as on the final strucuture of the Norilsk Nickel shareholding. Apparently this ge- passing that the predicted costs of Nord neral assembly did not lead to a frontal opposition between Vladimir Potanin and Stream have been revised upward and Mikhail Prokhorov, to the point that the structure they jointly control, KM Ma- are now established at 7,4 billion euros. nagement and which holds about 8% of the Norilsk capital decided to vote with the management of the mining company although the position of this structure 3Mechel strengthens in the general assembly was believed to be crucial. its position in If Bulgaria and Serbia have in recent Many elements that lead to the belief by close watchers of the business that months been the priority targets of the the cleavage between Potanin and Prokhorov, which was believed to be without Kremlin (Russia Intelligence n°70 of Jan- hope of return, is perhaps not so definite as that. In any case, at the close of this uary 31 2008), Romania is not in the least gathering, Andrey Klishas, president of the Norilsk administrative council, sur- bit absent from the sphere of interest of prised his world by declaring to the press that Norilsk was ready to purchase Mi- the large Russian industrial grooups. khail Prokhorov’s shares in case an accord with Deripaska did not materialise. Therefore, Mechel just announced the Many things must therefore take place during this month of April and the discus- purchase, for some 221 million dollars, of sions risk being torrid in view of the sums at stake and the well-known hostility the Ductal works. This acquisition between Oleg Deripaska and Vladimir Potanin. It is probable in fact that the Ru- supplements the two other assets of Igor sal bankers are questioning the interest for the aluminium group to find itself as Zyuzin’s group in Romania, Industria minority shareholder of Norilsk/Metalloinvest, in case this transaction materia- Sarmei (renamed Mechel Campia Turzii) lises. As for Mikhail Prokhorov, he can consider that his interests are more to sell and COST, purchased in 2002-2003. The his shares to Vladimir Potanin since the markets accord a higher value to Norilsk next phase of the Mechel expansion on in case of a merger with Metalloinvest rather than a cooperation with Rusal. the Romanian market should be in the en- ergy sector, with a joint offer with Hun- Mikhail Prokhorov also surprised observers by winning in a completely unex- gary’s Magyar Villamos Muvek for a pected fashion the auctions for the state share in the energy production company . We remind that Mechel has TGK-4, for the sum of 500 million dollars. This company operates 25 power sta- elsewhere profiled itself in recent weeks tions in central Russia (Smolesnk, Lipetsk, Tula, Voronezh). Already for a long by buying Oriel Resource (Russia Intelli- time, it was known that Mikhail Prokhorov was interested in the electricity energy gence n°74 of March 27 2008). Among sector. He was even seen as becoming the controlling shareholder of energy as- the other major Russian groups present in sets within Norilsk Nickel which Vladimir Potanin wanted to “spin off” this win- Romania should be mentioned Dmitry ter, an operation which Prokhorov was in fact opposed to. In Brief, this TGK-4 Pumpyansky’s TMK, which controls a operation intrigues many observers to the point that some are asking if it doesn’t steelwork in Resita, and the oil firm involve a “bonus” offered to Prokhorov to obtain his backing for one of the two Lukoil, owner of the refinery in Ploiesti structures surrounding Norilsk Nickel. And if this is the case, it could be not good d d 6 since 1998. news for Oleg Deripaska... Russia Intelligence N°75 j April 10 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks

cc TELECOM ALERTS Altimo pursues its competition with Telenor 3Kamaz on the lookout for a western investor and aims at the Turkish market Major manoeuvres are underway in the Altimo – the susidiary of the Alfa-Group in charge of management of the as- Russian automobile sector. Just a few sets of the holding company in the telecommunications sector – is in the process weeks after having concluded the sale of of launching a vast reorganisation of its industrial strategy. If we can believe the 25% of the capital in Avto Vaz to Renault whispers of its officers, Alexey Reznikovich and Kirill Babaev, the twin priori- (Russia Intelligence n∞68 of December ties are the takeover of control of Vympelkom and of , the main Turkish 20), Ruben Vardanyan, the boss of the mobile telephone operator (close to 30 million subscribers, or 63% of the local Troika-Dialog investment firm, is turning market. After which Altimo could eventually side with a European leader of the toward a new industrial undertaking. Av- telecommunications sector. In the meantime, the Russian group has resumed hos- tominvest Ltd, a subsidiary of Troika-Dia- tilities with its old Norwegian adversary, Telenor, which could once again repre- log, has just taken a 29,48% stake in Ka- sent an obstacle to the Altimo ambitions. maz, the truck manufacturer situated in Tatarstan made famous outside Russia for Ukraine, a Russo-Norwegian battlefield. its repeated victories in the Paris-Dakar We remind our readers that Altimo possesses to this day 43,8% of the mobile auto rally. This transaction allows Troika- telephone operator Vympelkom (“”), 25% + 1 share of its competitor Dialog to attain majority status since it al- Megafon, 13,22% of Turkcell, 49% of the Kirghiz operator Sky Mobile, 26,6% of ready held 21,2% of the Kamaz shares.The and 43,5% of the Ukrainian operator Kievstar. In the latter, like teams under Ruben Vardanyan will now Vympelkom, Altimo is associated with Telenor (29,9% in Vympelkom and 56,6% in begin to seek out a strategic investor, to Kievstar). A somewhat rocky association since 2005. At the time, Altimo backed whom they will propose 25% to 49% of the purchase by Vympelkom of URS, a small Ukrainian mobile telephone - Kamaz. Volvo, Iveco and MAN are fre- tor. An operation which was opposed by Telenor, which saw it as unfair competi- quently cited. Another scenario raised up tion vis-à-vis Kievstar. to now, cooperation with the ma- nufacturer MAZ, is in the process of being The transaction took place and was followed by a lengthy legal battle between abandoned because of the reticence of Altimo and Telenor before courts in Moscow and . The Norwegian group Alexandre Lukashenko. The Russian state was rebuffed in the URS case, but on the other hand was succesful last July when will remain present in the capital of Kamaz an American court ordered Altimo to release its 43,5% in Kievstar. More recently, through the Rostekhnologii holding com- relations have appeared calmer. Altimo and Telenor even agreed on the purchase, pany under Sergey Chemezov (38%). by Vympelkom, of the operator Golden Telecom, where they are both sharehold- ers (26,6% and 18,3% respectively). 3Moscow : Chigirinsky loses a new legal battle A short-lived truce. March 25, Altimo in fact filed before an arbitration court The oligarch of Georgian origin, at the in to obtain 1 billion dollars in damages and interest from Telenor. This head of the construction and public works amount corresponds, according to the , at the loss caused by the delay firm ST Development, has just experien- in the acquisition of URS. The chances for Altimo to succeed seem weak, but this ced a new setback. In its editions of Octo- complaint has the main objective to maintain pressure on the Norwegians to make ber 26 2006 and February 2 2007, Russia progress on another issue. Alexey Reznikovich, the president of Altimo, declared Intelligence echoed the information about at the end of March that he wanted to concentrate his activities around two poles the contest over the reconstruction of the – Vympelkom and Turkcell – where he hopes to gain a majority stake.This would Rossia hotel, located near the Red imply the purchase of one part of the shares of Vympelkom held by Telenor. But square.The call for proposals organised in it is not certain that the Norwegians want to sell, even if they have not completely late 2004 by the Moscow municipality and closed the door. won by ST Development had been challen- ged and then cancelled by court edict. Such Turkcell : toward an exchange of shares with TeliaSonera ? a situation was hardly designed to comfort Concerning the Turkish front, things are not any simpler for Altimo. They own Chigirinsky who — strengthened by the at this point 13,22% of Turkcell, a holding purchased in November 2005 for 1,6 bil- support of the capital’s mayor, Yuri Luzh- lion dollars from Cukurova, to which the Russian group also lent 1,7 billion dol- kov — had not halted the works. The situa- lars pledged for an additional 13,8% of Turkcell. Since Cukurova did not repay the tion appears more serious this time. At the debt in the time agreed, Altimo demanded that it be transferred 13,8% of Turk- end of March, the 9th appelate court of the cell, which was opposed by the Turkish side. Legal proceedings are therefore un- arbitration tribunal in Moscow invalidated derway. But it is through another means that Altimo intends to takeover control all the commercial procedures that follo- of Turkcell. The Russians plan in fact to propose to the Swedish group TeliaSon- wed the 2004 call for proposals, which was era – which holds 37,08% of the Turkish operator – to exchange its holding against reversed on January 23 by the supreme ar- Altimo’s in Megafon. A swap that would be accompanied by payment by the Russ- bitration court. ST Development lodged a ian group of 2 billion dollars in order to compensate for the difference in value final appeal and plans to pursue its policy between the holdings exchanged. of the fait accompli. But it remains that the environment in Moscow is evolving in a di- It remains that on the Megafon issue, Altimo risks nevertheless to have to take rection that is not favourable to Chigirinsky into account the appetite of Alisher Usmanov, who already owns 31,5% of the op- with the probable departure of his protec- erator and doesn’t hide his aim to take over control. d tor Yuri Luzhkov.d 7 Russia Intelligence N°75 j April 10 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks

FOCUS c Behind the Atomenergoprom-Toshiba accord

Whether a simple declaration of itent or the launching of former USSR, China, India and Bulgaria (even soon to the a wide-ranging industrial partnership, the framework coope- Maghreb, even if discussions with Egypt and Libya are far ration agreement signed March 20 between Atomenergoprom from concluding). The cooperation with Toshiba should also and Toshiba has in any case aroused a considerable interest allow the resolution, in part at least, of the problems in pro- in Paris, in both the concerned ministries as well as at Areva. duction capacity that is confronting the Russian industria- The stakes — no more no less than the constitution of a world lists, whether concerning turbines or reactor tanks. In ad- leader in the civilian nuclear sector — is truly far-reaching. dition, it permits Russia to “rejoin” the Kazakh group Kazatomprom, which bought from Toshiba 10% of Westing- If we believe the communiqué made public on March 20, house in the summer of 2007 (Central Asia and Caspian In- Russians and Japanese will begin feasibility studies on co- telligence n° 15 of august 30 2007). operation concerning the design and engineering for the construction of civilian nuclear power plants, the construc- The document of March 20 relates to an obvious comple- tion and maintenance of capital euquipment and the nuclear mentarity between Russians and Japanese. After the acqui- combustion cycle. It elsewhere underlines that “the comple- sition of Westinghouse in 2006, Toshiba disposes in fact of mentary links between the two companies could in the lon- quality products, especially the AP 1000 third-generation ger-term engender a strategic partnership. This accord will reactors, that compete with Areva’s EPR. Russians are, on permit to guarantee deliveries that are viable and secure their side, competitive in the combustion cycle supplying po- for services in the nuclear cycle to consumers of Japan, the wer stations. One of the first projects on which Atomener- United States and other countries.” goprom and Toshiba should cooperate is the construction of a nuclear power plant in the Russian Far east, near Vladi- The Russo-Japanese cooperation in the nuclear domain is vostok, which is backed by Oleg Deripaska’s Rusal (Rus- not really a surprise. It is the culmination of discussions be- sia Intelligence n°53 of April 30 2007). gun in the spring of 2007 during the visits to Tokyo of the for- mer Russian Prime minister and the boss On the political side, the implementation of the accord bet- of Rosatom, Sergey Kirienko (Russia Intelligence n° 50 of ween Toshiba and Atomenergoprom is an important signal, at March 2 2007). For Russia, the interest in collaboration with a time when Russians and Japanese have resumed discreet dis- Japan is obvious. It enlarges in effect the potential geogra- cussions on resolution of the territorial dispute on the Kurile phy of Atomenergoprom activities, up to now limited to the islands (Russia Intelligence n°71 of February 13 2008). d

Shipbuilding : FLK on a spree in Ukraine and in Germany If Ukraine remains the theatre of a Russo- that unites Russian aircraft companies (the sia Intelligence n°64 of October 25 2007). Norwegian competition in the telecoms sector other major shareholder being the State pro- (read article page 7), the atmosphere is more perty fund with 28,69%). FLC West is for its The purchase of Aker Yards Ukraine Hol- cooperative in the shipbuilding domain. March part jointly held by FLK and the Cyprus-based ding AS constitutes in all probability a signifi- 25, Aker Yards ASA announced the sale of firm Almiar Investment Ltd, which represents cant operation for Russia. The Okean Nikolaev 70% of its subsidiary Aker Yards Ukraine Hol- the interests of private shareholders in FLK yard is operating at virtually full capacity, with ding AS to FLC West, a subsi- close to Nail Malyutin and Ismael Ostrovsky. 12 vessels under construction (essentially bulk diary of the Russian leasing firm FLK. This trans- The initial mission of FLK was to support aer- carriers, container ships, chemical and refri- action of 291 million euros, which should be nautical industries by ordering new aircraft, gerated ships). Those of Wismar and concluded during the summer, concerns the notably from Tupolev. Certain persons consul- Warnem¸nde are for their part considered as Okean Nikolaev in Ukraine, as well as those ted by Russia Intelligence in Moscow do not solid, since they have benefitted in recent years of Wismar and Warnem¸nde in the former exclude that FLK was activated by the State to from impressive European funding to moder- GDR. The Norwegian side underlined that the undertake a conveying operation on behalf of nise. They will this year deliver 16 vessels, in- Aker Yards Ukraine Holding AS will remain ba- the holding firm specialised in shipbuilding, cluding 3 ice-breaker tankers(“Arctic class”) sed in Oslo and the management would be OSK, whose establishment is experiencing some for Lukoil. Historically, these yards worked retained. The presence of FLK in this deal is at delays and which to this day does not as a re- closely with the and some of their first glance surprising. The group is in effect sult dispose of all the instruments required for management are believed to be perfect Rus- 51,8% held by OAK, the public holding firm such a major foreign financial operation (Rus- sian speakers. d

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