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RIA60 30/08/07 9:34 Page 1

N°60 - August 30 2007 Published every two weeks / International Edition CONTENTS KREMLIN c P. 1-2 Politics & Government A new season marked by « low blows » KREMLIN Time seems to have accelerated in since a few days and the “post Putin” manoeuvres c A new season marked by have gotten off to a flying start even before the end of the vacations. On the side of the media close « low blows » to the Kremlin, the progressive and powerful ascendancy of Sergey Ivanov is being orchestrated, FOCUS to the point that it is in fashion to now consider him as the “successor” in the face of a Dmitry c Sergey Naryshkin Medvedev who has never really been convincing or taken on the profile of a future Russian leader. reinforces his positions But on the sidelines the blows are coming in low. Such as the attempts to gain control of Russ- neft, the 10th company of the country, controlled by Mikhail Gutseriev, of which we P. 3-7 Business & Networks have often spoken in these columns ( Intelligence n°56 of May 31 2007).At the beginning ENERGY of the summer, and Mikhail Gutseriev, constrained and forced, reached an accord c ’s new targets so that the group Base Element buys Russneft for a little more than 3 billion dollars (or a price BEHIND THE SCENE inferior to all the evaluations, which ranged between 6 and 8 billion), with the approval of Vladimir c Total’s Russian idyll Putin. But lightning struck on July 31, when the Lefortovo court in Moscow decided to freeze the shares in Russneft at the request of the tax administration. And it was learned these days that 2014 Gutseriev was the subject of an international arrest warrant, a few days after the death of his son, c The lobbies enter on stage c Vladimir Kozhin, the following an automobile accident. As of the latest news, he may be in …This scenario, superintendent of the which is reminiscent of the Khodorkovsky affair unless one is mistaken, could well be orches- Kremlin trated by the men who control Rossneft, at the head of whom is found , the deputy head of the presidential administration. It must be recognised that he would have a lot of nerve FOCUS c Oleg Deripaska, (or an infallible protection) to set himself in the way of a project having the support of Vladimir the global oligarch Putin and set in motion by someone close in the person of Oleg Deripaska (read page 6). The same questions surround the arrest of Vladimir Barsukov (alias Kumarin), described endlessly as the BEHIND THE SCENE head of the Tambov criminal group whose base is . But Barsukov is an old ac- c Telecoms : Leonid Reyman plows new fields quaintance of certain intimates of , such as the Kovalchuk brothers, Alexey Mor- dashov or Vladimir Yakunin, the boss of RZD, at the time when the Russian President worked in FOCUS the mayor’s office of the northern capital. The operation orchestrated by general prosecutor Yuri c Upheavals in store for Chayka leaves no doubt, especially since the latter complained that “very high officials” had at- the Russian energy sector tempted to block this arrest. Who is the target? Vladimir Putin, his friends in Saint Petersburg? BEHIND THE SCENE Who’s pulling the strings : Chayka, the head of the FSB, Nikolay Patrushev, the Interior minister c : Alrosa in ambush Rashid Nurgaliev, the Kremlin itself who would like to pressure into silence a man whose reve- AEROSPACE lations could be disturbing? c MAKS 2007 : mixed results for Russian industry In any case the blow is hard and could have unexpected repercussions. Needless to speak of the arrest of ten suspects in the murder of Anna Politkovskaya, about which nothing is known but P. 8 Regions & CIS that the leader is a Chechen and the mastermind, whose name is kept secret, has taken refuge abroad, that a unknown number of former and current FSB agents are part of this group and that FOCUS the crime, again according to Chayka, was organised from abroad to discredit President Putin… c The governors’ waltz This chain of events is disturbing and could lead to spectacular ends. One part of these ma- noeuvres could have a relentless logic : to remove from Vladimir Putin the little authority he re- SUBSCRIPTION tains on the system of Russian power and certain of the clans around it and to impose on him a Print Edition more “controllable” successor than Ivanov, who is known for the distance he maintains from cer- (23 issues, airmailed overseas) tain of these clans which wanted his downfall on several occasions. But a reversal is always pos- €770 TTC sible… The series of photos this summer showing an athletic bare-chested president in the re- The Web Pack gion of Tuva, rekindled the spontaneous demands in the population that remain at his post…To (Print Edition be sure Putin is not Nursultan Nazarbaev, the Kazakh president, who in a few weeks cast off two + PDF + archives acess) son-in-laws from the succession (read the last number of Central Asia and Caspian Intelligence), € 880 TTC granted himself a new term as president for life and a national assembly with only deputies of the The Premium presidential party “elected”. Brutal but efficient… d Subscription (Print Edition + PDF + access to all the website contents) Discover the latest issue of our new publication « Central Asia & Caspian Intelligence» € 1200 TTC Ask for a free copy : [email protected]

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RUSSIA INTELLIGENCE Politics & Government

FOCUS c Sergey Naryshkin reinforces his positions Even if Sergey Ivanov seems increasingly well-placed in his this state financing programme sets aside transfers amount- bid to succeed Vladimir Putin (read editorial page 1), the var- ing to 566 billion rubles (22 billion dollars) by 2013.They will ious leadership clans in the Kremlin are maintaining their mer- aimed primarily to modernise the regional infrastructure and ciless competition to carve out the power balances that will the city of Vladivostok, which has ambitions of hosting the emerge next spring. The post of head of the government, as well APEC summit of 2012. On this issue, German Gref, opposed as the control of the “energy bloc” will obviously be strategic. his Finance ministry colleague, Alexey Kudrin. The latter The heavyweights of the Russian political-economic elite are wanted that the financial flows be managed by the Treasury, likely to be called to –hopefully- higher functions in the com- while the Minister of economic development and trade was ing months and entering the final stretch in sometimes differ- promoting the idea of “single window” based at the federal ing situations. Very active in late-2006 and early 2007, Vladimir Rostroy agency. So Sergey Naryshkin will have to decide. Ac- Yakunin, the boss of the railways and the head of the “ortho- cording to information gathered by Russia Intelligence, he dox chekist” group, has been extremely discreet in recent weeks. would be leaning toward the view of German Gref. It’s true The head of Rosoboronexport, Sergey Chemezov, has for him- that the n°2 of Rostroy is none other than his old friend Vladimir self again shown proof of his influence by obtaining the nomi- Kogan, the former head of Promstroybank, the unofficial nation of his right-hand man, Vladimir Artyakov, to the posi- bank of the Saint Petersburg mayor’s office. Vladimir Kogan tion of governor of the region of Samara (read article page 8). was in any case named August 8 as the supervisor of Vladivos- tok projects (it should also be noted in passing that Sergey A few members of his team, nevertheless, indicate that he Ushakov, ex-director of the Federal protection service (FS0) would be interested in succeeding Sergey Ivanov at the lead of and former chief of security with Gazprom, has also been as- the Military-industrial commission (VPK) with the rank of vice signed by Vladimir Putin in early August to follow the security Prime minister. In the end, it’s Sergey Naryshkin – to whom aspects of the Vladivostok-2012 project). Russian Intelligence had drawn the attention of its readers as early as the fall of 2006 (n°43 of November 10 2006)—who has Finally, Sergey Naryshkin was promoted coordinator of the scored the most points this summer. eastern -Pacific ocean oil pipeline project. This deci- sion would have been taken by early June by Vladimir Putin The vice Prime minister has first of all created a surprise in at the request of the top man at , Semyon Vaynsh- being named in late July to head the OSK, the state holding tok, but it was made official only on August 18 by the Russian company in naval construction (Russia Intelligence n° 50 of government. We also remind that phase 1 of this programme March 2 2007). It had been the Defence minister, Anatoly plans the construction of a pipeline of 2694 kilometres and of Serdyukov, who had been tipped, as well as Viktor Khristenko, a capacity of 30Mt/yr between Tayshet and Skovorodino. A oil Industry and energy minister, who had the support of Sergey terminal should also be built near Nakhodka, as well as an off- Ivanov. It was at the last minute and to the general surprise shoot toward China (this last segment will be financed by that Vladimir Putin proposed the name of Sergey Naryshkin to China). 100 kilometres have already been built, but important a working session on the naval sector held on July 25 in the cost overruns have been registered (11.6 billion dollars rather Kremlin. than the 6 initially expected). According to information picked up in Moscow, one of the first decisions by Sergey Naryshkin Sergey Naryshkin also registered a double success on the would have been to postpone sine die the second phase of the Siberian front. On august 2, he saw himself confided a mission project (increasing the capacity of the oil pipeline to 80Mt and by Prime minister to resolve the difficulties building a Skovorodino-Pacific ocean section) while awaiting surrounding the ambitious federal financing programme for de- for certification of the precise potential of the Yakutia re- velopment of the Far-east region. We remind our readers that serves. d

New on www.russia-intelligence.fr Detailed biographies of three of the most influential men in the Russian power elite cYuri Kovalchuk cIskander Makhmudov cAndrey Belyaninov Yuri Kovalchuk is the Iskander Formerly with principal Makhmudov is the KGB, Belyaninov shareholder in AB president of the Ural was named just Rossia, a bank of and a year ago at the modest size which metallurgical head of the Federal nevertheless enjoys company (UGMK) customs service widespread influence in the circles of and majority shareholder in (FTS). His main mission : strengthening power in Russia because of its proximity Transmashholding (TMX – rolling stock). control of the financial flows linked with the Kremlin. He thus manages He is at the head of the 86th leading to hydrocarbon exports that represent « strategic » interests in energy, media world fortune (8 billion dollars) no less than 70 billion dollars for the and high technologies. according to the latest Forbes ranking. fiscal year 2006. 2 Who manages Russia? On www.russia-intelligence.fr, more than 30 exclusive notes & biographies on the circles of power. Free access for subscribers. Russia Intelligence N°60 j August 30 2007 www.russia-intelligence.fr RIA60 30/08/07 9:34 Page 3

RUSSIA INTELLIGENCE Politics & Government

SOCHI 2014 c The lobbies enter on stage A few weeks after the Guatemalan triumph for Vladimir The presidency of this public structure gives rise, we can Putin (Russia Intelligence n°59 of July 12 2007), a bit more is imagine, to considerable ambitions. Vladimir Putin, having let known concerning the details of the organisation for the win- it be known that he did not intend to take part directly in the ter Olympic games of 2014. This event of major economic, po- preparation of the Sochi winter games, (according to informa- litical and symbolic importance is already giving rise to severe tion gleaned by Russia Intelligence in Moscow, the Russian power struggles, whether in the Kremlin, at the regional level president would be, on the other hand, interested in the post or within the large industrial and financial groups vying for the of the IOC and would have even asked some of his close asso- construction or operation of the future infrastructure. ciates to gauge the reaction), the unofficial candidatures are It was German Gref who, August 14, lifted a corner of the multiplying. Among the names persistently raised must be in- veil. Following a meeting of the special coordinating commit- cluded those of German Gref, of his assistant Vitaly Savelev tee – a temporary structure created by presidential decree in (who is close to Yuri Kovalchuk, the boss of the bank Rossia) July – the Minister of economic development and trade an- of , the head of the presidential administra- nounced that the preparations for the winter Olympic games tion, and especially Vladimir Kozhin (cf infra). of 2014 would be carried out by three distinct organisms. The The choice of the future head of this organism is all the more organising committee, charged with liaison with the Interna- sensitive because he would have to reconcile the interests of tional Olympic committee (IOC) and assuring the policy su- the large industrial groups implicated in the preparation of pervision of the project, should be assigned to vice Prime min- Sochi-2014. It concerns, of course, of Oleg Deripaska’s Bazel, ister Alexandre Zhukov. This economist, less in the media which has length’s lead in front of his comrades. Owner of the spotlight than his colleagues Naryshkin, Medvedev and Ivanov, Sochi airport, purchased in late 2006 (Russia Intelligence n° played a central role in the candidature of Sochi and finds his of 44 of December 1 2007), extremely active in the construc- work rewarded (certain of Russia Intelligence’s sources also tion and public works sector, this native of Kuban in addition believe that this nomination is equivalent to a means of dis- maintains well-known privileged relations with the governor of tancing Alexandr Zhukov from Moscow at the same time as the the region of Krasnodar, Alexandre Tkachev. Bazel will no- start, probably by the end of 2008, of the succession of Yuri tably build the Olympic village and foresees investing no less Luzhkov at the head of the capital). A coordinating commit- than 2 billion dollars in the region of Sochi in the 2014 time tee under the government will also be created. According to frame. Gazprom and will themselves finance the con- information filtering in Moscow, it could be confided to Dim- struction of the downhill ski resorts. It should be noted in pass- itry Chernyshenko, ex-director general of the Sochi-2014 can- ing that the friction between and Mikhail didature committee. He will charged with following on a day- Prokhorov (read article page 6) does not spare the Roza Khutor to-day basis the state of progress of the different projects and project, a complex of 550 hectares that will include no less than coordinate the work of the participants – ministries, regional 40 ski slopes with a capacity for more than 10 000 visitors. and Sochi municipal administrations, public and private groups. Sochi-2014 will be therefore one of the major actions of the Finally, German Gref announced that the management of some future Russian presidency. Certain signs already lead to the be- 314 billion rubles (more than 9 billion euros) foreseen to be lief that the division of the Olympic “cake” not be easy and that dedicated to the federal Olympic programme would be assured not all will be served. In early August, the assistant to the mayor by an ad hoc public structure. The argument put forward by of Sochi in charge of infrastructure, Yuri Palamarchuk, was the Minister for economic development and trade – advised in removed from his post. A few days earlier, the mayor of the city, the matter by the consulting firm Vegas-Lex and the Institute Viktor Kolodyazhny, while vacationing in Saint-Petersburg, of regional policy – is the functional flexibility and simplifica- had seen his young daughter Valérie perish after being struck tion of the decision-making process between the managers and by a motorist. A banal road accident, according to the police the enterprises involved. of the “capital of the north”. d

Vladimir Kozhin, the superintendent of the Kremlin

Favoured to manage the approximately 9 Committee for presidency general services, an organisation billion euros that will be dedicated for external relations of directly attached to the head of state which construction programmes in Sochi and its the “northern manages the huge pool of properties and region in anticipation of the winter Olympics capital”, led by finances for the presidency. 2014, Vladimir Igorevich Kozhin, 58, is Vladimir Putin. Vladimir Kozhin gained favour by certainly the man that counts in Russian Kozhin was assisted effectively organising the G8 summit in power circles. by Yuri Kovalchuk, Saint Petersburg in July 2006 (his service In fact, the career of this native of the head of Bank was notably responsible for the renovation Chelyabinsk, graduate of the Ulyanov Rossia (biographical of the Konstantin palace in Strelna). A electronics institute in Leningrad, owes Vladimir Kozhin profile available on confident of the president, with whom he much to his links to Vladimir Putin an the Russia skies regularly, Vladimir Kozhin is reputed acquaintance from back in the early 1990s. Intelligence website). In September 1999, he to be close to Vladimir Yakunin, the boss In 1993, he assumed the leadership of the followed Vladimir Putin, to Moscow, where of the railways, as well as Viktor Association of mixed companies in Saint he is named director of the Service for Cherkessov (federal anti-drug service) and Petersburg, an organisation created two monetary control and exports. In 2000, he of Georgy Poltavchenko, the super-prefect years earlier with the active support of the replaced Pavel Borodin at the head of the of the federal central district. d 3 Russia Intelligence N°60 j August 30 2007 www.russia-intelligence.fr RIA60 30/08/07 9:34 Page 4

RUSSIA INTELLIGENCE Business & Networks

cc ENERGY BEHIND THE SCENE Total’s Russian idyll Gazprom’s new targets After several of what could be called E.On and the British electricity market. In its previous editions (n°54 of 27 April delicate years in Russia (we recall 2007), Russia Intelligence gave space to the growing interest by Gazprom in the elec- notably the entry into the capital of tricity sector. The holder of 10.5% in the national company, RAO EES Rossi, and con- aborted in 2005 and the trolling Mosenergo, the group run by this spring also signed an accord dispute with on the Vankor for the construction of a gas power station in the former East Germany and is actively deposit), the French petroleum group interested in the Greek market. If certain information circulating in Moscow is to be achieved a major success in mid-July by believed, it’s the British market that should be the stage of the next Gazprom expan- signing with Gazprom an accord on sion in the electricity sector. With the active support of its German partner E.On. Shtokman (Russia Intelligence special edition of July 12 2007). We also recall that in July 2006, Gazprom and E.On had signed a framework ac- The teams of Christophe de cord that foresees the transfer by the Russian group of 25% - 1 share of its Sev- Margerie are somewhat discreet about erneftegazprom subsidary, the owner of the development license for the Yuzhno- the conditions that made the Russkoe deposit which should feed the planned north European (Nord-Stream) gas breakthrough by Total in Russia, but pipeline. In exchange, E.On proposed interest in several of its Hungary holdings (50% certain details have nevertheless filtered - 1 share of E.On Foldgaz Trade and E.On Foldgaz Storage and 25% -1 share of the re- about the details of cooperation with gional electricity company E.On Hungaria) as well as financial compensation. The Gazprom. The coming 18 months will be discussions, which should conclude this summer, are nevertheless dragging on. One devoted to preparation of the technical of Alexey Miller’s assistants, Alexandre Medvedev, let it be known that Gazprom was and financial parameters of the now less convinced of the value of the Hungarian interests proposed by its German Shtokman project. In 2009 the partner. investment decisions will be taken. Under the terms of the framework Anxious to conclude the deal in time for the launch of Yuzhno-Russkoe, foreseen agreement signed on July 13, Total will for this fall, E.On is said to have made Gazprom a new set of proposals. They are said control 25% -1 share of the future to include some of the 5 gas power stations belonging to the group in Britain, a coun- company that will operate the deposit try where it represents 10% of the electricity. It remains, obviously, to be seen what (without actually holding the license, would be the reaction of British authorities. The prospects of seeing Gazprom expand which remains in the hand of in the national energy sector probably does not thrill new Prime minister Gordon Sevmorneftegaz). This accord is for Brown, especially in the face of the current bilateral context. But it is doubtful that duration of 25 years starting from the any initiative, if needed, would be launched to try to stop a transaction. Especially start of entry into production of since discussions are about to be initiated between Gazprom and British Petroleum Shtokman. Alexandre Ananenkov – co- in keeping with an accord signed last June on Kovytka (Russia Intelligence n°58 of signer of this document in the absence June 28). of an ailing Alexey Miller – specified that Gazprom intended to then regain What will BP propose to Gazprom? We remind readers that Gazprom, BP and control of the project and deal alone TNK-BP plan the creation in the coming months of one or several joint ventures that with its subsequent phases. they could invest some 3 billion dollars into. While , the Russian Certain sources of Russia Intelligence shareholder in TNK-BP, has declared that his Rospan subsidiary could be thrown into in Moscow believe, however; that the the common pot, the British participants have up to now taken good care not to show French group obtained guarantees their intentions. In early August an expert report put online on the TNK-BP website concerning the extension of its suggested that Gazprom might be proposed stakes in some of the British group’s proj- participation, as well as a right of ects in China. A credible possibility in view of the interest shown by Gazprom in the oversight on the pricing policy for the Chinese market, were it hopes to deliver its first supplies in the 2012 timeframe gas extracted from Shtokman (for through the future Altai gas pipeline system. memory, Gazprom announced a production of 27 billion m3 from 2013). According to information surfacing in Moscow, it seems, however, that another op- Total is on its side maintaining the tion might be favoured by BP. The British firm would propose to Gazprom that it would utmost secrecy about what was contribute its interest in the liquefaction terminals of Atlantic LNG in proposed to Gazprom in exchange for its Trinidad and Tobago, in which British Gas, Repsol, Suez and the local public firm entry into the Shtokman project. NGC Trinidad and Tobago are also present, into the assets of the future joint ven- In any case, it is a new era that is ture. The Caribbean archipelago is currently the main supplier of LNG to the United opening for the French group in Russia. States, and a foothold there would make sense for Gazprom, which has long sought Sign of the times, the federal agency a presence on the American market. Rosnedra inaugurated last week a new development plan for the Kharyaga Another possibility raised by some of Russian Intelligence’s Moscow sources – deposit, drawing a close to a dispute that North Africa. It is known that BP holds a stake in the Salah Gas and Amenas proj- we regularly analysed in our columns ects in Algeria, a country that has been very much in fashion in Russian business (Total and its partners, Norsk Hydro and circles in recent months. More generally, the Maghreb is a region where Gazprom NNK, will produce 1.6 Mt this year and wants to expand its presence. We also recall that its other German partner in the 3.1 Mt by the 2013 timeframe). Which Yuzhno-Russkoe project, BASF, is for its part preparing to sell it 49% in two gas de- should put President Nicolas Sarkozy in posits in Libya. d a better frame of mind before his visit to 4 Russia in September. d Russia Intelligence N°60 j August 30 2007 www.russia-intelligence.fr RIA60 30/08/07 9:34 Page 5

RUSSIA INTELLIGENCE Business & Networks

cc FOCUS BEHIND THE SCENE Upheavals in store for the Russian Polyus : Alrosa energy sector in ambush The intense power struggles now taking place in the wings surrounding the trans- The divorce announced in late January fert of Russneft (read article page 5) indicate that the reshaping of the hydrocar- between Vladimir Potanin and Mikhail bons sector was not achieved even after the division of the spoils of this spring Prokhorov, which we analysed in depth in (Russia Intelligence n°55 of May 16 2007). To the contrary, all signs point to more an earlier edition (Russia Intelligence n°57 important changes taking place in the run-up to the presidential elections, whether of June 14 2007), witnessed some new and it concerns the shape of Rosneft, the direction of Gazprom or the composition of important developments during the the “energy bloc” in the midst of the government. summer. As a sign that confidence no longer Contrary to the affirmations of the president of its administrative council, Igor reigns between the two men, Mikhail Sechin during the shareholders’ general assembly in early July, Rosneft has ap- Prokhorov has requested the convocation parently not given up on a final wave of expansion before the opening of the pe- of a general assembly of the shareholders riod, fraught with uncertainty, of the post-Putin era. Russia Intelligence had re- to elect a new board. It should be recalled vealed in previous editions (n°43 of November 10 2006 and n°46-47 of January 19 that last June, Vladimir Potanin and Mikhail 2007) the interest of Rosneft for Surgutneftegaz and the strange manoeuvres ob- Prokhorov had preferred not to be re- served among shareholders of the group headed by Vladimir Bogdanov. The ru- elected. Apparently the development of the mours pointing to a linking of Rosneft and Surgutneftegaz – to which Russneft and situation justified, in the eyes of the latter, the public group Zarubezhneft could also be joined – have resumed with vigour a return visit to the management following the publication of a dispatch from the American Energy Intelligence organisation. Again it should be underlined Group, prompting a 7.6% rise in the Surgutneftegaz shares in trading for the day that ONEXIM, the holding company on August 27. It should be noted that the 4th leading Russian oil group is a very at- belonging to , holds, tractive prey : it disposes notably of a “nest egg” evaluated at 16 billion dollars and among other things, 22% of Norilsk its production (65 Mt in 2006) grows regularly. Up to now, the scenario of a link- and 22% of Polyus Zoloto (Russia’s age between Rosneft and Surgutneftegaz collided against at least two important leading gold producer). obstacles. On the one hand, the position of Vladimir Bogdanov and, especially, of The other announcement concerns , the head of GUNVOR, a Geneva-based structure that com- precisely the transfer of the 22% held by mercialises the company’s crude oil. On the other hand, Rosneft’s financial situa- Mikhail Prokhorov in Polyus Zoloto. As we tion, heavily indebted to carry out the purchase of the Yukos assets sold at auc- had written this spring, Alrosa is tion last May and June . Obviously, it’s well-understood since the Yuganskneftegaz particularly interested. If we can trust affair and the “Baikal operation” (Russia Intelligence n°6 of February 11 2005) certain information circulating in recent that the most important asset transfers can sometimes amount to a simple game days in Moscow, a consortium is being of words and signatures. organised to conclude the deal. The Sputnik group of the ex-director general of If certain reports circulating in Moscow can be confirmed, the deal hatched by NTV, Boris Yordan, might also be the Sechin-Bogdanchokov duo would be a share swap between Rosneft and - involved. The transaction, estimated at neftegaz. As best as we can tell, about two-thirds of the shares of the Surgutneftegaz between 2 and 2.5 billion dollars, would be shares are currently held by Vladimir Bogdanov and his main associates (Mikhail financed by Vneshtorgbank. This was Globa, the financial director of the group, Ludmila Loginovskaya, the head of the confirmed by its boss, Andrey Kostin, in legal services, Valery Tatarchuk, Vladimir Ashikhmin and Vladislav Barankov mid-August. Mikhail Prokhorov would have – deputy director-generals, or also Svetlana Kukotina, the chief of the depart- also been approached by Suleyman ment of financial planning). Their interests could be converted into Rosneft shares Kerimov, the business and (probably close to 25%), which would allow the state to retain a majority. It should parliamentarian from Dagestan, who be recalled that the participation of the state in Rosneft (75.16%) is currently as- elsewhere recently announced that he was sured by the Rosneftegaz public entity, which also holds 10.74% of the Gazprom leaving the Liberal-democratic party of shares. In passing, it should be underlined that the new boss of Rosneftegaz, Lar- to rejoin United isa Kalanda, 43, is none other than the directrice of the Rosneft legal services. Russia for a “fee” that we can imagine is considerable. The other major question mark hangs over the cast of the government’s energy What remains to be settled bloc. The Minister of industry and energy, Viktor Khristenko, is in fact seen as on business. It is known the way out. His ministry is in any case expected to be broken up. The energy port- that the Kremlin wants to bring folio should undoubtedly be the object of a new rivalry between Gazprom and Ros- to an end by the presidential elections neft. Certain sources have told Russia Intelligence in Moscow they understand a situation that it considers as an that the candidature of Alexey Miller could be put forward. The Sechin-Bog- “anachronism,” of a strategic economic danchikov duo could for its part lobby to have the energy post assigned to Sergey sector controlled by an oligarch judged Naryshkhin, unless obviously they do not propel him to some other high position to be unreliable. Oleg Deripaska is (read article page 2). The posts of Yuri Trutnev, the Minister of natural resources, still in the wings, but the Russneft matter who was unable to steer the adoption of the underground law and who is consid- (read article page 5) has preoccupied ering a return to Perm (read article page 8), or even the one held by Semyon Vayn- him in recent weeks. Russia Intelligence shtok, the head of Transneft, could also be liberated. d will obviously follow the situation ever closely. d 5 Russia Intelligence N°60 j August 30 2007 www.russia-intelligence.fr RIA60 30/08/07 9:34 Page 6

RUSSIA INTELLIGENCE Business & Networks

cc FOCUS BEHIND THE SCENE Oleg Deripaska, the global oligarch Telecoms : Oleg Deripaska is without a doubt the most active of in recent Leonid Reyman plows months. It should be recalled that, last spring, he entered into the capital of several new fields first-ranked Western companies (Strabag, Hochtief, Magna – Russia Intelligence Hydrocarbons are not the only sector n°56 of May 31 2007) He maintained his high profile this summer by taking part in where assets are changing hands as the the major economic issues that concern Russian power circles. Known for his un- presidential elections of 2008 draw near. As failing support of the Kremlin – he declared to the in mid-July that proof, it was learned in late July that he was ready to give up Rusal to the state if it asked him – Oleg Deripaska never- , the boss of Gazmetall, theless perhaps committed his first grave mistake by colliding head-on into the in- GazpromInvestHold and the publishing terests of the Sechin-Bogdanchikov tandem. house Kommersant (Russia Intelligence n°39 of September 15 2006), was in the The underside of the Russneft affair. As we hinted at in these pages as early midst of discussions with Dane Jeffrey as May (Russia Intelligence n°56 of May 31 2007), Mikhail Gutseriev was finally Galmond for the acquisition of his stake in forced to throw in the towel. His resignation was accepted by the Russneft adminis- Telecominvest (58% through the trative board on July 30. The oligarch of Ingushetian origin also decided to give up firm First National Holding) his other interests (notably Russky ugol, the coal company that he shares equal and in IPOC, a firm registered in . control of with businessman Vadim Varshavsky). A few days earlier, Bazovy Ele- Telecominvest and IPOC respectively hold ment (Bazel), Oleg Deripaska’s holding company, had addressed itself to the Anti- 31.8% and 8% of Megaphone, the 3d trust committee informing it of its intention of buying 100% of Russneft’s shares. leading mobile telecom operator in Russia Moscow petroleum experts estimated then that the transaction would be under 5-6 (32 million subscribers for a turnover of 3.7 billion dollars in view of the debt and fiscal adjustments of the group (Russneft is billion dollars and profits of 812 million Russia’s 7th leading oil company with a production of nearly 15 Mt in 2006). Impro- dollars in 2006). visation seemed to have had no place in the new scenario for share transfers. It nev- Megaphone since several years has ertheless went off the rails as early as July 31. The tribunal of the Lefortovo district become the prize in a struggle between in Moscow in fact announced that it had placed under seal the totality of the Russ- some of its official and unofficial neft shares following the command of the Interior ministry’s investigative commit- shareholders. The origin of the conflict goes tee. A decision which in fact freezes the transaction between Mikhail Gutseriev and back to 2003, when – the telecoms Oleg Deripaska. As a sign that these developments were not at all coincidental, the subsidiary of the group Alfa which belongs boss of the Anti-trust committee, Igor Artemev, himself declared on August 7 that to – bought 25.1% his services could not study the Bazel request, which was, according to him, “badly interest from businessman Leonid formulated.” Rozhetskin. IPOC challenged this transaction in Russian and foreign courts, Russia Intelligence’s Moscow sources give different evaluations of the Bazel but without success. An arbitration court in prospects in the Russneft matter, but are unanimous in finding the origin of Oleg Zurich, in a decision handed down in May Deripaska’s difficulties with Igor Sechin and Sergey Bogdanchikov, who have per- 2006, came to the conclusion that IPOC haps not abandoned a new wave of external acquisitions before the election, in con- was in reality controlled by Leonid trast to what they declared during the Rosneft shareholders’ general assembly in Reyman, the Russian Information early July (Russia Intelligence n°59 of July 12 2007 and article page 6). technologies minister, and served as an offshore “laundry”. This was of course In any case, Oleg Deripaska intends fully to carry out his expansion in the energy denied by the interested party. Jeffrey sector. He is in the running to buy 40% of TGK-1, the electricity production company Galmond also denies being a “strawman,” for the Saint Petersburg region. In this road, he should find Gazprombank and KES, but admits that Reyman helped him during properties of Viktor Vekselberg, in the way. Bazovy Element is also interested by the 1990s. In fact Reyman, the former another prime objective, involved in a number of disputes since 2005 – Silovye telecommunications strong man in Saint Mashiny. The sale of the shares of RAO EES and Interros (about 55% of the capital) Petersburg, was at the origin of the creation will without a doubt one of the hot issues of the autumn in Russia. It should also be of Telecominvest in 2004 with his partner recalled that in early July, Alexey Mordashov, the boss of Severstal, had also sig- Valery Yashin, former director general of nalled his interest for Silvoye Mashiny (Russia Intelligence n°59 of July 12 2007). Svyazinvest which today is part of AFK Systema. The summer for Oleg Deripaska was also marked by a sustained activity in the The entry on stage of Alisher Usmanov construction and public works sector. Transtroy and Strabag are well placed to bring in any case had the effect of appeasing off the call for tender by the Sochi municipality for the construction of a new ring tension at Megaphone. IPOC, Altimo and road, a contract estimated at 2 billion dollars. Bazel is also in discussion with Mikhail Leonid Rozhetskin – who claimed until Prokhorov to buy 47% of “City”, the firm involved in the major project for the Moscow recently 500 million City business district. dollars in damages and interest from Reyman for allegedly forcing him to sell his Finally, Oleg Deripaska has reinforced his presence in the Balkans. This summer shares in 2003 – should sign an accord he had a discussion with the Serbian Prime Minister, Vojislav Kostunica, concern- under which they agree to withdraw their ing the privatisation of RTB Bor, mining company which produces primarily cop- complaints. According to information per. According to certain information, it was also question of the participation by possessed by Russia Intelligence, Leonid certain Serbian companies in Sochi sub-contracts. d Reyman would be looking for a villa 6 in Switzerland. d Russia Intelligence N°60 j August 30 2007 www.russia-intelligence.fr RIA60 30/08/07 9:34 Page 7

RUSSIA INTELLIGENCE Business & Networks

AEROSPACE c MAKS 2007 : mixed results for Russian industry The Moscow aviation show held from August 21 to 26 aimed, ian aerospace industry, Alexey Fyodorov, has also had meet- according to the organisers, at displaying the renaissance of a ings with two possible Western engine manufacturers (Pratt Russian industry in full reconstruction, the object of sustained & Whitney and Rolls Royce) in the margins of the MAKS-2007 attention by the public authorities and benefiting from the first airshow. It’s nevertheless probable that these announcements benefits of economic growth. What will be remembered espe- had the objective of testing Airbus over its possible interest in cially is the presentation of a new generation of Russian military ambitious industrial collaboration on a programme for a suc- equipment (long awaited in the case of Almaz-Antey’s S-400 air cessor to the A-320 family. defence system, more surprising in the case of the “Skat” com- bat drone from MiG), as well as a number of announcements on New holdings for Denis Manturov. After having success- civil aircraft and from the systems suppliers. On the other hand, fully managed the linkage between friendly rivals Mil and Kamov no significant contract was signed during the MAKS-2007. under the “Helicopters of Russia” umbrella, Oboronprom an- nounced it is working on the constitution of a new public hold- Green light for the MS-21. It has been well known that one ing company in the defence sector. It concerns, on one side, of of the priority objectives for OAK, the Russian aircraft consor- “Electronic Systems”, an organisation that would gather 25 en- tium created in late 2006, is to develop production of civilian air- tities (research institutes, consulting firms, production units) craft. To this day, Moscow’s hopes rest essentially on the Super- that develop electronic warfare systems. The other area in which Jet-100, the regional airliner developed by Sukhoi Civil Aircrafts. Oboronprom might become involved soon is the avionics sec- Other than the signature with Ural Airlines of a declaration of tor. For several months, a tendency toward concentration has intent covering five aircraft, MAKS-2007 was also the occasion developed under the auspices of the boss of Tekhnokomplex, for the group led by Mikhail Pogosyan to officially determine Givi Dzhandzhgava. Under one plan being studied by the Mil- the parameters of the its cooperation with Italy’s Alenia Aeo- itary-industrial commission (VPK), the Avionika holding firm nautica. As we forecast in preceding numbers, and Ital- currently being organised might be bought by Oboronprom. A ians have created a joint venture named SuperJet International new pole might then be created with the Saint Petersburg equip- based in Venice, that will be managed by an Italian and be charged ment producer Tranzas, a long-time partner with Rosobornex- with the marketing and after-sales service in Europe, the United port (ROE). These shifts within the Russian equipment manu- States and , markets that loom as terra incognita for factuers will be, we expect, followed very closely by a groups the Russian planemaker, but where it hopes for a breakthough such as Thalès, which obviously benefits from the delays of its in the coming years. It should be recalled that the business plan Russian competitors on the export markets but could also con- for Sukhoi Civil Aircraft aims at the sale of 800 aircraft by 2024, clude that the time has come for significant industrial cooper- about half in the West. To this day, firm orders for the SuperJet- ation in Russia. d 100 number 71.

The other approach being studied by Sukhoi Civil Aircraft ALERTE concerns expanding the SuperJet-100 capacity. This variable had originally been foreseen in the catalogue : 60, 75 and 95 seats. 3 India : will MiG become the victim The Sukhoi engineers had also imagined a 105-108 seat version of the “Admiral Gorshkov” affair by rationalising cabin space. But this was not enough in the eyes The news makes a dubious impression at a time when Russia is of their main client, Aeroflot, which wanted 130-140 seat mod- already facing increasing competition from the Americans, els to replace the old Tu-154 leaving service. The problem is that Europeans and Israelis on the Indian arms market. The aircraft one of the clauses of the accord signed between Sukhoi and Boe- carrier “Admiral Gorshkov” will be delivered to New Dehli in ing, advising on this project, stipulates that the Russian manu- 2011 and not in the summer of 2008 as expected in the facturer commits itself not to develop an airliner with a capac- intergovernmental accord of January 2004. The Sevmash and ity over 110 seats. The American preoccupation is naturally to Severodvinsk shipyards, the prime contractors of the project, had avoid any competition with its B-737 series. According to vari- apparently largely underestimated the scope and cost of the work ous Russian sources, the lifting of this clause would have been necessary to renovate this vessel which entered service in the old achieved by Aeroflot during the purchase of 22 B-787 this spring Soviet combat fleet in 1987. This mishap has already cost Vladimir (Russia Intelligence n°57 of June 14 2007). Such information Pastukhov, the director general of Sevmash, his job. He will be was indirectly confirmed by the head of the Federal industry replaced by Nikolay Kalistratov, the boss of the Zvyozdochka agency, Boris Alyoshin, but not by the main parties involved. repair plant also based in Severodvinsk. The Indian military is obviously furious. As a result, Sergey Chemezov, the chief of The other important announcement of the summer concerns Rosoboronexport, risks having a more difficult time convincing the medium-range MS-21. Carried out by NPK Irkut led by Oleg them to buy the MiG-35 in the call for tender of some 9 billion Demchenko, this project is systematically unwrapped and of- dollars that the Indian defence ministry should launch soon. In fered, but has up to now run up against strong expert scepticism, addition, another bilateral project – the MTA military air transport which doubts the Russian capacity to re-enter a market segment – on which President Putin put a lot of effort during his visit to in which Airbus and Boeing have reigned supreme for the past New Delhi in early 2007, is stalled due to the bureaucratic delays fifteen years or so (Russia Intelligence n°22 of November 17 on the Russian side. As a consequence, the Indian air force is 2005). OAK has in any case decided to press ahead and in July considering turning to Embraer or CASA. d approved the launch of the programme. The boss of the Russ- 7 Russia Intelligence N°60 j August 30 2007 www.russia-intelligence.fr RIA60 30/08/07 9:34 Page 8

RUSSIA INTELLIGENCE Regions & CIS

FOCUS c The governors’ waltz The summer season was not all rest for certain regional lead- concerns Yuri Matveev, another former vice-president of Ros- ers. The Kremlin in fact replaced three governors – Mikhail neft, who should lead the regional list for the Communist party Prusak in Novgorod, Ivan Malakhov in Sakhalin and Kon- next December. stantin Titov in Samara – and seems to be poised to do the same with the one in Perm region, Oleg Chirkunov. If the sce- Prusak, Titov: veterans pushed to the exit. The case of nario for yet another “takeover” of the regional cast of charac- the ex-governor of Novgorod is different from the one of Ivan ters by the Kremlin may be tempting just on the eve of the elec- Malakhov. At his post since 1991, this veteran of the regional tions, a closer analysis nevertheless indicates that each of these scene enjoyed a reputation as a “democrat” which long carried cases involved specific situations. favour with but was no longer in phase with the dominant ideology. After having received several signals from Far-East: Sergey Bogdanchikov places his chips. On Au- the Kremlin (certain of his close associates such as the mayor gust 7, the governor of Sakhalin, Ivan Malakhov, a former naval of Novgorod, Nikolay Grazhdankin, were subjected to investi- officer posted since 2003, was informed by the press service of gations by the FSB), Mikhail Prusak preferred to throw in the the Russian presidency that he was, according to the accepted towel. His understanding attitude in fact won him the nomina- formula, being replaced “at his request”. In reality, Vladimir tion as councillor to the chief of the presidential administration Putin refused to maintain Ivan Malakhov at his post, although Sergey Sobyanin. Not exactly a golden “closet” (the salary does a request to do so had been forwarded to him during the month not exceed 250 dollars) but allows an office in Moscow and a of July. The immediate cause of the decision lies in the inabil- staff car. Sergey Mitin, 56, vice minister of agriculture since 2004 ity of the regional authorities to effectively manage the conse- will replace Mikhail Prusak. quences of the earthquake that struck the municipality of Nevelsk in early August. It seems nevertheless that the dis- The most recent change concerns the gov- missal of Ivan Malakhov was under consideration for several ernor of the region of Samara, Konstantin months and that other factors entered into the equation, which Titov. The former candidate in the presiden- is corroborated by the identity of his successor, Alexandre tial elections of 2000 (1.4% of votes) has a Khoroshavin, aged 48, who occupied the position of mayor of profile in many ways similar to that of Mikhail Okha until he was confirmed in the post of governor on Au- Prusak : democrat since the first hour, he gust 9. He is especially an old acquaintance of Sergey Bog- was also a the head of his region since 1991. danchikov, the boss of Rosneft, with which he worked in Vladimir Putin accepted his resignation on Okhaneftegazdobycha in the late 1980s. Vladimir Artyakov August 27 and found him a replacement in the person of Vladimir Artyakov. This in- That Rosneft is seeking to have “its” governor named in formation confirms the tendency toward the reconstruction of Sakhalin should surprise no-one. The Russian petroleum group the fiefdoms in the Russian regions around the interests of the has in fact important interests there .In particular it holds 20% new oligarchs. This is a balance sheet far removed from the ob- of the Sakhalin-I consortium operated by ExxonMobil. But for jectives of regional reform launched by Vladimir Putin as early several months, a muted contest has been underway in the as the first weeks of his presidency in 2000. wings between Gazprom and the shareholders in Sakhalin-I. At stake are the direction of the gas flows extracted from these Chirkunov: a governor under surveillance. As for Oleg reserves. Backed by the state and anxious to preserve its sta- Chirkunov, he is still on duty but probably not for very long. The tus as exclusive exporter of natural gas in Russia, Gazprom re- general prosecutor in fact launched a surprise inspection of called on August 2 that it wanted to see the gas from Sakhalin- the regional administration in Perm and has already uncovered I directed toward the needs of the regions of Vladivostok and a number of infractions. This is a classic scenario, already in Khabarovsk. It should be recalled that in late 2006, ExxonMo- use this spring to evict the governor of the Amur region, Leonid bil had signed a preliminary accord with China to export some Korotkov (Russia Intelligence n°54 of April 27 2007). Put for- 8 billion m3 beginning in 2009. The nomination of Alexandre ward by his predecessor, the current minister of natural re- Khoroshavin, fully supported by Igor Sechin in the Kremlin, is sources Yuri Trutnev, who was also a business partner during therefore aimed at enhancing the “administrative resources” the 1990s, Oleg Chirkunov fell out with his mentor, who is per- of Rosneft in its contest with Gazprom. It should be noted in haps considering a comeback to his home base after 2008. The passing that Sergey Bogdanchikov methodically positions his good results (16%) registered by another native son, Nikita Be- men in the Far-Eastern power structure. In addition to his for- lykh, the boss of the Union of rightist forces, during the re- mer deputy Sergey Borisenko, recently named as deputy to gional elections of last spring was also seen as negative for the the plenipotentiary representative of the president Kamil governor. Lastly, the fact that his family lives in Switzerland is Iskhakov (Russia Intelligence n°58 of June 28 2007), it also not seen well in the Kremlin. d

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