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Home , Andrey Filatov, Iskander Makhmudov, Oboronprom, Sergey Chemezov, Sergey Mironov, Sergey Sobyanin

RIA58 28/06/07 15:19 Page 1

N°58 - June 28 2007 Published every two weeks / International Edition CONTENTS KREMLIN c P. 1-4 Politics & Government The New Temptation of the Balkans KREMLIN While the member countries of the European Union are managing – not without difficulty – to c The New Temptation reach agreement on a minimum content for the Constitutional Treaty, ratified by some countries of the Balkans and rejected by others, (France and the Netherlands) the energy strategy of the Kremlin and SUCCESSION in Europe has again made significant progress. Even if these two subjects are not con- c Governors on the up nected (the functioning of the EU’s institutions on the one hand and its energy supply on the ALERT other), one can only be struck by the lack of cohesion of the major European countries with re- c Life presidency gard to the supply of natural gas over the next few years. The most symbolic example has just been for ? provided by the signature on 24 June of a memorandum between Gazprom and the Italian group PROSECUTOR’S OFFICE ENI to build a gas pipeline linking and Bulgaria via the Black Sea and its extension to Aus- c ensures tria and Italy (See Page 5). If this project gets off the ground, Italy will therefore be directly linked his support to Russia via a fixed link, thus putting it into a similar position as Germany with the North Euro- ALERTS pean pipeline, the construction of which has already begun and which will link Russia and Ger- c When Sport and Politics many through the Baltic Sea. Gazprom is thus deploying its efforts over two converging axes: one go Hand in Hand going towards the north - not only to supply Germany but also Great Britain and the Netherlands and the other towards the south, supplying the Balkans, Italy, Austria and Hungary. c The Russian-speaking community in Good Hands In fact, it is now a race between Gazprom and the European Union concerning Russia’s control of gas supply to Europe. The Nabucco project, which will carry gas from Azerbaijan and even Iran P. 5-7 Business & Networks to Europe, avoiding Russia (and of which the new Italian-Russian gas pipeline is a direct competi- BALKANS AND SIBERIA tor), is enduring major delays in its implementation, is not yet assured of financing and is seeing c Gazprom achieves some of the countries involved- such as Austria and Hungary - undertaking separate talks with its line-Up Gazprom, as Russia Intelligence has written time and again. Russia is getting an obvious advan- INDUSTRY tage from the European Union’s internal wrangling on these questions while Turkey, which is be- c ’s coming an almost unavoidable passage for gas from Central Asia, the Caspian Sea and Russia, will triumphal march forward use this state of affairs in its negotiations with Brussels. c Vladimir Yukunin’s advisors Gazprom’s energy strategy is also at the service of the Kremlin’s diplomacy towards the Balkans. AEROSPACE During the summit of the Black Sea economic cooperation organization, an event about which lit- c Waiting for MAKS tle is reported but which nevertheless brings together Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Serbia, Turkey and , an obviously proud Vladimir Putin announced that Russia was “back in the Balkans”. One does not have to go back P. 8 Regions & CIS to 1914 to certify that has always considered this region as its “back garden in Europe” URAL and the rowdy discussions presently underway with regard to the independence of Kosovo are proof c Oligarchs’ power push of this. Incidentally, this interest of course is not just about Serbia. Of interest are the increas- FAR EAST ingly close ties between Greece and Bulgaria (members of the European Union) and Russia – of c Sergey Borisenko, which the energy question is just one aspect. man of the moment Gradually, and behind Gazprom’s mantle, Russia is engaged in exploring the weakness of the European Union and its geographical and cultural disparities. This is a relatively novel approach SUBSCRIPTION and questions of energy supply provide the ideal pretext for this strategy. d Print Edition (23 issues, airmailed overseas) €770 TTC BEHIND THE SCENES The Web Pack (Print Edition As if fixed pipelines were not enough, Gazprom has just announced that discussions are underway with + PDF + archives acess) RosUkrEnergo – 50% controlled by the Russian energy giant alongside Ukrainian businessman Dmitry € 880 TTC Firtash and his associates – to enable the purchase of four billion m3 of Ukrainian gas to be resold on the The Premium spot market in west Europe. It is a question of gas stocked in Ukraine that could have originated in Russia or Subscription Turkmenistan. RosUkrEnergo, which holds the monopoly of Ukraine’s gas supply, purchased this gas at (Print Edition + PDF + access between $95 and $160 while the experts anticipate that spot prices will be in the order of $280 per 1,000m3 to all the website contents) before the end of the year. Gazprom therefore is selling gas to Ukraine and is going to buy it from itself in € 1200 TTC order to sell it again to Europe, meanwhile amassing profits all along the line. d www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 2

RUSSIA INTELLIGENCE Politics & Government

SUCCESSION c Governors on the up Since they are no longer members of the Council of the Fed- Zelenin decided to re-direct his career to politics. In autumn eration by right and, especially since they are no longer elected 2002, Mikhail Kassyanov, who at the time was prime minister, by direct suffrage, it is indisputable that governors have lost appointed him deputy-managing director of Goskomsport, the political influence at the national level. The quasi-monopoly State Committee for Sport and Physical Culture. In charge of in federal bodies of -based politicians has in- investment, he managed to obtain for the committee the right deed closed the door to the prospects of the elites of other re- to grant the permits necessary to operate casinos and other gions of the country. games establishments. Taking umbrage at his ambitious deputy, Vyacheslav Fetisov, the all-powerful Goskomsport boss, went It is nevertheless true that most governors – although for- in quest of new horizons. And this was to be Tver. The con- mally established in the “power vertical” established by the quest of the region was carried out in tandem with Oleg Lebe- Kremlin – to a large extent remain masters in their own re- dev, a young businessman and citizen of Tver who in the sum- gions. In particular, it is absolutely necessary for the increas- mer of 2003 won the city hall. In December, Dmitry Zelenin, ing number of foreign investors becoming established in the was elected governor with the support of , sev- Russian provinces to have a privileged relationship with them. eral of whose leaders, including and Boris Gry- Vladimir Putin’s guide, Igor Shuvalov should not necessarily zlov, went in person to Tver. be taken at his word when he indicates that the next presi- dent could be a governor, but over the next few years some of Dmitry Zelenin’s trump cards are far from negligible. In ad- them – like Sergey Sobyanin, who went from Tyumen to head dition to a personal fortune, he has been able to strike close the presidential administration – will be called upon to exer- relationships with the region’s major industrial groupings. First cise important posts in Moscow. and foremost this concerns Transmashholding, whose man- aging director Dmitry Komisarov (see page 6) was for a long time director of a Tver production facility. Dmitry Zelenin also drew close to the Rosatom federal agency and its chief, Sergey Dmitry Zelenin: Moscow at the tip of his fingers. Kirienko. Since the victory of the Muscovite princes at end of the 14th century, Tver has lived These were logical choices as his region accommodates a in the shadow of the Russian capital. Its major nuclear power station. Dmitry Zelenin in addition boosts governor, Dmitry Zelenin, aged 44, in- his public relations side, every year welcoming participants to tends to make this proximity with Moscow the Valday Forum. A horse lover, he has also established a a trump card both for his region’s eco- “Governor’s Prize” race which takes place at the very select nomic development as well as for his own Zavidovo racecourse. Dmitry Zelenin recently undertook or political career. Elected chairman of the supported several initiatives of a kind that attract the good- Association of Russian Managers at the Dmitry Zelenin will of the Kremin. At the end of 2006, he launched a pilot end of 2003 with 57% of the vote and a (Tver) scheme seeking to reconvert former army officers as agricul- member of the United Russia national committee, he embod- tural managers. Dmitry Zelenin has also declared war on cor- ies the new generation of regional leaders that emerged from ruption, an announcement that coincided with massive accu- the world of business during the Yelstin era. sations both at the Tver City Hall and the regional council. As major manoeuvers have begun in the Kremlin with a view to Just after his graduation from the prestigious Moscow in- Valdimir Putin’s succession, various sources agree that Dmitry stitute of technical physics, in 1986 he joined the NIIAS com- Zelenin is backing , with whom he has a num- puter science research center, within which he established ber of affinities. two commercial bodies (Micrcard and Girvas) in 1989. It was then that he made the acquaintance of a certain , who was renting offices nearby. With Dmitry Zelenin having family in the United States and Potanin’s able Alexandre Tishanin: a neo-Siberian on the fast track. to undertake import and export operations, the two men as- To everybody’s sur- sociated to purchase computers and photocopying machines prise in the summer from America that they then resold in the USSR. At the begin- of 2005 Vladimir ning of the 1990s the paths of the two men went in different Putin proposed directions. Dmitry Zelenin developed his activities in finance Alexandre Tishanin (Ressource Bank and RATO Bank) and took shareholdings to head of the in the Khimvoloko chemical group, the ZIL automobile man- Irkutsk region He ufacturer and the Perm Motors engine builder on which he is surely one of the Alexandre Alexandre is a member of the board. governors whose ca- Tishanin Khloponin reer should be fol- (Irkutsk) (Krasnoyarsk) He again drew closer to Vladimir Potanin who, at the end lowed very closely. of 1995 appointed him managing director of Interros and sev- Born in 1966 at Troitsk in the region, his entire eral months later, deputy-managing director of . career was in the railways. Before being noticed by the Krem- There, he came across Alexandre Khloponin, the future in- lin and to assume new functions, for a little more than a year fluential governor (see below). Following a difference with he had occupied the post of regional director of RZhD for east- 2 , Vladimir Potanin’s main associate, Dmitry ern Siberia. Alexandre Tishanin is one of the favorites of Russia Intelligence N°58 j June 28 2007 www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 3

RUSSIA INTELLIGENCE Politics & Government

Vladimir Yakunin, the railway chief. Very active on the media time the Ulyanovsk region - successively led by the Commu- front (last February, he was 19th on the Mediologia institute’s nist Goryachev and then the general Shamanov, “hero” of the monthly list), he is in charge of several questions of federal first war – occupied the 85th place in the Federa- importance. This is especially the case for the Kovytka gas de- tion’s list in terms of economic development. posits (see the article on Page 4), in which the regional ad- ministration holds 11.24% of the shares, and also the eastern Especially, Sergey Morozov, a general in the police who be- Siberia/Pacific Ocean oil pipeline for which Alexandre Tis- tween 2000 and 2004 was Mayor of Dmitrovgrad, is very close hanin managed to get moved further north to avoid the length to the SOK group. SOK, based in the neighboring region of of Lake Baikal. Alexandre Tishanin also supported the Rosatom Samara, exercised de facto control of the automobile manu- project, seeking to build, in association with Kazakhstan, an facturer AvtoVaz before it was taken over by Rosoboronex- international uranium enrichment center at Angarsk. port in spring 2006. In 2004 SOK had financed the campaign of Morozov who, in return, appointed its chairman, Rustem The fourth session of the Baikal Economic Forum which took Shiyanov to the Federation Council. The Kremlin’s fond re- place last September in Irkutsk, enabled him to extend his con- gard for the governor of Ulyanovsk may be explained first and tacts in the economic sphere. It is worthy of note that recently, foremost by the spectacular recovery of the region’s financial Alexandre Tishanin was at the origin of the establishment of a health. Sergey Morozov was also able to convince Alexandre regional branch of the mechanical construction association, Konovalov, the President’s new plenipotentiary representa- the employers’ organization resuscitated in spring 2006 by tive, of the credibility of his grand infrastructural projects. Rososboronexport boss Sergey Chemezov (Russia Intelli- He has thus just obtained from the ministry of transport a sub- gence No.33 of 19 May 2006). To silence criticism of the diffi- sidy of two billion rubles to complete the construction of a cult situation in the region in housing and employment, the bridge over the River Volga. At the beginning of June, he also governor of Irkutsk reshuffled his team. He brought back some unveiled a massive project for a multimodal hub to link the of the civil servants who were working with his predecessor, regions of the Urals, the Volga basin and western Siberia. More Boris Govorin, (currently ambassador to Mongolia), and cre- anecdotally, Sergey Morozov has distinguished himself by link- ated a post of deputy governor in charge of the special eco- ing in a rather remarkable fashion, two of the Putin regime’s nomic zones. The position was given to Mikhail Lelyavsky, a major headaches: patriotism and demography. He in fact German-speaker who previously was vice president of Rosbank. launched a “put a patriot into the world” scheme that rewards parents giving birth to a child on 12 June, the day of the con- The other name circulating regularly in Moscow is that of stitution. And the civil servants of the regional administra- Alexandre Khloponin, the governor of Krasnoyarsk. Born in tion, to give an example, had the happy surprise of an extra Sri Lanka in 1965, this son of a diplomat who spent most of day off on 12 September. his career at Norilsk Nickel with Vladimir Potantin, is a heavy- weight of the Russian political scene. He has managed to get Sergey Maslov’s main comparative advantage is undoubt- himself seen as a liberal, something he claimed during his elec- edly to be an FSB general. Before being elected in May 2002 tion in spring 2002 following the death of Alexandre Lebed, to the government of this frontier region, he led the Smolensk in order to get closer to United Russia and the Kremlin. As a regional branch. He then won the election against Alexandre sign of this return to good grace, in 2006 he was given a mis- Prokhorov, his Communist opponent at the end of a campaign sion on regional development that he had the opportunity of marked by a bloody settling of accounts. Some weeks after the presenting in person to Vladimir Putin. He also managed to election, Vladimir Prokhorov (no relation), one of the Maslov succeed in the 17 April 2005 referendum in which the au- deputy leaders, had even been assassinated. Strengthened by tonomous areas of Evenki and Taimyr agreed to merge into the support of the region’s main industrialists (the Cristal di- the region of Krasnoyarsk. amond works, the nuclear power station and the train carriage factory), Sergey Maslov attained his goal: that Moscow stopped talking about Smolensk, which during the 1990s was presented as the Russian . d Sergey Morozov and Viktor Maslov: generals in quest of stripes. The governors of ALERT Ulyanovsk and Smolensk are not 3 Life presidency for Ramzan Kadyrov? really playing in the For the last few days a Constituent Assembly has been meeting same category as in Grozny, which must ensure that the constitution of the north Zelenin, Tishanin Caucasian republic is in accordance with that of the Russian and, especially federation. Amendments will be put to a referendum, which will Khloponin. Their Sergey Morozov Viktor Maslov take place the same day as the legislative elections at the respective political (Ulyanovsk) (Smolensk) beginning of December. Some of these are purely technical but weights and the the members of the Constituent Assembly could pepper the modest economic importance of their regions a priori do not coming vote with some more, political, questions. These could enable them to strive after top positions at the federal level. include the possible lengthening of the presidential term from four However, some aspects of their careers and their track records to five years and, especially, the abolition of any limitation of the show they are leaders whose vocation it is to remain in the length of the mandate (the president of the Chechen executive at Russian political landscape. present cannot serve more than two terms). Ramzan Kadyrov Sergey Morozov, aged 48, the last governor to be elected by therefore has every chance of shortly becoming, in all legality, direct universal suffrage, on 24 December 2004, and reap- a Chechenbashi. d pointed by Vladimir Putin in March 2006, has come far. At one 3 Russia Intelligence N°58 j June 28 2007 www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 4

RUSSIA INTELLIGENCE Politics & Government

cc PROSECUTOR’S OFFICE ALERTS Vladimir Putin ensures his support 3 When Sport and Politics go Hand in Hand The game of musical chairs between the Public Prosecutor’s Office and the Min- Leonid Tyagachev, the President of istry of Justice in May 2006 had seriously affected the balance between the different Russia’s National Olympic Committee, is centers of influence gravitating around President Putin (Russia intelligence No.35 soon to take his seat in the Council of the of 16 June 2006). The transfer of the General Prosecutor Vladimir Ustinov had con- Federation. United Russia proposed him stituted a setback for Igor Sechin, his protector in the Kremlin, and, by extension, as a candidate to the members of the for boss Sergey Bogdanichikov. On the other hand, Dmitry Medvedev, the Rostov Regional Assembly, which is first deputy prime minister and head of the Gazprom supervisory board had savoured expected to confirm the choice on 28 the revenge he had expected since the failed purchase of Yuganskneftgaz in spring June. In this position since 2001 after 2005. For his part, Yuri Chayka, the new general prosecutor, had installed a new team having served between 1995 and 1999 as around his old friend Alexandre Buksman (Russia intelligence No.43 of 10 Novem- Boris Yeltsin’s sports minister, Leonid ber 2006). One year later, Vladimir Putin decided to reshuffle the cards. On 6 June Tyagachev is charged with Sochi’s he signed two new texts of laws amending the Code of Penal procedure and redefin- candidature for the 2014 Winter Olympic ing the functions of the public prosecuter’s office. This reform sets up the General Games. Prosecutor’s Investigations Committee – a new body that takes over most of the co- The massive arrival of sports ercive functions of the Public Prosecutor’s Office. The latter retains only control func- personalities in the corridors of power tions, resulting in a reduction of competency and leading to Yuri Chayka handing in has raised tensions. Sergey Mironov, the his resignation to Vladimir Putin. president of the Senate, stated recently that he was “opposed to footballers, Under the terms of the new law, the chairman of the Investigations Committee is handball players and other personalities appointed by the Federation Council on a proposal from the Head of State, a proce- in the world of sport invading the dure comparable to that currently in force for the General Prosecutor. Hearings for chambers of parliament” and refused to applicants in the Upper house of parliament on 22 June produced a scene that for confirm the candidature of ex-Moscow the least can be described as comical. Climbing to the rostrum at the invitation of Spartak center forward Dmitry Alenichev, Sergey Mironov, Alexandre Bastyrkin vainly awaited the senators’ questions before, who was presented by the Omsk region. somewhat embarrassed, regaining his seat next to the representative of the presi- He had to make an exception for Leonid dent, Alexandre Kotenkov. Tyagachev who will sit in the Senate with Russian Football Federation boss Vitaly It should be said that the biography of Alexandre Ivanovich Bastyrkin, aged 54, Mutko. d was not really open to criticism. This citizen of Pskov in fact studied at the Leningrad Law Faculty with Vladimir Putin at the beginning of the 1970s and was even in charge 3 The Russian-speaking of the president’s group. The difference with the latter is that he did not join the KGB. community in Good Hands Registered to write a thesis after his military service, in 1980 Alexandre Bastyrkin be- Vladimir Putin has just signed a decree came head of the University’s Young Communist League () and then that setting up the “Russian World” foundation. of the City of Leningrad. Between 1985 and 1996 he taught law in several institutes This body, whose mission it is to support of higher education in the “capital of the North” before a brief term in the ministry and culture, will come of the interior as the North West regional commander’s legal counsel. From 1998 to under the joint responsibility of the the summer of 2006, he occupied various posts in the ministry of justice, (including ministry of education and science and the head of the federation directorate for the North-West District) and was then appointed ministry of foreign affairs. “Russian World” the ministry’s general director for the Federal central district (Moscow). Alexandre is directed by Vyacheslav Nikonov, the Bastyrkin officially assumes his position at the beginning of September. He will exer- political analyst known for being the cise authority over some 8,000 General Prosecutor investigation officers and have grandson of Vyacheslav Molotov, as well more extensive prerogatives than the General Prosecutor to whom he will formally as for his analyses that are always in the be attached with the status of first deputy. These are services that will, in particular, same line as the Kremlin’s. The board will have competency in activating legal actions. Alexandre Bastyrkin - who judged it use- be under the chairmanship of Lyudmila ful to stress that nobody, including parliamentarians is outside the law, even hopes Verbitskaya, rector of the University of that, in the not too far distant future his committee will take over the investigatory the State of Saint Petersburg and very functions of the interior ministry and of the FSB. In such a case, he would become close to the Putin family. It will also one of the post powerful men in the country. In the immediate future he has in front include the indispensable film director, of him several particularly politically sensitive files, including the assassination of Nikita Mikhalkov, the president’s “pen”, Anna Politovskaya and the Litvinenko affair. Dzhokhan Pollyeva, and the former President of North Ossetia, Alexandre Different Russian sources agree that Igor Sechin has been particularly active Dzasokhov. Very active with Viktor over the last few weeks in promoting Alexandre Bastyrkin’s appointment and neu- Yanukovich during the presidential tralizing the candidature of Dmitry Kozak, currently the president’s representa- campaign of 2004, Vyacheslav Nikonov tive plenipotentiary in the South Federal district. But, more than the interests of was supported in this matter by Modeste this or that clan in the Kremlin, it is the interests of Vladimir Putin that are served Kolerov, the Russian presidential by the rise of his former classmate. The Russian president is continuing to “mark administration’s “Mr. CIS”, who is also out” his succession in propelling to the front of the scene reputedly neutral people close to Gleb Pavlovsky, another from Saint Petersburg (Serdyukov and Naryshkin) with the hope they will be his political analyst still very well regarded contacts after he leaves the Kremlin. d by the Kremlin. d 4 Russia Intelligence N°58 j June 28 2007 www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 5

RUSSIA INTELLIGENCE Business & Networks

BALKANS AND SIBERIA c Gazprom achieves its line-Up In the space of 10 days, Gazprom has attained two of its house the Russian-Korean intergovernmental agreement that strategic goals: to take control of most of the gas reserves of envisages delivery of 10 billion m3 fro 2012-2013 Eastern Siberia and make decisive progress with its infra- structure projects in the European Balkans. One of the last questions in suspense for Gazprom in east- ern Siberia concerns exports to China. It is understood that a Kovytka: the epilogue. In autumn 2006, Gazprom was still struggle is underway with Exxon regarding the gas extracted virtually absent from Siberia. The Sakhalin projects were led at Sakhalin I (Russia Intelligence No. 57 of 14 June 2007): the by two consortiums dominated by Anglo-Saxon and Japanese US company envisaged selling it on the Chinese market while groups. The license to exploit the giant Kovytka deposit in the Gazprom intended it to be used in the region of Vladivostok region of Irkutsk belonged to Anglo-Russian joint venture TNK- which would enable it to export Chayanda or Kovytka gas to BP. Other zones holding large deposits (Chayanda) remained its big southern neighbour without having to face inopportune the property of the Russian state and couldn’t be attributed competition. to others until completion of long and complex procedures laid out by Yuri Trutnev, the minister of natural resources. Six Main gas pipelines projects in Europe months later, the situation is unrecognizable.

Gazprom first of all managed to beat TNK-BP on the Kovytka Nord Stream question. If there was little doubt as to the outcome of the Project struggle, on the contrary, over the last few weeks the condi- tions of surrender were the subject of bitter discussions. It was during the recent Saint Petersburg economic forum that Gazprom and BP executives defined the main thrust of the agreement that was signed on 22 June in Dmitry Medvedev’s office in the Kremlin. This text, which is a framework agree- ment, stipulates that TNK-BP within a space of three months will divest itself of its 62.89% shareholding in Russia Petro- South Stream leum, and the eastern Siberia gas company to Gazprom. The Project price is due to be fixed during later negotiations but the pro- tagonists are mentioning between $600 million and $900 mil- Nabucco Project lion (in comparison, Gazprom had to spend $7.45 billion for a 51% stake in Sakhalin II. The agreement also makes it clear that BP, TNK-BP and Gazprom will set up within a year from The new Russian-Bulgarian-Italian axis. Vladimir Putin 22 June one or more joint ventures to which will be transferred was in good humor when he arrived in Zagreb where, on 24 assets worth a minimum of $3 billion. TNK-BP might then, ac- June he participated in an energy forum bringing together 10 cording to the terms of the 22 June statement, once again pos- countries of the Balkan Peninsula. It should be said that the sibly enter into the Kovytka project with 25% plus one share positions of his country on the regional gas scene were con- “at market conditions at the moment of the transaction”. siderably strengthened following the signature, the previous Gazprom and BP have therefore decided not to rock the boat day in Rome, of a memorandum between Gazprom and ENI. of the future. Effectively, the Russians hope that their part- This document, seen within the framework of the strategic ners will transfer to future joint companies assets of special partnership agreement signed on 14 November 2006, provides interest to them (for example, electric power stations and gas for the construction of a gas pipeline between Russia and Bul- supply centers in Great Britain) whilst the British have not garia, where it appears it would separate into two branches, completely lost hope in being present for one-quarter of the the first towards Austria and the other to Italy. The capacity Kovytka deposit in their company’s reserves. of South Steam will be 30 billion m3. The date of its entry into service and its cost are not yet known but the entourage of ENI The stake in Kovytka concluded an interesting week for boss Paolo Scaroni last Sunday mentioned the sum of $5 bil- Gazprom on the eastern front. On 15 June the government en- lion just for the underwater section and three years – once the ergy commission under Mikhail Fradkov had confirmed the necessary authorizations have been obtained. country’s gas strategy in the Far East, the central element of which is the establishment of a regional integrated extraction, Signature of this agreement calls for several observations. transport and export system. To the stupefaction of most of First of all, Turkey is not involved in South Stream while the protagonists - although since the affair are used to Gazprom’s initial project provides for the construction of a the Kremlin’s manoeuvres in the energy sector that are not al- tube parallel to Blue Stream. Bulgaria steps in as the fulcrum ways very orthodox - the prime minister announced that it of Russian interests in southern Europe. Vladimir Putin, thanks would be suitable to agree to Gazprom’s requests and to give to a privileged relationship with his opposite number, Georgy it for free and without offering for tender the deposits of Sakhalin Parvanov, has succeeded in fulfilling three major projects in III and of Chayanda in Yakutia. According to Mikhail Fradkov the energy sector (apart from South Stream, there is construc- this was “exceptional” and represented a gift of around $3.5 tion of the Belene nuclear power station and of the Burgas- billion. It should be remembered that ’s group Alexandroupolis oil pipeline. At a time when the destiny of had motivated its request by explaining that in the absence of Kosovo is being decided, Russia reminds the world that it has its own deposits in the region, it would not be in a position to to be contended with in the Balkans d 5 Russia Intelligence N°58 j June 28 2007 www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 6

RUSSIA INTELLIGENCE Business & Networks

INDUSTRY c Sergey Chemezov’s triumphal march forward The rise of the managing director of hectares including the commercial areas dedicated to exhibi- (ROE) within Russia’s circles of power is not a new phenom- tions and also the five-kilometer runway – Europe’s longest. enon. Russia Intelligence has regularly analysed the strategy If so, Rosoboronexport would be in a position to develop air- of this person close to president Putin in the defense sector freight activity base on the “Moskovia” company that is con- as well as the expansion of his empire to such varied fields as nected to the Gromov Institute and, if it were to acquire Il- titanium, special steels and the automobile industry. However, 76m or An-124 jumbo jets, enter into possible competition since mid-June matters appear to have speeded up. Sergey with Volga-Dniepr (Russia Intelligence No.54 of April 27 2007) Chemezov has in fact unveiled a far-reaching reorganization and Ukraine’s Antonov Airlines. of his industrial activities and has stepped up his initiatives both in Russia and with regard to his foreign partners. If it New areas of development have also been announced in au- would be somewhat unwise to abandon the Chemezov hypoth- tomobile and titanium, Rosoboronexport’s most recent busi- esis in the possible scenarios surrounding the succession of ness sectors. AvtoVaz and VSMPO-Avisma are soon to set up Vladimir Putin, it would appear that the boss of Rosoboronex- with the ITERA company a joint venture to supply electricity port rather has in mind a position as a “super deputy prime for the particularly energy-hungry Togliatti and Verkhnaya- minister” who would exercise authority both over industry as Salda production sites (VSMPO-Avisma’s production facilities well as vast areas in the mining sector outside the coal sector. alone represent almost 10% of the Perm region’s energy con- sumption). The foreseeable increase in AvtoVaz’s production During his visit to the air show at Le Bourget, Sergey following the recent signature of an agreement with Canadian Chemezov first of all let it be known that Vladimir Putin was equipment manufacturer Magna (Russia Intelligence No. 57 preparing to sign a directive that would open the way to a deep- of 7 June 2007) will make it necessary to build a new gas-fired seated restructuring of his group. Before the end of the year electric power station. Concerning VSMPO-Avisma , of which the Duma is expected to adopt a law transforming Rosoboronex- Rosoboronexport took 66% of the capital at the end of 2006, port into a state corporation called “Russian Technologies”. It Sergey Chemezov has two aims in mind. The first is to limit would be a holding company with a special status whose sub- the group’s dependency on ore supplies and to this end sidiaries would have a broad margin of manoeuvre (including Rosoboronexport has let it be known it is interested in the organizing Initial Public Offerings). Under this new scheme, Tsentralnoe deposit located in the Tambov region. The only Rosoboronexport would be transformed into a company owned drawback is that Norilsk Nickel acquired the license to mine by shareholders and would be one of the subsidiaries of the in November 2006 but it is difficult to imagine that Vladimir holding company, as will be , Russpetsstal, Av- Potanin, one of whose assets are highly coveted toVaz and VSMPO-Avisma. According to Sergey Chemezov, the in the Kremiln (Russia Intelligence No. 57 of 7 June 2007), same person could not be managing director of Russian Tech- will risk a battle with Sergey Chemezov. The second announce- nologies and of Rosoboronexport. The executives of the two ment of the Rosoboronexport managing director concerns In- entities would be appointed by the Head of State while the dia. In exchange for arms contracts, VSMPO-Avisma in part- post of supervisory board chairman might be given ex-officio nership with the Indian group KMML, will build a titanium to Sergey Ivanov, who already supervises OAK and OSK, the manufacturing facility in the State of Kerala. According to aerospace and shipbuilding consortiums. Vladislav Tetyukhin, the head of VSMPO-Avisma, this joint venture, which will be operational in 2009, will enable A few days earlier, Dmitry Shugaev, Sergey Chemezov’s Rosoboronexport to strengthen its cooperation arrangements principal private secretary, confirmed that Rosoboronexport with Hindustan Aeronautics Limited (HAL), the probable re- was examining a plan to strengthen its presence at the Gro- cipient of a part of future Russian/Indian titanium production. mov Institute’s site at Zhukovsky where MAKS, the Moscow This is a supplementary argument for Russia while India con- Air Show is held (see accompanying article). It is on the cards tinues to hesitate between the Mig-35 and F-16 fighters to re- that the group could acquire the management of almost 400 new part of its fleet around 2009-2010. d

Vladimir Yukunin’s advisors The president of the national rail president of the TMX board of directors. coal trade – has been solidly company (RzhD) is continuing to spin Among the matters that Dmitry established for many years. It should his web. A matter of weeks after having Komissarov will be called upon to deal not be forgotten that several other confirmed a closer relationship with with is the plan the extend the businessmen already count among the Transmashholding (TMX – Russia “broad”(1.52 meters) line running from advisors to Vladimir Yukunin. This Intelligence No.56 of 31 May), Vladimir the Ukraine-Slovak border to Vienna, is especially the case of Maxim Yukunin has just announced he is raised during Vladimir Putin’s visit Beryozkin, who heads the ESN power going to appoint Dmitry Komisarov as to Austria on 23 May. Vladimir group (Russia Intelligence No.48 special advisor for international Yukunin’s new advisor should be of 2 February 2007), Andrey programs. The 36 year-old Dmitry able to count on Iskander Likhachev, close to Komissarov is close to oligarch Makhmudov’s contacts in the Austrian who, until last autumn ran Lenenergo Iskander Makhmudov. He will assume capital where Krutrade - one (TGK-1) and Andrey Filatov, the boss 6 his new functions whilst remaining of his companies specializing in the of Severstaltrans. d Russia Intelligence N°58 j June 28 2007 www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 7

RUSSIA INTELLIGENCE Business & Networks

AEROSPACE c Waiting for MAKS Leaders of the Russian aerospace sector usually reserve Sukhoi – even though it was assisted in this project by Tha- their announcements for the Moscow Air Show (MAKS), held les, Boeing and Alenia), has no experience in the manufac- every two years in the month of August at the Zhukovsky site, ture of civil aircraft, creating a precedent is crucial for the which explains their relatively modest presence at the Le Bour- commercial future of the Superjet-100. We also understand get Air Show. Several important signals have nevertheless been that helicopter producer AgustaWestland has been in discus- made by Moscow over the last few days, confirming the strong sion with Denis Manturov’s Oboronprom. The Russian side trends that Russia Intelligence has pinpointed over the last might produce the A119 light helicopter and the AW139 un- few months. der license at Ulan-Ude. Such a choice undoubtedly would compromise the Ka 60/61 programs on which the Turbomeca Moscow continues its ambiguous attitude with regard engine maker seemed to have placed some hope (Russsia In- to EADS. In our 31 August 2006 edition, we informed our rea- telligence No.57 of 14 June 2007). ders that Russian participation in EADS was, in fact, much hi- gher than the 5 to 6% claimed by Vneshtorgbank. If the infor- On the other hand AgustaWestland boss Giuseppe Orsi has mation in the Nouvel Observateur is to be believed, this is been more cautious on the prospects for the joint development what Vladimir Putin is said to have confirmed to a French bu- of a new helicopter in the 4-5 tonne segment mentioned by De- siness banker. It would appear that the Russian president men- nis Manturov. In the same way, ’s prospects of ente- tioned a shareholding of more than 10%. It is noteworthy that ring into Alitalia’s capital seem somewhat further off. The no statement that this level has been exceeded has been re- state of the Italian group’s finances and the social context as gistered by European stock exchange authorities – something led the Russian group to withdraw from the race by 2 July, the which is hardly likely to reassure the leaders of EADS with re- deadline for purchase offers to be made. gard to the intentions of Russia, which is always ready to slam manoeuvres of obstruction by its European partners. The fact Rosoboronexport prepares new contracts. The other remains that after having finalized its contract with Boeing news item that has been widely published in the Russian and for 22 Dreamliner aircraft (Russsia Intelligence No.57 of 14 international press concerns the future possible deliveries of June 2007) Aeroflot confirmed the purchase of an equivalent the Mig-29 and Mig-31 combat aircraft to Syria. It will not number of Airbus A350 aircraft earmarked for delivery bet- come as a complete surprise to our readers as Russia Intelli- ween 2014 and 2017. The Russian company will also order five gence announced in its 13 April edition that these contracts Airbus A321s and ten or so A330s. were in the province of Vladimir Putin. The Rosoboronexport boss denied this information, but the embarrassed silence of Italy establishes itself as the privileged ally of Rus- Russian industrialists met at Le Bourget rather tends to confirm sian industries. Illustrated by Vladimir Putin’s visit to Rome the preparation of a “coup”. This, however, should not be the in March (Russsia Intelligence No.52 of 30 March 2007 and only one for Rosoboronexport in the coming weeks. Strong ru- No.53 of 13 April 2007) the vitality of the partnership with mors in fact report the signature of new contracts with Vene- Italy daily becomes increasingly evident both in aerospace as zuela during the visit of Hugo Chavez to Russia at the end of well as in the energy sector (see Page 5). The Le Bourget Air June. It appears that this involves around 10 classic submari- Show saw the signature of the first firm contract for Sukhoi nes (five project 636s and four project 677s) as well as Tor-M1 Superjet-100 aircraft from a western client, the regional com- anti-aircraft systems. It is noteworthy that, according to the pany ItAli, which has ordered 10 aircraft earmarked for deli- Moscow-based Center for Strategy and Technologies Analysis very between 2009 and 2011. While the reputation of the Rus- (CAST), Venzuela represents almost 20% of the arms contracts sian aerospace industry suffered during the 1990s, and that signed by Russia in 2006 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 mining 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. Who manages Russia? On www.russia-intelligence.fr, more than 30 exclusive notes & biographies on the circles of power. Free access for subscribers. 7 Russia Intelligence N°58 j June 28 2007 www.russia-intelligence.fr RIA58 28/06/07 15:19 Page 8

RUSSIA INTELLIGENCE Regions & CIS

URAL c Oligarchs’ power push

The congress of United Russia on 3 December last year was a with the ear of central government, head of Vladimir Putin’s sort of consecration for Eduard Rossel. In receiving in his Urals regional support committee in the 2000 and 2004 presidential stronghold the cream of the presidential party and of the Krem- elections, he was a key element in the governor’s team. Alexey lin, the governor of the Sverdlovsk region believed he had effected Vorobyov finally accepted the proposal of the central circles a lasting consolidation of his positions. Since then this veteran of of United Russia to head the organisation in the Urals - a golden Russian political life, in power since 1995, has encountered more niche far away from the decision makers. According to infor- and more impediments, compelling him to forge new alliances. mation garnered by Russia Intelligence, this “promotion” was At first glance, the latest of these is anecdotal: on 21 June apparently suggested to by Valery Yazev, the a court in handed down a particularly light ver- chairman of the Duma’s Energy Committee and, with Arkady dict (a few dozen hours of community work) to Alexey Kalenov, Chernetsky, the Mayor of Ekaterinburg, one of Eduardo Rossel’s Dmitry Burilov and Kirill Borodin. The defendants had been main rivals on the regional scene. accused of having systematically tagged the word “thief” on Facing winds blowing in opposite directions, the governor Eduard Rossel’s election posters on official electoral hoard- of Sverdlovsk, has certainly not said his last word on the mat- ings before the 8 September 20056 regional election. The pros- ter. His recovery strategy involves strengthening his ties with ecutor had asked for 8-10 months in prison while United Rus- UGMK, the group of the oligarch Iskander Makhmudov (Rus- sia demanded several thousand euros in damages and interest. sia Intelligence No.51 of March 16 2007). Eduard Rossel has On 18 June, this crime of lightly punished lese-majesty had managed to convince the United Russia leadership to include been preceded by an announcement of the resignation of Alexey Andrey Kozytsin, the UGMK managing director, on the party Vorobyov from his post as head of the regional government. list for next December’s legislative elections. It is noteworthy Aged 57, he was one of the longest standing supporters of Ed- that in the neighbouring region of Chelyabinsk, Viktor Rash- uard Rossel who he had got to know on the Communist party nikov – the head of the Magnitka steelworks – also managed regional committee at the end of the 1980s, and had remained to install Andrey Morozov, his right-hand man, in the leader- close to him ever since. Reputedly a competent administrator ship of United Russia leadership. d

FAR EAST c Sergey Borisenko, man of the moment The former No.2 at Rosneft, who this spring quit his func- 2007 – 2013 period. Almost one-third of this sum will be allot- tions on the eve of the auction for the remaining assets of Yukos, ted to infrastructure at Vladivostok, which is seeking to organ- has just found a new situation. He has joined the team of Kamil ize the ASEAN summit in 2012 (Russia Intelligence No.46-47 Iskhakov, the president’s roving plenipotentiary in the federal of 19 January 2007). This provides dazzling budgetary oppor- district of the Far East, as deputy responsible for energy mat- tunities which are sharpening appetites and which justify fresh ters. In a way, for Sergey Borisenko it is a kind return to base. attention to this region that for so long has been left to its own This faithful follower of Sergey Bogdanchikov in fact spent devices by the central government. German Gref, the minis- many a long year at Sakhalinmorneftegaz before joining his ter of economic development and trade, intends to centralize mentor in Moscow in 1998 when he was appointed to head Ros- investment through a “central body” in the same way as for the neft that at the time was the second-ranking company. Sergey federal support program for the Sochi region (Russia Intelli- Borisenko’s new position is a trly strategic one as it will super- gence No.48 of 2 February 2007). Vitaly Savelev (close to Yuri vise matters as sensitive as construction of the Eastern Siberia Kovalchuk, the head of the Rossia bank) supported this ad hoc to Far East oil pipeline, the Sakhalin gas projects and the fu- solution during the 19 June session of the Governmental Com- ture nuclear power station of which the construction near Vladi- mission on the Far East, but clashed head on with Alexey Ku- vostok was announced by Sergey Kirienko and , drin, the minister of finance who preferred respect for the the boss of (Russia Intelligence No.53 of 13 April 2007). usual budgetary procedures. Another minister - Anatoly The appointment of Sergey Borisenko comes at a time when Serdyukov also has an opinion on this matter. The Vladivostok the fight for influence in Moscow is raging around the details modernization program in fact envisages shifting several units of implementation of the federal Far East development pro- of the ministry of defense from the city center to Russky Island gram. Confirmed by Mikhail Fradkov, the prime minister, at where the ASEAN summit is due to be held - a good reason for the beginning of 2007, the program involves the deployment of the new head of the armed forces to call for a supplementary some 358 billion roubles (?10 billion) of public funds for the budget of $20 million. d

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