SOURCE: The St. Petersburg Times
DATE: Issue #1493 (55), Tuesday, July 21, 2009
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TITLE: CIS Leaders Gather For Horse Races
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — President Dmitry Medvedev gathered leaders from some of Russia’s closest allies at the Moscow hippodrome this weekend for a stylish, though informal, CIS summit, but only half of the group’s presidents showed up.
While racehorses, 11 of which belonged to Chechen President Ramzan Kadyrov, circled outside, Medvedev hosted Saturday’s talks in a lavish white tent over food and wine, winning a promise from Kazakh President Nursultan Nazarbayev that a much discussed customs union would start Jan. 1. He also managed to set up direct talks between the presidents of Armenia and Azerbaijan over the Nagorno-Karabakh conflict.
Nazarbayev said in televised comments that several other CIS members were interested in joining the customs union with Russia, Belarus and Kazakhstan. But it was unclear which countries he meant and what the status was of negotiations with Belarus, whose leadership is locked in a bitter trade dispute with Moscow.
Prime Minister Vladimir Putin announced last month that Russia would abandon its 16-year bid to join the World Trade Organization in favor of a joint application with Belarus and Kazakhstan.
The move has been criticized as a ploy to indefinitely postpone Moscow’s WTO accession.
Lengthy talks on Friday and Saturday between Presidents Serzh Sargsyan of Armenia and Ilham Aliyev of Azerbaijan were later labeled as “very constructive” by the Kremlin, but little indication emerged of any major breakthrough over the Nagorno-Karabakh dispute, one of the so-called “frozen conflicts” left by the Soviet collapse.
“Statements by officials made after the meeting indicate that no progress on principle issues has been made,” said Panakh Huseinov, a member of the Azeri parliament’s security and defense committee and an opposition member, Reuters reported.
The Armenian government called the talks “constructive” and said the leaders would meet again in the fall.
Nagorno-Karabakh, a mainly ethnic Armenian enclave inside Azeri borders, declared independence in 1991 with support from Armenia and fought Azerbaijan in a war that killed 35,000 people before a shaky cease-fire was signed in 1994. No country has recognized the enclave’s independence.
Russia exerts strong leverage on both Azerbaijan and Armenia, and analysts say mediation over Nagorno-Karabakh could consolidate its strong role in the South Caucasus.
Tajik President Emomali Rakhmon and Moldovan leader Vladimir Voronin were the only other CIS leaders at the summit. But the presence of the presidents of Abkhazia and South Ossetia, whose separatist republics were recognized as independent by Moscow after last year’s war with Georgia, upped the Kremlin’s official number of heads of state to eight.
No invitation was issued for Georgian President Mikheil Saakashvili, whose country’s withdrawal from the Commonwealth of Independent States is to be finalized next month.
Yet five leaders of the currently 12-member CIS declined to come.
Turkmen President Gurbanguly Berdymukhammedov apologized, saying a close relative was sick, national media reported.
Kyrgyz leader Kurmanbek Bakiyev explained that he had to prepare for presidential elections in his country on Thursday.
A spokesman for Ukraine’s Viktor Yushchenko said the president went for a traditional ascension and prayers in the Carpathian Mountains.
Uzbek President Islam Karimov did not even bother to explain his absence, Interfax reported.
Belarussian President Alexander Lukashenko, who has been sparring with the Kremlin recently, did not consider a horse race an appropriate place for negotiations, said a senior Belarussian diplomat, Oleg Ivanov. “Our president does not plan to attend an event like that,” Ivanov said, Interfax reported.
It later emerged that Lukashenko instead gave his attention to steel horses that day, showing up on a Harley Davidson at a biker festival in Belarus.
Lukashenko snubbed a CIS security summit in Moscow in June, prompting a rebuke from Medvedev, who complained that he had not even bothered to personally explain his absence.
The no-shows should not be interpreted as a sign of further cracks in the CIS, said Vladimir Zharikhin, the deputy director of the Moscow-based CIS Institute, a think tank.
“Everybody could choose to attend or not to attend,” Zharikhin told The St. Petersburg Times. “So some came for the horse race, others for a photo opportunity with Medvedev, and still others decided they didn’t need either.”
TITLE: Biden to Reassure Ukraine Over ‘Reset’
PUBLISHER: Combined Reports
TEXT: KIEV — Vice President Joe Biden arrived in Kiev on Monday on a mission to reassure Ukraine that U.S. efforts to repair relations with Moscow will not come at the expense of support for Russia’s ex-Soviet neighbors.
But while Biden’s programs in Ukraine and, later this week, in Georgia, provide opportunities to express U.S. backing in word, his trip was not expected to spur new support from Washington in deed, experts said.
Biden was scheduled to hold talks Tuesday with Ukrainian President Viktor Yushchenko, Prime Minister Yulia Tymoshenko and other political leaders before travelling Wednesday to Georgia to meet leaders there.
Briefing journalists in Washington ahead of Biden’s departure, one of his top aides summarized the message President Barack Obama’s vice president was being sent to Russia’s neighbors to deliver.
“Our efforts to reset relations with Russia will not come at the expense of any other country,” said Tony Blinken, national security advisor to the vice president.
“We will continue to reject the notion of spheres of influence, and we will continue to stand by the principle that sovereign democracies have the right to make their own decisions and choose their own partnerships and alliances.”
Leaders in Kiev and Tbilisi are nervous that an improvement in U.S.-Russian ties could translate into a rollback of Washington’s aggressive past backing of their respective drives to move away from Moscow and integrate with the West.
Russia has strenuously protested the expansion of western influence and bedrock western institutions such as NATO into countries close to its borders that were once part of the Soviet Union.
Tensions also remain high since Russian troops in August 2008 pushed deep inside Georgia in a war over its breakaway regions, sparking new fears that Moscow would use force to assert its interest in the former satellite states.
Obama addressed such fears in a keynote speech in Moscow when he stressed his administration’s “firm belief that Georgia’s sovereignty and territorial integrity must be respected.”
Biden’s two state visits are expected to drive home the message that the United States has not, and will not, abandon Ukraine and Georgia.
But in its latest edition, the Ukrainian weekly Zerkalo Nedeli said that U.S. interest in Ukraine has already sharply faded four years after a pro-Western coalition ousted the old Moscow-aligned elite in the 2004 Orange Revolution.
“In geopolitical terms, Ukraine remains a suitcase without a handle. It is too valuable to throw away but too cumbersome to carry” for the U.S., the weekly commented ahead of the visit.
“Times have changed, and the instruments of American ‘influence’ are minimal here.”
Biden will also use his visit to continue to press for more progress on democracy efforts inside both countries, according to Blinken, who said both nations face “the challenge of fulfilling the promise” of their revolutions.
According to a source close to the Ukrainian presidency, Kiev is hoping to secure a bilateral deal with the United States containing national security guarantees in connection with the expiry of the Cold War-era START nuclear disarmament treaty at the end of this year.
Energy concerns will also be a topic of discussion in Kiev, where chronic disputes over gas prices with Moscow have interrupted European gas supplies, 80 percent of which are piped to Europe via Ukraine.
Biden is scheduled to leave Ukraine on Wednesday for Georgia, where he is due to meet President Mikheil Saakashvili and deliver an address to the Georgian parliament.
Saakashvili tried to break a three-month-old political standoff two days before a visit by U.S. Vice President Joseph Biden.
The U.S.-backed Saakashvili, in a speech Monday in Tbilisi, proposed measures aimed at satisfying opposition demands, including sanctions against officials who tamper with courtcases and further limits on the president’s ability to dissolve parliament.
We need “a continual opening of our political system,” said Saakashvili who called for direct election of mayors and local elections in 2010, while stopping short of granting the opposition’s demand for early presidential and parliamentary elections.
The opposition has held daily demonstrations in Tbilisi since April 9, calling for Saakashvili’s resignation and new elections. They blame him for Georgia’s defeat in a war with Russia last August over the separatist region of South Ossetia that caused $1 billion in damage to the economy, and say he has clamped down on democracy and freedom of speech.
Opposition leader Levan Gachechiladze, who came second in the January 2008 presidential election, said Saakashvili “always makes speeches like this when someone important is coming to town,” adding that the opposition “won’t buy” what Saakashvili’s trying to sell. “He needs to understand that stepping down is the only solution.”
(AFP, Bloomberg)
TITLE: Ecologists Appeal to Europe for Support Over Power Plant
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Environmental groups from Russia, Lithuania, Belarus and Finland are appealing to the European parliament to help push the Russian authorities to organize an international discussion and public hearings on the construction of the second Leningrad Nuclear Power Station, or LAES-2, which they regard as a highly hazardous project.
Work has already begun on LAES-2, a complex of six power station units with VVER-1200 reactors that is due to complement the existing four 4 RBMK-1000 units of the Leningrad Nuclear Power Station (LAES).
The project’s estimated cost is $10 billion.
Andrei Ozharovsky, a nuclear safety expert with the Moscow-based environmental organization Ecodefense, drew attention to the fact that in 1991 Russia signed the Espoo Convention on Environmental Impact Assessment in a Transboundary Context, which obliges all participating countries to organize public discussions on all potentially hazardous projects, not only within the countries considering them, but in all countries that might be affected by the consequences of an accident.
“For example, before the construction of the two-unit Olkiluoto Nuclear Power Plant in Finland [built in the 1970s, with a third unit scheduled to be complete by 2012], Russian environmental groups were granted an opportunity to give their comments,” Ozharovsky said.
The Russian Atomic Energy Agency said that by 2015, the town of Sosnovy Bor, where the station is located and LAES-2 is being built, will boast ten nuclear energy units. Sosnovy Bor is 80 kilometers south of St. Petersburg. Environmentalists say it will result in a significant increase of radioactive discharge, both in water and air. Air emissions of tritium would double, while discharge of cesium-137 and cesium-134 into the waters of the Gulf of Finland will increase by 60 to 290 times.
Environmentalists at the St. Petersburg branch of the international environmental pressure group Bellona say the simultaneous operation of the new and existing plants will have a negative radiological and bacteriological impact on the population of Sosnovy Bor. The Bellona experts also claim that the stations’ cooling towers could spread dangerous toxic microorganisms into the nearby Gulf of Finland.
Bellona members say that no independent analysis has been conducted of LAES-2 and that the analysis carried out by the state was biased.
LAES and the Atomic Energy Agency maintain that the project will be both safe and profitable.
“Russia’s nuclear industry boasts a number of international projects; the six new units for LAES-2 in particular are being constructed for a very specific purpose — to provide electricity to nearby Finland,” said Rashid Alimov, co-chairman of the St. Petersburg-based ecological organization ECOperestroika.
“According to the plan, all the spent nuclear fuel will be stored in Russia, while in the event of a leak or accident, all the countries of the Baltic region will find themselves in equal danger. This is why it is time to join forces and show resistance to such dangerous projects on an international level, at least in the region that might be affected by a nuclear accident.”
Many Russian and international environmental groups have called for Russia to follow the example of some Western countries that have dismantled their nuclear reactors in recent years.
TITLE: Kadyrov Shows Off His Horses
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Chechen President Ramzan Kadyrov basked in the successes of his racehorses at the Central Moscow Hippodrome over the weekend — even though his most prized acquisition placed a disappointing fourth.
His U.S.-bred mare Tame View won the National Horsebreeding Union’s prize, snatching 500,000 rubles ($15,700) in prize money, Kadyrov’s press service said in a statement posted on his web site Sunday.
His Indian Jameson stallion won the honor prize for the Moscow Hippodrome’s 175th anniversary, worth 150,000 rubles.
But his favorite-ranked horse, a four-year-old brown thoroughbred named Bronze Cannon, only made it to fourth place in the President’s Cup, the most prestigious contest of the day. The 3.5 million ruble ($110,000) prize went to Monomakh of the Donskoi stables in the southern Rostov region.
Bronze Cannon took away 210,000 rubles, probably a trifle considering the horse’s worth. The U.S.-bred stallion won the prestigious Hardwicke Stakes race held at Ascot, England last month.
Kadyrov bought the horse from Anthony Oppenheimer, a long-time senior executive with the De Beers diamond conglomerate, Britain’s Racing Post newspaper reported on its web site.
In Britain, thoroughbred racehorses on average sold for ?107,000 ($175,000) last year, although prices fell by more than 20 percent this year, London’s Independent on Sunday newspaper reported in April.
The horse races were held in stylish form at the 19th-century hippodrome on Begovaya Ulitsa and were overseen by President Dmitry Medvedev, who played host to CIS leaders at an informal summit.
Kadyrov, who has been president since February 2007 and has been accused of running war-ravaged Chechnya like a private fiefdom, has been known for collecting race horses and driving fancy, foreign-made cars.
In line with a Kremlin-led anti-corruption drive, he gave his first income declaration in May, saying he earned 3.5 million rubles ($110,000) last year and that his only personal property consisted of a tiny three-room apartment covering 36 square meters in Grozny and a VAZ-21053 car.
Komsomolskaya Pravda reported over the weekend that Kadyrov had sent 11 horses to start at the Hippodrome races. Among them was an Irish-bred stallion named Tsentoroi after his native village.
Kadyrov’s spokesman Alvi Karimov on Sunday refused to give any information on the president’s racehorses. Reached on his cell phone, he said he was just about to board a plane to Grozny and had to check with his superiors there first.
In an earlier interview with Komsomolskaya Pravda, Kadyrov said the horses belong to the Chechen republic rather than to him personally.
But Kadyrov’s press service in Saturday’s statement explicitly referred to the horses as belonging to Kadyrov.
This spring, Dubai police detained one of Kadyrov’s horse trainers on suspicion of involvement in the killing of Sulim Yamadayev, a former rebel commander who fell out with Kadyrov.
TITLE: Medvedev Targets Teens and Maybe Gymnast Khorkina
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — President Dmitry Medvedev indicated on Friday that he is actively looking for young people to join the government and hinted that Olympic medal-winning gymnast Svetlana Khorkina might be in line for a governor’s post.
“There are two charming women sitting here. I mean Svetlana Khorkina and [Nashi activist] Marina Zademidkova. You look like you belong here. Maybe I should appoint you as governors?” Medvedev said at a State Council meeting on youth politics, RIA-Novosti reported.
While many of the points he made to the regional governors and top officials were routine, such as a lower age limit for young people to take part in municipal politics, the comment to Khorkina stood out. It didn’t appear later in the transcript on the Kremlin’s web site.
Khorkina was elected as a State Duma deputy for United Russia in 2007, three years after ending a career as a gymnast that included two Olympic gold medals. She is a deputy chairwoman of the Duma’s Youth Affairs Committee.
The Sun described the 2007 Duma intake that included Khorkina, now 30, and former rhythmic gymnast Alina Kabayeva as the “Puty-cat Dolls.”
Controversially, Khorkina has posed for men’s magazines including the Russian version of Playboy, although she didn’t take all her clothes off. She has also dabbled in pop singing and acting.
Zademidkova is a Nashi activist who took part in a protest against U.S. foreign policy outside the U.S. Embassy on Halloween last year.
Khorkina later told the United Russia web site that she wasn’t ready to become a governor. “Of course it’s a very flattering offer, but I understand that I need to study a lot for this,” she said. “I have just begun this journey and am only beginning my work in politics.”
In other remarks, Medvedev said that nationwide, people should be able to run in municipal elections from the age of 18, while in some regions the age limit is 19 or 20.
“This is a kind of restriction on young people’s rights because we are one country,” Medvedev said in the transcript of the speech published on the Kremlin’s web site.
Young people, defined as those aged 14 to 30, make up 27 percent of Russia’s population, Medvedev said.
The speech also touched on restrictions on selling alcohol and tobacco to young people. Medvedev called for harsher punishments for those who sell to minors. He recalled the anti-alcohol campaign of the Mikhail Gorbachev era, saying there were “idiotic bans and mistakes,” but that the campaign did prompt an “unprecedented” improvement in the death statistics.
Alexander Morozov, an independent political analyst, said Medvedev’s remarks were linked to a Kremlin need for a new generation of politicians to replace those from the late 1990s and early 2000s.
Medvedev first called for a “reserve” of young people to be fast-tracked to top government and business posts in July last year. In February, the Kremlin published the top 100, although the oldest person on the list was 50. Khorkina and Zademidkova are not on the list.
TITLE: Unemployment, Overdue Wages Down Last Month
AUTHOR: By Paul Abelsky and Alex Nicholson
PUBLISHER: Bloomberg
TEXT: Russia’s unemployment rate fell in June as seasonal demand for labor boosted the manufacturing industry and the government increased spending.
The number of unemployed fell to 6.3 million, or 8.3 percent of the workforce, the Moscow-based Federal Statistics Service said by e-mail on Monday. The rate was 8.5 percent in May.
The government has made spending on social needs, including benefits and pensions, a priority of its stimulus program even as it sees revenue drop by one third and expects to run a budget deficit of about 8 percent of gross domestic product this year, Prime Minister Vladimir Putin said last month.
The economy “has reached or is rapidly approaching its turning point,” according to Goldman Sachs Group Inc., which expects the fiscal spending and easing of lending conditions to return the country to growth in the second half.
Russian Railways and GAZ, billionaire Oleg Deripaska’s vehicle maker, are among companies that have reduced staff numbers to curb operating costs as demand for industrial products wanes during Russia’s steepest contraction in 15 years.
Russia’s stimulus program earmarks 2.51 trillion rubles ($80 billion) in loans, state aid and subsidies to battle the slump. Putin said on June 9 the “peak in unemployment growth had passed.”
The number of officially unemployed people in Russia fell 0.3 percent in the week through July 8 to 2,145,000 and overdue wages fell by 1.5 billion rubles in June, Deputy Prime Minister Alexander Zhukov said at a government meeting this week.
The recent declines in the unemployment rate may be “a seasonal effect due to an increase in demand for labor” in construction and agriculture, said Yelena Sharipova, Moscow-based economist for Renaissance Capital.
The Economy Ministry expects GDP to decline as much as 8.5 percent in 2009 after exports plummeted and companies depleted stockpiles during the global slowdown. The reduction in inventories accounted for 80 percent of the total contraction, the ministry said.
Industrial output probably shrank 14.9 percent in the first half and may slump 12.5 percent for the year, according to the ministry’s estimates.
Russia may face outbreaks of labor unrest last seen in the 1990s as manufacturing slumps at a record pace and companies struggle to pay employees, according to a study by Moscow’s Higher School of Economics.
TITLE: Kadyrov Blamed for Murder
AUTHOR: By Musa Sadulayev
and Steve Gutterman
PUBLISHER: The Associated Press
TEXT: GROZNY — Natalya Estemirova’s last meeting with Chechnya’s president did not go well: She faced Ramzan Kadyrov and his lieutenants alone, summoned for a chilling dressing down in which he boasted of having “blood from my hands to my elbows.”
The March 2008 confrontation was not the human rights activist’s first brush with the bullnecked boxing enthusiast. But looking back, some of her colleagues say, it may have been a grim forewarning of her violent end.
On Wednesday, the 50-year-old single mother and onetime schoolteacher was kidnapped, shot in the head and dumped by a roadside.
Rights activists have laid Estemirova’s death at the doorstep of Kadyrov, whose security forces they accuse of the abduction, torture and murder of suspected insurgents and their relatives.
They said Kadyrov’s rule had created a climate of lawlessness and impunity that made her killing possible.
“Who is to blame for Natalya’s murder? I know this person’s name,” Oleg Orlov, head of Memorial, where Estemirova worked, told reporters last week. “His name is Ramzan Kadyrov.”
Orlov said Estemirova’s detailed investigations described Chechnya as a lawless province where “it’s possible to abduct people every day, kill them, put them in secret prisons” without little or no risk of punishment.
The result was not surprising: “Ramzan Kadyrov hated Natasha,” he said.
Activists said Kadyrov was outraged when Estemirova, in televised remarks in March 2008, criticized his order for women and girls to wear headscarves in schools, universities and government offices — a requirement that clashed both with federal law and, many Chechens say, Chechen traditions.
Kadyrov “yelled at her, asked questions about who she lived with, where her relatives were and how old her daughter was,” said Tatyana Lokshina, a researcher with the Human Rights Watch who specializes in Chechnya and the surrounding region.
“With Kadyrov she spoke like a schoolteacher — she put this D-student in his place,” said Alexander Cherkasov, a Chechnya expert at Memorial, choking back tears at the news conference last week. “But he knew how to do more than just spit wads of paper from the back row.”
Both Kadyrov and the Kremlin have angrily rebutted allegations of any involvement in the murder, and a Kadyrov spokesman said Friday he would file a slander lawsuit against Orlov.
Kadyrov called Orlov on Thursday to deny involvement in the murder.
Kadyrov showed a pattern of interfering in Estemirova’s human rights work. Amid the headscarf dispute, he dismissed Estemirova as head of his handpicked Public Council, a rights advisory group, only weeks after appointing her. And he ordered her to stop her routine visits to police, prosecutors and other officials, Lokshina said, part of her work on behalf of the families of the disappeared and murdered. Fearing for her safety, Estemirova fled to London a short time later, where she worked for Human Rights Watch, said Alison Gill, director of its Moscow office. But she returned three months later.
On July 10, Orlov said, Chechen human rights ombudsman Nurdi Nukhazhiyev summoned the head of Memorial’s Grozny office and told him that the group’s most recent material had “caused extreme indignation at the highest level of power.”
According to Orlov, the ombudsman added: “You understand that you are putting yourself in grave danger. You need to change your style of work.”’
Nukhazhiyev urged Memorial to report alleged abuses directly to Kadyrov and not make them public, Orlov said.
The last straw, several rights activists said, may have been Estemirova’s work with Human Rights Watch to publicize the execution of a man suspected of giving a sheep to insurgents: he was allegedly stripped to his underwear and shot in a village square by police July 7.
? “Memorial will suspend its work in Chechnya, Cherkasov told Ekho Moskvy radio on Saturday. “We have seen that the work that Natasha was involved in, the work done by our colleagues in Chechnya‚ documenting crimes committed by representatives of the authorities — is fatally dangerous. We can’t put them at risk,” he said.
TITLE: Accountant Given 5 Years For Fiddling Expenses
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — An accountant working at a major space enterprise was sentenced Friday to five years in prison for defrauding the company of 3 million rubles ($95,000) by falsifying claims for business trips, RIA-Novosti reported.
Tatyana Kulagina, a finance manager of the Khrunichev State Research and Production Center located outside Moscow, was found guilty by Moscow’s Dorogomilovsky District Court of pocketing money through several schemes, including one in which she claimed that workers had traveled by plane when they actually had traveled by train, a police source told RIA-Novosti.
In another scheme, Kulagina handed out money for travel expenses to workers who were not traveling.
“When someone would find that he was wrongly sent on a trip, Kulagina would apologize for the mistake and advise that he return the money at once,” the source said. “After that she assigned it to herself.”
TITLE: Putin Warns On VEB Loan Extensions
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: Prime Minister Vladimir Putin on Saturday warned United Company RusAl and several other top Russian companies that they would not be able to extend indefinitely the $10 billion in emergency government loans they received last year.
The world’s largest aluminum producer received $4.5 billion of the funds lent by state-owned Vneshekonombank, or VEB, to a handful of companies as a crisis-related measure for them to refinance foreign loans where valuable assets were provided as collateral. Other borrowers included Alfa Group’s telecoms division, steelmaker Evraz Group, developer PIK Group and state oil producers Rosneft and Gazprom Neft.
VEB chairman Vladimir Dmitriyev said in a meeting with Putin on Saturday that the bank had decided to give borrowers a chance to extend the one-year loans for another year. But Putin said the practice should only be temporary.
“The bank’s clients must understand that these extensions will not last forever,” Putin said, without naming any companies. “They must step by step rebuild their normal work.”
The interest rates for the extended loans may change, depending on the risks and credit market conditions, Dmitriyev said. Some potential borrowers, such as LUKoil, described the rate that VEB was charging late last year — 5 percentage points over the London interbank offered rate — as unattractive and opted for other banks.
RusAl, controlled by billionaire Oleg Deripaska, appeared to be making progress toward a better financial footing after announcing Friday that it had managed to cut its average production cost by 27 percent in the first half of the year, compared with December.
“By the end of the year, we intend to cut costs by another 7 percent to 8 percent, which will give RusAl a good safety margin and allow it to feel confident in any market situation,” Deripaska said in a statement.
The company has been helped by signs of recovery on the market. Aluminum for delivery in three months on the London Metal Exchange has advanced more than 30 percent from a low of $1,288 per ton Feb. 23. On Friday, the three-month contract finished at $1,708 per ton.
Nevertheless, demand has remained low, and RusAl reduced aluminum output by 10 percent in the first half of this year, compared with the same period of 2008, the statement said.
It was unclear whether RusAl planned to ask VEB for an extension. Calls to the company’s press center went unanswered Sunday afternoon.
RusAl is also negotiating a restructuring for $7.4 billion of loans from foreign lenders and expects an agreement before July 29, the statement said.
Oleg Mukhamedshin, RusAl’s director for capital markets, said in May that it expected an extension of “seven to eight years.”
Of the 10 companies that borrowed emergency refinancing money from VEB, only Rosneft has repaid its loan, for $577 million, ahead of time.
VEB performed well in the first half of the year, earning a profit of 6 billion rubles ($189 million), which is 60 percent of the profit for all of last year, Dmitriyev said.
The lender’s loans portfolio grew by 30 percent to 250 billion rubles in this period, he said. The rate complies with the government’s target for state-owned banks to increase their lending by 2 percent every month, he said.
Putin chairs VEB’s supervisory board.
TITLE: Tycoon Fails To Show Up
AUTHOR: By Oleg Nikishenkov
PUBLISHER: The St. Petersburg Times
TEXT: Beleaguered entrepreneur Shalva Chigirinsky might not return to Russia after failing to appear for questioning over a tax evasion case involving the Moscow Oil and Gas Company, investigators said Friday.
Chigirinsky, a former president of the company, and two ex-directors, Alexander Povolotsky and Oleg Ivanchenko, were ordered to appear before Moscow investigators, a law enforcement source told Interfax.
Police suspect the firm and its legal predecessor, the Moscow Oil Company, of “large-scale tax evasion,” involving some 600 million rubles (now $18.9 million) in unpaid taxes. The company was renamed in 2003.
Earlier this month, investigators searched the Moscow offices of Sibir Energy for documents related to the operations of the Moscow Oil and Gas Company and its predecessor.
“A while back, a summons was sent to the address where Chigirinsky is registered, ordering him to appear for questioning, but he did not appear,” the law enforcement source was quoted as saying.
“Given the circumstances, investigators are leaning toward the belief that the businessman might remain in Britain or leave for a third country to avoid meeting with investigators,” the source said.
The summons was served to Chigirinsky’s relatives, Interfax reported.
Under Russian law, if a person does not appear for a police summons, he will be called a second and third time, after which he can be forced to appear.
TITLE: Fluctuating Crude Price Keeps Ruble Volatile
AUTHOR: By Ira Iosebashvili
PUBLISHER: The St. Petersburg Times
TEXT: Last year, the ruble seemed to embody everything that was wrong with the Russian economy — it was managed but volatile, and prone to the occasional collapse.
Since last year’s controlled devaluation, the currency had been surprisingly well behaved. In the last two weeks, however, the markets received a reminder of just how fragile the ruble can be — and how dramatically it is linked to the price of oil.
The ruble slid more than 4 percent during the week of July 6, lagging an even steeper drop in crude prices. And last week, both the currency and the commodity took a sharp turn up, although not quite recouping their losses.
The wealth of economic news in the last two weeks — both positive and negative — had a hand in keeping the ruble jumping.
The Central Bank cut its key rates on July 10, a move that many attributed to continued worry on the part of the government about economic growth and the budget deficit. On the same day, however, Finance Minister Alexei Kudrin said the economy could switch gears and grow 1 percent in 2010.
There was more good news Wednesday, when the Economic Development Ministry said gross domestic product had shrunk by 10.1 percent in the first half, compared with the 10.2 to 10.4 percent previously forecast by the government, and would end the year at minus 8 to 8.5 percent.
The Central Bank did its part in keeping the ruble within bounds, saying Thursday that it spent an $8.4 billion chunk of the country’s roughly $400 billion in foreign reserves to stem the ruble’s decline the previous week.
Analysts, however, said oil, which seemed to find a short-term bottom last week, was what really pulled the ruble back from the edge.
“If you draw a graph of ruble prices in the last few weeks and compare it to oil prices, you’ll see an exact inverse correlation,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog.
Prices for Urals crude — Russia’s chief export — fell 9.2 percent in the week ending July 10, before gaining back 8 percent in the next five days. The trend was repeated on most global oil markets, with UTI and Brent falling toward $60 but not straying too far past.
The fact that the slide did not go further gave the ruble a bottom as well, Gavrilenkov said.
But oil was not the only factor responsible for the currency’s volatility.
An influx of government budgetary money at the end of June flooded the foreign exchange market with spare rubles, which greased the wheels for a downward move on bad news, Gavrilenkov said.
“As long as there is spare liquidity, the ruble will fluctuate along with oil,” he said.
Gavrilenkov called the Central Bank’s intervention last week a strictly “technical” event, done “just to suppress excessive pressure.” That could change, however, if the price of oil falls further, others warned.
At $40 per barrel, “the Central Bank would be very near a decision point” on whether to support the ruble, said Citibank chief economist Elina Ribakova.
Alfa Bank said last week that the ruble could fall 16 percent by the end of 2009 to a range of 35 to 38 per dollar if the weaker economy makes it “too expensive and harmful” to support. Such a fall could push the ruble beyond the trading band of 26 to 41 against a basket of dollars and euros set by the Central Bank in January.
Other economists questioned the Central Bank’s entire policy of targeting exchange rates. An OECD report issued Wednesday urged Russia to “not resist fundamental pressures for depreciation of the ruble” and switch to a policy of targeting inflation instead.
This will ultimately put the exchange rate in line with “large swings in fundamentals such as oil prices,” the report said.
But the OECD report seemed unlikely to cause a switch in the bank’s policy this late in the game.
“It would be like jumping from one ship to another in the middle of a storm,” said Yevgeny Nadorshin, chief economist at Trust Bank.
A switch away from exchange rate targeting can only come when “derivatives in the local currency market become sophisticated enough to allow participants to adequately hedge their own risk,” rather than having regulators do it for them, Nadorshin said.
“Regulators should be confident, the economy should be ready and expectations should be properly controlled,” he said. “Now is just not the time. It would be too much of a shock to the system.”
TITLE: In Brief
TEXT: Magna Crafts Final Bid
BERLIN (Bloomberg) — Magna International Inc., Canada’s largest car-parts maker, aims to buy a larger stake in General Motors Co.’s Opel unit than previously planned under a final bid being submitted Monday.
Magna would acquire 27.5 percent of Opel compared with the earlier proposal of 20 percent, a spokesman at the manufacturer’s Oberwaltersdorf, Austria, headquarters for Europe, said by phone Monday. Sberbank, Magna’s Russian partner, would own 27.5 percent instead of a planned 35 percent, the company said.
Wage Arrears Decrease
MOSCOW (Bloomberg) — Russian wage arrears fell 18 percent in June as manufacturing contracted at the slowest pace this year amid signs that the country’s deepest economic decline in 15 years is ebbing.
Total unpaid wages fell to 7.19 billion rubles ($226 million) after rising 10.8 percent in the previous month, the Moscow-based Federal Statistics Service said Monday in an e-mailed statement.
Industrial output decreased an annual 12.1 percent in June, falling for the eighth consecutive month, compared with a record drop of 17.1 percent in May, the Federal Statistics Service said last week.
Retail Sales Fall Further
MOSCOW (Bloomberg) — Russian retail sales fell for a fifth month in June as incomes dropped and lending to households declined.
Sales dropped 6.5 percent, compared with a year before, the fifth consecutive decline, the Federal Statistics Service said in an e-mailed statement Monday. That was more than the median forecast of 16 economists surveyed by Bloomberg for a 6.4 percent fall. Retail sales were up 0.2 percent on the month.
Retail loans dropped 1.9 percent in May as the rate of delinquencies rose to 5.5 percent of the total versus 5.1 percent in April, according to the central bank.
Aeroflot Sees Decline
MOSCOW (Bloomberg) — Aeroflot, Russia’s biggest airline, flew 3.85 million passengers in the first six months of this year, 12 percent fewer that a year earlier.
Traffic, or the number of passengers multiplied by the distance flown, declined 11 percent, the Moscow-based airline said in a statement on its web site. The proportion of seats filled was 63.5 percent, Aeroflot said, without giving a year-earlier comparison.
Kingfisher to Expand
LONDON (Bloomberg) — Kingfisher, Europe’s largest home-improvement company, plans to double its number of stores in Russia in the next 2 1/2 years and will trial a new smaller format in Moscow, international director Peter Hogsted said.
The London-based retailer aims to have 20 Castorama outlets in the country by the end of 2011, up from nine at present, Hogsted said in an interview in St Petersburg on Friday.
TITLE: The Price of Wealth
AUTHOR: By Anna Shcherbakova
TEXT: Now that we are at least 30 percent poorer than a year ago due to the devaluation, with another round of it expected, it’s time to examine what money really means to us. No doubt it’s food and a roof over one’s head. To delve a little deeper, money gives people self-confidence, security, power and freedom. Those who have a lot of money are presumed to be happier than others. The response of those who are poor — or rather, who feel poor — should be envy and rancor. It’s always the same, except for the fact that “old money” has established its own reputation in society. Managers of hedge funds are in general less respected around the world than heirs to a fortune. The problem in Russia is that there is no old money here — all Russian fortunes are at most 20 years old. So there is no opposition between heirs and the nouveaux riches, only conflict between rich and poor.
The former are strong-willed, flexible, smart and daring. The latter are different. Not lazy or stupid, but different. Many of them have chosen academic careers and are devoted to their advanced math or medieval chronicles, which are not as in demand as investment banking or glamour photography. They appreciate their leisure time and often say that spirituality is more important than material welfare, as did one literary theorist and great storyteller in her blog. According to the 80-year-old woman, the words “money,” “wealth,” “prosperity” and even “well-being” or “satiety” have a negative meaning in Russian. When people say someone is too wealthy or too satisfied, they are casting aspersions on that person’s character.
I have tested this theory on numerous occasions and can say it’s quite true, but often unfair. Many compatriots are suspicious of any success, and are hostile to those with thick wallets and big cars. Visitors to another blog criticized a successful businesswoman whose son has dropped out of university and doesn’t want to work. His mother, who has a lot of successful projects behind her belt, should have concentrated on her most important “project,” one woman wrote rather mercilessly. As if less prosperous people do not have problems with their spoilt offspring.
But cases in which those who have made their fortunes appear insecure are not rare either. A local business tycoon — the owner of a wholesale food company — behaved as modestly as a first-grade student when I met him at a charity auction of paintings by high-ranking representatives of the authorities and famous artists. It truly seemed that the former mathematician was ashamed of his fortune — several millions of which he spent at the auction. Other participants in the auction showed him no respect, with one famous actor even forgetting his surname while thanking the donors, referring to him by the name of his widely-advertised company. It’s not very polite, saying we do not wish to know you, we are different; but the millionaire was unfazed. He donated one million euros for the renovation of one of the city’s central squares, and said he expected nothing in return except good relations with City Hall.
The Russian authorities are inequitable to businesspeople, especially during the crisis. In combination with people’s objections to them, it makes for a very bad forecast. It’s becoming dangerous to be rich in Russia.
Anna Shcherbakova is the St. Petersburg bureau head of business daily Vedomosti.