Russia 100301

Basic Political Developments RIA: Medvedev to discuss economic, military ties with French top officials -

Medvedev is expected to meet with his French counterpart Nicolas Sarkozy, Prime Minister Francois Fillon, Paris Mayor Bertrand Delanoe, the heads of the French Senate and National Assembly, Gerard Larcher and Philippe Seguin, during his stay in Paris, Sergei Prikhodko said.

Itar-Tass: Medvedev, Sarkozy to discuss Iran and European security - “The subject of Iran will certainly be touched upon,” the Russian president’s aide, Sergei Prikhodko, said, adding that President Sarkozy was also paying great attention to Iran’s problem.

AFP: 'Privileged' ties focus of Medvedev's France visit - Medvedev is expected to build on the success of Prime Minister Vladimir Putin's visit to Paris in November when he clinched several landmark business deals, strengthening Russia's energy clout in Europe. During Putin's visit, French energy giant EDF signed a deal with Russia's Gazprom to join the consortium building the South Stream gas pipeline, a competitor to an EU-backed project known as Nabucco, while French automaker Renault signed a deal to help rescue its struggling Russian partner Avtovaz.

Reuters: Arms and energy on agenda for Medvedev in Paris - "Military-technical cooperation will be discussed, including the possible supply of a Mistral amphibious assault ship. But no document will (be signed) - we did not set such a goal," the official said, talking on condition of anonymity.

Interfax: Mistral talks reflect Russian-French partnership – ambassador - "I would like to cite French President Nicolas Sarkozy's statement in this connection. He said it was important to decide whether Russia is a partner, or an enemy. Russia is a partner for us. This being so, no taboos or bans exist in matters of military-technical cooperation," De Gliniasty said in an interview with Interfax.

The Times: France defends talks on sale of warships to Russia Georgian Daily: French Warship Sale to Russia: Another Symptom of NATO

Erosion? Expatica: 'Privileged' ties focus of Medvedev's France visit - Fyodor Lukyanov,

editor of Russia in Global Affairs magazine, said the trip was first and foremost aimed at further strengthening the privileged ties Russia has boasted with one of Europe's major players. The adoption of the Lisbon Treaty designed to boost the European Union's global standing and its ability to speak with one voice only reinforced Russia's understanding of the need to forge closer partnerships in Europe, he said.

Russia Today: Russia’s unilateral disarmament is out of question – Russian diplomat - The US prefers to avoid any legal limits in developing national missile systems, which is absolutely unacceptable for Russia, said the chairman of the State Duma Committee on International Affairs, Konstantin Kosachev.

AFP: Russia, Georgia reopen vital border crossing RFE/RL: Georgia-Russia Border Crossing Reopened Itar-Tass: Border checkpoint on Georgian-Russian border resumes operation

Georgian Times: ‘Citizens of Abkhazia and South Ossetia’ to be Able to Cross Kazbegi-Zemo Larsi

Ukrainian Journal: Yanukovych to try to reopen Russian natgas deal in Moscow on March 5

Kyiv Post: Presidential administration official: Ukraine not to join customs union - "Since the customs union contradicts and will greatly complicate Ukraine's membership in the WTO, this matter cannot be raised today, tomorrow or the day after tomorrow, it is absolutely out of question," first deputy head of the presidential administration Iryna Akimova said on the Inter TV channel.

Washington Post: New Ukrainian president could disappoint supporters in the Kremlin

Georgian Daily: Adriatic Watch: a Must for the European Commission - Croatian Prime Minister, Jadranka Kosor, is expected in Moscow on March 2 for her first official visit (HINA, February 24). Kosor’s talks with the Russian Prime Minister Vladimir Putin and Kremlin-connected energy companies may yield a breakthrough into Croatia’s energy sector. 

RIA: Kazakh prime minister to visit Moscow March 3 Gazeta.kz: Prime Ministers of Kazakhstan and Russia to hold negotiations in

Moscow - According to the press service, K. Masimov's telephone conversation with V. Putin took place on February 28. "The interlocutors discussed the conditions and prospects of further development of bilateral trade and economic cooperation and the questions of formation of the Customs Union of Kazakhstan, Russia and Belarus."

Kyiv Post: Russia, Belarus, Kazakhstan agreed upon Customs Code text - The Commission of the Russian-Kazakh-Belarusian Customs Union has agreed upon the text of the Customs Code, Russian First Deputy Prime Minister Igor Shuvalov said. RFE/RL: Russian Courts Ordered To Respect Strasbourg Rulings

Market Watch: Kinross Appointed to Russian Government Advisory Council on Foreign Investment - The Ministry of Economic Development of the Russian Federation has announced the appointment of Kinross to Russia's Foreign Investment Advisory Council (FIAC).

Itar-Tass: Putin to hold meeting on AF, air defence troops equipping - Equipping of the Air Force and air defence troops of Russia with state-of-the-art samples of armaments and military hardware will be the main issue of a regular meeting on issues related to the development of the national defence industry complex that will be held by Russian Prime Minister Vladimir Putin on Monday.

Itar-Tass: Putin to chair defense sector conference at Sukhoi Design Bureau RBC: Gov't to decide on additional funds for Russian Railways - The decision on

the allocation of additional funds to Russian Railways is to be passed during the drafting of the federal budget for 2011-2013, Deputy Prime Minister and Finance Minister Alexei Kudrin announced at a press conference in Sochi.

RSS: Russian Railways Announce Details Of Massive Investment For Infrastructure

AFP: Iran agrees to give Russia wild leopards - Iran has promised to donate two wild leopards to Russia, officials said Sunday, bringing closer the aim of settling the rare animals near the 2014 Winter Olympics host city of Sochi.

Itar-Tass: Tehran to carry on peaceful atomic energy activity – supreme leader: Iran will carry on peaceful atomic energy activity no matter what, Iranian Supreme leader Ayatollah Ali Hoseini-Khamenei told Foreign Ministry staff members on Sunday. Russia will have a measured attitude to possible sanctions against Iran as long as the latter cooperates with the IAEA, Chairman of the Federation Council International Affairs Committee Mikhail Margelov told Itar-Tass on the same day.

Telegraph: US steps up diplomatic pressure on Russia over Iran sanctions - Amid fears that Moscow remains intent on weakening a planned Security Council resolution punishing Tehran for its nuclear programme, western diplomats are seeking to convince Russia to support much more robust measures.

Novinite: Russia Eyes "At Least 50%" in Bulgaria Belene Nuclear Project AP: Russian Authorities Block Anti-Police Rally in Moscow - An opposition

leader says he and seven other activists were detained to prevent them from holding an anti-police rally in central Moscow.

Reuters: Russians to Protest ‘Dictatorship’ of Putin’s Party on March 20 - Russian opposition activists plan a 15,000-strong rally in the western exclave of Kaliningrad on March 20 to protest the “dictatorship” of Prime Minister Vladimir Putin’s party and the worsening economic situation.

Bloomberg; Russia Busts Crime Ring That Police Say Laundered $1.6 Billion - The group charged a fee of between 1 percent and 7 percent to legalize ill-gotten gains through three commercial banks and 79 domestic and foreign firms, the ministry said in a faxed statement today. More than 150 officials were involved in the investigation.

Interfax: Intl “washing machine” crushed after laundering over $1.5 Bln -Interior Ministry (Part 2) - Over 240 seals of fly-by-night firms, including non-resident companies, financial documents which provide evidence of the illegal transactions, and 36 million rubles in cash have been seized in searches conducted at banks and offices and in the suspects' homes.

RIA: Russian investigators rule out murder of Trans Nafta top manager RIA: Grenades launched at south Russia freight train - Unknown assailants

launched grenades at a freight train in Russia's volatile North Caucasus republic of Ingushetia, a police source said on Monday.

RIA: Police discover arms cache in Ingushetia Georgian Daily: More Attacks Reported in Ingushetia, Dagestan and Chechnya Global Research: Destabilization: Caucasus Geopolitics Threatens Russia's

Security - The analysis of the situation in the Caucasus and in Transcaucasia shows that the outlook for the geopolitical entirety is going to be shaped by the key Western countries' efforts aimed at debarring Russia from the Caspian oil and gas projects.

Interfax: Russian Muslim leaders doubtful over creation of supreme mufti post Interfax: Iskhakov re-elected to fourth term as Tatarstan mufti

Interfax: Chechnya wants Islamic leaders to attend Prophet Muhammad birthday celebrations in 2011

Itar-Tass: Smolensk mayor, his deputy seized on extortion suspicions The Moscow Times: Mayoral Elections Under Fire After Arrest - Smolensk's

mayor was arrested Sunday in an extortion investigation that could fuel calls for the Kremlin to end direct mayoral elections.

Itar-Tass: The Olympic flag handed over to Sochi mayor Bloomberg: Russians Limp From Vancouver Olympics as Sochi Looms in 2014 RIA: Vancouver Olympics over, Sochi picks up baton The Moscow Times: After Vancouver, Now It's Sochi's Turn - After the showbiz,

the hard work will continue back home as organizers continue to prepare for an event that has the prestige of Russia and its leaders — including Prime Minister Vladimir Putin — on the line.

The Moscow Times: Media in Sochi Area Face Major Pressure - Pressure on media in the Krasnodar region is making fair coverage of preparations for the 2014 Sochi Games all but impossible, a media watchdog said Saturday, as the host city's mayor visited Vancouver to receive the Winter Olympics flag.

Bloomberg; Russian Army Reclaims ‘Abandoned’ Tanks After Internet Exposure Eurasia Review: Sino-Russian Energy Relations: True Friendship Or Phony

Partnership? - Over the last decade, China and Russia have devoted increasing attention to what they term as their “strategic partnership.” Moscow and Beijing share interests in standing against the predominant influence of the United States and, more broadly, the West.

Reuters: Russia arms exports thrive, output barely keeps up - Russian arms exports edged up by $150 million to a post-Soviet record of $8.5 billion last year, the Moscow-based Centre for Analysis of Strategies and Technologies (CAST) said in a report made available to Reuters.

RFE/RL: What's New In Russia's New Military Doctrine? - by Mikhail Tsypkin Russia Today: 01 March, 2010 in Russian Newspapers

o Nezavismaya: Spring – time for borrowing money from the Westo Vremya Novostei: A “hello” from Yanukovich o Kommersant: Lithuania expects European discount rates form Gazprom

Interfax: Moscow press review for March 1, 2010o VEDOMOSTIo Six of the 12 members of Transcreditbank (RTS: TCBN)'s executive

board have sold their shares, the bank said in a statement.o The amendments, proposed to the Law on the Turnover of Medicines by

the United Russia party, suggest that packaging will have special markings, confirming that the medicines comply with the safety and quality standards, and obliging pharmacies to obtain equipment to check whether the markings are not fake.

o KOMMERSANTo The government remains undecided on the list of nominees for the board

of directors of Rosneft (RTS: ROSN)o The Baltic countries, following the example of major European

consumers, have asked Gazprom (RTS: GAZP) to review the structure of

prices for Russian gas. Lithuania, which buys Russian gas for $320 per 1,000 cubic meters, has asked Gazprom to deliver gas partly at a spot price of $200 per 1,000 cubic meters.

o France's Alstom this week is expected to sign a deal to buy a 25% stake in Transmashholding (RTS: TRMH), Russia's major producer of railway machinery.

National Economic Trends Bloomberg: Russian Manufacturing Expanded for Second Month in February Prime-Tass: PMI: Recovery of Russian mfg sector remains fragile in Feb Itar-Tass: Russia to take foreign loans in 2010 – Kudrin RBC: Russia piles up bank assets in 2009 Russia Today: Russia to support low-cost mortgage lending

Business, Energy or Environmental regulations or discussions Bloomberg: Lukoil, Norilsk Nickel, Polyus Gold: Russian Equity Preview The Moscow Times: Watchdog Proposes Formula Financial Times: Russia threatens ban on Austrian Airlines The Moscow Times: Hungary Buys Back Stake In Airline Malev From VEB Budapest Business Journal: Malév renationalized - The state of Hungary has

reached an agreement to acquire a 95% stake in national carrier Malév through a HUF 25.2 billion capital raise, including cash and the conversion of debt, the Finance Ministry told MTI early Saturday.

Bloomberg: Southeast Asia May Become Key Russian Grain Buyer, Union Says The Moscow Times: Mechel May List Shares - Wall Street Journal: Russian Firm Bets on Online Revolution - Since 2005, DST

has amassed $1.5 billion worth of stakes in 30 countries across eastern Europe and Russia. Last year Mr. Milner flew to California to meet with Facebook Chief Executive Officer Mark Zuckerberg, paving the way for a €141.6 million deal that saw him take a 2% stake in the social-networking firm. A stake he has subsequently grown to just under 5% today.

Barentsnova: Murmansk gets 16% of Russia’s fish caught

Activity in the Oil and Gas sector (including regulatory) RIA: Russia lowers oil export duty to $253.7 per ton from March 1 Itar-Tass: Russia reduces oil export duty to $254 per tone RBC: Russia, Kyrgyzstan sign gas cooperation accord 24.kg: Kyrgyzstan and Russian to investigate hydrocarbons market UpstreamOnline: TNK-BP sees 1-2% output boost Your Oil and Gas News: Investment in the Future - TNK-BP is trying to bring

to 95% its level of associated petroleum gas (APG) utilization. Although the company still has almost two years to do so, the standard that is established by the government program is already complied with in some fields.

Bloomberg; TNK-BP Seeks ‘Game Changing’ Unconventional Gas in East Europe

Peace FM Online: Lukoil, Vanco Make ‘Significant’ Oil, Gas Discovery in Ghana

Russia Today: Use of wasted gas could save billions - Russia says its oil companies could save more than 13 billion dollars a year, if they didn’t waste associated gas, a by-product of crude production. But some firms are starting to find ways round the problem.

Gazprom RBC: Turkey enjoys Gazprom gas price reduction RBC: Gazprom's European partners to get gas with discount The Moscow Times: Gazprom Boosts Reserves - Gazprom boosted reserves of

gas at the Kirinsky field off Sakhalin Island in the Far East by 33 percent to 100 billion cubic meters.

The Moscow Times: Gazprom Price Change to Last 3 Years Financial Times: Gazprom - The recession slashed European gas usage last year

and weakened the medium-term demand outlook. Thanks to the shale gas boom, moreover, the US has much less need for imported liquefied natural gas than previously projected. So LNG is being diverted to Europe, sending “spot” gas prices tumbling. That threatens the formula in Gazprom’s long-term take-or-pay contracts with European customers that links its gas price to (once again robust) oil prices.

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Full Text Articles

Basic Political Developments

RIA: Medvedev to discuss economic, military ties with French top officialshttp://en.rian.ru/world/20100301/158045761.html

03:1701/03/2010

Russian President Dmitry Medvedev will visit France on March 1-3 in order to discuss a range of international and bilateral issues with French top officials, the Russian president's aid has said.

Medvedev is expected to meet with his French counterpart Nicolas Sarkozy, Prime Minister Francois Fillon, Paris Mayor Bertrand Delanoe, the heads of the French Senate and National Assembly, Gerard Larcher and Philippe Seguin, during his stay in Paris, Sergei Prikhodko said.

The agenda of the talks includes Russian-French economic, military and humanitarian cooperation and Russia's accession to the WTO.

The parties are also expected to focus on the overcoming of the world economic crisis, a new European security treaty, and the situation in Afghanistan during the talks.

The Russian delegation includes some 80 top businessmen.

Medvedev's visit will mark the official start of the Year of Russia in France and France in Russia.

Russian-French trade turnover has risen by more than five times in 2003-2008. Despite the world economic crisis, French investments in the Russian economy accounted for $10.4 billion in 2009.

Russia and France are partners in the Nord Stream and the South Stream gas pipeline projects, intended to reduce Russia's dependence on transit countries when pumping natural gas to Western Europe. Russia pumps some 10 billion cubic meters of gas to France annually.

Russia is in talks with France to buy a French Mistral-class amphibious assault ship worth 400-500 million euros (around $540-$675 million). The French government has approved the sale but Russia has not yet made a final decision. A source in the Russian Defense Ministry earlier said the deal is not expected to be signed during Medvedev's visit to France.

The two countries also cooperate in space exploration. A contract to launch 10 Russian Soyuz-ST carrier rockets from the Kourou space center in French Guiana was signed by Russia's space agency and French satellite launch firm Arianespace in 2008. The first launch is likely to take place this year.

In February, Russia won a tender for a plot of land in downtown Paris and will build a spiritual and cultural center on the banks of the Seine River near the Eiffel Tower.

Russia and France are also expected to discuss the Iranian controversial nuclear program during Medvedev's visit to Paris.

Russia has opposed new sanctions against the Islamic republic over its recent decision to begin enriching uranium to 20% purity. Russian Foreign Minister Sergei Lavrov said in late February that there was no hard proof that Iran was working on nuclear weapons, but Tehran has to clarify several key issues on its nuclear program to avoid fresh international action.

MOSCOW, March 1 (RIA Novosti)

Itar-Tass: Medvedev, Sarkozy to discuss Iran and European security

http://www.itar-tass.com/eng/level2.html?NewsID=14872954&PageNum=0

01.03.2010, 04.01

MOSCOW, March 1 (Itar-Tass) -- The situation with Iran will be one of the thorniest issues in the international agenda of talks to be held between Russian President Dmitry Medvedev and his French counterpart Nicolas Sarkozy in Paris on Monday.

“The subject of Iran will certainly be touched upon,” the Russian president’s aide, Sergei Prikhodko, said, adding that President Sarkozy was also paying great attention to Iran’s problem.

At the same time, the high-ranking representative in diplomatic circles suggested that there wouldn’t be any detailed discussion of the Iranian issues, including sanctions against Tehran.

“The question about the scale of sanctions is premature,” he said.

In his special statement in New York last September Dmitry Medvedev said that Russia was ready for joint work on that matter. He also added that there are situations when sanctions become inevitable but what’s most important is Russia’s readiness to work on this matter.

“I don’t think that time will allow the two leaders to go into details of sanctions,” the diplomat went on to say. “They will probably discuss Russia’s interaction with France within the framework of the ‘six’ and the United Nations in broad context,” he added.

“The leaders will verify their positions in which Russia and France, by and large, don’t have contradictions,” the diplomat emphasized.

AFP: 'Privileged' ties focus of Medvedev's France visithttp://www.hurriyetdailynews.com/n.php?n=privileged-ties-focus-of-medvedevs-france-visit-2010-03-01

Monday, March 1, 2010MOSCOW – Agence Frace-Presse

Russian President Dmitry Medvedev headed to France on Monday for a three-day visit aimed at strengthening economic and political ties with one of Europe's top players.

Politics and economics will be high on the agenda as Medvedev and his host Nicolas Sarkozy kickstart a series of year-long cultural events aimed at flaunting the two nations' long-standing ties. The two leaders was expected to discuss Iran's nuclear program, Russia's accession to the World Trade Organization and Medvedev's proposal for a new European security pact, Medvedev's top foreign policy aide Sergei Prikhodko said.

France and Russia, whom many critics accuse of capitalizing on differences among the European Union members, will also discuss the preparation of a new partnership and cooperation agreement Moscow and Brussels have to sign after the old agreement expired in 2007. "It's important for us to hear their opinion," Prikhodko said. "France is one of Russia's privileged partners," the Kremlin said in a statement ahead of the visit.

Along with Germany, France is considered Russia's closest ally in Western Europe. But unlike with Germany, Moscow's biggest trade partner, cooperation with France until

recently has mostly been rooted in history and politics rather than economics, analysts say. Fyodor Lukyanov, editor of Russia in Global Affairs magazine, said the trip was first and foremost aimed at further strengthening the privileged ties Russia has boasted with one of Europe's major players.

The adoption of the Lisbon Treaty designed to boost the European Union's global standing and its ability to speak with one voice only reinforced Russia's understanding of the need to forge closer partnerships in Europe, he said. "Large countries like Germany and France have all the levers," Lukyanov said. "Not taking advantage of it would be strange."

Medvedev is expected to build on the success of Prime Minister Vladimir Putin's visit to Paris in November when he clinched several landmark business deals, strengthening Russia's energy clout in Europe. During Putin's visit, French energy giant EDF signed a deal with Russia's Gazprom to join the consortium building the South Stream gas pipeline, a competitor to an EU-backed project known as Nabucco, while French automaker Renault signed a deal to help rescue its struggling Russian partner Avtovaz.

Reuters: Arms and energy on agenda for Medvedev in Parishttp://www.reuters.com/article/idUSTRE61R11G20100228

5:23am EST

By Denis Dyomkin and Conor Sweeney

MOSCOW (Reuters) - Talks on buying a French-made helicopter carrier, energy tie-ups and Iran will be amongst the priorities when President Dmitry Medvedev travels to France for a three-day state visit on Monday, a Kremlin official said.

Medvedev will be hosted at the Elysee Palace by his French counterpart Nikolas Sarkozy, one of the most vocal Western advocates of tough sanctions against Iran over its nuclear program. Moscow has so far been less enthusiastic.

Sarkozy has sought to improve ties with Moscow and Washington while retaining his country's strong influence in the European Union. The French president brokered a ceasefire deal that ended Georgia's five-day 2008 war with Russia, which erupted months after Medvedev was sworn in as President.

The two presidents will discuss Russia's interest in buying a 21,300-tonne amphibious assault ship from France -- a sale which has alarmed Washington and NATO's East European allies.

A senior Kremlin official said no final agreement on a purchase of a Mistral-class warship - the first big arms sale by a NATO country to Russia - should be expected during the trip.

"Military-technical cooperation will be discussed, including the possible supply of a Mistral amphibious assault ship. But no document will (be signed) - we did not set such a goal," the official said, talking on condition of anonymity.

REGIONAL ALARM

The Mistral is marketed by French naval firm DCNS and estimated to cost 300-500 million euros ($404.3 million to $673.8 million). It can carry helicopters, troops, armored vehicles and tanks and Georgia fears Moscow could deploy such a vessel against it in a future conflict.

The head of Russia's navy, Admiral Vladimir Vysotsky, said in September that with a Mistral, Russia could have reached its military goal against Georgia in 40 minutes instead of 26 hours.

Military experts say much depends on how much advanced technology France might include in the ship and the Kremlin official identified this as one of the key points of discussion.

"We'd like to buy this kind of (helicopter carrier) and maybe continue cooperating with the French on technology," the Kremlin official said. Russia would also like to build another three Mistrals itself under license, he added.

The Baltic states, which split from the Soviet Union in 1991 and joined the NATO military alliance, are also worried about the Mistral sale and U.S. Defense Secretary Robert Gates has raised the issue with his French counterpart Herve Morin.

Lithuania last week said it was assured by Paris that any warships sold would be stripped of military technology but without the technology the ship may not interest the Russians.

IRAN TALKS

On Iran, the Kremlin official said he did not expect the two presidents to "delve into the details" of any sanctions package but would discuss cooperation at the U.N. Security Council.

Russia, which does significant trade with Iran, said last week it would not accept "crippling" sanctions against Tehran but has not said what form it might support.

Warmer relations between Paris and Moscow under Sarkozy have helped business between the two nations. Further agreements on energy cooperation under which Russian

gas export monopoly Gazprom will increase its exports to France will be inked during the visit, the Kremlin official added.

Medvedev signaled in an interview with French weekly magazine Paris Match that he would also revisit his plan for a new, binding security treaty for Europe to supplant NATO.

The proposal, which he first aired in Germany in 2008, has generated little interest from European states, some of whom say it is a rehash of Soviet-era attempts to draw Europe from the United States and give Moscow veto power in its security.

(Writing by Conor Sweeney; editing by Michael Stott and Philippa Fletcher)

Interfax: Mistral talks reflect Russian-French partnership - ambassador

MOSCOW. Feb 28 (Interfax) - France made the decision to start talks on selling a Mistral-class helicopter carrier to Russia, because it does not see Russia as an enemy, said French Ambassador to Russia Jean de Gliniasty.

"I would like to cite French President Nicolas Sarkozy's statement in this connection. He said it was important to decide whether Russia is a partner, or an enemy. Russia is a partner for us. This being so, no taboos or bans exist in matters of military-technical cooperation," De Gliniasty said in an interview with Interfax.

"We have started talks that are based on this fundamental political understanding," he said.

Also, "we are not the only [country] in the list of those who are open for military-technical cooperation with Russia," he said.

The international community has focused the attention on the French helicopter carrier, because it has a symbolic meaning," the French diplomat said.

"Military cooperation between us did not stop even in the moments of worst tensions between Russia and the West," he said. "This tradition was set many years ago. Naturally, it has evolved into individual joint projects in individual types of equipment and other areas. So this is indeed a distinctive feature of relations between France and Russia," De Gliniasty said.

Please, go the www.interfax.ru website to read the interview in full.

Sd

March 1, 2010 The Times: France defends talks on sale of warships to Russiahttp://www.timesonline.co.uk/tol/news/world/europe/article7044668.ece

Charles Bremner, Paris

The scene is set for conflict between France and its Nato allies when President Medvedev of Russia arrives in Paris today intent on ordering up to four powerful warships from French shipbuilders.

Washington and the former Soviet bloc members of Nato are alarmed by President Sarkozy’s willingness to sell a 600ft Mistral Class amphibious assault ship, and possibly three more, to the Russian Navy.

Georgia, which was subjected to a Russian invasion in 2008, is leading the charge to stop Moscow acquiring Mistrals, which sell for about £400 million each.

Admiral Vladimir Vysotsky, the chief of the Russian Navy, has described the helicopter and troop-carrying vessel as an ideal asset for Black Sea operations in the Caucasus.

No Nato nation has sold military hardware on nearly such a scale to Russia. France is arguing that the Mistral is little more than a freight vessel and that Moscow must be drawn into a partnership. “We cannot on one hand claim to be partners with the new Russia and, on the other hand, treat it like it was the old Soviet Union,” Hervé Morin, the Defence Minister, said.

The contract, which has been approved in principle by President Sarkozy, could create 2,000 jobs.

Russian officials said that no final decision had been taken on the order, but Mr Medvedev indicated in a French media interview last week that he hoped to clinch the warship contract on his Paris visit this week.

Georgian Daily: French Warship Sale to Russia: Another Symptom of NATO Erosion?http://georgiandaily.com/index.php?option=com_content&task=view&id=17377&Itemid=132

February 28, 2010

Vladimir Socor

Pierre Lellouche was for many years a staunchly Atlanticist politician in a Gaullist-minded France. Currently serving President Nicolas Sarkozy as his State Secretary for European Affairs, Lellouche follows Sarkozy’s line in defending the French Mistral warship sale to Russia, regardless of its corrosive effects on NATO. 

Visiting the Baltic States –where serious concerns have been voiced over the possible Mistral sale to Russia– Lellouche insinuated that other NATO countries might sell their warships to Russia, if France does not do so. Claiming that the warship sale would merely “turn the page on the Cold War,” Lellouche invited the Baltic States to follow the Franco-German example and seek reconciliation with Russia, overcoming a difficult history (BNS, February 24, 25).

This argument presupposes that Franco-German reconciliation would have worked if Germany had continually denounced France to Europe and the world for the “mistreatment of the German-speaking population in Alsace-Lorraine,” or if Germany had opposed French full membership in NATO as contravening some German design for an “all-European security order.” The Lellouche argument also assumes that Russia is a reconciliation-prone democracy, similar to Germany or the Baltic States.

Officials in Paris adduce varied arguments to different audiences in an effort to justify the French naval rearmament program for Russia (four or five Mistral-class power-projection ships). The justifications sometimes seem to underestimate the interlocutors’ comprehension capacity in trying to ennoble the motives behind the warship sale. An unusually frank case, however, recently appeared in the editorial pages of Le Figaro, which is known for its privileged connections with President Sarkozy’s Elysee Palace team (Le Figaro, February 19).

Alluding to an undeclared Franco-German competition for Moscow’s friendship, Le Figaro argues that the Paris-Moscow rapprochement merely follows in the footsteps of Berlin’s rapprochement with Moscow. Second, it notes that the United States itself has for some time closed its eyes to the Mistral warship sale to Russia; and that an overt opposition by Washington would be “very badly received in the Kremlin,” implying that the US has maneuvered itself into a no-win position on this issue through the reset policy on Russia.

Thirdly, it cites the political-diplomatic benefit for France stemming from the warship sale on two counts: “Marking France’s independence from NATO, despite its return to the integrated command, while sending a very strong signal of rapprochement with Russia.’’ And fourthly, it claims that the Mistral sale can incentivize Russia to cooperate on European security, or on nuclear nonproliferation, through the Mistral sale. Rewarding Russia with arms sales for political-diplomatic cooperation –and rewarding it, moreover, in advance of any performance on such cooperation, indeed on a record of non-cooperation– is an idea that France has introduced into Allied councils for the first time through the proposed Mistral sale.

French officials tell Baltic States’ representatives (or Georgian representatives, on the rare occasions when Paris bothers to do so) that the Mistral warships are basically defensive if sold as “bare hulls.” This is a bon pour l’Orient’ [merchandise for substandard markets] argument, however. Russia would not be prepared to enter into a multibillion dollar purchase for a few bare hulls. Moscow has made clear that it intends to put Russian, not French, combat helicopters on the Mistral ships for airborne landings (it

has not clarified its intentions regarding the armored vehicles on board for amphibious landings).

The Russian Chief of the General Staff, Army-General Nikolai Makarov, has also reconfirmed these ships’ high military value to Russia: “We do not have any such class of ship. Our large landing ships are three to four times smaller than the Mistral class. This is a multifunctional ship: a helicopter carrier, command ship, as well as an amphibious landing ship … Our amphibious landing ships use three times as much fuel as the Mistral class, despite being three to four times smaller. We need some years to produce such ships in Russia. That is why we want to buy this technology and build such ships in our country,” Makarov told the worldwide audience of Russia Today TV on February 24 (cited by Interfax, February 24).

When the Russian Navy’s Chief of Staff, Admiral Vladimir Vysotskiy, publicly extolled the Mistral warships’ offensive value for attacking Georgia, Paris was slightly embarrassed by that faux pas. Now, however, it is Makarov’s turn to highlight the offensive functions of this Russian-sought class of ship (along with its support functions such as naval transport or hospital facilities).

French Defense Minister Herve Morin told US Defense Secretary Robert Gates recently in Paris that the sale of Mistral-class ships would not significantly increase Russian naval capabilities. However, Makarov is the latest Russian official to contradict Morin. For his part, President Sarkozy sounded downright passionate when defending the warship sale during his recent meeting with Gates about selling these warships to a Russia led by the presumably friendly, reform-minded president Dmitry Medvedev.

Acceptance of this notion would negate any common Allied policy on arms sales to Russia and any effective policy toward Russia as such. When Morin tried to be convincing about selling the Mistral to the Russians, Sarkozy was passionate about selling the Mistral to his friend Dmitry. Again, Sarkozy presented political and not economic considerations as he did several weeks earlier to the US Secretary of State Hillary Clinton. But what happens if “friend Dmitry” is not in office 2-3 years from now? Clinton had asked Sarkozy: “If Dmitry is no longer the president, then what?” Sarkozy gave no clear answer. Gates repeated the same question.

Americans have understood that Sarkozy is very determined and passionate (and even obsessed when it comes to Dmitry) concerning his decision. French officials ignore the fact that Estonia does not want to “disturb” Franco-Russian relations, but is only raising an issue which directly concerns its interests. Unfortunately, France does not share more detailed information, even with the US.

Source: http://www.jamestown.org/programs/edm/

Expatica: 'Privileged' ties focus of Medvedev's France visithttp://www.expatica.com/fr/news/french-rss-news/privileged-ties-focus-of-medvedevs-france-visit_26978.html

28/02/2010

Russian President Dmitry Medvedev heads to France on Monday for a three-day visit aimed at strengthening economic and political ties with one of Europe's top players.

Politics and economics will be high on the agenda as Medvedev and his host Nicolas Sarkozy kickstart a series of year-long cultural events aimed at flaunting the two nations' long-standing ties.

The two leaders will discuss Iran's nuclear programme, Russia's accession to the World Trade Organization and Medvedev's proposal for a new European security pact, Medvedev's top foreign policy aide Sergei Prikhodko said.

France and Russia, whom many critics accuse of capitalising on differences among the European Union members, will also discuss the preparation of a new partnership and cooperation agreement Moscow and Brussels have to sign after the old agreement expired in 2007.

"It's important for us to hear their opinion," Prikhodko said.

"France is one of Russia's privileged partners," the Kremlin said in a statement ahead of the visit.

Along with Germany, France is considered Russia's closest ally in Western Europe.

But unlike with Germany, Moscow's biggest trade partner, cooperation with France until recently has mostly been rooted in history and politics rather than economics, analysts say.

Fyodor Lukyanov, editor of Russia in Global Affairs magazine, said the trip was first and foremost aimed at further strengthening the privileged ties Russia has boasted with one of Europe's major players.

The adoption of the Lisbon Treaty designed to boost the European Union's global standing and its ability to speak with one voice only reinforced Russia's understanding of the need to forge closer partnerships in Europe, he said.

"Large countries like Germany and France have all the levers," Lukyanov said. "Not taking advantage of it would be strange."

Medvedev is expected to build on the success of Prime Minister Vladimir Putin's visit to Paris in November when he clinched several landmark business deals, strengthening Russia's energy clout in Europe.

During Putin's visit, French energy giant EDF signed a deal with Russia's Gazprom to join the consortium building the South Stream gas pipeline, a competitor to an EU-backed project known as Nabucco, while French automaker Renault signed a deal to help rescue its struggling Russian partner Avtovaz.

Putin's trip rattled France's EU partners in eastern Europe as French and Russian officials discussed Moscow's possible purchase of the Mistral, a French amphibious assault ship that Russian neighbours fear could be used against them.

A Russian military source said on Friday the Mistral would be discussed but no firm agreement was expected to be clinched. "Of course we'd like to buy such a helicopter carrier," the official said.

Medvedev, accompanied by some of Russia's top tycoons, including billionaires Mikhail Prokhorov, Oleg Deripaska and Viktor Vekselberg, will also meet French business people.

On Tuesday, Medvedev was set to attend a wreath-laying ceremony at the Tomb of the Unknown Soldier near the Arc de Triomphe and unveil an exhibition of Russian icons and other art dubbed "Holy Russia" at the Louvre Museum.

Ahead of the trip, the Kremlin chief played up bilateral ties in an interview with the French magazine Paris Match, speaking effusively about his first stroll along the Champs Elysees and praising French cinema that he said was close to Russia's filmmaking tradition.

Russia Today: Russia’s unilateral disarmament is out of question – Russian diplomathttp://rt.com/Politics/2010-03-01/russia-us-disarmament-kosachev.html/print

01 March, 2010, 10:52

The US prefers to avoid any legal limits in developing national missile systems, which is absolutely unacceptable for Russia, said the chairman of the State Duma Committee on International Affairs, Konstantin Kosachev.

A highly-respected Russian diplomat, Konstantin Kosachev is currently in Washington DC meeting with top US officials. He joined RT to discuss the future of the US-Russian relations.

RT: Mr. Kosachev, thank you so much for being with us. First of all, what are your thoughts on Hilary Clinton’s recent speech, in which she said that NATO must co-operate

with Russia, whether it has to do with nuclear non-proliferation or missile defense. What are your thoughts on this?

Konstantin Kosachev: We are in a very interesting period of our relations, between Russia and the United States. And there are many initiatives and proposals coming from each side, including the latest comments by Hillary Clinton. Sometimes these comments go in line with our own ideas and proposals; sometimes they contradict our vision of the current situation and our expectations about the future.

I believe that the most interesting part of it they’ve reached so far in our relations during the period Mr. Obama and Ms. Clinton is that we have established this mechanism, infrastructure for our discussion in different areas like security, trade and economy, humanitarian issues and all others. And this means that sooner or later we will be able to work out common understanding, common evaluations about, let’s say, common threats and challenges in the field of security and whether we will create a different security structure for Europe – I do not know. I believe that Europe needs it, because the current structures, NATO included, are not efficient enough. Not a single security structure in Europe – neither NATO, nor OSCE, no other organization managed to prevent the conflict in Georgia, for example, or the previous conflict in Kosovo, for example. So, we need to do it in a different way, this is number one. And we need to do it through joint efforts – this is number two. But for that we need to evaluate our problems, threats and challenges on the bilateral basis, on the multilateral basis. And this is what we’ve started to do, and hopefully, we’ll reach some final result in the nearest future.

RT: You know, US-China relations seem to be growing more and more tense, whether it has to do with trade issues, or cyber-warfare, or arms sales to Taiwan. So is the United States essentially looking to serve support to another country, perhaps, maybe Russia now more than ever?

KK: Well, we watch the current developments in relations between the States and China. And we definitely are not going to interfere, or to make comments on that. This is a clear bilateral issue for the United States and China. And I believe that is equally wrong to believe that Russia “plays games” with China in order to tease Americans, or Americans would try to play games with Russia in order to tease China. This is rather naïve, this is too much simplifying things. I believe that we all need each other. China is a real player, Russia is a real player, the European Union is a real player, and of course the United States is a real player. And we do not have many options. Either we learn how to co-operate with each other without concentrating on contradictions and problems in our relations. We have many problems in the relations between Russia and the States, as many problems as the States has with China, for example. But either we learn not to concentrate on the problems and contradictions and we make progress in the areas where our interests coincide, or we will all the time be trapped in these contradictions and problems without any sufficient result, which is completely wrong.

RT: When we look at this START treaty. What are the major sticking problems here? Because it seems like we are missing deadline after deadline. And the negotiation process

is a lot more complicated than many people anticipated it would be. Why is that and when can we expect a new treaty?

KK: Number one is quite simple: there should not be any deadlines when we have a negotiation process, because what is important is a good result of these negotiations. It’s about two serious things – it’s about national security, it’s about strategic balance and it’s about possible further possible developments for other nuclear powers to join this process at a later stage. So, these are very serious things we speak about. And the sooner the better, definitely. But in case we need more time, it is much better to spend this time on further negotiations, rather than to work out a text that will not be sustainable enough. As far as I can see, we have just a couple of problems to be solved before the final result is reached, and the major problem is of course about the linkage between a strategic offensive and strategic defensive forces, between anti-missile systems in Europe, to put it the right way – and strategic armaments.

Americans, as far as I can see, would prefer to avoid any restraints, any limits in that area. They want to develop their national and multinational missile systems without any agreements with Russia or any other country. This is absolutely unacceptable for us. We cannot imagine a situation where we can continue to disarm, continue to cut down our strategic armaments without knowing exactly, what’s going to happen in the field of anti-missile systems. So, we insist on this linkage, and we believe that this linkage should be legally written down, should be legally written down on paper in the coming agreement on strategic armaments. And this disagreement continues to exist. But I believe that they have come closer to each other and that their compromise is rather close.

RT: Speaking of the nuclear issue, it seems like Russia is getting closer and closer to the possibility of imposing sanctions on Iran. Do you have any insight into that? Why the shift?

KK: We are getting more and more concerned about what is going on in Iran with its nuclear program. We have many questions and we do not get proper answers to them from the Iranian side. And the most important thing is that the IAEA – the International Atomic Energy Agency – is getting more concerned. This is their judgment that it should be important for Russia and for the United States and for everybody else, and we speak about how to react on that with our partners. It may be sanctions. It is not excluded at all. What is excluded is the use of military force – nothing else is excluded. It may be any other measures of setting additional pressure on Iran. What is important is to show that the international community in this aspect is consolidated – that we are not separated, that we are not divided. And we have come much closer in our approaches with our partners in this group. And we hope that this is also the position of our Chinese colleagues. Because the situation is bringing more and more concerns.

RT: Is China more likely to get on board if Russia takes this step?

KK: I believe that in case they see that the international community is consolidated, they will not hesitate to join the international community. This is my personal assessment.

RT: Could we get your take on the situation in Afghanistan and US efforts over there? You said before that you think that Russia and the United States should work together on restoring the Afghan economy. Can you elaborate a bit on that?

KK: The situation in Afghanistan is getting worse and worse, and one of the basic reasons for that is that people do not have any economic and social infrastructure to live on. And this is how they are either joining the so-called resistance movement, or start to deal with narcotics [production and trafficking] inside and outside of Afghanistan. So, we need to provide an alternative, a real alternative to the civil population of Afghanistan. And for that we need to assist with the restoration of the national economy of Afghanistan. America and NATO countries who participate in this operation do not do anything about that. Just nothing. They combat Taliban, they try to solve the drug problem, but they do not provide any options. And I believe that in case that we find formats suitable for Russia for further participation like money coming from, let’s say the European Union or the United States and us, Russian companies [conducting work] inside Afghanistan, that could be a very interesting development.

RT: Any chance Russia would send forces or maybe even instructors? What Russia’s role can be if any as far as manpower goes?

KK: Any participation in the ongoing military operation in Afghanistan is absolutely excluded. It is not possible and it is not discussible. In case we send people to Afghanistan – that may take place only in terms of civil projects, in terms of restoring national economy of Afghanistan based on the agreements with the ruling Afghan authorities, definitely. And this should be a question of further consultations, negotiations. There are no decisions made. This is my theoretical assessment that it can be possible, it can be done through joint efforts of Russia and other countries who are really interested in the peace process in this country.

AFP: Russia, Georgia reopen vital border crossinghttp://www.google.com/hostednews/afp/article/ALeqM5i7w37e36-lbbdsIa3AHCuh8xfscw

By Michael Mainville (AFP) – 3 hours ago

DARIAL GORGE, Georgia — The only usable land border crossing between Georgia and Russia reopened Monday after more than three years of closure, restoring a vital route between Russia and the strategic South Caucasus.

The crossing, known as Verkhny Lars in Russia and Darial Gorge in Georgia, reopened at 7:00 am local time (0300 GMT), an AFP reporter witnessed.

The checkpoint runs through a narrow pass in the Caucasus mountains, about 170 kilometres (105 miles) from the Georgian capital Tbilisi, amid craggy snow-covered peaks.

After a brief ceremony shortly before dawn, border police sat in roadside booths waiting, but no one was on hand to cross the border.

It is the only land border crossing that does not pass through Georgia's Russian-backed rebel regions of South Ossetia and Abkhazia, which were the focus of the bitter Georgia-Russia war in 2008.

The two countries late last year reached a deal under Swiss and Armenian mediation to reopen the checkpoint.

The deputy head of the regional police, Giorgi Gegechkori, told AFP that the re-opening of the crossing was a step towards better relations with Russia, but only a small one.

"It's a small step in that direction, but what really needs to happen is for Russia to end its occupation of Georgian territory," he said after attending the opening ceremony.

The crossing will be open to citizens of countries in the ex-Soviet grouping the Commonwealth of Independent States (CIS) as long as they don't require visas for either Russia or Georgia. Georgian and Russian citizens will require visas to cross but will be unable to obtain them at the border.

Russia closed the checkpoint in July 2006 in a move Georgian officials said was motivated by tensions over Tbilisi's efforts to build closer ties with the West.

Armed conflict between the two ex-Soviet neighbours erupted in August 2008, when Russian forces poured into Georgia to repel a Georgian military attempt to retake South Ossetia.

Russia later mostly withdrew to within South Ossetia and Abkhazia, which Moscow recognised as independent states, a move so far followed by only a handful of countries.

The closing of the crossing dealt a heavy blow to Georgia's neighbour Armenia, which relied on the crossing as its only overland route to Russia, its key economic partner.

Russia also cut air links with Georgia during the war, only four months after they had resumed following an 18-month embargo. Several charter flights were allowed to operate between the two countries in January, but full air links have not yet been restored.

A new checkpoint was built on the Georgian side of the border last year with 2.4 million dollars in aid from the United States.

"This facility is equipped with new modern equipment so we will be able to effectively ensure security on the border," Gegechkori said.

RFE/RL: Georgia-Russia Border Crossing Reopened http://www.rferl.org/content/GeorgiaRussia_Border_Crossing_Reopened/1970891.html

March 01, 2010 Georgia has reopened a Caucasus mountain border crossing with Russia that has been closed for more than three years amid hostilities between the two countries.

The checkpoint at Verkhny Lars is the only land border crossing between the two countries that does not pass through Georgia's separatist, Russian-backed regions of South Ossetia and Abkhazia.

A Georgian Foreign Ministry statement said the crossing from today will be open to people, vehicles, and cargo, but visas will still be required for Russian citizens to enter Georgia. Visas will not be issued at the crossing.

Russia closed the crossing in 2006 as ties between Moscow and the pro-Western Georgian government worsened, climaxing in the brief 2008 war between Russia and Georgia over South Ossetia.

The closing of the crossing marked a blow to traders in Armenia, who relied on the crossing as an overland route to business in Russia. 

compiled from agency reports

Itar-Tass: Border checkpoint on Georgian-Russian border resumes operation

http://www.itar-tass.com/eng/level2.html?NewsID=14872962&PageNum=0

01.03.2010, 01.31

TBILISI, March 1 (Itar-Tass) - The Verkhny Lars (Russia) – Kazbegi (Georgia) customs and border checkpoint, the only one on the Georgian-Russian border, will resume operation on Monday after a more than three-year interval.

The passage of individuals, transport vehicles, cargoes and animals via the Kazbegi and Verkhny Lars will be carried out in accordance with the Georgian and Russian laws, respectively.

Representatives of the Georgian Foreign Ministry explained that no preferential treatment in border crossings would be given to Georgian or Russian nationals who live in territories adjacent to the checkpoints from both sides of the Georgian-Russian frontier.

Georgian Times: ‘Citizens of Abkhazia and South Ossetia’ to be Able to Cross Kazbegi-Zemo Larsi

http://www.geotimes.ge/index.php?m=home&newsid=20608

Russian side informs that ‘citizens of Abkhazia and South Ossetia’ will be able to cross Russian-Georgian border by passing Kazbegi-Zemo Larsi checkpoint – Ria Novosti reports.Representative of Russian Security Federal Service Aleksandr Solod names the documents the de-facto republic’s citizens will be able to cross the Georgian state border with.He explains that citizens of CIS, ‘South Ossetia and Abkhazia’ will cross the state border by international passport, service passport or diplomatic passport, seaman’s passport and certificate of returning to Russian federation. Citizens of Georgia and Russia will have to take visas in the embassy of Switzerland in Moscow. IPN 2010.03.01 12:58

Ukrainian Journal: Yanukovych to try to reopen Russian natgas deal in Moscow on March 5http://www.ukrainianjournal.com/index.php?w=article&id=10005

Journal Staff Report

KIEV, Feb. 27 – President Viktor Yanukovych will raise the issue of changing a key natural gas agreement with Russia when he travels to Moscow on March 5, a top Yanukovych aide said Saturday.

Yanukovych, inaugurated on Thursday, on Monday will make his first foreign visit to Brussels that will be followed by the trip to Moscow for talks with Russian President Dmitry Medvedev.

Kyiv Post: Presidential administration official: Ukraine not to join customs unionhttp://www.kyivpost.com/news/nation/detail/60687/

Today at 11:02 | Interfax-Ukraine

First deputy head of the presidential administration Iryna Akimova has said that Ukraine does not intend to join the Customs Union of Russia, Kazakhstan and Belarus in the near future.

"Since the customs union contradicts and will greatly complicate Ukraine's membership in the WTO, this matter cannot be raised today, tomorrow or the day after tomorrow, it is absolutely out of question," she said on the Inter TV channel.

At the same time, Akimova said that Ukraine will build its customs policy so as to help

other CIS countries - not members of the WTO – to join the tripartite customs union.

Washington Post: New Ukrainian president could disappoint supporters in the Kremlinhttp://www.washingtonpost.com/wp-dyn/content/article/2010/02/28/AR2010022802599_pf.html

By Philip P. PanMonday, March 1, 2010; A08

MOSCOW -- The inauguration of Viktor Yanukovych as Ukraine's president was celebrated in Russian media last week as a long-sought victory for the Kremlin, which tried to put him in office five years ago, only to be thwarted by the mass protests known as the Orange Revolution.

Now that he has taken power, though, the man who had been Russia's preferred choice to govern the former Soviet republic could prove to be far less accommodating to Moscow's interests -- and more open to Washington's -- than the Kremlin would like.

Breaking with tradition, Yanukovych is scheduled to make his first official trip abroad Monday to Brussels, the seat of the European Union, instead of Moscow, which he will visit Friday. The decision follows a campaign in which he labored to shed his image as a Kremlin lackey and recast himself as a proponent of further integration with Europe as well as closer ties with Russia.

The line that Yanukovych and his advisers have used is that he will be a pro-Ukrainian president, not a pro-Russian or pro-Western one. In his inaugural address, he pledged that Ukraine would serve as a "bridge between East and West, an integral part of Europe and the former Soviet Union at the same time" and "a European state outside of any bloc."

How such rhetoric will be translated into policy, especially in Ukraine's strategically important energy sector, remains uncertain and will be the subject of close scrutiny in Yanukovych's meetings this week and in the months ahead.

Many analysts say Moscow is more likely than the West to be disappointed, if only because it wants much more from a Yanukovych presidency. In five years of bitter feuding with his predecessor, Viktor Yushchenko, the pro-West hero of the Orange Revolution, the Kremlin built up a substantial store of grievances that plunged relations between Russia and Ukraine to a low point.

Near the top of Prime Minister Vladimir Putin's agenda is greater control over Ukrainian pipelines that transport much of the natural gas that Russia sells to Europe. Other goals include scaling back Ukraine's cooperation with NATO, extending basing rights for

Russia's Black Sea fleet in the Ukrainian port of Sevastopol, and providing broader market access to Russian investors and businesses.

"I think that the elites here expect much more than Yanukovych could possibly give them," said Dmitry Oreshkin, an independent political analyst and scholar in Moscow, noting that the new president has been portrayed in Russian media as "a very pro-Russian politician."

In reality, though, Oreshkin said, Yanukovych is under pressure to broaden his political base, in Russian-speaking eastern Ukraine, by winning over voters in western Ukraine who are wary of Russia and feel more strongly about integration with Europe.

Washington and its European allies, analysts said, have more limited expectations, in part because they have looked on with frustration for five years as Yushchenko bickered with other Orange Revolution leaders and failed to deliver on the promise of the pro-democracy uprising.

"If the West was disappointed with Ukraine for the last five years, I think now it's Russia's turn," said Samuel Charap, a scholar of the region at the D.C.-based Center for American Progress. "If you believe the Russian press, they arrived with a wish list . . . and I don't think they'll get everything."

Charap said Washington's goals will be modest in comparison. U.S. and European officials will urge Yanukovych to continue cooperation with NATO and adopt legislation authorizing joint exercises, he said. They will also push for economic measures that would unlock a suspended emergency loan from the International Monetary Fund.

But the Obama administration is also expected to continue pressing Ukraine to clean up its corrupt energy sector, which is considered a source of political instability and was singled out as a priority by Vice President Biden in his visit last summer. The business interests that backed Yanukovych, however, make significant progress on that front unlikely, analysts say.

Mikhail Gonchar, director of energy programs at the Ukraine-based Nomos Center, said a key early test will be the fate of proposed legislation to bring regulation of Ukraine's domestic gas market to European standards. Another will be whether Yanukovych can put off a Russian proposal for an international consortium to upgrade and manage Ukraine's gas pipelines -- a plan that makes little financial sense for Ukraine, Gonchar said.

He added that Yanukovych is considering Russian proposals to establish partnerships in uranium and nuclear fuel production that would push out the U.S.-based atomic giant Westinghouse. "He's under a high level of pressure from the Russian side in the energy sector," Gonchar said. "It's a serious challenge."

Irina Kobrinskaya, a scholar at the Institute of World Economy and International Relations in Moscow, said she expected "tough bargaining" on energy issues but an easing of bilateral tensions because Yanukovych will drop his predecessor's efforts to appeal to Ukrainian nationalism by rewriting history and taking "ideologically anti-Russian steps."

While the Kremlin endorsed Yanukovych five years ago and sent political operatives to help his campaign, it hedged its bets in the recently concluded race by signaling its willingness to work with Yanukovych's chief opponent, Prime Minister Yulia Tymoshenko, who lost by 3.5 percentage points.

Putin had praised her handling of a gas contract and said Russia was staying neutral because it had been let down by candidates in the past -- a remark widely read as an expression of disappointment in Yanukovych's ability to deliver for Moscow while serving as prime minister from August 2006 to the end of 2007.

How that snub will affect Yanukovych's view of Russia is complicated by the fact he still presides over a divided government, with Tymoshenko refusing his demand to resign as prime minister. To oust her, he will need to win over lawmakers in her coalition or call early parliamentary elections, and thus continue reaching out to western Ukraine.

Ivan Lozowy, president of the Institute of Statehood and Democracy in Kiev, warned that Yanukovych might also make an autocratic bid to consolidate power that triggers a confrontation with Ukrainian society. A similar authoritarian turn in the early 2000s alienated the West and strengthened Russia's influence in Ukraine.

Still, Lozowy said, Yanukovych is unlikely to embrace Russia immediately because the powerful businessmen who support him are more interested in Western markets -- and wary of Russian competition -- than they were five years ago. "Europe is what's exciting for them now," he said. "I don't expect Ukraine to be throwing itself into the Russian bear hug."

Georgian Daily: Adriatic Watch: a Must for the European Commission

http://georgiandaily.com/index.php?option=com_content&task=view&id=17376&Itemid=132

February 28, 2010

Vladimir Socor 

Croatian Prime Minister, Jadranka Kosor, is expected in Moscow on March 2 for her first official visit (HINA, February 24). Kosor’s talks with the Russian Prime Minister Vladimir Putin and Kremlin-connected energy companies may yield a breakthrough into Croatia’s energy sector. 

Such a breakthrough could interfere with, or even block, the Adriatic lifeline for non-Russian energy supplies into Central Europe. By cutting off this alternative route, Russia could cement its dominance or monopoly on energy supplies in several countries in that region.

Croatia is the under-utilized and unheralded, yet potentially major energy transit route from the Adriatic coast into Europe. Such a contribution to European energy security should dovetail with Croatia’s far-advanced candidacy for membership in the European Union. However, Russia seeks to nip Croatia’s transit role in the bud, offering deceptive advantages in the short term that could permanently implant Russian companies in Croatia’s energy system. This move would preclude Croatia’s long-term development into a major international transit route.

Thus far, this country has been largely free of a Russian presence in its energy sector. The small energy market of Croatia can hardly interest Russia’s oil and gas giants from a business perspective. Croatia’s location on the Adriatic coast is what interests the Kremlin. If Russian state-linked companies acquire stakes in the Croatian energy transportation infrastructure, they could cut off or restrict non-Russian oil and gas deliveries from the Mediterranean via the Adriatic and Croatia into continental Europe. In that case, several Central European and Balkan countries would lose this chance to diversify their energy import options away from overdependence on Russia. This could then open the way for Russian expansion into those countries’ energy systems.

The political atmosphere, recently orchestrated in the Croatian media and internal debates, can facilitate Russia’s breakthrough into the country’s energy system. This is being fed by unrealistic expectations of a Russian energy bonanza to Croatia, prevailing over more realistic assessments (Vjesnik, Jutarnji List, Poslovni Dnevnik, Novi List, February 17 – 24).

Unlike its continental neighbors in Central Europe, Croatia is suddenly facing this problem, often without the benefit of acquired experience or detailed knowledge of issues involving Russia and European energy security. The popular head of state Stjepan Mesic, who completed his final term of office in January, has lent his aura to the propaganda line that Croatia “missed great opportunities” by not inviting Gazprom and Russian oil companies into the country under the previous government (EDM, December 18, 2009, January 14).

In parallel, Croatian media and some interest groups are being fed unsubstantiated allegations of malfeasance (or simply demands for contract revision) against the Hungarian privately owned MOL company, the dominant stakeholder in Croatia’s INA oil and gas company. MOL’s INA holdings are regarded as a major obstacle to the expansion of Russian energy companies into Croatia. After MOL had successfully defended itself against Russian takeover attempts in Hungary, Russian interests are attempting to undermine MOL’s position in Croatia, as a local backdrop to Kosor’s visit to Moscow.

The Kremlin would like Kosor to open the gates for Russian energy companies to expand their business to the Adriatic. According to Gazprom Vice-President Aleksandr Medvedev in a recent interview, “Gazprom is interested in arriving at the Adriatic coast” (Southeastern European Times, January 10). Gazprom seeks to reach the coast, if only virtually, through an extension of the planned South Stream pipeline. The main goal is not necessarily to build a pipeline extension, but to create rivalry against the liquefied natural gas (LNG) project on Croatia’s Adriatic coast, intended to supply Central European countries. Pipeline-delivered gas and LNG, however, can hardly coexist in the same market or along the same route inland. Gazprom’s “arrival to the Adriatic coast” would inhibit international investment in the LNG Adria project. In Croatia, just as in the Nabucco countries, South Stream is being deployed not as a supply project in a real sense, but rather as an anti-diversification project.

Toward that goal, Putin has personally offered in recent months to build a branch-off line to Croatia from the planned South Stream. The branch-off is a suboptimal solution, placing the recipient country (Croatia in this case) at the tail end of the supply link, and turning it into an ordinary importer, rather than a transit country (an option that Moscow is now also offering to Romania). Thus, Croatia would forfeit transit revenues, bargaining leverage, and other benefits accruing to transit country, in the implausible event of South Stream materializing. The only realistically possible outcome would be a halt to the Adria LNG project.

In Croatia’s oil sector, Russian oil companies would like to acquire a stake in the Adriatic Oil Pipeline (JANAF), which runs from the port of Omisalj across Croatia’s territory to northern Hungary. This line’s traditional function is to carry Middle Eastern oil to markets in Central Europe. The Russian government has long sought to reverse the pipeline’s flow, so as to use it for Russian oil exports via the Adriatic Sea. Toward that end, Moscow wants to connect the Druzhba oil pipeline with the JANAF pipeline (Druzhba-Adria integration proposal). Such a reversal could cut off Central Europe from alternative supply options, leaving that region more heavily dependent on Russian oil from the Druzhba pipeline.

Moscow has succeeded in reversing the flow of Ukraine’s Odessa-Brody pipeline, which is being used in reverse to carry Russian oil for export via the Black Sea, instead of the original function to carry non-Russian oil into Ukraine and Poland.

Source: http://www.jamestown.org/programs/edm/

RIA: Kazakh prime minister to visit Moscow March 3http://en.rian.ru/exsoviet/20100228/158043226.html

19:2928/02/2010

Russian Prime Minister Vladimir Putin and his Kazakh counterpart Karim Masimov agreed Sunday by phone that Masimov will visit the Russian capital on March 3, the Russian government said.

"Putin and Masimov agreed to hold the Kazakh premier's working visit to Moscow on Wednesday, March 3," the government press service said.

"The heads of government discussed current issues of trade and economic relations, as well as formation of the customs union of Russia, Kazakhstan and Belarus," it said.

Kazakhstan is Russia's third main trade partner after Ukraine and Belarus, with the trade turnover between the two states estimated at $13 billion in 2009.

In June 2009, the Russian, Kazakh and Belarusian prime ministers notified the World Trade Organization of their intention to join the world trade club as a customs union.

In October 2009, the three ex-Soviet republics announced they would hold talks on WTO accession separately, but on synchronized positions.

Russia and Kazakhstan actively cooperate in the space, nuclear, transport, innovation, energy and military spheres.

MOSCOW, February 28 (RIA Novosti)

Gazeta.kz: Prime Ministers of Kazakhstan and Russia to hold negotiations in Moscowhttp://engnews.gazeta.kz/art.asp?aid=141900

13:45 01.03.2010 text: "Kazakhstan Today"

Astana. March 1. Kazakhstan Today - The Prime Minister of Kazakhstan, Karim Masimov, and the Prime Minister of Russia, Vladimir Putin, will hold negotiations in Moscow on Wednesday, the agency reports citing the prime minister's press service.

According to the press service, K. Masimov's telephone conversation with V. Putin took place on February 28. "The interlocutors discussed the conditions and prospects of further development of bilateral trade and economic cooperation and the questions of formation of the Customs Union of Kazakhstan, Russia and Belarus."

According to the press service, "during the talk, the officials reached an arrangement on carrying out on March 3, 2010 of the working meeting of the Prime Minister of Kazakhstan, K. Masimov, with the Prime Minister of the Russian Federation, V. Putin in Moscow."

Kyiv Post: Russia, Belarus, Kazakhstan agreed upon Customs Code texthttp://www.kyivpost.com/news/russia/detail/60677/

Today at 10:11 | Interfax-Ukraine

Moscow, March 1 (Interfax) - The Commission of the Russian-Kazakh-Belarusian Customs Union has agreed upon the text of the Customs Code, Russian First Deputy Prime Minister Igor Shuvalov said.

"We held the 14th session of the Customs Union Commission today to discuss the most complicated issues for which we have been preparing for several weeks, including the transferring of money the countries gain from levying import duties on their territories to their national bank accounts in a certain proportion. We have also finally agreed upon the text of the Customs Code and determined the way we should work to draw up agreements on setting up a common economic area," the Russian government press service quoted Shuvalov as saying following the session.

The signatories to the Customs Union determined basic principles on which money is to be transferred on foreign payments a year ago, Shuvalov said. "We made our calculations based on the exemptions that each country has, including up to 400 positions in Kazakhstan. Today we completed settling these principles, which are now stipulated by the Customs Union Commission's decisions," he said.

The finance ministries have been tasked with making the final calculations in order "to determine the share, and this share will be stipulated by an international agreement to be submitted to the chiefs of state and government," he said.

The parties also agreed upon the procedure for transferring the money to the national bank accounts, Shuvalov said. "The national banks were involved in this work, and we believe this issue has been fully settled," he said.

The parties have also agreed on the work of expert groups drawing up international agreements on forming a common economic area, he said.

"This is a difficult and painstaking work. We should basically finish this work by the summer of 2010, as regards the conceptual basis of these agreements. The most important agreements should be adopted in 2010 and the rest in 2011. I would like to remind you that, in line with the instructions given by the presidents of the three countries, the common economic area should be set up by January 1, 2012," Shuvalov said.

RFE/RL: Russian Courts Ordered To Respect Strasbourg Rulings http://www.rferl.org/content/Russian_Courts_Ordered_To_Respect_Strasbourg_Rulings/1970630.html

February 28, 2010

MOSCOW -- Russia's Constitutional Court has issued a resolution declaring that rulings by the European Court of Human Rights in Strasbourg must serve as a basis for appeals on rulings passed by Russian courts, RFE/RL's Russian Service reports.

The review of the parts of the Russian Constitution pertaining to civil cases was made in response to three cases brought to the Strasbourg court by Russian citizens. In all three cases, the Strasbourg court concluded that, according to Article 6 of the international Convention on the Protection of Human Rights and Basic Freedoms, the plaintiffs' rights had been violated by Russian courts.

Following the findings of the Strasbourg court, the plaintiffs lodged appeals in Russian courts which were rejected on the grounds that there is no mention of the jurisdiction of rulings by the human rights court in the Russian Constitution.

The plaintiffs then turned to the Constitutional Court, which issued its resolution on Friday.

Retired Constitutional Court Judge Tamara Morshchakova told RFE/RL that the Constitutional Court's decision will have to be reinforced by the country's Supreme Court.

"I think our judges are very timid and in all cases act on their own initiative as little as possible," she said. "This is especially true in cases when a national court has already delivered a ruling which has come into force. And now they are supposed to review such decisions! In the Russian legal system this is impossible without a direct order from Russia's Supreme Court."

Feb. 28, 2010, 1:00 p.m. EST

Market Watch: Kinross Appointed to Russian Government Advisory Council on Foreign Investmenthttp://www.marketwatch.com/story/kinross-appointed-to-russian-government-advisory-council-on-foreign-investment-2010-02-28?reflink=MW_news_stmp

TORONTO, ONTARIO, Feb 28, 2010 (MARKETWIRE via COMTEX) -- The Ministry of Economic Development of the Russian Federation has announced the appointment of Kinross to Russia's Foreign Investment Advisory Council (FIAC).

FIAC was established in 1994 to assist Russia in forging and promoting a favourable investment climate based on global expertise and the experience of international companies operating in Russia. FIAC functions on the basis of direct dialogue between the chief executives of investor companies and the Russian government, with a focus on the crucial aspects of fostering a healthy investment climate.

The council is chaired by Russian Prime Minister Vladimir Putin and includes CEOs from 42 companies. Kinross is the only Canadian company to be named to the council.

"Kinross is honoured to be inducted into FIAC, which we view as an endorsement by the Russian government of our status as a valued investor," said Mr. Burt. "By working directly with the Russian government at a high level, the Council reinforces the government's ongoing efforts to improve Russia's investment environment. We look forward to playing an active role in advancing this shared goal."

Kinross has been active in Russia since 1995. The company currently operates the Kupol gold-silver mine in the Chukotka region of Russia through the Chukotka Mining and Geological Company (CMGC), which is owned 75 per cent by Kinross and 25 per cent by the Chukotka government. Kinross is the largest Canadian investor in the Russian Federation.

About Kinross Gold Corporation

Kinross is a Canadian-based gold mining company with mines and projects in the United States, Brazil, Chile, Ecuador and Russia, and employs approximately 5,500 people worldwide.

Kinross' strategic focus is to maximize net asset value and cash flow per share through a four-point plan built on: delivering mine and financial performance; attracting and retaining the best people in the industry; achieving operating excellence through the "Kinross Way"; and delivering future value through profitable growth opportunities.

Kinross maintains listings on the Toronto Stock Exchange (symbol: K) and the New York Stock Exchange (symbol: KGC).

Itar-Tass: Putin to hold meeting on AF, air defence troops equipping

http://www.itar-tass.com/eng/level2.html?NewsID=14872952&PageNum=0

01.03.2010, 10.37

MOSCOW, March 1 (Itar-Tass) - Equipping of the Air Force and air defence troops of Russia with state-of-the-art samples of armaments and military hardware will be the main issue of a regular meeting on issues related to the development of the national defence industry complex that will be held by Russian Prime Minister Vladimir Putin on Monday.

The government’s press service reported that the meeting will be held at premises of Russia’s largest producer of combat aircraft – OKB Sukhoi Design Bureau. Taking part in the meeting will be Vice Prime Minister Sergei Ivanov who is in charge of the defence industry complex, Vice Prime Minister and Finance Minister Alexei Kudrin, heads of a

number of ministries and departments, military commanders, heads of industrial companies.

Putin is also planned to familiarise himself with the work and products of OKB Sukhoi.

Itar-Tass: Putin to chair defense sector conference at Sukhoi Design Bureau

http://www.itar-tass.com/eng/level2.html?NewsID=14871351&PageNum=0

28.02.2010, 18.11

MOSCOW, February 28 (Itar-Tass) -- The provision of Russia’s Air Force and Air Defense with new armaments and military hardware will be the main item on the agenda of a defense sector conference Prime Minister Vladimir Putin will chair on Monday, the government press office said.

The conference will take place at the Sukhoi Design Bureau, the largest producer of warplanes in Russia. Deputy Prime Minister Sergei Ivanov, Vice-Premier and Finance Minister Alexei Kudrin, several ministers, department heads, military commanders and chief executive officers of industrial companies will take part in it.

Putin will take a look at the Sukhoi Design Bureau products.

Russia retains leading positions in the construction of aircraft and the development of air defense systems despite structural and economic problems of the previous years. Assiduous efforts of the government drastically changed the situation in the delivery of modern weaponry and hardware to Russian Air Force and Air Defense units. Contracts on the delivery of 130 warplanes to the Russian armed forces were signed in 2008-2009. A total of 27 planes, more than 50 helicopters and five squads of anti-aircraft missile launchers S-400 will be acquired this year.

In all, the armed forces will receive over 1,500 new planes and helicopters and about 200 anti-aircraft missile systems within the next ten years in keeping with the state armament program. As a result, the ratio of new armaments will amount to 80% in the Air Force and 75% at the Air Defense.

The Russian defense sector has been restructured for meeting the goal. Large holdings, among them the United Aircraft Corporation (UAC), Oboronprom, Almaz-Antei and Tactical Missiles, have been formed. The government assigned over 93 billion rubles for the recovery of the aircraft building industry, and 45.5 billion rubles in state guarantees were granted for backing plants’ borrowings. Hence, the production of warplanes enlarged by 7% in 2009.

The beginning of test flights of the fifth-generation fighter jet this January became an important indicator of the condition of the aircraft building industry. The new jet was developed at the Sukhoi Design Bureau. Experts say that the aircraft has high mobility, stealth and survivability and intellectual systems. It is supposed to become the main frontline aircraft of the Russian Air Force and to give an impetus to the Russian aircraft building industry at large.

Sukhoi warplanes amount to a substantial part of Russian defense exports.

The Sukhoi Holding, which incorporated the Sukhoi Design Bureau in 2003, is actively modernizing its plants in Komsomolsk-on-Amur and Novosibirsk, introducing modern management techniques and full-cycle projects, from research and development to post-sale support.

RBC: Gov't to decide on additional funds for Russian Railways

http://www.rbcnews.com/free/20100301105701.shtml

      RBC, 01.03.2010, Sochi 10:57:01.The decision on the allocation of additional funds to Russian Railways is to be passed during the drafting of the federal budget for 2011-2013, Deputy Prime Minister and Finance Minister Alexei Kudrin announced at a press conference in Sochi.

      As reported earlier, the company estimates its need for additional investment at RUB 400bn (approx. USD 13.36bn) in the period up until 2015.

      Kudrin explained that the government was not yet ready to announce its final decision on the matter. He also indicated that Russian Prime Minister Vladimir Putin had commissioned all concerned government bodies to analyze the timeframe of the implementation of the federal target program on the development of Russia's transportation system. According to Kudrin, the funds allocated to the railway system development projects had only been reduced slightly.

RSS: Russian Railways Announce Details Of Massive Investment For Infrastructure

http://www.handyshippingguide.com/shipping-news/russian-railways-announce-details-of-massive-investment-for-infrastructure_1366

01 March 2010

RUSSIA – Following on from last week's announcements on the rail and intermodal projects that are to receive TIGER funding from the U.S. government the Russian rail operator, RZD, has given its figures for intended investment over the next year in the national rail infrastructure.

At a meeting held in Sochi on Saturday, and chaired by Prime Minister Vladimir Putin, RZD President Vladimir Yakunin laid out details for the company’s plans for their 2010 - 2011 investment budget of 555 billion rubles (18.5 billion dollars / 12.14 billion pounds).

The money will largely be spent on upgrading and maintenance, with major repairs and reconstruction work to be carried out on more than 20,000 kilometers of track, with 3,200 kms to be totally reconstructed. In additional some 72 billion rubles (2.4 billion dollars) will be used to buy new rolling stock.

To give an idea of the scale of the proposed investment the American TIGER programme, which was spread across rail, road and port investments, as well as passenger transport projects, was for the much lower total of $1.5 billion.

RZD has already announced ambitious plans, its ‘2030 programme’, that it hopes will make rail freight transit via Russia a highly viable alternative to ocean freight on the Asia – European trade routes. The company states that by 2012 a freight container will be able to transit the entire width of the country in seven days which, as further improvements to the rail network come online, are expected to massively increase the amount of freight haulage that RZD undertakes.

AFP: Iran agrees to give Russia wild leopardshttp://news.yahoo.com/s/afp/20100228/wl_mideast_afp/oly2014rusrussiairanenvironment

Sun Feb 28, 4:49 pm ET

MOSCOW (AFP) – Iran has promised to donate two wild leopards to Russia, officials said Sunday, bringing closer the aim of settling the rare animals near the 2014 Winter Olympics host city of Sochi.

The reintroduction of the Persian leopard -- extinct in Russia's Caucasus region since the start of the last century -- is being championed by Prime Minister Vladimir Putin ahead of the games.

"There is an agreement with the government of Iran... Initially two female (leopards) will be given. They will be delivered in the spring," the head of the Sochi National Park, Nikolai Penkovsky, told the Interfax news agency

The inititaive to reintroduce the leopard is part of a drive to promote the mountainous region around Sochi, marking the western edge of the Caucasus mountains, as an area of natural beauty and diversity.

The agreement with Iran follows a visit to Tehran by Russian Natural Resources Minister Yury Trutnev for talks with the head of the Iranian environmental protection agency, Mohammad Javad Mohammadizadeh.

Iran's ISNA news agency also said the meeting had secured a pledge from Iran to give two leopards to Russia.

Turkmenistan has already given Russia two male leopards which are being held in a reserve outside Sochi.

Penkovsky said that for the reintroduction programme to have an effect, three females and three males would be required.

Many environmentalists have bitterly criticised plans for the 2014 Games, for which much infrastructure for the ski events has to be built from scratch.

The Russian branch of WWF this month accused the government of inflicting "huge damage" on the environment and said its future cooperation with the project was now in question.

Iran is one of the last holdouts of the leopards, commonly known as the Persian leopard, although there are smaller populations in Armenia, Georgia and Turkmenistan.

Russia has a severely endangered population of Amur leopards in its Far East region but it is a different sub species to the Persian leopard.

Despite his reputation as a tough-guy policymaker, Putin has been happy to display a soft spot for animals and personally welcomed the two Turkmen leopards in Sochi.

Itar-Tass: Tehran to carry on peaceful atomic energy activity – supreme leader

http://www.itar-tass.com/eng/level2.html?NewsID=14871350&PageNum=0

28.02.2010, 18.21

MOSCOW, February 28 (Itar-Tass) -- Iran will carry on peaceful atomic energy activity no matter what, Iranian Supreme leader Ayatollah Ali Hoseini-Khamenei told Foreign Ministry staff members on Sunday.

“Despite the pressure the Islamic Republic is experiencing, it has achieved impressive results in nuclear research. The research will continue regardless the slanderous speculations started by certain countries, among them the United States, the United Kingdom and the Zionist regime. The research will continue as long as it takes Iran to achieve complete and scientific self-sufficiency,” Khamenei said.

He criticized the International Atomic Energy Agency (IAEA), which condemned Iran last November for building a new nuclear site in Qum and recently expressed doubts about the peaceful nature of the Iranian atomic program.

“Some latest steps and reports of the Agency show that this international organization has a deficit of independence,” the Iranian supreme leader said. “The IAEA should not yield to the influence of the United States and some other countries, as this yielding does not add authority to the agency.”

The uranium enrichment in Iran causes serious concern about the actual target of the Iranian nuclear program, Russia, the United States and France said in a joint letter to Amano on February 16.

The letter criticized the Iranian production of higher enriched uranium.

Iranian Foreign Minister Manuchehr Mottaki said Tehran knew about the letter but noted that the letter did not contain any new proposals.

Russia will have a measured attitude to possible sanctions against Iran as long as the latter cooperates with the IAEA, Chairman of the Federation Council International Affairs Committee Mikhail Margelov told Itar-Tass on the same day.

“As long as Iran cooperates with the IAEA, our policy will be measured and cautious. I do not believe in the efficiency of sanctions. They do not work, as a rule,” Margelov said.

“The Russian stance is rather precise and clear. Being an Iranian neighbor, we want the Iranian nuclear program to be exclusively peaceful and strictly controlled by the IAEA. Not a single responsible politician in Russia is interested in the Iranian development of a bomb,” he said.

Iran is still ready for nuclear fuel exchange, President Mahmoud Ahmadinejad told a February 16 press conference in Tehran.

“This is not a closed subject and we are ready for the exchange, even with the United States,” the president said.

The consultations go on, he remarked.

“We did not plan higher enriched uranium production because that was not expedient. However, our partners did not show goodwill and we had to tell them that we would have to produce the fuel ourselves,” he said. “The situation will change with the delivery of fuel,” he added.

The sides developed a general formula of nuclear fuel delivery for the Tehran research reactor producing medical isotopes. The sextet proposed to higher enrich Iranian uranium in Russia and to make fuel assemblies in France. Iran expressed its basic consent at first but then insisted on exchanging its uranium for ready fuel. No agreement was reached, and Iran launched higher enriched uranium production.

Higher enriched uranium production started in Natanz a week before to the president’s order. The 20% uranium is being manufactured for the Tehran research reactor, a maker of medical isotopes.

The decision of Iran to start higher-enriched uranium production disappointed Russia, which was traditionally reserved about proposed sanctions.

“The Iranian decision to start higher-enriched uranium production not only disagrees with resolutions of the UN Security Council and the IAEA Board of Governors but also deepens doubts about the Iranian sincere wish to lift the remaining international concerns about its nuclear program,” Foreign Ministry spokesman Andrei Nesterenko said.

“Definitely, we are disappointed with the Iran step, which did not allow diplomats to agree on mutually acceptable ways of the fulfillment of the IAEA proposal of higher-enriched uranium fuel production for the Tehran research reactor outside Iran,” he said. “We are confident that further discussion of possible ways of the fulfillment of that project would have yielded results within a short time and become a major step towards the restoration of confidence in the exclusively peaceful atomic program of Iran and an appropriate atmosphere for the dialog.”

Russia does not rule out the drafting of a new UN Security Council resolution enacting sanctions against Iran, Nesterenko said.

“There is no work on the possible new sanctions against Iran now, but we cannot rule it out under the current circumstances,” he said.

“Russia is adherent to the two-track policy in settling the situation around the Iranian nuclear program. That implies efforts of the sextet (five permanent members of the UN Security Council and Germany) on negotiations with Tehran and sanctions if Iran does not act constructively,” he said.

“Russia is searching for additional options in the implementation of the October 1 agreements reached between Iranian representatives and the sextet political directors in Geneva,” Nesterenko said.

Russian Foreign Minister Sergei Lavrov said that Moscow opposed sanctions that might be harmful for the country but did not rule out the UN Security Council measures due to the Iranian unwillingness of closer cooperation with the IAEA. “We are absolutely positive that sanctions per se can hardly bring desirable results. If such a proposal is made at the UN Security Council, we will scrutinize it very carefully,” the minister said.

“Russia has no doubts that Iran shares the same rights with other non-nuclear members of the Nuclear Non-Proliferation Treaty, including the right to enrich uranium. However, Iran must comply with related commitments in order to use this right freely. In this case, it is necessary to answer all the remaining questions to the IAEA satisfaction,” Lavrov said.

“As no progress has been made and the Iranian administration has not responded to the constructive compromises, including the offer to supply fuel to the Tehran research reactor, I do not rule out that the UN Security Council may have to review the situation once again,” he said.

The UN Security Council has already applied sanctions to Iran in support of the IAEA requirements, Lavrov remarked.

The scale of possible sanctions on Iran will not be discussed at the Monday negotiations of Russian President Dmitry Medvedev and his French counterpart Nicolas Sarkozy, a high-ranking diplomat said on Friday.

“It would be premature to discuss the scale of possible sanctions,” he noted.

“The Russian president emphasized his readiness for cooperation with the sextet in New York last September. He also noted that sanctions were inevitable under certain circumstances, and the Russian readiness for joint work was important,” the diplomat said.

“I do not think that the presidents will have time to go into details [at the Paris meeting],” he said. “Possibly, they will discuss Russia-France interaction at the sextet and the United Nations at large. The leaders will compare their positions. In fact, there are no large disagreements between Russia and France.”

Telegraph: US steps up diplomatic pressure on Russia over Iran sanctions http://www.telegraph.co.uk/news/worldnews/middleeast/iran/7338680/US-steps-up-diplomatic-pressure-on-Russia-over-Iran-sanctions.html

The US and its western allies have stepped up a behind-the-scenes campaign to persuade Russia to back tough United Nations sanctions against Iran.

By Adrian Blomfield and Andrew Osborn in Moscow Published: 5:43PM GMT 28 Feb 2010

Amid fears that Moscow remains intent on weakening a planned Security Council resolution punishing Tehran for its nuclear programme, western diplomats are seeking to convince Russia to support much more robust measures.

They hope the West's case for robust action will be strengthened on Monday when the International Atomic Energy Agency (IAEA), the UN's nuclear watchdog, meets in Vienna to discuss a damning new report on Iran's atomic intentions.

According to the report, written by Yukiya Amano, the IAEA's tough-talking new chairman, Iran may be hiding "undisclosed activities related to the development of a nuclear payload for a missile".

The agency's findings are likely to pave the way for a Security Council resolution proposing a fourth round of sanctions on Iran.

Russia, along with China, ensured that the three previous rounds were considerably watered down. But in recent weeks, Moscow's patience with its long-standing ally appears to have evaporated and Russian officials have grudgingly talked of their support for some kind of sanctions.

Vladimir Chizhov, Russia's envoy to the European Union, conceded that dialogue with Iran was no longer working. "This prompts Moscow to think about options for sanctions."

Even so, diplomats privately say they expect Russia's cooperation to be, at best, limited.

In order to ratchet up the pressure on Iran's leadership, the United States, Britain, France and Israel are understood to back sanctions that would target Iran's central bank and financial sector, its main shipping and transportation companies and assets controlled by the country's powerful Revolutionary Guard.

But Russia favours a much more limited scope to sanctions, insisting that they should be narrowly targeted on individuals and companies directly involved in Iran's nuclear programme.

Diplomats concede that persuading Russia to change its position will be tough.

"Anything to do with proliferation we estimate the Russians will be cooperative," one said. "But when it comes to energy or arms, a whole different set of considerations comes into play."

Russia and China, both veto-wielding members of the Security Council, benefitted commercially from the previous rounds of sanctions. Russia sold Iran arms, China signed valuable energy deals and neither will surrender lucrative contracts easily.

Yet Western officials are still confident that they can win Russia over. Diplomats have made a number of discreet missions to Moscow to make power-point demonstrations, a source said.

Seeking to undermine those efforts, Iran on Sunday presented Russia with two rare Persian leopards -- a gift personally solicited by Vladimir Putin, the Russian prime minister.

Persuading China, however, could well be a mission to far, according to one diplomatic source: "It's not very encouraging," he said. "We don't have much leverage."

Worryingly for the West, the number of sanctions naysayers seems to be growing.

This week, Hillary Clinton, the US secretary of state, will visit Brazil in an attempt to persuade its president, Luiz Inacio Lula da Silva, to end his increasingly cosy relationship with Iran.

Brazil is also pursuing commercial deals that the West says could allow Iranian banks that fund Tehran's nuclear programme to avoid sanctions.

Novinite: Russia Eyes "At Least 50%" in Bulgaria Belene Nuclear Projecthttp://www.novinite.com/view_news.php?id=113701

Energy | March 1, 2010, Monday

Russia will insist that it holds at least a 50% stake in the planned 2,000 megawatt Belene nuclear plant on the Danube River in Bulgaria in exchange for a EUR 1,9 B loan, according to reports.

Rosatom, which controls Atomstroyexport contracted by Sofia to build Belene, claims that this would account for half of the agreement signed in 2008 worth EUR 4 B, Pari daily reported, citing sources close to the company, who spoke on condition of anonymity.

According to the Russian side the shares will make up for the lack of state or corporate guarantees that Bulgaria refused to give, the report says.

It adds that the assessment of the exact percentage of shares will be conducted by a third party.

Russia proposed last month to extend funding to Bulgaria for the construction of the stalled project until Sofia finds a strategic investor, even without corporate or state guarantees.

According to Bulgarian Energy and Economy Minister Traicho Traikov in exchange for the offer the Russian side can hold no more than 15-20% of the plant, while the remainder of the loan will be paid through electricity sales.

The minister confirmed that the government has abandoned plans to cut its shares from 51% to 20-30% and will aim to keep a 50% stake in the multi-billion nuclear project, which has stalled over lack of funding.

During their recent visit to Sofia, Russian Energy Minister Sergei Shmatko and Sergei Kiriyenko, head of the Rosatom state nuclear corporation, announced that Rosatom was ready to extend a loan and become a shareholder in Belene plant.

Meanwhile Bulgaria's new center-right government, which has put the Belene under review due to rising costs, announced a tender for a new consultant after German utility RWE walked out of the project due to funding problems and Sofia decided to redesign it to attract new investors.

AP: Russian Authorities Block Anti-Police Rally in Moscowhttp://www.foxnews.com/story/0,2933,587621,00.html

Sunday, February 28, 2010

MOSCOW —  An opposition leader says he and seven other activists were detained to prevent them from holding an anti-police rally in central Moscow.

Roman Dobrokhodov says police detained them as they gathered near the rally site. He spoke to The Associated Press by cell phone from a police station.

The Moscow police press office, however, denied anyone had been detained.

The detentions were reported by opposition Web site Kasparov.ru.

Police blocked off the square where the activists were to rally Sunday to demand an overhaul of Russia's notoriously corrupt police force. They also planned to give instructions on resisting arrest during protests.

Russian police often break up protests, which activists claim violates the constitutional right to assembly.

Reuters: Russians to Protest ‘Dictatorship’ of Putin’s Party on March 20http://www.businessweek.com/news/2010-02-27/russians-to-protest-dictatorship-of-putin-s-party-on-march-20.html

February 27, 2010, 9:22 AM EST

By Anastasia Ustinova

Feb. 27 (Bloomberg) -- Russian opposition activists plan a 15,000-strong rally in the western exclave of Kaliningrad on March 20 to protest the “dictatorship” of Prime Minister Vladimir Putin’s party and the worsening economic situation.

Thousands poured into the streets of Kaliningrad on Jan. 30 to vent their anger over the rising cost of living and tax increases in a region that has the highest wage arrears in the country and above-average unemployment. Organizers claimed 10,000 people showed up, though police put the number at 7,000.

“Our last demonstration didn’t yield much in the way of results,” Oleg Nikiforov, a member of Spravedlivost, or Justice, an organizer of the protest, said by telephone from Kaliningrad today. “We got a lot of promises, but nothing was done to change the situation. Many people

have fallen below the poverty line and they’re running out of patience.”

Gross domestic product of the world’s biggest energy producer contracted a record 7.9 percent last year and the government posted its first budget deficit in a decade. Fifteen percent of Russians were living below the poverty line in the second quarter of last year, when the average per-capita subsistence level was 5,187 rubles ($173) a month, according to the Federal Statistics Service.

First Deputy Prime Minister Igor Shuvalov warned on Feb. 4 that social unrest could impede the government’s anti-crisis plans to reform the economy. President Dmitry Medvedev and Putin have repeatedly said that social stability is one of the government’s main priorities.

Activists plan to call for the resignation of Kaliningrad Governor Georgy Boos, a senior official in Putin’s United Russia party. They’re calling on Putin to lower taxes, restore direct gubernatorial elections and fire Boos, according to a resolution published on regional Web site Rugrad.eu.

--Editor: Patrick G. Henry

To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@bloomberg.net.

To contact the editor responsible for this story: Hellmuth Tromm in Berlin at htromm@bloomberg.net

Bloomberg; Russia Busts Crime Ring That Police Say Laundered $1.6 Billionhttp://www.businessweek.com/news/2010-03-01/russia-busts-crime-ring-that-police-say-laundered-1-6-billion.html

March 01, 2010, 2:22 AM EST

By Maria Levitov

March 1 (Bloomberg) -- Russian investigators busted a crime ring that laundered more than $1.6 billion since 2007 for companies and individuals in and around Moscow, the Interior Ministry’s economic crimes department said.

The group charged a fee of between 1 percent and 7 percent to legalize ill-gotten gains through three commercial banks and 79 domestic and foreign firms, the ministry said in a faxed statement today. More than 150 officials were involved in the investigation.

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net

March 01, 2010 11:00

Interfax: Intl “washing machine” crushed after laundering over $1.5 Bln -Interior Ministry (Part 2)http://www.interfax.com/newsinf.asp?id=149269

MOSCOW. March 1 (Interfax) - The Interior Ministry's Department for Economic Security and Investigation Committee have exposed an international criminal group, which had been engaged in illicit bank transactions since 2007, the department said in a statement.

The group "has laundered over 30 billion rubles, 440 million dollars and 123 million euros," the statement says.

"A criminal case has been started against the organizers of the criminal group on charges of conducting illegal banking operations and money laundering, stipulated in articles 172 and 174 of the Criminal Code," it says.

The criminal group would open bank accounts for fly-by-night firms, provide cash services to private and corporate investors, run settlement operations at legal entities' request and buy and sell foreign currency, according to the statement.

"The criminal schemes involved three commercial banks, and 72 Russian and seven foreign organizations. The group levied 1% to 7% from cash transfers for the services provided," the department said.

Over 240 seals of fly-by-night firms, including non-resident companies, financial documents which provide evidence of the illegal transactions, and 36 million rubles in cash have been seized in searches conducted at banks and offices and in the suspects' homes.

"The bank accounts of the fly-by-night firms involved, with 72 million rubles in them, have been frozen," according to the press service.

Criminal charges have been brought against three members of the group. Two of them have been arrested and travel restrictions have been imposed on the third.

The investigation is continuing.

sd dp

RIA: Russian investigators rule out murder of Trans Nafta top managerhttp://en.rian.ru/russia/20100228/158042641.html

17:2728/02/2010

Investigators rule out that the top manager of a Russian oil and gas company whose body

was found Saturday in Moscow had been killed, the top Moscow investigator said Sunday.

"There is no fact of murder. A check is underway, all circumstances of what happened are being clarified," Anatoly Bagmet said.

Vladimir Kondrachuk, the board chairman of Trans Nafta, was found dead with a gunshot wound in his company's office in the center of the Russian capital Saturday night.

A police source said Saturday that Kondrachuk had most likely committed suicide.

At the turn of the centuries Trans Nafta supplied oil as part of Russia's federal programs and was Russian energy giant Gazprom's oil and gas condensate export operator.

Kondrachuk was a deputy governor of the Novgorod Region in 2004-2007. According to financial magazine Finans, Kondrachuk's fortune was $35 million in 2006.

MOSCOW, February 28 (RIA Novosti)

RIA: Grenades launched at south Russia freight trainhttp://en.rian.ru/russia/20100301/158047733.html

09:0301/03/2010

Unknown assailants launched grenades at a freight train in Russia's volatile North Caucasus republic of Ingushetia, a police source said on Monday.

No one was hurt in the attack, which took place at the central station in Nazran, the republic's largest city, on Sunday evening.

"A carriage was damaged, and the windows of two houses next to the station blew out," the source said.

Police discovered part of the grenade launcher at the scene. The investigation will continue on Monday.

Ingushetia, part of Russia's troubled trinity of North Caucasus republics that also includes Chechnya and Dagestan, sees almost daily militant activity.

The republic also suffers high levels of crime, with Russia's general prosecutor saying on Thursday that crime was "out of control" in Ingushetia.

MOSCOW, March 1 (RIA Novosti)

RIA: Police discover arms cache in Ingushetia http://en.rian.ru/russia/20100228/158040922.html

11:4828/02/2010

Police have found an arms cache in the Republic of Ingushetia in Russia's volatile North Caucasus region, a local police spokesman said on Sunday.

The weapons cache was found on Saturday in a garage in the central district of Nazran, Ingushetia's main city. The cache included a grenade launcher, about 2,000 cartridges and six electric detonators, the police spokesman said.

Measures are under way to identify the owners of the arms cache, the spokesman said.

On Thursday, police defused three explosive devices near an Interior Ministry office in the center of Nazran. Police searched the area near the building after a shootout with militants late on Wednesday. No casualties were reported among police or attackers.

But one explosive device detonated during the search, and three local residents were taken to hospital with concussion. The blast also caused a blaze at a natural gas pipeline, which was quickly put out.

Attacks on police and authorities have been an almost daily occurrence in Ingushetia, one of Russia's poorest regions. The neighboring North Caucasus republics of Chechnya and Dagestan have also been plagued by violence blamed on Islamic militants and criminal groups.

MOSCOW, February28 (RIA Novosti)

Georgian Daily: More Attacks Reported in Ingushetia, Dagestan and Chechnya

http://georgiandaily.com/index.php?option=com_content&task=view&id=17375&Itemid=65

February 28, 2010

The Jamestown Foundation 

Russian Prosecutor-General Yuri Chaika yesterday (February 25) painted a negative picture of the security situation in the North Caucasus. 

Speaking at a meeting of prosecutors and officials of the Federal Security Service (FSB), Interior Ministry and State Narcotics Control Committee (FSKN) on the subject of crime in the North Caucasus Federal District, which was held in Essentuki, Stavropol Krai, Chaika

said that measures taken by the district authorities to normalize the situation in the region have “not produced the needed results, while law enforcement agencies’ actions do not measure up to the level of the threat that has evolved,” adding that a number of high-profile crimes have yet to be solved in Dagestan in particular and other parts of the federal district. He said that “corruption has affected virtually all levels of government, law enforcement and judiciary bodies,” adding that bribes have been growing exponentially. Chaika said that the level of crime was especially worrying against the backdrop of uncontrolled trafficking in arms and explosives, noting that in 2009, crimes involving the use of firearms grew the most in Ingushetia (92 percent) and Dagestan (65 percent) (RIA Novosti, February 25).

Still, a spokeswoman for the Prosecutor-General’s Office, Marina Gridneva, told the meeting that law-enforcement agents killed 316 militants in special operations in the North Caucasus in 2009, and that courts had given prison sentences to another 200 (ITAR-TASS, February 25).

Meanwhile, a roadside bomb went off on the Kavkaz federal highway near the village of Troitskaya in Ingushetia on February 25 after it was discovered by interior ministry internal troops. No one was hurt in the incident. On February 24, police reported finding another explosive device, along with a fake bomb and a black flag with Arabic writing on it, in the village of Ordzhonikidzevskaya in Ingushetia’s Sunzha district. That same day, unidentified attackers fired automatic rifles and grenade launchers at the building of the interior ministry operational investigations bureau in the city of Nazran. No one was hurt in the incident, after which three improvised explosive devices were found around the building. One of the devices detonated after it was discovered, sending three local residents to the hospital with concussion and causing a blaze on a natural gas pipeline that was quickly extinguished (www.kavkaz-uzel.ru, February 26; RIA Novosti, February 25).

On February 23, an FSB officer, Mikail Shadyzhev, was killed when his car was fired on in Ordzhonikidzevskaya. A Nazran resident who was with him in the car at the time of the attack, Amir Albogachiev, was wounded and hospitalized (www.newsru.com, February 23).

Source: http://www.jamestown.org/programs/edm/

On February 21, an aide to a State Duma deputy was wounded along with his driver and two relatives when their car was fired on in the village of Ekazhevo in Ingushetia’s Nazran district. The Duma aide was identified as A.M Chukhraev (www.newsru.com, February 21). On February 19, the car of the head of the registration department of Ingushetia’s road police was fired on in the village of Barsuki in Ingushetia’s Nazran district. No one was hurt in the incident (www.newsru.com, February 20).

On February 19, unidentified attackers fired on the home of Rustam Khalukhaev, a member of the anti-terrorism center of Ingushetia’s interior ministry, in Nazran. No one was hurt in that incident (www.newsru.com, February 19). That same day, two bombings in Nazran wounded 17 policemen. Ten officers were reportedly injured in the first blast, which took place as a bomb disposal expert was trying to defuse an explosive device. A second

explosion reportedly injured seven policemen (www.kavkaz-uzel.ru, February 19).

In Dagestan, police discovered an insurgent dugout near the village of Kakshura in the republic’s Karabudikhkentsky district on February 25. An anti-personnel mine went off as police were searching the dugout, but no one was hurt (www.kavkaz-uzel.ru, February 26). On February 24, the acting traffic police chief of Dagestan’s Novolaksky district, Yusup Gairbekov, was shot to death when unidentified gunmen opened fire on his car. The incident took place on the Khasavyurt-Novolakskoye highway (RIA Novosti, February 24). On February 22, two policemen, a major and a captain, were killed when their car was fired on the outskirts of the village of Bata-Yurt in Dagestan’s Khasavyurt district. That same day, a bomb blast in the city of Khasavyurt injured two passersby. On February 20, two policemen were killed and a civilian wounded in Dagestan’s Gergebilsky district when gunmen fired on a police post from a wooded area (www.kavkaz-uzel.ru, February 22).

One Russian interior ministry internal troops serviceman was wounded on February 24, while trying to defuse an improvised explosive device in the Leninsky district of the Chechen capital Grozny. According the Kavkazsky Uzel website, two bombings targeting police took place in Grozny’s Staropromyslovsky district on February 17 but were hushed up because a British delegation headed by Lord Frank Judd was visiting the republic at the time (www.kavkaz-uzel.ru, February 25).

Global Research: Destabilization: Caucasus Geopolitics Threatens Russia's Securityhttp://www.globalresearch.ca/index.php?context=va&aid=17843

By Nikolai Dimlevitch

Global Research, February 28, 2010Strategic Culture Foundation - 2010-02-27

The analysis of the situation in the Caucasus and in Transcaucasia shows that the outlook for the geopolitical entirety is going to be shaped by the key Western countries' efforts aimed at debarring Russia from the Caspian oil and gas projects.  The rivalry between various geopolitical centers of force leads to the escalation of separatism and extremism, the intensification of the activity of international terrorist groups, and the perpetuation of conflicts in the region.  The main threats to Russia's security are bred by the instability in Transcaucasia, Iraq, and, potentially, Iran.  Georgia can be expected to continue pursuing a propaganda campaign aimed at convincing the international community that the zones of conflict in the Caucasus and in Transcaucasia should be passed under the UN, the EU, and NATO control. Terrorist provocations are likely to follow and Russia will be charged with the failure to ensure the security of local populations.

 The persisting US military presence in Iraq and the buildup of its infrastructures and centers of reconnaissance and control in the country provides Washington with a broad range of operative and tactical capabilities.  Given Tehran's current model of behavior in international politics, the permanent pressure exerted by the US and the EU on Iran under the pretext of nonproliferation can trigger escalation and spread of instability over neighboring territories including the Caspian region and Transcaucasia.  A serious challenge to Russia's security is posed by the extremist groups' attempts to disseminate Muslim fundamentalist doctrines in its regions with predominantly Muslim populations. The activity is supported by the ruling circles and religious centers of Pakistan, Turkey, the Saudi Arabia, and a number of other countries.  In 2009, the threat to Russia's security in Transcaucasia stemmed from the instability generated by the Georgian aggression against South Ossetia in August, 2008. While the full-scale political settlement is still lacking, M. Saakashvili's regime is steering a course of intense militarization accompanied by aggressive rhetoric targeting Russia, South Ossetia, and Abkhazia.  Though the EU (Tagliavini's Commission) report issued on September 30, 2009 stated clearly that Georgia was responsible for the aggression and that the West's arms supplies to the country over several years preceding the conflict had had a generally destabilizing effect, several countries (the US, Ukraine, Israel, and Turkey) still plan to resume military assistance to Georgia.  In the settings of the crisis caused by the August, 2008 hostilities, the new US Administration is fostering Georgia's hostility towards Russia and the tensions in the regions of the Georgian-Abkhazian and Georgian-South Ossetian conflicts. The implementation of Washington's plans concerning Georgia would result in the deployment of US military bases and forward operating locations in the country and in the strengthening of the American influence over the North Caucasus and Transcaucasia.  Tbilisi is cultivating its partnership with the US and NATO. Currently the Pentagon is preparing a draft agreement on the construction of three US military bases in Georgia and the dispatch of up to 25,000 US servicemen to the country by 2015.  The Georgian Administration refuses to recognize the independence of South Ossetia and Abkhazia and makes political and military efforts aimed at regaining control over the breakaway territories. Georgia's foreign politics remains markedly anti-Russian and pursues the goal of forming a negative perception of Russia by the international community.  To ensure long-term stability along its southern frontier, Russia entered into a number of bilateral political and military agreements with Abkhazia and South Ossetia including the ones on joint border guarding, military cooperation, and the creation of Russian military

bases. Thanks to the pro-active stance adopted by Moscow, at present the security at the borders between South Ossetia and Georgia and between Abkhazia and Georgia is maintained at an acceptable level and the number of incidents is kept low. The agreements reached by Russian President D. Medvedev and French President N. Sarkozy set a reasonable “division of labor” in the sphere of the Transcaucasian security: Russia is to safeguard South Ossetia and Abkhazia while the EU is responsible for guaranteeing that Georgia does not resort to military force. Russia's policy of strengthening the security and defense potentials of South Ossetia and Abkhazia made Russia a stronger player in Transcaucasia in 2009. The course aimed at reinforcing Moscow's political and military position in South Ossetia and Abkhazia should continue. The 2010 construction of Russian military bases and border guard infrastructures in the two Republics will help to prevent the recurrence of Georgian military revanchism in the region.  A precedent of withdrawal from the CIS was set in 2009 when Georgia enacted the corresponding decision which had been announced a year earlier. It is an indication of a purely political character of the gesture that Georgia opted for preserving – whenever the intentional law affords – its commitment to the international treaties signed in the CIS framework.  The result of the Georgian aggression against South Ossetia in August, 2008 and of its termination of the CIS membership is the practically complete freeze of Tbilisi's relations with Russia.  Joint mechanisms of incident prevention in the regions adjacent to South Ossetia and Abkhazia were launched in accord with the February 17-18 Geneva Conventions by the two Republics, Georgia, Russia, the UN, the OCSE, and the EU. The result should be serious ease of tensions and an improved security climate along the borders of South Ossetia and Abkhazia.  Russia implemented the policy of strengthening its positions in the Black Sea and the Caspian regions in the framework of such organizations as the Black Sea Economic Cooperation (BSEC), the Black Sea Naval Cooperation Task Group (BLAKCSEAFOR), the Black Sea Harmony and sustained dialog with its neighbors on the basis of the Turkish initiative of a platform of stability and cooperation in the Caucasus.  The Karabakh conflict remains unsettled. It puts obstacles in the way of rebuilding the relations between Armenia and Azerbaijan, impedes the recovery between Armenia and Turkey, and contributes to the overall instability in Transcaucasia. The Azerbaijani leadership continues to threaten Armenia with military actions. In 2009 Russia was actively involved in resolving the Karabakh problem both in the framework of the activities of the Co-Chairmen of the OCSE Minsk Group and on the bilateral basis in dealing with Armenia and Azerbaijan. Russia's active position in Transcaucasia is reflected by its efforts to strengthen the partnerships with both Armenia and Azerbaijan. The cooperation with Baku and Yerevan developed steadily in international organizations (mainly the UN and the OCSE) and on the regional level via the CIS, the Collective Security Treaty Organization, and the Eurasian Economic Community. It will be important for Moscow to continue

seeking maximal involvement in the settlement of the Karabakh problem parallel to the activity of the Co-Chairmen of the Minsk Group.  In 2010 Moscow should deepen its ties with Armenia including those in the framework of the Collective Security Treaty Organization, thus reinforcing Russia's status of a political and military leader in Transcaucasia. The cooperation with Yerevan, particularly in the military sphere, should continue to broaden.  As a parallel process, Russia should cultivate its strategic partnership with Azerbaijan, the country which is a major energy resources producer, an important regional player, and Russia's potential ally in the Black and Caspian Sea regions.  Certain Muslim groups are disseminating doctrines of politicized Islam across Russia which are untraditional for the country's Muslim population. The activity reached particularly high levels in Dagestan, Ingushetia, Chechnya, and Karachay-Cherkessia. Foreign Muslim centers are implementing programs of training Muslim clergy to preach in Russia. At the same time, a number of Western countries tend to exert political pressure on Russia in connection with the theme.  The Muslim indoctrination in the training centers of Algeria, Turkey, Syria, the Saudi Arabia, Jordan, and Pakistan is the key avenue of influencing Russia's Muslim population. Certain religious and political circles of these and other countries use student exchanges as an instrument of forming new political elites in the post-Soviet space that would wrestle over power and be oriented towards foreign Islamist centers. For example, the Saudi Arabia is allocating considerable financial resources to the cause.  A reasonable option for Russia in 2010 in the light of the objective to train moderate and traditionally oriented Muslim clergy would be to select Muslim young people to study in foreign Muslim schools of a moderate variety. The corresponding agreements can be signed, for example, with such renown centers as Al-Azhar University in Cairo.  Currently the US is putting into practice in the North Caucasus the key element of its novel military strategy – that of network wars.  North Caucasus – the Destabilization Factors There are reasons to believe that the US and other Western countries started preparing the conditions for the realization of the Color Revolution scenario in Russia during the 2011-2012 electoral cycle. The US President suggested a 25% increase in the number of US Department of State and USAID employees by 2013. A budget amendment envisages the creation of 1,226 new jobs in the institutions by 2010. In the future, the number of US Department of State employees is to increase by 25%, and the number of USAID employees – to double.  The US and other Western countries use NGOs as instruments in the network war to collect information and to influence political developments. Over 100 foreign NGOs and

monitoring networks of various types are operating in Russia's Southern Federal District.  In Russia's southern part, the implementation of the network war concept is exemplified by the activity of the American Soros Foundation, Carnegie Foundation, John D. and Catherine T. McArthur Foundation, the German Friedrich Ebert Foundation, Konrad Adenauer Foundation, and Heinrich Boll Foundation, the Unrepresented Nations and Peoples Organization, the International Institute for Strategic Studies, the Gringo Caucasian Refugee and IDP Network, the International Youth Human Rights Movement, etc. The ideologies, objectives, and tactic of the organizations are defined by their sponsors and are subject to the centralized coordination from a single center in the US.  Propaganda efforts are made in the framework of NGO activities to influence the peoples of the Caucasus so as to overcome the cultural integration of the Caucasus into Russia, to banish the pro-Russia orientation from the Caucasian societies, and to implant the ideology of hating Russia as the foundation of a new Caucasian identity.  (To be continued)27 February 2010, 18:20

Interfax: Russian Muslim leaders doubtful over creation of supreme mufti posthttp://www.interfax-religion.com/?act=news&div=6982

Kazan, February 27, Interfax - The head of one of Russia's leading Muslim organizations has expressed his doubts over an idea to create the post of supreme mufti to help unite the country's Muslims.

"If the Muslims do not see this person as a single, common mufti, he won't be a mufti and he won't have authority either in this country or abroad," head of Council of Muftis of Russia Ravil Gainutdin told the 4th congress of Tatarstan Muslims in Kazan on Saturday.

He also expressed doubts about setting up a higher coordinating Muslim council to be co-chaired by the heads of the three main Muslim associations: the Central Muslim Board, the Council of Muftis and the Coordinating Muslim Council of the North Caucasus. The idea was proposed about three months ago by head of the Central Muslim Board Talgat Tajuddin.

"We have tried before to set up various coordinating centers and councils. All in vain. We have gone through this and failed to become united over the past 20 years," Gainutdin said.

However, the head of Coordinating Muslim Council of the North Caucasus Ismail Berdiyev remains optimistic about this plan. 27 February 2010, 13:48

Interfax: Iskhakov re-elected to fourth term as Tatarstan muftihttp://www.interfax-religion.com/?act=news&div=6979

Kazan, February 27, Interfax - Gusman Iskhakov, 52, has been re-elected to a fourth term as the mufti and chairman of the Spiritual Muslim Board of Russia's Republic of Tatarstan.

Iskhakov, who has headed Tatarstan's Muslim Board since 1998, won the votes of 526 delegates who participated in the fourth Muslim congress, which took place in the republic's capital Kazan on Saturday.

The participants in the congress also voted unanimously in favor of recognizing the results of the board's work in the past four years as satisfactory.

Tatarstan's mufti is elected for four years. Only one candidate participates in such polls.

The Muslim Religious Board of Tatarstan includes 1,332 parishes, 1,200 of which have their own mosques. The board has founded seven secondary and two higher education madrasah, one secular secondary school and the Russian Islamic University. 27 February 2010, 10:02

Interfax: Chechnya wants Islamic leaders to attend Prophet Muhammad birthday celebrations in 2011 http://www.interfax-religion.com/?act=news&div=6977

Grozny, February 27, Interfax - Chechen President Ramzan Kadyrov has decided to celebrate the Prophet Muhammad's birthday next year at an international level, with the heads of a number of Islamic states invited, Ziyad Sabsabi, a Russian Federation Council member representing Chechnya, told journalists.

Speaking on behalf of Kadyrov, Sabsabi also invited all the members of a delegation of Islamic countries participating in celebrations of the Prophet Muhammad's birthday to come to Chechnya next year.

The delegation members praised positive changes that have occurred in Chechnya in a brief period of time.

A plane carrying the members of the delegation of Islamic counties has left the Grozny airport for Moscow.

Itar-Tass: Smolensk mayor, his deputy seized on extortion suspicions

http://www.itar-tass.com/eng/level2.html?NewsID=14871335

28.02.2010, 18.58

SMOLENSK, February 28 (Itar-Tass) -- Smolensk Mayor Eduard Kachanovsky and his deputy Valery Osipov were taken into custody on Sunday on suspicion of major extortion,

Natalia Khomutova from the regional department of the Prosecutor General’s Office Investigation Committee told Itar-Tass.

She referred to the ruling of the Smolensk Leninsky District Court.

Private guard company employee Roman Maximov is suspected for abetting the two officials.

“The mayor, his deputy and the guard are suspected of extorting a 2-million-ruble apartment from the director of a construction company in exchange for permission to commission the apartment house and a shop,” Khomutova said.

“Kachanovsky ordered the businessman to register the new apartment in the guard’s name,” she added.

The Investigation Committee said that no charges had been brought against Maximov and he was out on his own recognizance.

Detectives have searched the offices and homes of the suspects. A number of investigative procedures will be done.

The Moscow Times: Mayoral Elections Under Fire After Arrest http://www.themoscowtimes.com/news/article/mayoral-elections-under-fire-after-arrest/400661.html

01 March 2010By Natalya Krainova

Smolensk's mayor was arrested Sunday in an extortion investigation that could fuel calls for the Kremlin to end direct mayoral elections.

Mayors are the most senior local officials still elected to office after the Kremlin abolished gubernatorial elections in 2004, and a number of them have faced criminal charges in recent months amid a drive in certain quarters of the federal government to cancel mayoral elections.

Eduard Kachanovsky, mayor of Smolensk, a city of 325,000 located 360 kilometers west of Moscow, was arrested together with his deputy and his bodyguard on charges of extorting an apartment as a bribe from the head of a construction company in exchange for granting a permit for the apartment building, investigators said.

Kachanovsky faces up to 12 years in prison if convicted of large-scale extortion.

The trio was detained Friday, and a local court sanctioned the arrest of Kachanovsky and his deputy on Sunday, the Smolensk branch of the Investigative Committee said. The bodyguard

was released on condition that he not leave the city.

Smolensk regional Governor Sergei Antufyev told reporters Saturday that Kachanovsky's detention had "seriously damaged" his reputation and that of Smolensk and the surrounding region, Interfax reported.

He called for the abolishment of direct mayoral elections in the region. The governor "must have the power to weigh in on a mayor's candidacy. Popular elections are a risk," Antufyev said.

Antufyev said mayors should be replaced with "city managers" proposed by governors and confirmed by city legislatures.

Although mayors are directly elected by their constituents, governors can fire them under new powers granted by President Dmitry Medvedev last May. Medvedev said governors needed to be able to reign in rogue mayors, while critics countered that the Kremlin was trying to remove any possibility of unpredictability from politics.

Antufyev did not say whether he would dismiss Kachanovsky, who was elected last March after refusing to heed a United Russia request to withdraw in favor of its preferred candidate. Kachanovsky is also a member of United Russia.

Kachanovsky's arrest could be United Russia's way of teaching him a lesson, said Dmitry Oreshkin, a political analyst with Merkator, a think tank.

United Russia officials and the Smolensk governor's office could not be immediately reached for comment Sunday.

Kachanovsky was circled by plainclothes officers from the Federal Security Service as he left the building where the Smolensk governor's office is located after a meeting at about 4:30 p.m. Friday and driven away in a car, Antufyev's administration said in a statement.

The officers also detained Deputy Mayor Valery Osipov and Kachanovsky's bodyguard, Roman Maximov. Maximov is accused of registering the apartment at the center of the extortion charges in his name on Kachanovsky's orders, investigators said in a statement. It said the three-room apartment was worth more than 2 million rubles ($67,000).

Investigators did not identify the construction company.   

The alleged extortion attempt took place in September, Antufyev's administration said in a statement.

Antufyev said at the news conference that investigators have searched the offices and apartments of the suspects and have questioned a number of possible witnesses.

Kachanovsky, 36, worked for a local construction company and a company that sold real estate from 1993 until his election as mayor last year, according to a biography published on the city's official web site.

The directors of the real estate sales company, Erlan, where Kachanovsky worked as a manager from 1993 to 1997, were accused of failing to repay loans to several banks in 1995, Kommersant reported at the time.

Kachanovsky's administration has faced previous legal problems linked to extortion. Earlier last month, regional prosecutors sent to court a criminal case against Kachanovsky's adviser Alexei Khmelintsky, who is charged with seeking a bribe of 3.5 million rubles ($117,000) from the head of a construction company in exchange for a construction permit last summer.

Khmelintsky is also charged with submitting a fake diploma to obtain the position of adviser. The bribery charge carries a maximum penalty of six years in prison, while the fake documents charge could result in a prison sentence of up to six months.

Medvedev has declared war against corruption at all levels of government, and a number of mayors have come under fire.

In late February, prosecutors asked a court to hand Elista Mayor Rady Burulov a five-year suspended sentence on charges of abuse of office and illegal business activities.

In December, former Saratov Mayor Yury Aksenenko was sentenced to four years in prison after he was convicted of bribery and abuse of office.

Among earlier high-profile cases, former Arkhangelsk Mayor Alexander Donskoi was convicted of abuse of office and given a three-year suspended sentence in March 2008. In a separate case, Donskoi got a one-year suspended sentence in 2007 for faking his university diploma.

In February 2008, Tolyatti Mayor Nikolai Utkin was sentenced to seven years in prison on corruption charges.

Itar-Tass: The Olympic flag handed over to Sochi mayor

http://www.itar-tass.com/eng/level2.html?NewsID=14872694&PageNum=0

01.03.2010, 05.57

VANCOUVER, March 1 (Itar-Tass) - The Olympic flag has been handed over to Sochi Mayor Anatoly Pakhomov. The Black Sea city of Sochi will host the next Winter Olympic Games in 2014.

During the closing ceremony IOC President Jacques Rogge received the Olympic flag from

Vancouver Mayor Gregoy Robertson and handed it to the Mayor of Sochi. The flag of Russia was hoisted over the stadium which was followed by an eight-minute presentation of Sochi, the capital of the 2014 Olympic games.

Bloomberg: Russians Limp From Vancouver Olympics as Sochi Looms in 2014http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZdOupcHf_XU

By Erik Matuszewski

March 1 (Bloomberg) -- Russian President Dmitry Medvedev canceled a trip to Vancouver after his country’s hockey team was eliminated from medal contention by Canada and won its fewest gold medals at a Winter Olympics.

Medvedev may not have a chance to distance himself from the Olympics if Russia’s athletes provide similar results in 2014, when the Winter Games are held in Sochi, a summer tourist destination on the Black Sea that’s been called the “Russian Riviera.”

Canada entered the Vancouver Games off its best Winter Olympics performance four years ago in Turin, Italy, and then set a Winter Olympics record with 14 gold medals. Russia limps to Sochi after winning three gold medals in Vancouver, its worst showing since first competing in 1956.

“They don’t have any momentum at all because they don’t have any (government) program in place,” said David Wallechinsky, vice president of the International Society of Olympic Historians. “It’s been a real wake-up call, including for one particular Russian, Vladimir Putin. This is going to be a personal-pride situation for him,” he said, referring to the Russian prime minister.

Competing as part of the Soviet Union or Unified Team, Russian Olympians finished first or second in total medals at 10 straight Winter Games until 1992. Through that time, there was a Communist-controlled system to develop Olympic athletes.

With that program no longer in place, Russia is caught in a period of transition, Wallechinsky said.

Great Coaches

“They don’t yet have the tradition of a private, non- governmental system,” he said in an interview. “On one hand, with figure skating for example, they still have the great coaches, but those coaches are now in North America.”

Figure skater Maxim Shabalin mentioned those departures after winning the bronze medal in ice dancing with partner Oksana Domnina. This was the first year Russian athletes failed to

win a figure-skating gold since the 1960 Winter Games in Squaw Valley, California.

“I think we need to take all the Russian coaches back to Russia,” Shabalin said.

Olympic hosts often use the preceding Games to build toward hometown success.

The U.S. Olympic Committee ramped up training efforts after the 1998 Winter Games in Nagano, Japan, where American athletes won 13 medals. Four years later in Salt Lake City, the U.S. finished second with 34 medals, including 10 golds. Japanese Olympians took 10 medals and five golds in Nagano after claiming five medals and one gold in the 1994 Lillehammer Winter Games.

Summer Games

Britain, which will host the 2012 Olympics in London, displayed the success of its sports funding program, which is backed by the national lottery, at the 2008 Beijing Games. Britain finished with 19 gold medals, 12 years after it managed one in Atlanta.

Russia finished sixth with 15 medals at Vancouver, and their three golds were fewer than 10 other countries. South Korea and China, which before 1992 had never won a gold medal, both claimed more Olympic titles than Russia this year.

A day after Russia’s 7-3 hockey loss to Canada on Feb. 24, lawmakers in the Siberian city of Tomsk observed a moment of silence to “mourn” Russia’s fading sports glory.

“Of course we expected more,” Putin said last week in televised comments reported by Agence France Presse. Putin called for an organizational analysis aimed at getting a “worthy performance” from Russian Olympians in Sochi.

Medal Contender

The question is how many medal contenders Russia can develop in four years, said Wallechinsky, who wrote “The Complete Book of the Winter Olympics.”

“You don’t have figure skaters appear out of nowhere in a four-year period. You have to work your way up,” he said. “On the other hand, if they pour a lot of money into, say, cross- country skiing and biathlon, it is possible to build a medal- winning team in four years.”

Snowboarder Ekaterina Ilyukhina is among the Russian Olympians confident they’ll be able to make a good showing in their home country.

“In Sochi, we will be competing and will go for gold,” said Ilyukhina, who won Russia’s first snowboard medal with a silver in the women’s parallel giant slalom.

Positive Momentum

While Russia’s performance in Vancouver was a disappointment, Sochi organizers point to other positive momentum. They note that theirs is the first Winter Games to exceed $1 billion in sponsorships.

Among the top partners for the 2014 Winter Olympics are OAO Rostelecom, Russia’s dominant long-distance phone company; OAO Sberbank, the country’s largest lender; OAO Aeroflot, the largest airline in eastern Europe; and OAO Rosneft, Russia’s largest oil company.

Competition venues are being built from scratch and are expected to be completed two years before the Olympic opening ceremony, said Dmitry Chernyshenko, president of the Sochi 2014 Organizing Committee. Sochi’s Alpine skiing venue, which is located in the mountains 47 kilometers (29 miles) north of the city, plans to host a European Cup event next year.

Organizers said they’re confident Sochi will be ready to host the world’s best athletes and that Russia will be prepared to again claim repeated spots on the medal podium.

“Our authorities are running a special dedicated program to reach the level of preparation to ensure the athletes can reach their best,” Chernyshenko said. “So let’s wait. We’ll see in Sochi.”

To contact the reporter on this story: Erik Matuszewski in Vancouver, at matuszewski@bloomberg.net

Last Updated: March 1, 2010 00:02 EST

RIA: Vancouver Olympics over, Sochi picks up baton http://en.rian.ru/sports/20100301/158046657.html

06:0201/03/2010

The 2010 Winter Olympics were declared closed during a ceremony at BC Place Stadium in downtown Vancouver, and the baton has been passed to Sochi, where the next Winter Games will take place in 2014.

The Vancouver Games, which started on February 12, finished on Sunday with Canada's triumph in the men's hockey final match, in which the host nation defeated the U.S. 3-2.

The U.S. leads the overall medal standings, with a total of 37 medals won in Vancouver (9 gold, 15 silver and 13 bronze). Canada is first in the gold medal count, with 14 gold medals grabbed at the Games, and third in the overall standings, with a total of 26 medals (including 7 silvers and 5 bronzes).

Germany, which secured 30 medals (10 gold, 13 silver and 7 bronze) is second in the overall medal count.

Russia occupies the sixth position, with a total of 15 medals (3 gold, 5 silver and 7 bronze).

During the closing ceremony, the Olympic flag was handed from Vancouver Mayor Gregor Robertson to Sochi Mayor Anatoly Pakhomov. The Russian national anthem and ballet were performed at BC Place as part of 2014 Sochi Games presentation.

More than 150 Russian specialists involved in organizing the Sochi Olympics have visited the Games in Vancouver. Dmitry Chernyshenko, the head of organizing committee for the Sochi Games, said he would take the Canadian experience into account while organizing the 2014 Olympics.

Pointing to a horrific accident which claimed the life of Georgian luger Nodar Kumaritashvili during a training run hours before the start of the Games, the organizers of the Sochi Olympics pledged to take efforts to assure the security of the athletes.

Chernyshenko also pledged to create in Sochi "the same unique atmosphere" as in Vancouver, "although it will be slightly different, in the Russian style."

 MOSCOW, March 1 (RIA Novosti)

The Moscow Times: After Vancouver, Now It's Sochi's Turn http://www.themoscowtimes.com/olympic_coverage/article/after-vancouver-now-its-sochis-turn/400612.html

01 March 2010The Associated Press

VANCOUVER — As the Vancouver Olympics came to a close, the focus turned across the world to Russia's first Winter Games in 2014 — taking the Olympic movement to a new territory and a new set of challenges.

"We are next," Sochi organizing chief Dmitry Chernyshenko said. "The bar has been well and truly raised."

Sochi's first big moment in the global spotlight came during Sunday's closing ceremony, with the Olympic flag handed from the mayor of Vancouver to the mayor of Sochi.

The world got a first taste of what Sochi has to offer during an eight-minute segment featuring Russian sports stars, music and dance performers and giant glowing spheres called "Zorbs."

"This is a historic event for Sochi," Mayor Anatoly Pakhomov said before the ceremony.

"We understand it is a huge responsibility for Sochi and for Russia and we can't let anyone down."

After the showbiz, the hard work will continue back home as organizers continue to prepare for an event that has the prestige of Russia and its leaders — including Prime Minister Vladimir Putin — on the line.

Ever since Sochi was awarded the games by the International Olympic Committee three years ago, questions have been raised: Can Sochi complete its massive construction projects on time? Will the funding hold up? Will the games be safe in a city near the separatist Abkhazia region in neighboring Georgia?

Putin, Russian president at the time, was instrumental in Sochi securing the games when he traveled to Guatemala City in 2007 and personally lobbied IOC members. He and President Dmitry Medvedev remain centrally involved in making sure that the games are a success.

"It's so important for Russians that they will not allow it to fail," senior Canadian IOC member Dick Pound said. "Whatever has to be done will be done."

Sochi organizers say the games will feature the most compact layout in Winter Games history, with a cluster of ice arenas situated along the Black Sea coast and snow and sliding venues a half-hour away in the Krasnaya Polyana mountains. A new rail line is being built to connect the two clusters.

"You can swim in the warm Sochi sea, and after 24 minutes on a train, you can change clothes and go skiing in the mountains," Pakhomov said.

First, Sochi has to build virtually all of its Olympic facilities from scratch — "literally from nothing," Chernyshenko said.

All venues are now under construction, with 16,000 workers busy on "what is probably the biggest construction site in the world," he said.

"We are well on track and in some areas ahead of our ambitions," Chernyshenko said.

Sochi promises that all venues will be ready two years in advance to allow for the holding of Olympic test events. The first trial run will take place a year from now with a second-tier European Cup event in Alpine skiing. More than 70 test events are planned in 2012 and 2013.

The cost of the Olympic infrastructure project is put at $7 billion.

"All the money is allocated, and we don't see any risk for a shortage of finance," said Chernyshenko, who has a separate operating budget of $1.8 billion.

The construction and design of Sochi's bobsled and luge track will be under scrutiny following the high-speed training crash that killed Georgian luger Nodar Kumaritashvili on the day of Vancouver's opening ceremony.

IOC president Jacques Rogge has written Chernyshenko asking him to ensure that the track is safe. The Russian said plans already called for the track to be 10 to 15 kilometers per hour slower than Whistler's.

"We will learn from this tragedy," Chernyshenko said. "We will do all we can do guarantee the safety factor."

Security is also an issue on a wider front. Sochi is located in a volatile region, just north of the border with Abkhazia, where Russia has thousands of troops. Russia defied the West by recognizing Abkhazia and another separatist region, South Ossetia, as independent after its war with Georgia in 2008.

"Sochi has been the safest city in the country, the summer residence for the president and prime minister," Chernyshenko said. "This is a rather calm city. The government is doing everything to protect this region from any risk."

Sochi brought a team of 150 observers to Vancouver to watch and learn. One key lesson so far: have contingency plans in place for the type of weather problems that caused havoc at the snowboard and freestyle venue at Cypress Mountain.

"We are already thinking seriously about Plan B if the weather doesn't cooperate," Chernyshenko said, citing plans for new technology and snow-making techniques.

Another priority for Sochi is recruiting volunteers. Vancouver organizers brought in about 25,000 volunteers, who won rave reviews for their smiling hospitality. Russia doesn't have a tradition of volunteerism but is recruiting volunteers from all over the country.

"The games are about people and the human factor," Chernyshenko said.

The biggest challenge might be in replicating the way that Vancouver celebrated these games, with festive crowds in the streets and arenas packed with cheering fans. IOC officials said it's the best Winter Olympic atmosphere since the magical 1994 Games in Lillehammer, Norway.

"The Canadian atmosphere here is electric," Chernyshenko said. "That is exactly what we want to reach in Russia. We will do it with a Russian touch, a Russian look without the stereotypes."

The Moscow Times: Media in Sochi Area Face Major Pressure http://www.themoscowtimes.com/news/article/media-in-sochi-area-face-major-pressure/400658.html

01 March 2010By Maria Antonova

Pressure on media in the Krasnodar region is making fair coverage of preparations for the 2014 Sochi Games all but impossible, a media watchdog said Saturday, as the host city's mayor visited Vancouver to receive the Winter Olympics flag.

Local journalists confirmed to The Moscow Times on Sunday that regional and municipal authorities have been trying to keep a lid on dissenting voices. But the Olympics have merely shed light on an existing problem, rather than aggravating it, they said.

State-dependent publications were "press-ganged into supporting the Kremlin policy of 'the games at any cost'" without reporting on environmental and social concerns, "except to brand them as anti-patriotic," Reporters Without Borders said in a report on the situation in the Krasnodar region.

"The region's media have been brought under the thumb of its pro-Kremlin governor, Alexander Tkachyov," the report said.

The group said last year's election of Sochi Mayor Anatoly Pakhomov was not fairly covered in the local press and that financial dependence remains the biggest obstacle to independent journalism in the region.

"It may be a certain Cossack mentality typical of a border region, where historically there is paranoia about enemies all around," said Krasnodar-based journalist Yevgeny Titov, who has worked for two television stations, a radio station and two newspapers since 2004.

All of the publications — except his current employer, Novaya Gazeta — have faced pressure from the authorities, he said.

In 2005, it was common for the local television station to receive calls from the administration requesting a fair weekend weather forecast to help the governor promote tourism, Titov said. Reporters were told to make calls to the studio posing as students and pensioners during call-in sessions with the new Krasnodar mayor in 2004, and the channel was ordered by the mayor's office to give unfavorable coverage to the city's former leader.

Titov refused and was forced to resign after "being persecuted for political reasons at editorial meetings," he said.

Regional authorities keep an official media register of publications that receive advantages in exchange for political loyalty, the report said.

This year, about 100 newspapers, television and radio stations, were on the list, according to a decree on the regional administration web site. Benefits include subsidies on paper and

distribution expenses.

The Krasnodar government's press service did not respond to calls Sunday.

The register has turned "into a very effective means of controlling privately owned newspapers," the report said.

But there are plenty of other ways that officials can exert pressure on a privately owned paper.

Krasnodar is a relatively prosperous region, but financing for media is difficult because businessmen are afraid to sponsor papers with an alternative editorial position and advertisers avoid independent publications, said Dmitry Shevchenko, a Krasnodar-based freelance journalist.

"There are big companies in Krasnodar, but their advertising budget goes to papers controlled by the authorities," he said. "Nobody wants problems."

Shevchenko was fired from a local paper last year after authorities complained to his editors over a story he wrote about a woman whose leg was amputated in a city clinic because of medical negligence.

Officials attempt to control journalists' every step, especially during coverage of controversial subjects like Olympics construction or a 2007 oil spill in the straight of Kerch. Border control officers — a branch of the FSB — have cordoned off a section of the shore ever since, keeping television crews and other journalists away from the area most affected by the spill, Shevchenko said.

Sochi-based reporter Semyon Simorov, who works for the Kavkaz Uzel news portal, was turned away when he tried to attend a press event organized in October by Russian Railways, or RZD. The event was to highlight how the state-run company was compensating for the destruction of endangered trees by planting box-tree saplings.

"I registered by sending my information as requested, but my name was not on the list," he said. "In the end, they made me wait about 15 minutes and let in everyone but me."

Kavkaz Uzel, which was founded by rights group Memorial in 2001, has frequently written about environmental problems related to the RZD-led construction of a road from Adler airport to the Krasnaya Polyana ski venues.

Environmentalists said at the time that they saw workers digging saplings out of their natural habitat before the media event.

Bloomberg; Russian Army Reclaims ‘Abandoned’ Tanks After Internet Exposure

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTl78A1OflLQ

By Lucian Kim

Feb. 28 (Bloomberg) -- The Russian army is rushing to remove dozens of tanks from a forest in the Ural Mountains after a video circulated on the Internet showing the vehicles unguarded and covered in snow.

The army is loading T-80 tanks and BTR armored personnel carriers onto trailers near the village of Kalinovskoye, 1,400 kilometers (900 miles) east of Moscow, state broadcaster Rossiya 24 reported today. An amateur video posted on a regional Web site initially drew media attention.

About 200 vehicles were left in the woods more than two months ago, local residents told Rossiya 24. Local commander Sergei Skobelin denied the armor had been abandoned, saying it had been parked there because of severe cold and the limited capacity of a nearby railway station. The last tank will be removed within two weeks, the broadcaster reported.

The Volga-Urals military district was the focus of national attention in November, when a military depot in Ulyanovsk blew up on the eve of a visit by President Dmitry Medvedev. The Kremlin fired four top military officers for “lack of control” and “criminal negligence.”

Military prosecutors don’t plan to look into the tank incident, the Kommersant newspaper reported yesterday, citing an official with the military district prosecutor’s office. Prosecutors are satisfied with the official reply that the armor was in storage and not abandoned, according to Kommersant.

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net

Last Updated: February 28, 2010 11:00 EST

Eurasia Review: Sino-Russian Energy Relations: True Friendship Or Phony Partnership? http://www.eurasiareview.com/2010/02/32073-sino-russian-energy-relations.html

Sunday, February 28, 2010By Shoichi Itoh for RES

Over the last decade, China and Russia have devoted increasing attention to what they term as their “strategic partnership.” Moscow and Beijing share interests in standing against the predominant influence of the United States and, more broadly, the West.

It appears that with the signing of a final agreement in 2004 on the demarcation of the 4,000km-long Sino-Russian border and the completion of the related works in 2008, the biggest seed of historical distrust between the two countries has been removed, at least on the surface.

Recently, both countries’ governments have emphasized that the political aspects of their cooperation need to be bolstered by the deepening of economic ties. The energy sector has been highlighted as one of the most promising areas within which to achieve this goal, given the rich hydrocarbon potential in the regions of the Russian Far East and Siberia and China’s surging energy demand. Indeed, Russia’s exports of crude oil to China by rail have rapidly increased from 572,000 tons in 1999 to more than 15 million tons in 2009.

Additionally, in April 2009 Beijing and Moscow finally completed an intergovernmental agreement to construct a spur pipeline from the end-point of the first phase of the ESPO (East Siberia – the Pacific Ocean) pipeline to Chinese territory, in spite of Russia’s earlier equivocal attitude concerning the timing of the pipeline’s realization.

Do these events imply that mutual trust between China and Russia has grown through cooperation in the energy sector? Is it fair to assume that their bilateral energy partnership will go through a phase of evolutionary consolidation?

The Paradox of the China Factor

Russia is increasingly striving to develop new energy infrastructure in its eastern flank, in order to capitalize on new market opportunities in the Asia-Pacific region.

The Energy Strategy of Russia for the period up to 2030, approved by the Russian government in November 2009, outlines a planned acceleration in exploiting oil and gas supplies in eastern Russia, with the aim of exporting these products to the Asia-Pacific region. The strategy stipulates that Russia aims to increase the percentage of oil exports to the Asia-Pacific region, among its total oil exports, from 8 percent in 2008 to 14–15 percent in 2020–22 and to 22–25 percent in 2030 and that of natural gas exports from zero in 2008 to 16–17 percent in 2020–22 and to 19–20 percent in 2030.

China provides the main consumer market for Russia’s eastern energy strategy. China’s primary oil demand, for instance, is projected to increase by an average annual growth rate of 3.3 percent in 2007–2030, whereas that of the world is predicted to be 0.9 percent (the reference scenario in the International Energy Agency’s 2009 World Energy Outlook). Unlike the upsurge in China’s energy demand, Japan’s energy demand has almost peaked with oil demand already on a gradual decline.

Ironically, however, domestic voices have emerged expressing alarm that the rapid increases in the amount of energy supplied to China might leave Russia as a “resource appendage”, which strengthens its historical rival.

The share of crude oil in Russia’s total exports to China increased from 5 percent in 2000 to 40 percent in 2008. Admittedly, it is true that the Russian government is currently striving to boost the share of value-added products rather than raw materials in the overall structure of exports.

Yet, the same kind of concern was never heard with regard to the fact that crude oil accounted for 40 percent of Russia’s total exports to Japan in 2007.

Russia’s paranoia about China is based on a geopolitical mind-set and has prevented it from adopting a trust ing attitude toward its “strategic partner”. This mindset actually derives from Russia’s own weakness in addressing its vast, yet economically underdeveloped and scarcely populated eastern regions. The population of the Far East is less than 6.5 million people, but comprises about 40 percent of Russian territory, and a trend of further depopulation has remained irreversible for the last two decades. By contrast, the combined population on the Chinese side of the Sino-Russian border, including the three northeastern provinces (Heilongjian, Jilin, Liaoning) and Inner Mongolia, amounts to more than 130 million. Although border control of illegal Chinese immigration into the Russian Far East has been tightened and stabilized compared with the chaotic years following the collapse of the Soviet Union, concerns about “Chinese economic expansion” have continuously smoldered among the Russian power elite against the backdrop of the increasing scale of Chinese economic activities on Russian soil.

It is in this context that the Russians have been reluctant to encourage Chinese investment in hydrocarbon fields in eastern Russia. China’s involvement in upstream projects has been limited to only economically questionable ones. Examples include the Zapadnochonsky and Verkhnechersky mining deposits in the Irkutsk region, which possess only small volumes of oil and gas unproven resources, in spite of the involvement of the Vostok Energy joint-venture company, established by the Russian oil company Rosneft and China National Petroleum Corporation (CNPC). Rosneft has held a 51 percent stake in Vostok Energy since 2006.

Russia’s Acceptance at Last

Sino-Russian talks about the possibility of constructing a transnational crude oil pipeline date back to the mid-1990s. In 1998 CNPC and the Russian private oil company, Yukos started negotiations over the possibility of constructing a crude pipeline from Angarsk, in the Irkutsk region, to the Daqing oilfield in Heilongjian Province (i.e. the Daqing route). When Beijing and Moscow signed the Sino-Russian Treaty of Good-Neighborliness and Friendly Cooperation in July 2001, President Jiang Zemin and President Vladimir Putin agreed to construct the pipeline, with the aim of Russia exporting 20 million tons of crude oil to China from 2005 and 30 million tons from 2010. Both governments subsequently signed an intergovernmental agreement on undertaking a feasibility study for the pipeline to Daqing.

Meanwhile, however, the Russian state-owned oil pipeline company, Transneft,

coincidently proposed in July 2001 the construction of a pipeline from Angarsk to Nakhodka in Japan (i.e. the Pacific route). With the announcement of Japan’s support for the Pacific route during Prime Minister Jun’ichiro Koizumi’s visit to Moscow in January 2003, the so-called “Sino-Japanese scramble” over Russia’s crude oil began to hit the headlines in media reports around the world.

For about six years after this announcement, Moscow’s equivocal attitude with regard to the timing of the construction of the pipeline remained unchanged, despite the Russians’ repeated verbal promises to the contrary. Moscow formulated a compromise plan of designating the Pacific route as the trunk pipeline and the Daqing route as a spur pipeline from the former in May 2003.

This plan was also endorsed by the Energy Strategy of Russia for the period up to 2020, authorized by the Russian government in August of the same year. In February 2004, Transneft announced a revised Pacific route originating from Taishet, about 130km northwest of Angarsk, taking a northern detour from Lake Baikal, running via Skovorodino in the Amur region and terminating at Perevoznaia Bay in the Primorsky region. Subsequently, the would-be origin of the Daqing route became Skovorodino.

However, no reference to the possibility of this spur pipeline could be found in Russia’s official documents, including the Government Decree of December 2004, which authorized Transneft’s proposal to construct the ESPO pipeline, and the Directive by the Russian Ministry of Industry and Energy in April 2005, which divided the ESPO project into two phases. The latter document stipulated that the first phase of the pipeline construction would enable a maximum capacity of 30 million tons of crude per annum to be transported from Taishet to Skovorodino and that following the second phase, a maximum capacity of another 50 million tons per annum from Skovorodino to Perevoznaia Bay (later to be moved to Kozmino Bay) would be possible.

The first phase of the ESPO project commenced in April 2006, and the construction of the 2,700kmpipeline was completed in December 2009. Rosneft, the biggest supplier of oil to China, announced in November 2006 that it would deliver 14 million tons of crude via the spur pipeline upon completion of the first phase of the ESPO project. CNPC and Transneft signed a memorandum to build the spur pipeline in July 2007, and two months later, Minister of Industry and Energy Viktor Khristenko publicly stated that its construction would commence in 2008.

Nonetheless, as late as September 2007, Rosneft begun to suggest that Russia should postpone the construction of the spur pipeline until the second phase of the ESPO project, and also to imply that China was no longer a promising destination for oil exports.

With the global financial crisis beginning in autumn 2008, however, Moscow could no longer delay the signing of an agreement with Beijing, eventually promising the prompt start of the construction of the spur pipeline. The Russian economy was one of the most severely affected by the crisis. Rosneft and Transneft were no exception and faced

serious cashflow problems, including loan refinancing. Against this background, in February 2009, China agreed to provide a $15 billion loan to Rosneft and a $10 billion loan to Transneft in return for Russia’s extension of the spur pipeline from Skovorodino to Chinese territory and an annual supply of 9 million tons of crude by Rosneft and 6 million tons by Transneft for 20 years from 2011. These agreements were finalized in the form of a Sino-Russian Intergovernmental Agreement on the Oil Sector in April 2009. The spur pipeline, running 70km from Skovorodino to the Chinese border, and more than 900km within Chinese territory to Daqing, is scheduled for completion by the end of 2010.

Initially, Russia hoped that it could maximize Japanese investment in its ESPO pipeline project, in order to counterbalance China’s influence from the standpoint of geopolitical calculations. However, contrary to Russia’s expectation, rivalry with China has not always been a crucial factor in Tokyo’s decisionmaking.

Neither the construction of the pipeline, nor oilfield development, could attract massive inflows of Japanese capital. With crude oil prices hitting historical highs up until summer 2008, the Russians made no effort to improve a variety of unfavorable conditions for foreign investors, believing that time was on their side, and aiming to play China and Japan off against another.

However, with the financial crisis, Moscow’s geopolitical maneuvering was quickly swept away.

Natural Gas Cooperation in Disguise 

Russian-Chinese talks on cooperation in the gas sector also reflect an uneasy development in their energy nexus.

The proposed project of constructing a pipeline from the Kovykta mining deposit in the Irkutsk region (one of the biggest gas fields in eastern Siberia) to China was one of the biggest symbols of their bilateral partnership since the mid-1990s. As late as autumn 2003, RUSIA Petroleum (the Kovykta mining deposit’s operator) and CNPC, together with their Korean partner, Kogas, concluded a trilateral international feasibility study of the proposed 4,900km pipeline to the Korean Peninsula via Chinese territory. Beijing and Seoul accordingly approved the results of the study. Moscow, however, refused to clarify its position despite agreeing to evaluate the feasibility of the Kovykta project in the “Action Program for Implementing the Sino-Russian Treaty of Friendship for 2005–2008” in October 2004. Indeed, Gazprom and CNPC signed an agreement of strategic partnership in the same month.

It appears, in retrospect, that the Russian government had no intention of considering this proposal from the outset. As early as July 2002, Moscow designated Gazprom to draft the Eastern Gas Program, including a plan of natural gas exports to China. The final version was officially authorized in September 2007, ending the option of exporting gas from the Kovykta mining deposit to China. At the same time, the program has no concrete picture

as regards specific pipeline routes, even though it notes a plan to export 25–50 billion cubic meters of gas per annum to China and South Korea after 2020. Gazprom disagrees with Exxon, the operator of the Sakhalin-1 project, on the idea of extending a natural gas pipeline through the Khabarovsk region to Chinese territory, and instead, currently proposes to build a new LNG plant at the southern edge of Primorsky region. The economic viability of Gazprom’s plan remains questionable.

The so-called “Altai Pipeline” project, proposed by President Putin during his visit to Beijing in March 2006, was another half-baked concept. This proposed 3,000km pipeline from western Siberia to Xingjiang Uighur Autonomous Region, aims at 30–40 billion cubic meters per annum. However, prior to Putin’s announcement, Moscow had neither estimated the costs nor reached an agreement on the price of gas with Beijing. During this period, the Russians ascribed their procrastination regarding a decision on the Kovykta pipeline to disagreement on China’s purchasing prices, but the story of the Altai project demonstrates that this is not necessarily the case. Moscow merely sought to brandish the “China card” in order to influence its negotiations with the EU, which gradually became critical of Moscow’s high-handed approach in energy diplomacy.

Thus, it had nothing to do with the consolidation of Sino-Russian energy linkages. Indeed, in August 2009 Gazprom officially shelved the Altai project due to its economic non-viability.

Conclusion

A large part of the Sino-Russian energy partnership is rhetorical rather than substantial. China’s skepticism about Russia may well have been aggravated by the latter’s wavering attitude towards cooperative oil and gas projects with Beijing. Cooperation with China on energy has the potential to become an irreplaceable factor in Russia’s development plans for its eastern regions, by exploiting its hitherto untapped energy resources on commercial terms. However, Russia has yet to make the most of this opportunity due to its own deep-rooted geopolitical mind-set. The completion of the transnational oil pipeline between the two countries will soon be realized. Yet, Russia’s proposed project of constructing a gas pipeline to China will require several years before it becomes a tangible prospect. This is because mutual distrust will continue to lie beneath the politically inflamed Sino-Russian strategic partnership.

Shoichi Itoh is currently a visiting fellow at the Center for Strategic & International Studies (CSIS), Washington, DC. He is also an associate senior researcher at Economic Research Institute for Northeast Asia (ERINA) in Japan and a non-resident fellow at the Institute for Security and Development Policy (ISDP) in Sweden.

This article, "Sino-Russian Energy Relations: True Friendship Or Phony Partnership?" (PDF) first appeared in the "Russian Analytical Digest No. 73: Russia-China Relations, 23 Feb 2010, pages 9-12," produced by Russian and Eurasian Security (RES), and is reprinted with permission.

Reuters: Russia arms exports thrive, output barely keeps uphttp://in.reuters.com/article/worldNews/idINIndia-46506420100226

Fri Feb 26, 2010 5:29pm IST

By Dmitry Solovyov

MOSCOW (Reuters) - Russia's arms exports hit a record high in 2009, but analysts said on Friday that the defence industry may have reached the limits of its export revenue generating capacity.

Last month's test flight of Russia's first fifth-generation jet fighter suggests its defence industry is emerging from a period of post-Soviet neglect, while Moscow's portfolio of arms contracts can keep export revenue steady for five years.

Russian arms exports edged up by $150 million to a post-Soviet record of $8.5 billion last year, the Moscow-based Centre for Analysis of Strategies and Technologies (CAST) said in a report made available to Reuters.

Fluctuations in the dollar exchange rate resulted in exports showing "real-term growth of a modest 2.1 percent, meaning sales have essentially been flat over the past two years", it said.

"That serves as further indication that Russia's defence industry has reached the limits of its export revenue generating capacity," CAST said.

"Further growth will require a serious upgrade of production facilities, as well as investment in skills and training."

Russia's sole authorised arms exporter, Rosoboronexport, accounted for $7.436 billion of Russia's 2009 defence exports, up from $6.725 billion in 2008, CAST said.

"Russia's portfolio of defence contracts had reached $40 billion by the end of 2009 -- an increase of $7 billion on the previous year," CAST said. "Rosoboronexport ... secured an unprecedented $15 billion of new sales last year."

"The existing portfolio of defence contracts should keep Russian arms exports revenue steady for another five years."

FIGHTERS, HELICOPTERS, TANKS

Projections for 2010 include the sale of some 40 fighters of the Su-27-30 Flanker family, CAST said. Final deliveries will probably be made on the Indian deal for 16 carrier-based MiG-29K fighters. Russia will also start delivering the contracted 80 Mi-17V-5 helicopters to India.

Venezuela, Washington's sharp-tongued foe and Russia's new-found Latin American friend, received a $2.2 billion loan from Moscow in 2009 to be spent on weapons. The only known contract is for 92 upgraded T-72M1M main battle tanks.

Unofficial reports say the deal with Venezuela is worth up to $4 billion and may include S-300V air defence systems, Smerch multiple-launch rockets and howitzers.

Soviet-era political ally Vietnam became Russia's largest weapons buyer in terms of new contracts signed in 2009, making it one of Moscow's top six defence customers along with India, China, Algeria, Venezuela and Syria.

Vietnam has placed a large order, estimated at $4 billion, for six Project 636M conventional submarines and onshore infrastructure to be built by Russian firms. It has also signed a deal for eight Su-MK2 Flanker fighters.

Last month Russia successfully tested its fifth-generation fighter, breaking the United States' monopoly on the development and output of this type of aircraft.

The first MiG-29 and Su-27 prototypes of the previous fourth generation took to the air in 1977. CAST said several countries, including Libya and Vietnam, had expressed interest in the fifth-generation fighter, but serious financial, technical and even political hurdles remain before Russia starts producing it.

The aircraft's maiden flight showed "Russia is still a solid second in terms of defence technology," CAST said. The new plane, codenamed T-50, is to be jointly produced with India, Russia's traditional partner since Soviet days.

(Writing by Dmitry Solovyov; editing by Tim Pearce)

February 27, 2010

RFE/RL: What's New In Russia's New Military Doctrine? http://www.rferl.org/content/Whats_New_In_Russias_New_Military_Doctrine/1970150.html

by Mikhail Tsypkin Earlier this month, Russian President Dmitri Medvedev signed the new "Military Doctrine Of The Russian Federation Until 2020" to replace the doctrine signed by Vladimir Putin in 2000. It's supposed to be a guiding document for the development of the armed forces.

Western observers have focused on two aspects of the new doctrine emphasized by its drafters: the designation of NATO as a source of military danger, and the language on nuclear deterrence. Upon closer inspection, however, there is nothing new in the document on either subject.

The really interesting aspects of the new doctrine are the contradictions between its text and Russia's ongoing military reform, as well as those between the envisioned requirements for future weapons acquisition and the realities of Russia's defense industry.

The references to NATO as a source of military danger to Russia are neither new nor as direct as often presented in Western commentaries. The military doctrine adopted in 2000 did not mention NATO by name, but described enlargement of military alliances in areas adjoining Russia as a military threat. It was not necessary to use the word NATO to make it clear which alliance the document had in mind.

The new doctrine draws a distinction between "military danger" and "military threat." The former is an international situation that may, under certain conditions, lead to the latter. A military threat is an international situation that makes war possible. NATO's enlargement is listed at the top of the list of military dangers, which means that it could develop into a military threat. Thus NATO enlargement has actually been demoted from a threat to a danger in the latest doctrine.

The concerns about the role to be assigned to nuclear weapons in the new doctrine were triggered by a statement in October by Security Council Secretary Nikolai Patrushev (the Security Council was charged with preparing the draft doctrine) suggesting that the new doctrine "would not exclude preventive" nuclear strikes in situations "critical" to Russian national security, even in small-scale, local wars. (The August 2008 war with Georgia was a small-scale war.) The 2000 military doctrine assigned first use of nuclear weapons only to large-scale (in fact, global) wars, in situations critical to Russian national security. Once the 2010 doctrine was released, however, the formula of first use dropped any reference to the scale of war and somewhat tightened the main condition for such use to a "threat to the existence of the state itself." Such provisions, as nonproliferation expert Nikolai Sokov observes, are "standard" for any nuclear-weapons state.

Aleksandr Golts, one of the most perceptive Russian experts on military affairs, has noted a discrepancy between the doctrine and the development of the armed forces. The goal of the military reform conducted by the Defense Minister Anatoly Serdyukov since October 2008 is to make all military units fully combat ready without the mobilization of reservists.

The new military, 1 million strong, is intended to react quickly to conflicts along Russia's periphery rather than fight NATO. The doctrine, however, refers to a mixture of fully combat-ready units and those that can be deployed only after mobilization.

The military reform is very painful for the officer corps. According to Serdyukov's plan, the number of general officer billets is to be cut from 1,107 to 886; colonels from 25,665 to 9,114; lieutenant colonels from 88,678 to 15,000; majors from 99,950 to 25,000; and captains from 90,000 to 40,000. The officer corps will lose 13,313 out of 21,813 of its most desirable billets in the Moscow headquarters.

The command structure is to change from the current four-level one (military district-

army-division-regiment) to a U.S.-style, three-level one (military district-operational command-brigade). The 65 institutions of military education are to be consolidated into 10. These drastic changes challenge the self-interest of officers, some of whom will be discharged while others will have to learn how to do their jobs in new ways. Many of these officers cling to the purported NATO threat as they strive to preserve the Soviet-type, mass-mobilization military -- and thousands of officers' billets -- and impeded Serdyukov's reforms.

The 600-pound gorilla hiding in the verbiage of the new doctrine is the question of how to arm the military with the high-tech weapons listed in the document. The Russian defense industry suffers from outdated plants, an aging work force, and the incompatibility of a system built by Josef Stalin with the realities of a market economy.

The new doctrine suggests that Russia somehow invigorate investment into innovative technologies and keep its independence as an arms manufacturer. While debating the best way to direct the Russian economy toward technological innovation, Russia's leaders appear to be moving away from defense industry autarky. During a meeting with Western experts on Russia last September, Prime Minister Vladimir Putin reportedly said Russia wanted to cooperate with Western nations in weapons manufacturing.

The doctrine, which designates NATO as a source of danger to Russia, appears to be in conflict with the emerging weapons acquisition policy: importing selected major weapon systems from NATO members. The plan to buy a Mistral helicopter carrier from France (and other possible suppliers were reportedly Spain and the Netherlands) is a clear indication that Russian leaders are frustrated with the inability of their defense industry to produce modern armaments. Russia may benefit from importing and coproducing weapons, but it may also have to adjust its foreign policy to the reality of dependence on Western suppliers.

Nothing in the new doctrine points to growing aggressiveness on the part of Russia either at the conventional or nuclear levels. The doctrine suggests that the ongoing radical military reform has, at best, a lukewarm endorsement by the high command. If Serdyukov loses Putin's support, the reform may be left unfinished.

The doctrine avoids the thorniest issues. It contains no hint as to how Russia will supply its military with new weapons and how it might deal with what may become the greatest military challenge to Russia -- the rise of China. One may surmise that Moscow has not yet come up with answers to these fundamental questions.

Mikhail Tsypkin is associate professor of national security affairs at the Naval Postgraduate School in Monterey, California. The views expressed here are the author's own and do not represent the views of RFE/RL or those of the Department of the Navy or any other agency of the U.S. government

Russia Today: 01 March, 2010 in Russian Newspapershttp://rt.com/Top_News/Press/eng.html

Nezavismaya: Spring – time for borrowing money from the WestRussia will enter the foreign loan market this yearBy Sergey Kulikov

An enormous federal budget deficit, totaling nearly three trillion, does not leave the authorities any other choice but to borrow money – for the first time since 1998. As was stated on Saturday by Deputy Prime Minister and Minister of Finance Aleksey Kudrin, “foreign borrowing should begin as early as this year”. Experts have differing opinions on this subject – some say that with the currently favorable conjuncture of oil prices, the country should not borrow money. Others note that it is better to borrow money today, because in the future, we will be forced to ask for more and, by that time, faced with stricter lending conditions.

Vremya Novostei: A “hello” from Yanukovich Ukraine will not be joining the Customs Union with Russia, Andrey Susarov

Ukraine does not intend to join the Customs Union of Russia, Belarus and Kazakhstan. This was announced by Irina Akimova – first deputy chief of the new presidential administration of Viktor Yanukovich. According to the high-ranking official, the idea to make Ukraine a member of the Customs Union belongs to Prime Minister Yulia Timoshenko. However it is not possible, due to the fact that it would contradict Ukraine’s membership with the World Trade Organization (WTO).

Kommersant: Lithuania expects European discount rates form GazpromIt is asking that some gas be sold at the spot price

Vladimir Vodo, Natalia Grib, Tamila Dzhodzhua

The Baltic States, following Europe’s largest consumers, have asked Gazprom to revise the pricing structure for Russia’s gas. Lithuania, which obtains Russian gas at the price of $320 for 1,000 cubic meters, is asking for a portion of the gas to be sold at the spot price of $200. Gazprom representatives say that no price revisions have been provisioned for Lithuania for 2010. Perhaps, the position of Russia’s monopoly will be softened by Lithuania’s Constitutional Court, which recognized the legality of Gazprom’s acquisition of 37 per cent of Lithuania’s natural gas transmission system – Lietuvos Dujos.

March 01, 2010 10:02

Interfax: Moscow press review for March 1, 2010http://www.interfax.com/newsinf.asp?id=149256

MOSCOW. March 1 (Interfax) - The following is a digest of Moscow newspapers published on March 1. Interfax does not accept liability for information in these stories.

VEDOMOSTI

Six of the 12 members of Transcreditbank (RTS: TCBN)'s executive board have sold their shares, the bank said in a statement. Sergei Arsenyev, Boris Zemskov, Alexander Kolpakov, Andrei Kuptsov and Sergei Rusanov have zeroed the debts, and Oleg Panarin has sold more than a third of his stake. Overall, they have surrendered 0.32% of their shares. The nominal value of the stake is 7.4 million rubles, while its market value could reach 100 million rubles, according to Director of NEO Center's Business Appraisal Department Yekaterina Grigoryeva. (Debts Worse than Shares).

The amendments, proposed to the Law on the Turnover of Medicines by the United Russia party, suggest that packaging will have special markings, confirming that the medicines comply with the safety and quality standards, and obliging pharmacies to obtain equipment to check whether the markings are not fake. This will hardly solve the problem, but will most probably push up prices for medicines, market players think. (An Exam for Medicines).

Vnesheconombank, which has a 49.5% stake in the Hungarian air company Malev, has agreed to part with the stake. Almost 95% of the air carrier will go to the Hungarian government, according to an agreement between VEB, the Hungarian government, Malev and its shareholder, AirBridge (in which VEB has a 49.5% stake). Hungary will buy out the air carrier's additional share issue worth 25.2 billion forint ($127 million), the country's Finance Ministry has reported. Part of the stake will be bought for cash and the other part by way of settling Malev's debt to the budget. AirBridge's stake in the air carrier will contract from 99.95% to 5% (Malev Flies Away, see also Kommersant, Page 9. Malev Performs Return Flight).

KOMMERSANT

The government remains undecided on the list of nominees for the board of directors of Rosneft (RTS: ROSN). Deputy Prime Minister Igor Sechin, responsible for the fuel and energy complex, does not think there is any sense in changing the current board of directors. Meanwhile, the list, proposed by the Economic Development Ministry, does not include the current member, head of Surgutneftegaz (RTS: SNGS) Vladimir Bogdanov. Prime Minister Vladimir Putin will have the final say. (Page 11. Igor Sechin Doesn't Want to Lose Vladimir Bogdanov).

The Baltic countries, following the example of major European consumers, have asked Gazprom (RTS: GAZP) to review the structure of prices for Russian gas. Lithuania, which buys Russian gas for $320 per 1,000 cubic meters, has asked Gazprom to deliver gas partly at a spot price of $200 per 1,000 cubic meters. Gazprom argues that no changes in the price are envisioned for 2010 in the agreement with Lithuania. Perhaps the Russian gas monopoly's position will be softened by

Lithuania's Constitutional Court, which has acknowledged the legality of Gazprom's deal to acquire 37% in the Lithuanian gas pipeline system Lietuvos Dujos. (Page 1, Lithuania Expects European Discounts from Gazprom).

France's Alstom this week is expected to sign a deal to buy a 25% stake in Transmashholding (RTS: TRMH), Russia's major producer of railway machinery. This is expected to give Alstom access to Russian Railways' orders and Transmashholding - access to the French concern's intellectual property. (Page 11, Alstom Buys Into Transmashholding).

National Economic Trends

Bloomberg: Russian Manufacturing Expanded for Second Month in Februaryhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aS1tVzupFmlA

By Maria Levitov

March 1 (Bloomberg) -- Russian manufacturing expanded for a second month in February, signalling a “fragile” recovery, as new orders continued to grow, while employers shed more jobs.

VTB Capital’s Purchasing Managers’ Index slipped to 50.2 last month from 50.8 percent in January, the bank said in an e- mailed statement today. The index, which is based on a survey of 300 purchasing executives, shows a contraction with a figure below 50 and growth with a figure above 50.

“A marginal expansion in activity across the sector for the second month in a row” was driven by new orders and higher output, Dmitry Fedotkin, an economist at VTB Capital in Moscow, said in the report. “The employment situation deteriorated further as respondents claimed improvements in business activity were too weak to justify new hiring.”

Improving global sales are prompting companies including OAO Mechel, Russian billionaire Igor Zyuzin’s coal and steel producer, and OAO Novolipetsk Steel, Russia’s biggest steelmaker by market value, to raise production.

Industrial output and retail sales boosted gross domestic product, which expanded a seasonally adjusted 0.3 percent in January from the previous month, Deputy Economy Minister Andrei Klepach said on Feb. 25. Frail investment demand and rising unemployment remain “weak links” of Russia’s economic recovery, he said.

Rising Unemployment

Employers cut jobs at the fastest rate since last August and inflationary pressures built up, according to VTB. The unemployment rate rose to 9.2 percent last month, almost matching a credit crisis peak of 9.4 percent a year earlier, according to the Federal Statistics Service.

The average costs for manufacturers rose for a 13th month in February, driven by energy, utilities, transportation and metals prices, the report said. The rate of input cost inflation was the highest since July 2008, according to the report.

Manufacturers expanded input purchases at a faster pace in February, posting the highest rate since March 2008. Still, the overall level of input stocks in the sector continued to decline.

The PMI is derived from indexes that measure changes in output, orders, employment, suppliers’ delivery times and stocks, according to VTB.

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

Last Updated: March 1, 2010 00:00 EST

Prime-Tass: PMI: Recovery of Russian mfg sector remains fragile in Febhttp://www.prime-tass.com/news/show.asp?topicid=68&id=473916

MOSCOW, Mar 1 (PRIME-TASS) -- Business conditions in Russia’s manufacturing sector improved further in February, but the pace of growth remained lackluster, London-based VTB Capital said in its PMI report released Monday.

Output rose for the seventh successive month, although new orders increased at a weaker pace and jobs were shed at the fastest rate since last August, the bank said. Meanwhile, cost inflationary pressures built up.

The seasonally adjusted headline PMI, a composite index that reflects changes in new orders, output, employment, supplier performance, and input stocks in the manufacturing sector, posted above the no-change mark of 50.0 for the second month running in February. However, the latest figure of 50.2, down from 50.8 in January, signaled only a marginal overall improvement in operating conditions. The fall in the PMI mainly reflected weaker growth of both output and new orders, and a faster drop in employment, VTB Capital said.

“February’s Manufacturing PMI eased to 50.2 from 50.8 the month before but continued to point to a marginal expansion in activity across the sector for the second month in a row. The headline number was supported by the output (52.0) and new orders (51.7) sub-indices although both have posted weaker results than in January,” Dmitri Fedotkin, an economist at VTB Capital, commented on the survey.

“The employment situation deteriorated further as respondents claimed improvements in business activity were too weak to justify new hiring. Costs continued to rise amid energy and metals prices as well as utilities and freight charges, but producers were able to pass some of the costs on to end customers,” Fedotkin also said.

The VTB Capital Manufacturing PMI is derived from a monthly survey of 300 purchasing executives in Russian manufacturing companies and has been conducted since September 1997.

VTB Capital plc is a London-based subsidiary of Russia's second largest bank, government-controlled VTB Bank. VTB Capital was previously known as VTB Bank Europe.

End

01.03.2010 08:00

Itar-Tass: Russia to take foreign loans in 2010 – Kudrin

http://www.itar-tass.com/eng/level2.html?NewsID=14869765&PageNum=0

27.02.2010, 20.23

SOCHI, February 27 (Itar-Tass) -- Russia’s Finance Minister Alexei Kudrin confirmed on Saturday that in 2010 Russia would take external loans.

“We are preparing for this now,” he said following a meeting on the Russian Railways Company's investment programme. “A working group will work out all details.”

Some companies chosen on a conptested basis also take part in the working group.

“We shall have a road show to present the parameters and details of the loans,” he said.

The minister did not specify when this event will take place.

Earlier, Deputy Finance Minister Dmitry Pankin said that after a ten-year break Russia was planning to place dollar and euro-denominated sovereign bonds in international markets again. Under this year's budget Russia is to borrow 17.8 billion dollars.

RBC: Russia piles up bank assets in 2009

http://www.rbcnews.com/free/20100301113412.shtml

      RBC, 01.03.2010, Moscow 11:34:12.The assets of the Russian banking system climbed 5 percent in 2009 compared to a year earlier and stood at RUB 29.43 trillion (approx. USD 282.64bn) as of January 1, 2010, the Bank of Russian indicated in its documents today.

      Loans, deposits and other deposited funds inched down 0.2 percent to RUB 19.847 trillion (approx. USD 662.67bn). The amount of loans extended to legal entities edged up 0.25 percent to RUB 12.542 trillion (approx. USD 418.76bn). Overdue debt under these loans stood at RUB 762.5bn (approx. USD 25.46bn), or about 6.1 percent. Loans to individuals shrank 11.1 percent to RUB 3.574 trillion (approx. USD 119.33bn), with overdue loans at RUB 243bn (approx. USD 8.11bn), or 6.8 percent.

      Investments in securities skyrocketed 82.2 percent to RUB 4.309 trillion (approx. USD 143.87bn).

Russia Today: Russia to support low-cost mortgage lendinghttp://rt.com/Business/2010-02-27/russia-support-mortgage-lending.html/print

27 February, 2010, 12:03

Russian Prime Minister Vladimir Putin announced that the state will launch a program to support mortgage lending for low-cost new homes.

Putin said that program is to be launched in April and is among one of the top priorities on the national level.

“I think with the help of state resources we can and we must encourage demand for low-cost affordable housing. That is why the standard mortgage loans will be limited to 3 million Roubles in Russia’s regions and to 8 million in the Russian mega-cities of Moscow and St. Petersburg.”

Putin said that loans would only be given out for purchasing apartments in new buildings.

“Nowadays, new apartments are much lower in cost than housing on the secondary market, so this way we will support the housing construction industry and encourage new construction projects.”

The prime minister said that banks will be given additional help to facilitate the loans.

“To be able affordable loans, commercial banks will be granted additional financial aid both from the VEB bank and from the Sovereign Wealth Fund to the total amount of 250 billion Roubles.”

However, Putin warned that “to a certain degree, it is artificial support and artificial long-term money.”

According to the plan, interest rates would be capped at 11% and that additional installments are to be only 20% of the cost of the apartment.

“According to estimations, such conditions will considerably extend the circle of potential borrowers of mortgage loans encompassing those who are willing to take a loan but cannot afford to pay the current 14-15% interest which is too high.”

Putin said that due to the recession banks were unable to make such loans and that construction was slowed causing unaffordable rates for borrowers.

“Banks were deprived of access to the so-called long-term money. Although, frankly speaking, we actually never had such money, there was just a tendency for creating this resource.”

Business, Energy or Environmental regulations or discussions

Bloomberg: Lukoil, Norilsk Nickel, Polyus Gold: Russian Equity Previewhttp://www.businessweek.com/news/2010-03-01/lukoil-norilsk-nickel-polyus-gold-russian-equity-preview.html

March 01, 2010, 12:52 AM EST

By Lucian Kim

March 1 (Bloomberg) -- The following companies may be active in Russian trading. Stock symbols are in parentheses and share prices are from the previous close of trading in Moscow.

The 30-stock Micex rose 0.7 percent to 1,332.64 at the close of trading in Moscow. The dollar-denominated RTS Index increased 1.5 percent to 1,410.85.

OAO Lukoil (LKOH RX): Crude oil rose after a report showed the U.S. economy grew at a 5.9 percent annual rate in the fourth quarter. Shares in Russia’s biggest non-state oil producer slipped 0.3 percent to 1,575.22 rubles.

OAO GMK Norilsk Nickel (GMKN RX): Copper prices rose, capping the biggest monthly gain since August. Shares in Russia’s largest miner advanced 1.6 percent to 4,594.77 rubles.

OAO Polyus Gold (PLZL RX): Gold prices may gain as investors seek a hedge against inflation and volatile markets, said Graham Tuckwell, chairman of ETF Securities Ltd. Shares in Russia’s biggest gold producer increased 0.6 percent to 1,470.58 rubles.

--Editor: Carey Sargent

-0- Mar/01/2010 05:00 GMT

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net

To contact the editor responsible for this story: Chris Kirkham at ckirkham@bloomberg.net

The Moscow Times: Watchdog Proposes Formula http://www.themoscowtimes.com/business/article/watchdog-proposes-formula/400651.html

01 March 2010

The Federal Anti-Monopoly Service proposed using net backs, which are prices excluding export duties and transportation costs, to determine how much domestic oil products should cost as it seeks to rein in fuel costs.

Wholesale prices for oil products exceed comparable prices on the global markets by as much as 20 percent, based on analysis using three variants of net back prices, the service said Friday in a statement on its web site. The proposals have been sent to the government, it said.  

(Bloomberg)

Financial Times: Russia threatens ban on Austrian Airlineshttp://www.ft.com/cms/s/0/0e9a6fd2-24d3-11df-8be0-00144feab49a.html

By Pilita Clark in London

Published: March 1 2010 02:00 | Last updated: March 1 2010 02:00

Moscow has threatened to ban Austrian Airlines flights into Russia after the carrier's take-over by Germany's Lufthansa, raising concerns about future airline consolidation in Europe.

In a move that revives questions about Russian economic nationalism, Moscow has been pressing Vienna to prove the airline is still Austrian.

The issue has arisen because of conditions in the so-called bilateral air services agreement between the two countries, one of about 3,500 agreements worldwide that determine which airlines can fly where and who must own them. When airlines merge, the flying rights in these agreements are not automatically transferred to the newly combined company.

"Bilaterals are always a trade-off between the states concerned," said Hugh O'Donovan, barrister and leading aviation lawyer at Quadrant Chambers in London, "and the nationality provisions may be raised by a state simply to seek advantage for its own carriers, or to seek something in return from the other state, such as reciprocity or other concessions.

"So long as nationality provisions are contained in bilaterals they place a major constraint on cross-border airline consolidation and investment generally."

Giovanni Bisignani , chief executive of the International Air Transport Association, said: "Brands not flags must define our business."

Lufthansa declined to comment. Under its takeover of Austrian Airlines, a 100 per cent Lufthansa-owned subsidiary based in Austria owns 49.8 per cent of a separate company that has 96.55 per cent of Austrian Airlines' shares. The remaining 50.2 per cent is owned by a private foundation, registered and domiciled in Austria.

The Moscow Times: Hungary Buys Back Stake In Airline Malev From VEB http://www.themoscowtimes.com/business/article/hungary-buys-back-stake-in-airline-malev-from-veb/400629.html

01 March 2010Reuters

BUDAPEST — Hungary will almost fully renationalize air carrier Malev under a deal signed by the government and Malev's Hungarian and Russian shareholders in a bid to save the airline, the government said Saturday.

Under the agreement, reached after lengthy negotiations, the Hungarian government will raise Malev's capital by 25.2 billion Hungarian forints ($127.8 million) by injecting cash into the firm and converting its debts into equity.

This will result in the state holding a 95 percent stake in the airline, while the Russian shareholder AirBridge will have a 5 percent stake, the finance ministry said in a statement.

"The Hungarian state taking a majority stake [in Malev] will create the possibility for the company to operate in a financially stable way," the ministry said.

The two governments have been in talks for almost a year over loss-making Malev, owned by AirBridge in which Russia's state-owned Vneshekonombank holds 49 percent, with the rest of the shares held by Hungarian executive Magdolna Kolto.

Hungary's government said last year that it planned to convert some of its financial guarantees into a stake in Malev.

"Vneshekonombank will remain one of the biggest creditors of the Hungarian airline," the statement said adding that VEB will pay Hungary a 32 million euro bank guarantee and will also convert Malev's loans to more favorable terms.

The government said it aimed for a solution for Malev that would be in line with domestic and European Union regulations.

"The strong restructuring program started at the company must be continued partly to ensure that the financial rescue of the firm costs as little in taxpayers' money as possible, and also to ensure that the EU would not regard the Hungarian state's role as prohibited state subsidies," the statement said.

The aim of the restructuring is that Malev should become profitable by 2012 at the latest, and this will necessitate further layoffs and a renegotiation of suppliers' contracts, the ministry said.

Hungary sold off Malev to AirBridge in 2007. Malev has been struggling with financing difficulties and received capital injections in the past years.

Budapest Business Journal: Malév renationalizedhttp://bbjonline.hu/?col=1000&id=51907

Monday 8:08, March 1st, 2010

The state of Hungary has reached an agreement to acquire a 95% stake in national carrier Malév through a HUF 25.2 billion capital raise, including cash and the conversion of debt, the Finance Ministry told MTI early Saturday.

Under the terms of the agreement, reached between Finance Minister Péter Oszkó, representatives of Russia’s state-owned Vnesheconombank and former Malév majority owner AirBridge late Friday evening, AirBridge will retain a 5% stake in Malév.

The Finance Ministry said the change of ownership was being carried out through a reduction in Malév’s equity followed by a capital raise.

Vnesheconombank remains one of Malév’s biggest creditors, but the agreement “fundamentally changes” the bank’s role from that of owner to creditor, the ministry said.

The agreement is the result of a series of long negotiations, the ministry said. In the course of the talks, the state always aimed to “to assert the interests of the country, ensuring the continuation of the operability of the national carrier” while complying with domestic and European Union regulatory criteria.

The ministry said the National Asset Management Company (MNV) initiated a call-down of a €32 million bank guarantee undertaken by Vnesheconombank and the bank is fulfilling this obligation. As part of the agreement, the bank is swapping Malév loans undertaken under relatively unfavorable conditions for more favorable loans with lower rates.

The agreement opens the way for the creation of financial stability for the operation of the airline, but Malév’s ongoing restructuring program must be continued in order that the bailout of the company use the least taxpayer money as well as to prevent the EU from assessing the measure as prohibited state support.

The aim of the program is to make Malév profitable by 2012 at the latest. “In order to achieve this, further tough measures can be expected in the operation of the company including, for instance, restructuring of the network, further layoffs, renegotiation of agreements with trade unions, and renegotiation of supplier contracts,” the ministry said.

Martin Gauss will continue as CEO of Malév. (MTI-Econews)

Bloomberg: Southeast Asia May Become Key Russian Grain Buyer, Union Sayshttp://www.businessweek.com/news/2010-02-28/southeast-asia-may-become-key-russian-grain-buyer-union-says.html

February 28, 2010, 9:10 PM EST

By Luzi Ann Javier

March 1 (Bloomberg) -- Russia, the world’s third-largest wheat exporter, plans to ship 1 million metric tons of grains to Southeast Asia this year as it aims to become one of the top sellers to the region, an executive said.

“It’s going to be a main market for us in the next five years,” Andrey Skrurikhin, a director of the Russian Grain Union, said in an interview on Feb. 26 in Singapore, where he was attending a grain conference.

The Siberian Agrarian Holding Group of Companies aims to double its wheat output to 1 million tons in the next two years to boost shipments, said Skurikhin, who is also the deputy director general at the company.

Russia is seeking to increase exports to Southeast Asia as part of an effort to expand its share of the global grain trade. The region accounts for at least 10 percent of the 121.6 million tons of global wheat imports forecast by the U.S. Department of Agriculture this year.

About 67 percent of Russia’s wheat exports are shipped to Egypt, Turkey, Saudi Arabia, Syria, Pakistan, Azerbaijan and Iran, according to the grain union.

Russia is also seeking access to China’s grain and oilseed market, aiming to ship as much as 10 million tons of wheat, soybeans and barley a year to the Asian nation by 2030, Viktor Pokotilov, general director at Berkut Co. Ltd., a private company that manages some of the nation’s ports, said in a separate interview in Singapore on Feb. 26.

--Editors: Matthew Oakley, Richard Dobson.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

The Moscow Times: Mechel May List Shares 01 March 2010

Mechel is considering listing its preferred shares on an exchange, Interfax reported Saturday, citing an unidentified person familiar with the matter.

Mechel agreed to acquire coking-coal assets of Bluestone Coal in April for $436 million in cash and 83.3 million preferred shares and list the stock on an exchange as soon as market conditions become favorable, the news service said. The company hasn’t made a final decision, Interfax said.

(Bloomberg)

MARCH 1, 2010

Wall Street Journal: Russian Firm Bets on Online Revolution http://online.wsj.com/article/SB10001424052748703787304575075553169935606.html?mod=WSJ_business_whatsNews

By WILLIAM LYONS

On the last day of the Soviet Union's existence Yuri Milner caught a cab to Red Square. It was a chance to witness a little bit of history. Earlier that day it had been announced that the Soviet red flag, bearing the hammer and sickle, was to be lowered over the Kremlin and in its place the Russian Federation's tricolor raised.

"I thought for such an historic occasion there would be hundreds of thousands of people present," he says. "But when I arrived the square was virtually empty. So there we were,

just a few hundred of us watching the passing of one of the most significant periods in Russian history."

With that he explodes into laughter, an infectious fit of Russian giggles.

It's nice to see that nearly 20 years later he can still see the funny side. At the time one suspects he wasn't laughing as hard. Having spent 15 years training to be a physicist, Mr. Milner's lifetime ambition of a career at the Russian Academy of Sciences was shattered.

"Personally it was a crisis. I was a young man and I had to change my profession. I realized that everything I had been working toward was no longer relevant."

Today his line of business couldn't be more relevant to the age. His Moscow-based Internet investment company Digital Sky Technologies, or DST, is aimed at providing people just the sort of information that could have spread news of the ceremony at Red Square back in 1991 quickly and without the need of a media organization.

Since 2005, DST has amassed $1.5 billion worth of stakes in 30 countries across eastern Europe and Russia. Last year Mr. Milner flew to California to meet with Facebook Chief Executive Officer Mark Zuckerberg, paving the way for a €141.6 million deal that saw him take a 2% stake in the social-networking firm. A stake he has subsequently grown to just under 5% today.

In December, his profile was raised further when DST led a $180 million round of funding in social-gaming site Zynga. But amid the growth, there have been failures. Mr. Milner suffered in the dot-com crash of the late 1990s when his online investments, including a book retailer and auction site, failed to takeoff. He has, he says, experienced three crises: the collapse of the Russian economy in 1998, the bursting of the dot-com bubble in 2001 and the recession of 2008.

When we meet, he is in London for another round of fund-raising from institutional investors. Although coy about how much he is raising, he says he expects to announce another deal by the middle of the year.

"We're into late-stage Internet investment," he says. "More often than not if the companies are successful and growing fast there is a cost of going public too early. And some of the founders of these big successful companies feel they need an additional few years to really focus on the product rather than being a public company. That's where we come in."

The Facebook deal is indicative of DST's belief in social networking. He counters his critics who contend Facebook's popularity won't necessarily be matched by future profits by saying that revenue will come from three areas: targeted advertising, small user payments for premium content and the monetization of business online.

"The next decade will be transformational for the Internet," he says. "The last 10 years have been all about search; companies such as Google Inc. and Yahoo Inc. have benefited from this.

"But the next major trend is social. In the next three years, everything on the Internet will be becoming social, there will not be a site that will not be social, which will allow advertising to become much more targeted."

DST's guiding principle is that the communities built by sites such as Facebook are just the beginning. As these online communities continue to grow, their members will share more and more information with each other.

If Mr. Milner is right, it will significantly change the landscape as companies create applications based on consumers' purchases on the recommendation of their online social networks.

"The polling of Internet users shows that friends' recommendations are the most reliable driver behind purchasing decisions," he says. "Right now that market is largely untapped. Facebook and other social networks can allow that to happen."

But Mr. Milner has been wrong before. The son of an economist and doctor he was born in Moscow in 1961 and studied theoretical physics at Moscow State University, where he did research in elementary particles at the institute of physics in the Russian Academy of Sciences.

As Russia emerged into the private sector instead of privatizing utility companies, Mr. Milner headed to the U.S. to study at the Wharton School of Business at the University of Pennsylvania, after which he spent three years at the World Bank working on Russia's emerging financial sector.

It was, he cheerily admits, a bit of a lost opportunity. "At that time I was seeing the world as a scientist," he says. "I was seeing what I can do using my scientific skills."

He returned to Russia in 1996 where he set up a brokerage and investment-banking arm of Menatap, a bank founded by Mikhail Khodorkovsky. Two years later, after a stint in private equity, he stumbled across some Internet research by Morgan Stanley analyst Mary Meeker.

With Gregory Finger, a friend who had previously headed the Moscow office of the NCH hedge fund, they set about investing in Russia's burgeoning Internet scene.

They struck just before the dot-com bubble burst. Within 12 months a number of their ventures had run into serious financial difficulties including e-mail site Mail.ru. After firing 80% of the staff, he ran the company for two years until it broke even.

During that period, he learned that he wasn't suited to running a technology company. In 2005 Messrs. Finger and Milner set up DST and began courting backers for another round of investments.

People familiar with the matter say investors in DST now include Goldman Sachs, Renaissance Capital and Tiger Global. Alisher Usmanov, the Russian steel tycoon, also has a stake in the mid-30% range.

If the first dot-com boom came out of the U.S., it is to Asia and Russia that DST is now looking.

"The U.S. was the first inspiration," he says. "The second inspiration is Asia, built around business models such as multiplayer games that are based on user payments rather than advertiser model. The online-gaming market in China is very big business."

Write to William Lyons at william.lyons@wsj.com

Barentsnova: Murmansk gets 16% of Russia’s fish caughthttp://barentsnova.com/news/show/1603

2010-03-01

Murmansk region was calculated as the biggest fish/sea food producer in the North-West of Russia. 16% of Russian fish is caught in Murmansk.

Russian fish industry is 98% maintained by fish caught in Russia. In terms of geography, the biggest share in fish production goes to Far-East federal area (68%); while North-West produces 28% of Russian fish, informs Nord-News referring to Rosrybolovstvo. The Murmansk region namely holds 16% of all-Russia fish production.

The biggest caught volumes of fish stands after Alaska Pollack in Russia; 2008 had it 1,3 million tons.

This year, the fish quota misbalance in the northern seas will be expectedly adjusted by expansion of Murmansk fishing quota for cod (800 tons more) and haddock (200 tons more). The fish will be delivered from coast waters. The final decision should be taken by Rosrybolovstvo in the nearest future.

Activity in the Oil and Gas sector (including regulatory)

RIA: Russia lowers oil export duty to $253.7 per ton from March 1 http://en.rian.ru/business/20100301/158048632.html

11:0201/03/2010

Russia is lowering oil export duty on its Urals blend from the current $270.7 to $253.7 per metric ton from March 1, following trends on global oil markets.

Alexander Sakovich, head of the ministry's consolidated analysis department, earlier said the average oil price was $72.31 per barrel from January 15 to February 14.

Export oil duty from March 1 will therefore equal $253.7 per metric ton, duty on light petroleum products will fall to $183.2 per ton from the current $194.7 per ton, and duty on heavy petroleum products to $98.7 per metric ton from the current $104.9 per metric ton.

Last year, the government moved from a bimonthly to a monthly duty adjustment procedure to respond more swiftly to changes in world oil prices.

MOSCOW, March 1 (RIA Novosti) -

Itar-Tass: Russia reduces oil export duty to $254 per tone

http://www.itar-tass.com/eng/level2.html?NewsID=14872961&PageNum=0

01.03.2010, 08.23

MOSCOW, March 1 (Itar-Tass) - Russia reduces an export duty on crude oil from 270.7 U.S. dollars per tonne to 253.6 U.S. dollars per tonne as of March 1.

Export duties on light oil products decrease from 194.7 U.S. dollars to 183.2 U.S. dollars per tonne, and on dark oil products – from 104.9 U.S. dollars to 98.7 U.S. dollars per tonne.

At the same time zero duties on Eastern Siberian oil remain unchanged. A zero duty on thirteen oil fields in Eastern Siberia was introduced on December 1, 2009.

As of January 19, 2010, the zero duty encompassed twenty-two oil fields.

Earlier Russian Energy Minister Sergei Shmatko said the ministry considers it necessary to maintain the mechanism of zero duties in Eastern Siberia during the active phase of the region’s development.

RBC: Russia, Kyrgyzstan sign gas cooperation accord

http://www.rbcnews.com/free/20100227173216.shtml

      RBC, 27.02.2010, Moscow 17:32:16.Russian Energy Minister Sergei Shmatko and Kyrgyzstan's Prime Minister Daniyar Usenov have signed an agreement on cooperation in the gas sector. The document was signed during the meeting of the Russian-Kyrgyz intergovernmental commission on bilateral cooperation.

      Usenov indicated that the two countries were currently holding consultations on Gazprom's potential participation in hydrocarbon projects in Kyrgyzstan, as well as in the privatization of Kyrgyzgaz.

24.kg: Kyrgyzstan and Russian to investigate hydrocarbons market http://eng.24.kg/business/2010/03/01/10493.html

01/03-2010 10:07, Bishkek – News Agency “24.kg”

Kyrgyzstan and Russia have agreed upon an investigation of the Kyrgyz hydrocarbons market. The statement was voiced by the Prime-Minister Daniyar Usenov at the session of Kyrgyz-Russian Inter-governmental Commission on trade, economic, science, technical and humanitarian cooperation on 27 February, 2010 in Moscow.

By the Minister: Russia for the first time mentioned the need to explore hydrocarbons market with Belarus. “Russia has export duties of oil products for far-abroad countries that are not applied to post-soviet countries. “It means that post-soviet countries buy gasoline at a low price than other states do”, Usenov said.

The Prime-Minister underlined that Russia suspects Belarus of reexportation of oil products provided by the Russian Federation to the third states. Later the same happened with Kyrgyzstan. Russia does not exclude that Kyrgyzstan might also re-export some part of oil products. “We have no such data, that is why we have decided to create a unified group to investigate the question”, the Prime Minister said.

UpstreamOnline: TNK-BP sees 1-2% output boosthttp://www.upstreamonline.com/live/article207657.ece

Russian joint-venture TNK-BP expects 2010 hydrocarbon output to rise by between 1% 2% excluding the Slavneft business, chief operating officer Bill Schrader said.

Upstream staff  01 March 2010 06:04 GMT

"Our target this year is for growth between 1% and 2% (for hydrocarbon output)...excluding Slavneft," Schrader told Reuters in an interview.

In 2009, oil and oil equivalent output was 1.69 million barrels per day.

The executive at the company, which is half owned by supermajor BP, also stressed that the company had recorded a profit in 2009 despite a number of business and legal disputes.

"There are rules and regulations you have to follow to operate in this country," the executive said,

"The rules we have here are understandable and we can operate in this environment profitably and you will see it in the announcement of 2009 results.

TNK-BP is scheduled to release its financial results for 2009 later today.

The company is currently involved in a dispute over its East Siberian Kovykta gas field, with Russia's RosPrirodNadzor environmental watchdog recommending stripping TNK-BP's licence.

Schrader declined to comment on the matter.

The company was involved in a similar dispute in 2007, when it agreed to sell Kovykta to state-controlled gas transport monopoly Gazprom for around $1 billion in a deal that has thus far failed to materialise.

The following year a dispute erupted between BP and its mainly Russian partners which resulted in the departure of then-chief executive Robert Dudley.

Schrader said this dispute is in the past, and that all shareholders are united behind a single strategy.

"Now we have got a new board, independent directors...I think the company is operating very well and the shareholders dispute is truly in the past," he said.

"I think the dispute actually brought all parties closer together and 2009's performance will demonstrate that it probably has made the company stronger."

In a separate interview on Friday, TNK-BP co-owner German Khan told Reuters his company was seeking either to keep Kovykta or sell the field for around $1 billion.

Khan added that talks with Gazprom were not active and that TNK-BP is "looking for other options."

Schrader also said he is looking forward to working with new chief executive Maxim Barsky, who will join the company in 2011 and continue to pursue TNK-BP's new strategy of international and domestic expansion adopted after Dudley's departure.

"There are lots of things to work on both in Russia, around Russia and a number of CIS countries, as well as opportunities internationally," Schrader said.

TNK-BP plans to invest $1.7 billion in two Siberian projects over the next three years, as well as $180 million in Venezuela.

The company could also form a strategic partnership with PKN in order to manage the Polish company's Mazeikiu refinery in Lithuania.

"Our business is healthy now and we are looking for opportunities for growth," Schrader said.

Published: 01 March 2010 06:04 GMT  | Last updated: 01 March 2010 06:04 GMT

Your Oil and Gas News: Investment in the Futurehttp://www.youroilandgasnews.com/investment+in+the+future_46108.html

Monday, Mar 01, 2010

TNK-BP is trying to bring to 95% its level of associated petroleum gas (APG) utilization. Although the company still has almost two years to do so, the standard that is established by the government program is already complied with in some fields. Bill Schrader, TNK-BP COO, said yesterday that APG utilization projects would get $450M of investment this year and the total volume of investment would approximate $1.8B.

The company intends to continue implementing its program but advocates a dialog with the Government with regard to its new projects.

TNK-BP is among the industry leaders in APG utilization. The company utilized 79% of its produced APG (9.7 Bcm) and flared ca. 2.6 Bcm in 2008. According to Evgeny Bulgakov, TNK-BP Vice President, who talked to Vremya Novostei, the company managed to increase the level of utilization to 84% last year. By 2012, it intends to rise to the 95% utilization target set by the Government. The company is implementing several associated gas processing projects simultaneously in Nizhnevartovsk, which is TNK-BP’s largest production region. The level of APG utilization in the key Van-Yoganskoe Field will reach 95% as early as this year thanks to commissioning of the first stage of a gas turbine power plant. TNK-BP established a joint venture with SIBUR, Yugragazpererabotka, in 2007. The plant capacity is ca. 7.7 Bcm and may be increased by 0.8 Bcm per year. Since 2008, the company has a 25% interest in Nizhnevartovsk GRES, which takes an almost extra 3 Bcm a year to that volume.

According to Schrader, the holding spent $700M for all of its APG utilization projects. Starting from this year, the ‘investment in the future’ will amount to $1.1B. Therefore, the total cost of the TNK-BP program will reach ca. $1.8B.

However, this is far from the final figure since TNK-BP has no complete understanding of how much it could cost to implement the program in the new fields where the company has just started working. “Our new projects are a special topic”, Schrader says. — “We need years to understand how much associated gas we have and how to utilize it in the fields we are going to develop. We need to have a very clear understanding of the project and know the subsurface reservoir structure completely.

Otherwise, we cannot make any decisions. Such is the situation in Yamal, for instance”. So, the Chief Operating Officer believes they need a dialog with the Government on specific projects. “One cannot invest in something they do not understand. We are holding relevant discussions with the Government, and it understands the reality of doing business in this country as clearly as we do”, Schrader said.

It cannot be ruled out that companies, including TNK-BP, may seriously amend their plans for projects in East Siberia, which is becoming Russia’s most important oil region. According to Schrader, the scope of investment in Verkhnechonskoe Field where ca. 3 Mt of oil will be produced this year was determined on the basis of export duty nullification that was announced long ago. However, this idea is known to be vigorously criticized by the Ministry of Finance, so there is a probability that the zero duty decision will be cancelled. “We invest in East Siberia just considering that the tax and duty will be nullified. If, after all, they decide to reject export duty nullification, our project funding plans will be revised accordingly. Unfortunately, the Government is still unclear about it”, Schrader said.

Source: TNK-BP

Bloomberg; TNK-BP Seeks ‘Game Changing’ Unconventional Gas in East Europe http://www.bloomberg.com/apps/news?pid=newsarchive&sid=afJ0tFEdzn3A

By Anna Shiryaevskaya

Feb. 27 (Bloomberg) -- BP Plc’s Russian venture, TNK-BP, is considering unconventional gas opportunities in eastern Europe, as hard-to-extract deposits start to “make sense” with available technology and pricing conditions.

“That’s a game changer,” Chief Operating Officer Bill Schrader said in an interview. “It will have an impact globally. As economic activity recovers, that gas will be developed.”

TNK-BP, owned equally by BP and a Russian group of billionaires, is looking at former Soviet republics “where we can bring technology that we have, or even BP has, in exploiting tight gas,” Schrader said. Ukraine and other eastern European countries are possible areas, and the company is assessing the geological potential, he said.

BP, Europe’s second-largest oil company, said in November it plans to produce the world’s first coal-bed methane for liquefaction with Italy’s Eni SpA. In 2008, the British oil producer bought Arkansas shale assets from Chesapeake for $1.9 billion and assets in Oklahoma for $1.75 billion.

Record prices for natural gas pushed the U.S., the world’s biggest energy consumer, to tap unconventional sources of the fuel, Schrader said. U.S. success in extracting gas from shale, or rock formations, has spurred interest in Europe, which may compete with liquefied natural gas, or LNG, and pipeline supplies.

TNK-BP’s gas output is mostly a byproduct of crude oil production, as its natural-gas developments in Russia are restrained by access to OAO Gazprom’s pipeline network.

Strategic Sense

Gas makes up about 12 percent of TNK-BP’s total production, Schrader said in the interview late yesterday on a flight to Moscow from Nizhnevartovsk, the western Siberian region that accounts for about 51 percent of the company’s crude output.

“We would like to do more gas,” Schrader said. “We would like to do it even outside Russia where the technology and the experience we have actually make strategic sense.”

Potential gas projects will depend on the cost of access, operating environment and available connection to customers, according to Schrader. While investors seek to develop cheaper resources first, it is important to look at the economics of delivering the fuel to the market, he said.

European shale could be sufficient to displace the equivalent of about 20 million tons a year of LNG by 2015 and about 60 million tons a year of capacity by 2020, JPMorgan Chase & Co. said in a report on Feb. 9.

TNK-BP plans to produce about 11.6 billion cubic meters of gas this year. Of that, only 2.7 billion cubic meters will be produced at its ZAO Rospan International natural-gas unit. That is the volume granted by Gazprom in the Russian pipeline network. TNK-BP could pump 3.2 billion cubic meters this year while the potential is estimated as much as five times higher, Schrader said.

“The cost curve on gas is very interesting,” Schrader said. “It goes from very inexpensive, delivered in terms of costs to producer, up to something quite high for LNG that moves around the world. If you can break into that curve somewhere, you are in the business.”

For Related News and Information:

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

Last Updated: February 27, 2010 07:04 EST

Peace FM Online: Lukoil, Vanco Make ‘Significant’ Oil, Gas Discovery in Ghana

http://elections.peacefmonline.com/politics/201003/39328.php

AO Lukoil , Russia’s second-biggest oil producer, and closely held Vanco Energy Co.

made “a significant” oil and gas discovery off Ghana.

The partners together with Ghana National Petroleum Corp. drilled a well at the Dzata field of the Cape Three Points deep- water block in the Gulf of Guinea, Moscow-based Lukoil said today in a statement. The Dzata-1 well, drilled to a depth of about 4,500 meters (14,500 feet) tapped a 94-meter-thick hydrocarbon column.

“The primary reservoir sandstone contains gas and light oil,” Lukoil said. “The newly discovered hydrocarbon reserves are assumed to be quite significant.” Ghana is set to become one of Africa’s newest oil exporters in late 2010 when production begins at the Jubilee field, which has potential resources of as many as 1.8 billion barrels, according to Tullow Oil Plc, its operator. Jubilee is located about 70 miles from Lukoil and Vanco’s prospect.

Lukoil plans to drill three exploration wells offshore Ghana and neighboring Ivory Coast, Chief Executive Officer Vagit Alekperov said in April.

Russia Today: Use of wasted gas could save billionshttp://rt.com/Business/2010-03-01/wasted-gas-oil-association.html/print

01 March, 2010, 10:18

Russia says its oil companies could save more than 13 billion dollars a year, if they didn’t waste associated gas, a by-product of crude production. But some firms are starting to find ways round the problem.

Estimates of how much gas is wasted range from 14 billion to over 50 billion cubic meters.The government, hungry for budget revenues, will no longer tolerate such waste and has set a deadline of 2012 to capture 95 percent of the fuel.

Licenses could be revoked if the target is not meet, which could prove to be a formidable task, says Thomas Quiagley, Vice President of the West Siberia Gas Department for TNK-BP.

“It will be very challenging. We will be there or thereabouts. Whether we will actually meet the 95 percent, I’m not sure at this stage. We are investing a lot of time and money in the associated gas utilization.”

According to the Energy Ministry, in 2008 Surguneftgas was already using 95% of the gas. Privately run Lukoil and TNK-BP were using more than 70%, but Gazpromneft was still burning off more than half.

One way that oil companies have found to off-set the cost of capturing gas is through alliances with power generators, says Quigley.

“We have associated petroleum gas from our oil fields in this region. It will be processed and then we will supply all of the gas to Nizhnevartovsk powerplant.”

It’s a win-win solution that also keeps the government happy, says Roman Tumasev, Deputy General Director of Siburtyumengaz.

“Sibur has formed a Joint venture with TNK-BP. This plant processes some 9.5 billion cubic meters of associated petroleum gas a year. All dried gas goes to TNK-BP, and hydrocarbon liquids go to SIBUR and are used to produce petrochemicals.”

Using flared gas to produce electricity or to supply gas processing plants remains the most economic option.

Consultants from PFC Energy suggest an 80% cut in flaring could generate up to $7 billion in annual revenue.

Gazprom

RBC: Turkey enjoys Gazprom gas price reduction

http://www.rbcnews.com/free/20100227113610.shtml

      RBC, 27.02.2010, Moscow 11:36:10.Gazprom has lowered its price for gas by 6.5 percent for Turkey, the RBC Daily newspaper reported today. The Russian natural gas monopoly has also written-off the country's debt for purchasing less gas than was contracted in 2009. Ankara is expected to purchase 19bn cubic meters of gas from Gazprom at $330 per 1,000 cubic meters this year. Experts say that thanks to the discount, Turkey will save about $400m. The contract breach resulted in a debt of $160m.

      Gazprom has confirmed that certain European consumers were about to see "an adjustment of prices to fit current market conditions." At the same time, the company stressed that the new agreements did not violate long-term contracts, the 'take-and-pay' principle or the terms for setting the gas price on the basis of the price for oil.

RBC: Gazprom's European partners to get gas with discount

http://www.rbcnews.com/free/20100227145711.shtml

      RBC, 27.02.2010, Moscow 14:57:11.Gazprom has agreed to sell part of its natural gas to its largest European consumers at the prices quoted on the spot market, the RBC Daily newspaper reported today citing the company's Chairman of the Executive Committee Alexander Medvedev. Among the companies lucky enough to have received the discount are Germany's E.On Ruhrgas, Italy's ENI and France's GDF Suez.

      Gazprom's management approved changes to long-term contracts with the largest European consumers. In the next three years, the company plans to sell about 15 percent of all gas at spot market prices, which are currently nearly 25 percent lower than those cited in the contracts. Medvedev stressed, however, that in the long term, the price for gas would still be based on the price for oil. He also assured that the gas market's situation would improve in three years.

The Moscow Times: Gazprom Boosts Reserves http://www.themoscowtimes.com/business/article/gazprom-boosts-reserves/400654.html

01 March 2010

Gazprom boosted reserves of gas at the Kirinsky field off Sakhalin Island in the Far East by 33 percent to 100 billion cubic meters.

Gazprom plans to drill an exploration well at the field and a wildcat well at the surrounding Kirinsky block this year, the gas producer said. Output at the field is planned to start in 2014, Gazprom said.

(Bloomberg)

The Moscow Times: Gazprom Price Change to Last 3 Years http://www.themoscowtimes.com/business/article/gazprom-price-change-to-last-3-years/400633.html

01 March 2010The Moscow Times

Gazprom on Friday detailed the concessions it was giving to its four largest customers, saying its long-term contracts would take into account the much-lower spot price for gas for only three years.

The company said earlier last week that it renegotiated contracts with Germany's E.On, France's GDF Suez, Italy's Eni and Turkey's Botas as spot-traded gas remains about 25 percent cheaper than Gazprom's deliveries, which customers are contractually bound to buy.

Between 10 percent and 15 percent of sales will be linked to spot prices through 2012, Gazprom deputy chief Alexander Medvedev said in an interview. The rest will continue to be linked to oil prices.

"Every three years we have the right to look at prices, and what we have done today is just for a three-year period including 2010,” he said, The Financial Times reported. “We are sure that in three years the situation will be back on track.”

Gazprom has been widely criticized for being inflexible in its pricing, a policy that was believed to be one of the reasons it yielded some of its market share to competitors from Norway and Qatar. The crisis-hit demand, coupled with a surge in the production of cheap shale gas in the United States, led to an oversupply on the company's traditional market in Europe and Turkey.

Gazprom earlier said the take-or-pay condition for the contracts — a key point that allows it to plan its investment for years ahead — remained in place after the talks with customers.

Given Gazprom's record of sales last year, the company may lose $1.6 billion in revenues on exports this year alone if spot prices remain at the January level, Vedomosti reported, citing its own calculations.

Financial Times: Gazpromhttp://www.ft.com/cms/s/3/a0290dfa-24a1-11df-8be0-00144feab49a.html

Published: February 28 2010 20:35 | Last updated: February 28 2010 20:35

Who was the world’s biggest natural gas producer last year? Surprisingly, perhaps, not Russia. The US overtook it thanks to mushrooming production from “unconventional” sources, such as shale gas. Much has changed since Russia’s Gazprom monopoly talked a few years back of becoming the world’s first trillion-dollar energy company by market value.

The recession slashed European gas usage last year and weakened the medium-term demand outlook. Thanks to the shale gas boom, moreover, the US has much less need for imported liquefied natural gas than previously projected. So LNG is being diverted to Europe, sending “spot” gas prices tumbling. That threatens the formula in Gazprom’s long-term take-or-pay contracts with European customers that links its gas price to (once again robust) oil prices.

Now Gazprom has agreed to tweak some previously sacrosanct contracts for a three-year “crisis” period. Up to 15 per cent of sales to customers such as Germany’s Eon Ruhrgas, Italy’s Eni and France’s GDF Suez will be linked to spot prices. Gazprom says the temporary move preserves the “base principles” of its contracts. It touted rather more buoyant European demand forecasts at recent international investor roadshows than the multi-year supply glut foreseen by, among others, the International Energy Agency. The spot gas market, it argues, is too small to dent Gazprom’s position; shale gas production

has big environmental risks. Moscow-based VTB Capital suggests the contract changes will reduce 2010 revenues by less than  0.5 per cent.

But investors will fear the shifting pattern of demand and supply could make this renegotiation the thin end of a wedge. Meanwhile, Gazprom’s ambitions to become a significant exporter to the US have been knocked by shale gas, while hopes of becoming a big supplier to China remain as distant as ever. Gazprom must do more to convince shareholders to narrow its discount to a Russian market that is itself extraordinarily cheap.