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MOSCOW, August 24 (RIA Novosti, political commentator Peter Lavelle) - With Gazprom the likely buyer of Sibneft, beating out its arch-rival Rosneft, the question looms of how much it will pay for this major oil asset to the company's core shareholder Roman Abramovich. There is considerable political risk associated with a state-owned company paying billions of dollars to an oligarch. It must be nice being Roman Abramovich. When other oligarchs tripped up or ran afoul of the authorities, Abramovich was the oligarch everyone turned to for help. First, it was his former partner Boris Berezovsky. When Berezovsky wore out his welcome with the Kremlin, Abramovich "sorted out" some of the oligarchs' business affairs - making a nice profit in the process. When Vladimir Gusinsky ran into problems, Abramovich was asked to "sort out" his affairs in much the same way he helped Berezovsky. When Yukos and Mikhail Khodorkovsky were feeling the full weight of the state against them, Abramovich was allowed to quietly de-merge Sibneft from Yukos - waiting to sell Sibneft to another, more acceptable suitor. Sibneft's suitors have arrived. After the forced acquisition of Yuganskneftegaz from Yukos in December 2004, the newly created state-owned oil major Rosneft has made clear its intentions to expand further. National gas giant Gazprom also has ambitions to become a major player in Russia's oil patch. Now fierce competitors and political foes within the Kremlin, both Gazprom and Rosneft have expressed a strong interest in acquiring Sibneft. Abramovich could not be more delighted. Judging from the news flow over the past few weeks, it appears that Gazprom has beaten out its rival Rosneft to add Sibneft to its portfolio. With the winner in this contest all but obvious, a politically sensitive issue comes to the fore - will a Kremlin-controlled company actually pay $10-12 billion to a high-profile billionaire oligarch who lavishly spends tens of millions of dollars on an English football club and luxuries only the super-rich can afford? In the wake of the 2000-2004 "Oligarch Wars," is it politically acceptable to buy out an oligarch? The short answer is yes, but with considerable short-term political downside. Any state-sponsored strong-arm tactics against Abramovich to seize Sibneft would be an unmitigated disaster for Russia's investment case in the wake of the Yukos affair. Additionally, Abramovich wants to sell Sibneft and will probably be open to negotiating a price. The downside for the authorities is having a state-owned company buy back a former state asset valued at $10-12 billon from an oligarch. This most certainly will create political fallout, provoking a public outcry and emboldening opposition parties - particular ultra-nationalists. With both issues in mind, "Operation Abramovich Exit" could play out in the following fashion. Since Abramovich and other Sibneft core shareholders have to pay themselves a $2.3 billion dividend for 2004, Gazprom will strongly suggest paying some average price based on market trading over the past few months or an agreed valuation - and certainly not the company's current market value. Since Abramovich wants to sell Sibneft, agreeing to a politically acceptable price should not be a problem. The sooner Gazprom acquires Sibneft, the better for the Kremlin. With Russia's 2007-2008 election season approaching, buying out Abramovich now will give the Kremlin more time to deal with the political fallout. Additionally, the authorities will be able to spin paying billions to a billionaire as evidence of the state's respect for private property rights - "the days of stealing assets are in the past." This may not be completely convincing to an average Russian who dislikes the oligarchs, but it may do wonders to strengthen Russia's investment case. Abramovich's exit from Russia's oil patch is a windfall for Gazprom. Yet again, Abramovich is willing to help "sort out" someone else's affair and make a nice profit in the process. The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.

19.08.2005 13:36 MSK MosNews - U.S. investment bank Morgan Stanley plans a return to Russian financial markets after securing a banking licence from the Russian Central Bank, the Vedomosti business daily reported on Friday, Aug 19. Local unit Morgan Stanley Bank should start operations in late October. The U.S. bank first entered the Russian market in 1994 but scaled back operations after the 1998 financial crash. Vedomosti quoted Morgan Stanley's Russia head Rair Simonyan as saying that any global investment bank which failed to enter Russia now risked getting left behind by the competition in the fast-growing Russian marketplace. Morgan Stanley has carved out a leading role in arranging initial public offerings for Russian companies, raising $1.6 billion for consumer services group AFK Sistema in London this year in the biggest IPO of a Russian company.

MOSCOW. (RIA Novosti political commentator Yury Filippov) -- Seven years ago, on August 17, 1998, Russia defaulted on its foreign debt.
Although a decade has not yet passed since the default, Russians are still very much aware of the anniversary of the event. Economists are holding round tables and seminars and commentators are writing articles trying to understand what happened in Russia seven years ago, and whether the country could default again.
The country's population also remembers the default, with public opinion polls showing that more than 50% of Russians are afraid that it may happen again.
In August 1998, Sergey Kiriyenko's government imposed a 90-day moratorium on repayment of all foreign loans, and announced that it would default on its short-term ruble obligations. The currency trading band was expanded by more than 50%, but to no avail. By the end of the year the value of the ruble had plummeted to a quarter of its pre-default level. The national banking system went into a stupor, having swallowed up the deposits of businesses and individuals.
Speaking to the U.S. Congress as an expert on Russia, George Soros said in September 1998 that Russia had experienced a total financial collapse. The international financial guru said that this collapse was truly dreadful and would have enormous political and social consequences.
But even seven years ago leading Russian economists did not share his pessimism. Yevgeny Yasin, head of research at the Higher School of Economics and former finance minister, said several years ago that paradoxical as it might seem, the default had benefited Russia at the macroeconomic level.
Almost immediately after Russia defaulted, in late fall 1998, Russia embarked on a new cycle of economic growth. The Russian economy, which had declined by at least a third since 1991, grew by 5.3% in 1999, and then by 9% the following year. Since then it has been steadily growing by at least 5% a year. While there is some disagreement as to the exact rate of growth, it is indisputable that the economy has been on the up. There were two consequences of the default that economists say allowed the recovery of the Russian economy. The first was the devaluation of the ruble, which made goods manufactured in Russia competitive both at home and abroad. The second was the sudden boost given to Russia's previously torpid industry. The cost of imports skyrocketed overnight and most Russians switched to domestic products, much to the delight of local producers.
A third growth factor then came into play, though this time it was not a consequence of the default: world oil prices unexpectedly started going up in 1999. Moreover, every zigzag in world politics, especially after the Republican administration came to power in the U.S., pushed prices yet higher. As a result, the problem of Russia's foreign debt, which reached $150 billion in 1999, resolved itself. Despite gloomy forecasts, Russians did not have to tighten their belts either in 2003 when foreign debt repayments reached their peak, or later on.
High prices for oil and gas, which are Russia's major exports, mean that the country will not default again in the foreseeable future. At any rate, this is the view of the government, which two years ago established a stabilization fund for super profits from exports.
"By setting up its stabilization fund Russia has totally eliminated the risk of default," Russian Finance Minister Alexey Kudrin said. His opinion would appear to be well-founded considering that on August 1 of this year, the fund contained 721 billion rubles ($25.2 billion), which was comparable to Russia's 1998-1999 federal budget.
This is an enormous sum, but the Russian government has only recently decided to spend some of the fund on federal investment programs. After all, the risk of default is not simply an abstraction for Russia, no matter what the finance minister might say.
In addition to the availability of money, there are other factors protecting Russia against default. When it became impossible after August 17, 1998 for Russia to live off loans, the government established a tax system, something that had previously been practically non-existent. Although one third of all taxes come from energy exports, two thirds still come from industry, agriculture and services. Neither of these, especially the former two, had been doing well before the default, but August 17 gave them a new lease of life.
Yevgeny Yasin believes that terrorism and industrial accidents are Russia's worst problems affecting its economy as well. But although these are serious threats, they will not reverse the steady advance of the Russian economy. "If somebody talks about default, don't believe and don't panic," he said.

August 2, 2005 Russia Profile - Baltimore Sun -
Fraying U.S.-Russian relations seen in former Soviet states Expulsion at Uzbek base may be latest indicator of Moscow's skepticism By Douglas Birch Sun Foreign Staff Summary prepared by Hayk Sargsyan of CDI
The immediate cause of Uzbekistan's decision last week to expel the United States from an air base supporting military operations in Afghanistan was a quarrel over Uzbekistan's bloody suppression of a prison riot and protests in May. But the roots of the dispute run much deeper, diplomats and experts say, to a long-term deterioration of Russian-U.S. relations, and reflect the increasing tensions between Moscow and Washington over their influence in the nations of the former Soviet Union. "There is a concerted and coordinated effort [by the Kremlin] to foster the impression that the United States is trying to undermine the regimes in the region," Alexander Vershbow, the outgoing U.S. ambassador to Russia, said in an interview in July.
After the Sept. 11 attacks four years ago, there was talk of building a new strategic alliance between the Kremlin and the White House. Today, Western diplomats and analysts say, relations between the two nations are at their lowest point in more than a decade. Over the past two years, irritant has piled on irritant. Washington has become critical of Russia's record on democracy and human rights. Moscow has accused Washington of instigating the overthrow of regimes in Georgia, Ukraine and Kyrgyzstan, in order to undermine Russian influence.
In Uzbekistan, the White House suddenly faced a significant problem. Karimov responded to a prison riot and anti-government protests in Andijan with force, killing at least 187 people. The U.S. pressured the regime to permit an international investigation. On Friday, the United States helped Uzbek survivors of the Andijan clashes leave Kyrgyzstan for Eastern Europe. Karimov's Uzbek government, in turn, gave the United States 180 days to close its Karshi-Khanabad air base, called K-2. The Kremlin has so far had little to say publicly about the Uzbek decision. But the chill winds blowing from the Kremlin, some Western experts say, may reflect more than just annoyance over specific events or policies. Russia's leaders may be having second thoughts about political and economic integration with the West.
The rift, experts and analysts from both countries say, probably began with Western criticism of the war in Chechnya. Moscow claims it is part of the global war on terror. Europe and the United States insist that it is mostly a war against separatists, and have been critical of human rights abuses committed by pro-Russian forces there. The Kremlin's frustration grew during the diplomatic maneuvering preceding the invasion of Iraq, which was overwhelmingly unpopular here. The tension was exacerbated by Western criticism of the arrest and trial of the oil tycoon Mikhail B. Khodorkovsky as politically motivated. Frustrations seemed to boil over in September of last year, after 331 children, teachers and others died in the fiery school siege in Beslan, in the Caucasus. After the carnage, President Putin went on television to warn that an unnamed hostile power - by clear implication the United States - was fomenting unrest in the Caucasus in an effort to weaken Russia. The United States, Vershbow said, wants nothing more than for Russia to become a more stable, democratic nation. "The real cause of the Beslan tragedy was the poor management of the incident by the security services," he said. "But there was this scapegoat, the West."
Following Putin's lead, authorities at all levels here have adopted a militantly anti-Western tone. "Many politicians and leaders here still believe that there is some kind of American conspiracy, that Russia is being encircled," said Andrei Kortunov, a political analyst and president of the Eurasian Fund. So far, though, the main result of the growing mutual distrust is a chilly, arms-length relationship. "There is no real hostility, but a profound neglect of one another," Kortunov said.
Despite their differences, the United States and Russia still cooperate in areas such as international efforts to persuade North Korea and Iran not to pursue nuclear weapons development programs. Russian and American intelligence agencies continue to share information on the movement of arms and guerrilla groups. But "There's mutual agreement that we could be doing more," Vershbow said. "Some of it relates to the continuing ambivalence on the part of Russian security service as to just how much they want to cooperate."

22.07.2005 11:26 MSK MosNews - President Bush on Thursday chose William J. Burns, the administration's top official on the Arab-Israeli conflict, to be U.S. ambassador to Russia, The Associated Press reported. A career diplomat, Burns is assistant secretary of state for the Near East. If confirmed by the Senate, he will succeed Alexander Vershbow in Moscow. Burns has headed the Near East bureau since June 2001. He speaks Russian as well as Arabic and French, and has served in the U.S. Embassy in Moscow as a political officer. He is also a former U.S. ambassador to Jordan. He has made frequent trips to the Middle East to try to reduce tensions and promote Israeli-Palestinian negotiations.

HOT RBC, 02.08.2005, Moscow 15:18:30. - President Vladimir Putin has stressed that Russia's constitution does not allow him to be the head of state after 2008. Stability is the most important factor in today's Russia and it can be achieved on a constitutional basis only, he declared at a press conference after negotiations with Finnish President Tarja Halonen. Putin has also confirmed that he is against political activity in Russia being financed from abroad but he supports environmental and cultural projects.

08-03-2005 RBC News - Incomes of the upper 10 percent of Russia's rich made up 29.6 percent of the country's total personal earnings in the first half of this year, against 30 percent in the same period of last year. And incomes of the bottom 10 percent of the country's poor accounted for 2 percent of total earnings, unchanged from the first quarter of 2004, the federal statistics service of the Russian Federation reported. 1.3 percent of Russian people had an average cash income of up to RUR 1,000 a month per person in the first half of this year, against 2.8 percent from January through July last year. 35.2 percent received incomes of more than RUR 7,000, up from 25.2 percent 12 months before. Total cash incomes of Russian people reached RUR 5.944 trillion (about $207.8 billion) in the first six months of this year, up 21.4 percent from the same period of last year. Consumer spending stood at RUR 4.3073 trillion (about $150.6 billion), 24.6 percent more than in the first half of last year. Savings amounted to RUR 1.1228 trillion (about $39.26 billion), up 23.3 percent on the year. Real disposable incomes climbed 10.6 percent in June 2005 compared with June 2004, and they rose 8.3 percent in the first half of this year. Cash earnings in June averaged RUR 7,713 (about $270) per person, a year-to-date increase of 24.7 percent and 7.6 percent more than in the previous month. The average nominal salary in June stood at RUR 8.655 ($302.6), 22.2 percent more than a year ago and 7 percent up on the previous month. The average real salary in June was 7.5 percent up on the year and 6.3 percent more than in May 2005. The average pension in June was reported at RUR 2,327(about $81.4), an increase of 23 percent on the year. Real pensions climbed 8.2 percent in June compared with the same period last year, and it dropped 0.6 percent on the previous month. The number of the unemployed in June increased 0.4 percent on the year, to 5.552 million, which is 7.5 percent of the country's economically active population. The number of officially registered unemployed persons rose to 1.816 million, 16.7 percent more than in June 2004, including 323,400 in the Chechen Republic.

MOSCOW. (RIA Novosti political commentator Alexander Yurov.) - Almost all major world companies have offices in Russia. There are nearly 5,000 of them in Moscow alone, and many foreign companies have their own production sites here too. All of them have a common problem of finding skilled personnel.
Russians would gladly work for a foreign company because they pay much more. But this is not the only reason. The U.S. recruiting and executive search company Staffwell has polled applicants to foreign companies and concluded that they are guided by ethical reasons. They complain about nepotism in Russian companies, whose bosses hire friends and subservient staff. The applicants, convinced that foreign companies do not have such problems, want to make a career in a foreign company.
An international food company has opened a snack factory in Pavlovsky Posad outside Moscow. The factory has modern equipment and hence few staff, but there are always crowds at the personnel department. Some want a job, while other are quitting because of high demands set to them. Their vacancies are quickly filled. The factory has been working for a year but the staff turnover rate has not declined. This could have bankrupted the factory in some other country, but in Russia it survives by offering a low pay for the trial period.
The situation on the Russian market of working trades is paradoxical. Low-paid guest workers readily fill in vacancies in the settlements that lack local personnel. The oversight council for management and development at the Moscow government says the number of non-Muscovites has reached 64% among construction workers and repair specialists and 40% among waiters and sellers. Two-thirds of them are registered as temporary staff. Businessmen do not spend money on improving their skills, preferring to sack the old and hire a new staff.
Other segments of the labor market have similar problems. Russia has enough skilled personnel of humanitarian professions: Medium-level HR managers, market, advertisement and PR specialists, and lawyers. But it is much more difficult to find highly skilled and experienced professionals in these sectors.
It is difficult to find experienced and promising specialists in any country, especially top personnel, says Iya Novikova, recruitment director at Staffwell Search. This is why foreign companies prefer to hire expats for managing posts, including in Russia.
Russia does not have enough specialists capable of working by Western standards. It is most difficult to find good analysts, corporate finance specialists and VIP managers in the banking and financial sector. But mentality is the main reason why recruiters prefer expats to Russian managers. It is easier for foreign founders and bosses to work with spiritually close people. A Russian specialist may know the local market better and have more extensive ties, but the foreign firm will most probably choose an expat for a key post.
The recent trend points to the reduction of jobs held by foreigners, and personnel specialists say foreign companies search for expats only when they cannot find a suitable candidate on the local labor market. Moreover, requirements to expats include the knowledge of Russian and an experience of working on the Russian market.
Foreign companies are not trying to take into account local mentality and customs and so are searching for Russians that resemble foreigners. Regina von Flemming, president of the international consulting company Flemming & Partner, works in Berlin and Moscow. One of her tasks is to explain to recruiters in Germany and Russia what qualities the candidates should have. She said German companies have a specific behavioral feature and the Russian staff should know what it means to work for German firms and how they differ from other foreign companies.
Iya Novikova of Staffwell Search says there are no foreign companies without a Russian staff on the Russian market. But specialists with Russian mentality find it more comfortable to work for American and European companies with an aggressive style. They offer market average or higher than average salaries to their staff and a possibility of a rapid career.
It is more difficult for Russians to adjust their mentality to the style of Asian, including Japanese, Indian and Vietnamese, companies. In addition to cultural specifics, which affect management style, and strict hierarchy, it is more difficult to get a salary rise or promotion in such companies. But Russians nevertheless want to work for these companies.