Zee Beam News

MOSCOW. Jan 29 (Interfax) - U.S. Ambassador to Russia William Burns has confirmed the United States' interest in broadening the energy dialogue with Russia, noting, however, that the two countries lack action in this area. Burns said in an interview with Interfax that American-Russian energy relations have a great potential, but lack real action. He also said that logic is making the U.S. as a major consumer of energy resources, take energy relations with Russia, a large supplier of energy, very seriously. The U.S. ambassador also said that the U.S. welcomes the Russian- Ukrainian gas agreements and understands that Rsusia, like any other energy supplier, is trying to be guided by market prices. The question is, what should be done to ensure that the end result meet the interests of the supplier and consumer without causing external concerns, Burns said

30.01.2006 MosNews - The head of Russia's Federal Agency for managing special economic zones, Yuri Zhdanov, held a number of negotiations with potential investors during the World Economic Forum which took place last week in Davos, Switzerland. Russian daily Kommersant reported on Monday, Jan. 30, that it is now expected that such companies as Hewlett-Packard, Siemens, Sun and Unilever will become residents in Russia's special economic zones. The Russian delegation was able to hold negotiations with Hewlett-Packard, Siemens, Sun, Unilever and machine-building concern Shindler. The government officials are convinced that as early as spring no less than a half of these companies will become residents of Russia's special economic zones. Yuri Zhdanov specified that the Davos negotiations will bring special economic zones no less than $100 million in additional investments in 2006. The head of the federal agency also noted that it is planned that special economic zones will provide investors with even more benefits than the current law on special economic zones allows. In particular it is expected that local authorities in the cities of Lipetsk, Elabuga and Tomsk will free zone residents from all local taxes not for five but for 10 years. Officials believe that this will help Russia attract long-term investment. The creation of special economic zones seems to have been a productive move by the Russian authorities. Last year Russia attracted $25 billion in direct foreign investment while its main competitor China — $60 billion. A large part of this discrepancy is conditioned by the fact that China already had numerous special economic zones. Now the Russian authorities have taken the same step and, according to official information, more than 30 Western companies have already expressed their readiness to set up operations. As MosNews reported in November 2005, it was decided that at the first stage of the program six special economic zones will be set up in Russia. Technical innovation areas will be set up in the towns of Zelenograd and Dubna in the Moscow region, in St. Petersburg and in the Siberian city of Tomsk, Economy Minister German Gref said. Central Russia's Lipetsk region and the Tatarstan Republic won the right to set up industrial production zones.

25.01.2006 MosNews - Some 71 percent of chief executives worldwide plan to expand businesses in Russia, Brazil, India or China during the next three years, PricewaterhouseCoopers said, citing a survey of 1,400 CEOs that was released on Tuesday, Jan. 24. Report was quoted by the Reuters agency. The consulting group's ninth annual CEO survey also found that expansion overseas is increasingly attracting companies of all sizes searching for new markets and is no longer limited to multinational giants seeking lower costs. Among other findings in the full report, released in conjunction with the World Economic Forum in Davos, Switzerland, nearly two-thirds of CEOs were "optimistic" about their current and future prospects for global expansion. PwC also found that government regulations remain the biggest barriers to global expansion and the greatest source of complexity for companies. By comparison, terrorism and the anti-globalization movement are the least problematic challenges, while language and cultural differences are the least likely sources of complexity. Among the emerging market countries, China was the most popular, named by 55 percent of the respondents, followed by India (36 percent), Brazil (33 percent) and Russia (27 percent). According to the report, CEOs say they are globalizing to access new markets —- not just to cut costs. Some 78 percent of the CEOs said they were going global to find new customers, while only 48 percent said they were looking to reduce costs.

24.01.2006 MosNews - On Tuesday, Jan. 24, the head of Russia's Federal Statistics Service Vladimir Sokolin announced that the country's gross domestic product (GDP) grew by six percent in 2005. This is in line with forecasts made over the course of the year by various international agencies and government experts. As MosNews had reported, the original GDP growth forecast made by the Russian government for 2005 amounted to 6.5 percent. But in May 2005, Russian business daily Vedomosti reported that the government forecast had been cut from 6.5 percent to 5.8 percent. Slowing oil export volumes were to blame for the downgrade, meaning Russia was unable to capitalize on near-record international crude prices. "We cannot ignore these factors," Vedomosti quoted one ministry official as saying. Still, at about the same time the International Monetary Fund forecasted that Russia's GDP would grow by 6 percent. "We expect this year's increase roughly at six percent. Though it is much less than last year, the capital inflow will start reviving," Paul Tomsen, the IMF's senior resident representative in Moscow, was quoted as saying. Later, in September, the IMF changed its mind and downgraded GDP growth forecast for 2005 to 5.5 percent. "After a remarkable acceleration in 2003-2004, real GDP growth in the Commonwealth of Independent States (CIS) has slowed down noticeably in 2005. This has especially been the case in Russia, where policy uncertainty, the Yukos affair, and sharply higher marginal tax rates in the oil sector — to almost 90 percent at prices above $25 per barrel — have been key factors in sluggish investment and sharply lower output growth in the oil sector," the IMF report said. By October Russian officials were confident enough of their original forecasts. Russian Finance Minister Alexei Kudrin spoke at an investment conference and said: "We are mastering up the 6 percent growth plank with confidence. This means that all of the main positive tendencies in our economy remain." The final result did not exceed the six percent mark, and was much lower than the 7.4 percent growth registered in 2004, but Russian authorities still have cause to rejoice, because at the beginning of the year it appeared the Yukos affair would have a much more negative effect on the economy. The head of the Federal Statistics Service also said that inflation during the same period was 10.9 percent, the lowest rate in the past seven years. Russia's economy in recent years has rebounded significantly from the economic collapse of 1998 and Sokolin said the latest figures show "the positive trend of social-economic processes continued." He said average incomes rose 8.3 percent in real terms in 2005.

MOSCOW. Jan 23 (Interfax) - Former Russian presidential economic advisor Andrei Illarionov believes that Russia has become economically and politically unfree. "Today Russia is not the country it was six years ago. The country was unsettled, chaotic, impoverished. But it was free. Today Russia has changed. It is richer. And unfree," Illarionov said in an article published in the newspaper Kommersant on Monday. Illarionov believes that Russia is no longer "on the crossroads of an historic choice." "The crossroads has been passed, the choice has been made. Today we live in a different country," he said. "The main thing that we have lost is freedom. The main thing that has changed is the rules of behavior. In the economy, politics, public life, ideology and in foreign affairs. A new state model has arisen and gotten a foothold. The state has become corporatist," Illarionov said in the article. The former presidential advisor said that "changes in legislation and restrictions on political activity have devalued citizens' shares in what can be called The Russian State open joint stock company, and have turned the latter into a closed joint stock company." "Ownership of the Russian state has passed into the hands of a corporation that is not controlled by its nominal shareholders - Russian citizens," he said. "State companies have themselves been turned into the attack weapons of a corporatist state. Having mastered the main principle of state corporatism - the privatization of profits, the nationalization of losses - they have started large-scale intervention in the private sector. Victims of the expansion of corporations include Yuganskneftegaz, Sibneft, Power Machines, Kamov, OMZ, Avtovaz and East- Line," he said. Illarionov said that now any wish of a corporation - from contributing to one project or another to the sale of the company to the "correct" buyer - will be carried out. "Refusing is not an option: the face of Yukos is there for all to see," he said. "Another important principle of the new economic model is electivity. One company is subjected to the maximum possible (or impossible) tax claims, and another receives exclusive breaks. In one case the sale of shares to foreigners is banned, and in another it receives full state support (and financing in excess of the limits set by domestic legislation). In some cases foreign citizens cannot work in Russian companies "for reasons for national security," and in others they are ceremoniously invited. For one buyer a price is set at one level, and for another - five times higher. Uneven business conditions and economic and political discrimination are being made into an absolute principle. This economic model can be called various things. But it cannot be called free," Illarionov said.

01-20-2006 Kommersant - Moscow weather was just 2 degrees above than in Antarctica this morning, Echo of Moscow reports, recalling for the sake of justice, that it's summer in Antarctica now. As to Moscow, the frost will yield one or two decrees today with the temperature climbing to from minus 27 degrees Celsius to minus 25 degrees Celsius. Cold weather will survive tomorrow, unwillingly stepping back only from summer. Five people froze to death and 22 were taken to hospitals with cold injuries yesterday. Any failure of Moscow power grid must be prevented as it would cause the knock-on effect all over the country, Emergency Minister Sergey Shoigu told the cabinet yesterday. Operational emergency teams are on call in each part of Russia with abnormally low temperatures, the minister said. Nevertheless, a string of serious breakdowns was reported in Russia's Ordzhonikidze District of Ufa, Penza and Chita Regions, in Yeletsky-village of Komi, Vyborg, Karelia, Tomsk, Omsk and Sakhalin. The government's commissions are working in close bond with Gazprom and RAO UES of Russia, Vladimir Yakovlev, who heads the Regional Development Ministry, said some time earlier. In case of need, local authorities order to shift to reserve types of fuel – black oil and coal, the minister specified. The spell of cold weather that has covered nearly all Russia is a certain check of capacity for power engineering, municipal economy and rescuers' readiness to respond to emergency, Prime Minister Mikhail Fradkov said, finding comfort whenever he can.

MOSCOW. (RIA Novosti political commentator Pyotr Goncharov.) -- Turkmenian President Saparmurat Niyazov is getting ready for a working visit to Moscow next Sunday and Monday. The visit is not likely to produce any major documents. High-ranking sources report that the subject of discussions will be issues related to the fuel-and-energy complex. The prelude to the visit was as follows: on January 5th Vladimir Putin telephoned Saparmurat Niyazov, and the two presidents discussed bilateral relations, but gave priority to fuel and energy. The conversation was followed by a statement that President Niyazov will visit Moscow on January 22-23 at the invitation of Vladimir Putin. Cooperation in the oil and gas sector has become a priority for both countries. The April 2003 agreement on cooperation in the gas sphere provides for increasing supplies of Turkmenian gas to Russia: from 3-4 billion cubic meters in 2004 and 2005, to 80-90 billion cubic meters a year starting in 2007. These are impressive figures. The agreement also stipulates the construction of new capacities for the transportation of gas from Turkmenia to Russia, Ukraine, and other countries. In particular, it envisages a number of bilateral projects for the deliveries of Turkmenian gas to European consumers. Geographically, Russia lies to the West of the Turkmen gas route, that is, on its way to Europe Turkmenian gas will inevitably have to cross Russian territory, which means the two countries can develop a productive partnership. The agreement also provides for the joint development of oil and gas deposits on Turkmen territory. During the recent visits of the Gazprom CEO to Ashkhabad, the Turkmen side suggested Gazprom's participation in the exploration and development of the Turkmen part of the Caspian shelf, and the right bank of the Amu-Darya River, where large deposits of hydrocarbons have been recently discovered. Niyazov has repeatedly stressed Turkmenistan's readiness for close cooperation with Russia in the gas sphere. He has pointed out that contracts on gas deliveries to Europe, and Ukraine in particular, are impossible without Russia's participation. In turn, Russia is interested in Central and South-Asian directions. It could take part, for instance, in the Turkmenia-Afghanistan-Pakistan gas pipeline project, especially considering the experience accumulated by its experts in Afghanistan. However, gas is not the only subject, which the Russian and Turkmen leaders could discuss. Turkmenistan occupies a special place among former Soviet republics, and bilateral relations are not entirely cloudless. One of the main problems is the issue of dual Russian-Turkmen citizenship, which has been misinterpreted more than once. The flow of mutual grievances has considerably diminished recently but the problem is still there. Moscow wants Ashkhabad to grant dual citizenship to all those who ask for it, but Turkmenistan opposes this measure. There is also the problem of Afghan drugs. The Turkmen section of the border with Afghanistan is over 800 km, but the country prefers to fight drug trafficking on its own. It does not want to take part in anti-drug security belts, nor in anti-drug operations conducted by the forces of the Collective Security Treaty Organization together with the Russian and Tajik anti-drug agencies. There are other difficulties, such as the status of the Caspian Sea. Its discussion was postponed at Niyazov's initiative. But all these issues have receded into the background, as the problems of gas and gas pipelines have moved to the fore.

MOSCOW. (RIA Novosti economic commentator Vasily Zubkov.) - There is no doubt that there are more Europeans living in Moscow permanently or temporarily than in any other Russian city. Over 150 embassies, thousands of missions and companies from all over the world are based here. Foreign businessmen join clubs and associations, such as the American Chamber of Commerce (with more than 700 members, and not only Americans), the Russian-British Chamber of Commerce, Le Club France with hundreds of French businessmen, and the Union of the German Economy. Moscow is also home to international business organizations, such as the Association of European Business in Russia, the International Chamber of Commerce, and the International Association of Business Communications, etc. It is clear why more than 90% of foreign businessmen have chosen Moscow as their base in Russia. All central government bodies are located in Moscow. Some seven percent (13% if we count the Moscow Region) of Russia's population lives in Moscow. The city accounts for 20% of the nation's GDP and for over 30% of its retail trade. Small and medium businesses play a vital role in urban trade and services. Last year, Moscow's budget exceeded $16 billion. It accounts for the lion's share of the nation's business and about 80% of its capital. The urban economy is growing at a rate of more than 10% a year. Last year, Moscow's GRP went up by more than 20%, a record figure in history. Significantly, the growth of the real economic sector was 18%. In tentative estimate, Russia's GDP increased by 6.4% in 2005. The official unemployment rate is less than one percent. Salaries and wages are far higher in Moscow than in the rest of the country. In experts' estimate, the average annual per capita income is close to $8,000, or 250% more than in other Russian regions. Salaries are growing in both the private and the public sector. The latter represents a huge army of doctors, teachers and government employees. Moscow provides considerable financial benefits for pensioners and low-income residents by giving them various social allowances. The city spends 40% of the budget on social support. To finish the picture, there are 130 cell phones for 100 Muscovites. Is Moscow a comfortable place for foreigners? It certainly gives them a host of opportunities to establish business contacts: every Russian region has its mission in Moscow, and all big and medium provincial companies have affiliates in the capital. Moscow has a well-developed transport infrastructure and communications, an advanced financial network, which includes also major foreign banks, such as the French Societe General and the Austrian Raiffeisen Bank. Construction is making steady headway. In 2004, the Urban Land Institute (an international organization which studies the real estate market) named Moscow the most attractive city in Europe for real estate investment. A year ago some 3.4 million square meters of high quality office space were offered for rent or sale. The city and region are the biggest agglomeration in Europe. More than 40,000 jobs were created there last year. Moscow is one of the few places in Russia with positive demographic trends - the birth rate is ahead of the mortality rate. It has enough schools for foreign children - seven affiliates of the British School, which is attended by some 1,500 children from 60 countries, the French School, to name but a few. The class of world level consumers is growing in Moscow at an impressive pace. The flat rate of income tax at 13% and the still low cost of utilities allow the Moscow elite to spend almost two thirds of their income as they see fit - a luxury in industrialized countries, where more than half of the earnings can be eaten up by taxes alone. Whole districts and villages for the wealthy have been built in the suburbs of Moscow. For all its positive features, Moscow is among the world's three most expensive cities. On the positive side, Moscow has truly unlimited reserves of experts in all walks of life. Compared to other Russians, Muscovites are very dynamic and intelligent. They know full well the advantages of speaking other languages. A number of big recruitment agencies select qualified personnel for foreign companies. Information on vacancies is published in foreign language press. Salaries are the main incentive for 55% of local experts, followed by possibilities of promotion and career growth. As distinct from non-residents, Muscovites are much less interested in running companies they work for. Indicatively, foreign companies are gradually giving up "local staff tariffs," which are supposed to on the same level as the average local salaries. Gerard Lutique, Danone development director, who has worked in Russia for 12 years, believes that if a company pays a salary in rubles, it can expect its employees to spend their days in the office. But if it wants people to work, it should pay a handsome salary in dollars. Roger Pouliquen, head of a TACIS project in Russia, shares this opinion. He thinks that to achieve results Russian professionals should be paid as much as their European counterparts with the same qualifications. The times when companies paid salaries in envelopes are gone. Now all salaries, even very big ones, are legal and subject to tax.

19.01.2006 MosNews - Investment bank J.P. Morgan Chase published a report on Wednesday, Jan. 18, saying that investors should favor stocks in the developing nations of Eastern Europe, because profit growth in countries like Russia and Turkey will exceed analysts' estimates. "We are positive overall on emerging European equities," Edward Cole, an emerging market equity strategist at J.P. Morgan in London, wrote in a report that was quoted by Bloomberg agency. "Earnings should surprise to the upside." Fund managers should buy shares of Turkish lenders like Turkiye Is Bankasi on the outlook for falling interest rates in the country, and stocks that may benefit from higher consumer spending in Russia, like Mobile TeleSystems, Cole advised. The emerging market Europe index of Morgan Stanley Capital International covers 91 companies in the Czech Republic, Hungary, Poland, Russia and Turkey. It has climbed 10 percent this year, reaching a record on Jan. 16. The MSCI world index, a global measure, has added just 2.5 percent in 2006. MSCI's emerging Europe index has advanced for four straight years and has outpaced the global measure in each of the last five. The regional measure surged 47 percent last year, following gains of 33 percent in 2004 and 65 percent in 2003. Money managers should have more shares in Turkey than the weighting in indexes, a so-called overweight holding, Cole wrote. Earnings growth in Turkey, which started negotiations to join the European Union in October, may reach 35 percent in 2006, more than the 28 percent predicted by analysts, according to J.P. Morgan. Investors should also have an "overweight" holding in Russian stocks, Cole advised. "The potential for positive earnings surprises is in consumer-oriented sectors," he wrote. "We see the mobile telecoms as a cheap, liquid play on the Russian consumer." Moscow-based Mobile TeleSystems, the largest East European mobile phone company, was on the list of J.P. Morgan's top picks. The shares have climbed 5.7 percent this year. Cole wrote that operating profit in the country would rise 30 percent on average this year, higher than analysts' estimates of 27 percent growth. Citigroup, however, does not share this optimism on Russia. The New York-based analysts Geoffrey Dennis and Andrew Howell downgraded the country last month to "neutral" from "overweight", saying the stock market's surge may overstate earnings prospects.

December 2005 Aton Capital News - Former U.S. Secretary of Commerce Donald Evans has turned down Russian President Vladimir Putin's offer of a top job at Russian state oil firm Rosneft, the Wall Street Journal reported on Tuesday. Evans, a close friend of U.S. President George W. Bush, told the Journal that criticisms about possible conflicts due to a friend of Bush's joining the company had nothing to do with his decision. He told the paper that family and business commitments prevented him from taking the offer. Evans said Bush knew of the offer and did not offer an opinion on whether he should accept it, the Journal reported. It said Evans suggested that Putin had not made a concrete job offer but had asked whether he would consider taking "a position of serious responsibility at Rosneft". Russia's President Vladimir Putin said last week that Rosneft was keen to hire top foreign managers as the government is preparing the company for an initial public offering next year and is keen to boost the firm's image. Rosneft became a major producer last year after having bought a key unit of oil firm YUKOS, Yugansk, at a forced state auction to recover back taxes from YUKOS. Many analysts have said Rosneft bought the asset at below market price, and YUKOS has promised lengthy litigation, alleging theft and saying the sale was part of a Kremlin campaign to punish its main owners for political activities. YUKOS's founder Mikhail Khodorkovsky is currently serving an eight-year sentence for tax evasion and fraud. Khodorkovsky has regularly met with members of Bush's administration, including Evans, to discuss broadening energy cooperation between Russia, the world's No. 2 oil exporter, and the United States, the world's largest oil consumer. Analysts have said Rosneft, which wants to raise up to $15 billion in an IPO next year, will not drop its attempts to hire a respected Western manager. "We believe at least one investor-friendly appointment to a key post is likely as the company prepares for its IPO," Aton brokerage said in written research. But some analysts said Russia could offer a position which would not be as high as Rosneft's chairman, a post currently occupied by Igor Sechin, one of the most influential men in Putin's administration. Some of Russia's top state-run companies have sought to employ former officials with political weight to work on major projects. Former German Chancellor Gerhard Schroeder will become chairman of the North European Gas Pipeline (NGEP), which will supply Russian gas directly to Germany.

01-16-2006 RBC News - In 2005, the inflow of private capital into Russia exceeded the outflow of capital for the first time ever, Alexander Zhukov, the Deputy Prime Minister of Russia, said at Russian President Vladimir Putin's meeting with the government on Monday. Earlier, the outflow of capital from the country reached up to $25 billion a year, and "today's situation is a sign of positive changes in Russia's investment climate," Mayak radio quoted Zhukov as saying. Private capital inflow into Russia stood at $300 million last year, against an outflow of $8 billion in 2004, the Central Bank of Russia reported last week. In the first quarter of last year, net capital inflow in the private sector was reported at $400 billion. A net outflow of $4.3 billion was registered in the second quarter, a net inflow of $8.1 billion – in the third quarter and a net outflow of $3.9 billion was reported in the fourth quarter of last year. Net inflow of capital in the banking sector made $5.3 billion in 2005, while an outflow of $4.9 billion was reported in the sector of non-financial companies and households. In December 2005, the international consulting company AT Kearney rated Russia among the world's six most attractive countries in terms of foreign direct investment (in March, Russia was ranked 11th). China remained in the lead for the fourth straight year. India was second, followed by the United States; Britain remained fourth, Poland was ranked fifth, and Russia – sixth. Experts noted an increasingly growing investor interest in East European markets. Hungary was ranked 11th, the Czech Republic – 12th, and Romania – 25th. In contrast, West European countries are losing their position. From 2000 to 2004, at least three West European nations were named among the top ten countries, but only two remained last year – Britain, ranked fourth, and Germany, rated ninth.