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Wednesday, March 22, 2006

Depopulation forecasts divulged

RBC, 22.03.2006, Moscow 19:59:32 - Russia's population is expected to be 140.7m people in 2009, compared to 143.1m in 2005, the Economy Ministry's social and economic development scenarios for 2007 and through 2009 say. The document predicts that Russia's population will be declining by an average of 600,000 people a year. Thus, the population is forecast to be 142.5m people in 2006, 141.9m people in 2007, and 141.3m people in 2008. The working-age population will reduce to 88.4m people in 2009, which is 2.1 percent lower than in 2005 (90.3m people). The economically active population is anticipated to have sunk to 71.5m people by 2009 from 72.6m people in 2005.

Reality pushes energy egotism away

MOSCOW, (Yevgeny Velikhov, RIA Novosti) -- Global energy security is a cause of concern for everyone as it incorporates certain threats to international peace. Civilization's fast economic development is escalating the conflict between energy demand and the current possibilities of energy production. Simultaneously, another conflict is unfolding between intensive energy consumption and the consequences of this process in the form of industrial impact on the environment. As a result, greenhouse gases are threatening to increase global warming and climate change. There are two ways to solve the global energy problem. The first is energy egotism. One cannot but agree with President Vladimir Putin, who described it as "a road to nowhere". This scenario means that the Group of Eight industrialized nations, the so-called "golden billion", are isolating themselves, leaving the rest of the world to survive on its own. But this isolation would require military unions, fleets, etc., leading to big trouble, generating international conflicts at different levels and escalating terrorism. So trying to shut out those in trouble is akin to an ostrich burying his head in the sand. Only a policy that is realistic, uniform and long-term can be productive. Only such policy can ensure the crisis-free and self-sustaining economic development of the world. On the one hand, global energy consumption is enormous, but on the other hand, two billion people in the world do not have access to electricity at all. Not all countries have natural sources of energy; in the G8, Russia and, to a certain extent, Canada, are the only ones that have them. This means that Russia can influence the energy situation in the world. President Putin, who recently outlined the agenda of the forthcoming G8 summit in St. Petersburg and made energy security a priority, earlier repeatedly pointed to the importance of the issue. Six years ago at the Millennium Summit in New York, the Russian leader proposed considering measures to stabilize the global situation. His constant attention to the issue is not just a pacifist call, but an understanding that peace is global. The situation with energy resources in the world keeps deteriorating. It is enough to recall soaring oil prices. For many countries, where oil is the main source of energy, this is a catastrophe threatening bankruptcy. History has seen cases when some stressful political events or wars sent prices jiggering, but then they calmed down. Quite recently, about 15-20 years ago, energy was very cheap. But the situation has changed and, most probably, forever. This should be the premise for assessing energy issues and the proposals President Putin made in his article published in Western mass media on behalf of Russia as the holder of the rotating G8 Presidency. New aspects of this topic were raised at the meeting of G8 energy ministers held in Moscow last week. It is important that we realize that the energy crisis is not a temporary notion and start thinking on a larger-scale. What is a crisis? It means that events unfold as a nuclear chain reaction when your chain reaction is not enough. You take spontaneous measures and close up holes, but developments are wanton and you are swept off your feet. All this leads to an explosive critical situation. Based on this understanding of a crisis, we should choose necessary measures. An important step, as President Putin has underlined, is search for ways to improve energy efficiency with the help of new technology. Taking Russia as an example, we should admit that we burn gas inefficiently, lose too much heat when heating homes and often waste electricity for lighting. Another key task is to stabilize, expand and reinforce markets of main fossil fuels, i.e. oil and gas. Markets should be more predictable and manageable, with metering reserves and greater accessibility and transparency. I would like to stress the importance of a large gas task where Russia may play a significant part. Gas is mainly pumped via pipelines; unlike oil, it cannot be shipped by tankers to any place in the world. To increase mobility, it is necessary to shift to liquefied gas. Russia's huge gas reserves on the Arctic shelf can dominate the global LNG market. A large LNG shipment route needs to be established between Russia and Europe, which we are going to build. The project requires international participation and financial support, but circumstances require that it be launched immediately. Today we can no longer expect a major increase in the use of coal, although its global reserves are still significant. This type of fuel generates huge shipment and environmental problems. For example, coal burnt in China affects the environment in Japan. Aerosol sprays and acid rains do not make life better. To solve environmental problems and expand the possibilities of energy consumption, we need to give a new lease of life to nuclear power engineering that could become an important factor capable of influencing the crisis. Of course, there are many alternative energy sources that should be developed, such as the sun, wind, water and biomass. But their scale and pace cannot influence the dynamics of the energy crisis. In Russia, natural resources are state property, but are developed jointly by the state and private business. The sector cannot be stabilized with the taxpayers' money alone. The state should develop and gain benefit while private businesses should receive profits. Investment into the energy sector is linked with risks that vary greatly. Just imagine what will happen if a 150,000-ton tanker sinks or a nuclear power plant breaks down. Losses in both cases will be huge, and a private company will never be able to bear such risks. This is why it is very important to divide risks and determine which will be carried by the state and which by its partner. For example, the world needs about $16 trillion to spend on the development of power generating facilities until 2030. But for businessmen to be willing to invest, they should be confident that they will not lose the money, but rather return it at a profit. Significant success has been achieved in large international projects. The United States, Europe, Japan, Russia, China, India and South Korea have agreed to share the expenses and risks of building the world's first international thermonuclear experimental reactor, ITER, in France. The agreement is almost ready and is expected to be signed in the run-up to the G8 summit in St. Petersburg in June. Investments are currently being made, but the construction of the reactor will not be completed until 2030. In the long-term, thermonuclear power plants will have a huge influence on the global energy sector. After all, this extremely powerful energy source has been dubbed the "terrestrial sun" for a good reason. In fact, ITERs will be serving future generations. Such projects are the backbone of the global energy architecture that President Putin wants to leave to our children to save them from an energy collapse and energy conflicts. Yevgeny Velikhov is President of the Kurchatov Institute, a Russian research center, and a member of the Russian Academy of Sciences.

Thursday, March 16, 2006

The Russians are Buying

March 16, 2006 Russia Profile by Matthew Wrigley
Having Conquered the Domestic Market, Russian Companies Look Abroad
Rumors in early February that Gazprom was close to making a bid for the British gas distributor Centrica were enough to send Britain's leaders on a frantic search for alternative energy sources, dusting off long-shelved plans for a return to nuclear power. The frightening prospect of the Russian giant's takeover of the UK's national gas network even drew a rare comment from the Department of Trade and Industry, which called the Russian bid a threat to national security. The government's reaction seems rather extreme when most analysts agree that the deal makes sense in principle. British households pay the highest prices in all of Europe for gas, and falling domestic production in the North Sea threatens to push prices up by another 25 percent next year. In contrast, Russian gas giant Gazprom has no such problems – it produces a quarter of the world's gas and, according to the influential Energy Business Review, would probably be able to offer British consumers a lower price – one equivalent to that paid by consumers on the continent. The problem is that Russia's energy giants come with some image issues. "Gazprom is a very controversial energy company," said Peter Luff, Chairman of the British Parliamentary Trade and Industry Select Committee. "It appears to behave not simply in a commercial way, but also in a political way." The New Year's gas dispute with Ukraine, which interrupted Russian supplies to Europe for the first time in decades, has created – or, alternatively, reinforced – the belief that Gazprom is a tool of the Kremlin's foreign policy. The Washington Post characterized President Vladimir Putin as "brandishing Russia's natural gas and oil reserves as his Soviet predecessors once flaunted nuclear rockets." Britain's politicians fear seeing Russian control of the gas supply used as a political weapon in the event of a future dispute with Moscow. Gazprom's interest in Centrica is only the latest in a series of bids across Europe – and the rest of the world – by Russian energy firms focused on building up their overseas infrastructure. From oil fields in Kazakhstan to filling stations in the United States, Russian companies are playing an ever-larger role in the world energy market. The main question for many observers is why. Much of Russia's energy expansion has been focused on Europe, and Britain isn't alone in its skepticism. When oil giant LUKoil made a $1 billion bid for Poland's failing Refinery Gdansk in 2003, a move that would have secured 17 percent of Poland's domestic gasoline retail market, public opinion put an end to the deal. "We are worried about the leverage the Russians could get," said former Polish Defense Minister Janusz Onyszkiewicz, expressing the mistrust many Poles feel toward their eastern neighbor. Similarly, Hungary's government fended off Gazprom's proposed takeover of Borsodchem, a major chemical manufacturer, in 2000, fearing the deal would give Gazprom control over the nation's gas transit network. Alexander Rahr, Director of the Koerber-Center for Russia/CIS Studies, says this kind of suspicion is misplaced. "People may be afraid of economic dominance by Russian energy giants, but should learn not to look at Russia the same way as in the 1990s," said Rahr. "Russian energy companies have begun to integrate as responsible global players." In other words, Russian companies are willing to play by the rules of the market. "It's completely logical and legitimate for Russian energy companies to buy assets in Europe," argues Rahr. Russia's energy sector is cash-rich and looking for opportunities to diversify. Its needs seemingly go hand in hand with the development going on in central Europe, where the new EU member states are desperate for foreign investment. Over 60 percent of Russia's oil and gas exports are sold to the EU. At the same time, the EU's newest members are reliant on Russia for up to 80 percent of their oil and gas needs. Seen in the light of such enormous and economically vital commercial interests in the area, Russian purchases of energy infrastructure in these countries are a means of safeguarding uninterrupted deliveries to their most valuable markets – as well as a continued flow of income to the state budget. Price caps on energy for the Russian market mean that Gazprom and others barely break even on domestic sales. Put together with increasing yields, this gives energy firms reason to set their sights firmly on exports. "Production is growing and European markets are definitely more attractive than the domestic market," says Madina Butaeva, a senior equity analyst for Raiffeisen Bank in Moscow. "The planned export routes to the United States, Japan and China are still a few years away, so European exports are the most attractive option for Russian oil companies for the time being." At the end of January, Russian Finance Minister Alexei Kudrin announced Gazprom's participation in talks aimed at securing direct access to the Italian gas market. The company is also interested in the privatization of Italy's gas pipeline operator, Snam Rete Gas, scheduled for 2008. A look at the figures involved in Russian gas sales to Italy shows that Gazprom and others have good reason to increase their role further down the distribution chain. The price of Russian gas when it reaches the Italian border is around ?200 per 1000 cubic meters ($238/35,300 cubic feet). According to the Italian Authority for Energy, the price reaches ?640 ($761) by the time the gas gets to Italian households. Clearly, the closer Gazprom gets to the end consumer, the more profit it stands to make. Anisa Redman, an oil and gas researcher at Alfa-Bank, says an increase of both production and profits explains LUKoil's acquisition of refineries in Europe. LUKoil can make more money by refining its own hydrocarbons than simply selling crude oil for others to process. It's cheaper from a tax and transportation point of view to refine the oil as close to the market as possible, Redman says. This also explains LUKoil's focus on building a network of filling stations overseas. By controlling its own retail outlets, LUKoil becomes its own most reliable and dependable customer, while strengthening its brand. In short, Russian energy firms are buying stability. This does not mean, however, that Russian expansion poses no risk to Europe's energy security. Asked if Russia was turning to its growing economic might as a means to achieve its foreign policy aims, Russian President Vladimir Putin emphatically denied the charge. "I think it's absolutely unfounded to talk of a Russian energy weapon," he told the 900 journalists gathered in January for his annual press conference. But, in the words of Gazprom Deputy CEO Alexander Medvedev, "it is too naive to say that the energy business can be completely separated from foreign policy." Russia's energy sector carries enormous political weight by its very nature as the country's most significant generator of wealth. Because of their political influence, decisions made by energy heavyweights must balance both political and economic concerns. Putin has made it a stated priority to improve domestic living standards, and the fortunes of the country's energy exporters will determine the extent to which his promises are fulfilled. This alone offers some assurance that Gazprom and others will be left free of interference from the Kremlin to develop their business according to market forces, as long as their business remains profitable overseas. While Europe might be ever more dependent on Russia, Russia simply cannot afford to frighten its European consumers into looking elsewhere for its energy needs. As Redman says, "It's a partnership – both sides need each other. It's not like Gazprom is a monopolist and can do whatever it likes in Europe, because there are other suppliers as well." The Kremlin's sudden spirit of compromise with Ukraine in its gas dispute following an outcry from its customers further to the West can be seen as good news for Europe. It was a sign of the importance that Russia places on maintaining its reputation as a reliable supplier of gas – and gives reason to believe it will not use its control of European energy infrastructure as political leverage against its most important customers. Russia is unlikely to forget the experience of OPEC, which hurt itself politically and economically by using its grip on the oil supply to pressure the West in 1973. The situation with Russia's immediate neighbors is less clear-cut. Russia has turned off the gas taps before as part of a political dispute, most recently to Ukraine and, in 2002, Belarus. The completion of Gazprom's next major overseas venture – the North European Gas Pipeline carrying Russian gas directly to Germany and beyond, avoiding transit through Ukraine and the Baltic states – offers the prospect of serious change in the balance of power between Moscow and its ex-Soviet neighbors, since Russia's dependence on them for the transit of its gas exports will be reduced. Russian plans for the rest of Europe look more certain. As long as high energy prices remain, it is possible that Russian companies' shopping spree in the European energy sector has only just begun. Click here to see Russian Ownership in Select Foreign Energy Enterprises

Bodman Calls for Market Approach

Thursday, March 16, 2006 Itar-Tass by Stephen Boykewich - Bodman speaking in Moscow ahead of talks Wednesday with G8 ministers. U.S. Energy Secretary Samuel Bodman called Wednesday for renewed energy ties and new joint projects with Russia, saying he would push the Group of Eight energy ministers to liberalize markets as they began two days of talks in Moscow. "We are stressing the need for all G8 nations to employ a market-based approach to achieving greater energy security that encourages production, that encourages competition," Bodman told reporters ahead of the talks. His comments came a day after Industry and Energy Minister Viktor Khristenko dug in his heels against European calls for gas market liberalization and accused the United States of blocking Russian bids for U.S. energy projects. Russia and the West appear to be increasingly at loggerheads over global energy security -- the stated priority of Russia's G8 presidency this year -- as ministers met for the second major event leading up to July's G8 summit in St. Petersburg. Joining the G8 ministers for talks were energy officials from China, India, Brazil, Mexico and South Africa, as well as representatives of OPEC, the International Energy Agency and the World Bank. Khristenko on Tuesday dismissed renewed European calls for Russia to ratify the Energy Charter, a treaty that forbids member countries from cutting energy shipments during price disputes. Ratifying the treaty would prohibit Russia from unilaterally cutting off gas supplies, as it did to Ukraine and Moldova in January, and would allow foreign companies to dispute Gazprom's exclusive use of Russian gas pipelines in international arbitration court. European Commission president Jose Manuel Barroso plans to push President Vladimir Putin on ratification of the treaty when the two meet this Friday, Reuters reported. Forty-six of the charter's 51 signatories, which include virtually every country in Europe and northern Asia, Japan, and Australia, ratified the charter between 1995 and 2002. Andre Mernier, head of the Brussels-based Energy Charter Secretariat, said Tuesday at a Moscow conference on international energy security that the treaty was based on "national sovereignty over energy resources." He acknowledged, however, that "when Russian companies approach the Secretariat and ask whether they can protect their interests under the Energy Charter Treaty, we can provide only a cautious response." Khristenko's response was far from cautious when asked at a news conference Tuesday whether Russia planned further liberalization of its energy markets. "As far as liberalizing the market, the question must be answered: What does this mean? Free access for whom? You don't plan on liberalizing your home," Khristenko said. Khristenko said Russia had already done enough to liberalize its gas market by lifting the so-called "ring fence" that had restricted foreign investment in Gazprom until this year. When asked whether he would push Russia to ratify the Energy Charter and liberalize Gazprom, Bodman said, "I would not encourage the Russian government or the Russian people to do anything they don't believe is in their interest." Bodman rejected Khristenko's claim that U.S. regulators were making it "virtually impossible" for Russian energy companies to work on projects in the United States involving the re-gasification of liquefied natural gas, or LNG. LNG is the cornerstone of Russia's plans to expand energy supplies to the United States, but the United States currently has limited capacity to re-gasify imported fuel for industrial or household use. Bodman said there were currently 20 licenses under review for U.S. companies to build new re-gasification plants, and that he encouraged Russian companies either to enter partnerships with these companies or to pursue sole ownership and operation of their own plants in the United States. "I'd certainly encourage it if that's what they want to do," he said. Bodman urged Russia to speed development of the Shtokman project, a huge Barents Sea gas field in which U.S. oil majors Chevron and ConocoPhillips are seeking a stake. Gazprom has said it will announce two or three partners to develop the field, which is thought to contain 3.2 trillion cubic meters of gas, by April 15. Gas from the project would reach the United States as LNG. The United States also wants to see quick resolution of a dispute blocking Kazakhstan from shipping more oil to Western markets via Russia though the Chevron-led Caspian Pipeline, in which Russia is the largest shareholder. Russia is currently blocking the pipeline expansion, citing corporate governance concerns. Though President George W. Bush has called for reduced U.S. dependence on foreign energy sources, Washington's current priority is "making the widest supply available" and letting the market decide how to use it, Bodman said. Aside from maximizing supply, the G8 should defend against energy crises by coordinating emergency fuel stocks, securing infrastructure and diversifying energy transit routes, Bodman said. Bodman held separate meetings on energy cooperation with Khristenko and First Deputy Prime Minister and Gazprom board chairman Dmitry Medvedev later Wednesday. U.S. Deputy Commerce Secretary David Sampson held a similar meeting with LUKoil CEO Vagit Alekperov, Interfax reported. Chris Weafer, Alfa Bank chief strategist, said that Sampson's subsequent announcement that a bilateral agreement on Russia's accession to the World Trade Organization was weeks away should come as no surprise in the context of the energy talks. Aside from stated U.S. concerns about intellectual property rights enforcement in Russia, "it has always been thought that the real stumbling block for U.S. approval of Russia's WTO membership has been the lack of a specific energy deal" between the two countries, Weafer said Wednesday. But with U.S. participation in Shtokman likely and joint oil projects on the horizon as well, "that deal is coming," Weafer said. U.S.-Russia energy relations went cold after the 2003 arrest of Mikhail Khodorkovsky, the former Yukos CEO who had been negotiating the sale of a blocking stake in Yukos with U.S. oil giants ExxonMobil and Chevron.

Russia ready for change in living standards - Putin

BRIEFLY MOSCOW. March 16 (Interfax) - Russia has created the necessaryconditions for a vital change in living conditions, President Vladimir Putin said at a Thursday meeting of the Council of Legislators. "We have every prerequisite needed for drastic change in social and economic living conditions. We should use them for a qualitativeincrease of our citizens' well-being," he said. The amount of local funding for education, health care, housing andagriculture exceeds federal budgetary allocations in a number ofregions, Putin said. "Alongside funds assigned for national projects, this money ensuresan efficient solution of social problems," Putin said. "Concentration on major areas will eventually result in theirmodernization," he said. "This is a strategic task, so I ask federal departments andregional authorities not to forget about it," he said.

Societe Generale to issue 3-year bonds on Russian market

Soci�t� G�n�raleMOSCOW, March 15 (RIA Novosti) - French financial major Societe Generale is planning to issue 3-year bonds totaling 3 bln rubles ($105.3 million) through its Russian subsidiary in the next half year, the bank's board chairman said Wednesday. Philippe Delpal said the Rusfinance Bank would quadruple its charter capital to $55 million in the near future, and double its loan portfolio every year. The bank also plans expand its retail network from 34 to 60-70 Russian regions, and establish 12 representative offices in Kazakhstan. A Societe Generale's official said Rusfinance Bank could even acquire a bank in Kazakhstan if it helped the bank to expand its business on the country's financial market. Rusfinance Bank is a new Societe Generale brand on the Russian consumer loan market. In July 2005, SG subsidiary Rusfinance acquired 100% participatory share in the charter capital of Promek Bank, based in the Volga city of Samara, from SOK Group. Promtek-Bank was renamed Rusfinance Bank after the deal was formalized on February 15, 2006. Rusfinance and Rusfinance Bank are planning to merge their assets in May 2006.

Thursday, March 02, 2006

Russia Tops World Economy Growth

Russia Tops World Economy Growth02/03/2006 RZD News - The year 2005 has been a most favorable one for socioeconomic development in Russia, the Economy Minister told a government meeting today assessing the country's economic policy in 2005. The economy grew 6.4 percent last year, significantly outpacing the world economy, the minister said. However, the quality of economic growth did not improve, as trade has continued to expand while industrial production has advanced by only 4 percent against 8.3 percent a year ago, the minister claimed. In Gref's opinion, this is largely due to a slower advance in the fuel and energy industry, with gas production increasing by only 2 percent and oil exports actually sliding 2.1 percent, reports RBC. The Economy Minister believes that Russia will not be able to tame inflation and achieve a high rate of economic growth without serious structural reorganization. Without such changes, economic growth is unlikely to exceed 5 percent in the next few years, Gref concluded.

Foreign Investors Seek More Clarity

Thursday, March 02, 2006 – The Moscow Times - by Valeria Korchagina - The government should act to create clearer rules for business and tackle widespread corruption if Russia is to make the most of the current favorable economic conditions, foreign investors said Wednesday at an American Chamber of Commerce conference. Despite enjoying a seventh consecutive year of economic growth on the back of booming oil prices, the country is underperforming in attracting foreign investment, participants said. Unless active steps are taken to diversify the economy away from oil and gas and speed up decision-making, the momentum for a major breakthrough in sustainable growth could be lost, they said. "The real question before us at the beginning of 2006 is whether the Russian economy will do as well as it is capable of doing," U.S. Ambassador William Burns said at the annual conference. "[Corruption] was a big problem when I lived here 10 years ago, and it seems like a much bigger problem today. Along with its evil twin -- bureaucratic red tape -- it is a deadweight on economic dynamism and the growth of small and medium-sized enterprises," Burns said. "It's not a good sign that a society as rich in human and natural resources as Russia should let itself be lumped together in corruption rankings with small, impoverished countries like Albania and Sierra Leone," he said. The lack of clarity in the rules of doing business in Russia was singled out as a key concern of foreign investors. "We would like to see clarity on subsoil, fiscal and [natural reserves] licensing regimes," Kris Sliger, head of business development at TNK-BP, told the conference. The government has yet to outline its policy toward foreign firms' participation in projects involving the development of strategic natural reserves and foreign investment in strategic sectors, including those involving dual-use technologies. The Cabinet discussion on these issues was due to take place Thursday but was pushed back a week, Interfax reported Wednesday. "Russia clearly does not attract as much foreign investment as it deserves," Sliger said, adding that the reason for the lag was Russia's inability to create a fully competitive investment climate. While in 2005 Russia attracted a record $17 billion in foreign direct investment, the figure pales into insignificance compared with the world's total volume of about $900 billion, he said. Trem Smith, president of Chevron Neftegaz, the Russian arm of U.S. oil company Chevron, noted that the cash flow from abroad continued to be directed chiefly into the energy sector, and pointed out the need for increased diversification of the economy. Others speakers, however, including Charles Ryan, CEO of Deutsche Bank in Russia, said there were signs that the economy was beginning to expand outside the oil and gas sectors. "Pretty startling things have happened in the Russian economy. We've seen a fundamental breakthrough that cannot only be explained by oil. A number of things have happened in the last 12 months that reveal something much more fundamental," Ryan said. The growth of per capita gross domestic product, which jumped to nearly $5,500 in 2005 from just over $4,000 in 2004, is just one of the many encouraging developments, he said. "GDP per capita is finally starting to enter the range where the names of countries make some sense," Ryan said, pointing out that the current level put Russia way ahead of China and among nations such as Turkey and Latvia. Many of the speakers at the forum agreed that aside from energy, Russia has a great potential in developing the information technology sector. Richard Brody, president of United Technologies International Operations in Russia, however, said that just like in the oil and gas sector, the lack of clarity on rules and regulations in the IT sector remained a major barrier to development. Intellectual property rights protection -- one of the few remaining obstacles in Russia's negotiations with the United States for entry into the World Trade Organization -- is a major hindrance to increasing foreign capital in the IT and high-tech sectors. Chris Israel, the U.S. Coordinator for International Intellectual Property Enforcement, said Russian authorities were making encouraging steps toward protecting intellectual property, and conceded that it was possible for Russia to meet U.S. requirements for WTO entry by the end of 2006. Nevertheless, further improvements are needed in combating online piracy and counterfeit pharmaceuticals, improving patent protection, and enforcing the licensing for optical disk plants. AmCham president Andrew Somers said he expected the differences between Russia and the United States to be settled as soon as this spring. "On both sides the business community is urging for the very small gap that exists to be closed," he told the forum. Summarizing the overall business climate in Russia, Somers noted that "foreign business is still being very positive about Russia's development." "And this is based on the proven success in the past," he said.

Putin Promises Europe Stable Energy Supplies

Photo from news.yahoo.com 01.03.2006 MosNews - Russia's President Vladimir Putin, who is in Budapest now with an official visit, has said on Tuesday, Feb. 28, that Hungary may become a strategic partner to Russia with regard to ensuring stable energy supplies to Europe. The Russian President said there was an opportunity to extend the Blue Stream gas pipeline further into Southern Europe, and Hungary could participate in that project. Vladimir Putin once again underlined Russia's reliability as an energy supplier. He was quoted by Russia's Channel 1 as saying: "Nobody in Europe should have any doubt about the reliability of Russian energy supplies to European countries. Russia has never disrupted the supplies, not a single time, even in the time of the biggest economic difficulties in the mid-1990s. Never. All our recent actions are aimed solely at raising the reliability of the fulfillment of contract obligations by our suppliers. I have said more than once and can repeat once again: after 15 years of negotiations we finally agreed with our Ukrainian partners to separate two issues — that of gas supplies to Ukraine and of [gas] transit to European countries."

Russian Government to Restrict Foreign Access to 39 Strategic Sectors

02.03.2006 MosNews - Russian government will restrict foreign companies' access to 39 strategic economic sectors, including weapons production, the nuclear industry and mineral deposits, the country's Economy Minister German Gref said on Thursday, March 2. German Gref told a government session that the final version of a new bill was being drafted, but that the Ministry of Economic Development and Trade had already coordinated "certain approaches" to the issue with the Ministry of Industry and Energy. "We will identify a set of industries," Gref said, quoted by RIA Novosti. "For the moment, the list contains 39 types of activities where foreign companies will need [government] authorization to buy controlling shares." The minister added that in the raw materials sector limitations will only apply to strategic deposits. Restrictions will mostly apply to the sectors which produce arms, military equipment, nuclear materials and build nuclear power objects. He said the measures were "far more liberal than in other countries, for example, Finland and the United States," and added that the restrictions would concern sectors that account for 2-3 percent of national GDP. According to Gref, a "gray mechanism" is currently applied when foreign companies consult the government before buying assets in Russia. The minister called for clear and open regulations of foreigners' access to the country's strategic assets. He said a special interagency commission would be set up to authorize such deals.

Investment crucial to maintaining economic growth - minister

MOSCOW, March 2 (RIA Novosti) - Investments are crucial if Russia is to maintain its economic growth, the country's economics minister said Thursday. German Gref told a government session that investment value had risen 10.6% in 2005, although most of it was going into a small group of companies in transport, the minerals sector and real estate. The energy sector, metals and communications received a smaller share, and only 2% went to machine-building, Gref said. "Insufficient investment is becoming a critical factor in the competitiveness of the Russian economy and employment," Gref said.

Foreign companies to face new economic restrictions

MOSCOW, March 2 (RIA Novosti) - The government will restrict foreign companies' access to 39 strategic economic sectors, including weapons production, the nuclear industry and mineral deposits, the economics minister said Thursday. German Gref told a government session that the final version of a new bill was being drafted, but that the Ministry of Economic Development and Trade had already coordinated "certain approaches" to the issue with the Ministry of Industry and Energy. "We will identify a set of industries," Gref said. "For the moment, the list contains 39 types of activities where foreign companies will need [government] authorization to buy controlling shares." He said the measures were "far more liberal than in other countries, for example, Finland and the United States," and added that the restrictions would concern sectors that account for 2-3% of national GDP. According to Gref, a "gray mechanism" is currently applied when foreign companies consult the government before buying assets in Russia. The minister called for clear and open regulations of foreigners' access to the country's strategic assets. He said a special interagency commission would be set up to authorize such deals.

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