Zee Beam News

November 21, 2007 - Russia Today - The U.S. dollar hit a record low against the Euro and a two-year low against the yen on Wednesday, after the U.S. Federal Reserve gave a pessimistic outlook on growth in the U.S. next year. The dollar's also weaker against the rouble. The weakening of the American currency also pushes up the oil price. U.S. crude oil hit a record high of $US 99 a barrel in overnight trading, although it retreated on Wednesday. Analysts say higher prices will be both good and bad for Russia. “Oil products are the major export commodity in Russia. If oil prices increase, export revenues will increase and this will boost overall growth. On the other hand, a large inflow of dollars will create more inflationary pressure on the Russian economy,” said Vladimir Osakovsky from Aton Capital.

November 20, 2007 - Russia Today - Telecom companies are the most transparent firms in Russia, according to ratings agency Standard&Poor's. But investors remain unhappy about the level of information about Russian companies listed on the equity markets. Standard&Poor's says the behaviour of the top ten most transparent companies has changed notably. The biggest change has been in the disclosure of ownership. It is now easier to see who owns a company. The issues that still worry investors include management contracts, auditing practices and even the question of who the boss is. The problem is that Russian companies use a different accounting system - and only some produce parallel reports under the widely accepted international accounting standards. Slow progress on transparency and disclosure remains an important issue for the Russian companies that raise money on the financial markets - even though investors want to know more about the firms they invest in. Transparency debutantes For the first time CTC Media, Rosneft and Lukoil have entered the list of most transparent companies. Russian companies disclose information through three main sources - annual reports, web-based disclosures and public announcements. Aleksey Rybnikov, head of Moscow’s Micex company, forecast that it will take another five years before Russian firms reach international levels of disclosure. “Sometimes if you give too much information about yourself, you may become the subject of a hostile attack. This has become less of an issue during recent years, but the memories are still there”, Rybnikov said.

11/19/2007 MOSCOW - (Anatoly Gorev for RIA Novosti) - Merrill Lynch, a major U.S. company in the financial services industry, recently announced that it has acquired about 10% of the Trust Banking Group. Analysts have called this deal a landmark for two reasons. First, new key player has emerged in the Russian market and, second, Merrill Lynch has come to Russia after sustaining heavy losses in the mortgage crisis in the United States and is probably looking for a quiet harbor. Not much is known about the deal. Two or three months ago, a Trust shareholder decided to quit and asked Merrill Lynch to sell his stock. It transpired that Merrill Lynch decided to buy the stock itself. The sum of the deal has not been disclosed but analysts believe that it is unlikely to be huge: in the third quarter the Trust assets went down and the bank moved from the 69th to 101st place in the rankings of the Interfax Center for Economic Analysis (Interfax-CEA). Experts think that Merrill Lynch will stand to gain from this deal anyway, if only because its long-standing dream, to work in Russia, is coming true. Last March, it received a three years' license for its subsidiary in Russia, which entitles it to act as a broker and dealer. This step was interpreted as evidence of the desire to come to Russia and it was expected to buy stock there. As we see now, this forecast was correct. Probably, if the situation were better, it would take Merrill Lynch more time to make this move. But now the timing is right considering that Russia has practically remained immune to the U.S. mortgage crisis; its banking business is highly profitable and the financial situation is stable. Like many other large national banks, Merrill Lynch has suffered multibillion losses in the United States and the worst headaches are yet to come. Indirectly, this is clear from a recent statement by Federal Reserve Chairman Ben S. Bernanke. He warned that the U.S. economy could seriously slow down because of the mortgage crisis and a new round of inflation, which might be provoked by record oil prices and the weak dollar. In the worst-case scenario, success in Russia will not help Merrill Lynch, particularly because the funds, which it has invested into business here, are incomparable to its assets in the American and European markets. But if the scenario turns out to be not as bad, the U.S. brokerage firm may find the Russian market comfortable, especially since it has enough room for maneuver. Most likely, Merrill Lynch will actively work in the investment and banking sectors. Its experience, connections and handsome resources may well allow it to oust major Russian banks and its traditional rivals, such as the Morgan Stanley bank, which has operated in Russia for several years now. It is also quite probable that Merrill Lynch will go into private banking in Russia. It will have to compete against many rivals, including both Russian banks and foreign subsidiaries. Analysts believe that the customers will be attracted by the proud name of the American group and its world reputation despite the recent negative developments.

//Celebrating 200 Years of Not Getting Along
November 20, 2007 - Russia Profile by Paul Abelsky - In the two centuries that Russia and the United States have maintained diplomatic ties, this year is likely to go down as one of the more unsettling periods in the bilateral relationship. The events of the past 12 months have been seen by many as a harbinger of growing rivalry and mutual apprehension, as numerous disputes have continued to erode a frayed partnership in strategic global affairs. Even against the background of festivities marking the 200th anniversary on both sides of the ocean, the talk in recent months has focused more on the future of arms treaties and diplomatic discord on issues ranging from Iran and Kosovo to democracy promotion and access of election observers to Russia’s parliamentary vote in December. Still, numerous cultural exchanges and conferences have celebrated the longevity of the U.S.-Russian relationship. The range of this year’s events was itself a testament to the enduring curiosity between the two countries and the depth of the existing ties. Symbolic gestures abounded—from a small photography exhibit at the American Center in Novosibirsk and a historic exhibit of American art at the Pushkin Museum of Fine Arts in Moscow to a July visit of U.S. Navy vessels to Vladivostok and the opening in November of St. Petersburg’s Days of Culture in New York. But mounting diplomatic strains lurked behind expressions of sympathy and generosity. In the year of a momentous anniversary, the two powers are closer than ever to ditching strategic arms treaties that have been the bulwark of stability during and in the aftermath of the Cold War. Still, during an August speech at Spaso House, the U.S. ambassador’s residence in Moscow, U.S. Senator Richard G. Lugar (R-Indiana) urged both countries to take a longer term view of the situation. “We have disagreements over energy security, democracy, human rights, Iran, Kosovo, Georgia, and Moldova, just to name a few items frequently in the headlines. We even disagree about previously well-accepted foundations of stability, like the Conventional Forces in Europe Treaty,” he said. “While acknowledging divergent views on many issues, we cannot afford to succumb to pessimism. The United States and Russia have too much at stake and too many common interests to allow our relationship to drift toward conflict.” Repairing relations poses an ever greater challenge as the two countries’ geopolitical interests continue to diverge. Wielding veto power in the UN Security Council, Russia is blocking stricter sanctions on Iran and a partition of Kosovo and Serbia. The impending expiration of a key nuclear arms accord and the threatened future of a treaty restricting conventional forces in Europe have continued to fuel the unease. With the U.S. commitment to proceed with the deployment of the missile defense system in Eastern Europe, Russia has felt emboldened to carve out an increasingly assertive foreign policy course. In the waning months of the Bush presidency, however, Iran has emerged as the keystone of U.S. initiatives abroad. And Russia has plunged into the fray with forceful maneuvers aimed at bolstering its standing in the Middle East and positioning itself as a resurgent world power. President Vladimir Putin’s visit to Tehran in October, the first such trip by a Soviet or Russian head of state in 60 years, captured international attention at a time when the Iranian leadership has closed off most channels of communication with the West. The threat of further sanctions against Iran along with Russia’s contribution to its uranium enrichment program, have put added strain on U.S.-Russian relations. The week before Putin’s visit saw some of the most intense diplomatic exchanges in recent months between Russia and its chief international partners. U.S. Secretary of State Condoleezza Rice and Defense Secretary Robert Gates were in Moscow for urgent consultations on U.S. missile defenses in Europe and a host of other issues. Bookending their visit were French President Nicolas Sarkozy’s first trip to Moscow and President Vladimir Putin’s session with German Chancellor Angela Merkel in Wiesbaden. “There is very little the international community can do to pressure Iran,” said Georgy Mirsky, senior research fellow at the Institute of World Economy and International Relations in Moscow. “Putin may have delivered a mild message to Iranian President Mahmoud Ahmadinejad, but it’s clear that Iran is intent on following through on its ambition to develop a nuclear program.” The October meetings with U.S. officials were stipulated in the accords reached during Putin’s July summit with U.S. President George W. Bush in Maine. A statement from the Russian Foreign Ministry described the focus of the talks as “strategic stability,” and no issue is more destabilizing from the Russian viewpoint than the possibility of U.S. anti-ballistic missile facilities in Poland and the Czech Republic. The consultations fell far short of a breakthrough, but they showed the visiting side that Russia is resolute in opposing the U.S. program, which extends close to Russian borders. “The outcome of the talks is that Russia has got up from its knees and is openly questioning the wisdom and purpose of American installations,” said Anatoly Utkin, an expert at the USA and Canada Institute in Moscow. “Seeing that in all likelihood the defenses are ultimately directed against Russia, Putin warned that Russia will have to abandon important bilateral treaties signed with the United States.” The “two plus two” format for the consultations included talks between defense and foreign ministers on both sides. Speaking at a joint press conference during the meetings, Russian Foreign Minister Sergei Lavrov outlined two principal objections to the U.S. plans. “The first problem is that we differ in our assessment of the threat of missile proliferation, which is the target of the global system of anti-missile defense,” he said. “We have agreed that experts will focus on working out a common understanding of the present threats. And the second problem is that for the joint work of Russian and American specialists to become more effective, it is necessary to ‘freeze’ the plans for the deployment of the new installations in Europe.” The growing dispute has put in doubt cooperation in other crucial areas of strategic military cooperation. At a later meeting with Rice and Gates, Putin suggested scrapping the 1987 Intermediate-Range Nuclear Forces Treaty (INF), which helped eliminate medium-range nuclear and conventional missiles in Europe. The Russian side has also continued to threaten a withdrawal from the Conventional Forces in Europe (CFE) Treaty if it is not ratified by NATO. Putin harshly questioned the threat assessment implied in the U.S. plan, suggesting that any unilateral moves by the American side could further disrupt the more immediate security initiatives between the two countries. “The one point I would like to make is that we hope that you will not push ahead with your prior agreements with Eastern European countries while this complex negotiating process continues,” he said. “After all, we could decide some day to put missile defense systems on the moon, but if we concentrate solely on carrying out our own plans we could end up losing the opportunity for reaching an agreement.” The U.S. side has tried to counter Russian suspicions by introducing a program for a new “Joint Regional Missile Defense Architecture,” which would attempt to draw Russia into a broader anti-missile system with NATO and the United States aimed at protecting all of Europe. The partnership envisions closer coordination in designing and operating the defenses. Utkin notes, however, that Russia would remain hesitant to support a proposal that includes installations in Poland and the Czech Republic. Following Russia’s strategic retreat from Eastern Europe, the U.S. attempt to move into the area makes it seem like a particular threat. A proposed defense shield that spans a radar station in the Czech Republic and ten interceptor missiles in Poland has drawn little more than apprehension and protests from Moscow. “In a way, Russia left this area for the sake of the Americans, and now there is a chance they will target us from sites located there,” Utkin said. “What these talks have achieved is a clearer sense of where the opposing sides stand.” U.S.-Russian relations may still be defined by a mix of mutual fear and respect, but a shared sense of disappointment has made future cooperation more problematic. This year has provided a symbolic marker in a complex evolving partnership that will surely outlast the present-day crises. But it has not prompted the nations to steer toward a broader compromise on the thorniest matters that beset the relationship. And if public opinion surveys are any indication, signs of enmity extend beyond high-profile encounters. According to a poll conducted by the All-Russian Public Opinion Research Center (VTsIOM) in August, the United States registered the most negative reaction. Nearly a quarter of the respondents predict U.S.-Russian relations during the next 10-15 years will be “tense and hostile.”

11/16/ 2007 - MOSCOW - (RIA Novosti economic commentator Oleg Mityayev) - On November 17-18, Saudi Arabia will play host to the third summit in the 47 long-year history of the omnipotent oil cartel - the Organization of the Petroleum Exporting Countries (OPEC). On the eve of the summit, OPEC has been subjected to a massive attack led by oil consumers, who demand that it should immediately increase oil production. The price of oil may surpass the record of $100 per barrel any day, but it is already clear that the oil cartel is not going to make any concessions to oil buyers this weekend. Moreover, on November 14, OPEC bluntly rejected an appeal by the United States, a major oil consumer, to increase oil production this week. In response to this request by U.S. Energy Secretary Samuel Bodman, OPEC Secretary General Abdullah Badri said that "we don't see that we should add more oil...." He is absolutely right. Oil supplies fully meet the demand and the current soaring prices ($93-$95 per barrel) have been caused exclusively by speculative attitudes. Without a doubt, more oil in the market would help its consumers to stock reserves and ease speculation. But OPEC has a bitter experience of sudden drops in oil prices (the last one occurred in 1998), and does not want to rush decisions to increase oil production. Also, its opportunities in this sphere are quite limited. Now that prices have reached a record level, almost all oil-rich countries are producing as much oil as possible. This applies to Russia and other countries that are not part of OPEC. Only Saudi Arabia, the world's largest oil exporter, is in a position to step up its oil production but it does not see any point in this measure. Since November 1, OPEC, primarily the Saudis, has been putting an additional 0.5 million barrels a day on the market, but this has not reduced oil prices. The supply-and-demand balance alone cannot justify oil prices. Many experts believe that a fair price would be around $60 per barrel. Skyrocketing prices have been caused by a whole range of other factors, which have stirred up the objective economic trend toward increasing the costs of raw materials. These factors include geopolitical tensions, the decline of the dollar, the use of oil contracts for investment and profiteering and mishaps in the oil processing industry. Oil producing countries are ridden with political tensions. The situation on the oil market is clouded by the West's conflict with Iran over its nuclear program, which may develop into an armed conflict. In theory, the latter may put a halt to all oil supplies in the Gulf. After the U.S. invasion of Iraq in 2003, its oil industry has been unable to function normally because of continuous subversion at pipelines. Turkey deployed its 100,000-stong army on the northern border of Iraq and is ready to launch a military operation against Kurdish rebels on the country's territory. Riots are hindering oil exports from Nigeria. Furthermore, oil contracts are traditionally nominated in dollars, and a huge increase in prices should be attributed to a record drop of the U.S. currency in the fall ($1.47 for a euro). The weakening of the dollar coincided with the mortgage crisis in the United States and Western Europe, which is still fraught with the threat of collapse at the world stock exchange. Under these circumstances, the investors have found an escape - oil futures, but the profiteers have sharply raised their prices. On top of all that, there have been a number of accidents at oil processing facilities in the United States, which uses more gas than any other country. As a result, the commercial oil reserves have been depleted, which has further pushed prices up. After OPEC's adamant refusal to increase oil production, the consumers will have to hope for the cartel's mercy at a ministerial conference in Abu-Dhabi, United Arab Emirates, on December 5. This means that oil prices will remain extremely high. People in Russia have long realized that constantly rising oil prices are increasing their cost of living because of the growing flow of petrodollars.

Nov. 12, 2007 - Kommersant by Natalia Skorlygina
// James Pearson, head of Miller and Lents talks about the auditor's life in Russia
Recent problems with audits of oil and gas reserves have attracted attention not only in the oil industry, but among government officials as well. Miller and Lents chairman James Pearson tells Kommersant about fine points of an independent auditor's work, about recent changes in their classifications and the possibility of deceiving the auditor.
What are Miller and Lents' plans in Russia?
Mainly to continue making independent evaluations of oil and gas reserves. We do not plan to open an office for now. We want to remain a Western firm and to do all the work in Houston. But we established the Neftegazkonsalt company in Russia comparatively recently, and it will help us with its Russian experience and will make evaluations under the new Russian classifications that should come into force on January 1, 2009.
Why was it necessary to set up a new company?
In the new Russian classifications, and in the new classifications of the Society of Petroleum Engineers, there is a “resources” category that is especially complex to evaluate. Experience is needed working in the field in the region. Miller and Lents wanted to make sure it had access to that experience and to the data that we needed for those evaluations and to make use of the assistance of Russian engineers and geologists.
What is the difference between the methods for evaluating reserves used by Miller and Lents and DeGolyer & MacNaughton?
I can't tell you. Professional ethics prevent me from publicly discussing the evaluation methods of another auditing company. About ten years ago, I talked with Fred Grote, chairman of the board of D&M, and he said then that the company would not do audits of reserves, but only evaluations, but I don't know what became of that. We never compared who evaluates reserves more strictly, us or them. Competition between auditors is not that open. We do not do PR, we do almost no advertising, but we have been operating for 60 years and we always have orders.
What is the difference auditing and evaluating reserves?
They are two different kinds of work. An audit is when the client presents its evaluation of its reserves at every deposit and at every collector and input data that the evaluation is based on. The auditor checks the quality of the data and observes the evaluation procedures and writes a report about whether or not he considers the evaluation well-founded. As a rule, a evaluation made by a client of his own reserves is considered correct when it differs from the conclusions of Miller and Lents itself on the basis of analyses of the input data by no more than 10 percent. Otherwise, the auditor writes that the evaluation is incorrect and explains why. The evaluation is when the auditor independently estimates the reserves on the basis of data provided by the client.
Do Russian companies order audits or evaluations more often?
Mainly evaluations. But large companies sometimes order audits as well. We note that large international companies, like Chevron, ExxonMobil and Shell, evaluate their own reserves without turning to an independent auditor, and they have been doing it for 50 or 60 years. Depreciation of reserves happens very rarely. In the 1980s, Texaco reduced its evaluation of its gas reserves by 25 percent. The market trusts the evaluations of large international companies. But that is not so in the case of small, independent companies and, so far, that is not so in the case of Russian companies, because the West does not know them well enough. It will happen in time: they will do their own evaluations and the investors will trust them. But small companies will always need independent audits – they will always need investors, money and they will try to enter the stock market.
Oleg Mitvol, the deputy director of the Rosprirodnadzor, claimed that the evaluation of companies' reserves made by independent auditors is inadequate because the auditors make their conclusions based on data provided by the producer without checking them. Is it possible to deceive the auditor?
Yes. And Oleg Mitvol raised a really serious question. Companies like Miller and Lents work with base data provided by the client. The client comes to us and says, I want you to evaluate this deposit or that share in a project. Here is the production history, the geological maps, well log data – everything we need to know about the deposit. We do not check that information. It happens that companies provide us with false data. There are certain means against that, but not many. Oleg Mitvol is right about that. For instance, a company that owns a deposit in Western Siberia comes to Miller and Lents and gives us its data. And we know which of them have some relation to reality and which of them don't. We know how much it costs to drill a well in that region, what are the typical operating costs, what is the tax procedure. If the operator writes that he can drill a well for $100,000, we won't consider it. Whenever anything falls outside the norm, we will not accept the data. If the client has provided a falsified map or a map of a nonexistent deposit, or given false well diagrams or test well results, we try to check it.
And of they simply give you a map of someone else's deposit?
That is entirely possible to do. In general, we proceed a priori from the assumption that the asset put up for evaluation belongs to the client. At an early stage of our work in Russia, a problem of that kind arose. In 1996-1997, we evaluated the reserves of one of the large Russian companies in all its deposits. Then another large company came to us and we found deposits among its assets that we had evaluated for the former company. We showed this to them and refused to make a conclusion, but the second client said that we made a mistake with the first. I answered that, if we take those assets into account, we have to note separately that they had already been reflected in another evaluation by us. That problem was solved through the efforts of the companies themselves. But in several cases, we cannot track even that. There is a special cause in our evaluations saying that the data that were the bases of the conclusion we have made were received from the client and we did not confirm their authenticity. That is not within the sphere of our competency. Miller and Lents is a company of engineers and geologists who evaluate the technical and economic side of a project. We are not investigators or lawyers and we cannot determine whether an asset belongs to out client or not. In a word, if a corporation decides to provide us with false data, we cannot always catch it. But so far, that hasn't happened.
I would say that a more serious risk is that of the dishonesty of the auditor itself. I have seen the largest oil and gas industry – one more solid than Miller and Lents, D&M, Ryder Scott – lose everything because they took money, huge money, to make a false report. And it got out. Now that company no longer exists. Yes, they have fired us more than all the others combined, but everybody knows that our reports are not fabricated and are independent from the client. I've seen many bad reports by engineers and they main occurred because the client tried to pressure them or even blackmail them with the threat of not paying. That is a real danger.
Have Russian companies tried to pressure you?
I wouldn't say pressure. Companies often dispute our evaluations of their reserves, but we are ready for that. Sometimes their arguments are well-grounded, sometimes they provide us with additional data and we change our position, because we are interested in giving the most accurate evaluation. And to do that, you have to work with the client, because he knows his assets better than we do. Two very large Russian companies refused our services because they disagreed with our evaluation of their reserves and we refused to change it. In one case, they considered our evaluation too high and, in the other, too low. In the end, they proved to be true, because proof was eventually found that their reserves were higher. But, in the case when the client thought we had made a too high evaluation, he hired another auditor, who gave him an even higher evaluation.
You said that companies that try to deceive you can be caught. How?
In the 30 years that I have been working, we have been absolutely sure several times that our client gave us false information and we refused the order. Sometimes they gave us counterfeit well logs, but the counterfeits were overly ridiculous – people just took data from another well, which is easy enough to catch. But that hasn't happened in Russia. The thing is that one of the documents that we always ask for is the statistical account of the hydrocarbon raw materials balance. Sometimes there wasn't one that we could get the exact information we needed from. From the beginning, there was a very high-quality internal control method in Russia through the State Reserves Commission, better than in the United States, since in the U.S. there is no special agency that controls the reserves accounting of all companies.
What data do you ask your clients for?
It's a rather long list, which sometimes causes problems. It seems to the client that we ask for too much. There are geological maps, well log data for every well, isopach maps, development maps, results from test wells. There are electric log diagrams for individual wells, with which we check whether or not the electric log diagrams show the right oil net pay. And, finally, the statistical account of the hydrocarbon raw materials balance. We also ask for a lot of economic information. We give the client a form to fill out. It's information on the price of oil for calculating transport costs and export duties, operational expenses, capital expenditures for drilling and the creation of infrastructure. And the main thing is the client's plans. We evaluate the deposit based on them.
What do you think about the new Russian classification of reserves? You participated in their development to some extent.
I read the classification and wrote to [chief auditor of the development group for the new classification Grigory] Gabrielyants with my views, and I think that he included some of them, but I did not play a large role. I consider it a huge step forward. The State Reserves Commission understood the importance of economics and decided to bring Russian standards into line with world practices and brought them closer to the classifications of the Society of Petroleum Engineers, London Stock Exchange and U.S. Securities and Exchange Commission. The current classification is more geological and answers the question of how much can be produced technically. But the new classification says how much is economically expedient to produce. Under the new classification, you can't call anything a reserve if it is noncommercial. That is called conditional resources. Even though the old A, B, C1 and C2 categories remain, they are closer to what we have. That is, A is closer to what we call drilled proven developed reserves, B to drilled proven undeveloped reserves, C1 to proven undeveloped, C2 to likely or possible reserves. It seems to me that the Western community will now receive the Russian reserves classification with greater enthusiasm than before, because it will be more understandable.
What does Russia need a classification similar to that if the SOE when there is the SPE classification?
I have already been asked that. Honestly, I don't know. Maybe Russia needs its own classification. What I do know is that the new classification is closer to what is accepted in the world.
What changes were made in the SPE standards in March?
I was on the commission for their development. The main reason for the changes in the classification was the need to expand their scope. The classification had been limited only to reserves, but a significant part of the value of a company was not reflected. For example, its assets in geological exploration. The new classification includes not only reserves, but also conditional resources – those reserves that will become commercial, for instance, when the price of oil rises or new technologies are developed – and perspective resources – assets in geological exploration. Here a problem may arise with the practical implementation of the classification. I know very well that no two geologists will evaluate perspective resources the same. They will not agree on the questions of risk evaluation and potential. The problem is not in the classification or the idea – it is an excellent idea – but in its practical embodiment.
Gazprom has asked foreign companies onto the Shtokman deposit as contractors but those companies have said repeatedly that they will be able to place part of the Shtokman reserves on their own balances. Is that possible?
It's possible. Everything depends on the agreement between partners. If it says in it that the partners will be said for their services but Gazprom will remain the owner of the reserves, the partner will not be able to place them on its balance. But if it is said, as it is in some product-sharing agreements, that the partner will be paid from a share of net profit in barrels necessary to cover the investment, the partner may be allowed to place a share of the reserves on its balance. Everything depends on the text of the agreement. Even in old production regions, such as the U.S., disagreement arises about who owns the reserves, because of payment for the investor's services through a share in the net profit. It happened not long ago. The operator said, I am making all the decisions, I am managing the deposit, I bear all expenses and pay only a share in my net profit, when it accrues, as interest in a loan. So all the reserves are mine. But the SEC said no. Those who have a share in the net profit have the right to calculate how many barrels of oil they can receive from it and place those reserves on their balance. At Shtokman, I am sure, it is a question of whom the reserves belong to and how the Western partners will be paid for their participation, and it will be prescribed with crystal clarity. And the conditions of the contract will determine the presence of absence of that possibility.

Nov. 08, 2007 - Kommersant - The European Council on Foreign Relations, ECFR, has released ‘A Power Audit of EU-Russia Relations’ report, claiming Russia won the initiative in relations with united Europe because the European nations are unable to agree on their positions. The lack of agreed policy of Europe’s states in respect of Russia, the ECFR report says, enables the latter to strength influence on each of them, using the economic, first of all the energy levers, and playing the Kosovo card. According to ECFR executive chief Mark Leonard, Russia is the most powerful factor from the time of Donald Rumsfeld and the war in Iraq that has divided Europe. But if Europe eventually agrees on common policy towards Russia, it will win back the initiative, as Europe is more powerful in terms of economy. Nowadays, however, there are two approaches to Russia in Europe. The first one recognizes the threat posed by it and advocates soft deterrence. Under the second approach, Russia is a potential partner that should be integrated into the European system. In general, the ECFR analysts singled out five groups in terms of the attitude to Russia. Greece and Cyprus are called the Trojan horses, as they back up Russia more often then others. The second group includes Germany, France, Italy and Spain. These states are building strategic partnership with Russia despite the principles of common policy of the EU. Austria, Belgium, Finland, Slovakia, Portugal and five more states are the friendly pragmatists, while the Czech Republic, Latvia, Denmark, Sweden and Britain are the frosty pragmatists and Poland and Lithuania are the new Cold-warriors.

MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - Russia-EU energy relations saw a sudden warming last week (October 23-28), as both Russia and the EU made clear that they were ready to make mutual concessions. The previous excessive politicization of the energy issue has given way to pragmatism. The last bone of contention was a package of bills published by the European Commission on September 19, requiring European companies to "unbundle" their electricity and gas production businesses from their distribution activities - i.e. control of power grids and gas pipelines. Since the new legislation applies not only to European companies but also foreign companies investing in the EU energy sector, it directly affects the interests of the Russian gas monopoly Gazprom, which is not only the largest supplier of gas to Europe but also an active investor in the European gas infrastructure. No surprise then, that Russia's Fuel and Energy Minister Viktor Khristenko told the Financial Times, in an interview published on October 19, that the EU should not "fear money or rank it depending on the country of its origin," adding that Russia could diversify its industrial and energy cooperation by turning to Asian and Pacific countries if an "energy curtain" closes around Europe. Yet just a few days later, the minister's tone changed. At the Moscow Energy Dialogue on October 23, Khristenko said that Russia and the EU had begun to discuss amendments to European energy legislation and agreed with Andris Piebalgs, EC Energy Commissioner, on the establishment of a working group on the issue. Two days later, prior to the Russia-EU summit, the dialogue advanced still further. Speaking in Lisbon, Khristenko expressed certainty that Russia would come to terms with the EU on access for Russian investments to the European market (though he made it clear that under no circumstances would Gazprom be broken up). There is plenty of time to find agreement. The procedure for putting the new EU energy bills into effect has not yet been finalized; it will be discussed for another year. European companies will be given at least 18, and up to 30, months grace to divide their businesses. Furthermore, the legislation allows for exceptions for new projects, and the Nord Stream gas pipeline, which will run beneath the Baltic Sea between Russia and Germany, may be exempted from the new rules. Simultaneously, a session of the European Commission's gas coordinating group settled the issues arising from the latest gas dispute between Russia and Ukraine, which erupted in early October over Ukrainian payments for Russian gas. Following the group's session the European Commission issued a statement saying it was no longer worried about Russian gas transit to Europe via Ukraine. On the same day, October 25, it was officially announced that Norway's StatoilHydro had received a 24% stake in the company that will develop the Shtokman gas field in the Barents Sea. It was a welcome piece of news for Norwegians and it came after Russian President Vladimir Putin's telephone conversation with Norwegian Prime Minister Jens Stoltenberg (in the same way French oil giant Total gained a 25% stake in the Shtokman project after French President Nicolas Sarkozy spoke with Vladimir Putin in July 2007). The warming of relations is thus not confined to the EU - it also affects relations with Ukraine, and Norwegian investors. But though the thaw has been sudden, it should not be surprising: Russian gas accounts for 26% of Europe's total consumption. Europe needs guaranteed fuel supplies, and Gazprom needs the European market. For the foreseeable future up to 80% of Russian gas exports to western Europe will continue to be delivered via Ukraine; and the development of the Shtokman gas field will require western investment and technology.

October 31, 2007 – Radio Liberty – The Moscow city education authorities announced in a statement on October 31 a ban on "Halloween events" in the capital's schools, Interfax reported. The statement noted that the policy has been in force since 2003. The reason for the ruling is because the holiday "includes religious elements, such as the cult of death, the mockery of death, and the personification of death and evil, which contradict the secular nature of state educational institutions." The authorities added that unnamed psychiatrists support the ban on the grounds that Halloween is "destructive to the minds and the spiritual and moral health of pupils."