Russia 110517

Basic Political Developments Putin to attend Russia-Brazil cooperation commission session

o Russian Central Election Commission and the Supreme Electoral Tribunal of Brazil signed a memorandum of cooperation - Michel Temer arrived in Russia during a meeting of Russian-Brazilian high-level commission on cooperation. On Tuesday he will meet with Russian Prime Minister Vladimir Putin. According to the signed agreements in 1997, a commission headed by Vice-President of Brazil and Prime Minister of Russia.

Russia to Host Qaddafi Envoys in Effort to Negotiate Ceasefireo Russia To Hold Separate Talks With Qadhafi Envoys, Rebels o Russia’s FM to hold talks with Libyan officials o Tripoli may ask Russia to mediate Libyan conflict - expert : "It's evident

that the meeting will be held on Tripoli's initiative. Taking into account Russia's criticism of the western coalition and its operation in Libya, it's quite obvious that Tripoli today seeks Moscow help," the scientist added.

o Moscow to talk peace with Gaddafi envoys Austrian President in Russia to confer on economic issues and Sochi Olympics Russian, Czech officials to discuss European missile defense - "Deputy Defense

Minister of the Russian Federation Anatoly Antonov will hold a working meeting with First Deputy Defense Minister of the Czech Republic Jiri Sedivy in Moscow on May 17," he said.

Missile defense cooperation best way to ease Russia's concerns - U.S. official : "As we have said previously, our missile defenses are not directed at Russia nor do they threaten Russia's strategic deterrent. We believe that cooperation is the best way for Russia to gain confidence that U.S. missile defenses are not directed at it," the State Department source told RIA Novosti on the condition of anonymity.

Poland’s Attorney General in Moscow to discuss Smolensk crash investigation Russia’s sovereignty over Kurils indisputable – Foreign Ministry Russia outraged by breach of human rights and freedoms in Belarus Sunken Soviet destroyer found off Romania’s coast - The sunken Soviet WWII

naval ship Moskva has been found off Romania’s coast. Cell communication station attacked in Dagestan Russia mulls random passenger checks in metro - paper Documents stolen from Khodorkovsky's lawyer in street attack Moscow court postpones review of Khodorkovsky’s appeal of second verdict

o Court postpones review of appeal in Yukos case to May 24o Russia's Khodorkovsky appeals new jail term

Checks started into tax officials' alleged corrupt practices under Magnitsky case – Markin

Plane from China makes emergency landing in Russia, no one hurts Passengers of Boeing emergency landed in Krasnoyarsk accommodated Reuters PRESS DIGEST - Russia - May 17 RIA Russian Press at a Glance, Tuesday, May 17, 2011 Kremlin Tells Kids About Russia’s Political Opposition - There’s a new addition

this week to the Kremlin’s official website – a section explaining the importance of Russia’s political opposition. The new feature, dubbed “What do we need the opposition for?” is posted on a part of the website that is dedicated to children – kids.kremlin.ru.

A Quiet Revolution in the Kremlin - By Alexander Golts

National Economic Trends Econ Ministry suggests extending prohibitive gasoline duties into June Russian Economic Growth Rate Falls to 4.1% on Outflows, Missing Estimates Unrelieved Reliance - Russia's Pre-Election Budget Spending May Require

Adjustment as Slowing Global Demand Threatens Soaring Oil Prices

Business, Energy or Environmental regulations or discussions Russian equities ride oil wave despite poll risk Polymetal Jumps Most in Month After MSCI Index Weighting Raised Rostelecom sets 0.43 rouble dividend on prefs Rostelecom, Mechel Retreat After Exclusion From MSCI Russia UPDATE 1-Severstal swings to Q1 net profit of $531 million PRESS: GazEnergoStroy to build 800 mln euro power plant in Moscow Alstom modernises Russian hydropower plant Rosselkhozbank mulls subordinated debt issue-sources Moody's releases first-time survey on Russian bank CFOs Sahit_Muja: Russia has become a golden opportunity for China to invest.

Activity in the Oil and Gas sector (including regulatory) AAR to pursue cooperation talks with BP, Rosneft

o BP says talks on solving Russian impasse to go ono Rosneft to drop BP, seek Arctic partners: sourceo No deal in BP-Rosneft-AAR talks – sourceo Rosneft pulls out of BP Russia deal: Interfaxo BP’s Rosneft share-swap deal collapses - BP failed to reach agreement to

salvage its $16bn share swap with Rosneft, the Russian state oil champion, after a deadline of midnight on Monday expired, the UK oil group said on Tuesday.

o BP's Rosneft deal collapses but talks continue - BP's deal with Rosneft has collapsed, ending a flagship £10bn share-swap agreement and plans to explore Russia's oil-rich Arctic waters together.

o TNK-BP Partners May Sell Stake for $30 Billion, Vedomosti Says

LUKOIL sees 2011 Kazakh oil output at 8 mln T UPDATE 1-LUKOIL sees protracted talks on Kazakh gas field LUKoil’s President: Oil’s $100-price is more just Surgutneftegas RAS sales revenue up 41.3% in Q1

Gazprom Bolivia, Gazprom to Sign Exploration Agreement Within Weeks Gazprom Says Gas Sales to Italy Surged 44% in First Quarter NIS First Quarter Profit More Than Triples on Bigger Output Shtokman developers want protected eco zone

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Full Text Articles

Basic Political Developments

09:20Putin to attend Russia-Brazil cooperation commission sessionhttp://www.interfax.com/news.asp

GOOGLE TRANSLATION

Russian Central Election Commission and the Supreme Electoral Tribunal of Brazil signed a memorandum of cooperation http://www.rg.ru/2011/05/16/brazil-site-anons.html

Ivan Kartashov "Rossiyskaya Gazeta" - www.rg.ru 16/05/2011, 18:57 The first day of his visit to Russia, Vice-President of Brazil, Michel Temer began with a visit to the Central Election Commission of the Russian Federation. On Monday, the CEC building on Cherkassky Pereulok Vladimir Churov and chairman of the Supreme Electoral Tribunal of Brazil Ricardo Lewandowski signed a Memorandum of Understanding and Cooperation. Under the Memorandum, a joint presentation of the electoral systems of the two countries. His story about the elections in Brazil Lewandowski began with a brief digression into the history of their country. After a brief story about the peculiarities of the Brazilian election audience was shown a film about the vote in 2010. In turn, the head of the CEC of Russia Vladimir Churov told Brazilian colleagues distinctive features of Russia's electoral system and showed them the latest electronic tools used during the elections in Russia. Among them, the electronic ballot boxes to the national development and boxes that read the marks on the ballots.

Michel Temer arrived in Russia during a meeting of Russian-Brazilian high-level commission on cooperation. On Tuesday he will meet with Russian Prime Minister Vladimir Putin. According to the signed agreements in 1997, a commission headed by Vice-President of Brazil and Prime Minister of Russia.

Russia to Host Qaddafi Envoys in Effort to Negotiate Ceasefirehttp://www.bloomberg.com/news/2011-05-17/russia-to-host-qaddafi-envoys-in-effort-to-negotiate-ceasefire.html

By Henry Meyer - May 17, 2011 8:49 AM GMT+0200

Russia today hosts envoys from Libyan leader Muammar Qaddafi in a bid to negotiate a cease-fire in the North African country.

Foreign Minister Sergei Lavrov will meet with Libyan government representatives in Moscow this afternoon, his press service said. Lavrov said yesterday that Russia expected a Libyan rebel delegation to arrive soon for similar talks.

“Russia is very keen to see a rapid end to the bloodshed in Libya,” Lavrov said yesterday. “We have made it clear that we are ready to support any regional and international efforts that can achieve this.”

Russia abstained from the United Nations Security Council vote in March that authorized military intervention by the U.S. and its allies in Libya to protect civilians. It has since accused the NATO-led air campaign of violating the resolution by supporting the rebels and causing civilian casualties.

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

Russia To Hold Separate Talks With Qadhafi Envoys, Rebels http://www.rttnews.com/Content/MarketSensitiveNews.aspx?Id=1625539&SM=1

5/17/2011 2:35 AM ET(RTTNews) - Russia announced Monday that it has agreed to hold separate talks with envoys of embattled Libyan leader Col. Moammar Qadhafi and representatives of the rebels fighting his regime in Moscow in the coming days.

"We agreed on meetings in Moscow with representatives of both Tripoli and Benghazi (rebel officials)," Russian Foreign Minister Sergei Lavrov announced Monday.

"Official envoys from Tripoli will be here tomorrow. Envoys from Benghazi were supposed to be here on Wednesday, but as they informed us, they were forced to ask us to postpone this visit for technical reasons," the Russian foreign minister said.

Lavrov did not specify the reasons for the delay in talks with the Libyan rebels, but expressed hopes that the talks with the rebels "will take place in the foreseeable future". Reiterating Moscow's call for ending the ongoing fighting in Libya, he stressed that Russia was "ready to conduct dialogue with all" involved in the conflict.

The development came amidst an ongoing armed revolt against the more than four-decade-long rule of the autocratic regime of Qadhafi in the north African country. UN estimates that thousands have been killed in the fighting, which has also forced more than 750,000 others to flee the country.

A day earlier, Luis Moreno-Ocampo, the chief prosecutor of the International Criminal Court (ICC), had requested judges in The Hague to issue arrest warrants for Qadhafi, his son Saif al-Islam and the country's spy chief Abdullah al-Sanussi on charges of committing crimes against humanity. It is now up to the judges at the ICC whether or not to issue warrants for their arrest.

Ocampo told reporters in The Hague on Monday that his office had received strong evidence to prove that the autocratic leader personally ordered attacks on unarmed Libyan civilians, while Saif al-Islam organized the recruitment of mercenaries and Abdullah al-Sanussi directly participated in the attacks against demonstrators.

"The evidence shows that such persecution is still ongoing as I speak today in the areas under Qadhafi control. Qadhafi forces have prepared a list with names of alleged dissidents, and they are being arrested, put into prisons in Tripoli, tortured and made to disappear," he added.

While the leadership of the rebels fighting the Qadhafi regime, better known as the Transitional National Council (TNC), welcomed the ICC prosecutor's remarks, the Libyan government questioned his move and said that the ICC was a "baby of the European Union designed for African politicians and leaders."

Currently, a NATO-led military operation is progressing in Libya to enforce a UN-mandated no-fly zone over the north African nation to protect civilians from attacks by forces loyal to Qadhafi. In addition to its original intentions, the NATO-led operation has also assisted the Libyan rebels in their fight against the Qadhafi regime.

Russia has been a firm ally of the Qadhafi regime and has criticized the NATO-led operation for taking sides with the rebels fighting the Libyan government. Although

several nations, including France, have formally recognized the TNC as the north African country's legitimate government, Moscow is yet to recognize the rebel group.

Moscow has said that it will oppose such any move by the NATO-led coalition to launch ground operations in Libya if it is tabled in the UN Security Council (UNSC) for approval, stressing that the UN resolution that allowed the NATO-led intervention in Libya "directly and unequivocally rules out" ground operations.

Russia, along with China, had abstained from voting on the UN resolution that authorized the international military operation in Libya. The two nations have often opposed the use of force against a sovereign country in the past, saying that such action would set a dangerous precedent.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

Russia’s FM to hold talks with Libyan officials http://english.ruvr.ru/2011/05/17/50390964.html

May 17, 2011 06:03 Moscow Time

Russia’s Foreign Minister Sergei Lavrov will hold talks today with Libyan officials.

Moscow will insist that the Libyan authorities carry out the main demand of the UN Security Council - to avoid actions resulting in civilian deaths.

Mass protests swept Libya in mid-February, demanding withdrawal of the country's leader Muammar Gaddafi.

The demonstrations escalated into an all-out armed conflict.

Tripoli may ask Russia to mediate Libyan conflict - experthttp://en.rian.ru/world/20110517/164065123.html

06:16 17/05/2011

Representatives of the Tripoli government may ask Moscow to mediate the ongoing conflict in Libya at Tuesday's meeting with Russian Foreign Minister Sergei Lavrov, an expert said.

"I think mediation [request] should not be ruled out. One thing I can say for sure is that any military aid [to Libya] is impossible," said Vitaly Naumkin, a leading Russian expert on the Middle East.

"It's evident that the meeting will be held on Tripoli's initiative. Taking into account Russia's criticism of the western coalition and its operation in Libya, it's quite obvious that Tripoli today seeks Moscow help," the scientist added.

The meeting is likely to focus on preconditions for a ceasefire and negotiations between the government in Tripoli and rebel authorities in Benghazi.

Lavrov met with UN Secretary General's special envoy to Libya, Abdul-Ilah al-Khatib, late on Monday, but his meeting with representatives of the rebel Benghazi government has been delayed "for technical reasons."

The revolt in Libya against Gaddafi's forty-year rule, which began in mid-February, has already claimed thousands of lives, with Gaddafi's troops maintaining their combat capabilities despite NATO airstrikes against them.

Despite allied efforts under UN mandate, fighting between the rebels and Gaddafi loyalists has come to a standstill on several fronts.

MOSCOW, May 17 (RIA Novosti)

Moscow to talk peace with Gaddafi envoyshttp://rt.com/news/libya-russia-negotiations-peace/

Published: 17 May, 2011, 09:21Edited: 17 May, 2011, 09:46

Moscow will host talks with envoys of embattled Libyan leader Muammar Gaddafi later on Tuesday, with an offer to broker a ceasefire in the country.

“We have agreed to meet with representatives of both Tripoli and Benghazi in Moscow,” Russian Foreign Minister Sergey Lavrov said on Monday. “Representatives from Tripoli will visit us tomorrow [on Tuesday].Benghazi representatives were to arrive on Wednesday, but said that due to technical reasons they had to postpone the visit.”

The Russian FM added that he hoped representatives of the Libyan opposition forces would visit Russia in the near future. Sergey Lavrov observed that Russia is ready to negotiate with all sides of the Libyan conflict.  

“Moscow is very interested in the quickest end to the bloodshed in Libya and switching to political negotiations,” he said. “We support the African Union initiatives aimed at a ceasefire and beginning dialogue in reaching a national reconciliation in the interests of the entire Libyan population, in the interests of Libya's sovereignty and territorial integrity.”

Sergey Lavrov added that he supports the initiative put forward by the UN humanitarian representative on announcing pause in military actions in Libya in order to bring aid to the country’s civilian population.

Austrian President in Russia to confer on economic issues and Sochi Olympics http://english.ruvr.ru/2011/05/17/50389680.html

May 17, 2011 03:29 Moscow Time

Economics, environmental protection, cultural cooperation, as well as preparations for the Winter Olympics in Sochi are up for discussion during the official visit to Russia of Austria’s President Heinz Fischer, to last May 18 to 21st . The head of the Austrian government spoke in an interview for ITAR-TASS news agency and television channel "Rossiya 24".

According to Fisher, agreements up for signing during the visit are expected to greatly impact future bilateral relations. In particular, the essence of the Declaration on Partnership for modernization is to ensure implementation of ecology-friendly technologies that will solve the problem of climate change and unemployment.

In addition, said the President, we intend to establish a more intensive exchange of scientists, engineers and teachers in the field of higher education.

Russian, Czech officials to discuss European missile defenseToday at 09:28 | Interfax-Ukraine Moscow, May 17 (Interfax-Avn) - The Russian and Czech deputy defense ministers will exchange opinions on a planned missile defense shield in Europe on Tuesday, a Russian Defense Ministry spokesman told Interfax-AVN.

"Deputy Defense Minister of the Russian Federation Anatoly Antonov will hold a

working meeting with First Deputy Defense Minister of the Czech Republic Jiri Sedivy in Moscow on May 17," he said.

Apart from missile defense issues, the sides will discuss military and military-technological cooperation between the two countries, as well as ways to maintain regional and international security, the spokesman said.

Read more: http://www.kyivpost.com/news/russia/detail/104539/#ixzz1Maf567HS

Missile defense cooperation best way to ease Russia's concerns - U.S. officialhttp://en.rian.ru/world/20110517/164065483.html

06:52 17/05/2011

Moscow's participation in the European missile defense is the best way to ease Russia's concern about the project, a high-ranking U.S. Department of State official told RIA Novosti on Tuesday.

"As we have said previously, our missile defenses are not directed at Russia nor do they threaten Russia's strategic deterrent. We believe that cooperation is the best way for Russia to gain confidence that U.S. missile defenses are not directed at it," the State Department source told RIA Novosti on the condition of anonymity.

The statement comes shortly after Russian Deputy Foreign Minister Sergei Ryabkov expressed his concern about the U.S. refusal to provide legally binding guarantees that its European missile defense system will not be directed against Russia, and warned that Moscow may pull out of the new START Treaty in response.

Another State Department source expressed hope that the dialog with Moscow on the issue will continue.

"We do not negotiate in the media and Under Secretary Tauscher looks forward to continuing her conversations with her counterparts on this subject," the source said.

WASHINGTON, May 17 (RIA Novosti)

Poland’s Attorney General in Moscow to discuss Smolensk crash investigationhttp://english.ruvr.ru/2011/05/17/50388912.html

May 17, 2011 01:19 Moscow Time

Poland’s Attorney General Andrzej Seremet and chief military prosecutor Krzysztof Parulsky arrive in Moscow today to discuss the Smolensk air crash investigation.

In particular, the discussion will focus on admission of Polish investigators to the original Tu-154 "black boxes".

The presidential airliner crashed near Smolensk, April 10, 2010, killing all 96 people, including Polish President Lech Kaczynski.

An independent commission of the Interstate Aviation Committee concluded that the accident occurred as a result of actions of the crew that decided to land in adverse weather conditions.

Identified as systemic causes were flight servicing and crew training shortcomings.

Russia’s sovereignty over Kurils indisputable – Foreign Ministryhttp://english.ruvr.ru/2011/05/17/50395420.html

May 17, 2011 10:06 Moscow Time

Russia’s sovereignty over the Kuril Islands rests on an indisputable international law basis, says the Russian Foreign Ministry in a statement. The Ministry has posted a commentary on its website to point out that more attempts to question the islands’ status as part of Russia fails to impart constructive nature to Russian-Japanese relations. Earlier on Monday, the authorities in Tokyo deplored the fact that the Deputy Russian Prime Minister Sergei Ivanov and a number of Russian Government Ministers had visited the islands.

Russia outraged by breach of human rights and freedoms in Belarus17.05.2011 11:11http://www.newsbcm.com/doc/836

Russian Foreign Ministry has issued a statement in connection with the trials of Belarusian opposition leaders, calling on Belarus to respect its international obligations.  Yesterday, the trial of journalist Irina Khalip, who had participated in the riots on the night after the presidential election on December 19, ended in Minsk. She was sentenced to 2 years suspended imprisonment. The court took into account that Irina is taking care of a young child. Khalip’s lawyer explained that his client would not have to be in prison if during the two-year delay she were not reprimanded. Irina herself believes that the verdict is aimed at curbing her journalistic career. In 2 years, the court will decide

whether Khalip should serve the sentence. Recently, the husband of Irina Khalip, Andrei Sannikov, a former candidate for the presidency of Belarus, was sentence by the court to five years of penal colony. At a press conference after the elections, the newly elected president of Belarus, Alexander Lukashenko, stated that all participants of the riots would do their time. About 600 people were arrested at the time. Pickets in support of Belarusian political prisoners, who got real sentences, were held in Moscow at the embassy of Belarus. About 30 people attended the campaign. They were mostly journalists. Replacing each other, with placards in the picket were Lev Ponomarev, Alexander Ryklin, Viktor Shenderovich, Michael Schneider, deputy chief editor of Ekho Moskvy, Vladimir Varfolomeev, deputy chief editor of Novaya Gazeta, Vitaly Yaroshevsky, deputy chief editor of The New Times, Ilya Barabanov. The placards bore the inscriptions: "Lukashenko, remember Ceausescu," "Freedom to Belarusian political prisoners", and "5 years of intensive regime to the father, two-year suspended prison term to the mother. And Danny has just turned four".

Sunken Soviet destroyer found off Romania’s coast http://english.ruvr.ru/2011/05/17/50395204.html

May 17, 2011 10:02 Moscow Time

The sunken Soviet WWII naval ship Moskva has been found off Romania’s coast.

It was the Black Sea Fleet destroyer leader, and its sinking has always been seen as a greatest sea warfare mystery. The destroyer was sunk in the very first battle, on June 26th 1941. 70 seamen of the 250-strong crew survived, but were at once taken prisoner by Romania, which fought together with Nazi Germany. Historians tend to believe that the destroyer sank either because a Romanian shell or a torpedo hit its magazines.

Romanian, Russian and Ukrainian historians and divers have been searching for the destroyer for 30 years.

Cell communication station attacked in Dagestanhttp://vestnikkavkaza.net/news/politics/13890.html

Unidentified assailants opened fire at a cell communication station in Dagestan’s Karabudakhkent District on Monday morning, RIA Novosti cites a local police source on Tuesday as saying.

A lawyer reported to the police about the incident on the first kilometer of the Manas-Karabudakhkent road.

About 50 rounds of various calibers were found at the spot. Malicious destruction or damage to property may be punished with up to 5 years of prison, according to article 167 of the Russian Criminal Code.

Russia mulls random passenger checks in metro - paperhttp://en.rian.ru/russia/20110517/164068958.html

11:37 17/05/2011

Russia's Interior Ministry has proposed conducting random checks for weapons and explosives on metro passengers to further increase transport security, the Rossiyskaya Gazeta daily said on Tuesday, citing police.

The proposal is the latest in a series of government measures to increase security in Russian transport hubs, which have been the target of several recent terrorist attacks

"The new measure would mean that by buying a ticket and entering the metro system, any person a priori agrees to allow the police or security forces to search them for illegal weapons or explosives," the paper said.

Russian President Dmitry Medvedev signed into law on May 3 a bill that grants him to impose additional security measures in the event of an increased terrorism threat.

Under the bill, Russia adopted a color chart similar to that used in the United States to indicate the terrorism threat level at any given time. The president can decide which measures to take in accordance with the threat level.

The move came a month after Moscow marked the first anniversary of twin suicide bomb attacks in the city's metro and less than three months after a suicide bomb attack at Domodedovo international airport outside the capital.

The combined attacks left 77 people dead and scores wounded and prompted police to tighten security at public transport hubs across the city.

Both incidents were blamed on militants in Russia's North Caucasus, where federal security forces have been fighting an Islamist insurgency for the past decade.

MOSCOW, May 17 (RIA Novosti)

Documents stolen from Khodorkovsky's lawyer in street attackhttp://en.rian.ru/russia/20110517/164069680.html

12:09 17/05/2011

MOSCOW, May 17 (RIA Novosti) - A lawyer of jailed former oil magnate Mikhail Khodorkovsky was attacked near her Moscow flat on Friday evening, another lawyer said on Tuesday.

The unidentified assailants stole important documents for an appeal hearing of the Khodorkovsky case, including Khodorkovsky's speech.

"We demand investigations into attacks on any lawyers, regardless of the motives," lawyer Karina Moskalenko said.

The hearing at the Moscow City Court was originally scheduled for Tuesday, but was delayed until May 24 to allow the court to study complaints over the case.

Already in detention since 2003, Khodorkovsky and his business partner Platon Lebedev were sentenced to a further six years in prison for embezzlement and money-laundering in a widely condemned trial in December.

In February, an aide to Judge Viktor Danilkin, who sentenced the two men at their second trial, said he was acting under orders from the Moscow City Court. Danilkin denied the accusation.

RT News line, May 17

Moscow court postpones review of Khodorkovsky’s appeal of second verdict http://rt.com/politics/news-line/2011-05-17/#id10261

11:04

Former Yukos CEO, Mikhail Khodorkovsky, and his business partner Platon Lebedev were on Tuesday convoyed to the Moscow City Court, which had been scheduled to review an appeal against the second verdict against them. However the review was postponed until May 24. In 2004, Khodorkovsky and Lebedev were sentenced to eight

years each for tax evasion and fraud. Last December, the Khamovniki Court of Moscow also found them guilty in the second criminal case against them, and their jail terms were extended until 2017. Since the second verdict has been appealed, the sentence has not yet been implemented.

11:07 17/05/2011Top News

Court postpones review of appeal in Yukos case to May 24http://www.itar-tass.com/en/c32/143849.html

MOSCOW, May 17 (Itar-Tass) — The Moscow City Court postponed, to May 24, the review of former Yukos CEO Mikhail Khodorkovsky and former MENATEP director Platon Lebedev's appeal against the verdict within the second criminal case.

The Tuesday hearing was postponed as three lawyers and Lebedev lodged more petitions, appeals board chairman Vladimir Usov stated earlier on Tuesday.

"Due to the fact that more appeals came from three lawyers and an addendum from Lebedev, we're postponing the Tuesday hearing to May 24," Usov said.

He explained that the lodged petitions were voluminous and that the court would need time to examine them.

Earlier reports said Khodorkovsky and Lebedev had petitioned for presence during the review.

On December 30, 2010, Moscow’s Khamovniki district court sentenced former Yukos CEO Mikhail Khodorkovsky and his business partner, head of the Menatep company Platon Lebedev, to 13.5 years in jail within the second criminal case, finding them guilty of oil theft and money laundering. The next day, their lawyers appealed the verdict at the Moscow City Court.

In May 2005, Moscow's Meshchansky district court found Khodorkovsky and Lebedev guilty under several counts, including fraud and tax evasion and sentenced them to nine years in prison.

Later the Moscow City Court reduced the term to eight years.

The new sentence extends the jail term for Khodorkovsky and Lebedev until 2017.

Khodorkovsky and Lebedev were found fully guilty of theft and money laundering within the 2nd criminal case. The court classified the indictment under the 2010 amendments, which softened punishment for economic crimes.

Handing down the verdict, judge Viktor Danlikin underlined that the business persons had sold the stolen oil in domestic and foreign markets at a much higher price than the producers' selling price. "The bulk of profits was expatriated and used to the benefit of the participants in the organized group," Danilkin said.

He denied the defendants' claims that they were being tried twice for the same offense, because the crimes reviewed by the Meshchansky court were classified under other Criminal Code articles and transpired within a different timeframe.

"Khodorkovsky and Levedev guilt was fully proven by the whole body of evidence examined by the court," according to the verdict.

Meanwhile, the court dropped criminal prosecution against the defendants on charges of stealing shares of "Eastern Oil Company," due to the statute of limitations.

In February, the verdict for Khodorkovsky and Lebedev again drew a wide public response.

In mid-February, Khamovniki court spokeswoman Natalia Vasilyeva told a number of media outlets about violations during the trial of Khodorkovsky and Lebedev. She told them about the pressure on the court and that the verdict had been composed at the Moscow City Court and that the Khamovniki court's judge had never written it.

Danilkin said he had drawn the verdict personnel while adhering to all the norms of the law.

The Moscow City Court called Vasilyeva's statement "provocation." Vasiyev resigned soon thereafter.

In April, an independent expert examination of the Yukos case verdict began. It was conducted by experts enlisted by the council for developing the civil society and human rights under the Russian President.

Former Constitutional Court judge Tatyana Morshchakova, a Council member, said some 18 people were taking part in the expert examination. They are specialists in various fields of law. Some foreign lawyers had been invited, too.

Morshahkova underlined that after the verdict came into effect, the experts' conclusions would be forwarded to the Russian president.

Russia's Khodorkovsky appeals new jail termhttp://www.google.com/hostednews/afp/article/ALeqM5gPpaPhxouvkmgLYopQHiTS66i_dQ?docId=CNG.ce111ccd12af82eb1051dd6bce7e3986.861

(AFP) – 37 minutes ago

MOSCOW — Russia's former richest man Mikhail Khodorkovsky was Tuesday to appeal his conviction in a second fraud trial that sparked global condemnation and will keep him in jail until 2017.

The appeal will by heard by the Moscow City Court Tuesday morning, its spokeswoman Anna Usacheva told Russian news agencies.

Khodorkovsky, who built up Yukos into Russia's biggest oil firm before it was broken up by the state, was in December found guilty of money laundering and embezzlement on top of his first 2005 tax evasion conviction.

His supporters have long argued both sets of charges were trumped up by the state to punish Khodorkovsky for daring to finance opposition to Prime Minister Vladimir Putin and ridiculed the circumstances of the second trial.

In sometimes bizarre scenes, the judge raced through his reading of the verdict in an often inaudible mumble before announcing the conviction on December 30 as Russians were preparing for the New Year holidays.

Adding to widespread doubts, the spokeswoman for Moscow's Khamovnichesky District Court where the trial took place later said judge Viktor Danilkin was pressured from on high to deliver a guilty verdict in the case.

Danilkin has vehemently denied the allegations saying that "I will bear responsibility for this sentence until the end of my days."

Putin, who has never made a secret of his dislike of Khodorkovsky, said even before the verdict was announced that a "thief should be in prison", drawing criticism that he was interfering in the process.

The Khamovnichesky District Court handed Khodorkovsky and his co-accused Platon Lebedev a 14 year jail term but time already served means that under the terms of the ruling they should stay in jail until 2017.

Defence lawyers have said the verdict is riddled with errors but have not shown much hope of having the verdict overturned.

"We do not have any special illusions, especially as this is not the first time we have encountered this judicial instance (Moscow City Court)," Platon Lebedev's lawyer Konstantin Rivkin told Moscow Echo radio.

The defence says the Khamovnichesky District Court reviewed over 1,060 pages of its objections in just one day and then passed the trial to the Moscow City Court.

Business leaders have expressed fears that the new conviction will harm investment in Russia and the appeal hearing takes place just one day before a major news conference by President Dmitry Medvedev on modernisation.

May 17, 2011 11:16

Checks started into tax officials' alleged corrupt practices under Magnitsky case – Markinhttp://www.interfax.com/newsinf.asp?id=244016

MOSCOW. May 17 (Interfax) - The Russian Investigative Committee launched pre-investigation checks after receiving a compliant from the head of Firestone Duncan Ltd, Jamison Firestone, about alleged corrupt practices at Moscow tax inspectorates, Investigative Committee spokesman Vladimir Markin has announced.

"This letter has been registered in accordance with the established procedure. Checks have been started into the cited facts," Markin told Interfax on Tuesday.

A procedural decision will be made after the checks, he said.

Sd

Plane from China makes emergency landing in Russia, no one hurts http://china.globaltimes.cn/diplomacy/2011-05/656032.html

Source: Xinhua

[16:11 May 17 2011]

A Boeing 757-200 en route from China's Sanya to Russia's Novosibirsk made an emergency landing in Krasnoyarsk airport in Russia's south Siberia, RBC news agency reported on Tuesday.

The chartered flight, with 231 people onboard including eight crew members, was aborted due to one of the engines' failure, the Transport Prosecutor's Office of Western Siberia said.

Nobody was hurt during the landing and all passengers were housed in the local hotels, the transport prosecutor's office said.

The plane also carried 3,588 kg of cargo.

The office did not yet reveal which air company the Boeing belonged to.

10:02 17/05/2011Top News

Passengers of Boeing emergency landed in Krasnoyarsk accommodatedhttp://www.itar-tass.com/en/c32/143787.html

KRASNOYARSK, May 17 (Itar-Tass) —— The passengers of a Boeing 757-200 of the Nordwind Airlines that made an emergency landing at the Krasnoyarsk airport overnight to Tuesday were accommodated in three hotels of the city. According to preliminary reports, the departure for the destination city of Novosibirsk is scheduled for 3 p.m. local time (11 a.m. Moscow time) on Tuesday, a source in the Yenisei transport prosecutor’s office told Itar-Tass.

An airplane, which will bring a new power generator for the Boeing airliner, is about to arrive at the Krasnoyarsk airport.

According to preliminary reports, the Boeing 757-200, who was on a charter flight from Sanya to Novosibirsk, has made an emergency landing over the failure of the left power generator. With such breakdown the airliner can fly not more than an hour, therefore, the airliner crew decided to land in Krasnoyarsk.

The airliner was not damaged in the landing, no people aboard the airliner were injured. The airliner was carrying 223 passengers and eight crewmen. The Boeing was shipping over 3.5 tonnes of cargoes.

The Yenisei transport prosecutor’s office is making inquiries whether the flight safety rules were observed in the flight.

PRESS DIGEST - Russia - May 17http://uk.reuters.com/article/2011/05/17/press-digest-russia-may-idUKLDE74G02D20110517

7:53am BST

MOSCOW, May 17 (Reuters) - Following are some of the leading stories in Russia's newspapers on Tuesday. Reuters has not verified these stories and does not vouch for their accuracy.

KOMMERSANT

www.kommersant.ru

- Russia's billionaire Mikhail Prokhorov says in an interview that he will lead the Right Cause political party.

- Russia has launched a diplomatic game to settle the conflict in Libya, the daily says referring to Moscow's attempts to become a mediator in the conflict.

- Uralkali (URKA.MM: Quote, Profile, Research) chief Dmitry Konyaev says in an interview that the potash miner has no plans to sell any of its assets.

VEDOMOTI

www.vedomosti.ru

- Russian President Dmitry Medvedev and Prime Minister Vladimir Putin seems to support Prokhorov's wish to become a leader of a right wing party, the daily says.

- Former Soviet republics united in the Commonwealth of the Independent States (CIS) are planning to set up a free economic zone on their territories which will be similar to WTO.

IZVESTIA

www.izvestia.ru

- Russia's Rosneft (ROSN.MM: Quote, Profile, Research) and British BP (BP.L: Quote, Profile, Research) will probably not reach agreement on share swap, the daily says citing its sources close to the deal.

- Sergei Bogdanchikov, former Rosneft long-time head, has been awarded with 14.000 shares of the company worth 3.23 million roubles, the daily reports.

NOVYE IZVESTIA

www.newizv.ru

- Russia's analysts are registering a growth of social tension in the country in connection with a fall of incomes of middle class population, the daily reports.

NEZAVISIMAYA GAZETA

www.ng.ru

- Russia, where 600.000 people are officially reported as infected with HIV, is registering 160 cases of new HIV infections every day, the daily reports.

Russian Press at a Glance, Tuesday, May 17, 2011http://en.rian.ru/papers/20110517/164066539.html

08:36 17/05/2011

POLITICS

Billionaire Mikhail Prokhorov said he would lead Right Cause, the only party that has supported a second term for President Dmitry Medvedev, but observers expressed doubt that he would be able to salvage it from political limbo

(The Moscow Times, Vedomosti, Kommersant, Nezavisimaya Gazeta, Rossiiskaya Gazeta, Izvestia)

Russian Deputy Foreign Minister Sergei Ryabkov expressed concern about a U.S. refusal to provide legally binding guarantees that its European missile defense system will not be directed against Russia, and warned that Moscow may pull out of the new START Treaty in response

(Kommersant, Izvestia)

Representatives of Muammar Gaddafi's government are expected in Moscow on Tuesday

(The Moscow Times, Kommersant)

The Russian Foreign Ministry criticized Belarus for handing down "harsh" prison sentences to opposition activists convicted for protests over a December election in which President Alexander Lukashenko won a fourth term.

(The Moscow Times)

The Japanese Foreign Ministry has lodged an official complaint against the visit to the disputed Kuril Islands by a Russian high-ranking delegation, led by Russian Deputy Prime Minister Sergei Ivanov

(Kommersant)

ECONOMY & BUSINESS

The fate of the $16 billion "deal of the century" between BP and Rosneft hung in the balance late on Monday night as four-way talks between the two companies, BP's oligarch partners and the Russian government ended in a game of brinkmanship

(The Moscow Times, Vedomosti, Izvestia)

Heads of CIS governments will meet in Minsk on Thursday to discuss and sign a deal on a free trade zone agreement, a high-ranking Russian and CIS sources said

(Vedomosti, Rossiiskaya Gazeta)

The combined wealth of Russia's 50 richest families grew to $61.2 billion from $42.4 billion in 2011 year-on-year. A list detailing the incomes shows that 19 Russian families have amassed wealth of more than $1 billion

(Rossiiskaya Gazeta)

OIL & GAS

Gazprom CEO Alexei Miller will continue talks on reviewing the Russian gas giant's pricing formula for Ukraine. Ukrainian Prime Minister Mykola Azarov says the talks may be concluded by summer, but Miller was less optimistic

(Nezavisimaya Gazeta)

VEHICLES & ENGINEERING

Russia's new Yo-mobile hybrid car, a project run by a joint venture between truck maker Yarovit and billionaire Mikhail Prokhorov's Onexim group, will go on sale for 360,000-490,000 rubles (about $13,000-$17,500), half the price of Toyota's Prius, the cheapest hybrid car currently on the market

(Vedomosti)

REAL ESTATE

The sum of investment in Russia's domestic real estate market grew 128 percent last year to reach almost 2.2 billion euros ($3.1 billion), as economic stabilization after the crisis encouraged foreign and local investors, a survey said

(The Moscow Times)

SOCIETY

Resisting the advice of two jailed former Yukos executives, whistleblower Alexei Navalny said in comments published on Monday that he would not leave the country to avoid criminal persecution

(The Moscow Times)

Accusing investigators of a political crackdown, Hermitage Capital said its head, William Browder, was given 11 hours' notice to travel from London to Moscow for questioning - even though he is banned from Russia

(The Moscow Times)

The Moscow District Military Court has started hearing in absentia the case of Alexander Poteyev, accused of tipping off the U.S. authorities about a Russian spy ring last summer

(Kommersant, Rossiiskaya Gazeta)

A recent survey by the Romir research center showed that almost 90 percent of Russians have little faith in the country's higher education system

(Nezavisimaya Gazeta)

Kremlin Tells Kids About Russia’s Political Oppositionhttp://www.theotherrussia.org/2011/05/16/kremlin-tells-kids-about-russias-political-opposition/

May 16th, 2011 • Related • Filed Under

There’s a new addition this week to the Kremlin’s official website – a section explaining the importance of Russia’s political opposition. The new feature, dubbed “What do we need the opposition for?” is posted on a part of the website that is dedicated to children – kids.kremlin.ru.

“Do you like when people disagree with you? When they argue, object, or contradict you?” reads the website’s opening page. “Of course you don’t like it. Those who disagree with anyone and have a different, opposing opinion are called ‘the opposition.’”

In a colorful interactive slideshow, the website explains such concepts as “the strange word ‘opposition’” and “what if it’s repugnant to listen to them?”

A section titled “At first glance” reads: “It might appear that those who disagree with the state government are of perfectly no use. They just get in the way and prevent work from getting done. Can the government really not order them all to be silent?” The next section is titled “It turns out: it can’t.”

“The fundamental law of our state – the constitution – says: in the Russian Federation, everyone is guaranteed freedom of thought and speech and that no ideology can be established as state-mandated or required. This means that the government doesn’t have the right to force those with whom it disagrees to be silent,” says the site.

Moreover, it says, “the guarantor of the constitution is the president. That is to say, it is precisely he who guarantees and ensures the implementation of the constitution in our country.”

The site goes on to discuss how freedom of speech is preserved through media that is independent “even from the president himself” and that a democratic government is structured so that “even its opponents are useful.”

There is also a section dedicated to the fact that slander and libel are strictly punished according to federal Russian law.

“Of course, the state government most of all needs helpers who agree with it…But it turns out that it needs opponents as well,” the page stipulates.

In a country routinely accused of hosting fraudulent elections, critics will likely be angered at the website’s insistence that the president in Russia is chosen by the majority of voters: “Indeed, the majority of people voted for the president during the election. If it were the other way around – they would have chosen a different president. There would be a different government.”

A presentation of the new category is planned at the Kremlin on Tuesday. Children’s author Grigory Oster, who wrote the existing content from the Kremlin’s kids page, was also chosen to write about the opposition.

“We are trying to explain to children that in a normal democratic state the opposition not only does not hinder, but also helps the government,” Oster told Gazeta.ru.

In the writer’s words, the page will show children that “in the history of humanity, there have been cases when the opinion of the minority turned out to be right.” “We are explaining that if somebody disagrees with you it doesn’t mean they’re wrong,” he said.

The website will steer away from more difficult concepts such as the difference between the “systemic” and “non-systemic” opposition or parliamentary and non-parliamentary opposition parties and movements. “This is a site for children!” Oster explained. While the idea of making a section for the opposition came up long ago, the page itself took a long time to develop, he said.

The children’s version of the Kremlin’s website was launched six years ago and has made do without discussing the opposition for all that time. Currently, it includes several sections on the role of the president, what elections are for, and what democracy is. The latter explains in the form of a test that when grown people freely express their opinions and different people who get the majority of votes in fair elections become president – that’s democracy.

There are also some less-than-standard concepts. For example, “the president’s tolerance”: “For those who risk violating the rights and freedoms of citizens of the Russian Federation, it is not worth waiting for when the president’s cup of tolerance overflows. It will not end well for them,” explains a young citizen.

Compiled in part from material by Gazeta.ru.

A Quiet Revolution in the Kremlin http://www.themoscowtimes.com/opinion/article/a-quiet-revolution-in-the-kremlin/436926.html

17 May 2011By Alexander Golts

Revolutions happen silently in bureaucratic circles, without a single shot from enemy forces. One fine day, the head of the government simply signs a document that changes the entire structure of authority. At first, nobody understands exactly what has happened. But during an emergency, when bureaucrats do their best to avoid making decisions, it suddenly becomes clear that one person has appeared who has the power to give orders and is willing to assume responsibility.

A quiet revolution has been taking place under the shadow of the Kremlin administration, even as Prime Minister Vladimir Putin has rapidly created his All-Russia People’s Front to rally Russians around his re-election effort. President Dmitry Medvedev has signed a

decree inconspicuously named “Security Council Questions” that suddenly and unexpectedly grants unprecedented powers to the Security Council secretary.  

It should be noted that the people who previously held the secretarial post sometimes played very significant roles in state affairs. Former Security Council Secretary Andrei Kokoshin used his position to plan military reforms, and Putin himself, as secretary, prepared to lead the country. But the relative influence of the secretary has always been a function of how closely connected he was to the man at the top. Within the bureaucratic hierarchy itself, the Security Council secretary has always been more of an organizational post. The secretary was responsible for making preparations for Security Council meetings, drafting decisions and writing up pointless doctrines and policy papers. 

Now Medvedev’s decree endows the post with an importance almost rivaling the authority of the ruling tandem of him and Putin. Judge for yourself. From now on, the Security Council secretary will be responsible for “the control of Russia’s armed forces, other forces, military formations and bodies,” according to Medvedev’s decree. That is to say the secretary will control not only the armed forces, but also law enforcement and intelligence agencies. Moreover, Medvedev’s decree stipulates that the Security Council secretary will “participate in formulating and implementing foreign policy.” The secretary will also “make proposals to the Security Council for coordinating the work of federal and regional executive bodies in national emergencies.” In effect, the country’s siloviki, who previously answered only to the president, now have their own “tsar.”

I will hazard to guess that even in the ultra-centralized Soviet state no official held that degree of power. True, certain administrative departments of the Communist Party Central Committee carried a great deal of weight in supervising what are now called the siloviki. But their superiors were Politburo members who in turn answered to Central Committee members. But now the Security Council secretary is a member of the unofficial consultative body consisting of the defense minister, foreign minister and director of the Federal Security Service — all of whose functions the secretary now controls. In effect, he is the first among equals.

In addition, the Security Council itself is now empowered to monitor budgetary spending for defense, national security and law enforcement — fully one-fourth of the national budget. What’s more, the Security Council is charged with controlling the government, in part by analyzing a consolidated annual report on its main activities and results. In short, the Security Council will now run the government.

I hate conspiracy theories, but we can only guess at the motives lurking behind this development. It seems highly unlikely that all of this new-found power will be invested in current Security Council Secretary Nikolai Patrushev, who was given the post as a sort of honorable discharge from his previous job as FSB director. Recall that then-President Putin sent him to that post exactly three years ago after Patrushev became locked in a public conflict with then-

Federal Drug Control Service head Viktor Cherkesov. At the time, FSB officials worried about whom Putin would name as his successor. And in his role as Security Council secretary, Patrushev gained notoriety for having made ill-advised statements that Russia’s military doctrine would spell out rules for using nuclear weapons in local conflicts and that Moscow was prepared to launch a pre-emptive nuclear strike if necessary. That major gaffe was quietly disavowed by officialdom soon afterward.

Obviously, it would be unwise to hand so much power to a moderately competent political outcast who probably harbors less than tender feelings for the ruling tandem.

People well versed in Kremlin intrigues are convinced that somebody else will soon be appointed Security Council secretary. And that choice will reveal a great deal. It is entirely possible that strengthening the Security Council is part of Putin’s election campaign strategy — that he wants a trustworthy person in control of the siloviki to make sure there will be no more political infighting like he had with Patrushev and Cherkesov. But it is difficult to imagine that the national leader, given his obsessive suspicion of everyone around him, would risk giving so much authority to any single person.

It is also possible that Medvedev gave new powers to the Security Council in response to Putin’s maneuver of forming the people’s front, as a way to score points before his decisive conversation with the prime minister. It is also telling that, having signed the new decree, Medvedev found the courage to threaten the siloviki responsible for failed defense contracts. He essentially told them, “You should understand that at another time half of the people present would have been sent to the labor camps.” That gave Putin appointees something to think about.

Finally, it is entirely possible that the post of Security Council secretary is being prepared as a springboard for a new successor. Recall how Putin himself was appointed prime minister in 1999 as a means for demonstrating himself to the people. But that job happens to be occupied at the moment.

With slightly less than a year remaining before the presidential election, the power vertical is becoming a little wobbly. Hopefully, we’ll be able to get through the next year without a small, winnable war or apartment building bombings.

Alexander Golts is deputy editor of the online newspaper Yezhednevny Zhurnal.

National Economic TrendsMay 17, 2011 11:59

Econ Ministry suggests extending prohibitive gasoline duties into Junehttp://www.interfax.com/newsinf.asp?id=244037

MOSCOW. May 17 (Interfax) - The Russian Economic Development Ministry has submitted proposals, cleared with all agencies, to the government to extend prohibitive export duties on gasoline into June, a deputy economic development minister told reporters.

"The duty coefficient will be the same as now - 0.9 of the oil duty," Andrei Slepnev said.

Pr

(Our editorial staff can be reached at eng.editors@interfax.ru)

Russian Economic Growth Rate Falls to 4.1% on Outflows, Missing Estimateshttp://www.bloomberg.com/news/2011-05-16/russian-economic-growth-rate-falls-to-4-1-on-outflows-missing-estimates.html

By Paul Abelsky and Ilya Arkhipov - May 16, 2011 3:47 PM GMT+0200

Russia’s economic growth slowed in the first quarter as corporate investment stagnated and the biggest quarterly gain in oil prices for two years failed to offset $21.3 billion of capital outflows.

Gross domestic product rose 4.1 percent from a year earlier after increasing 4.5 percent in the previous three months. The median estimate in a Bloomberg survey of 15 economists was 4.2 percent. The Economy Ministry estimated growth at 4.5 percent, and Prime Minister Vladimir Putin put it at 4.4 percent.

President Dmitry Medvedev, whose term ends next year, seeks to boost growth to 10 percent within five years to match the pace of the fastest-growing developing economies. Capital flight and slowing domestic demand restrained economic output even as commodity prices rose, stoked by unrest in the Middle East, which produces about 35 percent of the world’s oil.

“The GDP number is surprisingly poor and reflects, in our opinion, the diminishing link between oil prices and Russian economic growth,” Tatiana Orlova, an economist at Nomura Holdings Inc. in London, said by e-mail.

The 30-stock Micex Index was little changed after the report, trading at 1620.04 as of 5:46 p.m. in Moscow, down 0.8 percent for the day. The ruble weakened 0.8 percent to 28.1625 per dollar and gained 0.2 percent to 39.8300 against the euro.

Net capital outflows totaled $21.3 billion in the first quarter and $38.3 billion in 2010, more than the central bank’s forecast of $22 billion. That compared with $56.9 billion a year earlier, central bank data show. The country last had a net inflow in 2007, when it reached $81.7 billion.

‘Political Uncertainty’

Political uncertainty before parliamentary elections in December and a presidential poll next year are spurring capital flight, German Gref, chief executive officer at OAO Sberbank, the nation’s largest lender, said in an April 15 interview.

“Persistent” outflows affect growth “via very weak fixed investment,” Orlova said. “In the atmosphere of political uncertainty, profits are repatriated and invested into assets abroad rather than into domestic production.”

Brent crude, the grade that underpins prices for Russia’s Urals blend, gained 24 percent in the first quarter.

Oil at more than $100 a barrel is no longer stoking Russia’s economy, the slowest-growing among the so-called BRIC nations. Finance Minister Alexei Kudrin said April 21 that oil has “exhausted its potential” to serve as a “locomotive for growth” in the world’s biggest energy exporter.

‘Sluggish Recovery’

Medvedev, 45, is seeking foreign investors for projects such as a technology hub outside Moscow as he campaigns to diversify Russia’s economy and reduce the country’s “humiliating” dependence on oil and natural gas revenues.

The price of Urals has fallen $12.70 a barrel since peaking at $122.88 on April 8, further threatening the recovery. It fell 1.8 percent to $109.28 at 10:51 a.m. in London.

Russia’s budget revenue falls by 62 billion rubles ($2.2 billion), or about 1.5 percent of GDP, for every $10 drop in the oil price, the International Monetary Fund said in a May 12 report.

“Russia has experienced only a sluggish recovery from the recession thus far,” the IMF said in the report, estimating that GDP will grow 4.8 percent this year. Outflows of capital “likely reflected investors’ renewed focus, in the wake of the crisis, on the lack of progress in addressing the economy’s fundamental underlying problems.”

The faltering expansion hampered first-quarter output of steelmakers including OAO Novolipetsk Steel and OAO Severstal. OAO Magnit, Russia’s largest food retailer by market value, saw profit decline 7.5 percent in the period on higher fuel costs.

‘Rouse the Economy’

Real wages fell for the first time in 16 months in March and disposable income dropped 3.4 percent, compared with a 0.6 percent decline in February. Fixed-capital investment shrank in the first three months of the year after 10 consecutive monthly gains.

“It’s very difficult to rouse the economy after the credit crunch,” Nikolai Kashcheev, head of research at the treasury department of Moscow-based OAO Sberbank, Russia’s biggest lender, said in an interview before GDP report. “The banking system is building up reserves and remains very selective when it comes to lending, favoring the most reliable borrowers.”

The economy grew 4 percent last year after shrinking 7.8 percent in 2009. The Economy Ministry expects GDP to rise 4.2 percent this year before the expansion slows to 3.5 percent in 2012. Growth averaged almost 7 percent from 1999 to 2008.

Cargo Volumes

Rail cargo turnover indicates the economy trails the pre- crisis level by “slightly more than” 10 percentage points, OAO Russian Railways Chief Executive Officer Vladimir Yakunin said April 25 in an interview in Moscow. Rail shipments are seen as a proxy for changes in output because railroads carry about 85 percent of the nation’s cargo, excluding products transported by pipeline, according to VTB Capital.

Metals and energy make up about 84 percent of exports from Russia, the world’s largest oil producer and the biggest exporter of natural gas, nickel and palladium. Energy sales contribute almost half of Russia’s budget revenue.

“Our view is that growth will strengthen this year, led by a recovery in consumption,” Alina Slyusarchuk, Morgan Stanley’s London-based economist, said May 13 in an e-mailed reply to questions. “Economic growth only marginally slowed in the first quarter.”

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Paul Abelsky in Moscow at pabelsky@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

Unrelieved Reliancehttp://russiaprofile.org/business/36517.html

Russia's Pre-Election Budget Spending May Require Adjustment as Slowing Global Demand Threatens Soaring Oil Prices

By Tai Adelaja Russia Profile 05/16/2011

Recent volatility in global crude and commodity prices may force Russia to revise its oil-dependent budget, experts say. Over the past several weeks, lingering uncertainty in global crude oil demand has sent jitters through the commodity markets, offsetting any longer-term bullish views that crude oil prices may continue their upward spiral. Both the West Texas Intermediate (WTI) light sweet crude and ICE Brent suffered heavy losses on Thursday, prompting warnings from industry analysts that last week’s heavy commodity selloff could become a trend.

The global commodities rout has also cast a long shadow over Russia's 2011 federal budget. The assumptions underpinning the budget, experts now say, are at risk of being overwhelmed by market events if the commodity price ructions turn into a sustained rout.

Russia’s Economic Development Ministry responded to a precipitous rise in oil and gas prices this year by raising its forecast for the average 2011 oil price by 30 percent, to $105 per barrel from $81 per barrel. The higher oil price assumption was expected to boost oil and gas revenues by 1.14 trillion rubles ($40.37 billion), Finance Minister Alexei Kudrin told legislators last month. In a bit of good news, Russia's Urals crude stayed almost unchanged at $111.1 a barrel on Friday, holding on to gains the previous day on fears that June export volumes could dip. The fears hinge on two destabilizing factors that could work to influence the Ural crude price. Firstly, the Urals brand oil supplies through the Novorossiysk pipeline are expected to slow in June because of Russia’s new regulations that make it difficult to transfer export rights from one company to another. On the other hand, market players expect domestic runs to rise after the government ordered full supplies of gasoline to local markets to avoid shortages and public discontent.

But despite Russia’s strong position, the balance of analysis appears to suggest that the soaring commodity prices were unsustainable, at least in the long run. With the oil prices on a downward spiral, the Russian government’s only option is to review its basic budget spending, which was based on the assumption that Russian oil will sell for an average of $105 a barrel, analysts say. In the two weeks ending Friday, May 13, Brent dropped about ten percent to close at $113.83 a barrel on ICE, while WTI plunged 12 percent to $99.65 a barrel at NYMEX, NASDAQ EconMatters reported Saturday. The dominant downtrend in oil prices has continued despite the ongoing geopolitical tension in the Middle East and North Africa, which was expected to keep crude prices sky-high.

Oil futures also faced renewed selling pressure from some bearish reports that hit the market last week. EIA data showed an unexpected rise in gasoline reserves to 1.3 million barrels – the first weekly increase in about three months – while crude oil stockpiles continued to build. A Bloomberg survey released last week shows that global investors have tempered their optimism about the U.S. and world economies, and plan to put more of their money in cash and less in commodities over the next six months. Europe's debt problems are also giving the U.S. currency a boost, as weak economic figures trigger investor worries about the global recovery. Last week's reports on consumer spending and jobs in the United States show that shoppers are spending more, but mostly on gas and food.

Various reasons have been advanced to explain the inevitability of the oil price collapsing in the longer term, among them the persistent high prices of oil. The Paris-based International Energy Agency announced on Thursday that it was lowering its global oil demand growth forecast for the year by 190,000 barrels per day, attributing the demand destruction to persistent high prices and lower growth projections for developed economies. “A four-dollar gallon gasoline is likely to yield an anaemic U.S. driving season,” said the agency, which has been pointing to the softening trends in crude consumption for the last two months. The financial information Web site MarketWatch reported last week that some refiners said their fuel sales in April had fallen by as much as four percent from March, as high prices prompted consumers driving less. The Short Term Energy Outlook released last Tuesday by the U.S. Energy Information Agency (EIA) also points to falling demand. The EIA now projects that total world oil consumption will grow by only 1.4 million barrels per day in 2011— some 0.1 million barrels per day lower than projected only last month.

The IMF is also predicting a likely deceleration in growth on the back of higher energy prices. In its latest report, the IMF warned that higher than expected commodity prices could cause major social concerns. "Fears have turned to commodity prices," Olivier Blanchard, the chief economist at the IMF, warned. "Commodity prices have increased more than expected, reflecting a combination of strong demand growth and a number of supply shocks. These increases conjure the specter of 1970s-style stagflation, but they appear unlikely to derail the recovery."

A major concern for Russia is that China and other top oil-consuming nations would tighten their fiscal policies and slow down to fight inflation. China's Central Bank on Thursday raised lenders' reserve requirements for the fifth time this year, stoking concern that anti-inflation policies may slow growth in the world's second-biggest economy. "China’s inflation data shows that the country will need to do more tightening," said James Holt, the Sydney-based director of BlackRock Investment Management Ltd., Bloomberg reported. Various forecasts of slower growth in global gross domestic product (GDP) and oil demand are another factor that could put downward pressure on crude prices. In its latest World Economic Outlook (WEO), published in April, the IMF predicts global GDP in 2011 and 2012 could reach 4.4 percent and 4.5 percent respectively, unchanged from its January forecast. IMF also expects real GDP in advanced economies and emerging and developing economies to expand by only about 2.5 percent and 6.5 percent respectively in this year and next.

Another piece of bad news for the oil market is the decision by the Federal Reserve to end its quantitative easing program on schedule in June. The economic support program, which consists of buying $600 billion in Treasury bonds, has helped boost the money supply and weaken the U.S. dollar, making commodities such as oil cheaper for investors with other currencies. Ending the program next month could mean that investors will be less inclined to own assets that don't pay anything, such as commodity futures. Traders are currently struggling to gauge the impact on crude markets. “The major policy that has shaped oil prices is winding down,” energy risk manager Cameron Hanover said in a

report. “As long as the Fed does not come up with a third round of quantitative easing, the major reason for oil price strength will be gone.”

However, Russia could yet benefit from lower global oil prices as it struggles to diversify its resource-based economy, analysts say. "For the Russian economy at any given period, falling oil prices are of course bad because this reduces revenues from the main source,” said Alexander Shtok, an expert with the 2K Audit-Business Consultations firm. “However, in global terms, more moderate oil prices should stimulate the development of other sectors of the economy.”

Business, Energy or Environmental regulations or discussions

Russian equities ride oil wave despite poll risk http://www.ft.com/intl/cms/s/0/cf6094be-7fde-11e0-b018-00144feabdc0.html#axzz1MaQr9AzB

By Charles Clover

Published: May 16 2011 18:55 | Last updated: May 16 2011 18:55

Soaring oil prices and a weak dollar have made Russia’s stock market the darling of emerging market investors this year.

In the first quarter of 2011, Russia’s benchmark RTS equity index rose 15.5 per cent in dollar terms, making it the best-performing large emerging stock market in the world. It is up 4.3 per cent so far this year.

At first sight, this looks puzzling. Russia suffered net capital flight of $21bn in the first three months of the year, testament to the considerable political and economic risks of the country as it heads into a new election cycle. There are parliamentary elections in December and presidential elections are due in 2012.

“Investors, both external and domestic, lack conviction about the future of the economy. They are also waiting for the election cycle to end in case there are any surprises,” says Chris Weafer, chief strategist at Uralsib, the Moscow-based investment bank.

The good news is that despite the rise, Russian equities are still one of the most undervalued of the large emerging markets. The Russian stock market’s price-to-earnings ratio is 8 times, versus 9.7 times for Brazil, 16 for China, and 16.5 for India.

The bad news is that there is a reason for this relatively cheap valuation: corporate governance is a constant problem in Russia.

Brokers and analysts say the country’s politicised and malfunctioning legal system, coupled with the widely held view that investors are vulnerable to powerful political interests, are, to an extent, priced into the stock market.

For some, that is part of Russia’s attraction. The same problems apply in Brazilian or Chinese equities, they argue, but the risks are more richly compensated in Russia. “Governance risks are a concern in many emerging markets, but at least in Russia it’s arguably in the price,” says Lewis Kaufman, managing director at Thornburg Investment Management, a US-based fund.

The Kremlin has been addressing some of the corporate governance problems, with a set of reforms announced at the end of March by President Dmitry Medvedev during a visit to Magnitogorsk.

The changes include ordering state bureaucrats to step down from the boards of state companies.

“It’s certainly an issue, and I think there’s been some noise come out of the government that they intended to deal with this,” says Dimitri Kryukov, chief investment officer of Verno Capital, a hedge fund that specialises in Russia.

The government’s decision to remove top bureaucrats from the boards of state companies is “a good first step”, he says.

“It’s possible to avoid most of the corporate governance pitfalls along the way, if you do the research, if you know the companies and if you meet the management. Basically, if you do your homework.”

However, much of the effort made by the Kremlin to improve matters has recently been undone by the harassment of several shareholder rights activists.

Last week, for example, prosecutors announced they would file criminal fraud charges against the best- known shareholder activist in Russia, lawyer and blogger Alexei Navalny.

Mr Navalny has denounced the charges, which stem from 2009, as “ludicrous”. Most observers believe they are political retribution for Mr Navalny’s stinging allegations, published on his website, about corruption at Russia’s largest state-owned companies, many of which have London listings.

Bill Browder, chairman of Hermitage Capital, and himself an activist shareholder who was expelled from Russia in 2005, says of the Navalny charges: “This is their standard operating procedure. Any time anyone points out corruption they open a criminal case against them.”

One of the reasons corporate governance can be such a problem is companies tend to have a highly concentrated ownership. A dominant shareholder or group of shareholders tend to see the company as their personal property, even after it goes public.

But there are other reasons investors remain wary. The stock market’s volatility, correlated with output growth, has scared off many investors. Russia’s gross domestic product doubled in the decade before 2008, but collapsed in 2009.

Mr Weafer says those vulnerabilities still apply. He says 70 per cent of the money invested in Russia this year has come from exchange-traded funds, which have been targeting oil and gas. “Investors also recall how quickly the Russian market collapsed in the second half of 2008 when oil fell. They don’t want to get sucked into the same story this time.”

Energy is by far the most popular sector to invest in, but other sectors are coming onto the radar screen too, says Mr Kryukov. Russia is in the middle of a consumer spending boom, but retail chains like X5 Retail Group and Magnit are thought by many in the market to be overvalued.

“We like the direct consumer plays, but people are looking for a cheap entry point” says Mr Kryukov. Russian banks are best placed to benefit from the consumer boom, he says, while real estate is recovering

Polymetal Jumps Most in Month After MSCI Index Weighting Raisedhttp://www.bloomberg.com/news/2011-05-17/polymetal-jumps-most-in-month-after-msci-index-weighting-raised.html

By Jason Corcoran - May 17, 2011 9:18 AM GMT+0200

OAO Polymetal jumped the most in a month after the Russian gold and silver producer had its weighting in MSCI Inc.’s Russia Index increased yesterday.

The stock gained 4 percent to 482.3 rubles by 11:02 a.m. in Moscow, the biggest intraday advance since April 15.

Polymetal’s weighting was increased by 0.42 percentage point.

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Rostelecom sets 0.43 rouble dividend on prefshttp://in.reuters.com/article/2011/05/17/rostelecom-dividends-idINLDE74G03T20110517

11:12am IST

MOSCOW, May 17 (Reuters) - Russian state telecoms company Rostelecom (RTKM.MM: Quote, Profile, Research) said on Tuesday its board had recommended to pay 0.4344 roubles ($0.015) per preferred share in 2010 dividends, or a total of 3.05 percent of last year's net profit.

The board also recommended to pay no dividends on ordinary shares, Rostelecom said in disclosure documents.

The company has already paid 1.14 billion roubles, for the first nine months of 2010, or 32.92 percent of net profit. (Reporting by Maria Kiselyova; editing by Guy Faulconbridge) ($1=28.09 Rouble)

Rostelecom, Mechel Retreat After Exclusion From MSCI Russiahttp://www.bloomberg.com/news/2011-05-17/rostelecom-mechel-retreat-after-exclusion-from-msci-russia.html

By Jason Corcoran - May 17, 2011 9:09 AM GMT+0200

OAO Rostelecom, Russia’s dominant long-distance carrier, and the preference shares of mining company OAO Mechel (MTLR) slumped after they were not included in MSCI Inc.’s Russia index yesterday.

Rostelecom’s stock dropped 3.8 percent to 171.25 rubles by 11 a.m. in Moscow, snapping a seven-day winning streak. Mechel’s preferred shares retreated 2.9 percent to 430 rubles.

Brokerages including Renaissance Capital, UralSib Financial Corp., Alfa Bank and Citigroup Inc. had forecast that the shares would be included in MSCI’s semi-annual review.

Luis Saenz, the London-based director of international sales at brokerage Otkritie Securities Ltd., said Rostelecom’s exclusion was a “surprise” and is a “firm sell today.” “Mechel preference shares were very much a consensus inclusion and the favorite pick of a number of banks,” Saenz said in e- mailed comments today.

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

UPDATE 1-Severstal swings to Q1 net profit of $531 millionhttp://af.reuters.com/article/metalsNews/idAFLDE74G09G20110517

Tue May 17, 2011 6:38am GMT

* Returns to profit after year-ago loss of $785 million

* Revenue up 36 percent to $3.73 bln, vs forecast $3.83 bln

* To sell 2.25 mln GDRs, 246,000 ordinary shares to cut debt

(Writes through, adds CEO comment)

MOSCOW, May 17 (Reuters) - Severstal (CHMF.MM), Russia's largest steelmaker, swung to a first-quarter net profit of $531 million on the back of higher global metal prices and demand.

Severstal also said on Tuesday it planned to sell 2.25 million global depositary receipts and 246,000 ordinary shares held in treasury to reduce net debt.

It had been expected to report a first-quarter net profit of $534 million, a Reuters poll found. It made a $785 million loss in the 2010 period. [ID:nLDE74F0OG]

Revenue rose 36 percent to $3.73 billion, compared with a forecast for $3.83 billion. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 60 percent to $934 million, against a $948 million forecast.

"Our net debt/EBITDA level continued to decline to 1.2 times, below the targeted 1.5 times and we are committed to maintaining this reasonable level of debt and strong liquidity position," chief executive Alexei Mordashov said. "We expect further improvement in our operating and financial performance in Q2 2011 and are confident about our full-year outlook," Mordashov, Severstal's controlling shareholder, said.

Severstal has assets in Russia, the CIS, Italy, France, the United States and Africa, and last week added a stake in Brazilian iron ore company Mineracao. (Reporting by Polina Devitt; Writing by Maria Kiselyova; Editing by Dan Lalor)

PRESS: GazEnergoStroy to build 800 mln euro power plant in Moscowhttp://www.powergenworldwide.com/index/display/wire-news-display/1418768263.html

Prime-Tass English-language Business NewswireMay 17, 2011

Russian corporation GazEnergoStroy, which focuses on the construction of generating capacities, plans to build a power plant worth approximately 800 million euros in Moscow, Kommersant business daily reported Tuesday citing the corporation's President Sergei Chernin.

The first stage of the power plant called Ogorodny Proezd-Novomoskovskaya with an installed electric power capacity of 600 megawatts (MW) and a thermal power capacity of 750 gigacalories is expected to be launched in 2014.

GazEnergoStroy is to act as the general contractor of the project and is expected to operate the power plant once the construction is complete. Transenergo, a subsidiary of Netherlands-based company Transenergo Int, which is reportedly affiliated with gas giant Gazprom's top executives, is to act as an investor of the project.

The power plant is expected to become the first large private power generating unit in Moscow and the Moscow Region, Kommersant said. A Moscow government ruling for the construction of the power plant by a consortium of private investors headed by Czech power company CEZ was already signed in 2007, but in 2010 the city government decided to change the site for the plant and the investor agreed to redesign the power plant at its own expense. The shareholder structure of the consortium has slightly changed since then, and CEZ no longer has a presence there, Chernin told the daily.

Meanwhile, power sales company Rusenergosbyt has pledged to purchase all the electric and thermal power produced at GazEnergoStroy's future plant, Chernin said. GazEnergoStroy has also already concluded a contract for gas supplies to the power plant until 2030, he said, declining to provide the name of the supplier and saying only that it was not Gazprom.

Chernin also said he believed the future power plant would not create competition for power facilities operated by Mosenergo, controlled by Gazprom Energoholding, which manages Gazprom's power assets. There are no generating capacities belonging to Mosenergo within a radius of 5-10 kilometers around the site of the future plant and power to be produced at the future plant is expected to be in demand, Chernin said. Meanwhile, Gazprom Energoholding believes the yet-to-be-built plant is likely to create competition for its facilities. Such projects lead to a growth in tariffs for electric power, the company's spokesperson said, adding that the company believed no additional generating capacities were needed to be built in this district of Moscow within the next five years.

Copyright 2011 Prime-Tass Business News AgencyAll Rights ReservedPrime-Tass English-language Business Newswire

Alstom modernises Russian hydropower planthttp://www.renewableenergyfocus.com/view/18006/alstom-modernises-russian-hydropower-plant/

17 May 2011

Alstom Hydro France, Alstom Russia and the Russian United Energy-Construction Corporation (OEK) will modernise the Cascade of Kubansky hydropower plant in Russia with Russia’s largest hydropower company, RusHydro.

By Renewable Energy Focus staff

The agreement follows an earlier Strategic Cooperation Agreement signed between Alstom and RusHydro in December 2010.

Alstom will carry out the rehabilitation of electro and hydro mechanical equipment as well as install a new instrumentation and control system. Its partner OEK will be responsible for all civil works at the hydropower plant.

The rehabilitation project may take between 6 to 10 years. Part of the equipment to modernise the Cascade of Kubansky hydropower plants could be provided by the joint hydropower manufacturing facility to be built by RusHydro and Alstom in Ufa City, in the Republic of Bashkortostan, Russia.

The factory will be oriented to production of hydrogenerating equipment for small hydropower plants, as well equipment for distributed control systems (DCS), condition monitoring systems, excitation systems for hydro generators and integrated site security systems. The enterprise will also be producing equipment for medium HPP, and pumped storage power plants.

The Kubansky Cascade hydropower plant complex, RusHydro’s subsidiary situated at the Kuban River (South of Russia) and extending for 235 km, includes eight hydropower plants and one pumped storage power plant, with a total original capacity of over 460 MW. The modernisation could ensure a capacity increase from 10% to 20% (up to 550 MW).

Rosselkhozbank mulls subordinated debt issue-sourceshttp://www.reuters.com/article/2011/05/17/russia-agribank-debt-idUSLDE74G0IA20110517

4:16am EDT

MOSCOW, May 17 (Reuters) - Russia's Rosselkhozbank has mandated three banks for its new subordinated debt issue, two banking sources told Reuters on Tuesday.

Rosselkhozbank, Russia's fourth largest by assets, has mandated Barclays Capital, J.P.Morgan and VTB Capital to arrange the offering, the sources said.

The size of the issue is subject to market conditions. Investor meetings will start on May 18.

Rosselkhozbank decided last week to exercise a call option for $500 million subordinated issue of loan participation notes (LPN) raised in September 2006. [ID:nLDE74B1NJ]

(Reporting by Katya Golubkova, editing by Maria Kiselyova)

Moody's releases first-time survey on Russian bank CFOshttp://finchannel.com/Main_News/Banks/87085_Moody%27s_releases_first-time_survey_on_Russian_bank_CFOs/

17/05/2011 02:56 (00:17 minutes ago) The FINANCIAL -- MOSCOW , May 17, 2011 -- 17 May 2011 -- Moody's Investors Service has conducted a survey of the Chief Financial Officers (CFOs) of around 100 Russian banks, covering those CFOs' expectations regarding Russia's operating environment and their banks' key financial metrics.

The publication of today's Special Comment represents the first time that Moody's has aggregated the information on the market expectations of Russian bank CFOs.

Although Moody's shares the expectations of Russian CFOs on most topics, the report highlights cases were survey responses seem either aggressive, or out of line with recent trends. "For instance, Moody's views CFO expectations of the extent of asset quality improvement in 2011 as overly optimistic, given our more conservative opinions on the recovery of problem loans and the anticipated performance of restructured loans," -- says Eugene Tarzimanov, a Moody's Vice-President -- Senior Analyst and author of the survey.

Overall, the responses confirm the view that the Russian banking system is benefiting from the gradual economic recovery, which is (i) driving a growing depositor base; (ii) increasing loan demand; and (iii) improving profitability.

The survey's main findings are:

- CFOs are optimistic about economic conditions in Russia, a country that suffered heavily from the recent crisis. Most bankers expect that lending growth will exceed 20% in 2011, compared with 12% in 2010, signaling that credit conditions are improving.

- Many CFOs expect increased profitability in 2011, owing to reduced credit risk and revenues from new lending.

- CFOs are optimistic on asset quality: 49% of respondents expect a decrease in the level of overdue loans, while only 8% expect an increase.

- Most bankers cite competition from state banks as a factor constraining the development of their franchises, a trend that became particularly pronounced during the 2008-2010 crisis when state banks encroached on the private banks' market share.

- Many CFOs are concerned about their ability to sustain their net interest margin (NIM), signalling the impact of competition from public sector banks that have access to lower-cost funding.

In Moody's opinion, the sample of banks used for the survey is representative of system-wide trends in Russia, as the surveyed banks represent around 50% of banking system assets at year-end 2010, and included institutions of all forms of ownership, size, and business profile. Around 95% of the surveyed banks are privately-owned, with only 5% being state-controlled and the survey responses were not asset-weighted.

Sahit_Muja: Russia has become a golden opportunity for China to invest.http://online.wsj.com/community/groups/oil-921/topics/sahitmuja-russia-has-become-golden

Sahit_Muja: Russia has become a golden opportunity for China to invest. With $3 trillion dollars in reserves China is expending Russian economy.

Albanian_Minerals President Sahit_Muja said "China to increase investments aggressively in Russia" . The world’s largest proven gas reserves are located in Russia.

Russia is frequently the world’s largest natural gas extractor. Russia has the world’s largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves. Russia is the world’s largest exporter of natural gas and the second largest oil exporter.

China has an insatiable appetite for the world's natural resources to sustain an economic growth at average 10 percent a year. China's quest for, oil, natural gas, metals, raw materials is the central goal of the country's foreign policy. Huge reserves of natural resources is found just over the China's border in Russia.

Russian have large reserves of natural gas, oil, diamonds and gold, while millions of square miles of birch and pine provide supplies of timber. China has been the fastest growing economy in the world over almost three decades, expanding at 10 percent average each year.

China bought record volumes of oil, natural gas, coal, copper, aluminum, gold, ferrochrome, chrome ore and iron ore this year. The world’s fastest-growing major economy consumes more than a third of the world’s aluminum output, a quarter of its copper production, a tenth of its oil and accounts for more than half of the trading in iron ore. China is hungry for land, food, energy, and all other natural resources. Hundreds of billions of dollars are invested presently by China in natural resources in Africa, Australia, Brazil, Russia, Iraq, Iran, Afghanistan, Qatar, Europe, Canada, East Asia, Latin America and US.http://www.prlog.org/11493809-russia-has-become-golden-opportunity-for-china-to-invest.html Albanian_Minerals New York

Activity in the Oil and Gas sector (including regulatory)

AAR to pursue cooperation talks with BP, Rosneft

http://www.rbcnews.com/free/20110517115348.shtml

      RBC, 17.05.2011, Moscow 11:53:48.The Alfa-Access-Renova (AAR) consortium intends to continue a discussion of potential cooperation with BP and Rosneft, Alfa Group owner Mikhail Fridman said today. "We see many advantages in possibly developing projects in tandem with Rosneft in line with a TNK-BP shareholder agreement and intend to continue a discussion of potential cooperation among BP, Rosneft and AAR," he said.

      This statement comes after BP announced it discontinued talks with Rosneft over joint development of Russian offshore Arctic fields. BP failed to resolve disagreements with AAR, its Russian partners in TNK-BP, who challenged the deal with Rosneft.

BP says talks on solving Russian impasse to go onhttp://www.forbes.com/feeds/ap/2011/05/17/business-eu-britain-bp-rosneft_8469759.html

Associated Press, 05.17.11, 03:27 AM EDT

LONDON -- Oil company BP says talks will continue to salvage its agreement to work with Russian oil company Rosneft to explore Arctic waters even though a deadline has been passed.

BP ( BP - news - people ) said Tuesday that it will intensify efforts to overcome opposition by Alfa-Access-Renova, BP's partner in the TNK-BP joint venture. AAR ( AIR - news - people ) went to court to block the Rosneft deal, claiming it had the right to share in all BP operations in the country.

The deal, announced in January, ran into opposition from shareholders in BP's separate Russian joint venture, TNK-BP, who claimed it violated that venture. BP and Rosneft had also agreed on a share-swap deal in which each would take a stake of about $8 billion in the other.

BP did not comment on any possible solutions it was exploring.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Rosneft to drop BP, seek Arctic partners: sourcehttp://www.reuters.com/article/2011/05/17/us-bp-russia-rosneft-idUSTRE74G17720110517

3:10am EDT

MOSCOW (Reuters) - Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) will pull out of its proposed strategic alliance with BP (BP.L: Quote, Profile, Research, Stock Buzz) and launch a search for new partners to explore the Arctic Kara Sea blocks, a source close to the company said on Tuesday.

The source told Reuters that talks to buy out the Russian shareholders in BP's Russian venture TNK-BP (TNBP.MM: Quote, Profile, Research, Stock Buzz) had failed to unblock the deal.

"We got the feeling that they were working to undermine the deal and did not want Rosneft to become the largest public oil company in the world by production and reserves," the source said.

(Reporting by Vladimir Soldatkin, Writing by Douglas Busvine)

No deal in BP-Rosneft-AAR talks – sourcehttp://uk.reuters.com/article/2011/05/17/uk-bp-russia-aar-idUKTRE74G0Y820110517

7:29am BST

MOSCOW (Reuters) - Talks between BP (BP.L: Quote, Profile, Research), Rosneft (ROSN.MM: Quote, Profile, Research) and the Russian shareholders in BP's Russian venture TNK-BP (TNBP.MM: Quote, Profile, Research) have failed to reach agreement, a source close to the matter said on Tuesday.

BP and Rosneft made a cash and stock offer to buy out the co-owners of TNK-BP, represented through the Alfa-Access-Renova (AAR) consortium. They also discussed a proposed BP-Rosneft share swap whose deadline expired on Monday night.

A source close to AAR, which represents a quartet of tycoons who own half of TNK-BP, said the company would issue a statement shortly.

(Reporting by Vladimir Soldatkin, Writing by Douglas Busvine)

Rosneft pulls out of BP Russia deal: Interfaxhttp://www.google.com/hostednews/afp/article/ALeqM5hI8GRuGgj3RWANn6vI_A8jTGysUA?docId=CNG.ce111ccd12af82eb1051dd6bce7e3986.a01

(AFP) – 13 minutes ago

MOSCOW — Rosneft has pulled out of its strategic alliance with BP and will look for new partners in Arctic oil exploration, Interfax quoted a source close to the state-held company as saying Tuesday.

BP’s Rosneft share-swap deal collapses http://www.ft.com/intl/cms/s/0/7d3d8c58-8058-11e0-adca-00144feabdc0.html#axzz1MaQr9AzB

By Catherine Belton in Moscow and Sylvia Pfeifer in London

Published: May 17 2011 08:59 | Last updated: May 17 2011 08:59

BP failed to reach agreement to salvage its $16bn share swap with Rosneft, the Russian state oil champion, after a deadline of midnight on Monday expired, the UK oil group said on Tuesday.

Rosneft was not willing to extend the deadline further, a person close to the state company said, after talks failed over a deal to buy out BP’s partners in TNK-BP, its existing Russian joint venture.

A person familiar with the matter said Rosneft would now seek new partners for the Arctic exploration deal it had proposed for the alliance with BP.

However, BP and its Russian partners in TNK-BP, represented through Alfa-Access-Renova, stressed in a statement on Tuesday that they would continue talks with Rosneft.

They sought to paper over the conflict that had broken out after AAR objected to BP’s proposed share swap and Arctic exploration alliance with Rosneft, claiming it breached the existing TNK-BP shareholder agreement.

“BP has conducted detailed negotiations with AAR and Rosneft to seek a reasonable and businesslike solution that would allow the agreements to proceed to the satisfaction of all parties. Such a solution has not been found at this time, although talks will continue,” BP and AAR said in a statement on Tuesday.

“Both BP and AAR see significant advantages in continuing to deepen this dialogue and co-operation with Rosneft.”

Bob Dudley, BP chief executive, said BP was committed to continuing to work with AAR in TNK-BP and with Rosneft.

“All parties have worked hard to reach an acceptable resolution, as we believe it could offer significant benefits to BP shareholders, to Rosneft, AAR and Russia,” he said.

Mikhail Fridman, the leading shareholder in AAR, also struck a conciliatory note, saying the Russian shareholders were interested in continuing dialogue on co-operation with Rosneft.

“AAR is a long-term strategic investor, and we look forward to working with BP on delivering the next phase of TNK-BP’s growth, both in Russia and internationally,” Mr Fridman said in a statement. “AAR also sees significant benefit to developing co-operation with Rosneft within the framework of the TNK-BP Shareholder Agreement, and we plan to continue discussions about potential collaboration among BP, Rosneft and AAR.”

Talks broke down on Monday afternoon after AAR rejected a proposal for BP and Rosneft to buy out their 50 per cent stake for $32bn.

“The feeling is they did not want to do a deal at all,” one person close to the talks said. “They were forwarding conditions that they knew ahead of time that BP and Rosneft could not accept.”

A second person close to the talks said: “We got pretty close to a deal to buy them out but there are sticking points.”

One stumbling block was Rosneft’s insistence that its share-swap with BP go ahead immediately, offering AAR no guarantee that the buy-out would take place.

“There is no agreement but it’s not the end of the story,” said one person close to AAR. “Talks may resume in two weeks, two months or two years. For the time being, the AAR shareholders are focused on running the business.”

Another person close to the talks said the deadline had not been extended by Rosneft in order to exert pressure on BP and AAR to reach a deal: “The deadline is self-imposed and artificial. If Rosneft is interested in an alliance with BP, it is free to extend it or sign a new agreement after the deadline has passed.”

Under the proposal, Viktor Vekselberg and Leonid Blavatnik, the other AAR partners, would have taken more cash for their TNK-BP shares, while Mr Fridman was more focused on BP shares.

BP shares reversed early losses to trade 0.8 per cent higher at 442.1p early in the London session.

Copyright The Financial Times Limited 2011. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

BP's Rosneft deal collapses but talks continue

BP's deal with Rosneft has collapsed, ending a flagship £10bn share-swap agreement and plans to explore Russia's oil-rich Arctic waters together.

8:59AM BST 17 May 2011

The two oil companies had been trying to save the deal for weeks but were unable appease BP’s existing Russian partners, who were unhappy with the alliance.

The failure of the deal is a blow for Bob Dudley, BP group chief executive, who heralded Arctic exploration as an exciting new opportunity.

However, the market did not seem too disappointed as the oil giant said talks with Rosneft continued and BP shares edged up in early trading after opening slightly down.

Mr Dudley said in a statement on Wednesday: "BP remains committed to Russia, to working constructively with Alfa-Access-Renova (AAR) in TNK-BP and to our existing good relationship with Rosneft."

The billionaire Russian partners in TNK-BP successfully argued in a London court that it violated an earlier agreement BP made with them.

After much wrangling, BP and the four oligarchs had suggested that the deal could be done through their joint venture, TNK-BP. However, it is understood that Rosneft rejected allowing the four oligarchs to join the deal.

Negotiations yesterday were focused on finding a way to buy out the Russian billionaires from BP’s joint venture TNK-BP. A price of $30bn (£18.5bn) to $32bn for a 50pc stake in TNK-BP was agreed by both sides but there were still sticking points.

One of the oligarchs, Mikhail Fridman, wants a slice of equity in BP and Rosneft – and there were also issues with the timing of the share swap.

It is understood that two of the billionaires, Viktor Vekselberg and Len Blavatnik, were ready and willing to sell up for cash but Mr Fridman, the most powerful of the four businessmen, wants to keep his hand in the oil game.

Mr Fridman, chairman of Alfa Group, said on Tuesday: "AAR ... sees significant benefit to developing cooperation with Rosneft within the framework of the TNK-BP shareholder agreement, and we plan to continue discussions about potential collaboration among BP, Rosneft and AAR."

Mr Dudley said: "It is gratifying that both BP and AAR have agreed to look beyond the disagreements of the past few months and to fully focus on this important and successful business we have built together. At the same time, we look forward to continuing our work with Rosneft in our Sakhalin joint venture, running our new joint German refining business, and considering other future projects."

The lapsing of the deal leaves the Russian state oil giant free to woo other partners such as Royal Dutch Shell and ExxonMobil.

It could also decide to pursue BP through the courts for entering into an agreement knowing that it might violate its contract with AAR.

TNK-BP Partners May Sell Stake for $30 Billion, Vedomosti Sayshttp://www.bloomberg.com/news/2011-05-17/tnk-bp-partners-may-sell-stake-for-30-billion-vedomosti-says.html

By Halia Pavliva - May 17, 2011 6:22 AM GMT+0200

BP Plc’s billionaire partners in TNK- BP may agree to sell their half of the Russian oil venture for more than $30 billion, including $9 billion of BP shares, the Vedomosti newspaper reported, citing unidentified people familiar with the negotiations.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; David Papadopoulos at papadopoulos@bloomberg.net

LUKOIL sees 2011 Kazakh oil output at 8 mln Thttp://uk.reuters.com/article/2011/05/17/lukoil-kazakhstan-idUKLDE74G01R20110517

5:31am BST

ASTANA, May 17 (Reuters) - Russia's second-biggest oil producer LUKOIL (LKOH.MM: Quote, Profile, Research) expects to produce around 8 million tonnes of oil and oil equivalents this year, CEO Vagit Alekperov told reporters on Tuesday. (Reporting by Maria Gordeyeva; writing by Maria Kiselyova; editing by Guy Faulconbridge)

UPDATE 1-LUKOIL sees protracted talks on Kazakh gas fieldhttp://af.reuters.com/article/energyOilNews/idAFLDE74G03S20110517

Tue May 17, 2011 7:04am GMT

* LUKOIL CEO says Karachaganak talks "constructive"

* Resolution could take six months to 10 years

* LUKOIL sees its 2011 Kazakh oil output at 8 mln tonnes

(Adds details, quotes, background)

By Maria Gordeyeva

ASTANA, May 17 (Reuters) - A solution to a shareholder dispute over the development of Kazakhstan's most prospective gas field could take anything from six months to 10 years, the head of Russian shareholder LUKOIL (LKOH.MM) said on Tuesday.

LUKOIL, which owns 15 percent of the consortium developing the Karachaganak project in northwest Kazakhstan, expects to find agreement on the project's crucial third phase in line with changing Kazakh laws, Chief Executive Vagit Alekperov said.

"It must be understood that the project was formed at the beginning of the 1990s, when the legislation was insufficient. Today this is changing," Alekperov told reporters.

"I hope that we will regulate all existing questions within the legislative framework of Kazakhstan."

Kazakhstan, with 3 percent of the world's recoverable oil reserves, has grown more assertive over its abundant natural resources in recent years, pushing to revise agreements signed with foreign energy majors after the Soviet collapse in 1991.

Britain's BG Group (BG.L) and Italy's ENI (ENI.MI) are the largest shareholders in the Karachaganak Petroleum Operating Group (KPO), which is developing the field of the same name. U.S. energy major Chevron Corp (CVX.N) has a 20 percent stake.

Asked when negotiations would be complete, Alekperov said: "I don't know. It's a protracted process, from which we could emerge in six months or maybe 10 years."

He said the negotiation process was "constructive".

ENI and BG Group each own a 35 percent stake in the KPO consortium. The Kazakh government has on several occasions charged the consortium with violating tax and ecological laws and with overstating costs.

KPO has consistently denied any wrongdoing.

Kazakh state oil and gas company KazMunaiGas [KMG.UL] last year stated its ambition to acquire a stake in the project, and ENI Chief Executive Paolo Scaroni said in August the company was holding talks on cutting its shareholding. [ID:nLDE67O1ZE]

The government has expressed interest in exerting greater control over costs during the crucial third phase of the Karachaganak field.

Kazakh Oil and Gas Minister Sauat Mynbayev said last month that the government hoped to settle the dispute within the first half of this year. [ID:nLDE73K106]

KPO, due to operate the project until 2038, has said hydrocarbon output at Karachaganak fell to 133.7 million barrels of oil equivalent in 2010 from 139.4 million barrels in 2009.

LUKOIL, Russia's second-largest oil producer, also expects to produce around 8 million tonnes of oil and oil equivalents this year from its operations in Kazakhstan, Alekperov said. (Writing by Robin Paxton)

LUKoil’s President: Oil’s $100-price is more justhttp://en.apa.az/news.php?id=147380

[ 17 May 2011 11:38 ]

Baku. Ali Ahmedov – APA-ECONOMICS. “Oil’s $100-price is more just. Oil-gas market changed”, said the LUKoil’s President Vahid Alakbarov at video-interview which posted on the blog of Kazakh Prime Minister.

“I consider that, the oil market is full. The just price is somewhere $100, or a little higher. We saw the prices rose until $125, today, the prices fell. This indicates that the market is inconstant”, he said.

According to him, 20-30% of oil price is speculative capital: “The capital is invested in oil and metals to compensate the lower incomes from bank deposits and other financial instruments. Oilmen need stable prices that we can plan our investment programs”.

May 17, 2011 10:00

Surgutneftegas RAS sales revenue up 41.3% in Q1http://www.interfax.com/newsinf.asp?id=243974

KHANTY-MANSIYSK. May 17 (Interfax) - OJSC Surgutneftegas (RTS: SNGS) saw its sales revenues increase 41.3% year-on-year to 193.075 billion rubles in the first quarter of this year as calculated to Russian Accounting Standards (RAS), the company reported.

The increase was largely due to increased prices for oil and oil products, as well as higher export duties on them, the company's report says.

Surgutneftegas posted Q1 net profits of 15.3 billion rubles, an 82% increase.

January-March gross profits were up 76.8% at 74.026 billion rubles, sales profits 93.3% at 60.932 billion rubles, and pretax profits 69.3% at 19.220 billion rubles.

The company's Q1 accounts payable increased 14.5% year-on-year to 51.709 billion rubles and its accounts receivable 18.3% to 109.801 billion rubles.

Gazprom

Bolivia, Gazprom to Sign Exploration Agreement Within Weekshttp://www.bloomberg.com/news/2011-05-16/bolivia-gazprom-to-sign-exploration-agreement-within-weeks.html

By Sara Shahriari - May 16, 2011 7:55 PM GMT+0200

Bolivia and OAO Gazprom may sign an accord within weeks to explore for hydrocarbons in the Acero block in the nation’s southeast, the head of the state-owned natural-gas company said.

Gazprom, as well as TecPetrol SA and state company YPFB Chaco, also plan to join Total SA (FP) to help develop the Aquio and Ipati oil blocks in eastern Bolivia, Carlos Villegas, chief executive officer of Yacimientos Petroliferos Fiscales Bolivianos, said today at a news conference. Total will hold 50 percent of the project, while Gazprom and TecPetrol will own 20 percent each and YPFB Chaco will control 10 percent, he said.

Bolivia will award oil and natural-gas exploration contracts this year for the first time since 2006, Villegas said in an interview May 1. Total, Repsol YPF SA (REP), BG Group Plc and Petroleo Brasileiro SA (PETR4) plan to invest $3 billion in gas plants and to drill 10 wells by 2014, he said at the time.

"We are now secure that the investment plan for development of Ipati and Aquio will be a reality," Villegas said today.

The agreement to develop the two blocks needs approval by congress and requires investments of $850 million, he said. Total said May 12 that its local unit found gas and condensate in a well at the Aquio block.

To contact the reporter on this story: Sara Shahriari in New York at sshahriari@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Gazprom Says Gas Sales to Italy Surged 44% in First Quarterhttp://www.bloomberg.com/news/2011-05-16/gazprom-says-gas-sales-to-italy-surged-44-in-first-quarter.html

By Anna Shiryaevskaya - May 16, 2011 4:58 PM GMT+0200

OAO Gazprom increased sales of natural gas to Italy by 44 percent in the first quarter as unrest in Libya affected supply from the North African country.

Gazprom, Russia’s gas-export monopoly, sold 4.78 billion cubic meters of gas to Italy, compared with 3.3 billion cubic meters in the same period of 2010, according to a first-quarter report posted today on the company’s website.

Deliveries through the Greenstream pipeline to Italy from Libya stopped on Feb. 22. The link normally supplies Italy with about 10 percent of its gas.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

NIS First Quarter Profit More Than Triples on Bigger Outputhttp://www.bloomberg.com/news/2011-05-16/naftna-industrija-srbije-first-quarter-profit-more-than-triples.html

By Misha Savic - May 16, 2011 11:33 AM GMT+0200

Naftna Industrija Srbije AD, Serbia’s biggest oil company controlled by OAO Gazprom Neft, said profit more than tripled in the first quarter as market share and output rose.

Net income, excluding currency effects, for the first three months advanced 209 percent to 5.3 billion dinars ($75 million) from 1.7 billion dinars in the year-ago period, Deputy Chief Executive Officer Alexey Urusov said today in Belgrade. With the currency impact, net profit was 9.6 billion dinars, compared with a loss of 4.5 billion dinars in year-ago quarter.

“A stronger dinar in the first quarter worked well for us, but the true strength came from increased production,” Urusov said at a press conference. Oil alone accounted for 246,000 tons of output, compared with 193,000 tons a year ago. Production rose 32.6 percent to 358,000 tons.

Vertically integrated NIS, which also owns and operates Serbia’s two refineries and a retail network of 480 fuel stations and warehouses, increased its share of the retail market to 37 percent from 32 percent a year ago, even as consumption in the country declined 6.5 percent.

‘Very Vulnerable’

“We remain very, very vulnerable to currency volatility,” Urusov said, declining to give a forecast for the rest of the year.

Chief Executive Officer Kirill Kravchenko said on May 6 that the 2011 result should be “at least” the same level as 2010, when net income reached 16.5 billion dinars.

NIS shares fell 3.22 percent to 571 dinars as of 11.27 a.m. in Belgrade. The stock, which started trading last August, reached a record-high 592 dinars on May 13.

Earnings before interest, taxes, depreciation and amortization rose 144 percent to 7.8 billion dinars in the first quarter.

NIS’s debt to banks rose 3.4 percent in the first quarter from the end of December to $632 million, Urusov said.

The company’s development plan to 2020 envisages increasing production to 5 million tons of oil equivalent and Ebitda reaching 130 billion dinars by the end of the decade.

Gazprom Neft, the oil arm of Russia’s state-controlled gas producer bought 51 percent of NIS for 400 million euros in early 2009 with a commitment to invest another 500 million euros. It raised the stake earlier this year to 56.15 percent.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

Shtokman developers want protected eco zonehttp://www.barentsobserver.com/shtokman-developers-want-protected-eco-zone.4921456-16178.html

2011-05-16

Teriberka, Murmansk Oblast

The Shtokman Development AG suggests to establish an environmentally protected zone near Teriberka, the hub in the Shtokman project.

In a meeting with environmental organizations last week, the SDAG proposed to establish a zone of special environmental protection in the area of the Voronya Bay on the Barents Sea coast.

The zone is to compensate for the major industrial developments in the nearby Teriberka, a press release from the SDAG reads. Teriberka will host a LNG plant and as well as other gas processing facilities.

In the meeting, which took place in Murmansk, the SDAG also invited several environmental organizations in the region to engage in a joint monitoring initiative on

industrial developments. From before, the company has an agreement with the WWF on information exchange. Represented in the meeting were WWF, Bellona Murmansk, the Kola Centre on Protection of wild nature, as well as companies and institutions like FREKOM, Pinro and the Marine Biological Institute, a unit under the Kola Science Centre.

The Voronya Bay, is located about 15 km east of Teriberka. It is connected with the Voronya River, which runs from Lovozero in the central part of the Kola Peninsula.

Text: Atle Staalesen