Russia 080607

Basic Political Developments Medvedev inaugurated as Russia's third president Medvedev Sworn in as Russia's Third President, Succeeding Putin Medvedev promises prosperity Cabinet tenders resignation as new president takes office LDPR faction to support Vladimir Putin's candidacy for the post of prime minister Yastrzhembsky to Step Down I’ve kept my promise: Putin Putin successor Medvedev to visit Berlin next month Canceled March Draws Big Crowd Uzbek couple murdered in Moscow Russia border with China not to be closed because of enterovirus threat - Gennady

Onishchenko 50,000 British Fans Coming to Town Japan tries to win favor of Sakhalin locals Export-oriented equipment to be displayed in Victory Day parade Trutnev's Trouble Officials

National Economic Trends Russia looks to boost economic zones Ulyukayev Says Russia May Let Ruble Gain, Kommersant Reports

Business, Energy or Environmental regulations or discussions Russian top managers leave Volkswagen Raspadskaya May List in London as Russian Coal Swells (Update1) Baltika, Gazprom, Evraz May Move: Russian Equity Market Preview SUEK Borrows $800M OGK-5's Full-Year Results X5 Investors Snap Up Stock Alcohol and Cigarette Taxes Novolipetsk Steel, or NLMK, secured European anti-monopoly approval to buy

two steel trading companies for 77 million euros ($119 million) to expand exports.

Activity in the Oil and Gas sector (including regulatory) Oil producers suffer from inflation hikes Russneft may go same way as Yukos YUKOS fate looming over RussNeft Tatneft says reserves climb Transneft to lift dividends

Gazprom Gazprom prodded toward hiring Norwegian contractors Gazprom lines up rig in Venezuela

Serbia's parliament may ratify a deal giving control of the its national oil company to Gazprom just ahead of a general election,

------------------------------------------------------------------------------------------

Full Text Articles

Basic Political DevelopmentsMedvedev inaugurated as Russia's third presidenthttp://en.rian.ru/russia/20080507/106775306.html

MOSCOW, May 7 (RIA Novosti) - Dmitry Medvedev was inaugurated as Russia's third president on Wednesday in a glittering ceremony at the Grand Kremlin Palace in front of some 2,400 guests as Vladimir Putin stepped down after eight years as head of state. The inauguration ceremony began at 11:45 a.m. Moscow time (07:45 GMT) and after the outgoing Putin had made a short speech, Medvedev swore an oath on a copy of the Russian Constitution. He then addressed the assembled dignitaries as Russia's new president. The entire ceremony was shown live on national television and the Internet. Medvedev swore to "respect and protect human and civil rights," as well as to "observe and defend the Constitution of the Russian Federation, its sovereignty and independence, security and integrity." He said the development of civil and economic freedoms in Russia would be a priority during his presidency. "They [rights and freedoms] are of the highest value and define the essence of state activities. The most important task is to further develop civil and economic freedoms and to create new civil opportunities," Medvedev said after being sworn in as president of Russia. The current Russian government is now due to resign and Putin is to become the country's new premier on May 8. He is also set to become the head of the ruling United Russia party. Forty-two-year-old Medvedev was nominated as a presidential candidate by United Russia and three other smaller pro-Kremlin parties in December. Putin later said on national television: "I have known Dmitry Medvedev well for over 17 years, and I completely and fully support his candidature." Medvedev, a trained lawyer, worked under Putin in St. Petersburg in the early 1990s, when the man who would become Russia's second president was the city's first deputy mayor. In 1999, in Moscow, Medvedev was appointed acting deputy chief of the presidential staff. He also headed Putin's campaign headquarters in the run-up to the 2000 elections. In 2003, he became chief of the presidential administration and retained the post until November 2005, when he was appointed first deputy prime minister and put in charge of an ambitious multi-billion dollar "national project" to improve living standards. The endorsement of the popular Putin ensured Medvedev a landslide victory in the March 2 elections, but has also left question marks over the nature of the president-elect's

position, with many analysts predicting that Putin will remain the real leader of the world's largest country. However, Putin has dismissed rumors of plans to give extra powers to the premier, saying in March that, "There is no need to change anything regarding this. The prime minister has sufficient powers." Medvedev also said after being elected that he had no intention of redistributing powers between the president and the prime minister upon taking over at the Kremlin. Speaking to the Financial Times in an interview last March, he said he was convinced his partnership with Putin would prove effective, and would not lead to a power struggle. Despite all the reassurances that the Putin-Medvedev 'tandem' will be able not only to co-exist, but also work together, many Russian and foreign political commentators are at a loss as to explain exactly how this 'power-sharing' will work in practice. However, ordinary Russians seem sure that ultimate power will remain with Putin, with more than two thirds of respondents stating in a poll carried out by the Levada Center in April that they believed the former KGB officer would "control" his hand-picked successor. Putin's second term has seen a rise in tensions with the West, as a resurgent Russia, awash with oil dollars, looks to reestablish itself as a global power. Moscow has strongly stated its opposition to NATO expansion and U.S. plans for a missile defense shield in central Europe. However, unlike Putin, Medvedev has no links to Russia's 'siloviki,' representatives of the country's security and defense agencies. Despite this, Putin has already said that the West will find Medvedev, seen as a pro-business moderate, no 'easier' to deal with. "He is no less, in the best sense of the word, a Russian nationalist than I am. I don't think that our partners will find things easier with him," Putin said, adding that, "He is a real patriot, and will actively uphold Russia's interests on the global stage." Many foreign political analysts also predicted that Medvedev would stay faithful to Putin's foreign policies, in the early days of his presidency at least. "In my opinion, Medvedev will continue Putin's policy for the first year," Aleksander Kvasniewski, the former president of Poland told RIA Novosti, adding that, "But the following year I think that Medvedev will become more independent." An attempt by the Other Russia opposition coalition movement to hold a protest rally on the eve of Medvedev's inauguration was prevented by police in Moscow on Tuesday. The opposition has called the March elections that brought Medvedev to power "a farce." Seven thousand police officers are on duty on Wednesday in the capital to ensure law and order on the streets before, during, and after the inauguration ceremony. Political change in Russia rarely comes easily, and as a light snow fell over Moscow on Wednesday morning after days of glorious sunshine, the cold snap only served to remind that in Russia it is not only the weather that remains unpredictable.

Medvedev Sworn in as Russia's Third President, Succeeding Putin http://www.bloomberg.com/apps/news?pid=20601087&sid=aFFIXhobZb80&refer=home

By Sebastian Alison and Henry Meyer

May 7 (Bloomberg) -- Dmitry Medvedev was sworn in as Russia's third president, succeeding Vladimir Putin, with promises to fight corruption and inflation in partnership with a predecessor who may try to overshadow him. Medvedev took the oath of office, administered by Constitutional Court Chairman Valery Zorkin, in a Kremlin ceremony attended by 2,500 government officials and ambassadors today. Putin plans to become his prime minister, possibly setting up a battle for leadership of the world's largest country. ``I will work with all my strength as president and as a man for whom Russia is his native home and his native land,'' Medvedev said in a speech broadcast live on state television. Medvedev, 42, a longtime Putin ally, rose to the rank of first deputy prime minister under his predecessor and remains chairman of OAO Gazprom, Russia's natural-gas export monopoly, a post he has held for more than six years. He assumes control of a country in its 10th straight year of energy-fueled economic growth. Russia, the world's biggest energy exporter, has benefited from record oil and gas prices, with the economy growing at an average 7 percent a year. That growth has pushed up wages, the ruble and inflation, making Russia less competitive. Medvedev has vowed to curb inflation, without presenting a specific program for doing so. `Inflation Problem' ``Economically we have a big inflation problem,'' Michael Ganske, head of emerging market research at Commerzbank AG, said in a Bloomberg Television interview. ``This is the problem Medvedev needs to solve to broaden his political base and gain the support of the public.'' On corruption, Medvedev has said Russia's problem pervades government on ``an enormous scale.'' Berlin-based watchdog Transparency International last year said businesspeople and analysts perceive Russia as being among the most corrupt countries of 180 it studied, with a ranking of 143. In November 2006, Deputy Prosecutor General Alexander Buksman estimated that corrupt Russian officials take about $240 billion in bribes a year. The State Duma, or lower house of parliament, will convene tomorrow to vote on Putin's nomination as prime minister. The government of Prime Minister Viktor Zubkov is set to resign immediately after the inauguration, clearing the way for Medvedev to confirm Putin's Cabinet. Power Struggle Putin has repeatedly said he won't change the constitution in order to increase his powers as prime minister at the expense of the president. Kremlin spokesman Dmitry Peskov declined to comment on a May 5 Gazeta newspaper report that Putin plans to push through a constitutional amendment to bolster his influence. Gazeta reported that Putin will more than double the number of deputy prime ministers and shift control of the Foreign Ministry, Defense Ministry and security services from the Kremlin to the prime minister's office. ``Before any such decisions are officially made, these reports are rumors, and we don't comment on rumors,'' Peskov said. Putin strengthened his grip on power last month when he became head of United Russia, the dominant party in parliament. The party has little in the way of ideology beyond backing Putin and making sure the country remains a global power. It's designed to keep

the same elite in control for decades, much like Soviet Union's Communist Party and Mexico's Institutional Revolutionary Party. ``We are now moving into phase two of the neo-authoritarian project in Russia,'' said Robin Shepherd, senior fellow at Chatham House, a London research organization. ``It is quite possible that United Russia will emerge as the key medium through which Putin and his clique acquire an enduring stranglehold over the Russian political system.''

Medvedev promises prosperityhttp://www.russiatoday.ru/news/news/24434

In his first words as Russia’s new president, Dmitry Medvedev has pledged to promote the success and prosperity of all Russians. The 42-year-old was sworn in as modern Russia’s third president during a ceremony in the Kremlin. During his acceptance speech, Medvedev said he’d support innovative approaches to lift living standards. After placing his right hand on Russia’s Constitution, Medvedev took an oath, and was then declared President by the Chairman of the Constitutional Court.

“I will be working to my fullest capacity as a President and as a man, for whom Russia is a native land and home. It is my duty to serve every day and every hour to do everything in my power to improve the life of our people,” Medvedev said.The ceremony has been attended by 2400 guests.

Dmitry Medvedev has become only the third president in Russia’s modern history.Medvedev’s personality

Medvedev has been Putin’s right-hand man since becoming the Russian Government’s Deputy Chief of Staff in 1999. But now the world’s eyes are on Medvedev – so what is Russia’s new president really like?

He has a great sense of humour, according to Political Analyst Aleksey Mukhin.

“But at the same time he's a cold, level-headed lawyer. And it makes him a very good administrator,” he says.

“He doesn't make friends very easily, but once he does - he values them. And he's a very flexible man, too. The fact he's a liberal - that's a myth. He is using that to his advantage. He's not a leftist or rightist, he's not 'red' or 'green' - he's a pragmatic but not cynical leader, with great abilities and a quick legal mind,” he added.

Medvedev’s ambition was evident from an early age.

“Boys usually want to be pilots or drivers. He said from the very start that he wanted to be a lawyer, because he wanted to know everything,” one of his school teachers recalls.

Medvedev’s steady rise

He graduated from Leningrad University with a PhD in Law and he worked at the

Leningrad City Council from 1990.

In 1994, Medvedev worked for a St. Petersburg-based timber company as legal affairs director and became an advisor to the mayor's office. That’s where he met Deputy Mayor Vladimir Putin.

In 1999, Putin became the country's Prime Minister and with him he brought a number of trusted colleagues. Medvedev was appointed Russia's government Deputy Chief of Staff.

After he ran Putin's successful election campaign of 2000, he was elected chairman of Russia's energy giant Gazprom.

Under Medvedev Russia's gas giant secured deals with former Soviet republics and became Europe's chief supplier of energy resources.

In 2005, Medvedev became Russia's First Deputy Prime Minister and was entrusted with overseeing the Council for National Projects.

The programme was aimed at developing social welfare in the country by pumping money into four selected areas - education, public health, housing and agriculture.

Medvedev comes to the job with perhaps the best reference possible – from arguably Russia’s most popular leader ever.

“I have known Dmitry Medvedev for a long time, and I am sure that all his personal qualities, and his experience will guarantee his success as the country's top man. He is an honest, progressive, open-minded young man. And I trust him,” Vladimir Putin said

Cabinet tenders resignation as new president takes officehttp://www.itar-tass.com/eng/level2.html?NewsID=12655317&PageNum=0

MOSCOW, May 7 (Itar-Tass) -- Russia’s Viktor Zubkov-led Cabinet has tendered its resignation, as Russia’s new president, Dmitry Medvedev has taken office. The Cabinet’s press-service has said Zubkov signed the order in compliance with article 116 of the Russian Constitution and article 35 of the federal constitutional law On the Government of the Russian Federation.

LDPR faction to support Vladimir Putin's candidacy for the post of prime ministerhttp://www.itar-tass.com/eng/level2.html?NewsID=12652457&PageNum=0

MOSCOW, May 6 (Itar-Tass) - The LDPR (Liberal Democratic Party) faction in the Russian parliament will support Vladimir Putin's candidacy for the post of prime minister, at the session on May 8. The relevant decision was made at a meeting of the LDPR faction on Tuesday, the faction's press office reported. Earlier on Tuesday, deputy house speaker Ivan Melnikov from the Communist faction said it would vote against Vladimir Putin's nomination for prime minister.

Yastrzhembsky to Step Downhttp://www.themoscowtimes.com/article/1010/42/362576.htm

Sergei Yastrzhembsky, President Vladimir Putin's chief adviser on relations with the European Union, will leave the Kremlin and will not be included in the new government, Kommersant reported Tuesday.

Yastrzhembsky, who has served as a Putin aide since 2000, has decided to leave of his own accord, the newspaper's Kremlin pool reporter, Andrei Kolesnikov, wrote in a front-page story without citing any sources.

"His fate is decided already: He is leaving the presidential administration and will not go to the government," the report said. "This is his own decision."

Yastrzhembsky's office had no immediate comment on the report.

The EU, Russia's biggest trading partner, has failed to agree on when to start partnership talks with Moscow after more than a year of deadlock.

Yastrzhembsky, 54, served as former President Boris Yeltsin's spokesman in the 1990s.

I’ve kept my promise: Putinhttp://www.russiatoday.ru/news/news/24447

Vladimir Putin gave a short speech before handing the presidency to Dmitry Medvedev. To applause from the audience, Putin said he’d kept his promise and responsibility to safeguard Russia’s interests. In his speech Vladimir Putin said the inauguration of the new democratically elected president of the Russian Federation is a very important step for the formation of democratic authority and an act that is meant to unite all the regions of the country and all its forces.

He stressed that the moral integrity of the people in power matters even more than their professional skills. He also said that keeping in mind the interests and needs of every single citizen is the only way for authorities to maintain the development of the country.

Putin also promised that he will continue to preserve and protect Russia the way he did during his two terms of office.

Putin successor Medvedev to visit Berlin next month http://www.earthtimes.org/articles/show/203586,putin-successor-medvedev-to-visit-berlin-next-month.html

Berlin - Russia's new president, Dmitry Medvedev, is to pay his introductory visit to Berlin next month, a German government spokesman said Tuesday, adding that contacts

were continuing about a precise date. A Bonn newspaper, the General Anzeiger, was set to report Wednesday that the Germans and Medvedev, who will officially take over from President Vladimir Putin on Wednesday, were likely to settle on June 5. As president, Medvedev would meet with both Chancellor Angela Merkel and Germany's mainly ceremonial head of state, President Horst Koehler. Merkel was in Moscow in March and met with Medvedev shortly after he won the Russian presidential election.

Canceled March Draws Big Crowdhttp://www.themoscowtimes.com/article/1010/42/362568.htm07 May 2008By Matt Siegel / Staff WriterMore than 300 OMON and Interior Ministry troops and hundreds of journalists poured onto Chistoprudny Bulvar on Tuesday evening in anticipation of a protest by the Other Russia opposition coalition -- only to discover that the protest had been called off.

Organizers, who had been denied permission for the march by city authorities, said they canceled the march, due to start at 6 p.m., for safety reasons after holding talks with police.

As journalists and security troops milled around and police lined Chistoprudny Bulvar from Chistiye Prudy metro to Ulitsa Pokrovka, fewer than a dozen protesters turned up.

One man unfurled a United Civil Front banner and was led away by police. Interfax reported that he was arrested, citing a police source. Another man was detained by police after shouting, "Free Russia!"

One prospective protester, television repairman Ivan Molchanov, said he attended in opposition to the Putin regime.

"All they do is trade in oil," he said. "They have taken away our culture."

Dmitry Pislar, a representative of the For Human Rights movement, said he came to protest against army conditions in the run-up to Saturday's parade.

"They call it a Victory Day, but it's not a Victory Day," he said.

Speaking on the telephone, Lyudmila Mamina, the spokeswoman for The Other Russia, said the organizers had determined that United Civil Front leader Garry Kasparov would be arrested if he attended.

"We received concrete information that if Mr. Kasparov attended, he would be arrested and detained," Mamina said. "So he decided not to attend -- both he and [banned National Bolshevik Party head Eduard] Limonov," Mamina said, declining to name the source of the information.

The city police said it held talks with the march organizers before the cancellation.

"The Mayor's Office has decided that the original decision should stand," said city police spokesman Viktor Biryukov. "We have spoken with the organizers of the march, and it has been canceled."

Standing beside the monument to writer Alexander Griboyedov, The Other Russia coalition member Denis Bilunov explained the organization's decision to journalists.

"We are canceling the protest because it's not safe for people," Bilunov said. "We won't hold this event, since we can't put people at risk," Interfax reported.

Around 40 protesters, including some journalists, were arrested on Ulitsa Pokrovka after trying to attend the march and to hold a flash mob, Interfax reported.

Earlier Tuesday, more than a dozen opposition activists were taken to a police station after voluntarily coming out of an apartment near Kolomenskaya metro station, where they had barricaded themselves against police.

One of the activists, Darya Dorokhina, said she and 16 other activists had been preparing in the apartment for the march. When they tried to leave, they were stopped by police stationed in the stairwell, and the electricity in the apartment was subsequently shut off, Dorokhina said by telephone at the time from the apartment.

Later, speaking from a Nagatinsky District police station at around 5:30 p.m., she said the 17 activists were being asked to provide their personal information but had not been arrested or charged with any offense.

"They gave us no official reason for why we've been detained. But obviously it was to prevent us from going to the Dissenters' March," Dorokhina said.

Uzbek couple murdered in Moscowhttp://en.rian.ru/russia/20080507/106764380.html

MOSCOW, May 7 (RIA Novosti) - An Uzbek couple were beaten and stabbed to death in northeast Moscow early on Wednesday, a police source said. Shortly after midnight, a group of three young people described as skinheads set upon the man and the woman, both in their forties. The couple were employed as street cleaners. Police have said the murder was either a racial attack or a particularly violent robbery. Routine attacks by skinheads and far-right groups on foreigners and people with 'non-Slavic' features have been reported across Russia in recent years. Some of the worst cities for racist attacks are Moscow, St. Petersburg, and the central Russian city of Voronezh. 2008 has seen another rise in the number of attacks on people of Central Asian origin in Russia. In February, the Kyrgyz embassy in Moscow sent an official note of protest to Russia's Foreign Ministry, Interior Ministry and the Prosecutor General's Office protesting at the murders of at least four Kyrgyz nationals in Russia since the start of the year.

Russia border with China not to be closed because of enterovirus threat - Gennady

Onishchenkohttp://www.itar-tass.com/eng/level2.html?NewsID=12655102&PageNum=007.05.2008, 12.18

MOSCOW, May 7 (Itar-Tass) - Russia will not close the border with China because of the incidence of intestinal enterovirus infection in several provinces of this country, the chief of the oversight service Rospotrebnadzor, Gennady Onishchenko, said on television channel Vesti. “We are not as yet talking about closing the border and banning the exit of the Russians,” he said. At the same time, precaution measures have been ordered at all Russian airports having scheduled or charter flight connections with China. In particular, observation of all passengers arriving from China, especially children, is being carried out. If they show signs of intestinal infection, they will be bound to undergo medical examination. Control of the water and food, which are ways of enterovirus infection transmission, has been intensified. “So far the are not quarantine measures, but we must not allow import of this virus to the territory of our country. I has never circulated in Russia,” Onishchenko said. The service Rospotrebnadzor ordered travel agencies on Tuesday to inform people who plan trips to China about a possible risk of contracting enterovirus infection. Onishchenko also commissioned specialists to pay special attention to the enterovirus incidence situation in the Chita and Amur regions, the Jewish Autonomous Area, the Khabarovsk and Primorye territories. The circulated document says these measures are aimed at the prevention of the getting in Russia of enterovirus infection that claimed lives of 26 children in China.

U.S. authorities bring charges against Russian 'arms dealer'http://en.rian.ru/world/20080507/106794024.htmlWASHINGTON, May 7 (RIA Novosti) - U.S. authorities have officially brought charges against an alleged Russian arms dealer who they claimed attempted to sell weapons to a terrorist organization in Colombia, a senior U.S. drug enforcement official has said. The charges against Viktor Bout, 41, include conspiring to kill Americans, conspiring to kill U.S. officers or employees, conspiring to provide material support to terrorists and conspiring to acquire and use an anti-aircraft missile. "Viktor Bout no doubt faces some of the most extraordinarily serious conspiracy charges possible for his crimes against Americans," Michele Leonhart, acting administrator of the Drug Enforcement Administration (DEA), said in a statement late on Tuesday. DEA prosecutors claim that Bout conspired with others to sell millions of dollars worth of weapons to the Revolutionary Armed Forces of Colombia, a leftist group listed by the U.S. as a terrorist organization. If convicted, he may face life imprisonment or, at the very least, a long prison term. Washington is seeking Bout's extradition from Thailand where he was arrested in March in a joint police operation led by the U.S. DEA agents. Thai authorities said in April that they would not bring charges against Bout, but would keep him in custody pending a decision on a U.S. extradition request.

Bout is a former lieutenant in the Russian military who quit the armed forces in 1991. He then allegedly transformed himself into an international arms dealer, earning the nickname 'the Merchant of Death.' The Western media has consistently referred to him as a "former KGB officer." Western law enforcement agencies consider him to be "the most prominent foreign businessman" involved in trafficking arms to UN-embargoed destinations. U.N. reports say Bout set up a network of more than 50 cargo aircraft around the world to facilitate his arms shipments. U.S. authorities took measures against Bout in 2005, freezing his bank accounts and submitting a list of 30 companies linked to Bout to the UN Security Council Sanctions Committee.

50,000 British Fans Coming to Townhttp://www.themoscowtimes.com/article/600/42/362560.htm07 May 2008By Max Delany / Staff WriterAfter the jubilation comes the hassle. Now that their team has reached the European Cup final, thousands of football fans are scrambling to negotiate a notoriously harsh visa system as they search desperately for tickets to travel to the other side of Europe.

Once they get there, they face some of the highest prices on earth and the threat of violence from opposition fans renowned for their thuggery.

But enough about the problems of Zenit St. Petersburg fans, who will be heading to the City of Manchester Stadium in northern England to watch their team take on Glasgow Rangers in the UEFA Cup final next Wednesday.

A week later, an estimated 50,000 English football fans will come streaming — by plane, train and automobile — in the opposite direction. They will come to Moscow to watch Manchester United play Chelsea in the Champions League final at Luzhniki stadium on May 21.

Despite the diplomatic tensions between the two countries and Russian consulates in Britain facing an avalanche of visa applications, the government has agreed to UEFA requests to waive the visa requirements for English fans with match tickets, although the decision still has to be approved by the State Duma.

For fans, getting into Russia is just the first step. The severe shortage and sky-high prices of hotel rooms in Moscow have forced club supporters and travel agents to come up with some ingenious ideas for alternative accommodation.

Meanwhile, city authorities have promised to pull out all the stops, putting more than 700 specially painted buses into service to ferry the estimated 100 planeloads of fans from the airports to the stadium and turning Red Square into a festival of football. Enterprising local businesses, from ticket agencies to strip clubs, are also set to cash in on the English invasion.

Fears persist, however, that the combustible mixture of a local police force prone to heavy-handedness and fans full of cheap beer and vodka is a recipe for catastrophe.

"We don't expect any nightmares or turmoil," said Alexei Sorokin, the Moscow government official in charge of arrangements for the final. "We are ready and expect everything to go as planned."

The visa breakthrough came after President Vladimir Putin gave his personal approval Tuesday to a request from UEFA chief Michel Platini to let match tickets double as 72-hour visas. Each club has been allocated 21,000 tickets for their fans — with the remainder of Luzhniki's 80,000 seats being sold in Russia or distributed by UEFA.

"Everybody was worried that the Russian consulates would not be able to process an extra 40,000 visas," Sorokin said. "We were sure that they would cope, but decided to take this step anyway."

An estimated additional 10,000 English fans are expected to make the journey without tickets and will still need to get tourists visas, said Anton Borisenko, a spokesman for the Russian National Tourist Office, which was set to handle visas for match ticket holders before the decision to waive the requirement.

Despite pleas from both Zenit St. Petersburg and UEFA boss Platini for Britain to simplify visa procedures for Russian fans, British authorities have been less accommodating for fans headed to the UEFA Cup final.

"For the U.K. government, visas and biometric checks are a vital part of immigration policy, and we are not prepared to waive them," said Mandy Ivemy, Director for British Visa Services for the CIS.

British authorities are expecting around 8,500 fans to travel and, although additional personnel are working round the clock, Ivemy urged Russian fans with a guaranteed ticket to submit their visa application form immediately.

"Russia is doing whatever possible to facilitate entry to Russia by British fans, and we hope for reciprocity from the British authorities for Zenit fans," Kremlin spokesman Dmitry Peskov said. Peskov said it had not yet been decided which Russian officials would attend the game.

For British fans here, there is virtually no chance of booking one of the city's 70,000 hotel rooms during the spring peak season, said Gennady Lamshin, vice president of the Russian Hotel Association.

Moscow's hotel prices rank among the highest in the world, something for which Sorokin said foreign travel agencies were to blame.

"These hotel rooms were mostly booked and paid for six months ago," he said. "It is the

travel agencies who are making money on this, and these are not Russian companies."

One enterprising British company has started selling hundreds of berths in three cruise ships to be moored on the Moscow River at Vodny Stadion, in the northwest of the city.

"This is purely a question of supply and demand, and this is the only way to boost the capacity in Moscow at short notice," said Steven Penney, a director at Select Travel, the company organizing the ships.

Even the floating hotels are not cheap. A one-berth room costs 420 euros, or about $650, for two nights. All the same, the rooms have been snapped up quickly and the company was forced to bring the third vessel in from Rostov-on-Don.

"The cost of the accommodation pales into insignificance in comparison to the charges for the flights, visas and getting a match ticket," Penney said.

One Russian agency was offering tickets on Tuesday starting at 2,500 euros, or about $3,850, while reports have put ticket prices at up to $10,000. Fans are being just as inventive in getting to Moscow, with some flying via Riga, Helsinki, St Petersburg and Dublin.

"We even have people driving all the way from Scotland to Moscow for the game," Penney said.

In line with UEFA requirements, opposing fans will arrive at separate airports, with Chelsea fans landing at Vnukovo and Sheremetyevo, while Manchester United fans fly into Domodedovo. Fans will be ferried to the stadium by 700 buses, daubed with the colors and emblems of the two teams.

On the days leading up to the match, beginning May 17th, Red Square will be taken over by UEFA's Champions Festival, with free entry to a minifield where football master classes will be offered.

The majority of Russian fans are likely to be cheering for Chelsea, which has fan clubs from Moscow to Anadyr, the capital of the far eastern Chukotka autonomous district, where club owner Roman Abramovich is governor.

Thousands of local officers and OMON units will be drafted in to police the final. A spokesman for the Moscow city police refused to comment on the issue, saying definitive plans would be announced after May 10.

City official Alexei Sorokin said there were no plans to curb the sale of alcohol ahead of the game. The sale of alcoholic beverages is prohibited near sporting venues.

Japan tries to win favor of Sakhalin locals http://en.rian.ru/analysis/20080506/106736492.html

Officials in Tokyo are considering giving pensions to representatives of small groups on Sakhalin mobilized by Japan during WWII. Making them eligible for Japan's social benefits may have a good propaganda effect in the 'Northern Territories' dispute. The move could also link Japanese companies' participation in the Sakhalin-2 project, as it was the Sakhalin Nivkhi's environmental protests that provided Moscow with a pretext to revise the agreement with foreign operators in the project.Under Japanese law, pensions are paid to all former soldiers and officers of the Imperial Army and their families, not necessarily ethnic Japanese. Pensions are also paid to Koreans as compensation for the damage inflicted on ethnic minorities during the war, explained Professor Kimitaka Matsuzato of the Hokkaido University.Pensions and compensation to the Sakhalin Nivkhi and Oroks who assisted the Japanese intelligence service during the war with the Soviet Union, are now being discussed in the same context.Before making the decision, the Japanese government wants to collect information about the Oroks, Nivkhi and other Sakhalin native tribes who served in the Japanese army. However, it is unclear yet whether or not the current Sakhalin residents who are Russian citizens will be entitled to the pensions. According to the 2002 census, there are 2,450 Nivkhi and 298 Oroks living in Sakhalin today.Professor Matsuzato said Japan was demonstrating its willingness to protect minorities' rights in cooperation with Russia and China, by raising the pension issue in the run-up to the next G8 summit.Russia's Foreign Ministry, in turn, said the situation needs to be clarified. "Russian officials are unlikely to object to compensation being paid to Russians for the damage done during WWII," the ministry's deputy information director, Andrei Krivtsov, told RBC Daily. "But to make specific comments on the situation, we need to study it in greater detail," he added.Meanwhile, Japan said last week it planned to receive annually 8 million metric tons of liquefied natural gas from Sakhalin, which would account for 8% of the country's demand and 83% of the total LNG to be produced on the island. To accomplish that, Mitsui and Mitsubishi Corporation plan to invest $3 billion in the Sakhalin-2 project.However, the small indigenous peoples protests over the environmental risks are a threat to the project. In 2005, local Nivkhi supported by the Green party and the Liberal Democratic Party accused foreign operators in offshore projects of killing local fish and game. Their initiative was the reason the Russian government revised the Sakhalin-2 agreement in favor of Gazprom. Tokyo must be hoping that Japanese pensions will make the locals more compliant.

Export-oriented equipment to be displayed in Victory Day parade Vedomosti http://en.rian.ru/analysis/20080506/106736492.html

http://en.rian.ru/analysis/20080506/106736492.htmlOn May 9, Moscow's Red Square will host the first parade involving advanced military hardware since 1990. However, the event will mostly feature export-oriented equipment, rather than that used by the Russian Armed Forces.The May 5 dress rehearsal on Red Square involved 8,000 officers and troops and 200

military units, including combat aircraft and helicopters.On May 5, President Vladimir Putin told government members that the parade would involve military hardware for the first time in many years. "This is not saber-rattling. We are not threatening anyone. This highlights our growing defense capabilities," President Putin said. However, only Soviet-era Topol land-mobile inter-continental ballistic missiles, rather than their upgraded Topol-M versions adopted in 2007, will take part in the parade.The Iskander shorter-range missiles, S-300PMU-2 Favorit, Buk-M2 and Thor-M1 surface-to-air missile systems, T-90A main battle tanks, BMD-4 airborne fighting vehicles, Sprut self-propelled guns and Tigr off-roaders will be displayed for the first time.The up-to-date Su-34 Fullback ground-attack jet now undergoing flight tests and some other older aircraft will fly over Red Square.Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies (CAST) and member of the Presidium of the Defense Ministry's Public Council, said the military hardware parade did not highlight a militaristic revival, and that many NATO and Third World countries were holding similar parades.The parades are a way of showing taxpayers where their money has gone, Pukhov told the paper.He said most weapons systems were export-oriented. A Defense Ministry source said foreign customers had received 200% more T-90 tanks and BMP-3 infantry fighting vehicles, and that Russian units lacked S-300PMU-2 Favorit and Buk-M2 SAMs.Colonel Sergei Suvorov of the tank force reserve, a former adviser to Rosoboronexport in the UAE, said the parade could help promote military equipment on global markets. He said the United Arab Emirates had decided to buy BMP-3 vehicles after they were showcased in the last Soviet-era parade in 1990, and that the UAE contract had sustained their production throughout the 1990s.

Trutnev's Trouble Officialshttp://www.themoscowtimes.com/article/1012/42/362575.htm

Prosecutors sent Natural Resources Minister Yury Trutnev a list of officials to discipline, after an audit of the ministry's subsoil licensing agency. Agency officials created "administrative barriers" for mining companies by setting unlawful payments, restrictions and procedures, the Prosecutor General's Office said Tuesday. The officials were not identified. Prosecutors also said they found "numerous" violations in the licensing of metals and gems deposits, the transfer of mining rights and the enforcement of contracts, environmental laws and safety rules. (Bloomberg)

National Economic TrendsRussia looks to boost economic zoneshttp://www.russiatoday.ru/business/news/24440

The Russian Government is slowly narrowing down applications for the special economic zones, designed to drive growth through low taxes and government investment.

“In Russia special zones will help the weak players in the industry. They are likely to expand the transport of goods, but they can't change their unfavourable geographical position. Stronger players would have been able to get a better outcome with these privileges,” believes Aleksey Bezborodov, Director of InfraNews transportation research agency.

The Economic Development Ministry has considered the first 20 port applications and dismissed three, including Sheremetyevo, because of incomplete applications.

Russia’s top 3 sea ports - Novorossiysk, Primorsk and St. Petersburg that account for over 200 million tonnes of trade per year - or half the country’s total port turnover - don’t appear to want or need the new status.

In June the Ministry will announce which, if any, projects qualify as special economic zones. However the ministry reserves the right not to make the award at all - if no regions demonstrate a compelling case.

Ulyukayev Says Russia May Let Ruble Gain, Kommersant Reports http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8o6bejejkCQBy Emma O'BrienMay 7 (Bloomberg) -- Alexei Ulyukayev, deputy chairman of Russia's central bank, said policy makers may allow the ruble to appreciate against the dollar and euro to curb inflation, Kommersant newspaper reported. ``We don't exclude, but we're not saying that we're going to do it, the use of the exchange-rate policy to control inflation,'' Ulyukayev was quoted as saying by the newspaper today. Bank Rossii will ``in one combination or another, or in one sequence or another'' use all the policies at its disposal to subdue inflation, he said, according to the report. These include raising interest rates, manipulating the ruble's exchange rate, and increasing the reserves banks are required to hold, the newspaper quoted him as saying. The ruble fell to 23.75 per dollar by 11:07 a.m. in Moscow, from 23.71 yesterday. It climbed to 36.79 versus the euro, from 36.83.

Business, Energy or Environmental regulations or discussionsRussian top managers leave Volkswagen Kommersant http://en.rian.ru/analysis/20080506/106736492.htmlDenis Petrunin, head of Volkswagen in Russia, may leave his post in July because the German auto concern's headquarters are unhappy with his promotion strategy.Petrunin is the second Russian manager to leave VW because of differences with the management. A year ago, Oskar Akhmedov resigned as director general of Volkswagen Group Rus, which imports Volkswagen, Skoda and Audi cars to Russia.Volkswagen is the only foreign automaker to hire Russian directors. The experiment has failed, and the company is currently 17th on the Russian auto market in terms of sales.Petrunin said it was down to insufficient imports, adding that small dealerships cannot

deal with growing sales."Volkswagen has always preferred working with small dealerships, which are considered more loyal, in Russia and elsewhere in the world," said a source in the concern.The recruiting of Russian management for Volkswagen in 2006 created a sensation, as no other foreign carmaker had considered Russians for top positions before, trusting only foreign specialists. And none of them have followed Volkswagen's example since.Alexander Agibalov, managing director of AG Capital brokerage, said Petrunin's promotion strategy was logical because in future car sales will grow faster in the regions than in Moscow or St. Petersburg.Large dealerships have extensive networks and are therefore preferable partners in the regions compared with small companies, he said.Mikhail Pak, an analyst at the Kapital financial group, said it is more difficult to dictate conditions to large players, but their brands are better known and they have a streamlined sales technology. Sales can be increased only if one works with large holdings, Pak said, adding that this should be a major argument for Volkswagen, whose plant in Kaluga is expected to reach design capacity by 2010.

Raspadskaya May List in London as Russian Coal Swells (Update1) http://www.bloomberg.com/apps/news?pid=20601213&sid=axZv4mofASFE&refer=homeBy Yuriy Humber and Maria KolesnikovaMay 7 (Bloomberg) -- OAO Raspadskaya, Russia's second- largest producer of coal for steelmakers, may sell shares in London to expand mines and increase exports after prices tripled in a year. Chief Executive Officer Gennady Kozovoy, who has a 20 percent stake in the company, said he wants to expand sales ``steadily'' into China, Japan and South Korea. Raspadskaya increased 250 percent in Moscow trading in the past year, valuing the company at $6.6 billion. The shares rose 3.16 rubles, or 1.5 percent, to 215 rubles ($9.06) as of 11:41 a.m. local time. Raspadskaya plans to expand its mines in Siberia's Kemerovo region and develop sites where it holds mining licenses. Prices for the coal sold under annual contracts increased to $300 a metric ton this year on growing steel production and shipping delays from Australia and Indonesia. The Bloomberg World Coal Index, which tracks 23 coal-mining companies, has posted a total return of 135 percent in the past 12 months. ``This year, prices will still grow, while next year they are likely to remain constant,'' Kozovoy said. That will offset costs, which are rising because of increased metals and power prices, he said. Raspadskaya produced 13.6 million metric tons of coal in 2007 and full-year profit more than doubled to $239 million. The company's Russian customers include OAO Novolipetsk Steel and OAO Magnitogorsk Iron & Steel. Increasing Liquidity ``If the company has some kind of an expansion, we may look to sell some more shares in London,'' Kozovoy said. ``At the moment we don't need the money.'' Listing shares in London is a ``strategic possibility to increase liquidity,'' Alexander Andreev, the company's head of strategy, said by phone today. ``At the moment the company has not taken any corporate actions with a view to issuing new shares or decided to list on any stock exchange abroad.''

A share sale would allow the company to enlarge mines including the Raspadskaya project, which produced 8.9 million tons of coal last year, and dig new pits in Kemerovo, where the company is based. Asian steelmakers agreed last month to pay BHP Billiton Ltd., the world's largest mining company, and Japan's Mitsubishi Corp. $300 a ton for coking coal, up from $98 a year earlier. Steel Prices ``An Asian expansion is an interesting area to develop, but the final decision will depend on the sustainability of high steel and coal prices,'' said Sergey Donskoy, an analyst with Troika Dialog in Moscow. Other European coal producers are planning share sales amid record coal prices. The Czech Republic's New World Resources BV, which supplies steelmakers, raised $2.2 billion in an initial public offering yesterday. Poland's Lubelski Wegiel Bogdanka SA will hold an IPO this year, the government said April 24. Russia's demand for coking coal is growing at 3 percent to 5 percent a year. Domestic prices will match export prices next year, compared with a current premium of about 6 percent, because of rising international transport costs, Kozovoy said. The premium was as much as 20 percent in 2007, he said. Trial Shipments ``This is a chance for Russian coal miners to stake their claim on the global market,'' Kozovoy said in an April 28 interview. ``If steel output stays at this level, China will be a serious importer in three to five years.'' Raspadskaya sent trial shipments to China, Japanese steelmaker JFE Holdings Inc. and South Korea's LG Group last year. It's also planning to ship to India, where imports will rise by more than half, to 60 million tons by 2012, Anil Razdan, India's power secretary, said last month. ``Indian mills have expansion plans ranging from 50 percent to 200 percent increases,'' Kozovoy said. Raspadskaya will publish in July a revised spending plan for the next three to five years. It previously said the company would invest $327 million in its mines through 2010. Kozovoy said that while mergers and acquisitions are ``possible,'' Raspadskaya doesn't plan any deals in the next year. Kozovoy opted to keep Raspadskaya separate from rival miner OAO Yuzhkuzbassugol, calling off a merger in March that would have created the world's third-largest coking coal producer, because he wanted to retain control of the combined company. Evraz Group SA, owner of Yuzhkuzbassugol and 40 percent of Raspadskaya, rejected a merger on those terms. ``I, as CEO, managed to pass the 2008 budget, set up a mid- term strategy, and increase the safety systems,'' Kozovoy said, referring to his nine-month stint as chief of Yuzhkuzbassugol while the merger was being negotiated. Evraz announced in June plans to merge the companies following two fatal explosions in as many months at Yuzhkuzbassugol. Evraz now plans to integrate Yuzhkuzbassugol with its steel operations and coking assets it bought in the Ukraine in December. ``It'll take three to five years to get the company to a stage when it has a good platform for further development,'' he said. Russia's biggest coking-coal producer is OAO Mechel.

Baltika, Gazprom, Evraz May Move: Russian Equity Market Preview http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a27QH73pij_QBy Lyubov ProninaMay 7 (Bloomberg) -- The following companies may have unusual price changes in Russian trading. Stock symbols are in parentheses, and share prices are from the previous close. Russia's Micex Index rose to a two-week high, gaining 0.4 percent to 1,694.44 in Moscow. The dollar-denominated RTS Index increased 0.6 percent to 2,153.32. OAO Baltika Breweries (PKBA RX): The largest Russian beer company is scheduled to report first-quarter earnings. Shares rose 0.5 percent to 1001.11 rubles in Moscow. OAO Gazprom (GAZP RX): Russia's natural-gas export monopoly plans to build pipelines capable of transporting 300 billion cubic meters of gas a year by 2030 from the Arctic Yamal Peninsula, it said in an e-mailed statement. Gazprom gained 0.72 percent to 316.27 rubles in Moscow. Evraz Group SA (EVR LI): Nomura Securities Co. raised its recommendation on shares of Russia's second-biggest steel producer by 29 percent to $155 a share. Evraz gained 5.12 percent to $107.75 in London.

SUEK Borrows $800Mhttp://www.themoscowtimes.com/article/1012/42/362575.htm

Siberian Coal and Energy Company said Tuesday that it raised $800 million of loans to finance acquisitions and repay existing debt.

The company, known as SUEK, said it would pay interest of 1.4 percentage points over benchmark rates on a $533 million three-year loan. The company will pay a margin of 1.5 to 1.7 percentage points on a $267 million five-year portion. (Bloomberg)

OGK-5's Full-Year Resultshttp://www.themoscowtimes.com/article/1012/42/362575.htm

OGK-5, a power generating unit controlled by Enel, on Tuesday reported a profit of 2 billion rubles ($84 million), or 6 kopeks per share, for last year.

Sales rose 27 percent to 33.5 billion rubles in 2007, the utility said. OGK-5's 2006 profit of 3.21 billion rubles, or 10 kopeks a share, included a one-time gain of 3.28 billion rubles from recognizing a deferred tax asset. Excluding that gain, the company had a loss of 59 million rubles, the company said. (Bloomberg)

X5 Investors Snap Up Stockhttp://www.themoscowtimes.com/article/1012/42/362575.htm

X5 Retail Group, the country's biggest food retailer, said Tuesday that its investors bought almost all of a stock offering worth more than $1 billion, and the remaining 1.68 million shares will be offered on the market.

X5's investors, including CEO Lev Khasis and Alfa Group, used their rights to buy 46.4 million shares, or 96.5 percent of the offering, the company said. X5 may offer a further 3.77 million of treasury shares, "depending on investor demand," it said. (Bloomberg)

Alcohol and Cigarette Taxeshttp://www.themoscowtimes.com/article/1012/42/362575.htm

The government plans to increase annual excise tax on alcohol by 10 percent in 2009 and 2010, more than a previously planned 6.5 percent increase, Vedomosti reported Tuesday, citing a source in the Finance Ministry.

The government also plans to raise the tax on tobacco by 25 percent next year and by 22 percent in 2010, compared with a 21 percent increase planned earlier, Vedomosti said. (Bloomberg)

http://www.themoscowtimes.com/article/1012/42/362575.htmNovolipetsk Steel, or NLMK, secured European anti-monopoly approval to buy two steel trading companies for 77 million euros ($119 million) to expand exports. (Bloomberg)

Activity in the Oil and Gas sector (including regulatory)Oil producers suffer from inflation hikeshttp://www.russiatoday.ru/business/news/24438Shares in Russian oil firms are in high demand, as crude oil has hit $US122 a barrel this week. But it’s not all good news for the industry. Inflation is starting to bite oil companies. Oil company shares are certainly outperforming.“If we assume that if the oil price on the average for 2008 is at today's level, which is highly likely, then we would foresee the upside for Lukoil and Rosneft to reach 40-45%,” expects oil & gas analyst at Unicredit Aton Tatyana Kapustina.Expectations jump another 10% if the government goes ahead with plans to cut export duties.But high oil prices also bring problems.Inflation is forcing oil companies to spend more on upstream services and technologies. Meanwhile high export duties mean they don't benefit much from high prices.Inflation is pushing up the cost of services, technologies and salaries. Last year's double digit inflation is not seen slowing much in 2008.Then there's the currency. Russian oil producers get paid in dollars, but their costs are in roubles. That's pushed up their costs, and means they have to borrow money from the banks just to keep their investment at the same level as last year.

Russneft may go same way as Yukos Gazeta.ru http://en.rian.ru/analysis/20080506/106736492.htmlRussneft, which has been left ownerless after its sole owner, Mikhail Gutseriyev, who fled the country, is threatened with bankruptcy. If it is declared bankrupt, it will be sold

out in portions, like Yukos. However, experts think the government is not interested in liquidating Russneft, because it would have to annul its licenses. The best approach would be to allow a company loyal to the Kremlin to buy Russneft.According to the results of inspections of Russneft's activities in 2006, tax agencies' additional claims to the company may reach 18-20 billion rubles (over $840 million). "Russneft will not be able to repay extra tax claims, which will actually result in its bankruptcy," a source familiar with the data of the Federal Tax Service said.If this is true and the company is to make additional tax payments, it will be unable to do so. Russneft has already lodged a complaint with the Supreme Arbitration Court against the extra tax of about 20 billion rubles for 2003-2005. The company also has big debts to Sberbank ($1 billion) and Switzerland's Glencore ($874.95 million), as well as a ruble debt amounting to 32.58 billion. Russneft is to repay its debts by the end of 2011. If the company is bankrupted, it will repeat Yukos' destiny. "Russneft's main creditor is the state and it will be in charge of the bankruptcy procedure," said Alexander Razuvayev, head of Sobinbank's market analysis department. "It is quite possible that Russneft will be given to a state-controlled company."At the same time, the liquidation of Russneft as a legal entity may have serious negative consequences. A market expert explains that "the company's assets and property will be given a new owner, but this is nothing without Russneft's licenses. With the company's liquidation, its license agreements will be annulled, and the new owners will have to pay a lot in order to restore them."The expert believes that the government's most probable decision will be to avoid Russneft's bankruptcy and allow a company loyal to the Kremlin to buy it. "This may be Deripaska's company, or Rosneft," he said.In his opinion, "the government is unlikely to recover more than 3-4 billion rubles in tax claims, but "this scenario will help to avoid many problems, including license problems."

YUKOS fate looming over RussNeft http://www.rbcnews.com/komment/komment.shtmlNew tax claims could render the company bankrupt The same fate as YUKOS's may be awaiting RussNeft, if the company is faced with RUB 18bn – RUB 20bn (approx. USD 758m – USD 842m) in back tax claims for 2006. According to a Reuters source familiar with the audit results conducted by the Federal Tax Service early this year, that is the amount, including fines and penalties, that the fiscal authorities are likely to voice. Experts do not rule out the scenario where the company would go bankrupt, assuming that its assets would be scooped up in auction by Rosneft and Gazprom Neft, unless Oleg Deripaska's affiliates manage to reach a deal with the tax collectors or lend RussNeft the needed sum to pay the back tax. An RBC Daily source close to RussNeft confirmed to the newspaper that a tax audit of the oil company's 2006 results took place at the beginning of the year, but said he was not familiar with its results, as a statement had not yet been received from the tax authorities. A possibility is not ruled out that the claims relate to RussNeft reducing its tax burden by purchasing oil from its subsidiaries at a premium through trading firms. It has been a year since the company has stopped using that scheme, but such practice was still in place in 2006. RussNeft is currently appealing against similar tax claims of RUB 20.5bn (approx. USD 863m) for 2003-2005 in the Supreme Arbitration Court.

If RussNeft does not succeed in disputing the earlier claims and receives new ones to top those, it will not be able to pay its debts, with the bankruptcy threat looming. According to the company's financial statement for the fourth quarter of 2007, its net loss amounted to RUB 16.7bn (approx. USD 703m), and its debt burden stood at RUB 32.58bn (approx. USD 1.37bn) and roughly USD 1.9bn. Although the company posted a RUB 3.5bn (approx. USD 147m) net profit in Q1 2008, this is clearly not enough to pay back all the tax and other debt. The potential bidders for RussNeft are Russian businessman Oleg Deripaska's affiliates and the Swiss trader Glencore. The latter, on a par with Sberbank, is the oil company's major creditor. However, the Federal Anti-Monopoly Service (FAS) has not yet given its green light to close the deal. Igor Sechin and Rosneft affiliates have also been named among those showing interest in the asset. According to unconfirmed data, Deripaska has already paid the former owner of RussNeft, Mikhail Gutseriyev, who is currently on both the federal and international wanted lists for tax crimes. The amount of the deal varies between USD 3bn and USD 3.5bn, plus the obligation to pay off any subsequent back taxes. The businessman himself has not confirmed this information. A lawyer who took part in YUKOS receivership has indicated that RussNeft had at least three possible scenarios if charged with new tax claims. Firstly, its governing body could apply for bankruptcy in order to have the opportunity be the one to appoint a trustee in bankruptcy. If RussNeft should dispute back taxes and the court not rule in its favor, it will be up to the company's creditors to appoint a receiver. Secondly, a third party (such as Oleg Deripaska's affiliates, if such were the terms of the deal) could lend the company the needed money under a loan agreement. And thirdly, a third party could buy RussNeft's shares from the asset's current owner or provide funds against these securities. Sberbank currently holds the company's shares as security for its loans. Mikhail Krutikhin, a partner at the RusEnergy consultancy firm, believes that RussNeft's bankruptcy is quite possible. In his opinion, Rosneft and Gazprom Neft could be interested in acquiring its assets in auctions after all the encumbrances have been lifted. However, he was unable to say if Oleg Deripaska's affiliates would also compete for the asset. Nikolai Manvelov, a spokesperson for Rosneft, told RBC Daily that the company would not be interested in acquiring RussNeft at the moment, but that the the state company's investment committee would consider the feasibility of participating in auctions when they are announced. A source close to Oleg Deripaska is convinced that RussNeft was acquired by this oligarch's affiliates and the deal paid for, despite the fact that formally it cannot yet be closed without the approval of the Federal Anti-Monopoly Service. He believes that Deripaska can settle all the problems with the fiscal authorities without having to pay a premium for the asset. “Oleg will not be able to retreat. That would be showing a sign of weakness,” the businessman thinks. Basic Element representative Pyotr Lidov said he would not comment on rumors. A representative of the concerned Federal Tax Service directorate declined to comment. A source close to RussNeft did not rule out the possibility that the fiscal authorities would in the end decide to wait until the Supreme Arbitration Court ruling on the appeal against previous back tax claims, before charging the company with new ones. The spokesperson indicated that a decision to “sell the company peacefully” to Oleg

Deripaska's affiliates and Glencore had been passed “behind the Kremlin walls,” and, if that were true, it was not likely that the tax authorities would make a “second YUKOS” out of RussNeft. RussNeft declined to comment.

Tatneft says reserves climbhttp://www.upstreamonline.com/live/article154097.eceWire servicesRussian medium-sized outfit Tatneft said today that its proved reserves of crude increased by 228 million barrels to 6.140 billion barrels last year. The outfit said in a statement its probable reserves of crude and condensate amounted to 2.141 billion barrels as of 1 January this year, up by 146.9 million barrels from a year before. Tatneft produced 25.74 million tonnes (517,000 barrels per day) of crude last year, reported Reuters.

Transneft to lift dividendshttp://www.upstreamonline.com/live/article154098.eceWire servicesRussian pipeline monopoly Transneft will recommend paying total dividends of 1.15 billion roubles ($48.4 million) on last year’s profits, 40% more than the previous year, a Russian newspaper said today. Vedomosti business daily cited two unnamed sources close to the company's board as saying the management's recommendation was made at a board meeting yesterday. The board is expected to approve the recommendation at its meeting on 26 May with shareholders to hold final vote on the issue at the company's annual general meeting later this year. Vedomosti said Transneft would pay 28.6% of net profit under the Russian Accounting Standards in dividends. The company, which has not yet disclosed its full-year profit for last year, declined to comment, reported Reuters. Owners of preferred shares in Transneft will receive 10% of net profit to Russian Accounting Standards, the newspaper said, quoting a report by Interfax news agency. Transneft posted net profit of 45.94 billion roubles ($1.93 billion) in the first nine months of last year, calculated to International Financial Reporting Standards, down 9.7% from the same period of 2006.

GazpromGazprom prodded toward hiring Norwegian contractors Kommersant http://en.rian.ru/analysis/20080506/106736492.htmlhttp://en.rian.ru/analysis/20080506/106736492.htmlManagers of Norway's StatoilHydro are doubtful that the Shtokman gas condensate project, the largest in Russia, can be implemented on time and that production will start in 2013.Gazprom, which will develop the deposit jointly with StatoilHydro and France's Total, assured that everything is proceeding to schedule.Experts believe that StatoilHydro wants to persuade the Russian gas monopoly to attract

Norwegian contractors.Benedict Henriksen, StatoilHydro's industrial relations boss in Russia, said the commissioning of Shtokman would depend on the choice of contractors, adding that the same goes for the LNG deliveries deadline set for 2014.Norwegian media reported last week that StatoilHydro might withdraw from Shtokman Development AG, a joint venture set up in February 2008 to design, build and use the deposit's first-phase facilities, before the final decision is made in late 2009.The thing is that the criteria for choosing Russian and foreign contractors have so far not been determined. There are some 100 potential subcontractors in Russia's Murmansk and Arkhangelsk regions, and 350 in northern Norway.Henriksen said the project might not be so good after all, and its financial structure unacceptable.Total has no doubts about Shtokman's commissioning deadlines and financial structure. Gazprom said the deadlines would not be changed, and its board of directors made the same conclusion at its April 25 meeting.Maxim Shein of the Broker Credit Service said StatoilHydro managers are making these statements to force Gazprom to hire Norwegian contractors.Foreign contractors have been chosen only for front-end engineering design (FEED) of the project's first phase (15 months). It has been tentatively estimated at $14-$15 billion, and all the three phases will cost $40 billion.There are only Russian, French and British companies among the foreign contractors so far chosen for the project. However, more contractors and equipment suppliers, including Russian and Norwegian ones, are to be attracted in the second half of 2009.Mikhail Korchemkin, director of the East European Gas Analysis, said the commissioning of Shtokman would affect the construction of the second leg of the Nord Stream gas pipeline, which would be left without gas if the commissioning of the project in the Barents Sea were postponed.

Gazprom lines up rig in Venezuelahttp://www.upstreamonline.com/incoming/article154028.eceBy Tom   Darin Liskey  Russian explorer Gazprom will use the newbuild jack-up rig Offshore Vigilant to probe a potentially prolific offshore project in Venezuela’s shallow water sector, sources at the Offshore Technology Conference in Houston said. The rig – capable of operating in water depths of up to 350 feet – is being built at the Keppel AmFels shipyard in Brownsville, Texas, for Scorpion Offshore. Details about the length and day rate for the independent-leg, extended reach cantilever rig were not available. Scorpion officials declined to confirm that Gazprom will use the rig, saying only that it will be delivered to Venezuela. The proposed contract will last at least 11 months and generate some $72 million in revenues. The rig is scheduled for completion this year and should be delivered to Venezuela in the third quarter. Russia’s Gazprom wants a rig to explore the Urumaco 1 and Urumaco 2 blocks in the Gulf of Venezuela. PDVSA sources have said the Urumaco permits are expected to unlock significantly more than 1 trillion cubic feet of gas, based on seismic data.

Meanwhile, Chevron is understood to be close to signing an agreement with Dallas-based Ensco for a jack-up to drill a well in Venezuela. Sources said the rig will probably come from the US Gulf of Mexico. The rig will be used to kick off exploration drilling in 2009 at the shallow-water Cardon 3 block. Moreover, the US supermajor has been leading an effort with other international oil companies including Spain’s Repsol YPF and Brazil’s Petrobras to share the rig. The Gazprom and Chevron acreage form part of the so-called Rafael Urdaneta project, which covers 30,000 square kilometres and, according to official reports, holds as much as 26 trillion cubic feet of natural gas.

http://www.themoscowtimes.com/article/1012/42/362575.htmSerbia's parliament may ratify a deal giving control of the its national oil company to Gazprom just ahead of a general election, Politika newspaper reported Tuesday. (Bloomberg)