28 October 2006

Any Takers for a Blackout in Moscow this Winter?

Reuters reports that GAZP is warning of power shortages in the regions;

Gazprom Warns of Fuel Crisis
Reuters

Gazprom on Thursday called for the state to step in to prevent a repeat of last year's winter fuel crisis, which it said was likely because of a poor state of readiness in the regions.

Gazprom, which supplies one-quarter of Europe's gas needs, had to restrict deliveries to some of its European customers last year to ensure there were sufficient supplies for domestic users who were enduring an exceptionally cold winter.

“The unsatisfactory current level of reserve fuel stocks in the regions causes serious concern. There is a threat of a repeat of last winter's events, when many regions turned out to be unprepared for a sharp decline in temperatures,” Gazprom said in a statement.

“The situation that has developed requires immediate intervention by state regulatory bodies.”

Gazprom had to briefly cut its gas supplies on the route to Hungary by 20 percent in January, and said it could also reduce flows to Italy and Austria, although it said it has never fallen below its contractual obligations.

It soon restored supplies to 7 percent above contractual volumes to European customers and 40 percent more than the contracted amount to Russia.

The company said it planned to significantly raise investment in 2007 -- to 531.78 billion rubles ($19.82 billion) compared with 373.14 billion rubles planned this year. It also slightly increased its 2006 production forecast by 3 billion cubic meters to 551 bcm.
Meanwhile Chubais has spent the summer warning of a lack of gas to heat and light us over the winter.

So what odds on a Moscow blackout?  If not Moscow then where?


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Reiman vs Alfa

In the interests of fairness I should report that having acquired a favourable decision in Russia IPOC is requesting that everyone who knows the truth undergo a suspension of disbelief.

From my early morning read the Royal Gazette:


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Putin Allies to Build Sports and IT Town

Let me help you translate this;

A sports fund headed by chums of VVP, the great leader, is building a residential complex cunningly named to make it sound as though it might have something to do with information in a tax free zone.

It is with great sadness  that a cynical view that I took a year ago has proven to be so true.

Putin Allies to Build Sports and IT Town:
The little-known Sport Fund, whose board is headed by Rosoboronexport chief Sergei Chemezov and stocked with close allies of President Vladimir Putin, is to build a vast residential complex dubbed Info-City in the Moscow suburb of Zelenograd, one of the government's high-tech special economic zones.


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25 October 2006

Ipoc cleared of money laundering charges - In Russia

Which is not entirely unlike my mum saying I am a nice guy.

Ipoc cleared of money laundering charges

Ipoc cleared of money laundering charges

By Stephen Fidler in London

Published: October 24 2006 18:43 | Last updated: October 24 2006 18:43

Ipoc International Growth Fund, a Bermuda based entity locked in a three year battle over ownership of a 25.1 per stake, in Megafon, Russia’s third largest mobile phone operator, said on Tuesday it had been cleared of money laundering charges by Russian prosecutors.

Ipoc is in a bitter dispute over the Megafon stake with Alfa, the conglomerate owned by Russian oligarch, Mikhail Fridman. The conflict has generated legal and arbitration proceedings in Switzerland, Bermuda, Russia, Sweden and New York.

Ipoc, which in May was hit by a decision from a Zurich arbitration tribunal that supported Alfa’s claim to a majority of the shares, said the prosecutors’ ruling that Ipoc was the true owner of the stake was the first by a body with investigative powers.

The general prosecutor’s office also said it found no evidence that Leonid Reiman, Russia’s communications minister, had abused his position. Alfa has repeatedly claimed that Mr Reiman was Ipoc’s true owner.


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Further to your comments on Gazprom

The Oil Drum is slowly waking up to what UBS refers to as a tight supply/demand scenario.  Further to your comments on Gazprom.  Given that I live and breathe this stuff every day some thoughts;

At the bottom I have summarized the arguments, nothing new, just note that the consumer who suffers is the Russian exporting industry, not your warm London, or Moscow, for that matter, apartment.

Vladimir Milov, the Politkovskaya of Russia's energy industry (uncomfortable truths, rather than female and dead) believes that Gazprom's state-sanctioned monopolistic behaviour (the link leads to a PPT pres) will cause a significant short fall in gas production.

The counter argument is that gas price liberalization will cause independents, Novatek, and the vertically integrated oil and gas companies, LUKoil et al, to fill the domestic gap and that domestic industry will invest to use more energy more efficiently.

To which Milov et al, argue that as GAZP controls UGGS (pipelines) you can shift the price as much as you like but GAZP will seek non-market rents (bribes) to sell gas at that price.  Thus wellhead net backs will remain below actual local market prices.  And he is right.  Price liberalization means nothing without releasing other parts of the system - mostly UGGS.

To which the optimist camp (me) would argue, without foundation, that the one thing that the 5th Directorate Thugs are truly frightened of is the Narod (the “People”).  If your Russia interest stretches beyond European gas shortages, the most significant event of early 2006 was the entirely botched reform of pension entitlements to travel.  At least one Thug has read Paine - I defy you to agitate a man on a full stomach.  Gas will be provided to heat our apartments whatever the economic cost.

Having said that UES has been preparing the press all summer for power cuts due to gas, Milov's graphs are partially UES inspired.  If we get a cold snap (-25) I would not bet against an eastern spalny raion (dormitory region) of Moscow or the business centre suffering a complete power, but not heating, outage.

The risk is that rent-seeking (corruption) moves too slowly to understand what the Narod really feels.  To the extent there ever was a Putin, the Good Tsar, he is too isolated to understand, or care.

Anyone for a heating revolution?

The arguments in short, though you have read this before;

Big Gazprom fields are in decline
Gazprom keeping production flat with mid-size fields and acquisitions
Gazprom's next big fields will not come on stream until 2015 at the soonest
European demand is growing
Russian demand is growing faster
The US wants its disproportionate share of the world's energy
Supply from Central Asia (generically referred to as Trashcanistan) is filling the gap but the pipeline infrastructure needs $2-3bn of upgrade capex to provide the supply in 2+/- years

Where TOD's analysis falls down are the economics, and again you have heard this before.

Gazprom's sales to Europe (old not new) are approximately $240 per thousand cubic meters (mcm)
Regulated domestic prices are $41/mcm (net back equivalent price ~ $58/mcm)
Unregulated prices are around $69/mcm (net back equivalent ~ $128/mcm)

There is a clear economic argument in favour of Gazprom meeting its export obligations.


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23 October 2006

Politkovskaya Update

I am also making headway in my attempt to become a billionaire.  Not having an oil company to rape or a telephone license to issue does however, make it problematic.

Notwithstanding, I am closer to becoming a billionaire than the real killers are to being captured.  And you have no idea what a gap the former is.

Politkovskaya Update:
Prosecutors said Friday that they had made headway in the investigation of the killing of journalist Anna Politkovskaya but did not disclose details.


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Reiman vs Alfa - Continuation

My early morning reading has delivered this gem from the Royal Gazette.

It is an article originally published in the WSJ by WSJ staffers, a kind reader had already provided me with a copy, but the pressure of work had kept me from commenting.  Now the weekend has arrived here are my thoughts.

Whilst the article assumes that you have some knowledge of the underlying case in order to truly understand the case, it make good reading.

For what its worth from the bits that I know, as opposed to suspect, its well written and researched and accurately reported.  Albeit that you can feel the dread hand of WSJ's legal team removing the juicier bits.

I heard on the grapevine that Alfa was beginning to despair over the damage that the row was doing to its business.  But now that the press has its teeth in to the story, mostly because there is evidence that can be sourced outside Russia, it strikes me that this is a story that won't go away.  Or at least until a couple of ex-Commerzbank investment bankers are languishing in jail (they were crappy bankers anyway) and a Danish lawyer is enjoying his “ownership” of a large chunk of the Russian telecom industry in a country where arrest warrants can't reach him; Russia in the summer and Maui in the Russian winter?

Here are some of the more interesting paragraphs selectively culled from the piece.  To get the whole story read the article;

In late 1994, Mr. Reiman gathered his state-controlled employer’s interests in the growing ventures into a firm called Telecominvest. His employer owned 95% of it. Mr. Galmond, the Danish lawyer, says that he indirectly owned the rest.

But just over a year later, the interest held by Mr. Reiman’s employer and another state company had shrunk to 49 percent. Now, 51 percent was in the hands of an obscure Luxembourg company called First National Holding.

What had happened was that Telecominvest issued new shares. Though the state-controlled companies, represented by Mr. Reiman, had a right to invest in these shares and maintain their dominant stake, they didn’t. Instead, First National Holding put up a modest $1.8 million for the new shares and wound up with the majority stake. Later its stake rose to 85 percent through the same process.

Who was this First National Holding? The question intrigued Russia’s then-telecom minister, who says he learned about the new ownership in the local press and called state telecom executives for an explanation. They told him First National Holding was just a vehicle for the actual owner – Commerzbank – says the former minister, Vladimir Bulgak. So “we didn’t make a scandal. We thought the Petersburgers found a good partner who would invest,” he says.

Telecominvest also portrayed Commerzbank as the owner. It said in regulatory filings that the bank owned First National Holding. And the German bank itself said the same. Commerzbank in a 2000 European Union regulatory filing, in annual reports and in letters to business partners said it owned First National. Now it admits that wasn’t the case.

German police found a long internal report from Commerzbank’s Moscow office warning that the bank was improperly helping Mr. Reiman conceal ownership of state assets, says a senior German police official. According to the official and to others with knowledge of the case, the employee who wrote the internal report told investigators that in 2001 he tried to give it to Commerzbank chief executive Klaus-Peter Müller at bank headquarters in Frankfurt, but Mr. Müller turned his back and wouldn’t acknowledge it.

For instance, a 2002 letter to a Liechtenstein bank said the telecom empire belonged to Mr. Reiman. The letter bears Mr. Galmond’s signature, according to an affidavit filed in a British Virgin Islands court. Mr. Galmond said the statement that the businesses belonged to Mr. Reiman was made by his staff in error.

Commerzbank executives considered Mr. Reiman to be the bank’s client, said a person familiar with its handling of the matter. The bank did due diligence on him as “the economic beneficiary” of the assets, said an affidavit filed in the Privy Council, quoting a Galmond adviser. Mr. Reiman’s explanation is that the bank’s lawyers looked into whether it would be legal for him to get a stake in some of the companies in the late 1990s as part of a deal Mr. Galmond proposed but that such a transaction never happened.

German prosecutors say their money-laundering investigation is complicated by the need to establish that a crime occurred at the beginning of the chain in Russia. They would need to show that the money that coursed through Commerzbank was dirty to begin with.
In Russia, authorities have shown little interest beyond a 1997 investigation by prosecutors in St. Petersburg, which found no significant violations in the 1994 formation of Telecominvest. No senior Russian official other than Mr. Reiman has publicly commented on the allegations against him. Russian prosecutors, when asked by legislators to respond to the Zurich tribunal’s ruling, said they saw no evidence that IPOC had engaged in suspicious financial operations.


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21 October 2006

Kremlin explains Putin rape 'joke'

If you want to understand what a Muzhik is then start at the top.

Don't worry boys you can bankrupt companies at will and then in celebration rape a couple of women and whilst your at it why not shoot a central banker, a journalist and a mayoral candidate.

And you know that you will get off scott free.

Kremlin explains Putin rape 'joke' - CNN.com:


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12 October 2006

Arrest Warrant Issued for MegaFon Investor - Reiman vs Alfa and Rozhetskin

You would think me remiss if I did not keep you abreast of the latest Megafon, Alfa, Reiman news.  Its from the shit-for-brains Moscow Times so its copied at the bottom.

In using Google's excellent search engine (I am such a trademark good boy) to find a link-friendly version (no luck I am afraid) I came across this from The Royal Gazette.  Here's the pertinent bit;

THE Bermuda Supreme Court has recognised a Swiss arbitration ruling that described the island-based IPOC International Growth Fund as a money-laundering organisation.

So here's my precis.  A Russian court has issued an arrest warrant for an individual who failed to sell his stake in Megafon to a fund which has been acknowledged by two courts as being involved in money-laundering and backed by a senior official in MinSvyaz.

As The Royal Gazette has it:

It is believed by sources close to the case that a Russian court would be seen as a “friendly” venue by IPOC.
Arrest Warrant Issued for MegaFon Investor:

A Moscow court has issued an arrest warrant for the man who sold a 25 percent share in MegaFon in 2003, sparking an international legal battle over the stake.

A court official said Wednesday that a ruling had been handed down Monday to arrest Leonid Rozhetskin on suspicion of serious fraud.

Rozhetskin is an American citizen and his current whereabouts are not known; Russian media have said he divides his time between Britain, France and the United States. It was not immediately clear whether the Russian arrest warrant would be enforced abroad.

Rozhetskin's spokeswoman said she was unaware of the court ruling.

“We have no confirmation of an arrest warrant issued,” Debra Reed said by telephone from Washington.

The dispute began in 2003 when Rozhetskin's company, LV Finance, sold 25.1 percent of MegaFon, the country's third-biggest mobile phone company, to Alfa Group, an investment vehicle for billionaire Mikhail Fridman, for $300 million.

A Bermuda-based emerging markets fund, IPOC, challenged the purchase, saying it had a prior option that gave it the right to buy the MegaFon shares.

The case has been followed closely because a Swiss tribunal ruled this year that IPOC's real master was IT and Telecommunications Minister Leonid Reiman. Reiman has denied that.

IPOC and LV Finance have crossed swords many times in international courts, but no court has issued a final ruling.

In June, IPOC filed a suit in a New York court alleging Alfa conspired with Rozhetskin to steal the fund's 25.1 percent stake in MegaFon through money laundering, bribery, wire fraud and other criminal acts.

Officials from the companies involved declined to comment on the latest court ruling.


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11 October 2006

Sean's Russia Blog: Moscow Police Documents Show Attempted “Proverka” of Georgian School Children

I referred to this earlier.  Sean's Russia Blog has the details.

Sean's Russia Blog: Moscow Police Documents Show Attempted “Proverka” of Georgian School Children:


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What to Make of Russia

I crawled out of bed early today to scribble my thoughts on what it feels like as an expat in Russia right now.  There will be no link love, mostly because its too early and I am not sure that the thoughts need expanding on.  Some, if not most, of these thoughts will not be popular amongst Russian friends and readers.

It is not always easy liking the country which I have lived and done business in for the last decade.  The past few weeks have been particularly bad;

Firstly Andrei Kozlov was shot and murdered, presumably for business reasons.  Not his business but the job that he was doing as a government official.  And by all accounts he was doing it well.  God forbid that a government official actually tried to make banking better.

Then, and its not clear which small child started throwing stones first, Russia and Georgia got in to a spat.  The worst of it is not that you cannot buy Georgian wine or soothe your stomach with Borjormi or fly in to and out of Tblisi.  The worst of it is that the Militia are demanding attendance lists from schools.  If your name ends -villi you can be sure that you will be getting a visit from the Militsia.  The Georgian restaurants are all “pod remont” (under reconstruction), voluntarily closed to stop being forcibly closed.  And, as I mentioned earlier, the casinos run by Georgians as criminal enterprises were closed down.  But to give you an idea of how inter-linked the “vlast” and money are, other casinos, not run by Georgians were also closed.  They will reopen in a couple of weeks or months - with new shareholders.

Finally, and most newsworthy, but unfortunately not most surprising, was the death and murder of Anna Politkovskaya.  I have no insight to add.  One observation; she died on Putin's birthday.  No one, that I have read, has made the Henry II, Thomas a Beckett link.  And one comment; to the LJ bloggers who describe her as an enemy of Russia - you are scum.

So why is it difficult to love my neighbours? I have written before of Russia's need to face up to its Stalinist past before it can move on.  It is difficult to see how a nation can move on when in its most liberal and cosmopolitan city (pace St. Petersburg) a spat with a tiny state on its southern border can lead to the Militsia demanding school lists on the basis of your name - notwithstanding that they may well have lived in Moscow as long as their persecutors.  And there is no outcry.  Oh well, not me.  Keep my head down and maybe no one will notice.

I am not even going to begin to compare asking for school lists with Stalin's purges.  But they started somewhere.  The somewhere was the lack of a society who would stand together, and a vast class of small-minded ill-educated thugs in uniforms who are willing to take a bad idea to its most illogical and violent extreme.

Opposition starts when brave people stand up and talk the truth - all too often they are found dead in their podezd's.  Three bullets in the body, a last one to the head and the murder weapon by their sides.

Society starts when government officials enforce the laws without prejudice.  Why would they do that when the result is an early death.  Who will rid me........

The VVP Petersburgers came to power to bring order to a state that had morally disintegrated.  Unfortunately, the untold wealth that comes from bankrupting Yukos and living off the fat of Gazprom profits means that they are no longer doing the job that they came to office to do.  There is no alternative to them, nor the ability to vote them out.  So we will do what foreigners here have always done; join our Russian neighbours, close our eyes and get on with making money.


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07 October 2006

Chechen war reporter found dead - In Moscow

Was the truth she knew so bad that even muzzled and without an audience inside Russia she had to be removed?

I despair.

Politkovskaya - Chechen war reporter found dead

From the BBC


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05 October 2006

Kremlin Reiterates Plans to Uphold PSAs, Slams Operators for Cost Overruns

VVP also reiterated that he did not want to see Yukos bankrupted, or Thursday follow Friday.

Kremlin Reiterates Plans to Uphold PSAs, Slams Operators for Cost Overruns:
04.10.2006 MosNews - Russia is not seeking to oust foreign oil majors operating big production sharing deals, but will not agree to massive cost overruns at these projects, head of the Kremlin he told a conference.


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03 October 2006

Putin instructs the Interior Ministry to protect business from criminals

and make sure that they are ready to be f***ed by the government

Putin instructs the Interior Ministry to protect business from criminals.:
The Russian President Vladimir Putin instructed the Russian Interior Ministry to protect businessmen from criminals, but told law enforcement agencies not to get involved in corporate conflicts. “Special attention should be paid to the protection of small and medium-sized companies as well as law-abiding, conscientious citizens and business entrepreneurs”, Putin noted speaking about the Ministry's role in countering crimes in the economic sphere at an expanded session of the Interior Ministry Board on Friday.


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28 October 2006

Any Takers for a Blackout in Moscow this Winter?

Reuters reports that GAZP is warning of power shortages in the regions;

Gazprom Warns of Fuel Crisis
Reuters

Gazprom on Thursday called for the state to step in to prevent a repeat of last year's winter fuel crisis, which it said was likely because of a poor state of readiness in the regions.

Gazprom, which supplies one-quarter of Europe's gas needs, had to restrict deliveries to some of its European customers last year to ensure there were sufficient supplies for domestic users who were enduring an exceptionally cold winter.

“The unsatisfactory current level of reserve fuel stocks in the regions causes serious concern. There is a threat of a repeat of last winter's events, when many regions turned out to be unprepared for a sharp decline in temperatures,” Gazprom said in a statement.

“The situation that has developed requires immediate intervention by state regulatory bodies.”

Gazprom had to briefly cut its gas supplies on the route to Hungary by 20 percent in January, and said it could also reduce flows to Italy and Austria, although it said it has never fallen below its contractual obligations.

It soon restored supplies to 7 percent above contractual volumes to European customers and 40 percent more than the contracted amount to Russia.

The company said it planned to significantly raise investment in 2007 -- to 531.78 billion rubles ($19.82 billion) compared with 373.14 billion rubles planned this year. It also slightly increased its 2006 production forecast by 3 billion cubic meters to 551 bcm.
Meanwhile Chubais has spent the summer warning of a lack of gas to heat and light us over the winter.

So what odds on a Moscow blackout?  If not Moscow then where?


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Reiman vs Alfa

In the interests of fairness I should report that having acquired a favourable decision in Russia IPOC is requesting that everyone who knows the truth undergo a suspension of disbelief.

From my early morning read the Royal Gazette:


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Putin Allies to Build Sports and IT Town

Let me help you translate this;

A sports fund headed by chums of VVP, the great leader, is building a residential complex cunningly named to make it sound as though it might have something to do with information in a tax free zone.

It is with great sadness  that a cynical view that I took a year ago has proven to be so true.

Putin Allies to Build Sports and IT Town:
The little-known Sport Fund, whose board is headed by Rosoboronexport chief Sergei Chemezov and stocked with close allies of President Vladimir Putin, is to build a vast residential complex dubbed Info-City in the Moscow suburb of Zelenograd, one of the government's high-tech special economic zones.


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25 October 2006

Ipoc cleared of money laundering charges - In Russia

Which is not entirely unlike my mum saying I am a nice guy.

Ipoc cleared of money laundering charges

Ipoc cleared of money laundering charges

By Stephen Fidler in London

Published: October 24 2006 18:43 | Last updated: October 24 2006 18:43

Ipoc International Growth Fund, a Bermuda based entity locked in a three year battle over ownership of a 25.1 per stake, in Megafon, Russia’s third largest mobile phone operator, said on Tuesday it had been cleared of money laundering charges by Russian prosecutors.

Ipoc is in a bitter dispute over the Megafon stake with Alfa, the conglomerate owned by Russian oligarch, Mikhail Fridman. The conflict has generated legal and arbitration proceedings in Switzerland, Bermuda, Russia, Sweden and New York.

Ipoc, which in May was hit by a decision from a Zurich arbitration tribunal that supported Alfa’s claim to a majority of the shares, said the prosecutors’ ruling that Ipoc was the true owner of the stake was the first by a body with investigative powers.

The general prosecutor’s office also said it found no evidence that Leonid Reiman, Russia’s communications minister, had abused his position. Alfa has repeatedly claimed that Mr Reiman was Ipoc’s true owner.


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Further to your comments on Gazprom

The Oil Drum is slowly waking up to what UBS refers to as a tight supply/demand scenario.  Further to your comments on Gazprom.  Given that I live and breathe this stuff every day some thoughts;

At the bottom I have summarized the arguments, nothing new, just note that the consumer who suffers is the Russian exporting industry, not your warm London, or Moscow, for that matter, apartment.

Vladimir Milov, the Politkovskaya of Russia's energy industry (uncomfortable truths, rather than female and dead) believes that Gazprom's state-sanctioned monopolistic behaviour (the link leads to a PPT pres) will cause a significant short fall in gas production.

The counter argument is that gas price liberalization will cause independents, Novatek, and the vertically integrated oil and gas companies, LUKoil et al, to fill the domestic gap and that domestic industry will invest to use more energy more efficiently.

To which Milov et al, argue that as GAZP controls UGGS (pipelines) you can shift the price as much as you like but GAZP will seek non-market rents (bribes) to sell gas at that price.  Thus wellhead net backs will remain below actual local market prices.  And he is right.  Price liberalization means nothing without releasing other parts of the system - mostly UGGS.

To which the optimist camp (me) would argue, without foundation, that the one thing that the 5th Directorate Thugs are truly frightened of is the Narod (the “People”).  If your Russia interest stretches beyond European gas shortages, the most significant event of early 2006 was the entirely botched reform of pension entitlements to travel.  At least one Thug has read Paine - I defy you to agitate a man on a full stomach.  Gas will be provided to heat our apartments whatever the economic cost.

Having said that UES has been preparing the press all summer for power cuts due to gas, Milov's graphs are partially UES inspired.  If we get a cold snap (-25) I would not bet against an eastern spalny raion (dormitory region) of Moscow or the business centre suffering a complete power, but not heating, outage.

The risk is that rent-seeking (corruption) moves too slowly to understand what the Narod really feels.  To the extent there ever was a Putin, the Good Tsar, he is too isolated to understand, or care.

Anyone for a heating revolution?

The arguments in short, though you have read this before;

Big Gazprom fields are in decline
Gazprom keeping production flat with mid-size fields and acquisitions
Gazprom's next big fields will not come on stream until 2015 at the soonest
European demand is growing
Russian demand is growing faster
The US wants its disproportionate share of the world's energy
Supply from Central Asia (generically referred to as Trashcanistan) is filling the gap but the pipeline infrastructure needs $2-3bn of upgrade capex to provide the supply in 2+/- years

Where TOD's analysis falls down are the economics, and again you have heard this before.

Gazprom's sales to Europe (old not new) are approximately $240 per thousand cubic meters (mcm)
Regulated domestic prices are $41/mcm (net back equivalent price ~ $58/mcm)
Unregulated prices are around $69/mcm (net back equivalent ~ $128/mcm)

There is a clear economic argument in favour of Gazprom meeting its export obligations.


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23 October 2006

Politkovskaya Update

I am also making headway in my attempt to become a billionaire.  Not having an oil company to rape or a telephone license to issue does however, make it problematic.

Notwithstanding, I am closer to becoming a billionaire than the real killers are to being captured.  And you have no idea what a gap the former is.

Politkovskaya Update:
Prosecutors said Friday that they had made headway in the investigation of the killing of journalist Anna Politkovskaya but did not disclose details.


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Reiman vs Alfa - Continuation

My early morning reading has delivered this gem from the Royal Gazette.

It is an article originally published in the WSJ by WSJ staffers, a kind reader had already provided me with a copy, but the pressure of work had kept me from commenting.  Now the weekend has arrived here are my thoughts.

Whilst the article assumes that you have some knowledge of the underlying case in order to truly understand the case, it make good reading.

For what its worth from the bits that I know, as opposed to suspect, its well written and researched and accurately reported.  Albeit that you can feel the dread hand of WSJ's legal team removing the juicier bits.

I heard on the grapevine that Alfa was beginning to despair over the damage that the row was doing to its business.  But now that the press has its teeth in to the story, mostly because there is evidence that can be sourced outside Russia, it strikes me that this is a story that won't go away.  Or at least until a couple of ex-Commerzbank investment bankers are languishing in jail (they were crappy bankers anyway) and a Danish lawyer is enjoying his “ownership” of a large chunk of the Russian telecom industry in a country where arrest warrants can't reach him; Russia in the summer and Maui in the Russian winter?

Here are some of the more interesting paragraphs selectively culled from the piece.  To get the whole story read the article;

In late 1994, Mr. Reiman gathered his state-controlled employer’s interests in the growing ventures into a firm called Telecominvest. His employer owned 95% of it. Mr. Galmond, the Danish lawyer, says that he indirectly owned the rest.

But just over a year later, the interest held by Mr. Reiman’s employer and another state company had shrunk to 49 percent. Now, 51 percent was in the hands of an obscure Luxembourg company called First National Holding.

What had happened was that Telecominvest issued new shares. Though the state-controlled companies, represented by Mr. Reiman, had a right to invest in these shares and maintain their dominant stake, they didn’t. Instead, First National Holding put up a modest $1.8 million for the new shares and wound up with the majority stake. Later its stake rose to 85 percent through the same process.

Who was this First National Holding? The question intrigued Russia’s then-telecom minister, who says he learned about the new ownership in the local press and called state telecom executives for an explanation. They told him First National Holding was just a vehicle for the actual owner – Commerzbank – says the former minister, Vladimir Bulgak. So “we didn’t make a scandal. We thought the Petersburgers found a good partner who would invest,” he says.

Telecominvest also portrayed Commerzbank as the owner. It said in regulatory filings that the bank owned First National Holding. And the German bank itself said the same. Commerzbank in a 2000 European Union regulatory filing, in annual reports and in letters to business partners said it owned First National. Now it admits that wasn’t the case.

German police found a long internal report from Commerzbank’s Moscow office warning that the bank was improperly helping Mr. Reiman conceal ownership of state assets, says a senior German police official. According to the official and to others with knowledge of the case, the employee who wrote the internal report told investigators that in 2001 he tried to give it to Commerzbank chief executive Klaus-Peter Müller at bank headquarters in Frankfurt, but Mr. Müller turned his back and wouldn’t acknowledge it.

For instance, a 2002 letter to a Liechtenstein bank said the telecom empire belonged to Mr. Reiman. The letter bears Mr. Galmond’s signature, according to an affidavit filed in a British Virgin Islands court. Mr. Galmond said the statement that the businesses belonged to Mr. Reiman was made by his staff in error.

Commerzbank executives considered Mr. Reiman to be the bank’s client, said a person familiar with its handling of the matter. The bank did due diligence on him as “the economic beneficiary” of the assets, said an affidavit filed in the Privy Council, quoting a Galmond adviser. Mr. Reiman’s explanation is that the bank’s lawyers looked into whether it would be legal for him to get a stake in some of the companies in the late 1990s as part of a deal Mr. Galmond proposed but that such a transaction never happened.

German prosecutors say their money-laundering investigation is complicated by the need to establish that a crime occurred at the beginning of the chain in Russia. They would need to show that the money that coursed through Commerzbank was dirty to begin with.
In Russia, authorities have shown little interest beyond a 1997 investigation by prosecutors in St. Petersburg, which found no significant violations in the 1994 formation of Telecominvest. No senior Russian official other than Mr. Reiman has publicly commented on the allegations against him. Russian prosecutors, when asked by legislators to respond to the Zurich tribunal’s ruling, said they saw no evidence that IPOC had engaged in suspicious financial operations.


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21 October 2006

Kremlin explains Putin rape 'joke'

If you want to understand what a Muzhik is then start at the top.

Don't worry boys you can bankrupt companies at will and then in celebration rape a couple of women and whilst your at it why not shoot a central banker, a journalist and a mayoral candidate.

And you know that you will get off scott free.

Kremlin explains Putin rape 'joke' - CNN.com:


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12 October 2006

Arrest Warrant Issued for MegaFon Investor - Reiman vs Alfa and Rozhetskin

You would think me remiss if I did not keep you abreast of the latest Megafon, Alfa, Reiman news.  Its from the shit-for-brains Moscow Times so its copied at the bottom.

In using Google's excellent search engine (I am such a trademark good boy) to find a link-friendly version (no luck I am afraid) I came across this from The Royal Gazette.  Here's the pertinent bit;

THE Bermuda Supreme Court has recognised a Swiss arbitration ruling that described the island-based IPOC International Growth Fund as a money-laundering organisation.

So here's my precis.  A Russian court has issued an arrest warrant for an individual who failed to sell his stake in Megafon to a fund which has been acknowledged by two courts as being involved in money-laundering and backed by a senior official in MinSvyaz.

As The Royal Gazette has it:

It is believed by sources close to the case that a Russian court would be seen as a “friendly” venue by IPOC.
Arrest Warrant Issued for MegaFon Investor:

A Moscow court has issued an arrest warrant for the man who sold a 25 percent share in MegaFon in 2003, sparking an international legal battle over the stake.

A court official said Wednesday that a ruling had been handed down Monday to arrest Leonid Rozhetskin on suspicion of serious fraud.

Rozhetskin is an American citizen and his current whereabouts are not known; Russian media have said he divides his time between Britain, France and the United States. It was not immediately clear whether the Russian arrest warrant would be enforced abroad.

Rozhetskin's spokeswoman said she was unaware of the court ruling.

“We have no confirmation of an arrest warrant issued,” Debra Reed said by telephone from Washington.

The dispute began in 2003 when Rozhetskin's company, LV Finance, sold 25.1 percent of MegaFon, the country's third-biggest mobile phone company, to Alfa Group, an investment vehicle for billionaire Mikhail Fridman, for $300 million.

A Bermuda-based emerging markets fund, IPOC, challenged the purchase, saying it had a prior option that gave it the right to buy the MegaFon shares.

The case has been followed closely because a Swiss tribunal ruled this year that IPOC's real master was IT and Telecommunications Minister Leonid Reiman. Reiman has denied that.

IPOC and LV Finance have crossed swords many times in international courts, but no court has issued a final ruling.

In June, IPOC filed a suit in a New York court alleging Alfa conspired with Rozhetskin to steal the fund's 25.1 percent stake in MegaFon through money laundering, bribery, wire fraud and other criminal acts.

Officials from the companies involved declined to comment on the latest court ruling.


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11 October 2006

Sean's Russia Blog: Moscow Police Documents Show Attempted “Proverka” of Georgian School Children

I referred to this earlier.  Sean's Russia Blog has the details.

Sean's Russia Blog: Moscow Police Documents Show Attempted “Proverka” of Georgian School Children:


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What to Make of Russia

I crawled out of bed early today to scribble my thoughts on what it feels like as an expat in Russia right now.  There will be no link love, mostly because its too early and I am not sure that the thoughts need expanding on.  Some, if not most, of these thoughts will not be popular amongst Russian friends and readers.

It is not always easy liking the country which I have lived and done business in for the last decade.  The past few weeks have been particularly bad;

Firstly Andrei Kozlov was shot and murdered, presumably for business reasons.  Not his business but the job that he was doing as a government official.  And by all accounts he was doing it well.  God forbid that a government official actually tried to make banking better.

Then, and its not clear which small child started throwing stones first, Russia and Georgia got in to a spat.  The worst of it is not that you cannot buy Georgian wine or soothe your stomach with Borjormi or fly in to and out of Tblisi.  The worst of it is that the Militia are demanding attendance lists from schools.  If your name ends -villi you can be sure that you will be getting a visit from the Militsia.  The Georgian restaurants are all “pod remont” (under reconstruction), voluntarily closed to stop being forcibly closed.  And, as I mentioned earlier, the casinos run by Georgians as criminal enterprises were closed down.  But to give you an idea of how inter-linked the “vlast” and money are, other casinos, not run by Georgians were also closed.  They will reopen in a couple of weeks or months - with new shareholders.

Finally, and most newsworthy, but unfortunately not most surprising, was the death and murder of Anna Politkovskaya.  I have no insight to add.  One observation; she died on Putin's birthday.  No one, that I have read, has made the Henry II, Thomas a Beckett link.  And one comment; to the LJ bloggers who describe her as an enemy of Russia - you are scum.

So why is it difficult to love my neighbours? I have written before of Russia's need to face up to its Stalinist past before it can move on.  It is difficult to see how a nation can move on when in its most liberal and cosmopolitan city (pace St. Petersburg) a spat with a tiny state on its southern border can lead to the Militsia demanding school lists on the basis of your name - notwithstanding that they may well have lived in Moscow as long as their persecutors.  And there is no outcry.  Oh well, not me.  Keep my head down and maybe no one will notice.

I am not even going to begin to compare asking for school lists with Stalin's purges.  But they started somewhere.  The somewhere was the lack of a society who would stand together, and a vast class of small-minded ill-educated thugs in uniforms who are willing to take a bad idea to its most illogical and violent extreme.

Opposition starts when brave people stand up and talk the truth - all too often they are found dead in their podezd's.  Three bullets in the body, a last one to the head and the murder weapon by their sides.

Society starts when government officials enforce the laws without prejudice.  Why would they do that when the result is an early death.  Who will rid me........

The VVP Petersburgers came to power to bring order to a state that had morally disintegrated.  Unfortunately, the untold wealth that comes from bankrupting Yukos and living off the fat of Gazprom profits means that they are no longer doing the job that they came to office to do.  There is no alternative to them, nor the ability to vote them out.  So we will do what foreigners here have always done; join our Russian neighbours, close our eyes and get on with making money.


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07 October 2006

Chechen war reporter found dead - In Moscow

Was the truth she knew so bad that even muzzled and without an audience inside Russia she had to be removed?

I despair.

Politkovskaya - Chechen war reporter found dead

From the BBC


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05 October 2006

Kremlin Reiterates Plans to Uphold PSAs, Slams Operators for Cost Overruns

VVP also reiterated that he did not want to see Yukos bankrupted, or Thursday follow Friday.

Kremlin Reiterates Plans to Uphold PSAs, Slams Operators for Cost Overruns:
04.10.2006 MosNews - Russia is not seeking to oust foreign oil majors operating big production sharing deals, but will not agree to massive cost overruns at these projects, head of the Kremlin he told a conference.


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03 October 2006

Putin instructs the Interior Ministry to protect business from criminals

and make sure that they are ready to be f***ed by the government

Putin instructs the Interior Ministry to protect business from criminals.:
The Russian President Vladimir Putin instructed the Russian Interior Ministry to protect businessmen from criminals, but told law enforcement agencies not to get involved in corporate conflicts. “Special attention should be paid to the protection of small and medium-sized companies as well as law-abiding, conscientious citizens and business entrepreneurs”, Putin noted speaking about the Ministry's role in countering crimes in the economic sphere at an expanded session of the Interior Ministry Board on Friday.


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