30 November 2006

28 November 2006

Treating Your Customer Like Effluent

No this is not a rant at service in Russian shops.  Whilst it leaves much to be desired it is a massive improvement over the way that we are treated by the MPAA.

The old DVD player has finally given up the ghost so off we trotted to one of Moscow's white good stores. Given that I have no knowledge of what is a good and a bad DVD player the range seemed OK.  We passed on the karaoke versions.

Shipped the blessed piece of metal coloured plastic home, plugged it in, connected it to the screen, popped in a DVD.  And out it popped again.  Turn on screen for a hint - “DVD not authorised for your region.”

Now this was a DVD which SWMBO had lavished vast mounts of cash on in Heathrow's departure lounge.  Not one of your Gorbushka knock-off's.  So we had legitimately bought a DVD in Region 2 (Europe) and brought it to Region 5 (the FSU - broadly) without any warning that it might well not work in the place to which we were flying.  You can just imagine the signs around HMV in Heathrow;

“Due to anti-customer policies the DVD we are offering you to buy here will probably not work where you are going.  As it is unlikely that you will be passing back through this airport again in the near future I am afraid that our money back guarantee is worthless. Enjoy this piece of moronically stupid entertainment featuring talentless actors earning enormous sums of money.”

Three hours later, an hour of which was spent with the mighty Google, and two syncing and unsyncing and re-syncing SWMBO's hijacked Treo, the newly-acquired DVD player had been fed with code which convinced it that it was everywhere simultaneously.

So now we can legitimately watch our legitimately acquired DVD's on any machine we care to, whenever we care to.  There is a fairly good chance that we will also take a more liberal view of the benefits of the kiosk knock-offs.

Paying Tom Cruise an obscene amount of money to star in crap films does not give you the right to restrict how and where I watch what I have paid for.

Treat me like shit and I will reciprocate.


[composed and posted with
ecto]

Saint Sasha, The Toenail Puller

I've been a little confused by the Litvinenko stories that have taken over MSM in the UK.  I don't care that much who killed him, but the story is being pushed very hard by someone.  Why might tell us more about life in Russia today than the simple fact of his death.  Or it might just indicate that London's climate is preferable to Chita's.

The core of the argument coming from the western-Russia blogs is that VVP's thugs were barely aware of Litvinenko and his strident criticism.  Even well-informed Russians have barely heard of him.  There is no chance of the narod, hearing or caring.  He lived in London, not in Moscow and was incidental to Russia.  If you are unaware, then you don't go to great length to find a rare radioactive material and stage a lengthy and painful death played out, finally, in the press.

If you turn on english language news you don't need me to tell you that VVP did it.  There are however a number of alternate views.  To give him his due copydude was the first of the Russian blogs was the first to offer up the Berezovsky connection with Saint Sasha, The Toenail Puller, which is a great headline.  In quick time he followed it up with Limonov and Litvinenko, highlighting the British press' rather pathetic ability to buy a line from PR agencies.  Given that copydude's previous posts (I know not all of them) have concentrated in rather different areas the strength of his convictions came through forcibly.

Sean's Russia Blog also weighs in with a meaty piece of analysis.

And its not just the blogosphere.  Tom Parfitt writing in the Guardian warns that we should not rush to judgment.

Back to work, need to hire myself a PR Agency.  Not that I am planning any murders; well not actively anyway.


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So What Are They Saying?

The redoubtable Jerome a Paris has provided a remarkable example of how your potato is my tomato.  In his piece he compares and contrasts Le Monde's coverage of the report with the FT's.

I am afraid that you need to click through to see his tables as I can't/don't know how to import them.


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27 November 2006

Aliens To Invest In Banks

The Duma, concerned over Russia's plummeting international image and the possible knock on impact on investment in the banking sector have, far-sightedly some would claim, prepared legislation allowing aliens to invest in banks.

As with many Russian laws it is slightly lacking in detail and does not differentiate between Martians and other aliens.  Nor does it state whether aliens can only come from planets and former planets.

Anyway its nice to know that our duma deputies are hard at work (when they aren't crashing their ferraris.)

Portfolio Investors to Press Strategic Investors:
Russia’s State Duma passed in the first reading Friday the bill whereby it will be easier for aliens to get stakes in Russia’s banks. Market players say the money inflow from foreign portfolio investors will step up capitalization of Russia’s banks and, therefore, lower the threat of the loss of control over the bank system.


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ecto]


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23 November 2006

Europe has nothing to fear from Russia - VVP

VVP wrote a comment in the FT on 21st November (paid for subscription required) Europe has nothing to fear from Russia.

I share his sentiment, as long as you define Europe as being west of the "near abroad."

There were a number of strange things about the article.  Not least of which is that it was originally written in Russian and translated by a non-native english speaker.  Which meant that it was full of long-winded meaningless statements which have no meaning in english.  They are beloved of Russian writers, not that anyone can explain what they mean;

"Though it is not striving to join the EU, when I consider the future of our relations I do not see any areas that are not open to equal, strategic co-operation based on common objectives and values."

It was also strange in that the target audience was solely EU heads of state and their foreign policy governments.  So much so that the FT wrote a translation of the article yesterday.  In fact the piece was so abstruse that it did not even appear in the physical version of the FT delivered to me here in sunny Moscow.   

Despite the FT's translation there remain passages which still remain beyond my understanding (not being the sharpest pencil in the pile).  Wrap your collective brains around this paragraph;

"Russia is closely watching the EU’s evolution, not least because the pace of development of our relations and their future depend largely on changes in the EU. The Union could remain a predominantly intergovernmental association or acquire supranational functions. Russia wants its largest neighbour to be stable and predictable, and hopes that changes and expansion will not erode the EU’s uniform legal framework, primarily in the sphere of ensuring equal rights to all EU people irrespective of country of origin, nationality and religion."
It may help to translate it back in to Russia and then back in to english via a third language - Mongolian maybe.

And then of course there is the requirement to recognise that Russia has a different European past from the Europe it wishes to join economically.

"When speaking of common values, we should also respect the historical diversity of European civilisation. It would be useless and wrong to try to force artificial “standards” on each other."

Other than the english being truly horrible the translation is; let us develop our kleptocracy our way and we will laugh at your Chirac's, Spanish mayors and British paid for peerages.


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Gas Decision Put Off until Next Month - Update

My decision to stick my neck out has proven to be mostly correct; Gas Decision Put Off until Next Month.  I could claim that I was completely correct however, the job of blogs like this is to try to explain the nuance that the MSM either cannot or will not.

The apparent decision not to progress with the deal which seems to have been worked out between GAZP, UES and Gref's MEDT Ministry is that the fundamental answers on energy balance between gas, coal and oil (mazut) going forward have not been worked out.  It's a point which has some merit after the failure of the Energy 2020 policy.  Adopted in mid/late 2003 it was already out of date by mid-2005.  With the government forecasting a requirement for $60bn of annual investment in the gas industry (by GAZP) some clarity on the return on that investment is needed.  Given the personal economic interests at stake it is hard to believe that some understanding has not been reached on future gas price liberalization.

UFG/Deutsche note in their morning comment that;

“the President requested the government to work out a consolidated position on whether to benchmark the domestic gas price in the long-term contracts against the international price.”

From other comments elsewhere there is a sense of basic economic misunderstanding from the Kremlin.  VVP thinks that as much gas as possible should be exported west where it will earn $250/mcm.  Yet the long-term price for gas in Europe, assuming $40-ish/bbl of oil is closer to $140/mcm.  More importantly GAZP, UES and MEDT have been basing their forecasts on netback parity pricing (the price where it makes no difference whether you export gas or not.)  I genuinely feel that this point has been missed somewhere out there.

Conspiracy theorists will wonder why VVP is so concerned that Russia should be shielded from international price movements.  Is Russia seeking to corner the European energy market?

The main reason for the delay in the decision seems to me to have two interrelated causes.  Firstly the good Tsar can't be seen to be hurting “his” people.  Secondly with so much media coverage being provided by the main participants (who were clearly muzzled after yesterday's meeting) it will be difficult for the bad news to be buried.  I reiterate my forecast that whatever decision will be, or has been, made will be made public in late-December.

Meanwhile, Mezhregiongaz held the first public trading session for gas.  GAZP and Novatek both participated with the average price being around $60/mcm.

“The market was not very active today. It is probably because of the mild weather. The main buyers were utilities from near Moscow and farther down to the Urals”

Whilst it would be naiive to describe this as the open market it is at least an indication of real pricing.  For specialist interests it is as yet unclear where the price is quoted.  If delivered the real price increases are not as huge as they would seem upfront.

The contracts are for physical delivery.


[composed and posted with
ecto]


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22 November 2006

Russian Banker Dead in Suspected Contract Killing

The spelling of banker is correct.  Dangerous business banking.  Who would have thought that lending and borrowing money could be so hazardous to one's health; if a banker from Spetznatsroibank (sp?) actually borrowed or lent.

Russian banker dead in suspected contract killing

“MOSCOW, November 22 (RIA Novosti) - The killing of another Russian banker in Moscow, the third in a few months, is set to draw heightened attention to crime in the country's banking sector.

Prosecutors said Konstantin Meshcheryakov, co-owner of a small Moscow-based bank, Spetssetroibank, was shot dead late Tuesday outside his apartment building in northern Moscow. An unidentified gunman shot him in the back at point-blank range, and then in the head after the banker fell.

”Investigators are considering all possible motives, including those linked to the victim's professional activities,“ a spokesperson said.

Meshcheryakov is the third Russian banker to be killed in three months.

Alexander Plokhin, the director of a Moscow branch of Russia's state-owned foreign trade bank Vneshtorgbank was shot in the head on the staircase of his apartment building in mid-October.

Andrei Kozlov, first deputy chairman of the Central Bank of Russia who led the CBR's effort to close down dozens of banks for violations of banking legislation, particularly on money laundering, died in September after gunmen opened fire on him with semi-automatic weapons.

President Vladimir Putin earlier ordered officials to crack down on crime in the sector.

Contract killings in Russia were frequent in the 1990s as gangsters sought to take control of lucrative assets in various fields; however, the murder of the Central Bank's deputy head was the most high profile since that time.”

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Russia's domestic gas price may double by 2010

Another putative VVP energy meeting tomorrow (update its today now).  Headlines started flying around pretty thick and fast.  Most of which are meaningless with comment.

Russia's domestic gas price may double by 2010:
MOSCOW, November 21 (RIA Novosti) - Russia's wholesale gas price for domestic consumers could more than double in four years' time, a gas market regulator said Tuesday.

Which is about 50% slower than the market wants it to happen.  Equally importantly GAZP is threatening to double transport tariffs over the same period.  Which would be fair if it was not Gazprom benefitting.
Gas Output Up 2.5% y-o-y
But domestic gas consumption was up more;

“Domestic gas consumption rose 2.9% in first ten months to 313.8 bln cu m.”
Oil and gas condensate up 2.2% y-o-y

Just so the oil industry does not feel left out.

Russia Gas Output to rise to 860 bcm p.a. by 2015

Which is all well and good but forecasts at the beginning of the year had gas demand at 866 bcm by 2015.  If there are readers with more time on their hands than me it would be interesting to know what tonnage of Russian coal, or fuel oil this would translate in to.

What I can tell you for free is that 6bcm is the equivalent of $720mn in revenue in 2015 (assuming the world still wants gas then.)


[composed and posted with
ecto]


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21 November 2006

Sticking My Neck Out

The long-delayed government meeting on, inter alia, gas tariffs and energy policy is due to be held tomorrow.

A quick forecast which will may well come back to bite me early; the meeting will not be held tomorrow, if it is held tomorrow the results will not be made known until some point when we are all so drunk or otherwise celebrating that no one will really notice.

Expect an update tomorrow.


[composed and posted with
ecto]


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18 November 2006

Build It And They Will Come

Moscow's traffic is becoming legendary.  Yury Mikhailovich who has clearly never read a single traffic management article in his life has determined that the best way to deal with this is not to invest in more communal transport but to widen the roads.

All the theory says that if you build more roads the amount of traffic will increase until the weight of traffic reaches previous proportions and people start using the over-crowded metro again.

Apparently no one has thought of actually investing in traffic control management software and fining drivers for “blocking the box” nor for actually forcing cars to actually meet the regulated requirements.  None of which makes as much money for YM and his lovely wife as building more roads.

I love the concept that something as complicated as Moscow's traffic management can be resolved in one week -

“The mayor gave the city's Transportation Department a week to set deadlines for the construction of such transit hubs.”
Luzhkov Weighs In on Traffic:

Moscow's mounting traffic problem took center stage at Tuesday's City Hall meeting, with Mayor Yury Luzhkov calling for widening roads leading out of the city.

The mayor's proposals are to be included in an updated plan for city development through 2025.

One way to reduce traffic, Luzhkov suggested, would be to deter people from outside the city from traveling into it. The mayor noted that many people travel to Moscow for shopping and entertainment they can't get in surrounding towns. Developing these areas would mitigate pressure on city roads.

The mayor called for an end to new office towers in the center of the city. And he said highways should be built above railway tracks.

City officials also discussed the creation of transit centers at key metro stations. The centers would make it easier for motorists and bus riders to transfer to the metro. The mayor gave the city's Transportation Department a week to set deadlines for the construction of such transit hubs.

Besides congestion, the new blueprint will focus on kindergartens and other “social” projects, said the city's chief architect, Alexander Kuzmin. More thermal and electricity facilities will be needed to meet the city's growing energy consumption, Kuzmin said.


[composed and posted with
ecto]


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Solving Moscow's Hotel Room Shortage


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15 November 2006

Russian Oil Fund Chief Shot Dead

Russian oil fund chief shot dead:

This turned in to the parentheses post.  But its too late to re-write and there are more important things to do.

I have it on reasonably good authority that our the victim had not been shy about handing it out .  In a (failed deal) when asked if he had any “skeletons in the closet” he (apocryphally) replied that he would never keep them there.

Notwithstanding, in the days between Putin's appointment and his election (oh those innocent days of winter 2000) whilst traveling in St. Petersburg I was somewhat shocked to come across a number of billboards; not overly professional (oh why does that seem so true today) but the message was clear;

“We must and have to control the people” (if you agree that the“narod” are the “people”)
Whilst the sentiment did not exactly fit with my liberal European views of democracy, the sentiment was understandable at the end of the Yeltsin-years.

But now as the VVP era enters its lame duck years, where are those who “must and have to control the controllers?”  As an aside “lame duck” is a very lame analogy in VVP's case.  More that he can no longer, if “he” ever could, keep a lid on it all.  And the “all” seems to be delivered from a Makarov these days.

However despicable Bush, Cheney, Rumsfeld (and you have to love the Germans for the torture indictment) et al the narod have, at least, fired a well-aimed shot over their collective bow.  With luck, the British public will do the same to Blair for his foreign affairs lies and manipulation, and to Brown for his attempt to take Britain back to, well France.

Not that VVP's friends and colleagues are overly keen on using luck as a way of electing the supreme rent-taker President.

I was in danger of getting in to a “lack of democracy” rant there.  I am not sure that checks and balances are exclusive to democratic institutions; witness the early VVP-years.  What Russia needs is more checks and balances, not more cheques and balances (apologies).

And until it does the skeletons will be found in the podezds not the closets.


“The director general of a Russian oil consultancy company has been killed in an apparent contract killing in Moscow, officials say.

Zelimkhan Magomedov, 50, was shot twice in the head, prosecutors told Itar-Tass news agency.

Ms Magomedov was the head of the National Oil Institute Fund, which seeks to develop small and medium-sized oil and gas producers.

The killing was described as a ”contract hit“ by officials.

”A criminal case has been opened over the contract hit,“ a representative of the city prosecutor's office told Tass.

Ms Magomedov's murder is the latest in a series of apparent professional killings in Moscow.

Last month, campaigning Russian journalist Anna Politkovskaya was shot dead in the city, while in September, Andrei Kozlov, the deputy chairman of Russia's central bank, was killed by gunmen.

The recent murders are reminiscent of a wave of assassinations which swept through the city in the 1990s, targeting businessmen and bankers.”


[composed and posted with
ecto]


[composed and posted with
ecto]


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09 November 2006

Alekperov Seems Bullish on Domestic Gas Prices

As well he might, but a five-fold increase in five years.

Has no one told him the people are revolting.  Well not exactly but the “I”-word (inflation) is getting louder and louder.


[composed and posted with
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08 November 2006

Gas, Gazprom and Novatek

The gas news is getting louder and louder;

  • Yesterday, and most uselessly, in the FT, Arkady Ostrovsky rehashed Kakha' visa-less UBS report and Vladimir Milov's criticisms.
  • Alfa Bank (no link love) in a research report suggested that over the next few years the regulated price of gas will rise by 20% per annum on average.  Albeit they seem to have missed the fact that UES already buys a substantial amount of its gas in the “open” market.
  • This morning rumours bubble (again) that Gazprom is about to buy up to 50% of Novatek - confirming Milov's comments that they are better “on Wall Street” than with the drill bit.
  • Vedoms yesterday reported that Gref and Kudrin are fighting a rearguard action to stop regulated price rises with fears of inflation on the horizon. I've been here before.
  • Today Pun hosts a Government meeting on energy.  I feel a Kanutian moment coming on; keep inflation down and raise tariffs, find more gas, preferably by January.

There is, of course, a fairly simple solution to all of this.  Demerge GAZP from UGSS and allow everyone access to the same export contracts and force all gas producers to sell a fixed portion of production for heating.  Unfortunately super-profits for individuals would disappear even if the lights stayed on and the radiators warm.

I think that UES and GAZP's PR departments are being more active than Gref's and Kudrin's.  Control of inflation is very important.  Somewhere before I have commented that the Kremlin is most afraid of the people.  This will win out in the immediate future over tariffs and Gazprom's desire to make more money even if they don't want to spend it on gas.


[composed and posted with
ecto]


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05 November 2006

VAT fiddles..

Ukrainian-based (?) blogger Foreign Notes is chronicling the rapid return of Ukraine to its previously corrupt state after a brief moment in the weak early morning sunlight of being only mostly corrupt.

There has been much (well some anyway) conversation recently of those heady days in Russia of Putin's first presidency before the Yukos affair.  Again there was a brief moment when we were naive enough to believe that the rule of law was going to prevail.  And then Khordokhovsky went to jail and Yukos was bankrupted.  Every petty Chinovnik and plenty who weren't realized that if the Kremlin could abuse the law in their favour so could everyone else.  All those businesses which had turned white(ish) and were telling the (insert name of favourite corrupt government department) to take a hike when they came with the begging bowl realized it was a futile game and went back to paying bribes.

I think the nostalgia is for earlier less cynical days when we all had hope that Russia would........well not be like Russia today.

And a happy fascist holiday Holiday of National Unity to you all.

VAT fiddles..:
Bits from an article it today's 'Delo' business daily entitled:

“Economy returning to the shadows”

The number of business enterprises in Ukraine who paid their taxes honestly in 2006 has dropped dramatically compared to the previous year.

The Institute of economic research and political consultations calculates that Ukrainian companies paid almost 80% of what was due last year, but this year the figure is around 55%.

According to the State Tax Administration, Ukrainian financial-industrial groupings [FIGs] are taking advantage of the links between their numermous enterprises to set up fictitious deals and avoid payment of taxes.

The FIG's who 'minimize' their financial responsibilities to the greatest extent, according to deputy head of the STA Mykola Romaniv, are 'Privat', 'Industrial Union of Donbas' [IUD], and 'Interpipe', [owned by Kolomoyskiy, Taruta/Hayduk, and Pinchuk resp.]

Akhmetov's System Capital Management, [SCM] was not mentioned on the list of transgressors. [What a surprise..]

Romaniv said that in order to minimize their VAT payments, the FIGs use 'pseudo-exporting' operations to obtain refunds [Well, well, well..]

“The mentality of Ukrainians is such that does not accept taxes which can be recompensed from the budget. If there is even a minimal possibility of return of tax from the budget, then there will certainly be abuses. To administer this nightmare in the present form is quite impossible, ” considers Dmitriy Svyatash, member of the VR committee on questions of finances and bank activity. [It's all the fault of Ukrainians' mentality then.]

Meanwhile other companies are complaining that they they are not receiving the VAT repayments to which they are entitled.

Newly appointed NSDC secretary Vitaliy Hayduk [see above] has recently been asked by the President to sort out the problem of VAT fiddles - obviously the right man for this vital task.

See also VAT-man Azarov


[composed and posted with
ecto]


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30 November 2006

28 November 2006

Treating Your Customer Like Effluent

No this is not a rant at service in Russian shops.  Whilst it leaves much to be desired it is a massive improvement over the way that we are treated by the MPAA.

The old DVD player has finally given up the ghost so off we trotted to one of Moscow's white good stores. Given that I have no knowledge of what is a good and a bad DVD player the range seemed OK.  We passed on the karaoke versions.

Shipped the blessed piece of metal coloured plastic home, plugged it in, connected it to the screen, popped in a DVD.  And out it popped again.  Turn on screen for a hint - “DVD not authorised for your region.”

Now this was a DVD which SWMBO had lavished vast mounts of cash on in Heathrow's departure lounge.  Not one of your Gorbushka knock-off's.  So we had legitimately bought a DVD in Region 2 (Europe) and brought it to Region 5 (the FSU - broadly) without any warning that it might well not work in the place to which we were flying.  You can just imagine the signs around HMV in Heathrow;

“Due to anti-customer policies the DVD we are offering you to buy here will probably not work where you are going.  As it is unlikely that you will be passing back through this airport again in the near future I am afraid that our money back guarantee is worthless. Enjoy this piece of moronically stupid entertainment featuring talentless actors earning enormous sums of money.”

Three hours later, an hour of which was spent with the mighty Google, and two syncing and unsyncing and re-syncing SWMBO's hijacked Treo, the newly-acquired DVD player had been fed with code which convinced it that it was everywhere simultaneously.

So now we can legitimately watch our legitimately acquired DVD's on any machine we care to, whenever we care to.  There is a fairly good chance that we will also take a more liberal view of the benefits of the kiosk knock-offs.

Paying Tom Cruise an obscene amount of money to star in crap films does not give you the right to restrict how and where I watch what I have paid for.

Treat me like shit and I will reciprocate.


[composed and posted with
ecto]

Saint Sasha, The Toenail Puller

I've been a little confused by the Litvinenko stories that have taken over MSM in the UK.  I don't care that much who killed him, but the story is being pushed very hard by someone.  Why might tell us more about life in Russia today than the simple fact of his death.  Or it might just indicate that London's climate is preferable to Chita's.

The core of the argument coming from the western-Russia blogs is that VVP's thugs were barely aware of Litvinenko and his strident criticism.  Even well-informed Russians have barely heard of him.  There is no chance of the narod, hearing or caring.  He lived in London, not in Moscow and was incidental to Russia.  If you are unaware, then you don't go to great length to find a rare radioactive material and stage a lengthy and painful death played out, finally, in the press.

If you turn on english language news you don't need me to tell you that VVP did it.  There are however a number of alternate views.  To give him his due copydude was the first of the Russian blogs was the first to offer up the Berezovsky connection with Saint Sasha, The Toenail Puller, which is a great headline.  In quick time he followed it up with Limonov and Litvinenko, highlighting the British press' rather pathetic ability to buy a line from PR agencies.  Given that copydude's previous posts (I know not all of them) have concentrated in rather different areas the strength of his convictions came through forcibly.

Sean's Russia Blog also weighs in with a meaty piece of analysis.

And its not just the blogosphere.  Tom Parfitt writing in the Guardian warns that we should not rush to judgment.

Back to work, need to hire myself a PR Agency.  Not that I am planning any murders; well not actively anyway.


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So What Are They Saying?

The redoubtable Jerome a Paris has provided a remarkable example of how your potato is my tomato.  In his piece he compares and contrasts Le Monde's coverage of the report with the FT's.

I am afraid that you need to click through to see his tables as I can't/don't know how to import them.


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27 November 2006

Aliens To Invest In Banks

The Duma, concerned over Russia's plummeting international image and the possible knock on impact on investment in the banking sector have, far-sightedly some would claim, prepared legislation allowing aliens to invest in banks.

As with many Russian laws it is slightly lacking in detail and does not differentiate between Martians and other aliens.  Nor does it state whether aliens can only come from planets and former planets.

Anyway its nice to know that our duma deputies are hard at work (when they aren't crashing their ferraris.)

Portfolio Investors to Press Strategic Investors:
Russia’s State Duma passed in the first reading Friday the bill whereby it will be easier for aliens to get stakes in Russia’s banks. Market players say the money inflow from foreign portfolio investors will step up capitalization of Russia’s banks and, therefore, lower the threat of the loss of control over the bank system.


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ecto]


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23 November 2006

Europe has nothing to fear from Russia - VVP

VVP wrote a comment in the FT on 21st November (paid for subscription required) Europe has nothing to fear from Russia.

I share his sentiment, as long as you define Europe as being west of the "near abroad."

There were a number of strange things about the article.  Not least of which is that it was originally written in Russian and translated by a non-native english speaker.  Which meant that it was full of long-winded meaningless statements which have no meaning in english.  They are beloved of Russian writers, not that anyone can explain what they mean;

"Though it is not striving to join the EU, when I consider the future of our relations I do not see any areas that are not open to equal, strategic co-operation based on common objectives and values."

It was also strange in that the target audience was solely EU heads of state and their foreign policy governments.  So much so that the FT wrote a translation of the article yesterday.  In fact the piece was so abstruse that it did not even appear in the physical version of the FT delivered to me here in sunny Moscow.   

Despite the FT's translation there remain passages which still remain beyond my understanding (not being the sharpest pencil in the pile).  Wrap your collective brains around this paragraph;

"Russia is closely watching the EU’s evolution, not least because the pace of development of our relations and their future depend largely on changes in the EU. The Union could remain a predominantly intergovernmental association or acquire supranational functions. Russia wants its largest neighbour to be stable and predictable, and hopes that changes and expansion will not erode the EU’s uniform legal framework, primarily in the sphere of ensuring equal rights to all EU people irrespective of country of origin, nationality and religion."
It may help to translate it back in to Russia and then back in to english via a third language - Mongolian maybe.

And then of course there is the requirement to recognise that Russia has a different European past from the Europe it wishes to join economically.

"When speaking of common values, we should also respect the historical diversity of European civilisation. It would be useless and wrong to try to force artificial “standards” on each other."

Other than the english being truly horrible the translation is; let us develop our kleptocracy our way and we will laugh at your Chirac's, Spanish mayors and British paid for peerages.


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Gas Decision Put Off until Next Month - Update

My decision to stick my neck out has proven to be mostly correct; Gas Decision Put Off until Next Month.  I could claim that I was completely correct however, the job of blogs like this is to try to explain the nuance that the MSM either cannot or will not.

The apparent decision not to progress with the deal which seems to have been worked out between GAZP, UES and Gref's MEDT Ministry is that the fundamental answers on energy balance between gas, coal and oil (mazut) going forward have not been worked out.  It's a point which has some merit after the failure of the Energy 2020 policy.  Adopted in mid/late 2003 it was already out of date by mid-2005.  With the government forecasting a requirement for $60bn of annual investment in the gas industry (by GAZP) some clarity on the return on that investment is needed.  Given the personal economic interests at stake it is hard to believe that some understanding has not been reached on future gas price liberalization.

UFG/Deutsche note in their morning comment that;

“the President requested the government to work out a consolidated position on whether to benchmark the domestic gas price in the long-term contracts against the international price.”

From other comments elsewhere there is a sense of basic economic misunderstanding from the Kremlin.  VVP thinks that as much gas as possible should be exported west where it will earn $250/mcm.  Yet the long-term price for gas in Europe, assuming $40-ish/bbl of oil is closer to $140/mcm.  More importantly GAZP, UES and MEDT have been basing their forecasts on netback parity pricing (the price where it makes no difference whether you export gas or not.)  I genuinely feel that this point has been missed somewhere out there.

Conspiracy theorists will wonder why VVP is so concerned that Russia should be shielded from international price movements.  Is Russia seeking to corner the European energy market?

The main reason for the delay in the decision seems to me to have two interrelated causes.  Firstly the good Tsar can't be seen to be hurting “his” people.  Secondly with so much media coverage being provided by the main participants (who were clearly muzzled after yesterday's meeting) it will be difficult for the bad news to be buried.  I reiterate my forecast that whatever decision will be, or has been, made will be made public in late-December.

Meanwhile, Mezhregiongaz held the first public trading session for gas.  GAZP and Novatek both participated with the average price being around $60/mcm.

“The market was not very active today. It is probably because of the mild weather. The main buyers were utilities from near Moscow and farther down to the Urals”

Whilst it would be naiive to describe this as the open market it is at least an indication of real pricing.  For specialist interests it is as yet unclear where the price is quoted.  If delivered the real price increases are not as huge as they would seem upfront.

The contracts are for physical delivery.


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22 November 2006

Russian Banker Dead in Suspected Contract Killing

The spelling of banker is correct.  Dangerous business banking.  Who would have thought that lending and borrowing money could be so hazardous to one's health; if a banker from Spetznatsroibank (sp?) actually borrowed or lent.

Russian banker dead in suspected contract killing

“MOSCOW, November 22 (RIA Novosti) - The killing of another Russian banker in Moscow, the third in a few months, is set to draw heightened attention to crime in the country's banking sector.

Prosecutors said Konstantin Meshcheryakov, co-owner of a small Moscow-based bank, Spetssetroibank, was shot dead late Tuesday outside his apartment building in northern Moscow. An unidentified gunman shot him in the back at point-blank range, and then in the head after the banker fell.

”Investigators are considering all possible motives, including those linked to the victim's professional activities,“ a spokesperson said.

Meshcheryakov is the third Russian banker to be killed in three months.

Alexander Plokhin, the director of a Moscow branch of Russia's state-owned foreign trade bank Vneshtorgbank was shot in the head on the staircase of his apartment building in mid-October.

Andrei Kozlov, first deputy chairman of the Central Bank of Russia who led the CBR's effort to close down dozens of banks for violations of banking legislation, particularly on money laundering, died in September after gunmen opened fire on him with semi-automatic weapons.

President Vladimir Putin earlier ordered officials to crack down on crime in the sector.

Contract killings in Russia were frequent in the 1990s as gangsters sought to take control of lucrative assets in various fields; however, the murder of the Central Bank's deputy head was the most high profile since that time.”

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Russia's domestic gas price may double by 2010

Another putative VVP energy meeting tomorrow (update its today now).  Headlines started flying around pretty thick and fast.  Most of which are meaningless with comment.

Russia's domestic gas price may double by 2010:
MOSCOW, November 21 (RIA Novosti) - Russia's wholesale gas price for domestic consumers could more than double in four years' time, a gas market regulator said Tuesday.

Which is about 50% slower than the market wants it to happen.  Equally importantly GAZP is threatening to double transport tariffs over the same period.  Which would be fair if it was not Gazprom benefitting.
Gas Output Up 2.5% y-o-y
But domestic gas consumption was up more;

“Domestic gas consumption rose 2.9% in first ten months to 313.8 bln cu m.”
Oil and gas condensate up 2.2% y-o-y

Just so the oil industry does not feel left out.

Russia Gas Output to rise to 860 bcm p.a. by 2015

Which is all well and good but forecasts at the beginning of the year had gas demand at 866 bcm by 2015.  If there are readers with more time on their hands than me it would be interesting to know what tonnage of Russian coal, or fuel oil this would translate in to.

What I can tell you for free is that 6bcm is the equivalent of $720mn in revenue in 2015 (assuming the world still wants gas then.)


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21 November 2006

Sticking My Neck Out

The long-delayed government meeting on, inter alia, gas tariffs and energy policy is due to be held tomorrow.

A quick forecast which will may well come back to bite me early; the meeting will not be held tomorrow, if it is held tomorrow the results will not be made known until some point when we are all so drunk or otherwise celebrating that no one will really notice.

Expect an update tomorrow.


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18 November 2006

Build It And They Will Come

Moscow's traffic is becoming legendary.  Yury Mikhailovich who has clearly never read a single traffic management article in his life has determined that the best way to deal with this is not to invest in more communal transport but to widen the roads.

All the theory says that if you build more roads the amount of traffic will increase until the weight of traffic reaches previous proportions and people start using the over-crowded metro again.

Apparently no one has thought of actually investing in traffic control management software and fining drivers for “blocking the box” nor for actually forcing cars to actually meet the regulated requirements.  None of which makes as much money for YM and his lovely wife as building more roads.

I love the concept that something as complicated as Moscow's traffic management can be resolved in one week -

“The mayor gave the city's Transportation Department a week to set deadlines for the construction of such transit hubs.”
Luzhkov Weighs In on Traffic:

Moscow's mounting traffic problem took center stage at Tuesday's City Hall meeting, with Mayor Yury Luzhkov calling for widening roads leading out of the city.

The mayor's proposals are to be included in an updated plan for city development through 2025.

One way to reduce traffic, Luzhkov suggested, would be to deter people from outside the city from traveling into it. The mayor noted that many people travel to Moscow for shopping and entertainment they can't get in surrounding towns. Developing these areas would mitigate pressure on city roads.

The mayor called for an end to new office towers in the center of the city. And he said highways should be built above railway tracks.

City officials also discussed the creation of transit centers at key metro stations. The centers would make it easier for motorists and bus riders to transfer to the metro. The mayor gave the city's Transportation Department a week to set deadlines for the construction of such transit hubs.

Besides congestion, the new blueprint will focus on kindergartens and other “social” projects, said the city's chief architect, Alexander Kuzmin. More thermal and electricity facilities will be needed to meet the city's growing energy consumption, Kuzmin said.


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Solving Moscow's Hotel Room Shortage


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15 November 2006

Russian Oil Fund Chief Shot Dead

Russian oil fund chief shot dead:

This turned in to the parentheses post.  But its too late to re-write and there are more important things to do.

I have it on reasonably good authority that our the victim had not been shy about handing it out .  In a (failed deal) when asked if he had any “skeletons in the closet” he (apocryphally) replied that he would never keep them there.

Notwithstanding, in the days between Putin's appointment and his election (oh those innocent days of winter 2000) whilst traveling in St. Petersburg I was somewhat shocked to come across a number of billboards; not overly professional (oh why does that seem so true today) but the message was clear;

“We must and have to control the people” (if you agree that the“narod” are the “people”)
Whilst the sentiment did not exactly fit with my liberal European views of democracy, the sentiment was understandable at the end of the Yeltsin-years.

But now as the VVP era enters its lame duck years, where are those who “must and have to control the controllers?”  As an aside “lame duck” is a very lame analogy in VVP's case.  More that he can no longer, if “he” ever could, keep a lid on it all.  And the “all” seems to be delivered from a Makarov these days.

However despicable Bush, Cheney, Rumsfeld (and you have to love the Germans for the torture indictment) et al the narod have, at least, fired a well-aimed shot over their collective bow.  With luck, the British public will do the same to Blair for his foreign affairs lies and manipulation, and to Brown for his attempt to take Britain back to, well France.

Not that VVP's friends and colleagues are overly keen on using luck as a way of electing the supreme rent-taker President.

I was in danger of getting in to a “lack of democracy” rant there.  I am not sure that checks and balances are exclusive to democratic institutions; witness the early VVP-years.  What Russia needs is more checks and balances, not more cheques and balances (apologies).

And until it does the skeletons will be found in the podezds not the closets.


“The director general of a Russian oil consultancy company has been killed in an apparent contract killing in Moscow, officials say.

Zelimkhan Magomedov, 50, was shot twice in the head, prosecutors told Itar-Tass news agency.

Ms Magomedov was the head of the National Oil Institute Fund, which seeks to develop small and medium-sized oil and gas producers.

The killing was described as a ”contract hit“ by officials.

”A criminal case has been opened over the contract hit,“ a representative of the city prosecutor's office told Tass.

Ms Magomedov's murder is the latest in a series of apparent professional killings in Moscow.

Last month, campaigning Russian journalist Anna Politkovskaya was shot dead in the city, while in September, Andrei Kozlov, the deputy chairman of Russia's central bank, was killed by gunmen.

The recent murders are reminiscent of a wave of assassinations which swept through the city in the 1990s, targeting businessmen and bankers.”


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09 November 2006

Alekperov Seems Bullish on Domestic Gas Prices

As well he might, but a five-fold increase in five years.

Has no one told him the people are revolting.  Well not exactly but the “I”-word (inflation) is getting louder and louder.


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08 November 2006

Gas, Gazprom and Novatek

The gas news is getting louder and louder;

  • Yesterday, and most uselessly, in the FT, Arkady Ostrovsky rehashed Kakha' visa-less UBS report and Vladimir Milov's criticisms.
  • Alfa Bank (no link love) in a research report suggested that over the next few years the regulated price of gas will rise by 20% per annum on average.  Albeit they seem to have missed the fact that UES already buys a substantial amount of its gas in the “open” market.
  • This morning rumours bubble (again) that Gazprom is about to buy up to 50% of Novatek - confirming Milov's comments that they are better “on Wall Street” than with the drill bit.
  • Vedoms yesterday reported that Gref and Kudrin are fighting a rearguard action to stop regulated price rises with fears of inflation on the horizon. I've been here before.
  • Today Pun hosts a Government meeting on energy.  I feel a Kanutian moment coming on; keep inflation down and raise tariffs, find more gas, preferably by January.

There is, of course, a fairly simple solution to all of this.  Demerge GAZP from UGSS and allow everyone access to the same export contracts and force all gas producers to sell a fixed portion of production for heating.  Unfortunately super-profits for individuals would disappear even if the lights stayed on and the radiators warm.

I think that UES and GAZP's PR departments are being more active than Gref's and Kudrin's.  Control of inflation is very important.  Somewhere before I have commented that the Kremlin is most afraid of the people.  This will win out in the immediate future over tariffs and Gazprom's desire to make more money even if they don't want to spend it on gas.


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05 November 2006

VAT fiddles..

Ukrainian-based (?) blogger Foreign Notes is chronicling the rapid return of Ukraine to its previously corrupt state after a brief moment in the weak early morning sunlight of being only mostly corrupt.

There has been much (well some anyway) conversation recently of those heady days in Russia of Putin's first presidency before the Yukos affair.  Again there was a brief moment when we were naive enough to believe that the rule of law was going to prevail.  And then Khordokhovsky went to jail and Yukos was bankrupted.  Every petty Chinovnik and plenty who weren't realized that if the Kremlin could abuse the law in their favour so could everyone else.  All those businesses which had turned white(ish) and were telling the (insert name of favourite corrupt government department) to take a hike when they came with the begging bowl realized it was a futile game and went back to paying bribes.

I think the nostalgia is for earlier less cynical days when we all had hope that Russia would........well not be like Russia today.

And a happy fascist holiday Holiday of National Unity to you all.

VAT fiddles..:
Bits from an article it today's 'Delo' business daily entitled:

“Economy returning to the shadows”

The number of business enterprises in Ukraine who paid their taxes honestly in 2006 has dropped dramatically compared to the previous year.

The Institute of economic research and political consultations calculates that Ukrainian companies paid almost 80% of what was due last year, but this year the figure is around 55%.

According to the State Tax Administration, Ukrainian financial-industrial groupings [FIGs] are taking advantage of the links between their numermous enterprises to set up fictitious deals and avoid payment of taxes.

The FIG's who 'minimize' their financial responsibilities to the greatest extent, according to deputy head of the STA Mykola Romaniv, are 'Privat', 'Industrial Union of Donbas' [IUD], and 'Interpipe', [owned by Kolomoyskiy, Taruta/Hayduk, and Pinchuk resp.]

Akhmetov's System Capital Management, [SCM] was not mentioned on the list of transgressors. [What a surprise..]

Romaniv said that in order to minimize their VAT payments, the FIGs use 'pseudo-exporting' operations to obtain refunds [Well, well, well..]

“The mentality of Ukrainians is such that does not accept taxes which can be recompensed from the budget. If there is even a minimal possibility of return of tax from the budget, then there will certainly be abuses. To administer this nightmare in the present form is quite impossible, ” considers Dmitriy Svyatash, member of the VR committee on questions of finances and bank activity. [It's all the fault of Ukrainians' mentality then.]

Meanwhile other companies are complaining that they they are not receiving the VAT repayments to which they are entitled.

Newly appointed NSDC secretary Vitaliy Hayduk [see above] has recently been asked by the President to sort out the problem of VAT fiddles - obviously the right man for this vital task.

See also VAT-man Azarov


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