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Business Watch: November 27, 2001


27 November 2001, Volume 1, Number 20
OIL & GAS
SIBUR SALES GROW BY 68 PERCENT (16 November)
According to Russian financial accounting standards, sales revenues of SIBUR oil company reached 35.86 billion rubles ($1.2 billion) in the first nine months of 2001. This is almost 68 percent above the corresponding period in 2000, according to RosBusiness Consulting. SIBUR's press service reported that export revenues made up 18.7 percent of all sales revenues for the company. Meanwhile, the company's profits reached 2.4 billion rubles (about $81 million), or 5 percent less than the first nine months of 2000. The volume of investments in SIBUR for upgrading production facilities and building new ones was reported as 4 billion rubles ($134 million). (TSK)

SURGUTNEFTEGAZ NOT TO PAY DIVIDENDS (19 November)
Surgutneftegaz oil and gas company announced it will not pay large dividends to its shareholders, RosBusiness Consulting reported. An adviser to General Director Aleksandr Sinenko stated that a number of preferred stockholders are not satisfied with the dividend policy of Surgutneftegaz. This is the same group that previously brought a lawsuit against the company. The court ruled in favor of Surgutneftegaz in the last legal dispute. (TSK)

BP READY TO START SAKHALIN-5 PROJECT (19 November)
British Petroleum (BP) is ready to begin operations at risk in two oil fields of the Sakhalin-5 project, RosBusiness Consulting reported. The future of Sakhalin-5 and other Sakhalin projects has remained uncertain in recent years. According to Sakhalin Governor Igor Farkhutdinov, BP expressed its intention to invest in prospecting and exploratory drilling, which will be done by Sakhalin geologists, physicists, and drillers. At the same time, the company asked the governor to lobby Russia's Natural Resources Ministry. BP will begin if these oil fields are added to a list of eligible projects subject to the product-sharing agreement. (TSK)

BASHNEFT TO COOPERATE WITH KAZAKH OIL COMPANIES (19 November)
Bashneft oil company has reached an agreement with Kazakh oil companies on the joint development of two oil deposits in Kazakhstan, RosBusiness Consulting reported. A license agreement is expected to be signed in the near future, and geological exploration will start soon. Kazakh oil deposits are located not far from Bashkiria, and the joint project will be favorable for Bashneft, whose oil deposits will soon be exhausted. Kazakh oil will be transferred to oil refineries in Bashkiria via existing pipelines. (TSK)

BUSINESS ALERT
ING BARINGS PREDICTS 5.5 PERCENT GDP GROWTH (15 November)
ING Barings predicts that Russia's economy will grow an average of 5.5 percent annually for the next five years if the country plows ahead with reforms. If reforms are neglected, growth will not top 2.5 percent, the "Moscow Times" reported. The Dutch bank, Europe's fifth-largest, stated in a new report that investment and imports will surge, while consumption will grow moderately. "Reforms can increase the average annual economic growth from 2.5 percent to 5.5 percent, or a total of 38 percent for the 2002-2007 period," said Yulia Tseplyayeva, the senior economist with Russian ING Bank Eurasia who spearheaded the report. According to the report, Russian stocks still trade at a significant discount to other emerging markets, and Russian assets are 40 percent to 80 percent undervalued. Russia is already performing considerably better than most emerging markets, but there are other success stories as well, she said. The main case in point is China, which arguably is now Russia's main rival for foreign investors. "A lot of investors are choosing between Russia and China now, and the question we need to answer in the government is whether Russia will present a more competitive and favorable environment for doing business," Deputy Economic Development and Trade Minister Arkadii Dvorkovich stated at a news conference presenting the ING report. (TSK)

NORILSK TO KEEP STRATEGIC RESERVES (15 November)
Norilsk Nickel plans to keep unsold nickel stocks in the near future as a strategic reserve to sell on the market in case of increased nickel demand, Prime-TASS reported. According to Viktor Sprogis, deputy general director of Norilsk Nickel, the company did not plan to reduce nickel production this year but did not rule out production cuts in 2002. He declined to provide exact volumes of stockpiled nickel. Metal traders estimate Norilsk Nickel has stockpiled over 80,000 tons of unsold nickel. (TSK)

RUSSIA MAY RECEIVE $30-40 BILLION IN PAYMENTS (15 November)
Russia may rely on receiving $30 billion to $40 billion from debtors of the former USSR, Vneshekonombank Chairman Andrei Kostin announced at a press conference in Moscow. He said Russia's foreign debt totaled $138 billion. At the same time, RosBusiness Consulting reported, the total amount of money owed to the former USSR is $103 billion. As Russia was entering the Paris Club of Creditors, the amount of debt to the USSR was equal to $150 billion. Since Russia agreed to write off some of the debts of the poorest countries, this amount dropped to $103 billion. According to Kostin, Yemen, Mozambique, and India have already begun paying off their debts to the Russian Federation. Ethiopia and Vietnam are supposed to join them in the near future. Some $1.3 billion was paid to Russia as the USSR's debt in 2000, and $1.1 billion over the 10 months of 2001. Kostin also said that the Commonwealth of Independent States (CIS) owes Russia $3.5 billion. (TSK)

GAZPROM-KALMYKIA SIGN COOPERATION AGREEMENT (16 November)
Gazprom CEO Aleksei Miller and the president of the Kalmykia Republic, Kirsan Ilyumzhinov, signed an agreement of collaboration, RosBusiness Consulting reported. The agreement provides for gas supplies to Kalmykia cities, regional centers, and rural areas, gas-prospecting works, and gas production. It will also improve the balance of energy resources due to a broader use of alternative fuels and ensure debt payment for gas supplies. Kalmykia will help Gazprom subsidiaries receive tax breaks on their investment projects. Gazprom annually provides about 200 million cubic meters of gas to Kalmykia. Kalmykia is the 64th region of Russia that has reached an agreement with Gazprom. (TSK)

RUSSIAN BUSINESS ABROAD
NORILSK-INCO DENY PLANS TO COORDINATE OPERATIONS (15 November)
Metals giants Inco and Norilsk Nickel denied their plans to coordinate operations despite a "fact finding" tour of Norilsk's facilities by Inco officials, Reuters reported. "We have a lot of these exchanges. The purpose is really to get to know each other better," said Steve Mitchell, a spokesman for Canadian-based Inco, the Western world's biggest nickel producer. "Meetings between officials of the two companies were dedicated to routine exchange of information between companies working in the same sector," Norilsk said in a statement. "No talks on coordinating the companies' actions or activities have taken place," it added, denying reports that the two companies had discussed ways to coordinate actions amid current volatility in metals markets. (TSK)

RUSSIA & FRANCE: MORE JOINT PROJECTS NEEDED (15 November)
Russian First Deputy Foreign Minister Aleksandr Avdeyev has called on implementing more Russian-French joint high-tech projects, ITAR-TASS reported. "We need new projects which would be accompanied by investments and ensured by high technologies," Avdeyev said in an interview. "If we take bilateral economic cooperation, its prospects lie in boosting the number of big investment projects and high-tech projects. Trade alone is not enough, despite its big volume," he stressed. According to Avdeyev, another urgent issue is that, "French efforts to convert Russian foreign debts into investments. We shall avail ourselves of the French experience in this case, and we also value assurances, given by French Prime Minister Lionel Jospin in this sphere of cooperation during his Moscow visit," Avdeyev added. (TSK)

ECONOMIC NEWS & BUSINESS STATISTICS
ADDITIONAL $10.6 BILLION BOOSTS BUDGET REVENUES (15 November)
Additional budget revenues are expected to total 318 billion rubles ($10.6 billion) this year, Prime-TASS quoted Finance Minister Aleksei Kudrin as saying at the Federation Council meeting on 13 November. Kudrin, also a deputy prime minister, said the government plans to forward about 25 billion rubles of this amount toward a special reserve fund designed to accumulate funds for the peak in foreign debt payments in 2003. Russia is due to pay about $19 billion to $20 billion in foreign debt in 2003. Kudrin believes that 25 billion rubles would make up only a quarter of the funds the government needs to collect by 2003 to ensure full and timely foreign debt payments. (TSK)

AEROFLOT 2001 BUSINESS STATISTICS (15 November)
Aeroflot carried 17.7 percent more passengers in the first 10 months of 2001, the flagship carrier told the "Moscow Times," but it may have a loss in the third quarter. Net profits decreased to $18.5 million in the third quarter, according to Russian accounting standards, suggesting a loss, Troika Dialog said in a research note. Aeroflot flew 5.086 million passengers in the first 10 months of this year, the company said in a statement. The company hauled some 5.1 million passengers in the whole of 2000, and is expecting to beat that number this year. (TSK)

SUAL SHAREHOLDERS APPROVE $50 MILLION RIGHTS ISSUE (15 November)
Shareholders of aluminum giant SUAL Holding approved an additional share issue aimed at raising $50 million in 2002, SUAL spokesman Aleksei Goncharov told Prime-TASS. The company plans to issue 1.5 billion additional shares, which will be placed in a public offering. The new shares' par value is set at 1 ruble per share. Goncharov said the company decided to issue additional shares to raise funds for investment projects despite low world aluminum prices. SUAL said it was cutting back on $170 million in planned investment, which would include suspension of work on a new mine and slower reconstruction of a smelter. Meanwhile, steel major Severstal plans to issue $100 million to $150 million in eurobonds in 2002, Severstal General Director Aleksei Mordashov told Prime-TASS. (TSK)

ROSTELEKOM POSTS PROFITS (15 November)
Russian long-distance telecom Rostelekom said it was profitable in the first half of 2001 and is ready to boost efforts to compete in a tight market. CFO Vladimir Androsik told Reuters that a deal to sell a 50 percent stake in profitable Moscow carrier Sovintel to Golden Telecom for $52 million and a 15 percent stake in Golden would close in the first quarter of 2002. He said the firm's first-half net profit, according to International Accounting Standards, was 1.65 billion rubles ($55.44 million), compared with a loss of 356 million rubles for the same period of last year. "I see these results as extremely positive," Androsik said. "We have a new management, we increased settlement rates [with local carriers] two times and we began a system of expense control. We are carefully tracking operational and non-operating expenses, where there is room for savings," Androsik said. "These things all brought about improved profitability." Androsik said Rostelekom would turn up the heat on its competitors by cutting tariffs in key areas where it is losing to competitors, such as Moscow-St. Petersburg calls and a few international routes. (TSK)

PROPERTY MINISTRY REVENUES EXCEED PLAN (15 November)
By preliminary estimates, Russia's Property Ministry has collected 28.523 billion rubles (about $957 million) in taxes for the federal budget over the first 10 months of 2001, RosBusiness Consulting reported. The original plan to collect 20.826 billion rubles (about $699 million) was exceeded by 36.9 percent. Approximately 20.136 billion rubles (about $676 million) were received for the use of federal property, which entails 146.6 percent of the plan. It is estimated that 8.387 billion rubles (about $281million) came from the sales of property and stakes in joint-stock companies conducted by the State Property Fund of Russia and property funds of regions and republics within the Russian Federation. (TSK)

EU TO GRANT 25 MILLION EURO TO GEORGIA (19 November)
The European Commission has allocated a 25 million euro grant to Georgia within a program of ensuring food supplies for the country in the next two years, Prime News Agency reported. According to Georgian President Eduard Shevardnadze, 1 million euros will be used to service the grant, and 24 million euros will go directly into the Georgian budget. The president added that the European Union's assistance to Georgia proves the latter's firm democratic orientation and stability. (TSK)

UPCOMING CONFERENCES
PREPARATIONS FOR CIS SUMMIT UNDERWAY (16 November)
The chairman of the Commonwealth of Independent States (CIS) Executive Committee, Yuri Yarov, said the preparations for the 29-30 November CIS summit in Moscow are underway, although some issues demand "additional attention," Prime News Agency reported. Among those issues is a draft document on joint antiterrorism operations on CIS territory. The summit agenda is likely to include a draft convention on the standards of democratic elections, electoral rights, and freedoms in the CIS countries. (TSK)

TRACECA MEETS IN TBILISI (19 November)
A meeting of the Transportation Corridor Europe-Caucasus-Asia (TRACECA) Interparliamentary Commission will be held in Tbilisi on 11-12 December, Prime News Agency reported. According to Georgi Gogiashvili, a TRACECA secretary, the meeting will be focused on new regional transport projects sponsored by the European Commission. The participants of the meeting will consider a proposal of international humanitarian organizations to use TRACECA for providing humanitarian assistance to Afghanistan, Gogiashvili added. (TSK)

POLITICAL ECONOMY
RUSSIA TO ISSUE $2 BILLION WORTH OF EUROBONDS IN 2002 (15 November)
Russia will take another step in untangling its debt problems next year by issuing $2 billion worth of eurobonds to corporate creditors who have been awaiting repayment since the Soviet days, Reuters reported. Andrei Kostin, the head of Vneshekonombank, the state's agent for paying debts, said, "I think we shall be ready to issue eurobonds in March or April." "We fully depend on a government resolution. If they issue it in December, I think we shall be ready by April," he told a news conference. The debt is the one from Soviet companies that received credits from foreign trade firms without government guarantees. A process of reconciling claims from creditors has been underway for several years, and the Finance Ministry has so far received $6.3 billion. (TSK)

WHO IS IN? WHO IS OUT?
HEAD OF FINANCE MINISTRY'S FOREIGN DEBT DEPARTMENT RESIGNS (15 November)
Andrei Cherepanov, director of the Finance Ministry's foreign debt department, resigned on 14 November due to disagreements over the ministry's foreign-debt policy, "Vedomosti" reported. Cherepanov called for a halt in domestic and foreign borrowing and pushed for the creation of a unified debt-managing agency as soon as possible. The ministry, however, plans to create the agency in about two or three years and continue foreign and domestic borrowing. Deputy Prime Minister and Finance Minister Aleksei Kudrin accepted Cherepanov's resignation. (TSK)

ALROSA HEAD BARRED FROM PRESIDENTIAL CAMPAIGN (15 November)
The Supreme Court of Yakutia (Sakha Republic) has barred Vyacheslav Shtyrov, head of the Alrosa diamond company, from participating in local presidential elections on 23 December, lenta.ru reported. According to Igor Nikolaev, chairman of the court board in charge of civil cases, Shtyrov�s registration to run for presidency was annulled on the grounds that the registration application was submitted to the Central Elections Commission one day past the deadline. The court decision is final and cannot be appealed, Nikolaev said. Shtyrov, along with the incumbent President Mikhail Nikolaev and Deputy Prosecutor General of Russia Vasilii Kolmogorov, are believed to be the front-running presidential candidates. According to Aleksandr Veshnyakov, head of Russia's Central Election Commission, the Shtyrov case might be submitted to the Russian Supreme Court. (TSK)

DORENKO NOT TO RUN FOR MOSCOW DUMA (15 November)
Sergei Dorenko, a top Russian TV anchorman, decided not to run for a seat in the Moscow City Duma, "Ekho Moskvy" reported. According to Dorenko, a recent "unjust" court decision "cast a shadow on his reputation" and his constituency might think that "he is hiding behind his voters� backs to escape possible political provocations." However, Dorenko stated, he will proceed with his political career. Earlier in November, Dorenko was convicted by a Moscow court on charges of "aggravated hooliganism" and given a four-year suspended jail term. A municipal court found Dorenko guilty of hitting naval Captain Valerii Nikitin in April with his Honda sport motorcycle. (TSK)

WHAT�S UP? WHAT�S DOWN?
MOODY'S AND STANDARD & POOR'S ISSUE NEW RATINGS (15 November)
International rating agency Moody's has assigned a "B1" rating to the eurobonds of Russia's Magnitogorsk Metals Plant and a "Ba3" rating to the steelmaker's ruble-denominated bonds, Interfax reported. Standard & Poor's (S&P) rating agency raised its long-term foreign currency issuer credit rating on the Samara region to "B" from "B-," Prime-Tass reported citing an S&P statement. (TSK)

PROFILE
THE NEW 'VODKA KING' OF RUSSIA
Russia's Highest Arbitration Court recently reached a verdict that returns Russia's most popular vodka brands -- including Stolichnaya, Moskovskaya, and Russkaya -- to state control, flb.ru reported. Another outcome of the long struggle for influence in Russia's spirits market was the emergence of a new oligarch. From now on, Sergei Zivenko, director general of Rosspirtprom (Russian Alcohol Industrial enterprise), can alter the direction of Russian vodka flows at his own discretion.

In terms of revenues, Russia's alcohol market can be compared with the oil market. The cost of a one-liter bottle of Rossiiskaya vodka is $1.50. The retail price for the same bottle in the West is approximately $25. The 10-year profits from the most popular Russian vodka brands are a combined $5 billion. In the past few years, Boris Berezovsky's close friends have enjoyed this bonanza. But times have changed and this lucrative market has been returned to the state's, or more precisely to Zivenko's, control. As is often the case with the new Russian business-political elite under President Vladimir Putin, many new oligarchs are being plucked from obscurity.

A native of the Stavropol region, Zivenko, nickname "the general," was seriously involved in boxing since his childhood. Zivenko did not reach great heights in sports, partly due to perestroika which, along with other freedoms, legalized private enterprise. Instead of a career in sports, Zivenko chose that of a businessman. In the late 1980s, he was introduced by chance to the legendary three-time Olympic champion Vasilii Machuga, who was then a chairman of the Krasnodar regional sports committee. Despite a considerable age difference, they became good friends and established a company, called Optimist, which specialized in providing sports equipment. By mid-1991, Machuga had become chairman of the State Sports Committee in the newly democratic Russia. This was quite a move for an ordinary entrepreneur, flb.ru noted. Some rumors claim that Machuga was the best barbecue cook in the Krasnodar region and then-Soviet Prime Minister Ivan Silaev adored barbecues; happy to indulge in such cooking on a regular basis, Silaev granted Machuga this position, the rumor goes.

Zivenko followed Machuga to Moscow, where they both established a new company producing sports clothes. In 1994, they even paid over half a million rubles in taxes, which in the early 1990s was considered something akin to philanthropy. Soon, Zivenko adopted the practice of bartering. Due to close ties with the prime minister at the time, Zivenko and Machuga were granted by the Russian Finance Ministry the rights to make a barter deal with KangaRus company, Zivenko's U.S. partner. It was a $5.5 million barter deal -- sporting goods in exchange for oil. Within two months, the prime minister had signed another government decree authorizing another barter agreement with KangaRus. This time, it was a $15 million deal allowing the acquisition of a sport shoes factory. Rosnefteproduct, a state-owned oil company, made the payment. The "business alliance" between Zivenko, Machuga, and Silaev did not last long. Machuga kept his post for less than a year. Silaev was soon removed from his position as prime minister, and Zivenko's career was under threat.

However, in 1992-93, the Kremlin was basically taken over by the so-called "Krasnodar team." Its most powerful members were Deputy Prime Minister Vladimir Shumeiko, Ethnic Issues Minister Nikolai Egorov, and National Security Minister Viktor Barannikov. These three powerful insiders appear to have taken Zivenko under their wing. (Egorov even viewed him as a future son-in-law.) With this new link to senior officials, Zivenko became "the father of Russian barter." Soon, he brought to Russia the idea of duty-free imports. He promoted the idea among his powerful friends in the Kremlin, and soon a decree on duty-free imports was signed into law by then-President Boris Yeltsin. This new legislation poured millions of dollars into the pockets of the new Russians. Russia's national sports fund alone, under the pretext of protecting public health, received over $3 billion from the duty-free import of alcohol and tobacco products. In 1996, a covert war over control of the Russian alcohol market unfolded between Zivenko's and Berezovsky's teams. Meanwhile, Zivenko was actively involved in the oil business which, according to flb.ru, eventually brought him some $50 million in profits.

Fortune appears to have smiled on Zivenko when Vladimir Putin was elected president. As it turned out, Putin and Zivenko were linked by mutual business ties. In 1994, when Zivenko was shipping alcohol products through St. Petersburg customs authorities, he met with then-St. Petersburg Mayor Anatolii Sobchak and his assistant on external economic relations, Putin. Little is known of the current relations between Zivenko and Putin. However, on 6 May 2000, the Russian government authorized the establishment of Rosspirtprom, a federal government enterprise for the spirits and vodka industry. By the same decree, Zivenko was appointed director general of Rosspirtprom, thus vanquishing his rivals in the war for Russia's alcohol market. Flb.ru speculated that Zivenko even used his own funds to finance the establishment of Rosspirtprom. With his own money and his own management, Zivenko gathered a team of associates whose reputations are far from clean, flb.ru stated. The old nickname, "General," comes in handy for Zivenko in this new capacity as Russia's "vodka king." (TSK)

IN FOCUS
RUSSIA AND OPEC FLIRT WITH A PRICE
Oil prices have fallen drastically since the terrorist attacks in the U.S. on 11 September. U.S. prices alone are down 40 percent since the attacks. In an attempt to boost prices, the Organization of Petroleum Exporting Countries (OPEC) is calling on non-OPEC members to make cuts in oil production. OPEC has called on Mexico, Russia, Norway, and Venezuela to cut their oil output by 500,000 barrels per day (bpd), along with OPEC's agreed cuts of 1.5 million bpd. OPEC has already cut production by 13 percent (or about 3.5 million bpd) this year in hopes of keeping prices near the target of $25 per barrel. OPEC is prepared to make these new cuts on 1 January 2002, "subject to a firm commitment" by non-OPEC producers. OPEC believes that non-OPEC members should shoulder some of the burden of propping up prices by managing supply based on demand. Mexico has already promised to cut 75,000 to 100,000 bpd. Norway indicated it would make a decision on a cut of up to 100,000 bpd sometime this week. But Russia, one of the world's largest oil producers, has agreed to a symbolic cut of 30,000 bpd. This represents a mere 1 percent of Russia's daily exports and less than 0.5 percent of daily production, which is estimated at 7 million bpd. Russian Deputy Prime Minister Viktor Khristenko, who heads a commission in charge of oil exports, indicated that Russia�s cuts might come in the form of a reduction in exports of 44,000 bpd.

The Russian government announced the proposed cuts after talks between Russia's six largest oil-producing companies and Prime Minister Mikhail Kasyanov on 12 November. While LUKoil, Surgutneftegaz, and Rosneft agreed to the cuts, Yukos, Sibneft, and Tyumen Oil Company (TNK) were angered by the government�s plans. The latter companies believe they would be hurt the most by the proposed cuts, since they have been actively investing in extra production capacity, the "Financial Times" reported.

Yukos President Mikhail Khodorkovskii said that any reductions by Russia would lead to other regional independent producers, such as Kazakhstan or Azerbaijan, supplying volumes instead. "If we are told [by the government] to cut production, we will cut," he said. "But I will do everything I can to prove that it is unreasonable." He also pointed out that Russia only represents 10 percent of world output and has little impact on European markets. Furthermore, Khodorkovskii stressed that it is important for oil producers in Siberia to keep their equipment running to keep their wells from freezing over. He said, "We are unable to regulate our output just by turning a knob, like the OPEC and southern non-OPEC countries can." In addition, a Yukos analyst noted that a price of between $16 and $22 per barrel was acceptable, but that Russian producers need a price of $18 a barrel to make their investment projects profitable.

Meanwhile, LUKoil Vice President Leonid Fedun said that Russia could technically cut oil output by 200,000 to 300,000 bpd. He noted that the cut "should be discussed between the government and the cartel." Fedun added that LUKoil was ready to support bigger cuts and that it would take responsibility for 24 percent of any reduction, equal to its share of Russian oil production, Reuters reported.

It appears that the government has restricted the reduction to a token one as a protectionist measure. The Russian economy is highly dependent on revenues and taxes earned on oil exports to hard-currency countries. Khodorkovskii predicted that "the losses of Russian industry from a fall in orders from oil companies will be about $6 billion," Reuters reported. If the price of oil drops below $18 per barrel, officials have expressed concern that the government would have to revise its 2002 budget.

On 15 November, a senior OPEC delegate said the organization would not take any more oil off the world market unless other key producers outside the cartel, notably Russia, cut their exports. The delegate said, "If the Russians do not participate [in cuts], nobody in OPEC will make sacrifices," to try to revive sliding oil prices, the "Financial Times" reported. Fears of a price war between the cartel and Russia prompted London's Brent crude prices to fall from $27.45 prior to the attacks to $18.75 on 14 November. On 15 November, oil fell to $17.15 per barrel on the New York Mercantile Exchange, its lowest level since June 1999, Reuters reported.

Saudi Arabian Oil Minister Ali al-Naimi said, "We are in a crisis mode and we need help." He added that OPEC would pursue its strategy of shared output cuts even at the risk of seeing prices fall further "until everyone cooperates." Kuwaiti Oil Minister Adel al-Sabeeh said on 15 November that the price of oil could fall as low as $10 per barrel, if the current output standoff between OPEC and non-OPEC members continues. Such low prices may not matter too much to Russia, analysts say. Alfa-Bank said in a research note that at an average price of $15 for Brent next year, Russia's GDP would grow 1.6 percent. Even if Brent fell to 1998 levels, at around $13 per barrel growth would remain positive, it said. On the other hand, the impact on the Russian economy immediately started to show on 19 November, with the ruble hitting a new record low of 29.80 to the U.S. dollar.

Al-Naimi also stressed that Russia was being unreasonable and that it, along with Saudi Arabia, would be the biggest loser if prices fell further. Al-Naimi stressed, "Russia's cut is miniscule and disappointing and we don't take it seriously." He added, "We make the appeal especially to Russia, to heed the lessons of the past," referring to the previous price crashes in 1986 and 1998. Iranian Oil Minister Bijan Zanganeh will travel to Russia to lobby for serious cuts. OPEC Secretary-General Ali Rodriguez will also visit Russia in December to hold talks on oil strategy, RosBusiness Consulting reported. In an interview with "Russia Journal," Rodriguez said, "We think that Russia can make a more significant [effort], as it is the world's second-biggest oil producer at this moment."

However, these efforts may not be welcome in Russia. Russian Prime Minister Mikhail Kasyanov on 16 November said, "We are not going to at any time reduce production on a big scale, it�s impossible. Perhaps we could cut some production for some time to achieve a fair price." But Finance Minister Aleksei Kudrin said on 17 November that there was room for negotiation on Moscow's offer. He said, "I didn't say it [30,000 bpd] was the final word. It is a matter of our negotiations. We are not prepared to carry out those profound cuts in our production." (JMR)

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