16 April 2002, Volume
POLAND CUTS DEMAND FROM GAZPROM, DISCUSSES PIPELINES WITH RUSSIA (4 April)
Polish Deputy Economic Minister Marek Kossowski announced that the Polish government cut its gas-demand forecast by around 23 percent during talks with Russia. It is seeking to renegotiate its deliveries with Russian giant Gazprom. The reduction coincided with talks between Gazprom and Polish gas monopoly PGNiG in Warsaw on 4 April. "The new forecasts for Poland's gas demand, as well as some revisions of gas needs in Western Europe, must be taken into account in talks with our gas suppliers, particularly Russia," Kossowski told Reuters. The new forecasts see Poland's gas demand -- now at around 11 billion cubic meters (bcm) a year -- growing at a much slower pace than previously assumed and reaching 12.7-13.7 bcm a year by 2005. A long-term deal with Russia originally envisaged imports of 250 bcm of gas by the end of 2020.
Russia and Poland are holding talks over pipeline routes. Both sides agreed in 1993 to build a giant gas link from Russia to the West via Belarus, Poland, and Germany. But the expansion project has been hit both by financing difficulties and disagreements over taxes. Officials met on 4 April to discuss the completion of the co-owned Yamal-Europe link. The Yamal-Europe pipeline currently carries around 20 bcm annually and needs $350 million to build three compressor stations to boost its capacity to an originally planned 33 bcm. "There is an agreement that investments into the existing stretch of the Yamal-Europe pipeline need to be made, but we also want to negotiate the timetable of future deliveries accordingly to new gas-demand forecasts," Kossowski said. According to a Gazprom statement, "Under the 1993 intergovernmental agreement, Poland was due to invest $350 million in the pipeline but has invested only $150 million so far. The Polish side confirmed early this year that it was ready to fulfill its financial obligations, but after several rounds of talks we did not agree on acceptable terms of financing." The Yamal-Europe link is built by EuroPolGaz, a 48/48 percent joint venture between Gazprom and PGNiG. The remaining 4 percent belongs to Bartimpex, Poland's largest private customer for Russian gas. (JMR)
LUKOIL, COLOMBIA SIGN EXPLORATION CONTRACT (8 April)
Russia's top oil group, LUKoil, signed an exploration contract in Colombia on 8 April covering a chunk of the same mountain chain where the country's largest oil fields are located. State-owned Ecopetrol said the contract marks the first time the Russian firm has joined an exploration venture in the Americas. The contract covers nearly 740,000 acres (300,000 hectares) in northeastern Colombia along a mountain chain dubbed the Piedemonte Llanero, where the 300,000 barrel-per-day Cusiana-Cupiagua fields are located, Reuters reported. (JMR)
WILLIAMS, YUKOS INITIAL OIL-FOR-EQUITY DEAL (11 April)
Williams and Yukos Oil Company 11 April initialed an oil-for-equity deal regarding the Lithuanian company Mazeikiu Nafta. Yukos will receive a 26.85 percent stake in Mazeikiu Nafta and supply the refinery with a long-term supply of oil. Yukos will make a $75 million payment, a loan of $75 million and a minimum supply of "nearly 5 million tons of crude" annually for 10 years, Reuters reported. Mazeikiu has struggled with supply problems in recent years. "I think Yukos is a serious company and serious partner who can bring Mazeikiu Nafta stability," Lithuanian Economic Minister Petras Cesna told reporters. However, he said it will take "a week or two before we can make any initial comments." The Lithuanian government, with a 59 percent stake, will have to give final approval to the deal. Williams International Director Randy Majors said Yukos and Williams agreed to work exclusively together and are eyeing 1 June as a hopeful date of completion for the transaction. The deal would cut the government's Mazeikiu stake to 40.66 percent. Williams -- whose Mazeikiu stake would also be trimmed to 26.85 percent -- will remain operator of the Lithuanian plant, but Yukos will be given advisory input through a shareholder steering committee. (JMR)
ALCATEL, SVYAZINVEST FORM JOINT VENTURE (3 April)
Alcatel and Svyazinvest have signed a Memorandum of Understanding establishing a joint venture to manufacture optical fiber in Russia. This makes Alcatel, the world leader in optical networking, the first Western company planning to manufacture high-technology fiber with a Russian partner for the booming Russian telecommunications market. Svyazinvest accounts for a significant amount of optical-fiber purchases in Russia because it includes several Russian service providers and the largest long-distance carrier, Rostelekom. Valerii Yashin, general manager of Svyazinvest, explained, "Our main goal is to provide high-quality telecom services to our users. We consider this joint project with Alcatel as an opportunity to create a local high-tech manufacturing facility that will provide cable manufacturers with domestically produced world-class optical fiber. We will provide Svyazinvest's subsidiaries with the required volumes of cable at a more affordable price." (JMR)
MALAYSIA TO BUY AIR-DEFENSE SYSTEM FROM EUROPE AND RUSSIA (10 April)
Malaysia signed nearly $400 million worth of contracts with European and Russian firms to buy air-defense missile systems to boost its army, Kyodo News reported. Defense Ministry Secretary-General Hashim Meon signed a $315.48 million deal with British-based MBDA on the purchase of an unspecified number of the Jernas enhanced short-range air-defense system. MBDA is a consortium of Matra BAe Dynamics in Britain, Aerospatiale Matra Missiles in France, and Alenia Marconi Systems in Italy. The three companies merged in December to form a single entity. Hashim later signed another deal worth $48 million with Russia's Rosoboronexport to purchase its IGLA short-range air-defense system. Malaysian Defense Minister Najib Abdul Razak said, "In modern warfare, the use of air power poses the biggest threat. If there is an attack, [the air-defense system] will be the first [line of] defense." Malaysia has been embarking on a military shopping spree now that its economy has recovered from the 1997 financial crisis. (JMR)
MTS BUYS 51 PERCENT OF KUBAN (10 April)
Russia's largest cellular operator, Mobile TeleSystems, announced on 10 April that it concluded a deal to buy 51 percent of southern operator Kuban GSM for $71.4 million, Reuters reported. MTS said it was buying out Southern Telecommunications' 26 percent stake, as well as shares owned by Kubtelekom, a private company, and individuals. Kubtelekom will retain a 49 percent stake in Kuban GSM, but MTS has an option to buy more of its shares at market price by February 2006, according to a company statement. MTS President Mikhail Smirnov said, "We are acquiring the fourth-largest operator in the country, a leader in its region in terms of subscriber numbers and technical development of its networks." (JMR)
FOSTER WHEELER WINS TURKMEN REFINERY CONTRACT (11 April)
Foster Wheeler Italiana has been awarded a basic and front-end engineering design (FEED) contract by Emerol Ltd. for the revamp of a delayed coker unit at its refinery in Turkmenistan. The total value of the project is approximately $43 million and the FEED is to be completed by early 2003. The contract calls for modernization and de-bottlenecking of the present delayed coker unit, which is of Russian design, according to a Foster Wheeler statement. The Turkmen refinery is the largest of two in the country and is undergoing a major modernization as the country expands the development of its oil and gas industry. The revamp of the delayed coker is the start of this modernization program. (JMR)
CNH GLOBAL TO SUPPLY SAMARA REGION AGRICULTURAL MACHINERY (11 April)
The world's leading producer of agricultural tractors and combines, CNH Global, announced on 11 April that it will supply Russia's Samara region with agricultural equipment worth more than $11 million. The sale follows a mission led by U.S. Commerce Secretary Donald Evans to Moscow in October. "This agreement is an outstanding example of what can be achieved through private cooperation," Evans said. "The more we trade, the more we grow economic opportunities for the workers of both sides." Under the terms of the agreement, CNH Global will provide 149 pieces of agricultural equipment manufactured in Illinois, Nebraska, and Wisconsin. The project includes 43 IH Axial-flow combines, 43 IH Grain headers and Pickup headers, four IH Corn headers, and 20 IH MX240 tractors and necessary spare parts. CNH Global will also work with its Russian distributors to organize and equip a service center for this machinery. President and CNH Global Chief Executive Officer Paolo Monferino said, "We are honored and privileged to be awarded with this project. We have a large stake in the world economy and with our leadership we will promote international trade in Russia." CNH also won a major project in the Uzbekistan last year. In the past six years, CNH Global has sold more than 7,000 machines in Uzbekistan. Company revenues totaled more than $9.7 billion in 2001. (IAM)
FLIGHTS RESUME BETWEEN RUSSIA AND NORTH KOREA (5 April)
Regular flights between Pyongyang and Khabarovsk in Russia's Far East region resumed for the first time in almost 10 years on 5 April. North Korea's state-run Air Koryo reopened flight services, with its aircraft leaving Pyongyang for the Russian Pacific coast city earlier in the day. The resumption of the flight service follows North Korea's active efforts to forge closer economic ties with the Russian Far East, Kyodo News reported. Russian-made Tu-134 passenger planes will make a round-trip flight between the two cities on Mondays and Fridays. North Korea and Russia launched an airline route between Pyongyang and Moscow via Khabarovsk in 1979 primarily to transport North Korean loggers but later suspended flights between the North Korean capital and Khabarovsk when relations with Russia cooled following the collapse of the Soviet Union in 1991. (JMR)
NORTH KOREA SEEKS RUSSIAN COAL SUPPLIES (11 April)
North Korean leader Kim Jong-Il has asked the Russian government to provide his country with coal to help make up for its acute shortage of energy, Kyodo News reported. The size of the coal request was not made public. The North Korean request for coal followed a request for the supply of electricity for industrial use that Kim made to Moscow when he visited the Russian Embassy in Pyongyang on 6 January. Analysts say the North Korean leader's repeated requests for electricity and coal show the country is facing a serious energy shortage. Relations between Russia and North Korea have been warming over the last two years. (JMR)
RUSSIA DOES NOT NEED WORLD BANK SUPPORT (6 April)
Russian President Vladimir Putin and World Bank President James Wolfensohn met on 6 April to discuss special programs and the economic situation in Russia. In an interview with "Izvestiya," Wolfensohn said, "At the current time there is no need for large-scale support of the Russian budget by the World Bank." He added, "We are very impressed by the various reform measures and management measures which have been taken in this country, and we want to be friends even if we cannot lend you money." The World Bank is switching to more specific projects in certain sectors, such as education, medical care, and institutional development, in which the bank could extend relatively cheap and long-term loans, Xinhua News reported. Putin expressed concern over Russia's massive debt to the World Bank. In the 1990s, Russia borrowed up to $10 billion. Putin has put a stop to large-scale borrowing and has worked to pay off foreign loans. In 2001, Russia repaid $13-15 billion in foreign debt on the strength of three years of economic growth and high world oil prices. Russia's overall foreign debt stands at $132-134 billion, according to the latest Russian government estimate. However, he noted that Russia will continue to cooperate with the World Bank on smaller projects. "Relations between Russia and the World Bank have a good history...and despite the fact that today we refuse taking big loans, we are quite interested in continuing joint work," AP quoted Putin saying. Deputy Prime Minister Viktor Khristenko told reporters after the talks that World Bank loans for various projects in Russia will total $300-500 million annually for the next three years. (JMR)
U.S. TREASURY REPRESENTATIVE ON RUSSIAN BANK REFORMS (11 April)
U.S. Treasury Undersecretary for International Affairs John Taylor visited Moscow for two days starting on 9 April to discuss banking between the U.S. and Russian businesses and to lay the groundwork for the economic portion of the Russian-U.S. summit in May, Reuters reported. "There have been a lot of good policy changes in Russia," Taylor said. "The introduction of the flat tax, the reduction of the corporate tax, land reform, bankruptcy law -- those are all good changes." However, he noted that Russia needs to make reforming the banking sector and the development of a strong system a "critical goal," AP reported. He met with representatives of the leading Russian and foreign-owned banks in Moscow and held talks with Russian Central Bank Chairman Sergei Ignatiev, who has made banking reform a top priority. Taylor also met with small business owners and Russian lawmakers. He stressed the need to have joint efforts to cut off financing to terrorist organizations. Trust in Russian banks remains low. Many people and businesses lost their savings during Russia's 1998 financial crisis, and now tend to keep their savings in cash at home or in accounts overseas. Russia's banking system is slowly being rebuilt -- helped by overall economic recovery -- after it was crushed by the 1998 ruble devaluation and debt defaults. Russia's economy has grown by nearly 20 percent in the past three years, but much of that came from a jump in global oil prices. The Russian government has been slow to revamp the banking system, infusing cash into insolvent but politically connected banks rather than liquidating them. (JMR)
ROSTELEKOM SETS 2001 DIVIDEND (12 April)
The board of Russia's national long-distance services provider Rostelekom set a 2001 dividend of 0.2144961 rubles ($0.006) per ordinary and 0.9195237 rubles per preferred share, Rostelekom announced. The 2001 payout on ordinary shares amounts to 7 percent of 2001 net profit and the payout to preference shareholders amounts to 10 percent of net profit, Rostelekom said in a statement. Shareholders in the company will receive dividends as of 14 April. The company's annual meeting is set for 1 June, Reuters reported. (JMR)
KAZKOMMERTSBANK TO LAUNCH EUROBOND (10 April)
Kazakhstan's largest bank, Kazkommertsbank, said on the heels of an upgrade by Fitch Ratings on 10 April that it plans to launch a Eurobond worth some $150 million later this year. Fitch raised the long-term rating of Kazkommertsbank to BB- from B+, noting the bank's "improving asset quality, maintenance of an adequate level of capital in the face of a rapidly growing balance sheet...and rising retail deposit base," Reuters reported. Kazkommertsbank board Deputy Chairwoman Nina Zhusupova said there are two "windows of opportunity" for the move -- the first from now until July and the second from mid-September to Christmas -- adding that the bank prefers the earlier time period. Last May, Kazkommertsbank repaid a three-year $100 million Eurobond. But plans to launch a new Eurobond were foiled by crises in Argentina and Turkey and the world financial turmoil after the 11 September attacks in the U.S. "We believe financial markets are stable overall today and market conditions are rather favorable," said Yeldar Abdrazakov, managing director of the bank. Zhusupova noted the bank's net profit in 2001 was $36 million -- representing more than half the sector's combined profit figure of $65 million. She said that in the first quarter, Kazkommertsbank made a net profit of $11 million and projected an annual profit of $40-44 million in 2002. Kazkommertsbank assets exceeded $1.27 billion last year, compared with $761 million at the end of 2000. Zhusupova said this year the bank will open more branches nationwide as part of a new strategy of developing retail deposits. The 10-year-old bank previously relied more on attracting funds from abroad. (JRM)
MOSCOW WANTS CONTROL OVER MOSKVICH (9 April)
Moscow Mayor Yurii Luzhkov announced on 9 April that the issue of handing control of the Moskvich car factory to Moscow will be discussed on 16 April. "It will be a huge load on Moscow's shoulders," Luzhkov said. Moskvich's debt to business partners is as high as 3 billion rubles (approximately $96 million). According to Luzhkov, approximately the same amount needs to be invested into the car maker's manufacturing processes. ITAR-TASS has reported that Moscow is ready to take the responsibility for the project. (IAM)
RUSSIA, AZERBAIJAN SIGN CASPIAN AGREEMENT (10 April)
Russia and Azerbaijan on 10 April signed an agreement on the borders of the Caspian Sea by outlining two geographical points that mark the Azerbaijani and Russian parts of the Caspian shelf, AP reported. The agreement between Russian Deputy Prime Minister Viktor Khristenko and Azerbaijani President Heidar Aliyev sets the stage for a June summit at which Aliyev will meet Russian President Vladimir Putin in St. Petersburg. The status of the Caspian, believed to contain the world's third-largest oil and gas reserves, has been disputed since the collapse of the Soviet Union. The need for a resolution to the dispute has arisen as the five littoral states squabble over the right to develop oil and gas reserves. A summit on the legal status will be held in Turkmenistan later this month. Previously, Soviet-Iranian treaties spelled out the sea's status. (JMR)
ITERA, BELARUS DISCUSS PRIVATIZATION AND WORKING RELATIONS (10 April)
Itera President Igor Makarov met with Belarusian President Alyaksandr Lukashenka to discuss plans for privatization and establish limits and operational factors for their working relationship. "The first step has been made in the privatization process, which is important for Itera," Makarov said. He noted that investments into Belarusian companies that are privatized will be a great benefit for the country. He also pointed out that the requirements for companies to work in Belarus are still preliminary. President Lukashenka has ordered that working groups be established to improve methods for share placement and the privatization of Belarusian enterprises. Makarov expressed an interest in the privatization of Belarus enterprises Azot, Polimir, and Naftan. (JMR)
RUSSIA MAKES $24 MILLION PAYMENT TO IMF (10 April)
Russia made a $24.4 million payment to the International Monetary Fund (IMF) on 10 April. Part of the payment came in the form of $13.056 million and another was 12.872 euros, according to the Finance Ministry. It was the first payment of the month. On 24 April, the Finance Ministry has to pay the IMF some $89.86 million. According to Finance Ministry data, Russia paid the IMF approximately $341.2 million in Special Drawing Rights (SDR) in the first quarter of 2002. Last year, Russia's debt to the IMF was reduced from 8.913 billion SDR to 5.915 billion SDR. Russia is scheduled to pay to IMF 1.218 billion SDR (approximately $1.5 billion) this year. (IAM)
MINISTER SAYS RUSSIA MAY MAINTAIN POULTRY BAN... (12 April)
Russian Agriculture Minister Aleksei Gordeev told reporters in the Siberian town of Novosibirsk that Russia may postpone for several days the termination of a ban on U.S. poultry imports, adding that a new meeting between Russian and U.S. veterinarians was needed to clarify some issues related to U.S. poultry safety. Russia imposed the ban on 10 March, but then agreed to lift it on 10 April as long as the U.S. met certain conditions, Reuters reported. Russian news agencies quoted First Deputy Agriculture Minister Sergei Dankvert as saying Russia was only partly convinced its demands had been met. Washington has accused Moscow of protectionism and insisted that U.S. poultry is safe. The issue has proven a sore point ahead of a May summit between U.S. President George W. Bush and President Putin. On 11 April, U.S. Secretary of State Colin Powell and Russian Foreign Minister Igor Ivanov discussed the trade spat during a wide-ranging meeting in Madrid. In 2001, the U.S. sold $640 million of turkey and chicken meat to Russia, making it the leading U.S. export to Russia. (JMR)
...THEN MOSCOW LIFTS MEASURE, BUT WARNS OF LOOMING CRACKDOWN (15-16 April)
Russian officials formally lifted the poultry ban on 15 April, but they warned the U.S. that it should expect new, stricter standards in the next two to three months, AP and other agencies reported. Deputy Agriculture Minister Dankvert said his country is not entirely satisfied with the quality of the U.S. imports, adding that a six-month ban remains in place against poultry from North Carolina, Virginia, Maine, and Pennsylvania, AP reported. Russia will likely demand extensive testing by U.S. producers and slap "stricter requirements on Russian businessmen who import food," storage and transportation facilities, the agency quoted Dankvert saying. ITAR-TASS then quoted U.S. Secretary of Agriculture Ann Veneman on 16 April as saying, "We are very glad that the ban has been lifted and American products can again go onto the Russian market." Asked by ITAR-TASS to comment on Russian officials' warning that new requirements concerning U.S. chicken meat will be introduced in two or three months, Veneman said, "I know that certain technical questions are still under discussion. But I would not like to comment on specific points under discussion."
SBERBANK PRESIDENT TO RESIGN? (11 April)
Minority shareholders at Sberbank have proposed ousting Chairman Andrei Kazmin. Sberbank's administrative council and the head of minority shareholder Hermitage Capital, Vadim Kleiner, announced on 11 April that a final decision will be made at the next shareholders meeting. Kazmin has served as president of the bank since 1996. Some minority shareholders have criticized him for what they perceive as a dictatorial and conservative management. The Russian Central Bank, Finance Ministry, minority shareholders, and Sberbank officials drafted a proposal on Kazmin's dismissal. If the bank's administrative council approves the proposal, Kazmir will have to retire. According to Kleiner, the minority shareholders involved are hoping for the government's support against Kazmin. "Our experience in dealing with the government these last two years shows that it has become more attentive to the shareholders," Reuters cited Kleiner as saying. "We are proposing to change the bank's charter so that the administrative council will make all of the important decisions related to credits extension and the bank's participation in other banks' capital," Kleiner said. "The shareholders are also proposing to adopt a corporate management code as the Western companies do, and also create an audit committee within the board." The anti-Kazmir minority shareholders also proposed taking away some of the Sberbank chairman's responsibilities and giving them to the administrative council.
The former chairman of the Russian Central Bank, Viktor Gerashchenko, kept tight controls on Sberbank. After Gerashchenko stepped down on 15 March, Sberbank's share price rose dramatically. The Central Bank's new chairman, Sergei Ignatiev, said his bank "had a constructive dialogue on the national power utility [Unified Energy Systems, or EES], now we are in negotiations with Gazprom, and we hope for the same kind of dialogue with Sberbank." The Russian financial community is hoping for serious banking reform under Ignatiev.
MTS SEES PROFITS SLIDE (10 April)
Russia's Mobile TeleSystems (MTS) profits and core earnings slid in the fourth quarter of 2001 from the previous three months as the country's largest mobile operator bled market share to competitors, Reuters reported. MTS held on to the top spot in Moscow and continued to pile up subscribers in outlying regions faster than competitors, closing a $71.4 million deal to buy 51 percent of Russia's top regional operator, Kuban. Analysts said the real damage to revenues came from declines in average monthly revenue per user (ARPU) to $32 per month in the quarter, from $39 in the third quarter. Deutsche Bank analyst Iouli Matevossov said, "It's not clear whether this is a one-time incident or a trend. The company needs a new strategy and management should say what it is going to do." MTS said net profit fell to $62.7 million in the fourth quarter on net revenues of $259.5 million, down from $78.4 million in the third quarter on $262.6 million in revenues.
That brought full-year net profit to $207.4 million, up from $90.1 million in the previous year. Earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped quarter-on-quarter to $125.4 million from $138.4 million, for a margin of 49 percent, down from 53 percent. EBITDA margin for all of 2001 was 47 percent, up from the previous year's 44 percent. MTS faced stiff competition from cross-town rival Vimpelcom, which had been losing market share as it focused on a return to profit, but then launched an aggressive and popular marketing drive to recoup its share. New competitor MegaFon, a joint venture between Sonera of Finland, Telia of Sweden, and Russian partners, also launched its network. (JMR)
SERGEI PUGACHEV: FROM 'FAMILY' MAN TO 'ORTHODOX BANKER' (Part 1)
Sergei Pugachev, co-founder of the International Industrial Bank, or Mezhprombank, and now a Tuva Federation Council representative, is widely viewed in the Russian press as the "ideologist" or "eminence grise" of a group of security service staffers and ex-intelligence officers ("the Chekists") seeking influence and control of Putin's Kremlin. Pugachev is emerging from the shadows and is now viewed by many as the "behind-the-scenes leader" of the intra-Kremlin battle for influence between Putin loyalists and Yeltsin-era holdovers (dubbed by many "The Family" and reportedly headed by presidential staff chief Aleksandr Voloshin). Pugachev, whom many observers claim is close to Russian President Vladimir Putin, and his allies are labeled by media observers as "new" Kremlin players, with the Russian press casting the influence battle as one between "old" and "new." Nevertheless, Pugachev was once widely viewed as a member of Boris Yeltsin's "Family," and his career, as well as his involvement in "clan" machinations, suggests a high degree of continuity between the Yeltsin era and the Putin presidency. One might say the more things change, the more they stay the same.
Pugachev, 38, graduated from Leningrad State University with a doctorate in technical sciences and worked for several years in the Promstroibank system. He was one of the founders of Mezhprombank (MPB) in 1992. MPB is reportedly Russia's largest private bank and the country's third-largest bank after Sberbank savings and the foreign trade bank Vneshekonombank.
Pugachev stepped down from his position as chairman of the board at MPB just before taking a seat on the Federation Council in December. But he is still believed to be in control of the bank's operations from his "senator's" seat. "Kommersant-Daily" reported in January that, since taking office, he no longer "owns even a 5 percent stake in the company." But there are many other benefits for Pugachev the senator, even if this is true. The first benefit is immunity from criminal prosecution. Allegations linking him and his bank with scandals can easily be found in the Russian press; these include the Bank of New York (BONY) money-laundering case and the Pavel Borodin/Mabetex scandal. From his privileged position in the "upper chamber," Pugachev is also in an ideal position to lobby and protect the interests of MPB. While some claim that Pugachev is the only oligarch to have unfettered access to President Putin, his new position may safeguard that access. Putin has implemented a policy to restrict oligarch access to the Kremlin: Meeting with a senator is politically understandable and does not contravene this policy. Meeting with an oligarch frequently conflicts with Putin's announced policy of "equidistance" "Moskovsky Komsomolets" reported in December 2001.
Pugachev is also a member of the administrative office of the "oligarchs' union," the Russian Union of Industrialists and Entrepreneurs, and has been consistently rated among Russia's most-influential business magnates during the past two years. In a poll published in "Kompaniya" on 8 April, he again is among the top 10 "most influential businessmen" even though he no longer is the chairman of MPB. In fact, he increased his standing from last year, when he was in 10th position, rising to ninth. Pugachev's position within the Russian Union of Industrialists and Entrepreneurs administration links him closely with Arkadii Volskii. The Union joined with others to form Media-Sotsium, a partnership that eventually won the coveted television license for TV-6. Media-Sotsium has been perceived as being closer to the "red directors" and having a "Chekist" political orientation, and was led by the head of the non-governmental Chamber of Commerce and Industry and former Prime Minister Yevgenii Primakov, along with the Russian Union of Industrialists and Entrepreneurs' (RSPP) Arkadii Volskii and Shestoi Telekanal (Sixth Channel), a consortium of 12 businessmen, and former TV-6 journalists. Gazeta.ru speculated that the Kremlin does not fully trust all the oligarchs behind Sixth Channel, who it said tend to be more independent and centrist in their outlook. They do not necessarily perceive the press as a threat, Gazeta.ru suggested. The "Chekists" do, and for this reason the Kremlin reached out to Primakov and Volskii. Some originally thought that Pugachev would end up with control of TV-6, and observers speculate that his failure to do so is an indication of his loss of status. This might be explained in part by his exiting the shadows and entering the political limelight. Others have commented that they believe he controls the Moskovia TV channel.
Pugachev's role in the TV-6 results is another indication of his orientation. Former Deputy Prime Minister Boris Nemtsov in polit.ru described Primakov's "full victory" on 6 March as "burying the idea of independent television in Russia." The website said the broadcast license will go to Media-Sotsium and journalists will only be able to broadcast on the basis of a contract with Primakov's partnership, "which will be able to fully control the editorial policy of the channel." In effect, the argument goes, Primakov has thus taken a "state censor" role within the consortium and Pugachev fully supports this approach to please the Kremlin.
It is not clear when Pugachev became acquainted with Putin. Some accounts claim the two met in St. Petersburg in the early 1990s, when Pugachev was establishing the Northern Trade Bank -- whose Moscow branch grew into MPB -- and had dealings with the Putin when he worked within Anatolii Sobchak's city administration. Others claim that Pugachev cultivated a friendship with Putin when the latter worked for Pavel Borodin, the Yeltsin-era chief of the Presidential Affairs Administration (PAA), and Pugachev developed a business relationship with "The Family." One of Putin's duties when he worked in Moscow for Borodin was to inspect companies controlled or working closely with the PAA. During that time, it is quite plausible that the men would have become familiar with one another. Pugachev has reportedly maintained his close contacts with Borodin. At any rate, it was during Putin's work at the PAA that Pugachev and his MPB were reported to have played a key role in the Mabetex scandal, whose roots lay in suspected money laundering and construction kickbacks and which implicated Borodin, the PAA, and "The Family." Moreover, MPB officials were implicated in the Bank of New York money-laundering scandal as well. (PMJ)
'KOMPANIYA' LISTS RUSSIA'S MOST POWERFUL OLIGARCHS (8 April)
Unified Energy Systems (EES) Chairman Anatolii Chubais tops a "Kompaniya" list of the country's most-powerful oligarchs. The authors claim Chubais has become a de facto shadow prosecutor-general in disputes between the government and oligarchs. They cite his efforts in replacing the management at Gazprom, Railway Ministry reform, scandals surrounding TV-6, and the dismissal of the Russian Central Bank chairman -- asserting that he has influenced the outcomes of all of these examples. The article also says that Chubais symbolizes a "third power." One analyst quoted by "Kompaniya" said of Chubais, "Some people have influence, but no money. Some have money, but no influence. And some have both, plus leverage on top of everything." Another points out that Chubais uses opportunities wisely and provides President Vladimir Putin with arguments and decisions to his liking.
Chubais is followed in "Kompaniya" rankings by the governor of Chukotka Autonomous Okrug and the president of RusAl, Roman Abramovich; Interros Chairman Vladimir Potanin; LUKoil President Vagit Aleksperov; Yukos Chairman Mikhail Khodorkovskii; and Alfa Group Chairman Mikhail Fridman, respectively. The list groups these men together as representing the new economic order of capitalism as formed in the mid-1990s. They have earned their positions in this year's ranking because they are loyal to Putin and their companies are well managed and protected. The president of Bazovy Element (formerly SibAl), Oleg Deripaska, was ranked seventh, while newly appointed Gazprom Chairman Aleksei Miller was ranked eighth. Gazprom represents a hybrid between ministry and corporation, the magazine pointed out, and Miller's influence and power have grown as a result of his appointment in June. Under his management, Gazprom is moving to reassert control over its assets. Miller is followed by banker Sergei Pugachev (see "Profile" above). The president of Urals Mining Metallurgical Company, Iskander Makhmudov, also made the list. He, Deripaska, and Abramovich are known as the "Moscow-Family" group for their wealth and power. The top 15 is rounded out by Surgutneftegaz President Vladimir Bogdanov, Moscow Mayor Yurii Luzhkov, Severstal Chairman Aleksei Mordashov, Bankirsky Dom executive Vladimir Kogan, and Media Minister Mikhail Lesin, respectively. Luzhkov and Lesin are thus the only civil servants who made the top 15.
Other key oligarchs on the list include: Central Bank President Andrei Kazmin; Vneshekonombank Chairman Andrei Kostin and Vneshtorgbank head Yurii Ponomarev, who made the list for the first time; and another new initiate, MDM banking group Chairman Andrei Melnichenko. Also mentioned are Rosneft chief Sergei Bogdanchikov, AvtoVAZ Chief Executive Officer Vladimir Kadannikov, and RJES's Mikhail Abyzov. (JMR)