N75 - April 10 2008

CO N T E N T S
P. 1-3

Politics & Government

DIPLOMACY
c Some grist for the mill
between Moscow and
Washington
BEHIND THE SCENE
c Toward a Pax russica in
Transnistria
FOCUS
c Putin puts a marker on
Medvedev
ENERGY
c TNK-BP : Moscow blows
hot and cold
ALERT
c Suez /Gaz de France
P. 4-8

Business & Networks

INDUSTRY
c Abyzov, the rising star of the
Russian electricity sector
ALERTS
c Voloshin / Inter RAO
PROFILE
c Skorobogatko and
Ponomarenko, the strong
men on the port of
Novorossiysk
ALERTS
c Nord Stream / Mechel
FOCUS
c Norilsk : Oleg Deripaska
under pressure
TELECOM
c Altimo pursues its competition with Telenor and aims
at the Turkish market
ALERTS
c Kamaz c Chigirinsky
FOCUS
c Behind the Atomenergoprom / Toshiba accord
SHIPBUILDING
FLK on a spree in Ukraine
and in Germany
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DIPLOMACY
c Some grist for the mill between Moscow and Washington
The farewell meeting between George Bush and Vladimir Putin in Sochi, just after the NATO summit in Bucharest, confirmed what we had already noticed on several occasions in the past : the two men
never really understood each other. Although they deny it, they are both products of the cold war.Their
two Foreign ministers, Condi Rice and Sergey Lavrov, are also both derived products and the very subjects raised in Sochi NATO, anti-missile systems would not have been out of place in one of the good
old US-Soviet summits from the 1970s or 1980s. It was a remarkable relationship George Bush felt appropriate to conclude, remarkable in fact since it leaves the United States and Russia at a sort of square
one after the feverish hugs of the 1990s and the aborted grand designs of the 2001-2003 period.
In a few days, Dmitry Medvedev will establish himself in the Kremlin and will become the new interlocutor for George Bush until next January. There is little chance that significant changes will take place
by then. Then in January, it will be the unknown for Russian diplomacy, with the only certainty being at
this stage : that none of the three candidates for the presidency of the United States has been seen as
being particularly amicable toward Russia, with Senator McCain appearing the most outspoken since he
has called for a withdrawal of Russia from the G8.
This does not necessarily mean that everything is frozen on all the most sensitive issues that will reappear with the new American administation. Concerning the enlargement of NATO and the delay in the
inclusion of Georgia and Ukraine in the Membership Action Plan, Russia earned a precious point. The
most moderate reaction by Moscow to the proclamation of independence by Kosovo was probaly worth
a type of recognition on the part of a certain number of European member countries of the Alliance. But
Russian diplomacy is not the only one to have been able to claim the credit for the rejection of the Georgian and Ukrainian candidacy. Even in the United States, and more so in Europe, there exist some doubts
on the interests that NATO can have to recruit those two countries. During a seminar co-organised by the
Brookings Institution in Tbilisi the day after the Bucharest summit, certain American experts, reputed
close to the two democratic candidates for the nomination, questioned the justification for Georgias integration. As for Ukraine, it is known that the consensus on the subject even within the population does
not exist, and it can be guessed by the recent statements from Vladimir Putin (provocation or awkwardness?) suggesting a possible partition of the country and a return of the Russian territories to the motherland, that the case of Ukraine is probably the most sensitive of all for Moscow.
Concerning the anti-missile systems to be deployed in Poland and the Czech Republic, the situation
is clearer. Several former Clinton administration officials close to Hillary, such as Richard Holbrooke,
or General Wesley Clark, cast into doubt privately the utility of this initiative by the Bush administration
which set fire to the powder in the Kremlin. In case of a victory for Senators Clinton or Obama, a negotiating space would open on this question.
In fact, it was on Afghanistan that American and Russian positions drew the closest together in recent weeks. The fact that Russia accepted the transit on its territory of non-military products and equipment from NATO countries toward Afghanistan is not anodyne. The establishment of a corridor between Europe and the Afghan territory, by Russia and Uzbekistan and the construction of the railway
bridge over the Amu Daria will facilitate the transfer of equipment and materiel toward Afghan cities
and would especially make them less expensive. By helping NATO in Afghanistan, Russia is helping itself
in combatting religious fundamentalism in Central Asia and the Caucasus. Even if the support is provided without excessive enthusiasm on the part of Moscow, it is a sign addressed in the direction of the
member countries of the Alliance so that they do not weaken their efforts to re-establish peace in Afghanistan. In counterpart, Russia could assist in a more convincing way with the negotiation with Iran on
its uranium enrichment programme, which even in the United States, some feel would be very desirable.
Even if Bush and Putin separated in aknowledging failure, their successors will nevertheless dispose
of an essential resource for negotiation and diplomacy : some grist for the mill...d

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Po l i t i c s & G ov e r n m e n t

RUSSIA INTELLIGENCE
BEHIND THE SCENE

cc F O C U S

Toward a Pax russica

in Transnistria

As Russia Intelligence had let it be understood in its edition of January 31, the situation around the frozen conflict in
Transnistria is on the way toward some
movement. On April 7, the President of
Moldova, Vladimir Voronin, and the head
of he secessionist province, Igor Smirnov,
held a telephone conversation. It represented an event in itself since the two men
had not spoken since 2001. According to a
communiqu published by the authorities in
Tiraspol, they should even meet in a short
delay.This possibility of a conclusion to the
lengthy crisis has been made possible by
the closer relations between Chisinau and
Moscow. It must be remembered that the
last-minute rejection by Vladimir Voronin of
the Kozak Plan, at the end of November
2003, and the introduction of new border
controls toward Transdnistr with the support of Ukraine in March 2006, put a chill
on Russo-Moldovan relations. Things
changed after the Poutine-Voronin meeting
on June 27 2007. The embargo decreed by
Moscow on Moldovan agricultural products
(especially wine) was lifted in exchange for
political guarantees whose scope can now
be evaluated. At the same time, Moscow focused the pressure on Igor Smirnov and
favoured the emergence of a new pole of
influence around the young president of the
local parliament, Yevgeny Shevchuk (Russia Intelligence n45 of December 2006).
On a daily basis, it was Yuri Zubakov, the
n2 of the Russian national security council,
and ambassador Valery Nesterushkin, a
rather francophile diplomat who retains an
emotional memory of his stay in Mauritius,
who have followed the Moldova-Transdnistr
issue since 2004. The deterioration of relations between Chisinau and Bucharest
(Russia Intelligence n50 of March 2 2007),
as well as the imminence of general elections in Moldova also played a role in the
more conciliatory attitude by Vladimir
Voronin.
Russia is therefore preparing to make a
diplomatic splash of the first order by this
summer. In this matter, it intends to send a
very strong signal to the West, by showing
that it holds the keys to the frozen conflicts in the former USSR. Georgia and
Ukraine are also in sight. Among the concessions that Chisinau is preparing to make
to recover its territorial integrity are included in effect a renunciation of NATO and
the exit from GUAM. A position, which, it is
hoped in Moscow, would be a cause for reflection for Vladimir Yushchenko and
Mikhail Saakashvili. d

Russia Intelligence N75 j April 10 2008

Putin puts a marker on Medvedev

A slightly better picture is emerging about the political sequence for the coming
weeks in Moscow. As Russia Intelligence explained in its previous edition, the first
major episode will be the convention of United Russia, brought forward to April 14
and 15 (instead of the 19th of May as originally planned). Vladimir Putin should be
offered the party presidency. This was confirmed April 7 by Boris Gryzlov, the current officeholder of the State Duma presidency. He also added in the most serious manner possible that the ideal would be for Vladimir Putin to accept. The
takeover of United Russia should allow the future Prime minister to better control
deputies, governors and, more generally, the senior bureaucracy, always efficient in
adjusting to changes in the balance of power in Moscow. Vladimir Putin is progressing toward a double lock system perfectly in tune with KGB norms.
The second phase of this political sequencing to come will be the investiture of
Vladimir Putin to the office of head of government. It will take place May 8, the day
after the assumption of office by Dmitry Medvedev to the Kremlin. Contrary to tradition, the vote of the State Duma will take place without prior consultation. It will
not have been only for pure form, but this acceleration of the calendar displays a
certain nervousness on the part of a segment of Vladimir Putins inner circle. Not
to leave Dmitry Medvedev alone in power even for 24 hours above all before the
Victory day celebration May 9, which should have a particular aura this year since
the tanks will once again roll on Red Square was apparently absolutely imperative.
In anticipation, the war of the clans continues unabated in the structures of power. The most spectacular developments emerged from the General prosecutors office, the theatre, since last summer, of constant tension between Yuri Chaika and
his deputy, Alexandre Bastyrkin, an old companion of Vladimir Putin named at
the head of the Investigating committee who distinguished himself since then especially by playing an active role in the Bulbov and Storchak affairs (Russia Intelligence n63 of october 11 2007 and n64 of october 25 2007). Put forward by Igor
Sechin and Nikolay Patrushev, Alexandre Bastyrkin had hoped to take control of
a possible Russian FBI. The choice of Dmitry Medvedev as Vladimir Putins successor in the Kremlin has, however, compromised his chances. Since the end of
March, Alexandre Bastyrkin is even frankly on the defensive, which is nothing but
bad news for his protectors.
On March 28, he had to suspend one of his closest collaborators, Dmitry Dovgy,
as well as three other members of the Investigating committee Alexey Novikov,
Sergey Glukhikh and Yuri Ermakov. A decision not gladly taken which followed a
letter of denunciation addressed by two other investigators on the Committee
Sergey Chernyshev and Zigmund Lozhis to the presidential administration. They
accused Dovgy, Novikov, Glukhikh, Ermakov of corruption. According to Chernyshev, Dovgy had received 2 million dollars in exchange for the liberation of a suspect,
a deal all the more disgraceful in that it concerned an affair linked to Yukos. Ermakov and Glukhikh for their part may have worked for the transfer of Vladimir Barsukov the godfather of the Tambov mafia in Saint Petersburg arrested last autumn (Russia Intelligence n61 of september 13 2007) from his high-security
cell in the notorious Matroskaya Tishina to Saint Petersburg, where he was able
to regain his freedom thanks to other connections.
To sort out all these developments is obviously not easy, but one thing is certain :
Yuri Chaika is rubbing his hands. The contest between him against Bastyrkin appears
as won. But, as is well-known, behind Chaika are profiled the loyal supporters of Dmitry Medvedev, notably the boss of the Federal anti-narcotics service, Viktor Cherkesov. Suddenly, the latter believes more than ever in his chances to replace Nikolay Patrushev in the Lubyanka after mid-May. The current boss of the FSB could well see
being offered a post as vice Prime minister in charge of power structures, according
to information collected in Moscow by Russia Intelligence. Our sources indicate nevertheless that a decent delay could be observed and that the shifts awaited in the
midst of the power structure could then be delayed until the autumn. d
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RUSSIA INTELLIGENCE
ENERGY
c TNK-BP

Business & Networks

: Moscow blows hot and cold

Even as the president of its supervisory board prepared to enter the Kremlin, Gazprom launched a vast spring offensive. Intense discussions are being pursued with TNK-BP on the Kovytka issue, but also despite the denials over the purchase
of 51% of the interest in the Russo-British joint venture. Things
are also well underway with Italys ENI, which is ready to associate Gazprom in some of its projects in Libya or even Egypt. On
the internal front, Gazprom has won an important victory by obtaining from the government that it will not increase the gas side
of the tax on extraction of raw materials as the Finance minister, Alexey Kudrin, wanted.
Can Viktor Vekselberg not sell ? Intervening two weeks after the disruptive searches in the Moscow offices of TNK-BP and
the recall of 148 British expatriates of the group (Russia Intelligence n74 of March 27 2008), the discussions that took place
April 3 in Moscow between Alexey Miller, Tony Hayward (the
boss of BP) and Viktor Vekselberg (head of the Russian shareholders in TNK-BP and in charge of the groups gas projects) was
much awaited. They appear by all accounts to have gone rather
well. According to Robert Dudley, the president of TNK-BP, an
accord about Kovytka should be signed before May 1st (sources
close to the matter nevertheless indicated to Russia Intelligence
that the two parties did not narrow their differences over the
price of the transaction. Gazprom would not want to spend more
than 800 million dollars, while TNK-BP evaluates the investments
achieved on the deposit since 1994 at 1 billion dollars). Another
sign of improvement between TNK-BP and Gazprom is that a compromise has been found between two of their subsidiaries, Mezhregiongaz and Rospan (the latter obtained expanded access to
the internal Russian gas pipelines and as a result could double
its production, which will be sold by Gazprom).

Nothing, on the other hand, filtered out regarding the evolution of the TNK-BP shareholdings. Officially, the question was not
on the agenda. Robert Dudley underlined this during his press
conference. According to information gathered by Russia Intelligence in Moscow, the reality is nevertheless a bit different. Gazprom has not given up on buying the shares of the Russian owners. Viktor Vekselberg (Renova), Len Blavatnik (Access
Industries) and Mikhail Fridman (Alfa-Group) have denied, in
February, wanting to sell, but recent history in Sakhalin notably demonstrates that this need not be a insurmountable
obstacle.
According to our sources, Alexey Millers forces would also like
the British to sell them 1% of TNK-BP in case the Russian shareholders decide to sell their interests to Gazprom. The question
of price is still open. 51% of TNK-BP would represent an investment of more than 20 billion dollars. A possibility that does not
figure in the memorandum made public by Gazprom in late March
on the occasion of a new Eurobond emission.
The Russo-Italian honeymoon still underway. Things are
much simpler for Gazprom with its strategic partner ENI. The
boss of the Italian group, Paolo Scaroni, confirmed April 2 that
his group was ready to sell it a third of its involvement in the Libyan Elephant oil deposit (proven reserves of 68 Mt). This announcement was made on the occasion of a meeting between Vladimir Putin, Dmitry Medvedev and an impressive delegation of
Italian businessmen, which included, among others, Pier Fran-

Russia Intelligence N75 j April 10 2008

cesco Guargualini (Finmeccanica), Fulvio Conti (ENEL),

Gianfelice Rocca (Techint), or also Luisa Todini (former
European deputy for Forza Italia, president of the Todini Finanziara holding company). In addition to the accord between Gazprom and ENI, it was also noted that this meeting
was marked by the proposal by Intesa to create a Russo-Italian investment bank whose objective will be to operate in
the former USSR, but also in China and India. Officers of
ENEL, for their part, confirmed that they were ready to cooperate with Rosatom (whose boss, Sergey Kirienko, was
present in Novo-Ogaryovo) on projects in central Europe, notably in Slovenia.
LNG, Gazproms new priority. Developments at Gazprom are also quite intense within Russia itself. On March
26, the groups board adopted its strategy in the sector heretofore embryonic in Gazprom of liquidified natural gas
(LNG). It foresees a spread of investments situated between
45 and 60 billion dollars by 2030 and an annual LNG production somewhere between 39 and 63 Mt by a horizon of 2030
(essentially Shtokman and Sakhalin).

Also, Gazprom achieved a major victory on the fiscal level.

The interministerial meeting held on March 25 around the
Prime minister Viktor Zubkov adopted a decision favourable
to the gas giant. The gas chapter of the MET, the mineral extraction tax, remains set at 147 rubles/1000m3, an amount unchanged since 2006, although Alexey Kudrin proposed an increase to 735 rubles/1000m3 by 2010. According to Gazprom,
an increase in the tax would deprive it of funds necessary for
investments in exploration.

This victory, however, could be only a momentary one. A

possible reduction in the VAT to 12% strenuously advocated
by the Economic development minister Elvira Nabiullina,
but opposed by Alexey Kudrin would in effect force the government to look for other means of financing. So much so
that most economists (such as those gathered for the annual
High School of Economics colloquium in Moscow in early
April) consider that public financing will encounter serious
difficulties beginning in 2009 resulting from the combined
effect of increases in public spending and an erosion in the
countrys commercial surpluses. d

ALERT
3 Electricity : Suez puts a brake
to Gaz de Frances appetite
The cooperation between Suez and Gaz de France has some
quite unexpected collateral impact in Russia. According to information collected by Russia Intelligence from sources close to the
matter, the Gaz de France management has not been able to
convince SUEZ of the interest in investing in the Russian electricity
sector. It is known that last autumn on the margins of the 20th
world energy congress, Gaz de France had expressed its interest
for TGK-10, finally acquired in early March by Fortum (Russia Intelligence n73 of March 14 2008). d

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RUSSIA INTELLIGENCE

Business & Networks

INDUSTRY
c Mikhail

Abyzov, the rising star of the Russian

electricity sector

While the reforms of the electricity sector conceived and applied by

Anatoly Chubais are entering the final stretch (Russia Intelligence
n74 of March 27 2008), a name is raised more and more frequently in
Moscow conversations of Mikhail Abyzov. The boss of the E4 holding company has in fact established himself, at only 35, as a more and
more inescapable actor in this sector.
The meteoric career of Mikhail Abyzov began in 1993. At the time,
he joined the small team of deputy Ivan Starikov, elected on the Choice
of Russia list headed by Igor Gaydar. A native of Novosibirsk, Starikov presented Abyzov to the governor of the region, Vitaly Mukha. A
decisive meeting since it permitted Abyzov in 1996 to make his first big
play in the business world. The firm ORTEK he created a year earlier
supplied various equipment and fuel to the regional authorities; a modest transaction 500,000 dollars accompanied by serious guarantees. In this case, 19.5% of the Novosibirskenergo electricity, a stake
evaluated then at... 40 million dollars. The regional authorities revealed themselves to be incapable of managing ORTEKs expenses, and
Mikhail Abyzov becomes a shareholder in Novosibirskenergo and takes
his first steps in the Russian energy sector. It should be noted in passing that this episode led to charges against Vasily Mukha, who was finally amnestied in 2001.
In 1998, Anatoly Chubais who was named at the head of the national electricity company RAO EES Rossii noticed the young Abyzov (who at the time was 26 years old) and offered him the direction
of the investment department. A year later, Mikhail Abyzov joined the
board of directors of RAO EES Rossii, which he would not leave until
April 2005. He was notably charged with the supply of coal, gas and fuel
oil to regional affiliates. A strategic post that allowed him to weave productive relations at the time of the privatisation of the groups power
stations.
By coincidence or not, it was in Kuzbasrazrezugol the main mining asset of SUEK where Mikhail Abyzov landed in the fall of 2005.
Collaboration with Iskander Makhmudov and his partners proved to
be in any case complicated (he will definitely leave the group in 2007).
In parallel, Mikhail Abyzov had created his own organisation, E4, which

collected subcontracting deals for RAO EES

in the engineering and maintenance sector.
To this day, the E4 holding company unites
some fifty companies throughout the country
and is expanding its field of operations in
other sectors (notably the agro-food sector
through the Rukon investment firm, but also
Mikhail Abyzov several companies in the Urals, Siberia and
the Far-east specialised in the repair of road infrastructure).
But it is in the field of power generation that Mikhail Abyzov is on the way to achieving his most successful operations.
During the course of an interview, Viktor Vekselberg, revealed that Mikhail Abyzov held an option for the 25% of KES
(Kompleksnye energeticheskie systemy), the Renova affiliate
in charge of managing assets in the electricity sector. Rather
evasive about the origins and outlines of this partnership, Viktor Vekselberg limited his explanation by saying that it dated
back to the autumn of 2006 and that it was linked to other
operations with Renova. It concerned a major asset since KES
holds shares in numerous electricity generation units privatised in recent months (TGK-5, TGK-7, TGK-9 and TGK-10).
Last but not least, Mikhail Abyzov has just taken a stake of
at least 25% in Transneftservice-S. Controlled by the businessman Alexandre Rubanov, a trader historically linked with
Transneft, where he was the main supplier of electricity. The
departure of Semyon Vainshtok and the nomination of new
teams around Nikolay Tokarev (Russia Intelligence n70 of
January 31 2008) nevertheless changed things. Transneftservice-S lost its contract with Transneft which represented
close to 80% of its turnover. A vulnerability that immediately
profited Abyzov by entering into its capital. But in all likelihood, it is precisely Transneftservice-S which should buy OGK1, the main production unit for RAO EES Rossii which will be
sold at auction on April 17 for about 6 billion dollars ( a price
which forced Electricit de France, as well as Finlands Fortum to drop out). d

ALERT
3 Alexandre Voloshin makes his entry in Inter RAO

The former boss of the presidential administration and head of the

supervisory board of the national electricity company, RAO EES Rossii is actively preparing his return to the front lines of power in Russia. Observed at the side of Dmitry Medvedev on the evening of
the elections, Alexandre Voroshin is part of that small circle of
high officials to which the new president should refer to fill his team
after May 7. If his future elevation is not yet confirmed, one thing is
nevertheless clear : Alexandre Voroshin will continue to play an important role in the sector being completely reorganised of electricity.He has just been named to the supervisory council of Inter
RAO, the international subsidiary of RAO EES Rossii, which is the exclusive operator for import-export of power in Russia and which
possesses or operates a certain number of assets in Georgia, in Armenia, in Tajikistan and in Moldova (Inter RAO will also soon
inherit stations in Russia, notably in Sochi and in Kaliningrad). Up

Russia Intelligence N75 j April 10 2008

to now, the group was managed by Yevgeny Dod (director general)

and Andrey Rappoport (president of the supervisory council and
right-hand man to Anatoly Chubais. But the internal balance of power is in the process of changing. Andrey Rappoport will not be
reappointed to head the supervisory council.The Energy and industry minister, Viktor Krishenko, should replace him. Temporarily, at
least, since it is doubtful that he will be retained in the government
after May 8. The most likely possibility is that the presidency of the
supervisory council of Inter RAO will go to Alexandre Voloshin. He
should be, along with Vladimir Dmitriev, the boss of Vneshekonombank, the new shareholder of Inter Rao (Russia Intelligence
n74 of March 27 2008), the strong man of the group. His actions in
any case should be followed closely in Paris, where it is still hoped
that EDF will be able to take a 25% share of Inter RAO in the coming few months. d

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RUSSIA INTELLIGENCE

Business & Networks

PROFILE
c Alexandre Skorobogatko and Alexandre Ponomarenko, the strong

men on the port of Novorossiysk

Names can create a destiny. This is possibly what Alexandre
Skorobogatko (soon rich) thinks. He only counts for 1.4 billion dollars in the latest Forbes ranking, placing him far behind Deripaska (28 billion), Abramovich (23 billion), Fridman (22 billion) or Mordashov (22 billion). With his colleague
Alexandr Ponomarenko, Alexandre Skorobogatko, has nevertheless the merit of not being at the head of an oil, mining or
metal company, but a commercial port. Not just any port since
it involves Novorossiysk (NMTP), the 1st in Russia in terms of
volume (80Mt last year), a strategic asset which should profit
fully from the economic fallout from the winter olympic games
of 2014 in Sochi.

of Lukoil, Vagit Alexperov) to sell its share to the Skorobogatko-Ponomarenko team for 530 million dollars. This transaction was essentially financed by the sale of Investberbank
RGBs new name to the Hungarian bank OTP in August 2006. Up to then not really known for the transparency
of their management, Skorobogatko and Ponomarenko lifted the veil on the shareholding of the commercial port of
Novorossiysk in the autumn of 2007, just as they were preparing to launch an IPO in London. It is learned that they
have consolidated close to 63,36% of the capital, notably
through the Kadina firm, registered in the Virgin Islands.
The state holds 20%, the remainder in the hands of unidentified minority shareholders, some of whom may be acting
on behalf of Skorobogatko and Ponomarenko. Organised by
Morgan Stanley, the IPO covering a bit less than 20% of
the capital is an honest success. 980 million dollars are
raised, which brings the value of NMTP to close to 5 billion
dollars. On that occasion, the Railway (RZhD) take over 5%
of the port capital.

Skorobogatko, 40, and Ponomarenko, 43, are both natives of

Ukraine. It was in Simferopol in Crimea that they met at the
end of the 1980s. There they created a small firm specialised in
perfume production. After the collapse of the USSR, they set up
in Moscow, where they founded the Russian general bank (RGB).
Skorobogatko obtained an economics degree from the prestigious Plekhanov Academy and began to frequent political circles. In 1996, he became the assistant to the Communist deputy
Alexandre Korovnikov, a close associate of Sergey Stepashin
who had numerous contacts in the Academy of the Interior ministry in Saint Petersburg (which in fact awarded Skorobogatko the title of doctor of law in 1998. We also recall that Skorobogatko remains one of the sponsors of the ice hockey team
of the Interior ministry). In August 2002, he was named to the
Federation Council, where he represented the Kaliningrad region. Then in 2003, Skorobogatko was elected to the State Duma
on the list of the liberal-democratic party of Vladimir Zhirinovsky. Feeling the wind changing, he finally joined United Russia in 2007.

According to information gathered by Russia Intelligence,

Skorobogatko and Ponomarenko have been able to establish
sound relations with Vladimir Yakunin, one of whose objectives, as is known, is to reinforce the presence of RZhD in
the countrys ports.
Already flourishing, business for Skorobogatko and Ponomarenko should continue to develop during the course of
the coming years. A good share of the material to be imported in view of the construction of the infrastructure in Sochi would in fact transit through the port of Novorossiysk.
Its activity should also benefit from the launching of major
projects South Stream, the underwater gas pipeline that
will link Novorossiysk to Bulgaria in about 2013, and the
Bourgas-Alexandroupolis oil pipeline to be built by Transneft. In the meantime, Skorobogatko and Ponomarenko have
decided to take advantage of their networks in Saint Petersbug and Kaliningrad to develop their activities on the Baltic. NMTP announced in early March that it would take 50%
of the freight terminal under construction near Lomonosov,
a project up to now operated by Mediterranean Shipping
Company. d

Skorobogatko and Ponomarenko became interested in the

port of Novorossiysk as early as 1994. The Russian general bank
patiently acquired shares in NMPT and thereby reached 13% of
the capital in the early 2000s. Skorobogatko and Ponomarenko
took over control of the commercial port of Novorossiysk in two
phases. In 2005, they first bought the interest held by the deputy Sergey Shishkaryov and his partner Mikhail Bashin (about
20%). Then in 2006, it was the turn of the investment firm Uralsib owned by Nikolay Tsvetkov (a close associate of the boss

ALERT
3 Venezuela

: new arms contracts in sight

Venezuelan president Hugo Chavez truly intends to profit from his

presence in Moscow in early May where he will assist at the inauguration of Dmitry Medvedev to sign new arms contracts with
Rosoboronexport. The most advanced deal concerns the sale of 4
conventionally-powered Kilo (project 636) class submarines. A
decision in principle was reached early this year by the Venezuelan
military. Moscow and Caracas are currently discussing the grant of a
loan for 800 million dollars by Vneshkonombank that would allow
for the financing of the bulk of the transaction evaluated at close to a
billion dollars. Dmitry Pankin the new Finance vice minister who
succeeded Sergey Storchak, in prison since last autumn (Russia Intelligence n66 of november 21 2007) is charged with the matter

Russia Intelligence N75 j April 10 2008

in Moscow. The Venezuelan shopping list also includes a dozen Il-76

transport aircraft, as well as Mi-28 combat helicopters. According to
sources close to the boss of the Rostvertol plant in Rostov on Don,
Boris Slyusar, the deliveries could take place as early as the summer
of 2009. Finally, Sukhoi which will complete deliveries of the 24
Su-MK2-V ordered by Caracas in the summer of 2006 has hopes
for the Su-35 (to be presented shortly at the FIDAE air show in Santiago de Chile). Obviously the technical problems encountered by
some of the helicopters delivered to the Venezuelan air force by
Russia in 2006, no more than the fiasco over the Algerian MiGs (Russia Intelligence n72 of February 29 2008), have killed Hugo Chavezs appetite for Russian armaments.d

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Business & Networks

RUSSIA INTELLIGENCE
ALERTS

3 Nord Stream : the

consortium retreats in the
face of Swedish reservations
Nord Stream AG, the operator of the future northern European gas pipeline operated by Gazprom, BASF, E.ON and
Gasunie, has finally abandoned construction of a maintenance platform close to
the island of Gotland in Swedish waters.
Other technical solutions are being considered, according to the consortium. It is
known that Stockholm was concerned
about the projects by Nord Stream AG,
with some experts believing that a platform could possibly be used for intelligence purposes by Russia. Gazprom and
its European partners, who want to follow
the initial calendar for the project launch
(the end of 2010 for the first pipeline, 2013
for the second), have therefore decided to
withdraw their plans, which should also
reduce the concertation procedures with
the Swedish side. In keeping with the 1982
convention on the law of the sea, Stockholm, just like Copenhagen and Helsinki)
will give its opinion after examining the
ecological impact of the project, but cannot in principle prevent construction of
the pipeline. It should also be noted in
passing that the predicted costs of Nord
Stream have been revised upward and
are now established at 7,4 billion euros.

3 Mechel strengthens

cc F O C U S
Norilsk : Oleg Deripaska under pressure
The strange ballet being played since several weeks by four of the most important oligarchs of the Russian metals sector, Oleg Deripaska, Vladimir Potanin,
Mikhail Prokhorov and Alsiher Usmanov, has an outcome that appears less and
less certain. We indicated in our last editions (Russia Intelligence n 73 of March
13 and 74 of March 27) that the chances of Oleg Deripaska to become the leading
shareholder in Norilsk Nickel by buying the shares of Mikhail Prokhorov were seriously eroding since several weeks. The latest events have tended to confirm this
possibility. The closure of the Deripaska/Prokhorov operations has been delayed
until the end of April. Some last-minute difficulties have appeared in the provisions of the accord concluded between the two men. It is known that the agreed
price for 25% or 28% of Norilsk held by Prokhorov is 12,7 billion dollars, of which
a certain part in Rusal paper (about 11% of the capital), one part in cash (4,5
billion dollars) and another part in defered payments (about 3 billion dollars).

In addition, Prokhorov may have obtained a guarantee of being able to freely

resell his shares to Rusal in 2010. But the international banks that will assure the
financing of the 4.5 billion dollars of the cash portion of the transaction are asking, apparently, an early repyment of the same amount if Rusal does not list on
an exchange by November 1 2009, a clause that hardly pleases Mikhail Prokhorov, who is said to have requested to revise the conditions for the operation.
The other element that troubles the game is naturally the projected merger
between Norilsk Nickel and the Metalloinvest group of Alisher Usmanov. During
the extraordinary general assembly that was held on April 8, the Norilsk shareholders gave themselves one month to complete an accord with Alisher Usmanov,
discussions to focus essentially on the value of the Metalloinvest assets as well
as on the final strucuture of the Norilsk Nickel shareholding. Apparently this general assembly did not lead to a frontal opposition between Vladimir Potanin and
Mikhail Prokhorov, to the point that the structure they jointly control, KM Management and which holds about 8% of the Norilsk capital decided to vote with
the management of the mining company although the position of this structure
in the general assembly was believed to be crucial.

its position in Romania

If Bulgaria and Serbia have in recent

months been the priority targets of the
Kremlin (Russia Intelligence n70 of January 31 2008), Romania is not in the least
bit absent from the sphere of interest of
the large Russian industrial grooups.
Therefore, Mechel just announced the
purchase, for some 221 million dollars, of
the Ductal Steel works. This acquisition
supplements the two other assets of Igor
Zyuzins group in Romania, Industria
Sarmei (renamed Mechel Campia Turzii)
and COST, purchased in 2002-2003. The
next phase of the Mechel expansion on
the Romanian market should be in the energy sector, with a joint offer with Hungarys Magyar Villamos Muvek for a
power station. We remind that Mechel has
elsewhere profiled itself in recent weeks
by buying Oriel Resource (Russia Intelligence n74 of March 27 2008). Among
the other major Russian groups present in
Romania should be mentioned Dmitry
Pumpyanskys TMK, which controls a
steelwork in Resita, and the oil firm
Lukoil, owner of the refinery in Ploiesti
since 1998. d

Russia Intelligence N75 j April 10 2008

Many elements that lead to the belief by close watchers of the business that
the cleavage between Potanin and Prokhorov, which was believed to be without
hope of return, is perhaps not so definite as that. In any case, at the close of this
gathering, Andrey Klishas, president of the Norilsk administrative council, surprised his world by declaring to the press that Norilsk was ready to purchase Mikhail Prokhorovs shares in case an accord with Deripaska did not materialise.
Many things must therefore take place during this month of April and the discussions risk being torrid in view of the sums at stake and the well-known hostility
between Oleg Deripaska and Vladimir Potanin. It is probable in fact that the Rusal bankers are questioning the interest for the aluminium group to find itself as
minority shareholder of Norilsk/Metalloinvest, in case this transaction materialises. As for Mikhail Prokhorov, he can consider that his interests are more to sell
his shares to Vladimir Potanin since the markets accord a higher value to Norilsk
in case of a merger with Metalloinvest rather than a cooperation with Rusal.
Mikhail Prokhorov also surprised observers by winning in a completely unexpected fashion the auctions for the state share in the energy production company
TGK-4, for the sum of 500 million dollars. This company operates 25 power stations in central Russia (Smolesnk, Lipetsk, Tula, Voronezh). Already for a long
time, it was known that Mikhail Prokhorov was interested in the electricity energy
sector. He was even seen as becoming the controlling shareholder of energy assets within Norilsk Nickel which Vladimir Potanin wanted to spin off this winter, an operation which Prokhorov was in fact opposed to. In Brief, this TGK-4
operation intrigues many observers to the point that some are asking if it doesnt
involve a bonus offered to Prokhorov to obtain his backing for one of the two
structures surrounding Norilsk Nickel. And if this is the case, it could be not good
news for Oleg Deripaska... d
www.russia-intelligence.fr

RUSSIA INTELLIGENCE
cc T E L E C O M
Altimo pursues its competition with Telenor
and aims at the Turkish market
Altimo the susidiary of the Alfa-Group in charge of management of the assets of the holding company in the telecommunications sector is in the process
of launching a vast reorganisation of its industrial strategy. If we can believe the
whispers of its officers, Alexey Reznikovich and Kirill Babaev, the twin priorities are the takeover of control of Vympelkom and of Turkcell, the main Turkish
mobile telephone operator (close to 30 million subscribers, or 63% of the local
market. After which Altimo could eventually side with a European leader of the
telecommunications sector. In the meantime, the Russian group has resumed hostilities with its old Norwegian adversary, Telenor, which could once again represent an obstacle to the Altimo ambitions.
Ukraine, a Russo-Norwegian battlefield.

We remind our readers that Altimo possesses to this day 43,8% of the mobile
telephone operator Vympelkom (BeeLine), 25% + 1 share of its competitor
Megafon, 13,22% of Turkcell, 49% of the Kirghiz operator Sky Mobile, 26,6% of
Golden Telecom and 43,5% of the Ukrainian operator Kievstar. In the latter, like
Vympelkom, Altimo is associated with Telenor (29,9% in Vympelkom and 56,6% in
Kievstar). A somewhat rocky association since 2005. At the time, Altimo backed
the purchase by Vympelkom of URS, a small Ukrainian mobile telephone operator. An operation which was opposed by Telenor, which saw it as unfair competition vis--vis Kievstar.
The transaction took place and was followed by a lengthy legal battle between
Altimo and Telenor before courts in Moscow and New York. The Norwegian group
was rebuffed in the URS case, but on the other hand was succesful last July when
an American court ordered Altimo to release its 43,5% in Kievstar. More recently,
relations have appeared calmer. Altimo and Telenor even agreed on the purchase,
by Vympelkom, of the operator Golden Telecom, where they are both shareholders (26,6% and 18,3% respectively).
A short-lived truce. March 25, Altimo in fact filed before an arbitration court
in Geneva to obtain 1 billion dollars in damages and interest from Telenor. This
amount corresponds, according to the Russians, at the loss caused by the delay
in the acquisition of URS. The chances for Altimo to succeed seem weak, but this
complaint has the main objective to maintain pressure on the Norwegians to make
progress on another issue. Alexey Reznikovich, the president of Altimo, declared
at the end of March that he wanted to concentrate his activities around two poles
Vympelkom and Turkcell where he hopes to gain a majority stake.This would
imply the purchase of one part of the shares of Vympelkom held by Telenor. But
it is not certain that the Norwegians want to sell, even if they have not completely
closed the door.
Turkcell : toward an exchange of shares with TeliaSonera ?

Concerning the Turkish front, things are not any simpler for Altimo. They own
at this point 13,22% of Turkcell, a holding purchased in November 2005 for 1,6 billion dollars from Cukurova, to which the Russian group also lent 1,7 billion dollars pledged for an additional 13,8% of Turkcell. Since Cukurova did not repay the
debt in the time agreed, Altimo demanded that it be transferred 13,8% of Turkcell, which was opposed by the Turkish side. Legal proceedings are therefore underway. But it is through another means that Altimo intends to takeover control
of Turkcell. The Russians plan in fact to propose to the Swedish group TeliaSonera which holds 37,08% of the Turkish operator to exchange its holding against
Altimos in Megafon. A swap that would be accompanied by payment by the Russian group of 2 billion dollars in order to compensate for the difference in value
between the holdings exchanged.
It remains that on the Megafon issue, Altimo risks nevertheless to have to take
into account the appetite of Alisher Usmanov, who already owns 31,5% of the operator and doesnt hide his aim to take over control. d
Russia Intelligence N75 j April 10 2008

Business & Networks

ALERTS

3Kamaz on the lookout

for a western investor
Major manoeuvres are underway in the
Russian automobile sector. Just a few
weeks after having concluded the sale of
25% of the capital in Avto Vaz to Renault
(Russia Intelligence n 68 of December
20), Ruben Vardanyan, the boss of the
Troika-Dialog investment firm, is turning
toward a new industrial undertaking. Avtominvest Ltd, a subsidiary of Troika-Dialog, has just taken a 29,48% stake in Kamaz, the truck manufacturer situated in
Tatarstan made famous outside Russia for
its repeated victories in the Paris-Dakar
auto rally. This transaction allows TroikaDialog to attain majority status since it already held 21,2% of the Kamaz shares.The
teams under Ruben Vardanyan will now
begin to seek out a strategic investor, to
whom they will propose 25% to 49% of
Kamaz. Volvo, Iveco and MAN are frequently cited. Another scenario raised up
to now, cooperation with the Belarus manufacturer MAZ, is in the process of being
abandoned because of the reticence of
Alexandre Lukashenko. The Russian state
will remain present in the capital of Kamaz
through the Rostekhnologii holding company under Sergey Chemezov (38%).

3Moscow : Chigirinsky
loses a new legal battle
The oligarch of Georgian origin, at the
head of the construction and public works
firm ST Development, has just experienced a new setback. In its editions of October 26 2006 and February 2 2007, Russia
Intelligence echoed the information about
the contest over the reconstruction of the
Rossia hotel, located near the Red
square.The call for proposals organised in
late 2004 by the Moscow municipality and
won by ST Development had been challenged and then cancelled by court edict. Such
a situation was hardly designed to comfort
Chigirinsky who strengthened by the
support of the capitals mayor, Yuri Luzhkov had not halted the works. The situation appears more serious this time. At the
end of March, the 9th appelate court of the
arbitration tribunal in Moscow invalidated
all the commercial procedures that followed the 2004 call for proposals, which was
reversed on January 23 by the supreme arbitration court. ST Development lodged a
final appeal and plans to pursue its policy
of the fait accompli. But it remains that the
environment in Moscow is evolving in a direction that is not favourable to Chigirinsky
with the probable departure of his protector Yuri Luzhkov.d

www.russia-intelligence.fr

Business & Networks

RUSSIA INTELLIGENCE
FOCUS
c Behind

the Atomenergoprom-Toshiba accord

Whether a simple declaration of itent or the launching of

a wide-ranging industrial partnership, the framework cooperation agreement signed March 20 between Atomenergoprom
and Toshiba has in any case aroused a considerable interest
in Paris, in both the concerned ministries as well as at Areva.
The stakes no more no less than the constitution of a world
leader in the civilian nuclear sector is truly far-reaching.
If we believe the communiqu made public on March 20,
Russians and Japanese will begin feasibility studies on cooperation concerning the design and engineering for the
construction of civilian nuclear power plants, the construction and maintenance of capital euquipment and the nuclear
combustion cycle. It elsewhere underlines that the complementary links between the two companies could in the longer-term engender a strategic partnership. This accord will
permit to guarantee deliveries that are viable and secure
for services in the nuclear cycle to consumers of Japan, the
United States and other countries.
The Russo-Japanese cooperation in the nuclear domain is
not really a surprise. It is the culmination of discussions begun in the spring of 2007 during the visits to Tokyo of the former Russian Prime minister Mikhail Fradkov and the boss
of Rosatom, Sergey Kirienko (Russia Intelligence n 50 of
March 2 2007). For Russia, the interest in collaboration with
Japan is obvious. It enlarges in effect the potential geography of Atomenergoprom activities, up to now limited to the

former USSR, China, India and Bulgaria (even soon to the

Maghreb, even if discussions with Egypt and Libya are far
from concluding). The cooperation with Toshiba should also
allow the resolution, in part at least, of the problems in production capacity that is confronting the Russian industrialists, whether concerning turbines or reactor tanks. In addition, it permits Russia to rejoin the Kazakh group
Kazatomprom, which bought from Toshiba 10% of Westinghouse in the summer of 2007 (Central Asia and Caspian Intelligence n 15 of august 30 2007).
The document of March 20 relates to an obvious complementarity between Russians and Japanese. After the acquisition of Westinghouse in 2006, Toshiba disposes in fact of
quality products, especially the AP 1000 third-generation
reactors, that compete with Arevas EPR. Russians are, on
their side, competitive in the combustion cycle supplying power stations. One of the first projects on which Atomenergoprom and Toshiba should cooperate is the construction of
a nuclear power plant in the Russian Far east, near Vladivostok, which is backed by Oleg Deripaskas Rusal (Russia Intelligence n53 of April 30 2007).
On the political side, the implementation of the accord between Toshiba and Atomenergoprom is an important signal, at
a time when Russians and Japanese have resumed discreet discussions on resolution of the territorial dispute on the Kurile
islands (Russia Intelligence n71 of February 13 2008). d

Shipbuilding : FLK on a spree in Ukraine and in Germany

If Ukraine remains the theatre of a RussoNorwegian competition in the telecoms sector
(read article page 7), the atmosphere is more
cooperative in the shipbuilding domain. March
25, Aker Yards ASA announced the sale of
70% of its subsidiary Aker Yards Ukraine Holding AS to FLC West, a Luxembourg subsidiary of the Russian leasing firm FLK. This transaction of 291 million euros, which should be
concluded during the summer, concerns the
Okean Nikolaev in Ukraine, as well as those
of Wismar and Warnemnde in the former
GDR. The Norwegian side underlined that the
Aker Yards Ukraine Holding AS will remain based in Oslo and the management would be
retained. The presence of FLK in this deal is at
first glance surprising. The group is in effect
51,8% held by OAK, the public holding firm

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that unites Russian aircraft companies (the

other major shareholder being the State property fund with 28,69%). FLC West is for its
part jointly held by FLK and the Cyprus-based
firm Almiar Investment Ltd, which represents
the interests of private shareholders in FLK
close to Nail Malyutin and Ismael Ostrovsky.
The initial mission of FLK was to support aernautical industries by ordering new aircraft,
notably from Tupolev. Certain persons consulted by Russia Intelligence in Moscow do not
exclude that FLK was activated by the State to
undertake a conveying operation on behalf of
the holding firm specialised in shipbuilding,
OSK, whose establishment is experiencing some
delays and which to this day does not as a result dispose of all the instruments required for
such a major foreign financial operation (Rus-

sia Intelligence n64 of October 25 2007).

The purchase of Aker Yards Ukraine Holding AS constitutes in all probability a significant operation for Russia. The Okean Nikolaev
yard is operating at virtually full capacity, with
12 vessels under construction (essentially bulk
carriers, container ships, chemical and refrigerated ships). Those of Wismar and
Warnemnde are for their part considered as
solid, since they have benefitted in recent years
from impressive European funding to modernise. They will this year deliver 16 vessels, including 3 ice-breaker tankers(Arctic class)
for Lukoil. Historically, these yards worked
closely with the Soviet union and some of their
management are believed to be perfect Russian speakers. d

Russia Intelligence j Group Publisher and Managing Editor : Franois Roche j Editor-in-chief :
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Copyright : Eurasian Intelligence 2006 - Copy and dissemination in any form prohibited (including Intranet).
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c Russia Intelligence is published by Eurasian Intelligence SAS Capital euros 37,000 j CEO: Franois Roche j RCS Paris B 479 124 943
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Russia Intelligence N75 j April 10 2008

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