The « national champion
Transcript
The « national champion
Published every two weeks / International Edition N°78 - May 30 2008 CO N T E N T S P. 1-3 Politics & Government OLIGARCHS c The « national champion » of the mining sector in view ? DIPLOMACY c Russia-China : what's left of the strategic partnership ? ALERT c Stubborn Russo-Iranian dif- ferences on a “Gas OPEC” FOCUS c The insinkable Igor Sechin BEHIND THE SCENE c Who wants Mikhail Kovalchuk's head ? P. 4-7 Business & Networks OIL c When Gennady Timchenko emerges from the shadows ALERTS c Neighbourly quarrels on the shores of Lake Léman… c The appetite for property of the Russian Orthodox church RAILWAYS c Privatisation of Deutsche Bahn, Bombardier : Vladimir Yakunin’s major projects FOCUS c Shipbuilding : the Kremlin reshuffles the cards ALERTS c Agusta approaching c A brawl at TNK-BP P. 8 Regions & CIS FAR-EAST c Governor Sergey Darkin in the eye of the storm SUBSCRIPTION Print Edition (23 issues, airmailed overseas) €770 TTC The Web Pack (Print Edition + PDF + archives acess) € 880 TTC The Premium Subscription (Print Edition + PDF + access to all the website contents) € 1200 TTC OLIGARCHS c The « national champion » of the mining sector in view ? A climate of economic euphoria has reigned in Moscow recently which has not been seen for a long time. It is fed by a succesion of good news : rises in the price of crude oil, unexpectedly fast rate of growth (8.4% in annual rate in April 2008 against 7.1% in April 2007), record numbers of net influx of capital (19 billion dollars in April, 15 billion in May); very good grain harvest at 85 million tonnes which will not require export restriction measures...Without speaking of projected fiscal exemptions to relaunch oil exploration and production or the measures destined to support the shipbuilding industry (pages 3 & 7). Then, during the night of March 28 and 29, the icing on the cake : the official announcement by Vladimir Potanin and Alisher Usmanov of the conclusion by their two groups of a strategic partnership, rendered concrete through cross shareholdings, which could lead eventually to the constitution of the one of world’s largest mining and metals companies, if, since he is invited, Oleg Deripaska joins the operation. For several months already we have chronicled in these columns of the separation between Vladimir Potanin and his associate Mikhail Prokhorov, of the sale by Prokhorov of 25% of Norilsk to Oleg Deripaska and the discussions held between Potanin and Usmanov to prevent Deripaska from purely and simply taking control of Norilsk. According to the official communiqué distributed May 29, Interros (Potanin’s holding company) takes 25% plus one share of Metalloinvest while Gallagher (Usmanov’s holding firm) will buy between 5% and 10% of Norilsk Nickel on the stock markets. This first exchange of shares should be followed by a merger between the two grroups. Two possible outcomes are possible : if Oleg Deripaska joins the project, Norilsk will be the centre of operations and each of the three oligarchs will holds about 25% of the capital of a complex whose value would be on the order of 100 to 120 billion dollars. If Deripaska refuses to join the merger project, the operation would then take place around Metalloinvest in which Usmanov and Potanin would hold 30% each, leaving Deripaska in a minority position. But even in its broad outlines, the manoeuvre is not simple, because at the same time he negotiated with Potanin, Usmanov stated he wanted to list Metalloinvest on the market. The negotiations should have been particularly animated between the two partners. In fact, the Ria Novosty agency announced at 20:26 May 28 that the discussions between Metalloinvest and Norilsk were frozen before stating an hour later the conclusion of an accord... The financial discussion between the three partners will be ferrocious, as well as the negotiations relating to the composition of the future administrative council. We can neither ignore the political backdrop to this deal. The more or less “spontaneous” union of three of the most powerful oligarchs in Russian metals and mining is monitored by Vladimir Putin and Dmitry Medvedev who have for years run after the creation of a “national champion” of world scale, consolidating the desire of Russia to become a global “player” in the globalised economy. The background trends at work in the mining and metals industries (spectacular rise in prices for raw materials and steel, consolidation underway or projected such as the offer of BHP Billiton for Rio Tinto or the discussion between Valle and Glencore) provide a favourable terrain for Russian actors. Especially since the potential of the new Norilsk/Metalloinvest/ Rusal group could benefit from a welcome gift from the authorities : the award of a operating license for the Udokan copper deposit, in the region of Chita, discovered in 1949 and whose reserves are estimated at 14.9 million tonnes of copper per year, or 15% of the annual Russian production. We know that four competitors are vying to win the auction, whose date has been delayed from July 17 to August 14 : Norilsk Nickel, Rostekhnologii owned by Sergey Chemezov, BasEl, Oleg Deripaska’s holding company and a consortium regrouping RZD owned by Vladimir Yakunin, the Vnesheknonombank and the mining group UGMK belonging to Iskander Makhmudov. The opening bid has been set at 4.5 billion rubles, or a bit more than 122 million Euros. If the planned mergers are confirmed by August 14 (but this date may change again), there will be only two bidders, the complex of Norilsk/Rusal/Metalloinvest which has been joined by Chemezov on one side , and the alliance of Yakunin/Makhmudov on the other...Unless the rumour which has Mikhail Prokhorov and Roman Abramovich associating is confirmed. We are therefore on the eve of an industrial and capitalist operation of a scale never seen before in Russia. d www.russia-intelligence.fr RUSSIA INTELLIGENCE Po l i t i c s & G ov e r n m e n t c DIPLOMACY Russia-China : what's left of the « strategic partnership » ? German leaders had long hoped that Berlin would be the first destination for the new Russian President, but it was in Astana and Beijing that Dmitry Medvedev made his entrance on the international stage as head of state. This choice has been widely interpreted in the European press as a first discordant note to the supposed attraction of the new tenant of the Kremlin for the West, but also as a sign of continuity with the foreign policy of Vladimir Putin. vedev involves 6 Ka-226 and Ka-32 helicopters. Even though the Russian side had to swallow a lot of rebuffs to relaunch the system. The boss of Sukhoi, Mikhail Pogosyan, systematically — and very courteously — avoided the pirating by his Chinese partners of the Su-27 produced under license in Shanghai (200 units were to have been produced, but China stopped importing the components from Russia after 105 aircraft were assembled). Paradoxically, the meetings of Dmitry Medvedev in Kazakhstan and, especially, in China illustrate more than anything the very ambiguous character of the diplomatic heritage of the former President to his heir. Things are hardly any brighter concerning energy issues. The Altaï gas pipeline project which had been signed during the visit of Vladimir Putin in Beijing in the spring of 2006 has not seen the least concrete beginning. The oil issue arouses even more questions. Rosneft estimates losing 40 dollars per tonne of crude delivered to the Peoples republic and is ready to break the contracts underway if the rates are not revised upward (the Chinese side — in this case CNPC — recalls that it was thanks to the credit of 6 billion granted in late 2004 that Rosneft was able to absorb Yuganskneftegaz). Also, the definite path for the East Siberia-Pacific ocean pipeline (VSTO) has still not been decided. The Transneft n°2, Mikhail Barkov, declared concerning the diversion of the oil pipeline to the Chinese frontier that the decision was the choice of the sharholder, in other terms the state. Officially, the “strategic partnership” between Moscow and Beijing is better than ever. At the conclusion of his visit to Beijing, Dmitry Medvedev declared that it represented a major factor of stability and balance in the world. And he added, in very Putinian tones : “Some don’t like this kind of strategic cooperation between our countries, but it serves the interest of our countries and we will strenghten it whether some like it or not”. The members of the Russian presidential delegation for their part insisted on the spectacular development of bilateral trade, passed from 28.6 billion dollars in 2006 to 48.2 billion in 2006. Without really succeeding in dispelling the doubts about the real state of Russo-Chinese relations. It must be said that differences — some sublimated — have multiplied in the course of the past few months. At the politial level, while Russians and Chinese affirmed up to now sharing a common vision of the international order, several subjects of importance are now avoided in public. Therefore, the final declaration does not mention the opposition to the plans for enlargement of the Atlantic alliance, a subject that is known to be sensitive for Russia and which the staff of Sergey Prikhodko, Dmitry Medvedev’s diplomatic advisor tried vainly to “sell” to their Chinese counterparts. According to our information, Beijing’s position on the question will be dictated by its desire not to jostle certain European members of NATO who are still opposed to lifting the embargo on the export of arms to the Peoples republic. Moscow and Beijing also clash on the recasting of the UN Security council : Russia wants to limit the addition of new members and does not necessarily see in it the same countries as China (Japan among others). 2 The subjects of friction are even more numerous in the economic sphere. The shipment of Russian arms to China, which represented up to 40% of the total military exports of the country at the beginning of decade, are frozen. It’s known that the Chinese side hardly appreciated that the contract of August 2005 for 38 Il-76 and Il-78 transport and supply aircraft has not been fulfilled (the Russian side has put forward technical problems at the Tashkent site, where the planes should have been assembled, and wants to increase the amount of the contract). Discussions on the sale of Su-33 for the Chinese naval air wing and the Su-35 are stopped. One of the objectives of the Russian side in Beijing had been to obtain a date to be set for the next meeting of the bilateral military-technical cooperation commission, but General Vladimir Dmitriev left empty-handed, according to our sources. The only contract signed during the visit of Dmitry MedRussia Intelligence N°78 j May 30 2008 Finally, the only contract of any significance was to the credit of the boss of Rosatom, Sergey Kirienko. Tekhsnabexport (TENEX) will build a nuclear enrichment plant in China valued at 500 million dollars minium for semi-enriched uranium for its Chinese neighbour beginning in 2010. d ALERT 3 Stubborn Russo-Iranian differences on a “Gas OPEC” Periodically brandished as a scarecrow against Westerners, the idea of a natural gas OPEC has been slow to materialise. The cause has been the lack of a consensus between Moscow and Tehran concerning the charter of such an organisation. This was confirmed by the vice president of the State Duma and president of the Russian natural gas association , Valery Yazev, during a conference organised by the DGAP in Berlin May 20. According to him, there are currently two proposals on the table : one, which is more restrictive and is in fact modeled after the OPEC one, which was proposed by the Iranians, and a more flexible one proposed by the Russians. In the absence of an accord, the next session of the forum of natural gas exporting countries, originally foreseen for June, will probably be delayed until October. Concurring sources in Moscow believe that Russia has decided to exercise prudence on a subject that it knows to be particularly sensitive in the eyes of the West. To follow the lead of the Iranians would probably not be the wisest course at a time when the Kremlin is seeking to convince its partners of the non-political orientation of its hydrocarbon energy strategy. Last May 22, the Republican vice president of the House of representatives, Ilena Ros-Lehtinen, declared that the United States could not tolerate the creation of a gas OPEC that would amount, according to her, to “nothing more than a global attempt at extortion and racketeering”. d www.russia-intelligence.fr RUSSIA INTELLIGENCE Po l i t i c s & G ov e r n m e n t cc F O C U S The insinkable Igor Sechin The reactions have continued unabated in Moscow relating to the composition of the government, the staffing of the Presidential administration and, more fundamentally, about the balance that is being established between Dmitry Medvedev and Vladimir Putin. From this standpoint, one of the most striking and most unexpected elements in the wave of nominations announced May 12 is that Igor Sechin retains such an important place in the ranking, which is obviously quite upsetting for the new President. If it is not completely lacking, the margin of manoeuvre now available at this stage to Dmitry Medvedev is limited. He has not been able to chose the head of his administration. It is known that he wanted for this post either Igor Shuvalov (who was named 1st vice Prime minister) or Alexandre Voloshin. The new President had to accept the nomination of Sergey Naryshkin, who is certainly not a dyed-in-the wool “Sechin man” but who is neither one in whom he can have complete trust. Dmitry Medvedev also had to accept the imposition of Marina Entaltseva to the post of head of protocol. Maria Entaltseva is one of the most loyal friends of Vladimir Putin’s and has been his personal secretary since 1991, first in the Saint Petersburg and then the Presidential administration. She is eternally grateful to Vladimir Putin for having saved her from a fire that ravaged her dacha in 1996. According to information gathered by Russia Intelligence, Marina Entaltseva is also close to Igor Sechin, with whom she collaborated directly in the Kremlin from 2000 to 2008. The only man whom Dmitry Medvedev could select to fill his staff in the Kremlin was Konstantin Chuychenko, his old school friend, member of the Gazprom direction and administrator of RosUkrEnergo. As we indicated in our previous edition, Konstantin Chuychenko will be responsible for the very powerful general direction for controls. Dmitry Medvedev should in addition be able to count on Natalya Timakova, his new press secretary, a close associate of Anatoly Chubais and of Alexandre Voloshin, to whom she owes her entire career. Things are more complicated when it comes to the organs of power. Igor Sechin loses his two companions Nikolay Patrushev and Vladimir Ustinov. The first is “put in the closet” in the national security council and replaced by his assistant, Alexandre Bortnikov, reputed to be equidistant from Putin and Medvedev. But the predictable weakening of Igor Sechin’s position in the FSB is partly compensated by the nomination of Viktor Ivanov to the post of the federal anti narcotics service, up to now controlled by Viktor Cherkesov, an avid supporter of Dmitry Medvedev. Vladimir Ustinov — whose son is married to Igor Sechin’s daughter, Inga — is certainly replaced by someone close to Medvedev, Alexandre Konovalov, but he recovers an important post, that of high presidential representative to the southern federal district, long supervised by Dmitry Kozak. Elsewhere, Igor Sechin also maintained in the loop former Prime minister Viktor Zubkov, whom he hoped to make the “heir” to Putin in autumn 2007. Viktor Zubkov should soon be named to the presidency of the Gazprom supervisory council, which is not neutral in view of its rivalry with Rosneft. With Zubkov with Gazprom and Igor Sechin in the position of vice Prime minister in charge of the energy sector, the balance will change (since the Energy minister, Sergey Shmatko, who comes from the nuclear power stream, is unlikely, at least at the beginning, to involve himself too much with hydrocarbon energy). The retention of the son-in-law of Viktor Zubkov, Anatoly Serdyukov, at the Defence ministry should also be noticed. Lastly, Igor Sechin will also probably cut across the paths of Sergey Ivanov and perhaps also Sergey Chemezov by taking over control of the presidency of the supervisory council for OSK, the public holding company for shipbuilding (read also article on page 7). Igor Sechin in addition can also count on the loyalty of the Industry minister Viktor Kristenko, long-time friend at Rosneft (his daughter is married to the son of Viktor Bogdanchikov). Other second-ranking federal officials such as Anatoly Ledovskikh (Subsoil development agency) are also Sechin men. We also observe, according to information gathered in Moscow by Russia Intelligence, that the president of the Senate, Sergey Mironov, has also drawn closer to the new vice Prime minister of Vladimir Putin. d Russia Intelligence N°78 j May 30 2008 BEHIND THE SCENE Who wants Mikhail Kovalchuk's head ? Who wants Mikhail Kovalchuk’s head ? It’s a tragic affair and for the least a troubling one which has just unfolded in Moscow. May 8, Svetlana Zheludeva, assistant director of the Cristallography institute of the Academy of sciences (IKRAN), was opening an envelope containing a letter and a bag of white powder sent by another academy institute in Novosibirsk. Five days later, she was rushed to a hospital, before plunging into a coma and dying on May 17. Doctors at the Sklifovosky Institute declared anonymously they “do not understand what happened. The patient saw her liver destroyed in the space of three days”. An ordinary hepatitis B with no connection to the contents of the envelope, as maintained by Gennady Onishchenko, the head of the Russian health services, who had distinguished himslef by eminently declaring Moldovan and Georgian wines to be toxic in the autumn of 2006 ? Several elements lead to the possibility that the matter may be more complicated. In particular the fact that the letter opened May 7 was addressed to Mikhail Kovalchuk. The brother of Yuri Kovalchuk, the boss of the Rossia bank, Mikhail is not unknown to our readers. In its edition of May 16 2007, Russia Intelligence indicated that this great friend and dacha neighbour of the Science minister Andrey Fursenko, who also holds the post of director of the Kurchatov Nuclear research institute and is a member of the supervisory council of Rosnanotekh (the public holding company created in 2007 to guide the development of nanotechnology), might fancy himself as the president of the Academy of sciences. Less for the prestige than for the direction of the “budget downpour” linked to the development of nanotechologies (4 billion Euros) and the immense financial and property resources of the Academy.Appetites which do not please everyone surrounding the current president, Yuri Osipov, who had discreetly worked to assure that Mikhail Kovalchuk did not receive the title of Academy member on May 28 (which should in theory prevent him from taking over the direction. Mikhail Kovalchuk nevertheless was named acting vice president of the Academy of sciences by decree last June). From there to imagine that someone would seek to bar his way at any price...The family of Svetlana Zheludeva has in any case indicated that she was in good health before the events and that it would not be satisfied with the version extended by Gennady Onishchenko. Visibly embarrassed, the police services indicated they would give themselves one month to decide whether or not to open a criminal inquiry. d www.russia-intelligence.fr 3 RUSSIA INTELLIGENCE Business & Networks OIL c When Gennady Timchenko emerges from the shadows Very strange, this duel between the Financial Times and Gennady Timchenko, the man of Gunvor, which in a few years has become the third leading oil trading company in the world... May 14, the British economic daily published a long article, signed by its correspondents in Moscow, Catherine Belton and Neil Buckley, retracing the career of Timchenko, since his early days in Saint Petersburg , until his spectacular climb in power begining in 2003 and letting it be understood that this spectacular ascension had a connection with the friendly links between Gennady Timchenko and Vladimir Putin. The readers of Russia Intelligence in fact have been informed for a considerable time about the voyage of Gennady Timchenko as well as certain episodes that the Financial Times does not raise, such as the creation of the fleeting Baikal Finance which won the auction on Yuganskneftgaz on December 19 2004 (Russia Intelligence n°6 of February 11 2005). Nevertheless, the publication of this article in the Financial Times was not to the liking of Gennady Timchenko, who replied through a letter to the daily on May 22, a posting in which he downplays his friendship with Vladimir Putin and specifically challenges the notion that Gunvor owes its success to any “favours” from the Kremlin. It was the first time that Timchenko had taken a public stance and it is interesting to analyse the reasons. No one ignores that the rise in power of Gunvor has coincided with the resumption of the control of Kremlin in Russian oil activity, whose most symbolic episode naturally was the arrest in autumn 2003 of Mikhail Khodorkovsky, the boss of Yukos. In 2004, Gunvor reached 4 billion dollars in sales. This year, the firm, whose headquarters is at Geneva, will be close to 70 billion dollars, according to Torbjörn Törnqvist, a former BP trader, who is president and co-founder of Gunvor with Timchenko (the company was officially created in 1997). This makes it the third leading oil trading company in the world, behind Glen- 3 Taxation threat hangs over the steel industry The theory of a plot always has considerable success in Russia, and some in Moscow attribute the “attack” of the Financial Times against Timchenko to the desire of certain Russian oligarchs to oppose the “Sechin/Zubkov/Timchenko” group whose influence over the Russian energy sector can only increase, the day after the formation of new management teams (read page 3). In truth, it is not difficult to anticipate such a phenomenon. The mission confided by Vladimir Putin to Igor Sechin is clear : to replace Russian oil production on a rising path (between January and April 2008, production of crude declined by 0.3% compared with the same period the previous year). Two strategies will be deployed, a fiscal one, the other concerning development of port infrastructure. The government “presidium” decided during its meeting of May 26, to transmit to the Duma a draft law planning a fiscal exemption for up to fifteen years for the establishment of production for deposits already identified or the exploration of new felds. In addition, the extraction tax will be lightened, which would represent a “gain” for oil companies of 4.2 billion dollars in a full year, according to Alexey Kudrin. In total, according to experts, the Russian oil industry should benefit from at least twenty billion dollars in additional revenues thanks to these fiscal measures, and the first beneficiaries should be Rosneft and Gazpromneft. If Russian oil groups benefit from tax exemptions, it is not the same for steel and metalurgical companies. The Russian market for steel is one of the most active in the world, but it is subject to substantial price increases : more than 40% from one year to the next. The major steel consumers in Russia (especially the oil groups and tube pipe producers) accuse the steelmakers of a price conspiracy and complain bitterly to the government. The steelmakers reply that the increase in domestic prices is due to the skyrocketing of world prices for steel. But the government is seriously considering imposing a tax on steel imports and a control on domestic prices. In addition, the old question of transfer pricing returns to the fore. Russian steel groups are highly integrated vertically, which allows them to play on prices for raw materials, coal or iron ore, in order to “optimise” their tax charges. From time to time, the government raises the threat to examine these practices more closely to bring the oligarchs of the sector to their senses, and this is precisely what it has just done. On the infrastructure side, it only took a few days for the new Prime minister Vladimir Putin to visit the oil terminal in Primorsk and confirm the development of the one at Ust Luga, in the gulf of Finland, a project which the former president of Transneft, Semyon Vaynshtok apparently did not defend with the enthusiasm required. Since he has been replaced by Nikolay Tokarev (Russia Intelligence n°63 of October 11 2007) the pace has quickened. Gunvor should notably be involved in the constructioon of the new terminal at Ust Luga (of a capacity of 11 million tonnes) along with Zarubezhneft, the public company presided over until last autumn by Tokarev. It is therefore clear that the men of the Prime minister will play a key role in the development of crude oil production and exports. The “outing” of Timchenko denying all political backing from the state to Gunvor may be unprecedented, it is no more convincing... ALERT 4 core and Vitol. All the Russian oil groups, even TNK-BP, turn to the services of Gunvor (with the notable exception of Lukoil) which handles about 30% of Russian crude oil exports by maritime transport and whose principal clients are Surgutneftegaz, Gazpromneft and Rosneft, three firms whose managers are close to Vladimir Putin. As for his personal ties to Vladimir Putin, they must be more solid than Timchenko today contends. It is known that it was in the latter’s villa on the Basque coast in July 1999 that secret meetings took place between Putin and Boris Berezovsky concerning the nomination of the man who was then only the head of the FSB to be Prime minister. Russia Intelligence N°78 j May 30 2008 www.russia-intelligence.fr RUSSIA INTELLIGENCE Business & Networks ALERTS 3 Neighbourly quarrels on the shores of Lake Léman… Daggers have been drawn by two of the prestigious residents of Cologny, the VIP district of Geneva, on the shores of Lake Léman. Vyacheslav Kantor, the fertiliser magnate (Akron group) and property holdings, who is also president of the Russian and European Jewish congress, has bought land to enlarge his Cologny property to build a private museum aimed at housing his rich collection of Russian paintings. These enlargements are not to the taste of his neighbour, in this case Klaus Schwab, founder and executive director of the Davos World Economic Forum, who has launched legal proceedings against Kantor, without success up to now. But this has no bearing on the interest that Schwab has for the Russian market (read below). 3 Yuri Kovalchuk and the Berlusconi group in NTV ? It is still only a rumour, but Yuri Kovalchuk (Gazprombank, Bank Rossiya), is said to want to take over control of the NTV television channel, at the moment held by Gazprom Media. The links between Kovalchuk and the Gazprom galaxy are well-known and the Saint Petersburg banker has pre- viously bought certain assets from Gazprom Media, such as the Izvestia daily. Kovalchuk already controls two television channels, Ren TV (with Surgutneftegaz and Severstal) and TRK-Petersburg. Contacts are also said to have been made at the highest level to propose to Mediaset, a subsidiary of the Fininvest group, controlled by Silvio Berlusconi and his family ( his daughter Marina is president), a stake of some 20% in NTV, which during the Yeltsin years was the symbol of the rebirth of Russian television. 3 Record attendance awaited for the Saint Petersburg Economic Forum The cream of politics and the business world has found a new gathering spot : the Saint Petersburg Economic Forum, whose 12th edition will take place June 6 and 8. Up until recent years, the Saint Petersburg Forum had been relegated to a second level in comparison with the London one. But the latter has lost the favour of Russian politicians and entrepreneurs after the Kremlin prevented several ministers from participating in the last two or three editions. Co-organised in part by Schwab, the founder of the Davos economic forum, the Saint Petersburg Forum has already obtained the registration for this year of the participation of most prominent Russian and international business managers (Thierry Desmaret, Christophe de Margerie, Daniel Bouton, Patrick Kron, Bernard Arnaud, Jean-Louis Befa, Christine La- garde, Anne-Marie Idrac will be among the French delegation). It must be said that the Kremlin mobilised itself for the organisation of this forum, whose organising committee was constituted through Presidential decree n°65 of January 22 2008. It is presided by Elvira Nabiullina, Economic development and commerce minister. 3 The Grefs, a new banking dynasty In its edition of February 28, Russia Intelligence spread the news about the first steps of German Gref in the presidency of Sberbank, the Russian savings bank, the country’s leading banking institution. It has been learned that the former Economic development minister is not the only member of the Gref family to inaugurate a financial career . His son Oleg, a yound graduate of the noted Saint Petersburg law faculty, has been working since last summer with the commercial operations of the Moscow affiliate of Deutsche Bank. The younger Gref has been nurtured by Alex Bazarov, an apparently fruitful collaboration since the latter was recruited after a month by the elder Gref for the position of corporate director at Sberbank. The banking connection is, as is well known, especially attractive to the offsprings of the Russian official elite. Dmitry Patrushev, the son of the exFSB director and new secretary of the na- tional security council, is assistant director general of the Vneshtorgbank (VTB) alongside Andrey Kostin. Pyotr Fradkov, the son of the former Prime minister and currently boss of the external intelligence service (SVR) Mikhail Fradkov, is for his part member of the directorate of the Development bank, integrated into the Vneshekonombank (Russia Intelligence n°46-47 of January 19 2007). 3 The appetite for property of the Russian Orthodox church According to information gathered by Russia Intelligence, the Moscow Patriarchy has become actively involved recently to find a building site in Paris. Contacts have been made with the circles around Prime minister François Fillon and a meeting may be scheduled with the capital’s mayor Bertrand Delanoé. The assistant to the Patriarch of the Russian Orthodox church, Metropolitan Kirill, recently dispatched to Paris two young clerics fluent in French and also knowledgable in legal issues, accordiing to our sources. Moscow seems to have eliminated the rue Daru — the bastion of the white Russian immigra- Russia Intelligence N°78 j May 30 2008 tion — and hopes to build a new Russian Orthodox pole in Paris. The property plans of the Moscow Patriarch are not limited to France. A church has recently been inaugurated in Rome. The Holy Land is also a priority objective. The President of the Palestinian Authority Mahmud Abbas has also given his accord to the restitution to Russia of several sites in Bethlehem, Jericho and on the Mount of Olives. These sites belonged to the Orthodox Imperial Palestinian Society founded in 1882 by the Emperor Alexander III. It was the boss of the Court of Accounts, Sergey Stepashin, president of this society since 2007, who conducted the negotiations and who was given the deeds to the properties by Mahmud Abbas. The other topic is the Serge Hermitage (Sergievskoe podvorie) in Jerusalem. Since the break in diplomatic relations between Moscow and Tel Aviv in 1967, this two-story building housed the services of the Israeli Agriculture ministry. Discussion initiated in the wake of the visit of Vladimir Putin to Jerusalem in the spring of 2005 are on the point of concluding. Before leaving the Kremlin, Vladimir Putin released 300 000 Euros for the restoration of this site. www.russia-intelligence.fr 5 RUSSIA INTELLIGENCE Business & Networks RAILWAYS c Privatisation of Deutsche Bahn, IPO, rapprochement with Bombardier : Vladimir Yakunin’s major projects The boss of the national railway company, who — according to information gathered by Russia Intelligence in Moscow — refused a post as vice Prime minister for transportation, has displayed his intention to accelerate toward a certain number of priority objectives for RZhD. Strengthened by recent successes in Armenia and Libya (Russia Intelligence n° 70 of January 31st, 2008 and n°76 of April 24, 2008), Vladimir Yakunin intends to pursue his ambitious international development strategy. The next objective for RZhD is Germany. Speaking on May 21 in Sochi during the Russia Transport 2008 show, the strongman of the Russian railways declared his interest in the partial privatisation of Deutsche Bahn (24.9% ) planned for this autumn. He also is said to have had discussions on this subject with his German counterpart Hartmut Mehdorn. In this case, RZhD would have to disburse between 4 and 6 billion euros, according to the different evaluations of experts. Such a strategic decision would also require the approval of the Kremlin. But at this stage, the Russian authorities appear not to have decided. The vice Prime minister Alexandre Zhukov, who is also the president of the RZhD supervisory board, has just underlined in the midst of the declarations by Vladimir Yakunin that to raise such prospect now was “premature”. But it is a good bet that the boss of RZhD, who is on good terms with both Vladimir Putin and Dmitry Medvedev, will have no trouble in putting his views across when the time comes. The other priority for Vladimir Yakunin is to find the financing to put his development strategy for rail transport 2030 adopted last autumn into practice (Russia Intelligence n°63 of October 11th, 2007. We recall that this document foresaw massive investments — no less than 520 billion dollars — in modernisation of infrastructure and replacement of rolling stock. 40% of this amount will have to be financed by RZhD. To guide the group finances, Vladimir Yakunin last November recruited Tatyana Paramonova, the former vice president of the Russian central bank. A first wave of asset sales (notably a 15% stake in the freight operator Transkonteyner) has already taken place in late 2007, which led to the entry of 316 million Vladimir Yakunin dollars into the RZhD coffers. But the biggest operations are yet to come. By next autumn, the Russian railways will place on the market 4 billion dollars in Euro obligations. The second phase will be the organisation of an IPO for 25% of the capital of RZhD (held up to now, we remind, by the state). According to Fyodor Andreev, 1st vice president of RZhD, the operation should take place in 2011.Estimating last fall what the opening of 20% of the capital of the Russian railways might bring, the boss of Vneshtorbank, Andrey Kostin had raised the number of 300 6 Russia Intelligence N°78 j May 30 2008 billion rubles (or about 8 billion dollars). We can see therefore that the financial operation foreseen by Vladimir Yakunin would one of major importance. Another related industrial operation — the entry into the capital of Transmashholding (TMX), the main provider of rolling stock to RZhD, by a Western investor — should see some important developments in the coming weeks. It is known that Vladimir Yakunin publicly declared in early December 2007 his support for Canada’s Bombardier. According to our information, the Transmashholding team is more reserved, close associates of Dmitry Komisarov even favouring the Alstom option. But some signs indicate that in this matter, the Canadians have the lead. The latest to date was the conclusion on May 21 of an accord aimed at establishing a joint company for the development of a new generation of locomative using the asynchronous propulstion technology. The text was signed in Sochi by Wolfgang Tölsner, the head of development for Bombardier Transport, and Andrey Andreev, acting director general for ZAO “Transmashholding” in the presence of Vladimir Yakunin. We also recall that in May 2007, a preceding accord had been signed by for creation of two joint companies between TMX and Bombardier (Russia Intelligence n°56 of May 31st, 2007). According to our information, the visit planned by Vladimir Yakunin to Canada on June 12 in the context of his Foundation for the dialogue of civilisations should not be limited to an academic exercise. The only false note in this rather harmonious score for Vladimir Yakunin came in Saudi Arabia. In our edition of January 31st 2008, we indicated that RZhD had won the call for tender by the Saudi government for the construction of 520 km of rail between Az-Zabira and the King Khaled international airport in Riyad. But this result has just been cancelled . According to Vladimir Yakunin, the technical proposals of his group have not been questioned, but the reason for the Saudi turnaround arise from “problems of international relations”. In fact, it was the contract obtained by RZhD in mid-April in Libya during the visit by Vladimir Putin to Tripoli (Russia Intelligence n°76 of April 24, 2008) which might be the reason for the problem. It is known in fact that the wahhabist kingdom has horrible relations with the Jamarihiya (in 2004 the Saudi services had even accused Colonel Kadhafi of having fomented a plot again the heir to the throne, Prince Abdalallah). Russia Intelligence sources close to Vladimir Yakunin believe nevertheless that the loss of the Saudi contract is not necessarily bad news from a financial standpoint. The RZhD offer (800 million dollars, or about 1.5 million dollars per km, while the going price in Russia is close to 7 million dollars), was obviously undervalued and the implementation of this contract would have generated significant losses for the Russian group. www.russia-intelligence.fr RUSSIA INTELLIGENCE cc F O C U S Shipbuilding : the Kremlin reshuffles the cards To once again make Russia a great maritime power, we know, is one of the constant preoccupations of Vladimir Putin since his accession to office. On July 27 2001, the Russian President at the time had promulgated, on the occasion of the fleet festival in Saint Petersburg, the “Maritime doctrine of the Russian federation to 2020”. A few weeks later, he created a Maritime college (Morskaja kollegjia), an ad hoc creation uniting members of the government, governors and industrialists in order to reach a consensus on the initiatives of the different protagonists in the matter. On the industrial side, Vladimir Putin stimulated the creation of a public holding company — OSK — uniting the totality of the public actors in shipbuilding. Founded by a presidential decree on March 21 2007 (Russia Intelligence n°52 of March 30 2007), OSK was officially registered last autumn (Russia Intelligence n°64 of March 30 2007). It should also be recalled that this holding company will involve three regional centres : West (Saint Petersburg, Kaliningrad), North (Sevmash and Zvezdochka in Severodvinsk on the White sea) and Far-east. The Saint Petersburg shipyards owned by Sergey Pugachev (Baltiysky zavod and Severnaya verf) are not involved in this reorganisation in view of their status and despite their industrial importance. The landscape would be incomplete without Sovkomflot, the public maritime transport company which the Kremlin wants make a national champion and a Russian standard-bearer on the world seas. The administrative council of Sovkomflot is, it is known, directed by Igor Shuvalov, the new 1st vice Prime minister, very close to Dmitry Medvedev. The least that can be said is that the brief existence of OSK up to now has not resembled a peaceful voyage. From March to September 2007, it was General Alexandre Burutin, former military adviser to the President, who assumed the operational management. Then it was Yuri Yarov, former executive secretary of the CIS and vice Prime minister at the beginning of the Yeltsin presidency, who took the controls in September. With mixed results since Sergey Ivanov, the boss of the Military-industrial commission, and Vladimir Putin have each expressed their disappointment about the advancement of the shipbuilding reforms in recent weeks. As a result, the Kremlin decided to once again change the pilot. The presidency of the supervisory board of OSK was awarded to the vice Prime minister Igor Sechin. Among the new hats (read page 2), which was undoubtedly the least expected since he had up until then displayed no interest for this sector of activity. The other change involves the presidency of OSK directorate. Yuri Yarov yields the post to Andrey Dutov, who up until then directed the Federal Industrial agency (Rosprom). This nomination is interesting in more than one way. First of all because Andrey Dutov is reputed to be closely linked to Sergey Chemezov. We remember that the director general of Rostekhnologii in the summer of 2006 had sought the shipyards owned by Sergey Pugachev. In addition, because Andrey Dutov was named without Igor Sechin being consulted. It was the departing president of the OSK supervisory board, Sergey Naryshkin, who signed the decree. According to Russia Intelligence sources in Moscow, this slight manoeuvre was aimed a rebalancing things and avoiding that Igor Sechin exercise too strong a hold on the naval sector (we recall that Yuri Yarov is a friend of the former Prime minister Viktor Zubkov, who is himself allied to Sechin). The arrival of a “heavyweight” such as Igor Sechin in shipbuilding in any case complicates matters and creates a new pole of influence (with Igor Shuvalov, Sergey Pugachev, Sergey Chemezov, without forgetting Yuri Kovalchuk, whose partners control the promising Vyborg shipyards - Russia Intelligence n°77 of May 13 2008). These new upheavals take place as Vladimir Putin has just announced a certain number of fiscal measures for Russian transport companies in order to urge them to place orders in Russia (during the past 10 years, only 6% of vessels ordered were built in national shipyards). This decision is in direct line with the Federal programme for the “Development of civil naval materiel” adopted in late 2007 and endowed with 136.4 billion rubles (about 4 billion Euros). Russia Intelligence N°78 j May 30 2008 Business & Networks ALERTS 3 Agusta approaching The spectacular breakthrough of Italian groups in Russia, which we have regularly analysed in these columns (see, among others, Russia Intelligence n°52 of March 30 2007, n°53 of April 13 2007 and n°77 of May 13 2008), is continuing in the aerospace sector. Oboronprom, the “Russian helicopter” public holding company and AgustaWestland signed an important accord during the HeliRussia 2008 show in mid-May. This document foresees that Oboronprom will market the AW109 and AW139 on the Russian market (the Italians count on selling for some 400 million Euros by 2012). Maintenance centres will then be created in Moscow and Saint Petersburg, then, in a third phase, an assembly unit will be installed in Lyubersty on a site belonging to Kamov. We recall that Agusta had already made a first attempt at industrial cooperation in Russia in the middle of the 1990s. The Ka-64 civilian helicopter project had nevertheless been abandoned for lack of financing on the Russian side. In this deal, AgustaWestland was able to count on efficent lobbying on the part of Denis Manturov, the former boss of Oboronprom today Industry vice minister. The importing and assembly of the AW139 are presented as transitory solutions while awaiting the entry into production of the Ka-60/62, for its motor Turbomeca is in contention. 3 A brawl at TNK-BP The Russo-British oil group has continued to hit the headlines since early spring. Following searches by the FSB in late March (Russia Intelligence n°74 of March 27) and the swell of persistent rumours about an entry by Gazprom in the capital (Russia Intelligence n°75 of April 10 2008), it has been learned that an open conflict erupted between the Russian and British shareholders. The latter want to concentrate investment by the group in Russia and reinvest the major part of the profits, while their associates are more inclined to distribute dividends. The atmosphere has visibly deteriorated and low blows have multiplied. Robert Dadley, the president of TNK-BP, accused the executive director of the group, German Khan (formerly of AlfaGroup), of having deliberately reduced the number of requests for work permits for foreigners from the Social affairs ministry in order to “Russify” the group’s Moscow staff. In this context, Gazprom foresees an opening and is rubbing its hands, even if — officially — the opening of the TNK-BP capital is not planned by its shareholders. To be followed... www.russia-intelligence.fr 7 RUSSIA INTELLIGENCE FAR-EAST c Governor Regions & CIS Sergey Darkin in the eye of the storm For some months already, Russia Intelligence has drawn the attention of its readers to the situation in the Far-eastern province of Primoria and indicated that the governor Sergey Darkin — whose past and reputation are somewhat controversial — was being watched closely by the Kremlin (Russia Intelligence n°4647 of January 19 2007). Matters accelerated sharply in recent days, foreshadowing a profound change in the local political landscape. On May 15, Sergey Darkin was convoked and questionned by representatives of the Investigations committee of the Prosecutor’s office in Vladivostok. In the aftermath, searches were conducted at his residence. The investigators are looking into the possible role of the governor of Primoria in a case brought to light last year that concerns illegal transfers of federal assets (some 70 hectares may have been improperly privatised — including one part protected as a “green zone” — before being offered to property developers for construction of cottages). Five persons have already been charged in the context of this investigation. On leaving the office of the investigators, a pale Sergey Darkin was transported to take a plane to Moscow, where he, according to the official version, was hospitalised in the Kremlin central clinic for cardiac problems. In fact, it involves Darkin quickly mobilising support in the capital. From a technical standpoint, a medical pause would have the advantage of preventing all destitution procedures of a governor. If the matter is taken very seriously by Sergey Darkin, it is because alarming signals had multiplied and the vice was tightened around him in recent months. One of his assistants, Alexandre Shishkin, was arrested by the FSB in June 2007 in a flagrant act of corruption (he was receiving an envelope with 30 000 Euros). Another of his associates in charge of the very lucrative markets sector, Leonid Beltyukov, fell for the same reasons last April. Other former regional officials were also in difficulty with the law, which hardly contributed to reassure Sergey Darkin about the determination of the federal authorities. In 2007, the former mayor of Vladivostok, Vladimir Nikolaev, for example had been condemned to 4 years in criminal prison for misuse of public funds. His predecessor, Yuri Kopylov, is currently being tried in Vladivostok for the same reason. According to information gathered by Russia Intelligence , this major house-cleaning in Primoria was decided at the highest levels in Moscow. Two factors, linked, led federal authorities to put such a scenario into place. On the one hand, the launching of the federal programme for the development of the Far-east, which foresees close to 23 billion dollars in public investment by 2013. These funds must serve to especially modernise the infrastructure in Vladivostok, which will play host to the summit of the APEC heads of state in 2012. It was out of the question that the Kremlin confide such amounts to personalities as mercurial as Sergey Darkin and his little friends. In a first stage, the Kremlin had dispatched to Vladivostok Sergey Ushakov, the former boss of security at Gazprom and former boss of the FSO (service for the protection of personalities), to keep an eye on the local elites and especially on Darkin (Russia Intelligence n°60 of August 30 2007). Then the case was given to the new high presidential representative in the Far-east, Oleg Safonev, another KGB veteran who is none other, in civilian life, than the son-in-law of Viktor Ivanov (Russia Intelligence n°65 of November 8 2007). Elected to the general surprise in 2001 and re-named in his post in early 2005 by Vladimir Putin, Sergey Darkin has obviously little chance of keeping his post. Especially since the war on corruption is established as one of the public priorities by the new President Dmitry Medvedev. Names have already begun to circulate in Moscow to succeed Sergey Darkin. The n°2 of the United Russia parliamentary group in the State Duma, Vladimir Pekhtin, seems the best placed. Yuri Osipov, who leads the Primorsky district in Saint Petersburg, as well as Semyon Vaynshtok — recently dismissed from his post as the boss of Olymstroy in Sochi — are also mentioned. Vladimir Kogan, future Senator from Saint Petersburg ? The nomination of Senator Vitaly Mutko to the post of minister for sports, tourism and youth in the Putin government opened up a — very desirable — position as representative of Saint Petersburg in the Federation council. There are numerous candidates, but, according to various sources in the Northern capital, the best placed would be Vladimir Kogan. The latter is not unknown to the readers of Russia Intelligence. In our edition of March 1 2006, we retraced the progress of this automotive mechanics graduate of the Leningrad Institute of engineering who during the 1990s gradually took over control of the Promstroybank and other Saint Petersburg banking establishments (notably the Bank Sank Perterburg, which Ko- One Year Subscription Printed Edition The Web Pack (23 issues, airmailed overseas) (Printed Edition + PDF + online acess) €770 TTC € 880 TTC Tél: + 33 1 46 45 53 75 Fax: + 33 1 46 45 53 75 E-mail: [email protected] gan sold to the family of the governor Valentina Matvienko — Russia Intelligence n°17 of September 9 2005 — and the Petrovsky Bank, sold to the MDM group). Close to Vladimir Putin and to the vice Prime minister in charge of finance, Alexey Kudrin, Vladimir Kogan has gradually withdrawn from the business world to engage in political life. After having sold for 36 million dollars his interest in the Zenit football club to Gazprom in late 2005, he was named to the post of deputy director of Rosstroy, but the recent dismantling of the federal agency during the last ministerial reshuffle left him empty-handed. On the spot, his old friends went out in search of a post. It will in all likelihood be the Senate, which he has sought for years. c Russia Intelligence j Group Publisher and Managing Editor : François Roche j Editor-in-chief : Arnaud Dubien j 115, rue Saint Dominique 75007 PARIS - France j Editorial : [email protected] / Tel. : 33 1 53 59 35 72 j Subscription : [email protected] / Tel. & Fax 33 1 46 45 53 75 j ISSN : 1771-3900 j Commision paritaire : 1206 I 85736 j Imprimerie : Hemmerlé, 75002 Paris j Copyright : Eurasian Intelligence 2006 - Copy and dissemination in any form prohibited (including Intranet). c Russia Intelligence is published by Eurasian Intelligence SAS Capital euros 37,000 j CEO: François Roche j RCS Paris B 479 124 943 j Headquarter : 115 rue Saint Dominique - 75007 - PARIS Russia Intelligence N°78 j May 30 2008 www.russia-intelligence.fr