The « national champion



The « national champion
Published every two weeks / International Edition
N°78 - May 30 2008
P. 1-3
Politics & Government
c The « national champion »
of the mining sector in
view ?
c Russia-China : what's left of
the strategic partnership ?
c Stubborn Russo-Iranian dif-
ferences on a “Gas OPEC”
c The insinkable Igor Sechin
c Who wants Mikhail
Kovalchuk's head ?
P. 4-7
Business & Networks
c When Gennady Timchenko
emerges from the shadows
c Neighbourly quarrels on the
shores of Lake Léman…
c The appetite for property of
the Russian Orthodox church
c Privatisation of Deutsche
Bahn, Bombardier : Vladimir
Yakunin’s major projects
c Shipbuilding : the Kremlin
reshuffles the cards
c Agusta approaching
c A brawl at TNK-BP
P. 8
Regions & CIS
c Governor Sergey Darkin in
the eye of the storm
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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
Po l i t i c s & G ov e r n m e n t
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).
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
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
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
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
Business & Networks
c When
Gennady Timchenko emerges from the
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...
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
Business & Networks
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.
Business & Networks
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
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.
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
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
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...
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-
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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 :
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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
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Russia Intelligence N°78 j May 30 2008