Late on November 3 (November 4 in Europe) the General Motors (GM) corporation decided to retain ownership of its heavily indebted German subsidiary Opel. The decision reverses GM’s September 10 tentative consent to sell a majority stake in Opel to a Kremlin-dominated consortium.

GM’s reversal became public on the final day of Chancellor Angela Merkel’s November 2-4 visit to the United States. Merkel learned about GM’s Opel decision only after completing her series of meetings with U.S. officials (Frankfurter Allgemeine Zeitung, Financial Times Deutschland, Sueddeutsche Zeitung, Handelsblatt, November 5, 6).
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Local government elections held on October 11 in 75 regions of Russia were massively rigged by the authorities in favor of the ruling United Russia party. There is, of course, nothing particularly new about election fraud in Russia –the nation is not a democracy and vote rigging is widespread. By producing the best possible result in favor of United Russia, local authorities demonstrate their loyalty to the supreme national leader Prime Minister Vladimir Putin, who is the chairman of United Russia. What was indeed surprising in the elections last month is that the opposition factions of Communists (KPRF), pro-Kremlin Liberal Democratic Party (LDPR) and Just Russia (SR) staged a walk out in the State Duma, while their leaders angrily protested against the vote rigging (EDM, October 14).

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Gazprom said Monday that its net profit in the first six months of the year fell by nearly half, which the company attributed to falling demand for its gas in Europe and at home.

Profit fell 48 percent to 296.2 billion rubles ($10.22 billion), from 573.7 billion rubles during the same period in 2008, the gas export monopoly said in a statement. Revenue was down 7 percent to 1.64 trillion rubles ($56.5 billion). Second-quarter net profit was down 36 percent to 192.5 billion rubles, while revenue for the period fell 16 percent to 708.3 billion rubles.

Analysts said the results were largely in line with expectations. Gazprom’s shares finished up 3.9 percent on the MICEX, although they lagged the exchange’s 30-stock index, which closed up 5.1 percent.

Third-quarter results may be even lower, said Alexander Nazarov, an analyst at Metropol.

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Russian economic and political penetration in parts of former Yugoslavia proceeds apace in the wake of President Dmitry Medvedev’s visit to Belgrade. Serbia risks turning into an Armenia of the Balkans by accepting Russian economic tutelage (EDM, October 27, 28). On November 6 the government of Slovenia finalized an agreement (which it had been considering since last year) to join Russian Gazprom’s South Stream project and is set to sign up imminently (Interfax, STA [Ljubljana], November 6). The recently reshuffled government of Croatia, lacking a clear policy on energy, is also considering the illusory South Stream option under Russian lobbying.
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Today, all Russia’s actions in the south are dictated by the increasingly active armed underground in the North Caucasus and Russia’s desire to oppose its growing influence on the region’s indigenous population. In the summer of 2009 alone 462 acts of violence were reported, while throughout the whole of 2008 only 265 incidents were registered. As a result, more than 442 persons died in the summer of 2009, while there were only 150 deaths reported in the entire year of 2008 (www.regnum.ru, October 28). In other words, the number of acts reported throughout the region by Russia has nearly doubled.
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On November 5 the Finnish and Swedish governments gave Nord Stream, the Gazprom-led consortium, permission to lay the pipeline through their respective economic zones on the Baltic seabed, on an approved route from Russia to Germany. The Danish government had given its permission in late October. The Kremlin and Gazprom had been seeking that permission arduously for the last three years.

Those three Nordic governments had resisted or procrastinated on the basis of ecological and security considerations. The influential Scandinavian Greens objected strongly. Ultimately, however, each government’s bilateral political relations with Russia weighed heavily in their decisions. Of these three countries, only Denmark seeks to be connected with the Nord Stream pipeline and import Russian gas, in modest volume initially.

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Gazprom will increase its investment program next year by 5 percent to 802 billion rubles ($27.94 billion), a source close to the company said on Thursday.

The investments will rise from 761.5 billion rubles earmarked for this year, of which 483.5 billion was classed as capex.

The company's investment program includes both capex and so-called longer-term investments. The source declined to break down the total figure.

"Next year it will rise to 802 billion rubles," the source said about Gazprom's investment program, which is usually revised several times during the course of the year depending on market conditions.

http://www.themoscowtimes.com/business/article/gazprom-to-boost-investment-by-5-in-2010/389351.html

This week the Moscow daily Gazeta published extracts of a leaked defense ministry document describing the results of military training this year –providing a rare opportunity to know firsthand the actual battle readiness of the entire Russian armed forces. According to Russian military tradition, the military training year begins on December 1 and ends on October 30, with November –the time to summarize results and hand out marks to all units like in high school: A, B, C and D grades. An A stands for “excellent” battle readiness and D-grade –not ready for action (www.gzt.ru, November 10).

The summarized report, according to Gazeta, shows that the Russian armed forces that are not fully ready for action: 23 divisions (47 percent of divisions in the entire armed forces), 105 brigades (60 percent of all brigades) and 97 separate regiments (50 percent of all regiments) received C grades indicating the limited battle readiness of more than half of the entire armed forces. The Navy, Air Force and the Strategic Rocket Forces (RVSN) demonstrated better results with half of the units, warships and newly formed air bases gaining A and B grades. The army, where this year tank and motorized rifle divisions have been transformed into brigades fared worse, with the majority of the new brigades securing C grades, while a motorized rifle brigade in the North Caucasus and another in Siberia were given D grades. Units that received D grades are required to perform immediate improvements in order to be reexamined to establish they have regained battle readiness (www.gzt.ru, November 10).

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On November 3, Dagestani President Mukhu Aliev held a special meeting of the commission dedicated to the problems of ethnic Russians living in the republic. Despite the optimistic tone of the officials, it appears that ethnic Russians are still leaving Dagestan, although in fewer numbers than immediately after the breakup of the Soviet Union in 1991. According to President Aliev, Russians comprised 20 percent of Dagestan’s population, and were the second largest ethnic group in this ethnically diverse republic in 1959. However, by 1989, the ethnic Russian population had decreased to 9 percent of the republic’s total and in the following years to less than 5 percent. Today, ethnic Russians rank sixth among numerous ethnicities of Dagestan; the Avars, Dargins, Kumyks, Lezgins and Laks each number more than the Russians. In the period between two Russian censuses in 1989 and 2002, the Russian population in Dagestan declined –according to the official figures, by 27 percent, down to 120,000 (www.riadagestan.ru, November 3).
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The European Union and Russia on Monday agreed to an "early-warning" mechanism to shield Europe from potential energy supply cuts and protect consumers in the event of a repeat of January's gas dispute with Ukraine.

The agreement requires both sides to notify the other of any likely disruption to supplies of oil, natural gas or electricity and to work together to resolve the problem. Third parties would also be allowed to participate, the European Commission said.

"An energy crisis like the one the EU suffered in January is harmful for supply, transit and consuming countries alike," EU Energy Commissioner Andris Piebalgs said after signing the agreement with Russian Energy Minister Sergei Shmatko.

http://www.themoscowtimes.com/news/article/eu-russia-agree-to-quotearly-warningquot-mechanism-for-gas-issues/389554.html

Prime Minister Vladimir Putin won Slovenia’s approval Saturday for the South Stream pipeline, undermining European Union efforts to reduce dependency on Russian gas and clearing the way for the project to start.

The seal of approval is the latest victory for the Kremlin as it seeks to counter the long-delayed Nabucco pipeline, which is backed by the EU to curb its energy dependency on Russia by pumping gas from the Caspian and the Middle East.

Slovenia’s approval brings the South Stream pipeline a step closer to being built, though its backers — Gazprom and Italy’s Eni — still have to raise billions of dollars to finance the project.

http://www.themoscowtimes.com/business/article/slovenia-signs-up-to-south-stream/389484.html

Depressed natural gas consumption in Europe will rise next year and the surplus of gas will disappear in 2011, boosting prices, Gazprom deputy chief executive Alexander Medvedev said Tuesday. 


The world's largest natural gas producer plans to ship 160.8 billion cubic meters of gas worth $50.3 billion in revenue to Europe next year, Medvedev said at a televised gas conference. That volume is 13 percent higher than what Gazprom expects to sell this year. 


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The country will sell its first tanker of Siberian oil from a new Pacific port in December as Moscow seeks to conquer Asian markets and warn Europe that competition for energy resources is rising.

Traders told Reuters on Tuesday that Russian leaders will attend a tanker-loading ceremony at the port of Kozmino that will mark the launch of the Pacific branch of Russia's first pipeline to Asia.

"I can bet it will be a heavy political show. One aim will be to tell Europe — we can sell our energy to Asia, so be careful when not supporting our new pipelines," said a trading source with knowledge of the detail of the tender.

http://www.themoscowtimes.com/business/article/new-asian-oil-export-route-expected-in-december/389695.html

On December 2, the Russian Federal Anti-Monopoly Service reportedly will consider the conflict between two Russian state-owned companies –Gazprom and Rosneft. The decision came after Rosneft filed a complaint alleging that Gazprom limited Rosneft’s access to the Russian main gas pipeline network from April through August. Because it was unable to sell the gas, Rosneft said it had to flare off associated gas in quantities exceeding the maximum amount permitted by environmental legislation, thus incurring a fine (The Moscow Times, October 29).

Gazprom controls the country’s gas transmission network –the main system of pipelines used to transport gas throughout the country. Rosneft has to use the system to transport the gas that it obtains as part of the oil drilling process from its oil fields in eastern Siberia (The Moscow Times, October 29).

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Russian President Dmitry Medvedev, during his address to the Federal Assembly in Moscow on November 12, again highlighted the need to equip the armed forces with modern weapons and equipment. In the context of a lengthy, wide ranging speech which developed the theme of modernizing the Russian economy, first elaborated in his article “Go Russia!” on September 10, it was unsurprising to find this initiative being applied to the military. However, Medvedev was quite specific, saying that next year the defense industry must supply “more than 30 ballistic land and sea-based missiles, 5 Iskander missile systems, about 300 modern armored vehicles, 30 helicopters, 28 combat aircraft, three nuclear-powered submarines, one corvette-class warship and eleven spacecraft” (www.kremlin.ru, November 12).
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Before departing for the APEC Summit in Singapore President Dmitry Medvedev signed into law new legislation concerning the use of Russia’s armed forces abroad. While retaining the stipulation that the armed forces would only be used under extreme circumstances, the new law stated that force could be applied to protect Russian citizens and interests around the globe. Medvedev had asked for the legislation in August just after the first anniversary of the Russo-Georgian War. On signing the bill Medvedev stated: “Our citizens must be protected in any part of the world, and they must feel protected by the state.” The legislation provides a legal basis for the use of the armed forces abroad to repel attacks on Russian forces deployed overseas, to repel or deter attacks on foreign states seeking protection from Russia, defend Russian citizens abroad, fight piracy at sea and to protect Russian maritime commerce (RIA Novosti, November 9).
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Ukraine finds it increasingly difficult to survive without money from the International Monetary Fund (IMF). The country paid Russia for October’s gas deliveries with IMF funds and the same means will be used for November’s gas deliveries. However, the IMF did not disburse the fourth $3.8-billion tranche of its $16.4-billion loan to Ukraine in mid-November because of the government’s populist policies (EDM, November 4). This means that Ukraine may not receive more IMF money until after the presidential elections in January and February, and consequently it is unclear where it will find the money to pay for Russian gas in early 2010. The debt-ridden Naftohaz Ukrainy state-run oil and gas behemoth ran out of money long ago. There are fears that the situation in early 2009, when gas deliveries to Europe via Ukraine were stopped for two weeks over a pricing dispute between Russia and Ukraine, may be repeated.

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