OLIGARCHS IN OUTER SPACE, RUSSIA IN OUTER DARKNESS, KREMLIN LOSES GRAVITY

By John Helmer in Moscow

In outer space, as everyone knows, the absence of the force of gravity produces the appearance of weightlessness. Everything floats away.

The markets have decided that Russia is now without gravity; its equities are without weight, and at risk of floating away. Late last year, the RTS, the principal stock market index, starting decoupling from the price of the principal Russian export, oil, as the latter started to plummet. The emerging market investment funds, which have also moved with oil and Russia’s other exportable commodities, also decoupled from commodity prices and the RTS. Since the start of January, the RTS and the oil marker have been in negative correlation. That means that even if the oil price goes up, Russian share prices go down. This is the equivalent of outer space.

It is no surprise, therefore, that everyone in the Russian market is gasping for an oxygen-mask, and a safety belt.

President Dmitry Medvedev and Prime Minister Vladimir Putin believe they are the constitutionally elected heads of government, and imagine their government is the air supply and safety-belt of the state. Those officials aligned with them — Deputy Prime Minister Igor Shuvalov with Medvedev, Deputy Prime Minister Igor Sechin with Putin — like to think that, although elected by noone to nothing, they too are the safety-belts, and pilots, of the state. Watch them closely — the more carefully Shuvalov brushes at his coiffure, and Sechin draws his face into a scowl, the more you can be certain they think they are in charge of Russia’s mass, motion, weight, air supply.

Without a banking and state audit system accountable to parliament, without a parliament accountable to the voters, and with regional governors and mayors appointed, not elected, where else can the force of gravity be located? If not with them, then all of Russia has indeed decoupled, and equity is in danger of valuelessness.
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PUTIN FORGIVES ACRON ITS TRESPASSES, GIVES KANTOR PLENTY OF DAILY BREAD

By John Helmer in Moscow

In the Kingdom of Russian fertilizers, there has been the Power and the Glory of hugely profitable export margins and high-flying share prices. But there is only one Will which can be done.

Prime Minister Vladimir Putin visited Acron’s Novgorod chemicals plant last Sunday, January 25, and he appeared to give his personal blessing to a string of costly financial and industrial blunders by Vyacheslav Kantor, the Geneva-based founder and controlling shareholder of the company. Putin was accompanied by Deputy Prime Minister Igor Sechin, who is currently reviewing several plans to consolidate Russian mining companies, including the principal potash and phosphate producers.

At the Acron plant, Putin is quoted by Bloomberg as saying: “The owners of this enterprise not only keep jobs in quite difficult conditions, they also develop the social sphere. Owners of the enterprise are not poor people. If those who deal with real production also have a feeling of social responsibility, we will support such people.”

The list of Acron’s supervisory board and senior management, and the disclosure of shareholders, do not include Kantor, who owns almost 72% of the company. But it isn’t difficult to determine how much of Acron’s profit, and Kantor’s wealth, derives from what can be termed “real production”. An experienced kabbalist might be needed, however, to interpret why substantially more “real” producers in the fertilizer sector than Acron have failed to qualified for Putin’s nod.

Kantor’s company Acron (ticker AKRM:RM) is Russia’s leading producer of complex fertilizers. These are a combination of the three basic chemical nutrients for plant growth — nitrogen, potassium, and phosphorous; or a combination of urea, phosphate, and potash, referred to by the acronym NPK. Nitrogenous fertilizers are derived from natural gas; potash and phosphates are mined. Acron mixes the ingredients and trades the NPK product in higher volumes than any other fertilizer producer in Russia, earning a higher margin on the spot price than the individual fertilizers which comprise it. But Acron doesn’t produce — that’s real production — the feedstocks which comprise the product it sells. It has bought licences to start mining the real stuff. But it is years away from that — and if what Kantor told Putin is the truth, Acron has no hope of ever getting there.
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OPPENHEIMER HUFF, LUKOIL PUFF PUT THE WOLF AT THE DOOR AGAIN FOR $10 BILLION RUSSIAN DIAMOND PROJECT

By John Helmer in Moscow

Jonathan Oppenheimer, the embattled heir to Nicky Oppenheimer and to the struggling De Beers group, and Vagit Alekperov, chief executive and controlling shareholder of LUKoil, one of Russia’s leading oil producers, have started fighting again over the disputed Grib pipe; also known as the Verkhotina project in the northwestern Russian region of Arkhangelsk.

The diamonds at stake, unmined below the surface, were estimated a year ago to be worth $9.7 billion. Until the start of January, Oppenheimer and Alekperov were almost equal partners in a joint venture, signed last April, to develop a mine at Verkhotina. Now they are adversaries again, as Oppenheimer reshuffles his crew for a fight; and Alekperov signals that he is engaging a French company to start independent drilling at the minesite.

Oppenheimer has appointed one of his closest associates in the company to the board of Archangel Diamond Corporation (ADC). The announcement of Tony Guthrie to the ADC board was issued by ADC on January 23.

ADC’s Toronto listed share (ticker TSXV:AAD) lifted from 5 Canadian cents to 6.5 cents on the news. The Candian junior, controlled by De Beers, is the only foreign mining company ever to find, and try developing a diamond mine in Russia.

The ADC release is curt, giving no reasons for the shakeup of its board. “Archangel Diamond Corporation … has announced the resignation of Mr. Bruce Cleaver as Chairman of the Board and a director of the Corporation and Mr. Jonathan Dickman as a director of the Corporation. The Board expresses its appreciation for their services to the Corporation. Mr. Robert Shirriff, a current director of Archangel, has been appointed Chairman of the Board in place of Mr Cleaver. The Board has appointed Mr. Tony Guthrie and Mr. Steven Thomas to the Board to fill the vacancies created. Mr. Guthrie is a mining engineer and senior manager with De Beers Group Services in Johannesburg. Mr. Thomas is Chief Financial Officer of De Beers Canada in Toronto and is also Chief Financial Officer of Archangel.”
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POLYUS GOLD AND KINROSS — IVANOV PASSES THE BUCK

By John Helmer in Moscow

Premature ejaculation is not usually an event which gentlemen call a public meeting to disclose. At least, not unless they are selling a cure.

The announcement this week in Moscow by Tye Burt and Yevgeny Ivanov, chief executives of Kinross Gold (KGC:US) and Polyus Gold (PLZL:RU), that they have signed a preliminary undertaking to think of doing a feasibility study in eighteen months’ time of the Nezhdaninskoye goldmine in Russia’s fareast is puzzling for its circumlocution, and its lack of specificity. According to the Polyus Gold announcement, the two companies “have concluded Memorandum of understanding on the possible joint development of Nezhdaninskoye hard-rock gold deposit located in the Sakha Republic (Yakutia)….within the time frame of 18 months the companies are planning to jointly prepare a Feasibility Study for the industrial development of the Nezhdaninskoye deposit.” Thereafter, another pair of conditionals — “upon completion of the Feasibility Study and, if warranted by its results, the parties will review the possibility to enter into a joint venture agreement for developing the Nezhdaninskoye deposit.”

Kinross has so far omitted to refer to Nezhdaninskoye, and Burt is not usually so coy. What is more, he already knows at least as much about Nezhdaninskoye as Ivanov. For this is one of the most carefully studied and valued gold deposits in Russia. First discovered in the Soviet period, and mined from 1975, it was thoroughly appraised in the early 1990s by David Deuchar, then technical director for Anglo American. The company decided the technical problems of the deposit raised costs above Anglo’s threshold of profitability, at the gold price prevailing at the time.

The mining rights subsequently went to Celtic Resources in its Irish phase. Then taken over by the West Australian Kevin Foo, all the detail the market might want for the deposit was issued in London, when Celtic was listed on the Alternative Investment Market (AIM). Although mining had been mothballed, and Celtic produced no gold for sale from the mine, Nezhdaninskoye performed as Celtic’s principal value- driver in the stock market, representing about 90% of its asset inventory. According to Celtic’s pre-feasibility studies and JORC count, Nezhhdaninskoye held 14 million oz of gold, with a prospective production rate of 450,000 oz per annum.
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SOME ENCHANTED EVENING, ACROSS A CROWDED ROOM, TWO STRANGE RUSSIANS

By John Helmer in Moscow

Once upon a time, in not so ancient Greece, a crooked banker had the idea of hedging the consequences of his crimes by buying a popular newspaper, and also a popular football team.

But the risk hedges didn’t work quite as he intended. The banker was indicted and jailed in his homeland; then escaped prison; and flew for asylum to the United States. He might have succeeded in securing safe haven there, for US officials wanted to give him asylum in return for his support of a Greek putsch they were planning. Instead, he was arrested before there was time for them to act. He spent three years in a US prison fighting extradition; and then a decade in prison at home. The government he tried so hard to attack survived him, and was re-elected.

That was an inauspicious debut for the idea of purchasing an asylum hedge through pop media and football teams.

The modus operandi – football team minus media – has been tested with greater success by the Russian, Roman Abramovich, in the United Kingdom. He hasn’t applied for asylum in London, where his team plays, but then he hasn’t needed to. A Russian state bank, chaired by the Russian Prime Minister, is lending his over-leveraged enterprises bailout money, and noone accuses Abramovich of indictable offences. Noone dares to.

Alisher Usmanov, another Russian who has bought a stake in an English football team, owns a newspaper in Moscow, and has also avoided the necessity of applying for asylum outside his homeland. His name appears in the civil court papers of a US court case involving a diamond mine, but he too is not guilty of anything.

Let’s be clear – just because a wealthy Russian buys pop assets in foreign lands doesn’t mean he’s guilty of anything. Except, possibly, of poor commercial judgement.
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BULLETS, BUCKS & BLANKS – THE HEROICS OF THE FREE PRESS, AS PERFORMED IN LONDON

By John Helmer in Moscow

When it comes to the heroics of the free press, London reporters and their proprietors prefer to tell of chests bared and bloody corpses on foreign streets, preferably in places designated by Her Majesty’s Secret Service as enemy country. Moscow, for example.

In the City of London, by contrast, the spectacle of reporters putting on their blinders and dropping their shorts for money, or the fear of it, is not even anti-heroic, but the kind of reality show that can’t win awards in the light entertainment or comedy categories.

Take, for example, the recent sale and purchase of the London Evening Standard for the price of one English pound by Alexander Lebedev. The seller was the Harmsworth family, which has run out of ready cash. The fourth Viscount Rothermere inherited a peerage that was his progenitor’s reward for publishing newspapers that entertained politicians just before World War 1, and who subsequently promoted reporting that was good for his real estate, commercial, and sexual interests in the fascist states of Hungary and Germany. The cash the current viscount has explained he doesn’t have is estimated at ₤1 million per month, which the Standard is said to have been losing over the past year.

Lebedev is reported in the London papers (and reports himself on his personal website) as a former lieutenant-colonel of the KGB, whose job as a spy once posted in London required him to read, clip and file the newspapers.

The Financial Times reported the transaction, noting that Lebedev was buying through a special purpose vehicle (SPV) he had set up in December for his son Yevgeny to run. Called Evening Press Ltd., in which a Rothermere company retains a 24.9% stake, the new company is, according to the Guardian, “a shell”. According to the Financial Times, it has a “£40m equity value”. Financial reporters should know how to count, but it isn’t clear how the SPV can be worth so much if 75.1% of its only asset is currently worth ₤1.
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GAS WAR ENDED BY THE POLITICS OF THE IMPOSSIBLE

By John Helmer in Moscow

It was the the 19th century German politician Otto von Bismarck, who famously claimed that politics is the art of the possible — before he sent his armies to invade westwards.

To judge the outcome of this month’s “gas war”, initially between Russia and Ukraine, but then involving many of the East European states as well, Russia’s prime minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, have devised the politics of the impossible, thereby warming Ukrainian stoves for less cost, while earning Gazprom, Russia’s principal enterprise, more profit.

The details are being studied in Beijing by Chinese bank and oil negotiators, who have not yet to agree with Rosneft for supply guarantees and an oil-price and loan repayment formula to regulate the next decade of Russian deliveries of crude oil to northern China.

A purported text of the gas agreement, signed on January 19 by Gazprom and Naftogas Ukrainy, has been released to the press in Kiev, but Gazprom officials refuse to answer questions about the terms of the new contract. Denis Ignatiev, the spokesman for the company’s foreign relations, told 21st Century Business Herald that he cannot add comment or clarification to the official Gazprom statement, released at the time of the contract signing in Moscow, in front of Putin and Tymoshenko.

The Russian position is focused on defining the price of gas at Ukraine’s eastern frontier; establishing a formula for quarterly adjustments to this price for the remainder of this year; fixing the volumes of new gas to be delivered to Ukrainian consumers and to European customers for the quarter, and for the year; and to exclude commercial intermediaries upstream, between Gazprom and Naftogas, while allowing them downstream, between Naftogas and end-users in Ukraine.
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PUMPYANSKY FEELS HOT BREATH OF BANKS, COLD HAND OF THE KREMLIN

By John Helmer in Moscow

Noone, least of all Dmitry Pumpyansky, should be faulted for not anticipating exactly when the oil and gas bubble would burst. But what can be said of Pumpyansky’s calculation that he had at least two more years of defying gravity, and no hedge against the risk that he might be wrong?

Pumpyansky, who turns 45 years of age shortly, is the figure who managed the creation of TMK, Russia’s largest alliance of steel pipemills (ticker TMKS:LI), out of murky origins, and with associates who are now best left unnamed. His acumen is undoubted; so was his good fortune. Between October 2006 and November 2006, TMK jumped in price from $4 billion, when Pumpyansky arranged to buy out his Russian partners, Sergei Popov and Andrei Melnichenko, to $7 billion, which was the market capitalization of the company at its London initial placement offering (IPO). In the twenty months that followed to June 2008, TMK doubled its value to $9.4 billion.

By then Pumpyansky, the number-3 pipemaker in the world after Tenaris (Argentina, TS:US) and Vallourec (France, VK:FP), had set his sights on matching, besting, buying out, or swapping his stake into one of the other two. For that he needed to become bigger, and more international. And for that he needed to borrow money. The idea was impeccable; the timing was off. According to a new report issued in Moscow today by Troika Dialog, a Russian investment bank, Pumyansky led TMK into a serious miscalculation of financial and trade risks. These have placed the company today in dependence on favour from the Kremlin — favour which Pumpyansky has been unable to demonstrate on the way up.

Pumpyansky individually, or with others, controls 77% of TMK’s stock; 23% is the currently estimated free float. Market capitalization of TMK today is $720 million. Yesterday it was $835 million. Tenaris is currently at $12 billion and rising; Vallourec, $4 billion, and also on the up. From the banking point of view, it is difficult to catch a falling star, and put it into your pocket.
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NO TSUNAMI FOR NOVOROSSIYSK SEA PORT, NOT YET

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Share Price Chart 3M: NMTP

By John Helmer in Moscow

The wave of bad news that has been expected to hit, and keep on hitting Novorossiysk, Russia’s leading outlet on the Black Sea — weakening rouble, falling cargo volumes in and out, dwindling revenues –struck first in November. But it seems it didn’t return to strike the port in December.

Oddly, investor sentiment towards the port, the only Russian seaport publicly listed in Europe (NMTP:RU, NCSP:LI), was blowing fair when the port prospects were foul; and has reversed itself since January 1.

Novorossiysk is the largest sea-port operator in Russia by total cargo turnover – it accounts for 18% of total sea cargo operations in Russia. It is one of the top-10 seaports in Europe by volume, and one of the top-3 for oil shipments. All the company’s terminals are located in Novorossiysk, except for one container terminal, which operates in the Kaliningrad region on the Baltic Sea.

The latest throughput figures for Novorossiysk port as a whole show that the impact of the global financial crisis struck heaviest in November. After registering cargo volume of 101 million tonnes for the 11-month period to November 30, up 1% on the same period of 2007, the port then reported that November cargo volume fell 15%, compared to October. Among the worst affected of the port terminals and stevedoring companies was NUTEP, which belongs to the National Container Company; it reports a drop in turnover of 33% month to month, despite an overall gain in container movement in November at other terminals of the port of 29%.

Cargoes most affected by the November downturn at Novorossiysk were ores, down 100%; nonferrous metals, down 41%; sugar, down 29%; mineral fertilizers, down 26%; grain, down 17%; and crude oil — the dominant cargo for export through Novorossiysk — down 16%.
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RUSSIAN EVRAZ DARES TO GIVE CHINA THE BIRD

By John Helmer in Moscow

Russian oligarchs are famously bad as bird-fanciers.

As corporate takeover tacticians, when times were good, they were reluctant to share their premiums in buy-sell transactions. Not for them, the proverbial wisdom that what is good for the goose is good for the gander. Taking the latter bird’s position, they preferred to believe that what might be bad for the goose should be especially advantageous for the gander.

In the short history of Russian business tactics, it has often turned out that way. But now that times have turned bad, and the oligarchs have burdened their public companies with debt they cannot repay, while putting their own assets out of reach, they prefer to believe that what is bad for the gander should be even worse for the goose.

This explains the curious contradictions in a carefully arranged public statement by one of Russia’s largest steelmakers on January 20, Alexander Abramov of Evraz. While begging the international stock markets and his bankers to treat him gently, promising a swift revival of profits, and rapid rise in asset equity value, he issued an aggressive ultimatum to Beijing and Singapore. Unless China’s DeLong and Best Decade Holdings agree to slash their asking price for their steelmill, Evraz will walk away from its year-old takeover offer.

Abramov, chief executive of Evraz, described in a Moscow newspaper statement today [January 20] that last year’s agreement by Evraz to take over DeLong Holdings is conditional on renegotiation of the asset price. Asked if Evraz will go ahead with the takeover, Abramov said: “Yes, but we will have to agree on a different price Why overpay? Do not expect irrational behavior from us. We have positive greed in that sense.”
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WHEN MORE IS LESS — GAZPROM SIGNS 10-YEAR UKRAINE GAS DEAL, WITHOUT DETAILS FOR THREE MONTHS

By John Helmer in Moscow

There can’t be too many young children, who were still awake when the Ukrainian gas pantomine finished its traditional January run on Monday evening in Moscow. The problem was that those presiding at the curtain-fall, the Prime Ministers of Russia and Ukraine, and the heads of their respective gas companies, couldn’t deliver lines that, despite all their earlier run-throughs, would satisfy a simple-minded grown-up.

As the Kremlin clock was edging past 6:30 pm, on Monday, Gazprom officials were saying they could not confirm the precise terms of the agreement on resumption of gas deliveries to Ukraine, which had been announced by Prime Ministers Vladimir Putin and Yulia Tymoshenko after their meetings on Saturday and Sunday. All that Gazprom was able to say was that negotiations were still continuing between Gazprom and its Ukrainian counterparty, Naftogaz Ukrainy; that the pricing and delivery terms had not been signed; and that deliveries would not resume until the signatures hit the paper.

Seven minutes later, the flags were up, the pens were wet, contract papers were flourished, and Putin and Tymoshenko announced something very big. Russia and Ukraine, they said, had agreed on a 10-year gas supply from now until the year 2019. What will happen for the next three months, however, remained almost as foggy as before. Only now everyone will be able to peer through the murk with their gas-fires blazing. How and who will pay the new bill, and what exactly it will come to, is no better known now than before this gas stoppage began.

If there had been any other outcome, this wouldn’t be the great old panto Russian-Ukrainian gas relations have always been.
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RUSSIAN ALUMINIUM IN END-GAME — DERIPASKA SEEKS KREMLIN WALL FOR HIS LIABILITIES

By John Helmer in Moscow

It is commonplace for foxes to take chickens where they find them. It is rare for the fox to stay on, and appoint himself chief executive of the hen-house. It is unprecedented for the fox to sell the bird carcasses for a premium to the poulterer.

From inside the coop, blood and feathers are now flying at one of the world’s largest miners of bauxite, and producers of alumina and aluminium — United Company Rusal. After failing in the autumn to persuade Chinese investors to rescue the company, Oleg Deripaska, the controlling shareholder, is close to handing over his control stake to the Kremlin on highly lucrative terms — for himself.

Unexpectedly on Sunday, Rusal announced on its website that Deripaska has replaced Alexander Bulygin, his veteran administrator and loyal friend, as the chief executive of UC Rusal. Bulygin has been demoted into a non-executive role, supervising the board of one of Deripaska’s many sub-holdings, En+.

The company announcement cites Deripaska as saying: “Alexander Bulygin has headed RUSAL for more than five years. Under his management the company, which was the largest Russian aluminium producer, became the leader of the world’s aluminium industry, a truly global company with diversified and one of the most competitive operations in the global metal and mining sector. I am confident that Alexander’s experience in consolidating assets and executing large deals will be applied in full in his new role.”

The website also claimed that Deripaska “was already the CEO of RUSAL for a three year period after the company was established in 2000. In the following years he took an active part in the company’s development as a member of the Board of Directors. Now his role as CEO will be focused on providing for the sustainable development of the company under the conditions of the global financial crisis and implementing a series of crisis management measures.”
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NO NEWS LOOKS BAD NEWS FOR URALKALI

By John Helmer in Moscow

Market speculation in Moscow turned sharply negative for Uralkali, Russia’s dominant potash producer, on Wednesday this week, as the share price was slashed 8% to $1.67 on the Russian Trading System (RTS). This followed a modest drift upward in international trading of the shares, while the RTS was closed for the long Russian New Year holiday.

The pressure on Uralkali stems from the failure of high Russian government officials to release the results of a commission of inquiry into fault, penalties, and costs of the two-year old collapse of Uralkali’s Mine-1 at Berezniki, in Perm region. The commission, which was initiated on October 29, has already missed several announced release deadlines during December.

Initial government investigations of the Mine-1 subsidence in October 2006 ruled that the loss of the mine and its potash reserves was force majeure.

The Ministry of Natural Resources said Thursday the current commission “is still working”, and it declined to say when it would finish. Yevgeny Anoshin, spokesman for the investigating organ, the Federal Environmental, Engineering, and Nuclear Inspection Service (Rostekhnadzor), told FW: “the commission is still processing data. The decision will not be made before the end of January.” He did not explain the reason for the delay of another month. This is significant because industry sources in Moscow do not believe the commission has uncovered fresh technical data that were unavailable to the first commission of inquiry, or to the December 26 session of the commission, when officials last met to review the decision materials.

The issue for the commission, according to these sources, is what are the full costs of the Mine-1 loss, and who should be liable to pay them.
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WARNING FLAG GOES UP FOR RUSSIA’S FAR EASTERN FLEET

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By John Helmer in Moscow

After Far Eastern Shipping Company (Fesco), Russia’s dry-cargo fleet leader, lost 22% off its share price in the past week, Moscow investment bank Renaissance Capital has issued an investment warning that the plummeting rate for container shipping between Asia and Europe “creates a major headwind for FESCO”.

Fesco (ticker FESH:RU), based in Moscow and Vladivostok, is the most important of the Russian commercial fleets serving the Sino-Russian, Asian and Pacific dry-cargo routes.

According to the Rencap report, written by maritime analyst Paul Roger, rates now being quoted in Hong Kong for shipping some container types from Asia to Europe have hit zero. Much of Fesco’s shipping line income is directly affected by this rate movement.

Separately, National Container Company (NCC), the largest of Russia’s container terminal companies, half-owned by Fesco, reports today there was a collapse of container volumes at its three terminals in the European part of Russia during December. The First Container Terminal (FCT) of St.Petersburg, the largest in the country, reports that for the month, the terminal handled a total of 86,944 Teu [twenty-foot equivalent units], down almost 3% compared to December 2007. But refrigerated container movements at the terminal, in which Russian food imports are transported, fell by 30%, compared to December 2007, to just 7,603 Teu.

The results were much worse for NCC’s terminals on the Black Sea. At Novorossiysk, NCC’s terminal reports a drop of 21% in Teu volume in December last, compared to a year earlier. Despite months of growth early in the year, the Ilychevsk terminal, on the Ukrainian coast of the Black Sea, reports that it handled 48% less container volume in December, compared to 2007.
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ABRAMOVICH RESHUFFLES HIGHLAND GOLD EQUITY RISK

By John Helmer in Moscow

Roman Abramovich’s holding company Millhouse has obliged two of its Russian steelmaking partners, Alexander Abramov and Alexander Frolov, to buy an indirect stake of 9.99% in Highland Gold Mining. No explanation for the move has been issued, either by Highland Gold, or by Millhouse; or by Abramov and Frolov, who made their acquisition through a private company called Tremadon.

No details of the transaction value have been disclosed.

Highland Gold (ticker HGM:LN) told Minesite through spokesman Dmitry Yakushkin that there has been “an indirect change. Practically, this doesn’t concern [our] company.” He said Abramov’s and Frolov’s company had bought a 9.99% stake in Highland Gold from Primerod, the company through which Abramovich’s holding controls its 32% stake in Highland. This is the largest stake in the AIM-listed mining company, which has suffered an 85% loss in its market value over the past year; it is now worth less than $180 million. According to Yakushkin, “the pie-chart [of shareholders] remains the same. Millhouse still has 32%.”

Millhouse also controls the Evraz steel and coal and iron-ore mining group, Russia’s largest steelmaker. Last month, Abramovich forced changes in the Evraz board resulting in the demotion of Frolov, who was replaced as board chairman by Abramov. This followed a severe loss of market confidence in Evraz’s capacity to refinance its foreign loans, and an emergency bailout from the state VEB bank to save Evraz from forfeiting US steelmill assets to its banks. Evraz has also been funded by the Kremlin to pay its Russian tax bill.
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RUSSIA TELLS DE BEERS DIAMONDS ARE NEVER EVER

By John Helmer in Moscow

With a 17-line announcement the Toronto-listed Archangel Diamond Corporation (ADC), a De Beers-affiliated company, has cancelled its agreement to mine diamonds in the Arkhangelsk region of northwestern Russia. Almost twenty years of exploration and mining effort, including the first major diamond discovery in western Russia for a century, have been abandoned.

ADC shares (ticker AAD:CN) dropped 32% in Toronto trading on Monday, following the disclosure, and are now priced at 9 Canadian cents.

A press release from ADC claims the company has withdrawn from the Russian project, because the Russian government has failed to meet deal implementation deadlines, which expired during the holiday period.

The ADC announcement says that “in connection with its proposed acquisition of a 49.99% equity interest in OAO Arkhangelskoe Geologodobychnoe Predpriyatie (“AGD”) from OAO LUKOIL(“LUKOIL”) (the “Transaction”) described in the Corporation’s news release dated April 16, 2008, Archangel has exercised its rights to terminate and has terminated the Share Purchase Agreement (“SPA”) between LUKOIL, the Corporation and De Beers Societe Anonyme dated April 15 2008… because two conditions precedent to the SPA have not been fulfilled by the long stop date of December 31 2008…The Board of Archangel is now considering future options for the Corporation including financing options and a potential resumption of the litigation currently suspended.”
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SIMPLY WAITING DRINKING TEA WITH HONEY: OLEG MITVOL, THE SOMETIME NOTORIOUS RUSSIAN MINING REGULATOR, PREPARES FOR BATTLE WITH HIS OWN MINISTRY

By John Helmer in Moscow

Oleg Mitvol, Russia’s well-known mining regulator and gadfly to Aim-traded stock values, has filed a half-dozen lawsuits in Moscow, challenging the terms of his removal from his functions. And he appears to have Deputy Prime Minister Igor Sechin on his side.

The legal and political moves follow months of effort by Vladimir Kirillov, who as the new chief of Russia’s mine licence inspectorate, Rosprirodnadzor, has tried to fire Mitvol, his independent deputy. In the annals of the federal Ministry of Natural Resources, Mitvol’s resistance is unique, as is the apparent reluctance of the minister, Yury Trutnev, a former provincial governor backed by the LUKoil oil company, to intervene in the contest of wills, and in the conflict beneath the surface of Russia’s use-or-lose resource licensing policy.

Way back on 18th June, the state newsagency Itar-Tass reported that Mitvol had been “stripped of his water, forest, and ecological supervision powers, which have constituted most of his competences”. This was the first sign of an apparent official decision, following informal efforts from new boss Kirillov, dating back to last February, to press Mitvol to resign. An anonymous source was cited by Itar-Tass for its information. It was also reported that “according to the source, the Rosprirodnadzor chief, Vladimir Kirillov, has no intention of submitting a motion to the government, in the shape of Natural Resources Minister Yuri Trutnev, for re-appointing Mitvol as his deputy.” Itar-Tass quoted Mitvol as saying: “As far as I know, in a future staff list, yet to be authorized, the position of a fourth deputy, that is, of yours truly, is absent.” So at least there was some agreement on that score.

Then in July, Mitvol was forced to vacate his office at the Ministry of Natural Resources, and lost his secretaries. He remained contactable only on his personal mobile telephone, and he had lost access to his official files and to the ministry’s licence and reserves database. At the time, a spokesman for the ministry confirmed that Mitvol was no longer in his office.
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THE DIAMOND CARTEL MELTS DOWN — ALROSA FREEZES OUT DE BEERS

By John Helmer in Moscow

With the end of the year 2008, the last of the legendary diamond cartel deals has sunk back into the murk from which it originated when Cecil Rhodes created his African Diamond Syndicate in 1873.

Forced three years ago by a ruling of the European Commission (EC) to halt trading of rough diamonds, De Beers and Russia’s diamond miner Alrosa have wound up a series of trading agreements that date back — most of them secret, some open — for almost 50 years. Although the EC ruling was subsequently overruled by the European Court of Justice, De Beers and Alrosa decided separately that their best interests would be served if, from now on, they produce and trade competitively. From January 1, Alrosa will no longer sell and export a fixed quantity or value of rough diamonds each year to De Beers.

At peak, in the 1990s, De Beers was buying more than a billion dollars’ worth of Russian rough from Alrosa through official channels, and doing profitably on the leakage, or unofficial trade, as well.

Before January is out, it will also be clear whether the Russians have decided to roll up De Beers’s coattails, and oust Archangel Diamond Corporation (ADC), a De Beers-controlled Canadian subsidiary, from its position as co-owner and operator of the newest of Russia’s diamond mines in the Arkhangelsk region of northwest Russia.

Does this mean that the Russians believe that Alrosa, which accounts for about one-quarter of the global supply of mined diamonds, is better positioned to weather the market-wide collapse of diamond value than De Beers, which controls about 40% of diamond output? Because Alrosa is backed by Russian state financing, treasury guarantees, and the capacity of the state stockpile to absorb Alrosa’s diamonds until they can be sold, the answer is a tentative yes. Therein lies the potential for a revolution in international diamond clout.
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ALROSA REPORTS SALES DECLINE FOR 2008, WORSE FOR NEW YEAR

By John Helmer in Moscow

Alrosa, Russia’s state-owned diamond miner, has reported that rough sales this year have slipped by 1.1%, and will slip by ten times that margin in 2009.

Alrosa, a wholly state owned shareholding company controlled by the federal government, does not issue production and financial results by the half-year or quarter. It also does not disclose conventional production data by diamond weight (carats). Like-for-like comparisons by carat, mine source, and year are also not available. Instead, production results are cited in ore tonnage excavated, and in US dollar value terms for diamonds recovered, making precise volume comparisons impossible. Announcements of result data are timed arbitrarily, and executives do not respond to detailed questions.

In the latest press release posted on the Alrosa website, rough sales by Alrosa, excluding its share of sales of production from the Catoca mine in Angola, are reported as totaling $2.76 billion. This was reported in a Russian news agency citation from Alrosa CEO Sergei Vybornov as a decline of 1.1% on the 2007 level. It is also down on the sales projection by the board three months ago of $2.85 billion.

The information provided in the Alrosa Annual Report for 2007 is unclear. In Vybornov’s report to shareholders at the opening of the report, and in the sales section of the report, Alrosa’s rough sales revenues were given for the year as totaling $2.79 billion; this comprised $2.13 billion for Alrosa’s wholly owned mines in Sakha; and $663.1 million in sales from the Nyurba mine, whose equity is equally divided between Alrosa and the Sakha regional government. The figure for the main mines was reported as falling 4.3% from the 2006 result, while the Nyurba figure was rising by 3.8% on 2006.
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AFTERSHOCK OF NORD STREAM EXPLOSIONS RUMBLES WARSAW — POLISH POLITICIANS GO “NUTTERS”

By John Helmer, Moscow
  @bears_with

The Polish government in Warsaw, facing re-election in less than a year, wants all the credit from Washington for their joint operation to sabotage the Nord Stream gas pipelines on the Baltic seabed.

It also wants to intimidate the German chancellor in Berlin, and deter both American and German officials from plotting a takeover by the Polish opposition party, Civic Platform, next year.

Blaming the Russians for the attack is their cover story. Attacking anyone who doesn’t believe it, including Poles and Germans, Warsaw officials and their supporting media claim they are dupes or agents of Russian disinformation.

Their rivals, Civic Platform (PO) politicians trailing the PiS in the polls by seven percentage points,   want Polish voters to think that no credit for the Nord Stream attack should be earned by the ruling Law and Justice (PiS) party. They also want to divert  the Russian counter-attack from Warsaw to Washington.

“Thank you USA” was the first Polish political declaration tweeted hours after the blasts by Radoslaw Sikorski (lead image, left), the PO’s former defence and foreign minister, now a European Parliament deputy. In support and justification,  his old friend and PO ministerial colleague, Roman Giertych, warned Sikorski’s critics: “Would you nutters prefer that the Russians find us guilty?”

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THE BORNHOLM BLOW-UP REPEATS THE BORNHOLM BASH — POLAND ATTACKS GERMANY AND BLAMES RUSSIA

By John Helmer, Moscow
  @bears_with

The military operation on Monday night which fired munitions to blow holes in the Nord Stream I and Nord Stream II pipelines on the Baltic Sea floor, near Bornholm Island,  was executed by the Polish Navy and special forces.

It was aided by the Danish and Swedish military; planned and coordinated with US intelligence and technical support; and approved by the Polish Prime Minister Mateusz Morawiecki.

The operation is a repeat of the Bornholm Bash operation of April 2021, which attempted to sabotage Russian vessels laying the gas pipes, but ended in ignominious retreat by the Polish forces. That was a direct attack on Russia. This time the attack is targeting the Germans, especially the business and union lobby and the East German voters, with a scheme to blame Moscow for the troubles they already have — and their troubles to come with winter.

Morawiecki is bluffing. “It is a very strange coincidence,” he has announced, “that on the same day that the Baltic Gas Pipeline  opens, someone is most likely committing an act of sabotage. This shows what means the Russians can resort to in order to destabilize Europe. They are to blame for the very high gas prices”.   The truth bubbling up from the seabed at Bornholm is the opposite of what Morawiecki says.

But the political value to Morawiecki, already running for the Polish election in eleven months’ time, is his government’s claim to have solved all of Poland’s needs for gas and electricity through the winter — when he knows that won’t come true.  

Inaugurating the 21-year old Baltic Pipe project from the Norwegian and Danish gas networks, Morawiecki announced: “This gas pipeline is the end of the era of dependence on Russian gas. It is also a gas pipeline of security, sovereignty and freedom not only for Polish, but in the future, also for others…[Opposition Civic Platform leader Donald] Tusk’s government preferred Russian gas. They wanted to conclude a deal with the Russians even by 2045…thanks to the Baltic Pipe, extraction from Polish deposits,  LNG supply from the USA and Qatar, as well as interconnection with its neighbours, Poland is now secured in terms of gas supplies.”

Civic Platform’s former defence and foreign minister Radek Sikorski also celebrated the Bornholm Blow-up. “As we say in Polish, a small thing, but so much joy”.  “Thank you USA,” Sikorski added,   diverting the credit for the operation, away from domestic rival Morawiecki to President Joseph Biden; he had publicly threatened to sabotage the line in February.  Biden’s ambassador in Warsaw is also backing Sikorski’s Civic Platform party to replace  Morawiecki next year.  

The attack not only escalates the Polish election campaign. It also continues the Morawiecki government’s plan to attack Germany, first by reviving the reparations claim for the invasion and occupation of 1939-45;  and second, by targeting alleged German complicity, corruption,  and appeasement in the Russian scheme to rule Europe at Poland’s expense. .

“The appeasement policy towards Putin”, announced PISM, the official government think tank in Warsaw in June,  “is part of an American attempt to free itself from its obligations of maintaining peace in Europe. The bargain is that Americans will allow Putin to finish building the Nord Stream 2 pipeline in exchange for Putin’s commitment not use it to blackmail Eastern Europe. Sounds convincing? Sounds like something you heard before? It’s not without reason that Winston Churchill commented on the American decision-making process: ‘Americans can always be trusted to do the right thing, once all other possibilities have been exhausted.’ However, by pursuing such a policy now, the Biden administration takes even more responsibility for the security of Europe, including Ukraine, which is the stake for subsequent American mistakes.”

“Where does this place Poland? Almost 18 years ago the Federal Republic of Germany, our European ally, decided to prioritize its own business interests with Putin’s Russia over solidarity and cooperation with allies in Central Europe. It was a wrong decision to make and all Polish governments – regardless of political differences – communicated this clearly and forcefully to Berlin. But since Putin succeeded in corrupting the German elite and already decided to pay the price of infamy, ignoring the Polish objections was the only strategy Germany was left with.”

The explosions at Bornholm are the new Polish strike for war in Europe against Chancellor Olaf Scholz. So far the Chancellery in Berlin is silent, tellingly.

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LEMONS, MIMOSAS, AND STALIN’S SHOVEL

By John Helmer, Moscow
  @bears_with

The only Russian leader in a thousand years who was a genuine gardener and who allowed himself to be recorded with a shovel in his hand was Joseph Stalin (lead image, mid-1930s). Compared to Stalin, the honouring of the new British king Charles III as a gardener pales into imitativeness and pretension.   

Stalin cultivated lemon trees and flowering mimosas at his Gagra dacha  by the Black Sea in Abkhazia.  Growing mimosas (acacias) is tricky. No plantsman serving the monarchs in London or at Versailles has made a go of it in four hundred years. Even in the most favourable climates, mimosas – there are almost six hundred varieties of them — are short-lived. They can revive after bushfires; they can go into sudden death for no apparent reason. Russians know nothing of this – they love them for their blossom and scent, and give bouquets of them to celebrate the arrival of spring.

Stalin didn’t attempt the near-impossible, to grow lemons and other fruit in the Moscow climate. That was the sort of thing which the Kremlin noblemen did to impress the tsar and compete in conspicuous affluence with each other. At Kuskovo, now in the eastern district of Moscow, Count Pyotr Sheremetyev built a heated orangerie between 1761 and 1762, where he protected his lemons, pomegranates, peaches, olives, and almonds, baskets of which he would present in mid-winter to the Empress Catherine the Great and many others. The spade work was done by serfs. Sheremetyev beat the French king Louis XIV to the punch – his first orangerie at Versailles wasn’t built until 1763.

Stalin also had a dacha at Kuskovo But he cultivated his lemons and mimosas seventeen hundred  kilometres to the south where they reminded him of home in Georgia. Doing his own spade work wasn’t Stalin showing off, as Charles III does in his gardens, like Louis XIV before him. Stalin’s spade work was what he had done in his youth. It also illustrated his message – “I’m showing you how to work”, he would tell visitors surprised to see him with the shovel.  As to his mimosas, Stalin’s Abkhazian confidante, Akaki Mgeladze, claimed in his memoirs that Stalin intended them as another lesson. “How Muscovites love mimosas, they stand in queues for them” he reportedly told him.  “Think how to grow more to make the Muscovites happy!”

In the new war with the US and its allies in Europe, Stalin’s lessons of the shovel and the mimosas are being re-learned in conditions which Stalin never knew – how to fight the war for survival and at the same time keep everyone happy with flowers on the dining table.

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AND THEN THERE WERE NONE

By John Helmer, Moscow
  @bears_with

Agatha Christie’s whodunit entitled And Then There Were None – the concluding words of the children’s counting rhyme — is reputed to be the world’s best-selling mystery story.    

There’s no mystery now about the war of Europe and North America against Russia; it is the continuation of Germany’s war of 1939-45 and the war aims of the General Staff in Washington since 1943. Defense Minister Sergei Shoigu (left) and President Vladimir Putin (right) both said it plainly enough this week.

There is also no mystery in the decision-making in Moscow of the President and the Defense Minister, the General Staff, and the others; it is the continuation of the Stavka of 1941-45.  

Just because there is no mystery about this, it doesn’t follow that it should be reported publicly, debated in the State Duma, speculated and advertised by bloggers, podcasters, and twitterers.  In war what should not be said cannot be said. When the war ends, then there will be none.  

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RUSSIANS RAISE THEIR GLASSES – THE TOAST IS TO BEATING THE BLOCKADE OF MOSCOW



By John Helmer, Moscow
  @bears_with

Alas and alack for the Berlin Blockade of 1948-49 (Berliner Luftbrücke): those were the days when the Germans waved their salutes against the unification of Germany demilitarised and denazified; and cheered instead for their alliance with the US and British armies to fight another seventy years of war in order to achieve what they and Adolf Hitler hadn’t managed, but which they now hope to achieve under  Olaf Scholtz — the defeat of the Russian Army and the destruction of Russia.

How little the Germans have changed.

But alas and alack — the Blockade now is the one they and the NATO armies aim to enforce against Russia. “We are drawing up a new National Security Strategy,” according to Foreign Minister Annalena Baerbock. “We are taking even the most severe scenarios seriously.”  By severe Baerbock means nuclear. The new German generation — she has also declared “now these grandparents, mothers, fathers and their children sit at the kitchen table and discuss rearmament.”  

So, for Russia to survive the continuation of this war, the Germans and their army must be fought and defeated again. That’s the toast of Russian people as they salute the intrepid flyers who are beating the Moscow Blockade.  

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THE INTERNATIONAL ATOMIC ENERGY AGENCY GOES TO WAR — GORILLA RADIO GOES NUCLEAR

By John Helmer, Moscow
  @bears_with

Last week the International Atomic Energy Agency’s (IAEA) board of governors voted to go to war with Russia by a vote of 26 member countries against 9.

China, Vietnam, India, Pakistan, Egypt, Senegal and South Africa voted against war with Russia.  

The IAEA Secretary-General Rafael Grossi (lead image, left) has refused to tell the press whether a simple majority of votes (18) or a super-majority of two-thirds (23) was required by the agency charter for the vote; he also wouldn’t say which countries voted for or against. The United Nations Secretary-General Antonio Guterres then covered up for what had happened by telling the press: “I believe that [IAEA’s] independence that exists and must be preserved is essential. The IAEA cannot be the instrument of parties against other parties.” The IAEA vote for war made a liar of Guterres.

In the IAEA’s 65-year history, Resolution Number 58, the war vote of September 15, 2022,  is the first time the agency has taken one side in a war between member countries when nuclear reactors have either been attacked or threatened with attack. It is also the first time the IAEA has attacked one of its member states, Russia, when its military were attempting to protect and secure a nuclear reactor from attack by another member state, the Ukraine, and its war allies, the US, NATO and the European Union states. The vote followed the first-ever IAEA inspection of a nuclear reactor while it was under active artillery fire and troop assault.

There is a first time for everything but this is the end of the IAEA. On to the scrap heap of good intentions and international treaties, the IAEA is following the Organisation for the Prohibition of Chemical Weapons (OPCW), and the UN Secretary-General himself.  Listen to this discussion of the past history when the IAEA responded quite differently following the Iranian and Israeli air-bombing attacks on the Iraqi nuclear reactor known as Osirak, and later, the attacks on Pakistan’s nuclear weapons sites.

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INTERNATIONAL ATOMIC ENERGY AGENCY TAKES UKRAINE SIDE IN WAR IN SEPTEMBER 15 VOTE, MAKING UN SECRETARY-GENERAL GUTERRES EITHER A LIAR OR A FOOL

By John Helmer, Moscow
  @bears_with

The International Atomic Energy Agency (IAEA) decided this week to take the side of Ukraine in the current war; blame Russia for the shelling of the Zaporozhye Nuclear Power Plant (ZNPP); and issue a demand for Russia to surrender the plant to the Kiev regime “to regain full control over all nuclear facilities within Ukraine’s internationally recognized borders, including the Zaporizhzhya Nuclear Power Plant.”      

This is the most dramatic shift by the United Nations (UN) nuclear power regulator in the 65-year history of the organisation based in Vienna.

The terms of the IAEA Resolution Number 58, which were proposed early this week by the Polish and Canadian governors on the agency board, were known in advance by UN Secretary-General Antonio Guterres when he spoke by telephone with President Vladimir Putin in the late afternoon of September 14, before the vote was taken. Guterres did not reveal what he already knew would be the IAEA action the next day.  

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THE RUSSIAN SITUATION COMEDY IS NO LYING MATTER – THE JOKE IS ON THE OFFICE OF FOREIGN ASSETS CONTROL

By John Helmer, Moscow
  @bears_with

Never mind that King Solomon said proverbially three thousand years ago, “a merry heart doeth good like a medicine.”  

With seven hundred wives and three hundred concubines, Solomon realized he was the inventor of the situation comedy. If not for the sitcom as his medicine, the bodily and psychological stress Old Solly had to endure in the bedroom would have killed him long before he made it to his death bed at eighty years of age,  after ruling his kingdom for forty of them.

After the British sitcom died in the 1990s, the subsequent stress has not only killed very large numbers of ordinary people. It has culminated today in a system of rule according to which a comic king in Buckingham Palace must now manage the first prime minister in Westminster  history to be her own joke.

Even the Norwegians, the unfunniest people in Europe, have acknowledged that the only way to attract the British as tourists, was to pay John Cleese of Monty Python and Fawlty Towers to make them laugh at Norway itself.   This has been a bigger success for the locals than for the visitors, boosting the fjord boatman’s life expectancy several years ahead of the British tourist’s.  

In fact, Norwegian scientists studying a sample of 54,000 of their countrymen have proved that spending the state budget on public health and social welfare will only work effectively if the population is laughing all the way to the grave. “The cognitive component of the sense of humour is positively associated with survival from mortality related to CVD [cardio-vascular disease] and infections in women and with infection-related mortality in men” – Norwegian doctors reported in 2016. Never mind the Viking English:  the Norwegian point is the same as Solomon’s that “a sense of humour is a health-protecting cognitive coping resource” – especially if you’ve got cancer.  

The Russians understand this better than the Norwegians or the British.  Laughter is an antidote to the war propaganda coming from abroad, as Lexus and Vovan have been demonstrating.   The Russian sitcom is also surviving in its classic form to match the best of the British sitcoms, all now dead – Fawlty Towers (d. 1975), Black Adder (d. 1989), You Rang M’Lord? (d. 1988), Jeeves and Wooster (d. 1990), Oh Dr Beeching! (d.1995), and Thin Blue Line (d. 1996).

The Russian situation comedies, alive and well on TV screens and internet streaming devices across the country, are also increasingly profitable business for their production and broadcast companies – not despite the war but because of it. This has transformed the Russian media industry’s calculation of profitability by removing US and European-made films and television series, as well as advertising revenues from Nestlé, PepsiCo, Mars, and Bayer. In their place powerful  Russian video-on-demand (VOD) streaming platform companies like Yandex (KinoPoisk), MTS (Kion),  Mail.ru (VK), and Ivi (Leonid Boguslavsky, ProfMedia, Baring Vostok)  are now intensifying the competition for audience with traditional television channels and film studios for domestic audiences.  The revenue base of the VOD platforms is less vulnerable to advertisers, more dependent on telecommunications subscriptions.

Russian script writers, cameramen, actors, designers, and directors are now in shorter supply than ever before, and earning more money.  “It’s the Russian New Wave,” claims Olga Filipuk, head of media content for Yandex, the powerful leader of the new film production platforms; its  controlling shareholder and chief executive were sanctioned last year.  

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RUSSIAN AVIATION INDUSTRY CORRECTS YELTSIN YAW – BOEING, AIRBUS DITCHED



By Olga Samofalova, translated and introduced by John Helmer, Moscow
  @bears_with

It was the American humourist Mark Twain who didn’t die in 1897 when it was reported that he had. Twain had thirteen more lively years to go.

The death of the Russian aerospace and aviation industry in the present war is proving to be an even greater exaggeration – and the life to come will be much longer. From the Russian point of view, the death which the sanctions have inflicted is that of the US, European and British offensive against the Soviet-era industry which President Boris Yeltsin (lead image, left) and his advisers encouraged from 1991.

Since 2014, when the sanctions war began, the question of what Moscow would do when the supply of original aircraft components was first threatened, then prohibited, has been answered. The answer began at the Federal Aviation Administration (FAA) in 1947 when the first  Supplemental Type Certificate (STC) or Parts Manufacturing Approval (PMA) was issued by Washington officials for aircraft parts or components meeting the airworthiness standards but manufactured by sources which were not the original suppliers.   

China has been quicker to implement this practice; Chinese state and commercial enterprises have been producing PMA components for Boeing and Airbus aircraft in the Chinese airline fleets for many years.  The Russian Transport Ministry has followed suit; in its certification process and airworthiness regulations it has used the abbreviation RMA, Cyrillic for PMA. This process has been accelerating as the sanctions war has escalated.

So has the Russian process of replacing foreign imports entirely.

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FOR WANT OF A NAIL THE KINGDOM WAS LOST – ENGLISH PATHOLOGIST GUY RUTTY FACES CHALLENGE TO THE RELIABILITY OF HIS NOVICHOK EVIDENCE



By John Helmer, Moscow
  @bears_with

The weakest link in the British government’s four-year long story of Russian Novichok assassination operations in the UK – prelude to the current war – is an English medical expert by the name of Guy Rutty (lead image, standing).

A government-appointed pathologist advising the Home Office, police, and county coroners, Rutty is the head of the East Midlands Forensic Pathology Unit in Leicester,  he is the author of a post-mortem report, dated November 29, 2018,  claiming that the only fatality in the history of the Novichok nerve agent (lead image, document), Dawn Sturgess, had died of Novichok poisoning on July 8, 2018. Rutty’s finding was added four months after initial post-mortem results and a coroner’s cremation certificate stopped short of confirming that Novichok had been the cause of her death.

Rutty’s Novichok finding was a state secret for more than two years. It was revealed publicly   by the second government coroner to investigate Sturgess’s death, Dame Heather Hallett, at a public hearing in London on March 30, 2021. In written evidence it was reported that “on 17th July 2018, Professor Guy Rutty MBE, a Home Office Registered Forensic Pathologist conducted an independent post-mortem examination. He was accompanied by Dr Phillip Lumb, also an independent Home Office Registered Forensic Pathologist. Professor Rutty’s Post-Mortem Report of 29th November 2018 records the cause of death as Ia Post cardiac arrest hypoxic brain injury and intracerebral haemorrhage; Ib Novichok toxicity.”  

Hallett, Rutty, Lumb, and others engaged by the government to work on the Novichok case have refused to answer questions about the post-mortem investigations which followed immediately after Sturgess’s death was reported at Salisbury District Hospital; and a cause of death report signed by the Wiltshire Country coroner David Ridley, when Sturgess’s body was released to her family for funeral and cremation on July 30, 2018.  

After another three years, Ridley was replaced as coroner in the case by Hallett in March 2021. Hallett was replaced by Lord Anthony Hughes (lead image, sitting) in March 2022.

The cause-of-death documents remain state secrets. “As you have no formal role in the inquest proceedings,” Hallett’s and Rutty’s spokesman Martin Smith said on May 17, 2021, “it would not be appropriate to provide you with the information that you have requested.” 

Since then official leaks have revealed that Rutty had been despatched by the Home Office in London to take charge of the Sturgess post-mortem, and Lumb ordered not to undertake an autopsy or draw conclusions on the cause of Sturgess’s death until Rutty arrived. Why? The sources are not saying whether the two forensic professors differed in their interpretation of the evidence; and if so, whether the published excerpt of Rutty’s report of Novichok poisoning is the full story.   

New developments in the official investigation of Sturgess’s death, now directed by Hughes, have removed the state secrecy cover for Rutty, Lumb, and other medical specialists who attended the post-mortem on July 17, 2018. The appointment by Hughes of a London lawyer, Adam Chapman, to represent Sergei and Yulia Skripal, opens these post-mortem documents to the Skripals, along with the cremation certificate, and related hospital, ambulance and laboratory records. Chapman’s role is “appropriate” – Smith’s term – for the Skripals to cross-examine Rutty and Lumb and add independent expert evidence.

Hughes’s appointment of another lawyer, Emilie Pottle (lead image, top left), to act on behalf of the three Russian military officers accused of the Novichok attack exposes this evidence to testing at the same forensic standard. According to Hughes,  it is Pottle’s “responsibility for ensuring that the inquiry takes all reasonable steps to test the  evidence connecting those Russian nationals to Ms Sturgess’s death.” Pottle’s responsibility is to  cross-examine Rutty and Lumb.

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