A NEW CHAPTER IN THE TALE OF RUSSIAN GAS – IS TIMCHENKO SELLING OUT, TAKING RETIREMENT? OR HAS HE BOUGHT A BARGAIN-PRICED ENTRY INTO THE FUTURE OF ARCTIC LNG?

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By John Helmer in Moscow

In the chapbooks of the medieval Finns, it was reported that pygmies lived in the Arctic Sea regions. The men there were dwarfed, so the Finns and Lapps thought, because of the effect of the North Pole and ice cap as a low-hanging roof over the world that made it impossible for normal-sized men to walk about. What they lacked in stature, though, the Arctic pygmies were suspected of making up for in aggressiveness. If they couldn’t find men to fight, they would attack flocks of cranes, riding on the backs of goats.

Not a great deal is known about a company called CITCO Waren-Handelsgesellschaft except that it has a handsome office in Vienna at number 8, Nussdorfer Platz; and there trades refined gases in liquid form, such as propane and butane; as well as nitrogenous fertilizers, other petrochemicals, and synthetic rubber. The company website reveals that it employs at least 15 people, and in 2007 had turnover of $1.88 billion. A presentation in Monaco last year claimed that CITCO has a 60% share of the liquefied gas trading market in the world.

Does CITCO’s obscurity rate it a pygmy by Arctic standards?

During May, it was reported in more than one Russian news medium that the company had been bought by Sibur, a petrochemical holding which belongs to Gazprom, the world’s largest producer and exporter of gas, and Russia’s largest company. Sibur spokesman Rashid Nureyev refused repeated questions to confirm this fact, or the price Sibur has paid. Sibur’s financial reports run a year in arrears, and its cross-shareholdings and related-party dealings within the Gazprom group, which include Gazprombank and Gazfond, leave open the possibility that the acquisition will never be publicly accounted for.
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ALROSA PREPARES FOR VYBORNOV’S REPLACEMENT

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By John Helmer in Moscow

Sergei Vybornov, the chief executive of Alrosa since February 2007, is likely to be replaced, sources close to the company have told Polished prices.com. An announcement is expected to be made before the annual general meeting of Alrosa shareholders, scheduled for three weeks’ time, on June 20.

Vybornov’s spokesman has been refusing to answer his telephone, or respond to questions about the replacement, although Russian diamond industry figures have been speculating about it for weeks.

On Tuesday, Vybornov summoned reporters from Bloomberg to his office in a demonstration that he is still at the helm. He was not asked, and he didn’t say, whether he intends to remain at his post.

Bloomberg reports that Vybornov repeated an earlier announcement, following the last round of executive and shareholder meetings this month, that Alrosa has cut mine output so far this year by 4% from last year’s level. Vybornov was also reported by Bloomberg as saying that about two-thirds of this year’s production will be offered to the state stockpile agency, Gokhran. The state’s buying price has not been disclosed, but it appears to be close to cost.

If this sales plan holds, the sale to Gokhran would represent about $1.6 billion in target value. Altogether, the Alrosa Supervisory Board confirmed on May 14 that it plans $2.1 billion in production value this year; the company does not issue output figures in carats, nor releases an average per-carat price supporting its announcements of production and sales targets.
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WHEN THE POT CALLS THE KETTLE TO ACCOUNT — RUSSIA’S ANTI-MONOPOLY SERVICE OPENS INVESTIGATION OF CUSTOMS SERVICE CLOSURE OF SCRAP EXPORT PORTS

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By John Helmer in Moscow

The Federal Antimonopoly Service (FAS), Russia’s anti-trust watchdog, announced this week that it has opened an official investigation of the State Customs Service (FTS).

The head of the FAS, Igor Artemyev, is a careful St. Petersburg apparatchik, who has made a 5-year career of running the anti-trust agency without getting out of step with his superiors. So it is surprising that the trust-busters have opened fire on the Customs men; it is understandable that it has taken them six months for them to pluck up the courage. The Customs agency is headed by Andrey Belyaninov, whose first career was in the KGB; and who came to the FTS in 2006, after running Russia’s arms export monopoly.

The target is an action the FTS ordered late last year to close down most of Russia’s customs clearance points at ports shipping ferrous scrap for export abroad. This measure has brought Russian scrap exports to a virtual halt in the Russian fareast, and cut the volume of exports to a trickle on the Black and Azov Seas.

Citing a provision of the antimonopoly legislation which bans administrative orders that hinder competition and limit free trade, and also a complaint from a scrap industry lobby organization, FAS issued a release this week, announcing it will commence its proceedings on June 10. A public statement by FAS, dated May 26, noted that the agency “suspects that FTS Russia violated the Federal Law «On Protection of Competition» by adopting acts that lead to restricting competition on the market of export of ferrous metals and limiting the rights of economic entities for selling, buying, otherwise acquiring or exchanging goods in the Russian Federation.”

Dmitry Kotikov, chiefspokesman for the State Customs Service, told CRU Steel News: “I can’t comment on the spot. We are aware of this information. I think our official position will be presented [on June 9].”
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MECHEL’S DOUBLE FAULT — ZYUZIN FAILS AGAIN TO REFINANCE $1.5 BILLION LOAN

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By John Helmer in Moscow

The Mechel steel and coal group has failed for the second time in two months to agree with its bankers on repayment of a year-old $1.5 billion loan. The news, first issued in Moscow as trading commenced on the New York Stock Exchange, where Mechel is listed, dropped the share price by 2% by mid-afternoon.

The obligation was first undertaken for a one-year term in March of 2008, when Mechel bought the chrome miner and refiner, Oriel Resources. The debt became overdue on March 20, and was extended for 50 days until May 15.

Before that deadline, the company told Reuters it was thinking of issuing unsecured bonds worth a total of 45 billion roubles ($1.35 billion). This was not announced officially by the company, which also did not tell Reuters the purpose of the bond issue.

On May 14, a press leak by the company to Reuters claimed that Mechel would meet its refinancing deadline by paying $500 million in cash, and rolling over the balance of $1 billion on a longer-term arrangement. The cash outlay was reported as coming from Gazprombank. This indirectly state-owned bank has been reported, again without confirmation from Mechel, as having loaned Mechel $1 billion some time in the first quarter.

A report by Renaissance Capital to brokerage clients on May 15 claimed “we expect an official announcement from the company on the debt restructuring situation today.” No disclosure materialized. At the time, according to Renaissance Capital analyst Boris Krasnojenov, the reported claim that Mechel had resolved its refinancing problem was “positive for Mechel provided the refinancing is actually agreed upon… we identified successful refinancing of Mechel’s $1.5bn bridge loan as one of the key drivers of the stock. Mechel’s ADRs on NYSE were up 5.5% yesterday [May 14]. The positive impact of the news will largely depend on the details of the refinancing scheme.”
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GAZPROM WARNS THAT EITHER KIEV OR BRUSSELS MUST PAY FOR UKRAINE GAS, OR NO GAS

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By John Helmer in Moscow

Following the weekend European Union (EU) summit meeting with Russia in Khabarovsk, Gazprom chief executive Alexei Miller warned yesterday in Moscow that if the Ukraine cannot pay the tab for past-due bills for gas, or for future deliveries for winter storage, and if the European Union won’t lend the money, Gazprom may cut off the supply once again.

Miller is reported Tuesday in a Moscow newspaper as acknowledging that Ukrainian payment delays are currently “very, very difficult”. He adds that Gazprom doubts that the Ukrainians can cover the arrears, or the cost of filling the gas storage. The costs were estimated during the EU session as between $4 billion and $5 billion.

If the arrears aren’t cleared, Miller said the supply agreement between Moscow and Kiev signed last in January provides for Gazprom to require new gas to be paid for ahead of delivery.

To European leaders, President Dmitry Medvedev said it was up to the EU to help the Ukrainians finance gas imports, if Brussels wants to resolve the conflict over gas movement. “There are no problems on our part,” Medvedev said. ” Let the one who pays for the gas offer assurances.” In parallel, Prime Minister Vladimir Putin meeting Ukrainian Prime Minister Yulia Tymoshenko, said: “We have applied to the European Commission with this question [of providing financial support to Ukraine]. We got the answer through a minister of finance, ‘We have no money for Ukraine.’ ”

FITCH TAKES AXE TO MORDASHOV FOLLY — DOWNGRADES SEVERSTAL ON FALLING EARNINGS MARGIN

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By John Helmer in Moscow

Fitch, the international ratings agency owned by the Paris-listed Fimalac, has issued a downgrade notice for Severstal, lowering its issuer default and senior unsecured ratings from BB to BB-. The agency has also placed Severstal on a further watch for the possibility of deteriorating financial information leading to a further downgrade.

A report issued by Fitch says the action reflects the “view that Severstal’s profitability and credit metrics will deteriorate in 2009-2012 to levels that are not consistent with a ‘BB’ rating. EBITDA margin dropped to -5.7% and 7.4% in Q109 and Q408 respectively, from an average 23%-24% in 2006-2008. Fitch forecasts that EBITDA margin will remain in single digit in 2009-2010. Fitch is also concerned about uncertainty surrounding steel product volume and pricing trends over 2009-2010, especially in the automotive and construction sectors to which Severstal is most exposed. ”

Responding to Severstal’s financial report this month, disclosing that Severstal North America made a $243 million Ebitda loss in the first quarter, and to this site’s publication last week of borrowing covenants in Severstal’s 2013 and 2014 Eurobonds, Fitch has announced: “Severstal’s attempts to restructure its US assets have failed to improve the performance of its North America division, which in Q109 reported an EBITDA margin of -25%… Fitch expects Severstal’s 2009 profitability to remain under pressure and to materially weaken from 2006-2008 levels. As a result, the agency believes that Severstal could breach covenants under various facilities.”

Fitch told the market it will “assess expected developments in Severstal’s key markets and the adequacy of anti-crisis measures announced by management to reduce financial and operational risks.”
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RUSSIA ARRESTS EGYPTIAN ORANGES AS GRAIN TRADE BATTLE CONTINUES

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By John Helmer in Moscow

Russia has seized a shipment of Egyptian oranges at Novorossiysk port, after discovering Mediterranean fruit-fly infestation. The orange move has been reported in the Russian media as tit for tat for Egyptian moves to seize three shipments of Russian wheat since May 13.

Rosselkhoznadzor (RSN), the government’s food and farm product inspectorate, confirmed that the imported oranges have been impounded, but said this is not a retaliation for last week’s arrest by the Egyptian prosecutor-general of Russian wheat. Alexei Alexeyenko, the RSN spokesman, said the arriving citrus was inspected, and after the pest was found, the shipment has been quarantined and fumigated. In time, it will be allowed to be delivered to the consignees.

Alexeyenko also told Fairplay that two weeks after the Egyptians claim to have found infestation in 137,000 tonnes of arriving Russian wheat, there is still no official report from the government in Cairo of any contamination; and no official Egyptian government complaint. He said RSN has run special laboratory checks on grain from the same source as the wheat exported to Egypt, but no trace of weevil infestation has been found.

Alexeyenko said that traditionally, Egypt buys medium quality (4th and 5th class) wheat. “It always corresponds to the GOST [state inspection standard] and to the quality indicated in the [sale] agreement.” Alexeyenko reflects government thinking in Moscow that the Egyptian seizures are a ruse to cut the trading price of the Russian grain in the Egyptian market, and to favour competing exporters from other countries. The timing, he said, is related to the World Grain Summit, when world grain producers and buyers will assemble in St. Petersburg on June 6.
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MORDASHOV ASKS ALMOST $4 BILLION FOR SALE OF US MILLS — NO BUYERS

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By John Helmer in Moscow

Alexei Mordashov, controlling shareholder and chief executive of the Moscow-based Severstal group, has set a sale price on the group’s North American assets of $3.6 billion, according to a source close to the company. Lazard Freres is the investment banking firm advising Mordashov on the deal.

The disclosure comes after press leaks of talks Severstal North America (SNA) has been holding with potential buyers. These have included talks with AK Steel for the Warren, Ohio, mill; with Nucor for the SeverCorr minimill in Mississippi; and with CSN, Essar, and ArcelorMittal.

Severstal is refusing to comment on the negotiations, but bank sources have been speaking to the industry press. They are reported as telling The Deal Reporter early this month that “other than its SeverCorr mini-mill …Severstal’s North American assets are considered nothing spectacular, and the company is likely to struggle to find an entity willing to take on the entire portfolio in the current climate.”

CRU Steel News has been told that the only interest so far shown in Mordashov’s sell-off proposal has come from Nucor. The source claims that Nucor’s interest is limited to SeverCorr. But Mordashov has been told that no deal is possible now, and that the price must come down to cost. No other steelmill in the Severstal North America (SNA) portfolio has attracted buying interest to date, the source claims.

Severstal’s financial reports indicate that atotal of about $1.9 billion in debt matures this year, and must either be repaid or refinanced. In February already, the group repaid $325 million in Eurobond obligations; and must repay another $480 million by year’s end. In 2010 Severstal will have another $900 million in debt repayments. Then between 2010 and 2013, about $4 billion in debt will reportedly fall due.

Although Severstal has indicated confidence it has enough cash on hand, and current cashflow, to handle this year’s repayments, the Eurobond loan agreements which Severstal signed are putting pressure on Mordashov to remove losses from his current balance-sheet by sellingloss-making SNA mills. At the same time, the loan covenants sharply curtail the company’s refinancing and restructuring options.
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CHINA AND RUSSIA IN STEEL TRADE CLASH

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By John Helmer in Moscow

Russian steelmakers in Moscow have confirmed that their export surge towards China, on which the revival of Russian mill capacity is currently based, is now threatened by an anti-dumping (AD) inquiry launched by Beijing.

According to an unconfirmed report from Interfax China this week, Beijing has ordered an AD investigation against Russian flat steel imports. Three Russian exporters — Novolipetsk, Severstal, and Magnitogorsk — decline to comment on the record, but they acknowledge knowing of the Chinese government’s trade move. One mill executive said that, for the time being “we have heard about the investigation starting. We don’t know the details. We are trying to find out.”

The Chinese move strikes at one of the most sensitive growth points of Russia’s current steel position, which is boosting mill output and increasing the proportion of steel exported abroad, mostly to China. Chinese imports in the first quarter have enabled Russian mills to lift production, and take the global lead among steel exporters.

It is believed in Moscow that Beijing may be retaliating against Russian anti-dumping moves against Chinese steel imports. The most recent of these was initiated by the Russian trade ministry in late March against stainless steel products, and was lobbied by the dominant Russian stainless producer, Mechel; Mechel’s Asian export market is primarily one for coal, not steel.

A representative of the Chinese steel industry association is reported by Interfax as having mentioned the new AD investigation in an interview with local press. Industry observers now concede that a serious steel trade row between Russia and China is brewing.

Alfa Bank steel analysts Barry Ehrlich and Dennis Vodnev told clients in Wednesday’s bank report: “Our view has been that protectionist retaliation from countries losing market share to Russian imports will begin much earlier in this cycle than in the post-1998 period. Unlike in 1999, Russia is not viewed sympathetically in most foreign capitals making it easy for domestic lobbies to push through measures to defend their markets.”
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RUSSIAN GRAIN UNION LAUNCHES COUNTER-ATTACK ON EGYPTIAN GRAIN CLAIMS

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By John Helmer in Moscow

The president of the Russian grain exporters’ association went on the offensive against Egypt today, charging the Egyptian government has so far failed to report any findings, or lodge any claims, against Russian wheat imports. According to Egyptian media reports, 137,000 tonnes of Russian grain cargoes have been detained from three shipments since May 13. The volume represents about 4.5% of this year’s estimated deliveries from Russia to Egypt of 3 million tonnes. GASC, the Egyptian state buyer and distributor of grain, and two commercial traders, Union Trade and Horus, have been identified as the consignees, according to Russian reports.

Russia provides roughly one-quarter of Egypt’s import requirement, more than double the next largest exporter, India. The cargo arrest orders appear to have been signed by the Egyptian Public Porsecutor’s Office, alleging infringement of the sanitary norms in the cargo contracts. The halt to the trade in the world’s largest-volume importer of wheat appears to have triggered a 4% increase in wheat futures trading in the US commodity market this week.

Arkady Zlochevsky, head of the Russian Grain Union, said that certificates of quality for Russian grain exports are routinely issued by the government’s farm product inspectorate, Rosselkhoznador, while sanitary checks and warranties are issued by international surveyors. Fumigation in ship holds then follows. According to Zlochevsky, allegations of infestation in cargoes that have arrived in the past week at the Egyptian ports of Safaga and Damietta are not official, but have been leaked to the press. Novorossiysk was the port of origin, he said. Novorossiysk port is reporting that the volume of its grain shipments in the four months of the year to April 30 is 3 million tonnes, a fourfold jump over the same period of 2008.

As of one hour ago, Rosselkhoznador has received no Egyptian complaint or cargo claim, Zlochevsky added. “No matter what is written in press,” he told Fairplay, “we have not received a single officially drafted claim. ” Neither the Egyptian Embassy in Moscow, nor GASC, the state wheat buyer, is speaking to the press.
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RUSSIA CHANGES SOMALI PIRATE POLICY — TAKE FAXES, NO PRISONERS

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By John Helmer in Moscow

Russia has abandoned its anti-piracy policy of fire, capture, arrest, and trial. Instead, the Defence Ministry and Navy have begun issuing orders to the destroyer Admiral Panteleyev, off the Horn of Africa, to put ashore the group of pirates it took on April 28. The Navy also appears to have changed the rules of engagement to emphasize firing to deter, disperse, or kill attackers, not to secure their surrender.

The General Prosecutor, Yury Chaika, has abandoned the stance he took at a meeting on May 4 with President Dmitry Medvedev to put on trial in Russia Somali pirates charged with attacking Russian vessels. Medvedev appears also to have abandoned the position he told Chaika to implement, in favour of an “international practice”. This was reported by Russian wires as a Kremlin proposal for an international court to try pirates.

However, the Rusian officials refuse to answer questions to clarify the policy shift. Instead, Captain Igor Dygalo, the Navy spokesman, requested a fax. There was no reply, and his office claimed to have lost it. The Defence Ministry spokesman told Fairplay: “I would comment if you were a friend of mine”, then insisted on a fax. The Foreign Ministry spokesman, Andrei Nesterenko, requested a fax, but did not reply. Marina Gridnevoi, spokesman for Chaika, did the same.

The only public admission came yesterday, after Fairplay began questioning, when Colonel-General Alexander Kolkmakov, the first deputy minister of defence, announced: “according to our legislation, we will hand them over to a third party.”
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ILL WIND BLOWS FOR MORDASHOV — EUROBOND CREDITORS HAVE PUNCHING POWER TO FORCE US MILL SALE

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By John Helmer in Moscow

Severstal, the third-ranked Russian steelmaker, continues to suffer from owner and chief executive Alexei Mordashov’s past ambitions to be the world’s largest steelmaker, with safe-haven production lines in the United States. What has already happened to other Russian oligarchs has arrived for Mordashov: caught in the ring with his bankers, the debts he ran up to buy stakes beyond the Kremlin’s reach have now now turned into liabilities giving the foreign creditors power to dictate terms. Until now, the small print in Mordashov’s loan agreements, which give the bankers this punching power, has not been disclosed.

On May 15, Severstal headquarters reported in Moscow that in the first quarter ended March 31, the company sustained a negative earnings (Ebitda) figure of $158 million, and a foreign exchange loss from ruble devaluation of $381 million. On revenues for the quarter totaling $2,796 million, Severstal reported an after-tax loss of $644 million. This was well below industry analyst estimates, prior to the disclosure. Revenue was down 30% on the fourth quarter of 2008, and down 35% on Q1 2008.
The results were, according to Troika Dialog steel analyst Sergey Donskoy, “the lowest point in the company’s history since its London IPO.”

Mordashov claimed, in a statement attached to the financial report, “we continue to act decisively to reduce fixed costs and improve working capital management, with benefits already coming through in the first quarter…. Despite current difficulties we are well-positioned to weather the challenging year ahead given our robust financial position and competitive cost structure.”

The plummeting Ebitda, according to Michael Kavanagh, steel analyst for Uralsib Bank, was “driven mainly by the weaker operating performance of Russian steel operations (EBITDA margin of just 8%)…The biggest disappointment came from the company’s Russian steel operations, as EBITDA for the segment fell by 69% QoQ to $88 mln in 1Q09, implying a weak EBITDA margin of 7.6% (down from 16.2% in 4Q08). We view the deterioration in the operating performance of Russian operation as a very negative sign, which shows the very thin margins on export sales and high costs at Severstal’s coal assets, which were essentially subsidized by the profitable Russian steel segment.”
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RUSSIAN DIAMOND SCHEME KEEPS MINE OUTPUT UP, BUT ALROSA PROFIT SLASHED –VYBORNOV WALKS THE HIGH WIRE

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By John Helmer in Moscow

A meeting of Alrosa management board, followed by the board of directors, last week decided to modify earlier estimates of this year’s mine production plan, but slashed this year’s target profit figure. This is the first official indication of how effective the state purchasing scheme for Alrosa diamonds is proving to be. But it also reveals the low, virtual cost price at which the state stockpile agency Gokhran is purchasing the goods.

According to a prominent international diamantaire, the outcome should mean that Alrosa will operate a much higher capacity than its international rivals, De Beers and Rio Tinto, but without a bottom-line loss.

The Executive Board met on April 13, and was followed the next day by the Supervisory Board. No decision was taken on the highly sensitive issue of whether to replace the current chief executive, Sergei Vybornov. Sources close to the company confirm that the chief executive’s position has been under review and debate for months. It is now believed that if no consensus candidate is agreed by June 20, the scheduled date of the annual general meeting of Alrosa shareholders, Vybornov will have successfully fought off his critics and rivals.

The latter continue to maintain their confidence the chief executive will be replaced. But Vybornov, who has not responded to direct questions for some time, has issued an optimistic bulletin for the company’s prospects this year. “I believe there is a very good outlook in terms of demand for Russian rough,” he said in a series of statements recently delivered to the Russian news agency, Interfax. According to Vybornov, there is global shift in demand under way, away from the US. “On the whole, demand in America may drop considerably since they all there lived on credit for a long time…As for other markets, they are already recovering. Dubai is a very good market – it is a new world-scale center of diamond jewelry trade…It is likely that the market will shift to Asia and Europe and I think it will virtually balance off the drop in U.S. demand completely.”
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CLASH OVER RUSSIAN GRAIN SHIPMENT TO EGYPT

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By John Helmer in Moscow

The Russian Grain Union has accused the Egyptian government of a legal manoeuvre with an arriving wheat shipment, in order to force a cut in Russian export prices.

Alexander Korbut, vice-president of the producers’ union, told Fairplay a 52,000-tonne shipment of medium-quality wheat has been arrested at the Red Sea port of Safaga, on the warrant of the Egyptian Prosecutor-General. A vessel arriving with a second shipment has been prevented from discharging its cargo at Safaga until samples are checked.

The Egyptian claim is that the Russian grain contains impurities and is unfit for human consumption; officials at the Egyptian Embassy in Moscow were unavailable to substantiate the details.

Korbut said there had been a similar episode in 2006. Sources differ over whether the contamination discovered then had occurred after delivery and warehousing in Egypt, or in Russia before shipment.

Russia delivers more than 3 million tonnes of grain to Egypt annually, and is the largest of Egypt’s import sources for grain. The Russians charge that an Egyptian importer sought the cargo arrest to improve its bargaining position for new contracts.

THE CASPIAN IS RED AGAIN — LUKOIL TO START OFFSHORE OIL FLOW, OPENS ASTRAKHAN FRONT IN BATTLE FOR SOUTHERN EUROPE OIL MARKETS

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By John Helmer in Moscow

Russia’s second oil producer, LUKoil, has successfully moored the first of its new oil production platforms in the Russian sector of the Caspian Sea. The company issued an announcement last Friday. The ice-resistant platform is a production unit of the Yury Korchagin oilfield, which is located at sea, 180 kilometres southeast of Astrakhan, where the platform was built; and 240 kilometres northeast of Makhachkala, where the crude oil will be transshipped. Korchagin is scheduled to come onstream later this year.

Caspian Sea production now ranks as an equally high priority in LUKoil’s future oil production and export plan as the Timan Pechora wells, which feed the Barents Sea terminal at Varandey, in Russia’s far north.

The Korchagin field is expected to produce up to 47,000 barrels daily of crude oil, and 1.2 billion cublic metres of gas per year. It will be followed by the second of the Caspian offshore fields, known as Vladimir Filanovsky, with much larger production — about 181,000 bd, commencing in 2011. Other fields in the same area are also under development, and are expected to come onstream by 2015. In testing so far, Filanovsky has demonstrated an unusually high flow rate, some eighty times the average Russian well flow rate. Reserves of both oil and gas in the Russian Caspian sector are enormous. An estimated 75% of LUKoil’s Caspian reserves will be lifted as crude oil; the remainder as gas. The Russian oil output will be much larger than the Caspian fields opened by Azerbaijan – so large that they are expected to revive and transform the century-old oilfield sector of the Volga River delta.

The crude is expected to be loaded on shallow-draught Caspian tankers, and delivered to northern Iranian ports, where it will be swapped for export cargoes traded out of the Persian Gulf. The new crude will also be shuttle-tankered to Makhachkala, and then transported by Transneft pipeline across the Russian Caucasus to Novorossiysk port. From there the Russian crude will be taken by a second tanker shuttle westwards across the Black Sea to Burgas, Bulgaria, avoiding Turkey and the Bosphorus Straits. Part of the crude will be refined at LUKoil’s refinery at Burgas; most will pumped by the new pipeline to the Greek tanker terminal of Alexandropouli.

OM IS MORE THAN A SACRED SYLLABLE – IN GLOBAL MANGANESE FIGHT, OMH CLAIMS SACROSANCT STATUS, FIGHTS OFF DISCLOSURE CHALLENGE — STRATFORD SUN TRIES SETTING IN THE EAST

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By John Helmer

The world of manganese mining is so small, concentrated, and dependent on China, as both producer and consumer, that if there are shenanigans, the reputation of the trade can be swiftly and seriously threatened, especially in China.

For the biggest of the producers, the Australians and South Africans, manganese is a sideline. Samancor is the largest manganese producer in the world, with peak production capacity of 7 million tonnes per annum; currently, this has been cut to 5.5 million tonnes. But Samancor is not separately listed; it is 60% owned by BHP Billiton, and 40% by Anglo American Corporation, whose consolidated earnings dwarf the contribution from manganese. Eramet, the French mining company, ranks second globally in manganese output, with 3.3 million tonnes produced from its Moanda mine in Gabon. It has cut back on production by 60%. Last year, when manganese was booming on the back of steel, manganese contributed 50% of the Eramet group’s revenues; this past quarter, the proportion dropped to 43%.

Assmang, the second South African producer owned by the Sacco family through Assore Ltd., and by African Rainbow Minerals, has peak production capacity of 2.5 million tonnes. At peak last year, manganese generated 64% of Assore’s revenue; 74% of its earnings. Vale of Brazil has a 2-million tonne capacity, but in the first quarter of this year has announced a mining cutback of 77%; manganese forms a small part of Vale’s multimineral output, which is led by iron ore, bauxite, and coal. The Australian producer, Consolidated Minerals (Consmin), was producing at peak last year of almost 1 million tonnes; its Woodie Woodie mine has capacity for 1.1 million tonnes. It was followed by the Australian-listed OM Holdings, whose Bootu Creek mine in northern Australia, reached peak capacity of 690,000 tonnes (currently at 500,000 tonnes).

The last two, Consmin and OM, are manganese specialists; production and sales of the ore constitute 74% of Consmin’s annual revenue; 100% of OM’s. Until January last year, Consmin’s shares had been publicly listed on the Australian Stock Exchange. The Ukrainian entrepreneur Gennadiy Bogolyubov took over after a fierce takeover contest with Brian Gilbertson’s Pallinghurst Resources. Bogolyubov already had manganese mining and refining interests in the Ukraine, as well as in Ghana. His was the second last great battle for shareholder valuation in the manganese sector. At Bogolyubov’s buy-in and subsequent delisting, Consmin was valued at A$1.3 billion.
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THE TSAR AND THE PIRATES — WHAT DID MEDVEDEV REALLY MEAN?

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By John Helmer in Moscow

The last time Russia took fighting pirates seriously was two centuries ago, when the Empress Catherine the Great, followed byher short-lived successor Tsar Paul I, backed the Knights of Malta, who in turn fought naval engagements with the pirates of Barbary — as the Arab statelets and fortress towns of the North African coast were collectively called.

Ransoming rich European hostages was a high-margin line of business for the corsairs;European hostages too poor to buy their freedom were put to work as slaves on shore, or as oarsmen for the pirate vessels. Individually, they didn’t last long, but that wasn’t the point from a naval point of view. The pirate vessels demonstrated much more manoeuverability in combat than the European navies could muster. When one oarsman died, the pirates simply grabbed another.

For a while, Russia had a pirate of her own. That was the legendary Maxim Vasilii, who learned his seamanship from the Barbary corsairs; adapted their tactics to stealhis own ship, the Thermopolae, from a Greek port; managed to circumnavigate the world in the mid-17th century; and was an advisor to Tsar Peter the Great on the creation of the first Russian naval fleet.

Later, and for a very brief time — after Napoleon took Malta for France in 1805 — Tsar Paul became the principal host of the Knights of Malta and their commander in St. Petersburg.At that distance from the Mediterranean, this naturally made not a whit of difference to the pirates.
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THE CAT’S PAW AWARD — MAY 8 – JULY 3, 2009

May 8-July 3, 2009

Adam Waldman of The Endeavor Group, Washington, DC, for “correction” of media publications reporting that he is Oleg Deripaska’s lobbyist to recover Deripaska’s US visa, revoked by the US State Department in 2006

Registration with the US Department of Justice by Adam Waldman for The Endeavour Group, pursuant to the Foreign Agents Registratrion Act, May 8, 2009:
http://www.fara.gov/docs/5934-Exhibit-AB-20090508-1.pdf

Reports and correspondence

http://www.intelligenceonline.com/Identification/p_identification.asp?rub=login&lang=ANG&service=ART&context=BOI&doc_i_id=63906361

CORPORATE INTELLIGENCE
Deripaska in Frantic Bid for Visa
354 words
18 June 2009
Intelligence Online
INTON
596
English
Copyright 2009 Indigo Publications All Rights Reserved

Close to Hillary Clinton, the Endeavour company has been hired to obtain a visa for Oleg Deripaska.
Since July, 2006, the chairman of the aluminum giant Rusal, Oleg Deripaska, has lacked a visa for the United States: the State Department cancelled the former visa without explanation two years after issuing it. The travel ban could play havoc with the oligarch’s finances at a moment when he needs the most help. Rusal is currently negotiating for fresh terms with its creditors who are owed USD 7.4 billion. The talks with banks were almost completed as Intelligence Online went to press.
To help persuade the State Department to give him a new visa, Deripaska retained the services of a small lobbying concern, Endeavour Group, at the end of May. Run by Adam Waldman and Ashley Allen, Endeavor specializes in providing services to billionaire and show business personalities. It is particularly known for mounting philanthropic projects on behalf of its clients but it equally acts to resolve delicate private matters.
Deripaska’s choice of Endeavor to land him a visa was dictated by the fact the firm is close to secretary of state Hillary Clinton. One of the partners of Endeavor, Lorrie McHugh-Wytkind, was Clinton’s head of communications when she was a senator for New York state.
Some of the firm’s advisers are also close to the Clinton couple, including Bill Clinton’s former secretary of the interior, Bruce Babbitt. And financier Richard Blum, husband of the influential Democrat from California, Diane Feinstein, is also a consultant of Endeavor, as is Ed Mathias, one of the founders of the Carlyle equity fund. Mathias is also an adviser to the business intelligence concern Diligence, who worked for Deripaska for years.
Before taking his business to Endeavor, Deripaska had other firms working on his visa problem. One who banged on the State Department’s door on behalf of the oligarch was Bob Dole, former Republican senator and presidential candidate. Dole works as a lobbyist for the law firm Alston & Bird.

http://www.intelligenceonline.com/Identification/p_identification.asp?rub=login&lang=ANG&service=BRE&context=BOI&doc_i_id=64767470
CORPORATE INTELLIGENCE

02/07/2009 UNITED STATES
Clarification
Following publication of our article “Deripaska in Frantic Bid for Visa” in our last issue, the oligarch’s public relations firm in Washington, Endeavour, contacted Intelligence Online to specify that Lorrie McHugh-Wytkind, former head of communications for Hillary Clinton and a partner in Endeavour, was not involved in the firm’s work on behalf of Deripaska . The latter’s visa was withdrawn by the State Department in July, 2006 without explanation and he has been trying ever since to have a new one issued. Elsewhere, Endeavour said that Bill Clinton’s former interior secretary, Bruce Babbit, who sits on the company’s informal advisory board, has no contact with its customers. Endeavour also pointed out that it was not a lobbying concern, as Intelligence Online stated.

—– Original Message —–
To: jcooke@blumcapital.com
Sent: Thursday, July 02, 2009 11:31 PM
Subject: From Moscow — re Oleg Deripaska visa representation

FROM JOHN HELMER
MOSCOW BUREAU

President, Endeavour Group
2001 K Street, NW,
Washington, DC 20006
USA

Dear Mr Waldman:

I am the longest serving American correspondent in Russia. You may find background and samples of my coverage, which is published around the world, if you will go to the website address indicated in the header. My questions relate to the report of your firm’s engagement by Oleg Deripaska.

I am grateful to Ms Cooke for agreeing to convey to you, and the other appropriate members of your firm, my request for clarification of the matters arising from the recent reports by Intelligence Online
(www.intelligenceonline.com).

Regarding the June 18, 2009, report, and the July 2 “clarification”, would be kind enough to say:

1. Has your firm been engaged by Mr Deripaska? If so, when?

2. Is the purpose of the engagement to assist Mr Deripaska in securing State Department and other US Government endorsement for the issuance of a visa permitting him to enter the US?

3. Has your firm registered pursuant to the Foreign Agents Registration Act? If so, when?

4. What members of your firm have been designated to work on this engagement for Mr Deripaska?

5. Are you aware of, and do you believe to be true, US reports that in relation to the US visa matter, and other issues, Mr Deripaska met together with the Republican presidential and vice presidential candidates, prior to Election Day last year, on board a yacht outside the territorial limits of the US, in Canadian waters?

6. According to your website, Edward Mathias is listed as an advisor to your group. According to Intelligence Online, Mr Mathias is “also an advisor to the intelligence firm Diligence”. Are you aware, and has Mr Mathias made you aware, that Mr Deripaska is one of the proprietors of the Diligence firm?

I shall be obliged if you would respond by email, or by telephone, as soon as possible.

Should you decline to respond, you and your firm may be reported as refusing to respond.

With my thanks,

John Helmer
Moscow Correspondent

—– Original Message —–
From: Adam Waldman
Sent: Friday, July 03, 2009 12:58 AM
Subject: Your July 2 Fax

Dear Mr. Helmer:

I just received a copy of your fax (and have long been a follower of your fine coverage).

I would like very much to respond to your questions, and have requested permission from my client to do so. Mindful of the time difference, what is your deadline?

Kind regards,
Adam Waldman

Sent: Thursday, July 02, 2009 7:54 PM
To: Adam Waldman
Subject: Re: Your July 2 Fax

Dear Mr Waldman:

Thank you for your prompt response. I’d like to offer you as much time as you think reasonable with respect to those questions your client may oblige you to obtain his permission to answer, subject to the confidentiality provisions that prevail. I take it you have been in discussion with your client on this point for at least two weeks — since June 18, the publication date of the first report by Intelligence Online.

Your second sentence, and also the July 2 response to Intelligence Online, appear to answer Q1. With respect to Q3, I suppose it is to the US statute, not to Mr Deripaska’s permission, that your duty is owed.

Qs 5 and 6 relate to matters of fact occurring before the engagement; and so I have difficulty in seeing how your knowledge, or non-knowledge, of them can be subject to non-disclosure or withholding retrospectively.

With my thanks,

John Helmer

—– Original Message —–
From: Adam Waldman
Sent: Friday, July 03, 2009 6:49 PM
Subject: RE: Your July 2 Fax

Dear Mr. Helmer:

As a general matter, the Intelligence Online piece you inquired about did not make any attempt to contact my firm Endeavor or me before running its piece; I immediately sent Intelligence Online a correction of factual inaccuracies which they agreed to run. I am not a subscriber to their service but assume they have done so at this point. I sent a similar note to Harper’s, which cited the Intelligence Online piece, and they also agreed, and did indeed, print a correction.

I do appreciate, in contrast, your request for accurate information in advance of running a piece. The following are responses to your questions in the order you presented them:

1. Although Endeavor rarely comments publicly about any aspects of its engagement with clients, it is a matter of public record that we work with Mr. Deripaska.

2. The purpose of the engagement is to advise Mr. Deripaska and entities controlled by him on a range of commercial, regulatory and philanthropic matters. We have not had any engagement with the US government about any visa matters on his behalf. Our web site is www.theendeavorgroup.com – this will provide you some feel for our work.

3. Yes, and it is a publicly available filing.

4. The answer to your question is contained in the filing; but for your convenience my colleague Carolyn Mansfield and I work with Mr. Deripaska.

5. No such meeting has ever taken place and, consequently, no such discussion of visa or other issues ever happened.

6. Mr. Deripaska is not a proprietor of Diligence, or of any other intelligence firm.

I hope these factual clarifications are helpful to you.

Kind regards,
Adam Waldman

—– Original Message —–
To: Adam Waldman
Sent: Saturday, July 04, 2009 11:20 AM
Subject: Reply and follow-up questions

Dear Mr Waldman:

Thank you for taking time out of your holiday to respond, and for writing so painstakingly. At risk and with regret of interrupting your fireworks celebration, may I point out some problems that remain with your response:

Attached below is the full text of the “Clarification” published by Intelligence Online. There appears to be no “correction”, as you use the term or as you mean readers to understand it. The reference relating to Ms McHugh-Wytkind from your side clarifies what the original publication sourced to someone referring to Mr Deripaska’s intention in engaing your firm, not to what you say is your current or future “work”. I am persuaded that you are not denying the original report at all, or the implication that your firm was sought out for influence-peddling. Whether you wish to acknowledge that you accept Mr Deripaska’s idea of you (including Carolyn Mansfield) as an influence-peddler is a judgement that reasonable people are bound to be able to make if they have access to the full record.

Your two other clarifications in the Intelligence Online note — one related to Mr Babbit and one to the interpretation of the term lobbying — suggest the follow-up:

(1) Are you saying that you and Mr Babbit have gone through your list of assignments, clients, and “customers”, and have determined that Mr Babbit has had “no contact” with any of them?

(2) Are you saying that in relation to your engagement by Mr Deripaska, you and Ms Mansfield have made, and will make, no contact of any kind whatsoever with any US government official, any member of the US Congress, or anyone else connected such officials?

(3) Please clarify for me what is Ms McHugh-Wytkind’s association with your firm, and what contacts with what US Government officials she has made since she commenced with your firm, and in particular since May 8.

In relation to the wording of Question/Answer 2, you state: “The purpose of the engagement is to advise Mr. Deripaska and entities controlled by him on a range of commercial, regulatory and philanthropic matters. We have not had any engagement with the US government about any visa matters on his behalf.”

In the filing to the US Department of Justice which you signed on May 8, Registration Number 5394, at
http://www.fara.gov/docs/5934-Exhibit-AB-20090508-1.pdf

you state: “the agreement or understanding between the registrant and the foreign principal is the result of neither a formal written contract nor an exchange of correspondence between the parties”. Please explain how you reached your understanding with Mr Deripaska, and through what persons acting for him, and what persons acting for you?

You also state: “Endeavour Group is engaged at will by Mr Deripaska to provide general legal advice on issues involving his US visa as well as commercial transactions.” You repeat this point at Box 7 of the registration form: “”Endeavour Group provides legal and advisory services to the principal Mr Deripaska around US visa issues and commercial transactions.”
At Box 8, your work on the US visa issue is explained in greater detail: “Endeavor Group assists the principal Mr Deripaska in the preparation of a US visa application and advocates for US approval of such application”.

At Box 9, you state: “Endeavour Group expects to engage with the U.S. Government regarding the status of the foreign principal’s visa application”.

If all true, please explain:

(4) How your admissions to the US Government do not belie your claim to me: “We have not had any engagement with the US government about any visa matters on his behalf”?

(5) How your “advocacy” is not “lobbying” as this term is understood in the US Code?

(6) To which officials, by name, at what US Government agencies, have you or your Firm or any person in any way connected with you and your firm made contact in relation to Mr Deripaska’s visa issue?

(7) In your registration, you state you are being paid $40,000 per month, plus expenses, by Mr Deripaska. Since Mr Deripaska as chief executive and stakeholder of Rusal, and as controlling shareholder of other companies in the Rusal and Basic Element groups, is currently the object of government supervision, bank investigation, court claims for insolvency, and public protest as a payment defaulter; and since he and his group have unpaid obligations estimated to be about $17 billion, will you please state whether you are being paid monthly in advance; monthly in arrears; or by another sum paid in advance?

(8) Do you believe it to be lawful for your firm to be representing entities that may be trading as insolvents in one or another foreign country, and lobbying for their financial interests before the US Government?

(9) In the registration, at Q8 (b), you have marked the “No” boxes to the following questions: “Is this foreign principal “supervised by a foreign government”, and “financed by a foreign government”. Do you claim to be unaware of Mr Deripaska’s obligations to the Russian state banks, including for $4.5 billion to Vnesheconombank (VEB), chaired by Prime Minister Vladimir Putin; of the state Accounting Chamber’s investigations and supervision of Rusal accounts and payment compliance: and of the intervention, supervision, and investigation by Russian state bodies, including the Prime Mibistry and the Arbitrazh courts, of Mr Deripaska’s indebtedness and lack of financial means? Do you wish to amend the meaning of your registration and file “Yes” to these questions?

(10) With respect to the lobbying assignments you have registered you and your firm as performing for Mr Deripaska relating to aluminium and “General Motor’s [sic] European operations”, what claims have you made regarding your client’s means to make good on payment commitments?

(11) With respect to the claims and evidence currently before the US courts in the Norden case — http://johnhelmer.online/wp-content/uploads/2009/03/norden-cmplnt1.pdf — please tell me what you advocate before the US Government regarding the value of Mr Deripaska’s contract coomitments?

(12) You refer in your Question/Answer 2 to “philanthropic matters” on behalf of Mr Deripaska. What amounts of money and for what “philanthropic” purposes is Mr Deripaska and his group giving away, subject to your expertise and advice?

Finally, and do pardon me for the detail of this follow-up, occasioned by the nature of your reply,

(13) Please explain why you think your reference in your last line to “factual clarifications” might be “helpful”, if the facts in the public record appear to be at considerable variance with your claims? And if that is so with regard to your claims regarding the US visa issue, will you reconsider and reword your claims with respect to Questions/Answers 5 and 6, relating to the meetings on board Mr. Kerimov’s boat, and with respect to direct and indirect forms of ownership and control of Dilgence? Or are you now saying you and your firm do not know, and have not investigated directly and independently, whether what you have been told of these matters is true or false.

With my thanks,

John Helmer

EVRAZ MAKES DEBT REVELATION — RUSSIAN STATE BANK TAKES SECURITY OVER IPSCO, ZAPSIB MILLS

evraz

By John Helmer in Moscow

Evraz, the most heavily indebted of Russia’s steelmakers, has refused to respond to questions about disclosures in its annual financial report for 2008, released on April 30, that the Russian group has pledged virtually its entire shareholding stakes in its North American assets, and in its lead longs mill, West Siberian Metallurgical Combine (ZSMK, Zapsib), to secure repayment of loans and refinancings of the debt incurred to make the asset acquisitions.

Evraz is controlled by Roman Abramovich, and run by former controlling shareholder, Alexander Abramov.

Evraz investment relations spokesman Sergei Lavrinenko was asked to clarify Russian media reports of the asset pledges. He then refused to respond by email or telephone. The disclosures are highly sensitive, because of fears, widespread throughout the Russian steel industry, that the Russian government may take shareholding control of steelmakers, which prove unable to meet the heavy debts they have run up, particularly in premium-priced acquisitions in Canada and the US.

At page 35 of the 44-page report, Evraz reveals, for the first time, details of the state bank bailout loan from Vnesheconombank (VEB), which late last year saved Evraz from default. VEB is chaired by Prime Minister Vladimir Putin. According to the Evraz report, the VEB loan “is granted in 5 tranches of U.S.$201.3 million each to partially refinance the company’s principal installments falling due in 2008 and 2009 under the US$3,214 million syndicated loan borrowed in November 2007. The loan is secured with pledge of 99.999993 % of ZSMK shares and assignment of receivables under certain ZSMK and NTMK export contracts, and bears interest at 12-month LIBOR plus a margin of 5% per annum. Each tranche is repayable on the first anniversary of its respective disbursement date, with the final repayment in December 2010. On December 10, 2008, Evraz Group S.A. entered into a U.S.$800 million loan with VEB. The full facility amount was utilised on December 12, 2008. The facility is secured with pledge of 100% of shares in Evraz Inc. NA Canada, all movable and immovable property of Evraz Inc. NA Canada, as well as suretyships provided by NTMK and ZSMK, and bears interest at 12-month LIBOR plus a margin of 5% per annum. The facility is repayable in one instalment in December 2009. It was utilised to refinance the two U.S.$400 million bridge facilities arranged in June 2008 for the acquisition of the IPSCO Tubulars business from SSAB.”
(more…)

TRANSNEFT TO START RUSSIA’S NEW OIL PORT — SPOT OIL CARGOES TO BE OFFERED TO CHINA IN DECEMBER

transneft

By John Helmer in Moscow

Russia’s state-owned crude oil pipeline company Transneft will commence loading oil tankers at Kozmino, the newest Russian oil port to be launched, as soon as December. With eventual capacity to load and ship 50 million tonnes per year (1 million barrels per day), Kozmino is to be one of the largest oil outlets opening on to the Asian and Pacific market.

Starting this year, Igor Demin, spokesman for Transneft, told 21st Century Business Herald that Russian rail deliveries of up to 15 million tonnes of crude oil (300,000 bd) will be loaded at the new port. Five million tonnes of that (100,000 bd) are already committed by contract to be shipped to China, under loan and oil supply contracts recently signed in Beijing by Transneft and Rosneft with the China Development Bank and the China National Petroleum Company.

Another 15 million tonnes (300,000 bd) of Russian crude are committed, according to the same contracts, for delivery to northern China through the new overland pipeline being built from Skorovodino to the Chinese border. In four years’ time, as Transneft builds the rest of the planned pipeline from Skorovodino to Kozmino — called the East Siberian Pacific Ocean, or ESPO, pipeline — a total of 80 million tonnes (1.6 million bd) of new Russian crude will flow for export eastwards. Of that amount 30 million tonnes (600,000 bd) are already committed for delivery to China by the northern overland pipeline and from Kozmino port.

Demin also revealed that about 3 million tonnes of the new oil will go to domestic Russian refineries, including a new one to be built by state oil company Rosneft, located 4 kilometres from the terminus of the ESPO pipeline and the tanker terminal at Kozmino Bay. Demin’s disclosure of the 3-million tonne capacity at the new refinery is substantially below previous published estimates. This hints at competition between the two state companies, Transneft and Rosneft. It also suggests that Transneft sees more profit for itself in exporting crude through Kozmino, rather than delivering the crude for Rosneft to refine, and then export as petroleum products.

Until the ESPO pipeline opens in 2013, Demin said he expects 7 million tonnes pa (140,000 bd) of rail-delivered oil will be traded on spot or contract terms from Kozmino, starting at the end of this year. Demin said that South Korean buyers have already signaled interest in this crude, and that Chinese buyers will also be able to buy on spot-price terms.
(more…)

FIRST THE COLLAPSE OF RUSSIAN GOLDMINER VALUE, THEN THE RISE OF CHINA GOLD, AND FINALLY THE SOUTH AFRICAN REVENGE

prokhorovgold

By John Helmer in Moscow

In the world of mining, it can be much more profitable to leave the gold in the ground, and take out the cash from booming share or equity value. According to Oleg Mitvol, the mine regulator for the Russian Ministry of Natural Resources until last month, Russian goldminers are guilty of investing in only one kind of digging — on the stock exchanges, where share prices are driven by gold reserves in the ground.

The paradox of Russian gold equity value starts with this: in terms of gold reserves, Russia ranks second in the world, trailing only South Africa. However, in terms of gold production, Russia is currently lagging in sixth or seventh place – behind China, South Africa, Australia, the US, Peru, and sometimes Indonesia.

For stock market hustlers, this discrepancy is treated as a positive – a disproportionately low production level relative to the resource base, suggests significant upside or growth potential. If a global or emerging market investment strategy recommends the gold sector for all the reasons that make the precious metal attractive in current conditions, then this anomaly, the reserve potential factor, should recommend Russian goldmining stocks for buying.

That is, unless investors suspect that Russian reserve potential is a mirage, a pig in a poke, or worse, a fake — that there’s a relatively high Russian risk that the local miners will delay the capital expenditure required to bring their new projects into production, and fill out their reserve totals by moving paper, instead of shovels.

Just how far and how fast gold equity values can move can be seen in China, where two of the leading goldminers listed on the stock exchanges are Zijin Mining Group, with a current market capitalization equivalent to $3 billion; and Zhongjin Gold Corporation, worth roughly the same.

In market value, they are less than half the value of Polyus Gold, Russia’s leading goldminer, whose market capitalization is currently about $8 billion. But each of the Chinese miners is substantially larger than the value of the second largest Russian goldminer, Polymetal, currently at $2 billion; or the next two Russian goldminers, Peter Hambro Mining and Highland Gold, at $1.7 billion and $241 million, respectively. Even allowing for Peter Hambro’s recent capital gain from absorbing its Aricom non-gold affiliate, the two Chinese goldminers are one and a half times the value of the three Russians.
(more…)

RUSSIAN HORNPIPE – SOVCOMFLOT DANCING CLEAR OF DEBT, SERGEY FRANK SINGS OF STEPPING DOWN

scf

By John Helmer in Moscow

Steady as she goes — that isn’t exactly the message from Sovcomflot, Russia’s largest shipping company, and one of the five largest energy shipping, oil and gas tanker fleets in the world.

Analysts at Moody’s Investors Service have issued a rating downgrade for the state-owned shipping company Sovcomflot, with a report that focuses on growing doubt that the Russian government will or can support the refinancing requirements of Sovcomflot’s fleet.

According to the April 29 report from Moody’s analysts in Italy and France, Sovcomflot has been downgraded from Baa1 to Baa2. “The rating action,” says the report, “reflects Moody’s decision to lower the government support assumptions for the company in the framework of Moody’s rating methodology for Government Related Issuers. Although the rating agency continues to believe that SCF enjoys a high degree of support from the Russian government, the one-notch downgrade reflects the view that, in the current market conditions, such support provides a lower level of enhancement to the company’s own creditworthiness.”

Moody’s report cautions that the national credit ratings for Sovcomflot are not comparable to non-Russian companies, or to other international shipping companies. They differ “from global scale ratings, as assigned by Moody’s Investors Service, in that they are not globally comparable to the full universe of Moody’s rated entities, but only with other rated entities within the same country.”
(more…)

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?”

(more…)

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.

(more…)

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.

(more…)

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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