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BP Named The Fourth Most Profitable Company In The World

July 8, 2010

BP may be one of the most hated companies in the world, but it’s also one of the most wildly profitable. Fortune has released its most recent list of the world’s most profitable companies and BP has placed fourth, pulling in a whopping $16.56 billion in profits in 2009. BP shares are heading toward their second straight weekly gain on news of progress on stopping the oil spill in the Gulf of Mexico, the AP notes. Gazprom, the Russian gas conglomerate, took the top spot on Fortune’s list with 24.55 billion in profit. Exxon Mobil took the second spot ($19.28 billion), and the Industrial & Commercial Bank of China and China’s Construction bank ranked third and fifth, respectively. Barclays, the U.K.-based bank, ranked seventh, beating out financial services rival Goldman Sachs by six spots. Goldman, however, saw profits increase by 476 percent from 2008 to 2009, the highest year-to-year increase in the top 20. As the AP reports, BP stock has gained about $20 billion in lost value in recent days, but is still down approximately 45 percent since the gulf oil spill began on April 20. But, BP’s 2009′s profit are sure to be vastly different from this year’s. Do you think BP will make it onto next year’s list of the world’s most profitable companies? Check out Fortune’s full list here .

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Daniel Isenberg: Dear President Medvedev: Stop Emulating Silicon Valley

July 2, 2010

So you say you want a revolution? Let a thousand flowers bloom (Chairman Mao)? Reduce Russia’s dependence on oil (like King Abdullah and KAUST)? Instead of hobnobbing for the cameras with Steve Jobs and Eric Schmidt, you should be talking — and listening — to Natalya Kasperskaya (Kaspersky Lab), Arkhady Volozh (Yandex), Victoria Livschitz (Grid Systems), Sasha Galitsky (serial entrepreneur), and Serguie Beloussov (Parallels). These great Russian entrepreneurs are right under your nose. With brains, determination, leadership, and a little je ne sais quoi , they are navigating the maze of the Russian environment. If you want to build a healthy entrepreneurship ecosystem for sustained economic prosperity, you should learn from those who know how to make it work now, and how to make it work better in the future. Back in the USSR. President Medvedev, your Skolkovo Valley smacks like a repackaging of top-down industrial and economic planning. If it is entrepreneurship you are after, you cannot dictate it top down. Moscow can’t emulate Silicon Valley. Kigali can’t emulate Silicon Valley. Cali can’t emulate Silicon Valley. Guess what: Silicon Valley can’t emulate Silicon Valley. Rather than wasting time and resources trying to recreate the ideal and impossible, consider these rules to jumpstart Russia’s next entrepreneurial revolution : 1. Identify and over-celebrate the entrepreneurs who have made it. I have been all over the world looking, and I have yet to see a society without entrepreneurs: like art and music, entrepreneurship in part expresses something fundamental in the human spirit. Sometimes a societies’ entrepreneurs are flying under the radar, but you have the ability to sniff them out. 2. Talk with them and listen to them . Create a candid, informal, bidirectional dialog. Not the big company talking heads show of this month’s St. Petersburg International Economic Forum, but an ongoing discussion where you can learn the real entrepreneurs’ perspectives. Use them to help you figure out how to practically change the ecosystem to make it conducive to entrepreneurship, big time. Remember, these are Russia’s best and brightest. And remember, Russia has an amazing scientific and technological legacy to build on. 3. Put Russia’s Diaspora to work . Form a group of the best ex-patriate Russian entrepreneurs living in the U.S., Europe, and Israel. They would be intrigued, if not downright proud, to be consulted. Tear a page out of Taiwan’s book when the newly elected Premier Sun created the “foreign monk” Science and Technology Advisory Group. STAG had an incredible impact, and was one of the root causes of the brain gain of 40,000 US-trained high tech entrepreneurs and executives flooding back to Taiwan in the 1990s. 4. Remain sectorally agnostic . For three decades, Israel’s vaunted Chief Scientist program adamantly avoided prioritizing sectors to promote. Sectoral agnosticism sends a strong message because it encourages entrepreneurs to identify and realize what THEY think are opportunities. This is part of letting the thousand flowers bloom. Remember that entrepreneurship is inherently a contrarian activity: you need to let loose the hounds, and let them sniff out the opportunities. 5. Don’t paint the zebra . You cannot take a white donkey, paint it with black stripes, and call it a zebra. Help entrepreneurship grow organically . Create conditions for zebras to breed. A lot of that involves removing the obstacles that prevent them from doing so. Remember that removing bureaucratic obstacles is more impactful than creating incentives, all else being equal. 6. Intervene holistically . There are 13 distinct, but interrelated elements which compose an entrepreneurship ecosystem. All 13 of these have to line up eventually in order for there to be sustainable entrepreneurship. Is there capital and technology? Bolster these with diaspora networks and entrepreneurship education. Are their success stories? Use them to encourage large companies to become customers to small suppliers. Does the culture support risk taking and honest failure? Encourage support services to help reduce the failure rate. Russia’s next revolution won’t happen overnight, but the key is to look inside. You should emulate yourself, not Silicon Valley. And if you want to do international benchmarking, instead of visiting San Jose and Cupertino, you should be visiting Hsinchu City, Herziliya and Reykjavik. Daniel Isenberg is the Professor of Management Practice at Babson College, Founder and Executive Director of the Babson Entrepreneurship Ecosystem Project , and author of the Harvard Business Review article, ” How to Start an Entrepreneurial Revolution ” (June 2010).

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Video: Matias Says Russia Sought Assurances on BP Chief’s Plans

June 29, 2010

June 29 — Vladimir Matias, managing director at Asset Capital Partners, talks about the visit of BP Plc Chief Executive Officer Tony Hayward to Russia and assurances sought by the Russian government. Matias speaks from Moscow with Francine Lacqua on Bloomberg Television’s “Countdown.”

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Tony Hayward Resigning? Russia News Agency Reports Resignation Is Coming

June 28, 2010

MOSCOW — Russia’s state RIA Novosti news agency is quoting a senior Russian Cabinet official as saying that BP Chief Executive Tony Hayward is expected to resign, a report BP denied. It quoted Deputy Prime Minister Igor Sechin as saying that Hayward “is leaving his post.” Sechin, who is set to meet with Hayward on Monday, said the BP chief would introduce his successor. BP spokeswoman Carolyn Copland in London said the report “is definitely not correct.” Hayward was to assure officials of BP’s viability and discuss issues related to Russian joint venture TNK-BP, which accounts for about a quarter of BP’s reserves and production.

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Video: Smith Says BP Russian Asset Sales `Not Going to Happen’

June 28, 2010

June 28 (Bloomberg) — Greg Smith, managing director of Fat Prophets, talks about the outlook for BP Plc as chief executive officer Tony Hayward meets Russian Deputy Prime Minister Igor Sechin today to discuss the company’s projects. Smith speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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Bob Dudley New BP Point Man For Gulf Oil Spill

June 20, 2010

LONDON — BP’s new strategy to clean up its image and the Gulf Coast is to hand the job from its British CEO, widely criticized for tone-deaf comments and yachting amid the crisis, to one of its top-ranking Americans. Bob Dudley is no stranger to tough situations, having protected his company’s interests in rough dealing in Russia even after he was barred from the country. Perhaps most importantly, he is a fresh face for the oil giant as it attempts to fix the spill and protect its future. Dudley will take over as BP’s point man on the spill response, reporting to CEO Tony Hayward. Company officials have variously put the time frame at anywhere from immediately until after the spill is plugged, which isn’t likely to happen until August. Hayward’s gaffes include saying, “I’d like my life back,” and most recently enjoying a yacht race off the coast of England on Saturday while oil spill relief workers sweated it out. BP officials, however, say the switch is intended to allow Hayward to focus on running the company, rather than an attempt to bounce back from bad publicity. Dudley, BP’s managing director, spent part of his boyhood in Hattiesburg, Miss., an easy drive from the coast. The 54-year-old spent two decades climbing the ranks at Amoco Corp., which merged with BP, and lost out to Hayward on the CEO’s slot three years ago. Analysts say Dudley’s job will involve nothing short of rehabilitating the environment, compensating everyone who has suffered a loss and generally salvaging BP’s global image. Dudley has plenty of experience protecting BP’s interests under great pressure. As chief of TNK-BP, a joint venture with a consortium of Russian billionaires, he steered the firm through a series of politically explosive disputes that saw one employee charged with espionage, the company’s offices raided by Russian intelligence, an investor boycott and a barrage of tax and labor investigations. In the teeth of a Russian effort to remove him from office, Dudley clung on until 2008, at one point running the company from abroad after Russian authorities barred him from the country. Despite fears that BP’s partners would expropriate the British company’s share of the venture, BP has managed to keep its cut of TNK-BP’s multibillion-dollar profits. Managing Siberian energy fields and containing the 65 million- to 125 million-gallon Gulf slick aren’t quite comparable, though the situations do have parallels, said Amy Myers Jaffe, an energy studies fellow at Rice University’s public policy institute. Both involve a “complex situation involving multiple parties that might sue each other and multiple levels of government.” “I do think he did a good job in Russia, under the circumstances,” she said. Dudley also has shown a steady hand in his limited public appearances since the April 20 oil rig explosion that killed 11 workers and triggered the Gulf spill. He was the one tapped to make the rounds of the Sunday morning shows at the end of May when BP’s latest bid to stanch the flow fell short. “We failed to wrestle this beast to the ground,” he said matter-of-factly. A week later, he struck a conciliatory note as he toured the Louisiana coast with Gov. Bobby Jindal, saying he was frustrated and saddened by what he saw. He was there to promise that BP would fund state efforts to build sand berms to protect barrier islands from the oil. “We understand the importance of this,” he said. “We are deeply sorry.” BP did not respond to a request from the Associated Press for an interview with Dudley. Industry insiders such as former Shell Oil president John Hofmeister have argued that BP from the start should have made an American the public face of its spill recovery efforts. “I’ve been saying for weeks that Tony Hayward ought to pass this over to his top American executive,” Hofmeister said Sunday. “He has completely competent people in the U.S. that can represent him in every instance.” Hofmeister said Dudley has been involved in the Gulf oil spill recovery effort from the start, and he expects no changes in BP’s approach once he takes over. “I think this is just a natural step for him to be exclusively focused on this aftermath,” he said. President Barack Obama has said he would fire Hayward if he could, and many Gulf Coast residents have had their fill of him as well. Craig Bielkiewicz, a fisherman who’s unemployed as a result of the spill, said as long as BP foots the bill for the cleanup, it’s better that Hayward just stay away. “As long as he foots the bill and does what he says he’s going to do, then we don’t need him,” he said. “All we need is for him to back off and let us do what we need to do.” Tim Arnold, of U.K. media consultancy Arnold Strategy Ltd., said that the idea of throwing an American up for the sole purpose of placating a U.S. audience was “a very silly approach.” He added, however, that Hayward has botched things and whoever handles the spill response next faces a considerable challenge. “Effectively you need to relaunch the company,” he said. Ed Overton, an environmental chemist at Louisiana State University who has been tracking the spill, said Hayward’s replacement would have to prove he was emotionally invested in the Gulf Coast’s problems. “Hayward never seemed to connect with any of the local people and was treating this as kind of a ‘hold your nose and have to do it’ type of job,” he said. He had some simple advice for Hayward’s successor: “Show a genuine concern.” ___ Tom Murphy reported from Indianapolis. AP video journalist Bonnie Ghosh in Grand Isle, La., contributed to this report.

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Medvedev Promotes Ruble to Lessen Dollar Dominance

June 19, 2010

By Paul Abelsky June 19 (Bloomberg) — Russia wants the ruble to be one of the world’s reserve currencies as President Dmitry Medvedev renews his push to reduce the dollar’s dominance and make Moscow a global financial hub. “Only three, five years ago it seemed like a fantasy” to create a new reserve currency, Medvedev said yesterday in a speech in St. Petersburg, Russia. “Now we are seriously discussing it.” Medvedev, who has repeatedly called for a supranational currency to match the dollar, said discussions with China are continuing on broadening the global options. Russia sold U.S. Treasuries for a fifth consecutive month in April, the U.S. Treasury Department said June 15. The world may need as many as six reserve currencies, Medvedev said. “It’s something that’s obviously needed,” he said at the St. Petersburg International Economic Forum. “Developing a financial center in Moscow will considerably help to strengthen the ruble’s position as one of the reserve currencies.” Reasserting Power Medvedev’s comments underline Russia’s ambition to reassert its global power following the financial crisis. Gross domestic product shrank 7.9 percent last year, the worst contraction since the fall of communism in 1991, after the credit crunch sent commodity prices plunging. If a country wants to alter the world economic order, including the number of reserve currencies, it must become an international financial center, Bank of Israel Governor Stanley Fischer said in an interview yesterday. “For a currency to be a reserve currency, you have to have capital markets in which you can sell it and buy it very easily,” Fischer said. “New reserve currencies don’t emerge by fiat. They emerge as countries change.” The ruble and the yuan may by 2015 be added to the basket of currencies that set the value of International Monetary Fund units called special drawing rights, Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill said. O’Neill coined the BRIC term in 2001 to describe the four nations — Brazil, Russia, India and China — that he estimates will collectively equal the U.S. in economic size by 2020. Free Float The ruble “has as many reasons to be in it as the pound,” he said today in an interview in St. Petersburg. “If Russia really wants to be in it, it’s got to allow people to use it all over the world.” Allowing the ruble to trade freely is “very important,” O’Neill said. “Inflation targeting is key,” he said. Without a shift to an inflation targeting regime, the ruble “isn’t going to be part of the SDR. You can’t have it both ways, really, unless the Chinese change the rules, which they might do by the end of this decade. China is going to be so big.” Russia may “come very close to floating the ruble” in the course of one year to 18 months, Bank Rossii Chairman Sergei Ignatiev said in April. Even so, the central bank doesn’t need to take on legal obligations to stop intervening in the currency market, he said. Yuan Flexibility The People’s Bank of China today said it will allow more yuan exchange rate flexibility and reform of the exchange-rate mechanism as the nation’s economic recovery has “cemented” after the global financial crisis. Medvedev said he envisages a new economic hierarchy allowing emerging-market giants such as Russia and China to drive the global agenda as the world emerges from the first global recession since the 1930s. “We really live at a unique time, and we should use it to build a modern, prosperous and strong Russia, a Russia that will be a co-founder of the new world economic order,” he said. The BRIC countries were net sellers of U.S. assets in April, driven mainly by Russian divestments, Brown Brothers Harriman & Co. Senior Currency Strategist Win Thin said in a June 15 note. Russia may add the Australian and Canadian dollars to its international reserves as the central bank diversifies the world’s third-largest stockpile away from the greenback, central bank First Deputy Chairman Alexei Ulyukayev said in a June 16 interview. Though Russia is “very carefully monitoring what’s happening in the euro zone,” the emergence of the euro as a currency to rival the dollar’s dominance helped soften the impact of the global crisis, Medvedev said. “If the world depended completely on the dollar, the situation would have been more difficult,” Medvedev said. To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net

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Medvedev Shows Off Sample Coin of New &lsquoWorld Currency&rsquo at G-8

June 19, 2010

By Lyubov Pronina July 10 (Bloomberg) — Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.” “Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.” The coin , which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said. The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.” Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency. To contact the reporter on this story: Lyubov Pronina in L’Aquila, Italy at lpronina@bloomberg.net

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Medvedev Pushes Ruble Reserve Currency to Cut Dollar Dominance

June 19, 2010

By Paul Abelsky June 19 (Bloomberg) — Russia wants the ruble to be one of the world’s reserve currencies as President Dmitry Medvedev renews his push to reduce the dollar’s dominance and make Moscow a global financial hub. “Only three, five years ago it seemed like a fantasy” to create a new reserve currency, Medvedev said yesterday in a speech in St. Petersburg, Russia. “Now we are seriously discussing it.” Medvedev, who has repeatedly called for a supranational currency to match the dollar, said discussions with China are continuing on broadening the global options. Russia sold U.S. Treasuries for a fifth consecutive month in April, the U.S. Treasury Department said June 15. The world may need as many as six reserve currencies, Medvedev said. “It’s something that’s obviously needed,” he said at the St. Petersburg International Economic Forum. “Developing a financial center in Moscow will considerably help to strengthen the ruble’s position as one of the reserve currencies.” Medvedev’s comments underline Russia’s ambition to reassert its global power following the financial crisis. Gross domestic product shrank 7.9 percent last year, the worst contraction since the fall of communism in 1991, after the credit crunch sent commodity prices plunging. If a country wants to alter the world economic order, including the number of reserve currencies, it must become an international financial center, Bank of Israel Governor Stanley Fischer said in an interview yesterday. ‘Don’t Emerge by Fiat’ “For a currency to be a reserve currency, you have to have capital markets in which you can sell it and buy it very easily,” Fischer said. “New reserve currencies don’t emerge by fiat. They emerge as countries change.” Medvedev said he envisages a new economic hierarchy allowing emerging-market giants such as Russia and China to drive the global agenda as the world emerges from the first global recession since the 1930s. “We really live at a unique time, and we should use it to build a modern, prosperous and stron Russia, a Russia that will be a co-founder of the new world economic order,” he said. The BRIC countries — Brazil, Russia, India and China — were net sellers of U.S. assets in April, driven mainly by Russian divestments, Brown Brothers Harriman & Co. Senior Currency Strategist Win Thin said in a June 15 note. Russia may add the Australian and Canadian dollars to its international reserves as the central bank diversifies the world’s third-largest stockpile away from the greenback, central bank First Deputy Chairman Alexei Ulyukayev said in a June 16 interview. Though Russia is “very carefully monitoring what’s happening in the euro zone,” the emergence of the euro as a currency to rival the dollar’s dominance helped soften the impact of the global crisis, Medvedev said. “If the world depended completely on the dollar, the situation would have been more difficult,” Medvedev said. To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net

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Medvedev Pushes Ruble Reserve Currency to Cut Dollar Dominance

June 19, 2010

By Paul Abelsky June 19 (Bloomberg) — Russia wants the ruble to be one of the world’s reserve currencies as President Dmitry Medvedev renews his push to reduce the dollar’s dominance and make Moscow a global financial hub. “Only three, five years ago it seemed like a fantasy” to create a new reserve currency, Medvedev said yesterday in a speech in St. Petersburg, Russia. “Now we are seriously discussing it.” Medvedev, who has repeatedly called for a supranational currency to match the dollar, said discussions with China are continuing on broadening the global options. Russia sold U.S. Treasuries for a fifth consecutive month in April, the U.S. Treasury Department said June 15. The world may need as many as six reserve currencies, Medvedev said. “It’s something that’s obviously needed,” he said at the St. Petersburg International Economic Forum. “Developing a financial center in Moscow will considerably help to strengthen the ruble’s position as one of the reserve currencies.” Medvedev’s comments underline Russia’s ambition to reassert its global power following the financial crisis. Gross domestic product shrank 7.9 percent last year, the worst contraction since the fall of communism in 1991, after the credit crunch sent commodity prices plunging. If a country wants to alter the world economic order, including the number of reserve currencies, it must become an international financial center, Bank of Israel Governor Stanley Fischer said in an interview yesterday. ‘Don’t Emerge by Fiat’ “For a currency to be a reserve currency, you have to have capital markets in which you can sell it and buy it very easily,” Fischer said. “New reserve currencies don’t emerge by fiat. They emerge as countries change.” Medvedev said he envisages a new economic hierarchy allowing emerging-market giants such as Russia and China to drive the global agenda as the world emerges from the first global recession since the 1930s. “We really live at a unique time, and we should use it to build a modern, prosperous and stron Russia, a Russia that will be a co-founder of the new world economic order,” he said. The BRIC countries — Brazil, Russia, India and China — were net sellers of U.S. assets in April, driven mainly by Russian divestments, Brown Brothers Harriman & Co. Senior Currency Strategist Win Thin said in a June 15 note. Russia may add the Australian and Canadian dollars to its international reserves as the central bank diversifies the world’s third-largest stockpile away from the greenback, central bank First Deputy Chairman Alexei Ulyukayev said in a June 16 interview. Though Russia is “very carefully monitoring what’s happening in the euro zone,” the emergence of the euro as a currency to rival the dollar’s dominance helped soften the impact of the global crisis, Medvedev said. “If the world depended completely on the dollar, the situation would have been more difficult,” Medvedev said. To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net

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Medvedev Promotes Ruble as World Reserve Currency to Cut Dollar Dominance

June 18, 2010

By Paul Abelsky June 19 (Bloomberg) — Russia wants the ruble to be one of the world’s reserve currencies as President Dmitry Medvedev renews his push to reduce the dollar’s dominance and make Moscow a global financial hub. “Only three, five years ago it seemed like a fantasy” to create a new reserve currency, Medvedev said yesterday in a speech in St. Petersburg, Russia. “Now we are seriously discussing it.” Medvedev, who has repeatedly called for a supranational currency to match the dollar, said discussions with China are continuing on broadening the global options. Russia sold U.S. Treasuries for a fifth consecutive month in April, the U.S. Treasury Department said June 15. The world may need as many as six reserve currencies, Medvedev said. “It’s something that’s obviously needed,” he said at the St. Petersburg International Economic Forum. “Developing a financial center in Moscow will considerably help to strengthen the ruble’s position as one of the reserve currencies.” Medvedev’s comments underline Russia’s ambition to reassert its global power following the financial crisis. Gross domestic product shrank 7.9 percent last year, the worst contraction since the fall of communism in 1991, after the credit crunch sent commodity prices plunging. If a country wants to alter the world economic order, including the number of reserve currencies, it must become an international financial center, Bank of Israel Governor Stanley Fischer said in an interview yesterday. ‘Don’t Emerge by Fiat’ “For a currency to be a reserve currency, you have to have capital markets in which you can sell it and buy it very easily,” Fischer said. “New reserve currencies don’t emerge by fiat. They emerge as countries change.” Medvedev said he envisages a new economic hierarchy allowing emerging-market giants such as Russia and China to drive the global agenda as the world emerges from the first global recession since the 1930s. “We really live at a unique time, and we should use it to build a modern, prosperous and stron Russia, a Russia that will be a co-founder of the new world economic order,” he said. The BRIC countries — Brazil, Russia, India and China — were net sellers of U.S. assets in April, driven mainly by Russian divestments, Brown Brothers Harriman & Co. Senior Currency Strategist Win Thin said in a June 15 note. Russia may add the Australian and Canadian dollars to its international reserves as the central bank diversifies the world’s third-largest stockpile away from the greenback, central bank First Deputy Chairman Alexei Ulyukayev said in a June 16 interview. Though Russia is “very carefully monitoring what’s happening in the euro zone,” the emergence of the euro as a currency to rival the dollar’s dominance helped soften the impact of the global crisis, Medvedev said. “If the world depended completely on the dollar, the situation would have been more difficult,” Medvedev said. To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net

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Barclays Steps Up Russia Hiring in Bid to Be No. 1 Foreign Investment Bank

June 18, 2010

By Jason Corcoran June 18 (Bloomberg) — Barclays Plc , the U.K.’s third- largest lender, will hire dozens of bankers in Russia as it seeks to become the leading foreign investment bank in two to three years, local chief Bob Foresman said. “We will need to have over 100 people just in the broker dealership,” Foresman, Barclay’s country manager, said in an interview yesterday in St. Petersburg. The former local chairman for Dresdner Kleinwort Wasserstein said he is overseeing “a very aggressive strategy” in Russia. Barclays of London is stepping up hiring as the economy of the world’s biggest energy exporter rebounds from a record 7.9 percent contraction last year, bolstered by higher oil and metals prices. Russian companies may sell 1 trillion rubles ($32 billion) of domestic bonds this year, according to Trust Investment Bank and ING Groep NV. Russian stock sales may total $20 billion, according to UBS AG. Barclays Capital, the bank’s securities unit, was one of the four arrangers of Russia’s first sovereign Eurobond since the government defaulted in 1998. The government sold $5.5 billion of the securities in April, the second-biggest emerging- market debt offering on record. Third-Biggest Underwriter Barclays Capital is expanding into European and emerging- market equities following its acquisition of the North American operations of Lehman Brothers Holdings Inc. Barclays has rebranded Expobank, a Russian retail bank it acquired in 2008 for $745 million. In Russia, Barclays Capital is the third-biggest underwriter of debt this year, according to data compiled by Bloomberg. The U.K. bank aims to be the “top global investment bank in Russia across all products,” said Foresman, who Barclays hired in September from Moscow-based Renaissance Capital, where he was deputy chairman. “We have every intention to set up a sales, trading and research team on the equity side and build our own platform.” Hans-Joerg Rudloff , the chairman of Barclays Capital, said in an interview in May that the bank recently arranged financing for TNK-BP International Ltd., BP Plc’s oil venture with a group of Russian billionaires, along with OAO Lukoil, Russia’s largest non-state oil company, VTB Bank, the country’s second-biggest lender, and Russian Railways. “We are one of the biggest foreign lenders in the country,” Rudloff said. “We just completed many capital market transactions.” To contact the reporter on this story: Jason Corcoran at Jcorcoran13@bloomberg.net

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Video: Tariko Says Russian Standard Seeks to Buy Nemiroff Vodka: Video

June 18, 2010

June 18 (Bloomberg) — Russian billionaire Roustam Tariko, the owner of Russian Standard vodka, discusses his company’s efforts to buy Nemiroff, a maker of Ukrainian vodka. Tariko talks with Ryan Chilcote on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Video: Jennings Says Renaissance Plans ‘Major’ Hong Kong Hub

June 18, 2010

June 18 (Bloomberg) — Stephen Jennings, chief executive officer of Renaissance Capital, talks with Bloomberg’s Ryan Chilcote in St. Petersburg about plans for a “major” hub in Hong Kong and the outlook for Russian stocks.

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Medvedev Says He Cannot Rule Out Euro Collapse Amid Region’s Debt Crisis

June 18, 2010

By Lyubov Pronina June 18 (Bloomberg) — Russian President Dmitry Medvedev says he can’t rule out the collapse of the euro as the European Union struggles to contain the sovereign debt crisis. Asked if the emergency could threaten the single currency, Medvedev said, “So far, no. But one cannot rule out this danger because at least a unique situation has emerged,” according to the text of an interview with the Wall Street Journal that was provided by the Russian government. Medvedev touched on issues ranging from the BP Plc oil spill in the Gulf of Mexico to Iran and recent violence in Kyrgyzstan during the interview. Medvedev, 44, travels to the U.S. next week for talks with U.S. President Barack Obama before heading to Canada for a meeting of the Group of 20 nations. He is currently hosting the St. Petersburg International Economic Forum, which began yesterday and runs through tomorrow. Commenting on the oil spill that forced London-based BP to set aside $20 billion for potential damages, Medvedev suggested the disaster could lead to the company’s breakup and said he wanted to assure that the interests of Russian shareholders in the TNK-BP venture are safeguarded. The venture, which accounts for almost a quarter of BP’s output, is half-owned by Russian billionaires, including Viktor Vekselberg . Iran Sanctions Medvedev backed the sanctions against Iran that were passed by the UN Security Council on June 9. The measures, which call for a tighter arms embargo, authority to seize cargo that could be used in nuclear weapons, and restrictions on financial transactions with Iran, represent a balanced approach, he said. “The sanctions that have been imposed are strict enough, yet at the same time they do not harm the Iranian people,” Medvedev said. “They may push the Iranian leadership to, at some point, take a decision on closer cooperation with the global community” and the International Atomic Energy Agency. Medvedev criticized the U.S. and EU for going beyond the UN resolution. The EU yesterday approved penalties targeting the oil and gas industry, including the prohibition of new investment, technical assistance and technology transfers. “Unilateral sanctions, be it U.S. sanctions or those of the EU or any other countries, would worsen the situation because they are not agreed upon with anyone,” Medvedev said. Kyrgyz Air Base Medvedev also said that the U.S. air base in Kyrgyzstan, a key installation for American operations in Afghanistan, should be closed down once its job is done. Kyrgyzstan, a former Soviet republic, has been the scene of sporadic violence since April, when President Kurmanbek Bakiyev was ousted and replaced by an interim government. At least 189 people have died in fighting between Kyrgyz and Uzbek groups in the Central Asian nation over the past seven days. If the base “is needed for fighting terrorism, for bringing order, then OK,” Medvedev said. “But it is obvious, and it is my position and I speak openly about it, that it should not exist forever. It should, in my opinion, resolve concrete tasks and complete its work.” To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

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Yen Rises for Fifth Day Versus Dollar as Japan Pledges to Cut Debt Levels

June 17, 2010

By Ron Harui June 18 (Bloomberg) — The yen rose for a fifth day against the dollar after Japanese Prime Minister Naoto Kan pledged to cut the world’s largest public debt, saying failure to do so may undermine the country’s sovereignty. Japan’s currency advanced versus 14 of its 16 major counterparts as Kan also said he’d consider the opposition Liberal Democratic Party’s proposal to raise the consumption tax to 10 percent. The euro headed for its biggest weekly advance against the dollar in a year as increased demand at Spain’s bond auction spurred optimism Europe’s debt crisis is easing. “The structural reforms appear to be aimed at securing funding sources” for Japan, said Yuji Saito , director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “This is likely to be positive for the yen.” The yen rose to 90.91 per dollar as of 11:15 a.m. in Tokyo from 91.01 in New York yesterday, when it climbed to 90.51, the strongest since May 27. The currency gained 0.2 percent to 112.58 per euro, and advanced 0.2 percent to 78.92 versus the Australian dollar. The euro traded at $1.2388 from $1.2389 yesterday, when it climbed to $1.2413, the highest since May 28. The 16-nation currency has risen 2.3 percent this week, the most since the period ended May 22, 2009. The yen headed for a second weekly gain versus the dollar after the ruling Democratic Party of Japan, in an election document distributed yesterday, called for cross-party talks on raising the country’s 5 percent consumption tax. Economic Plan Japan’s government pledged in its medium-term economic plan today to reduce its corporate tax of 40.7 percent and nurture the environment and healthcare industries as part of a plan to combat deflation and end two decades of economic stagnation. “Unless we work on fiscal rehabilitation, an international organization such as the International Monetary Fund could control our fiscal management,” Kan said yesterday. “We must rehabilitate our finances with our own power without relying on other countries.” The euro traded near a three-week high versus the dollar after Spain sold 3 billion euros ($3.71 billion) of 10-year debt yesterday at an average yield of 4.864 percent, less than the 5.04 percent the bonds traded at yesterday before the sale. The nation also sold 30-year debt at 5.908 percent, with a bid-to-cover ratio of 2.45, higher than the 1.38 at the previous sale on March 18. ‘Boost’ to Euro “The Spanish bond auction was better than expected, providing a boost to risk appetite and allowing the euro-dollar to break the $1.2350 resistance,” analysts led by Hans-Guenter Redeker , London-based global head of currency strategy, wrote in a research note today, referring to a level at which sell orders may be clustered. European Union leaders yesterday agreed to disclose how banks perform on stress tests, seeking to show investors the financial system can withstand financial shocks. South Korea’s won rose, poised for its biggest weekly gain in 13 months, as signs the economic recovery is gathering pace fueled overseas demand for the nation’s assets. Finance Minister Yoon Jeung Hyun said today growth will likely exceed 5 percent this year and a government report showed spending at the three biggest department stores climbed for a 15th month in May. ‘Pretty Well’ “The won has been doing pretty well because of the economic fundamentals,” said Yun Suk Cho , a currency dealer at Korea Exchange Bank in Seoul. “It will test 1,200 against the dollar today, but will move slowly rather than seeing a quick jump.” The won gained 0.5 percent to 1,207.60 per dollar, boosting this week’s advance to 3.1 percent. Overseas investors bought $723 million more Korean shares than they sold in the first four days of this week, stock exchange figures show. Gains in the euro were tempered after Russian President Dmitry Medvedev said he can’t rule out the collapse of Europe’s common currency as the European Union struggles to contain its sovereign debt crisis. Asked if the emergency could threaten the single currency, Medvedev said, “So far, no. But one cannot rule out this danger because at least a unique situation has emerged,” according to the text of an interview with the Wall Street Journal that was provided by the Russian government. “His comments suggesting concern over the euro appear to be causing the currency to come off,” said Lee Wai Tuck , a foreign-exchange strategist at Forecast Pte in Singapore. “It’s negative for risk.” To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net

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Russia to Buy Canadian, Aussie Dollars for First Time

June 16, 2010

By Paul Abelsky and Maria Levitov June 16 (Bloomberg) — Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. dollar and euro. “Adding the Australian dollar is being discussed,” Alexei Ulyukayev , the central bank’s first deputy chairman, said in an interview at an event hosted by Bloomberg in Moscow last night. “There are pros and cons. We have added the Canadian dollar but haven’t yet begun operations” with the currency. U.S. dollars account for 47 percent of Russia’s reserves, while euros make up 41 percent, British pounds 10 percent and Japanese yen 2 percent, Ulyukyaev said in November. The central bank has reduced dollars from 50 percent in 2006, when euros accounted for 40 percent and the remaining 10 percent was in yen and pounds. Russia’s international reserves, the world’s third biggest, reached $458.2 billion on June 4. President Dmitry Medvedev last year suggested Russia would reduce its use of the U.S. dollar as a reserve currency after the greenback lost 34 percent of its value against the euro in 2 ½ years. The euro fell to a four-year low of $1.1877 on June 7 and has dropped 22 percent since Nov. 25 on investor concern policy makers may fail to contain Europe’s debt crisis. Push to Diversify Russia’s push to diversify reserves “is more a result of their desire to do something in response to the extreme volatility of the dollar and the euro,” said Elena Matrosova , a Moscow-based economist at BDO International, the financial consultancy that lists the central bank among its clients. The Canadian or Australian dollar “can’t be truly called international reserve currencies because of their very limited liquidity,” she said. The Australian dollar traded near the strongest level since mid-May, at 86.43 U.S. cents as of 6:40 a.m. in London. The Canadian and Australian dollars have been among the best performers in the past 12 months as investors speculated a recovering global economy would increase demand for the countries’ raw materials. The Canadian dollar has gained 10 percent against the U.S. currency and 23 percent versus the euro during that period. The Australian dollar is up 8.6 percent and 21 percent, respectively. Ruble Gains Medvedev has pushed for the creation of regional reserve currencies and in July produced a prototype coin for a “world currency,” which he said was needed to stabilize the global economy. Central Bank Chairman Sergey Ignatiev said May 27 that Russia hadn’t changed the currency structure of its reserves after year-end figures showed Bank Rossii increased the portion held in dollars. The U.S. dollar may account for more than half of Russia’s foreign currency reserves by the end of this year, Paris-based BNP Paribas estimated last month. The ruble has gained almost 11 percent against the euro and 0.2 percent versus the dollar in the past 12 months. The Russian currency strengthened for a fifth day against the greenback, climbing 0.7 percent to 31.1450 for its longest winning streak in two months. Russia had a net capital inflow of about $3 billion in May after an inflow of between $3 billion and $4 billion in the previous month, said Ulyukayev. “There was a small capital inflow of about $3 billion in May, according to preliminary calculations,” he said. The Russian government forecasts no net capital inflow this year after outflows of $52.4 billion in 2009. To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net .

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Kyrgyz Violence Funded by Former President’s Supporters, Uzbek Leader Says

June 15, 2010

By Chris Kirkham June 15 (Bloomberg) — An Uzbek community leader in Kyrgyzstan accused the ousted former president’s family of fomenting violence that left more than 100 people dead and forced as many as 80,000 from their homes. “This was a planned action against Uzbeks,” said Dzhalaldin Salakhitdinov, president of the Uzbek cultural center in Osh, by telephone. “We supported the interim government but the old officials who used to enjoy life and who lost power didn’t want any stability. They wanted the interim government to lose its authority so they created provocation against Uzbeks.” The death toll from four days of rioting in the Jalalabad and Osh regions is at least 170, news agencies said, with more than 1,700 injured. The violence erupted on June 10 when supporters of former President Kurmanbek Bakiyev clashed with groups loyal to the interim government. The Uzbeks welcomed Bakiyev’s overthrow in April, blaming him for impeding the minority’s business growth and ignoring its political leaders, while many Kyrgyz in the south supported Bakiyev, who comes from the region. ‘Carefully Planned’ The clashes were aimed at disrupting a June 27 referendum on a new constitution and were funded by people close to Bakiyev, according to the government’s first deputy head, Almazbek Atambayev , Interfax reported. “It was a carefully planned operation conducted by the enemies of the interim government,” Atambayev said today. “Its goal was to overthrow the new authorities of Kyrgyzstan and to thwart the referendum. The information available to our special services confirms that all of these measures were funded by the Bakiyev family, particularly Bakiyev’s youngest son Maxim.” The United Nations and the European Union urged Kyrgyzstan not to allow the unrest to derail the referendum and October parliamentary elections. UN representative Miroslav Jenca said in the capital Bishkek today that the referendum and elections must go ahead. “The referendum and the elections must be held at the announced times,” Jenca said. Germany’s ambassador to Kyrgyzstan, Holger Green, said the EU shared that position. Influence Struggle The U.S. and Russia have been jostling for influence in Kyrgyzstan, where both countries have air bases. Russia agreed in April to give the provisional government $50 million. Edil Baisalov, the government’s chief of staff, said at the time that the U.S. planned to give emergency aid. The U.S. relies on the Manas air base outside the capital Bishkek to support operations in Afghanistan after Uzbekistan evicted the American military in 2005. The International Monetary Fund on May 25 warned Kyrgyzstan’s projected 4.6 percent economic expansion this year may be damped by political upheaval. The fund predicted 8 percent growth for Uzbekistan, the world’s third-biggest shipper of cotton, at the time. Landlocked Kyrgyzstan depends on remittances from migrant workers in Russia for about 40 percent of national income, and also relies on rent paid by the U.S. and Russia for their bases. Kyrgyzstan’s average monthly wage was $132 in January, according to the country’s National Statistical Committee. About a third of the population lives below the poverty level, making the country eligible for aid from the International Development Association, the World Bank’s support arm for the poorest economies. ‘Calming’ Salakhitdinov in Osh said the violence had abated this morning. “There are no clashes at the moment,” he said. “The situation is calming down a bit. But the government still cannot control it. There is no Kyrgyz house in Osh which was burnt. All Uzbek property, enterprises, restaurants, businesses were looted and burnt. More than 200 Uzbeks were killed.” Maxim Bakiyev was detained in Britain yesterday by the U.K. Border Agency after he landed at Farnborough airport in Hampshire on a rented private plane, Kyrgyzstan’s national security chief Keneshbek Duishebayev told Channel One broadcaster, according to Interfax. His father, who has taken refuge in Belarus, has denied accusations that he is involved in the unrest. More than 60,000 people have crossed into Uzbekistan, according to Cholponbek Turusbekov, deputy chief of the Kyrgyz border guards service. ‘Houses, Cattle’ “People were fleeing and they were leaving behind their houses, cattle, vegetable gardens,” he said by telephone today. “There are already some facts of people coming back to check on their property. In the last 24 hours, we see a change in the situation, it’s becoming better and there are some signs of stabilization and recovery. The border is closed, but if people try to cross it, the guards do not shoot them.” Salakhitdinov said a further 30,000-40,000 people are still waiting to flee. “We don’t have enough food and water in Osh,” he said. There are some areas where we cannot deliver any aid because of violence. We are getting very little humanitarian aid from abroad and Russia so far.” The UN High Commission for Refugees is preparing to deploy an emergency team and aid to help Uzbekistan cope with the influx, the commission said in a statement yesterday. The commission yesterday praised the Uzbek authorities for cooperating with the UN. António Guterres , UN High Commissioner for Refugees said it agreed to support Uzbek efforts to “assist tens of thousands, mostly women and children.” Officials of the Collective Security Treaty Organization, which comprises central Asian former Soviet republics, met Russian President Dmitry Medvedev yesterday, according to the president’s website. The group said it would support Kyrgyzstan’s government with equipment, including helicopters, to help transport troops to the strife-affected region. The president didn’t exclude sending Russian soldiers in future. More than 80 human rights groups have demanded Russia send peace-keeping troops to end the bloodshed, Interfax said. To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@bloomberg.net .

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Medvedev to Hold Kyrgyz Crisis Talks to Prevent Spread of Unrest, Violence

June 14, 2010

By Anastasia Ustinova June 14 (Bloomberg) — Russian President Dmitry Medvedev will meet with regional representatives to stem unrest in the former Soviet Republic of Kyrgyzstan as local human rights organizations called on the Kremlin to send peace-keeping troops, Interfax reported. Security Council secretaries of member nations of the Collective Security Treaty Organization, which comprises the central Asian former Soviet republics, will meet today to discuss the situation, Interfax reported, citing Medvedev’s press secretary Natalia Timakova. More than 80 human rights organizations have called on Russia “urgently” to send peace- keeping troops to end the bloodshed, the newswire said today. Kyrgyzstan’s interim government yesterday extended a state of emergency throughout the Jalalabad region as tens of thousands of refugees fled the country and Russia sent a battalion of soldiers to protect its military base. The Kyrgyz government declared a partial mobilization of civilian reservists and authorized troops to shoot to kill rioters in a bid to stabilize the situation in the south of the country. Kyrgyz and Uzbek groups are clashing for a fourth day, burning down houses and looting stores. “If we don’t take timely and effective measures, the unrest could become much more serious and descend into a regional conflict,” the government said on its website yesterday. Deaths, Clashes At least 97 have died and 1,247 have been injured since the violence erupted late on June 10 in the southern Osh region. The area was a focus of unrest in April when supporters of deposed Kyrgyz President Kurmanbek Bakiyev clashed with groups loyal to the country’s interim government. More than 75,000 ethnic Uzbeks — mostly the elderly, women and children — have begun fleeing to Uzbekistan, where refugee camps have been set up, state-run RIA Novosti said, citing the local emergency ministry. The Kremlin has sent three aircraft carrying troops to protect Russia’s Kant military base, Interfax reported, citing an unidentified military official. Dmitry Peskov , a spokesman for Russian Prime Minister Vladimir Putin , yesterday said Russia wouldn’t send troops after the interim leader Roza Otunbayeva asked Moscow to help quell ethnic violence. A call to Peskov wasn’t immediately returned yesterday. In a statement released yesterday in Washington, State Department spokesman Philip Crowley said the U.S. “calls for a rapid restoration of peace and public order in the city of Osh and elsewhere where it appears ethnic violence is occurring.” Bakiyev, who has taken refuge in Belarus, denied accusations yesterday by the government that he is involved in the unrest, Interfax said, citing Bakiyev. To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@bloomberg.net .

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Xinjiang Goldwind Is Said to Scrap Its $1.2 Billion Hong Kong Share Sale

June 13, 2010

By Bei Hu June 14 (Bloomberg) — Xinjiang Goldwind Science & Technology Co. scrapped a plan to raise as much as HK$9.09 billion ($1.2 billion) in a share sale in Hong Kong, said two people with knowledge of the matter. Some investors decided to skip the Goldwind sale for the upcoming initial public offering by Agricultural Bank of China Ltd. in Shanghai and Hong Kong, according to one person, who declined to be identified because it hasn’t been publicly announced. Thomas Yao , the spokesman for Goldwind, the world’s fifth-largest wind turbine maker, declined to comment. Goldwind was attempting a share sale at a time when Hong Kong’s Hang Seng Index has slid more than 10 percent since April 9 as the debt crisis in Europe reduced investors’ willingness to take risk, prompting at least three other companies to shelve offerings in the city. Goldwind, based in Urumqi, had planned to sell 395.3 million new shares, equal to a 15 percent stake, at between HK$19.80 and HK$23 apiece, it said June 6. About 40 percent of the proceeds would be spent on building plants and 24 percent on overseas expansion, the company said. China International Capital Corp., Citigroup Inc. and Credit Suisse Group AG were managing the sale. Goldwind is already listed in Shenzhen. Markets in China are closed between June 14 and June 16 for a holiday. The Wall Street Journal reported on the shelving of the share sale yesterday. Delayed Share Sales Swire Properties Ltd. delayed a plan to sell shares in Hong Kong on May 6, its parent said at the time. Strikeforce Mining & Resources Plc, the Russian molybdenum producer controlled by billionaire Oleg Deripaska , postponed taking orders for its Hong Kong IPO until equity markets have stabilized, a person with knowledge of the decision said on May 8. China Tian Yuan Mining Ltd., the largest privately owned iron ore producer in the northern province of Hebei, delayed a Hong Kong initial public offering last month, two people with knowledge of the decision said on May 7. Agricultural Bank of China may raise as much as $15 billion in the Hong Kong part of what could be the world’s largest initial public offering, according to an e-mail sent to investors. China, the world’s largest coal consumer, invested $34.5 billion in low-carbon energy technologies in 2009 compared with $18.6 billion for the U.S., according to Bloomberg New Energy Finance. As part of efforts to reduce greenhouse gas emissions, the world’s second-biggest energy user wants to install 150 gigawatts of wind power by 2020, compared with 25.5 gigawatts as of last year, Bloomberg New Energy Finance said in a May report. To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net ; John Duce in Hong Kong at Jduce1@bloomberg.net

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Iran to Consider Limiting Ties With UN Nuclear Agency After Sanctions Vote

June 10, 2010

By Ali Sheikholeslami and Bill Varner June 10 (Bloomberg) — Iran said it will consider downgrading relations with the United Nations nuclear agency after the UN Security Council passed a fourth round of sanctions against the Persian Gulf nation over its atomic development. Parliament on June 13 will discuss revising Iran’s ties with the International Atomic Energy Agency as a result of the sanctions, a senior lawmaker, Esmaeil Kosari, was cited as saying today by the state-run Fars news agency. “We are studying this and will comment when it’s done,” Foreign Ministry spokesman Ramin Mehmanparast said by phone from Tehran. The Security Council , with backing from Russia and China, yesterday approved new sanctions including restrictions on financial transactions, a tighter arms embargo and authority to seize cargo suspected of being used for Iranian nuclear or missile programs. With further U.S. and European Union sanctions likely, Iran may take “provocative” steps over the next few months, Cliff Kupchan , a senior analyst at Eurasia Group, a New York political-risk consulting firm, said in an e-mailed commentary. Iran’s representative at the IAEA downplayed the possibility his country would end its cooperation with the agency, which monitors compliance with the international treaty on nuclear weapons. “The parliamentarians are very upset,” Ambassador Aliasghar Soltanieh told reporters today at the IAEA’s offices in Vienna. “As of now, there is no intention to withdraw from the nuclear Non-Proliferation Treaty or to stop our cooperation in accordance with IAEA safeguards.” ‘Trash Bin’ Iran denounced the sanctions, which President Mahmoud Ahmadinejad said should be “thrown into the trash bin like a used tissue.” The 15-nation council voted 12 to 2, with one abstention, to approve a resolution that also freezes the assets of 40 companies, banks and government agencies, and bars the foreign travel of Javad Rahiqi, head of a branch of the Atomic Energy Organization of Iran. Turkey and Brazil voted against the measure, and Lebanon abstained. China said today the sanctions don’t close off continued diplomacy. A solution to the nuclear standoff should be resolved through dialogue and diplomatic means, spokesman Qin Gang said in comments posted on the Foreign Ministry’s website after the vote. “We will ensure that these sanctions are vigorously enforced,” President Barack Obama said at the White House. “A nuclear arms race in the Middle East is in nobody’s interest.” Energy Production The new penalties, the fourth set of sanctions imposed on Iran by the council since 2006, aim to block Iran’s ability to develop nuclear weapons and pressure the country to join international talks on the issue. Iran maintains that its nuclear development is needed for energy production. Brazil and Turkey, which have temporary seats on the Security Council, both criticized the sanctions. The two countries brokered a proposed agreement with Iran under which half of its low-enriched uranium would be swapped for a more concentrated supply in a form that can only be used in a medical-research reactor in Tehran that will run out of fuel. They say the exchange would build confidence and keep talks with Iran open. The U.S. and its allies say Iran has rebuffed diplomacy. Iran has refused Security Council demands to suspend the production of enriched uranium, which can fuel a reactor or form the core of a bomb. The IAEA has criticized Iran for failing to cooperate with its inspectors. Inspectors’ Access Cutting IAEA access in Iran would be a blow to inspectors, who last month negotiated enhanced access to a uranium enrichment site in Natanz. The agency said May 31 that it won the right to add more cameras, increase atomic-material accounting and conduct surprise inspections at the site, where Iran has produced 5.7 kilograms (12.6 pounds) of 20 percent enriched uranium. While most nuclear weapons contain 90 percent enriched uranium, concentrations as low as 20 percent can start the atomic fission seen in nuclear weapons. Russia and China, which had resisted further UN sanctions to avoid damaging their commercial ties with Iran, agreed to the measures after amendments to the text. Russia is building Iran’s first nuclear power plant and will supply the fuel for it. Iran expressed disappointment with China’s vote for sanctions. “It will slowly lose its respectable position in the Muslim world and will wake up when it’s too late,” said Ali Akbar Salehi , vice president and head of the Atomic Energy Organization of Iran, said according to the Iranian Students News Agency. Lebanon Vote Lebanon said it abstained because its Cabinet couldn’t reach a decision on the resolution. The UN measure bars Iran from investing in uranium mining or the construction of new enrichment facilities. It bans sales to Iran of tanks, armored combat vehicles, artillery, fighter jets, attack helicopters, warships or missiles. Russia will freeze a contract to deliver its S-300 air- defense systems to Iran, Interfax reported today, citing an unidentified Russian defense-industry official. Iran’s financial transactions, including those related to insurance and re-insurance, would be barred if they might have a nuclear purpose. Air, Sea Cargo The sanctions text “calls upon” nations to intercept and inspect any cargo by air or sea suspected of containing banned materials that would contribute to Iran’s nuclear or missile programs. Three annexes to the resolution’s main text cite 15 entities “owned, controlled or acting on behalf” of the Revolutionary Guard Corps, an arm of the Iranian military with extensive business interests. Also cited are three companies the resolution says are related to the Islamic Republic of Iran Shipping Lines, and 22 companies it says are involved in nuclear and ballistic missile activities. “If Iran would meet and engage on their nuclear program, there was receptivity,” Secretary of State Hillary Clinton said in Colombia. “We know that Iran did not and would not. At the end of the day, it was clear Iran was not willing to abide by the expectations of the international community.” The UN action is “long overdue but doesn’t go far enough,” Representative John Boehner of Ohio, the Republican leader in the U.S. House, said in a statement. Boehner said Obama’s 16-month “engagement strategy” on this issue has simply given the Iranians 16 more months to work on acquiring nuclear capability. “At the request of the administration, Congress has repeatedly delayed mandatory bilateral sanctions legislation,” he said. “Any justification for delay is now at an end, and the Congress must act immediately.” To contact the reporters on this story: Ali Sheikholeslami in London at alis2@bloomberg.net ; Bill Varner at the United Nations at wvarner@bloomberg.net .

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UBS Hires Nick Jordan to Replace Steven Meehan as Russia Chief Executive

June 10, 2010

By Jason Corcoran June 10 (Bloomberg) — UBS AG , Switzerland’s biggest lender, hired former Lehman Brothers Inc. Russia chief Nick Jordan to run its operations in Moscow as competition for bankers intensifies in the country. Jordan will replace Steven Meehan , who took over UBS’s Russian operations in March 2008 and will work alongside his replacement before “moving on to a new role,” Jordan said. “Steven wants to do something different and we will work together in a transition over the next few months,” Jordan said by phone from Moscow. Global banks are competing for talent in Russia as the economy of the world’s largest energy supplier recovers from its steepest decline on record. Companies will probably sell a record 1 trillion rubles ($32 billion) of domestic bonds this year, according to Trust Investment Bank and ING Groep NV. Both UBS and Renaissance Capital forecast Russian companies will raise $20 billion in initial public offerings. Jordan left Lehman, where he was chief investment banker for central and eastern Europe, last year after losing his bid to run the U.S. investment bank’s merged operation with Nomura Holdings Inc. to Maxim Seltzer . The two banks combined their Russian operations last year after Nomura acquired the European and Asian units of Lehman Brothers in October 2008. Jordan, an American, was paid as much as $7 million in March 2007 to join Lehman from Deutsche Bank, according to two people familiar with the matter. He had been co-head of investment banking in Russia for the German lender in London. ‘Significant Contribution’ Meehan, 45, moved to Russia more than two years ago from New York, where he was managing director of UBS’s Global Healthcare Group and Life Sciences units. Meehan joined UBS in 1999 from Salomon Smith Barney, where he was a senior director for the U.S. brokerage’s environmental and medical device group. “Meehan has made a significant contribution as CEO Russia and CIS,” said Alex Wilmot-Sitwell , co-head of UBS’s investment bank, in an e-mailed statement. Wilmot-Sitwell said Meehan’s new position at UBS would be announced shortly. Goldman Sachs Group Inc. in January named Christopher Barter its Russia chief and recruited former OAO GMK Norilsk Nickel Deputy Chief Executive Officer Tav Morgan to improve its commodities business in the former Soviet Union. Morgan Stanley in April hired Gergely Voros and Dmitry Avdeev as co-heads of investment banking for Russia, replacing Yan Tavrovsky . For Related News and Information: For Russian brokerage news: TNI RUSSIA SCR For stories about people in the news: WNEWS Top emerging-markets news: EMTO

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Iran to Consider Limiting Ties With UN Nuclear Agency After Sanction Vote

June 10, 2010

By Ali Sheikholeslami and Bill Varner June 10 (Bloomberg) — Iran said it will consider downgrading relations with the United Nations nuclear agency after the UN Security Council passed a fourth round of sanctions against the Persian Gulf nation over its atomic development. Parliament on June 13 will discuss revising Iran’s ties with the International Atomic Energy Agency as a result of the sanctions, a senior lawmaker, Esmaeil Kosari, was cited as saying today by the state-run Fars news agency. “We are studying this and will comment when it’s done,” Foreign Ministry spokesman Ramin Mehmanparast said by phone from Tehran. The Security Council , with backing from Russia and China, yesterday approved new sanctions including restrictions on financial transactions, a tighter arms embargo and authority to seize cargo suspected of being used for Iranian nuclear or missile programs. With further U.S. and European Union sanctions likely, Iran may take “provocative” steps over the next few months, Cliff Kupchan , a senior analyst at Eurasia Group, a New York political-risk consulting firm, said in an e-mailed commentary. Iran’s representative at the IAEA downplayed the possibility his country would end its cooperation with the agency, which monitors compliance with the international treaty on nuclear weapons. “The parliamentarians are very upset,” Ambassador Aliasghar Soltanieh told reporters today at the IAEA’s offices in Vienna. “As of now, there is no intention to withdraw from the nuclear Non-Proliferation Treaty or to stop our cooperation in accordance with IAEA safeguards.” ‘Trash Bin’ Iran denounced the sanctions, which President Mahmoud Ahmadinejad said should be “thrown into the trash bin like a used tissue.” The 15-nation council voted 12 to 2, with one abstention, to approve a resolution that also freezes the assets of 40 companies, banks and government agencies, and bars the foreign travel of Javad Rahiqi, head of a branch of the Atomic Energy Organization of Iran. Turkey and Brazil voted against the measure, and Lebanon abstained. China said today the sanctions don’t close off continued diplomacy. A solution to the nuclear standoff should be resolved through dialogue and diplomatic means, spokesman Qin Gang said in comments posted on the Foreign Ministry’s website after the vote. “We will ensure that these sanctions are vigorously enforced,” President Barack Obama said at the White House. “A nuclear arms race in the Middle East is in nobody’s interest.” Energy Production The new penalties, the fourth set of sanctions imposed on Iran by the council since 2006, aim to block Iran’s ability to develop nuclear weapons and pressure the country to join international talks on the issue. Iran maintains that its nuclear development is needed for energy production. Brazil and Turkey, which have temporary seats on the Security Council, both criticized the sanctions. The two countries brokered a proposed agreement with Iran under which half of its low-enriched uranium would be swapped for a more concentrated supply in a form that can only be used in a medical-research reactor in Tehran that will run out of fuel. They say the exchange would build confidence and keep talks with Iran open. The U.S. and its allies say Iran has rebuffed diplomacy. Iran has refused Security Council demands to suspend the production of enriched uranium, which can fuel a reactor or form the core of a bomb. The IAEA has criticized Iran for failing to cooperate with its inspectors. Inspectors’ Access Cutting IAEA access in Iran would be a blow to inspectors, who last month negotiated enhanced access to a uranium enrichment site in Natanz. The agency said May 31 that it won the right to add more cameras, increase atomic-material accounting and conduct surprise inspections at the site, where Iran has produced 5.7 kilograms (12.6 pounds) of 20 percent enriched uranium. While most nuclear weapons contain 90 percent enriched uranium, concentrations as low as 20 percent can start the atomic fission seen in nuclear weapons. Russia and China, which had resisted further UN sanctions to avoid damaging their commercial ties with Iran, agreed to the measures after amendments to the text. Russia is building Iran’s first nuclear power plant and will supply the fuel for it. Iran expressed disappointment with China’s vote for sanctions. “It will slowly lose its respectable position in the Muslim world and will wake up when it’s too late,” said Ali Akbar Salehi , vice president and head of the Atomic Energy Organization of Iran, said according to the Iranian Students News Agency. Lebanon Vote Lebanon said it abstained because its Cabinet couldn’t reach a decision on the resolution. The UN measure bars Iran from investing in uranium mining or the construction of new enrichment facilities. It bans sales to Iran of tanks, armored combat vehicles, artillery, fighter jets, attack helicopters, warships or missiles. Russia will freeze a contract to deliver its S-300 air- defense systems to Iran, Interfax reported today, citing an unidentified Russian defense-industry official. Iran’s financial transactions, including those related to insurance and re-insurance, would be barred if they might have a nuclear purpose. Air, Sea Cargo The sanctions text “calls upon” nations to intercept and inspect any cargo by air or sea suspected of containing banned materials that would contribute to Iran’s nuclear or missile programs. Three annexes to the resolution’s main text cite 15 entities “owned, controlled or acting on behalf” of the Revolutionary Guard Corps, an arm of the Iranian military with extensive business interests. Also cited are three companies the resolution says are related to the Islamic Republic of Iran Shipping Lines, and 22 companies it says are involved in nuclear and ballistic missile activities. “If Iran would meet and engage on their nuclear program, there was receptivity,” Secretary of State Hillary Clinton said in Colombia. “We know that Iran did not and would not. At the end of the day, it was clear Iran was not willing to abide by the expectations of the international community.” The UN action is “long overdue but doesn’t go far enough,” Representative John Boehner of Ohio, the Republican leader in the U.S. House, said in a statement. Boehner said Obama’s 16-month “engagement strategy” on this issue has simply given the Iranians 16 more months to work on acquiring nuclear capability. “At the request of the administration, Congress has repeatedly delayed mandatory bilateral sanctions legislation,” he said. “Any justification for delay is now at an end, and the Congress must act immediately.” To contact the reporters on this story: Ali Sheikholeslami in London at alis2@bloomberg.net ; Bill Varner at the United Nations at wvarner@bloomberg.net .

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BP Show of Support May Fail to Save Chief Hayward as Obama Goes on Attack

June 9, 2010

By Stanley Reed and Brian Swint June 10 (Bloomberg) — On the night of June 7, a group including Vittorio Colao , head of telecom company Vodafone Plc, Martin Sorrell , chief of advertising firm WPP Plc, and John Sawers , director-general of the intelligence agency MI6, gathered on the sixth floor of BP Plc’s London headquarters to show support for Tony Hayward , the company’s beleaguered chief executive officer. “We have learned that he is made of steel,” BP Chairman Carl-Henric Svanberg said as Hayward, dressed in a rumpled blue suit and dark checked shirt, worked the room. The 53-year-old CEO will testify before Congress next week. The show of support may not save Hayward, Bloomberg Businessweek reports in its June 11 issue. The day after the London party, President Barack Obama said he would have fired the BP chief if he were working for him. Demands for a change in leadership will probably become irresistible, said Gudmund Halle Isfeldt , an analyst at DnB NOR ASA, Norway’s largest bank. “Both Hayward and the chairman are likely to go,” he said in a phone interview from Oslo. “That will be down to pressure from politicians.” Lose Patience Investors may start to lose patience as well. BP shares have tumbled again this week, taking losses since the Deepwater Horizon rig exploded on April 20 to 40 percent, a drop that’s wiped about 50 billion pounds ($74 billion) off the value of the company. The cost of cleaning up the spill and settling claims may reach as much as $37 billion, according to Credit Suisse. Should the board seek a change, there are three leading inside candidates to succeed Hayward, analysts said. Andy Inglis , 50, the head of exploration and production, had been considered as Hayward’s likely successor. His chances suffered after the calamity occurred in his unit. Refining and marketing chief Iain Conn , 47, has made a start at turning around BP’s downstream business, where the 2005 explosion at the Texas City refinery forced improvements to safety. Another candidate is Robert Dudley , 54, who ran BP’s Russian affiliate TNK-BP until he left in 2008 during a battle with the company’s Russian partners. On June 5, Hayward put Dudley in charge of a special unit responsible for the cleanup operation. Dudley, born in New York and raised in Mississippi, would be the first American CEO at the 101-year old British company. ‘Great Job’ “If he does a great job at running the unit, there’s no reason he can’t go to the top” said Dougie Youngson , an analyst at Arbuthnot Securities Ltd. in London. To show the company is serious about changing the way it operates, BP’s board may decide to bring an outsider in as chief executive officer for the first time ever. One possibility is Frank Chapman , 56, head of BG Group Plc , who built the former state-owned gas driller in to the biggest British-based oil and gas company after BP. He hugged Hayward sympathetically at the party this week. “BP is clearly going to require a renewed focus on safety,” said David Hart , an analyst at Westhouse Securities Ltd. in London. “In deepwater drilling, companies are pushing the bounds of technology and, perhaps industry-wide, there was not a great understanding of what would happen if things went wrong.” To contact the reporter on this story: Stanley Reed in London at sreed13@bloomberg.net ; To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net .

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Rudd’s Election Gamble Backfires as Australia Resource Tax Aids Opposition

June 7, 2010

By Marion Rae and Gemma Daley June 8 (Bloomberg) — Australian Prime Minister Kevin Rudd ’s proposal to collect more tax from mining companies is shaping up to be an election-winning strategy. Just not for him. Rudd’s Labor party trailed the opposition Liberal-National coalition for the first time in four years, according to a Nielsen opinion poll released yesterday. Faced with intense criticism from BHP Billiton Ltd. and Rio Tinto Group , Rudd invoked powers normally reserved for national emergencies to buy advertising to defend the levy, which he says will help pay for wider tax cuts and improved health care. “To introduce a new tax, particularly one which becomes controversial, in an election year, is bad politics,” said Ian McAllister , a professor at Australian National University in Canberra. “An election fought on tax would favor the coalition because they’re generally seen as the better economic managers.” Industry groups say the tax would force companies to shift operations overseas, jeopardizing investment in a business that represents about 10 percent of the A$1.2 trillion ($980 billion) economy. The proposed levy “makes Australian mining a tougher prospect,” BHP said today in a full-page ad in the Australian Financial Review newspaper. Rudd, who must hold an election within 10 months, saw his public support start to slip in April when he scrapped a plan to implement carbon trading, a key part of a campaign pledge to fight global warming. His popularity dropped further after the mining tax was announced May 2, retreating to 41 percent from 60 percent two months ago, the Nielsen survey showed. ‘Patchwork Quilt’ The plan, which would take effect in 2012, aims to collect more tax from resources companies benefiting from surging demand in India and China. Instead of what Rudd has described as a “patchwork quilt” of state levies, the government would tax returns above six percent at a 40 percent rate. The overhaul is needed to boost spending on health care and secure retirement benefits as society ages, Rudd has said. It would provide tax breaks for 2.4 million small businesses and reduce the corporate rate to 28 percent from 30 percent by 2014 to stimulate growth. Rudd has acknowledged the government’s intent to address demographic changes has been lost in the backlash. One quarter of a projected population of 36 million will be aged 65 or over by 2050, according to government estimates. ‘Tough Debate’ “This will be a tough debate,” Rudd said today in comments broadcast on 2UE radio. The Nielsen poll found that 53 percent of voters preferred the opposition compared with 47 percent who backed Rudd’s party. The survey of 1,400 people contacted between June 3 and June 5 had a margin of error of 2.6 percentage points. The coalition now led by Tony Abbott had trailed in polls since Rudd became leader in 2006, before taking power in the November 2007 election. Abbott became opposition leader six months ago. The initial winner in the spat over the tax, which would take effect from 2012, has been the advertizing industry. Melbourne-based Shannon’s Way is handling the government’s A$38.5 million newspaper, radio and TV campaign. One television commercial shows a man in a classroom explaining that for Australians to have a secure retirement the tax system must be overhauled. Taxes must be simplified and cut for small businesses while ensuring that “all Australians share the wealth of our natural resources,” he says. Badjar Ogilvy, a unit of STW Communications Group Ltd. is handling the Minerals Council of Australia’s counter campaign. That effort began five days after the tax was announced with full-page newspaper ads, YouTube clips and television spots. ‘On Hold’ “Billions of dollars of investment are already on hold,” one council television advertisement reported. “Who will be hurt by this super tax? Everyone,” the ad says, warning of job losses and lower returns for pension funds. Funding for the commercials comes from companies, council spokesman Ben Mitchell said, declining to say how much is being spent. “But it is less than the government and it is not taxpayer money,” he said. In Western Australia, which accounts for 62 percent of the nation’s mineral production and 73 percent of natural gas output, the Liberal party has started a “fighting fund” to unseat federal lawmakers from the Labor party, state director Ben Morton said. ‘Comrade Kevin’ A separate campaign by a group of 220 West Australian-based miners released a radio ad in which a miner described as Russian thanks “Comrade Kevin” for imposing a tax that will encourage companies to invest in his country rather than Australia, according to the Australian Associated Press. The clash centers on the targeting of a “super” profit, or returns above the long-term Australian government bond rate of about 6 percent. The nation’s petroleum resource rent tax , also levied on profits at a rate of 40 percent and in place since July 1987, only takes effect when returns exceed 11 percent. Rio Tinto Managing Director for Australia David Peever said May 20 the company is reviewing all of its investment decisions because of the tax. BHP is reassessing its Yeelirrie uranium project in Western Australia, the project’s general manager, Andrew Shook, said last month. Xstrata Plc , based in Zug, Switzerland, said June 3 that A$586 million of work expanding the Ernest Henry copper mine and the A$6 billion Wandoan coal project in Queensland aren’t viable under the new tax. It was the first company to suspend major work because of Rudd’s planned levy. The new tax “doesn’t stop any current mine or proposed mine being profitable for its investors,” said Tony Maher , national president of the Construction, Forestry, Mining and Energy Union. “Of course the big multinationals are protesting.” To contact the reporters on this story: Marion Rae in Canberra at mrae3@bloomberg.net ; Gemma Daley at gdaley@bloomberg.net

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Merkel Says Economic Growth Must Not Come at Price of High Budget Deficits

June 5, 2010

By Tony Czuczka and Maria Kolesnikova June 5 (Bloomberg) — German Chancellor Angela Merkel said economic growth can’t come at the expense of reductions in budget deficits, hinting at differences with the U.S. over the pace of paring public spending. Leaders of the Group of 20 countries “will focus on sustainable growth paths” when they meet in Canada at the end of the month, where the fight against “high-deficit budgets” is a key topic for Germany, Merkel said after talks with Russian President Dmitry Medvedev in Meseberg, Germany, today. The German government “believes we must not achieve growth at the expense of high deficits,” Merkel told a news conference. Treasury Secretary Timothy Geithner , who attended a meeting of G-20 finance chiefs in South Korea that ended today, called on Japan and European countries such as Germany to boost domestic demand to complement the U.S. “shift towards higher savings.” Merkel is pressing European countries for budget savings to protect the stability of the euro, which has declined 16 percent versus the dollar this year amid investor concern about deficits in countries such as Greece. She’s heading a two-day Cabinet meeting starting tomorrow in Berlin to set budget cuts for 2011. With a $900 million financial backstop agreed by European leaders in May, debt-laden euro-area countries are only “buying time” during which they have to consolidate budgets, Merkel said. “This protective umbrella doesn’t solve the problems.” Budget Consolidation Geithner, in a letter before the G-20 meeting, said fiscal tightening won’t “succeed unless we are able to strengthen confidence in the global recovery.” French Finance Minister Christine Lagarde said yesterday that budget consolidation is “priority No. 1” for most G-20 members. Medvedev, who met Merkel at the Meseberg Palace country manor outside Berlin, said Russia holds “significant” euro reserves and urged European countries to stabilize the shared currency. “That’s what the euro zone needs, that’s what its partners such as Russia need, this is what the global financial system needs,” he said. “I’m sure that our colleagues will be able to cope with the problems they have.” To contact the reporters on this story: Tony Czuczka in Meseberg, Germany at aczuczka@bloomberg.net ; Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

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PayPal Founder Musk Tests Rocket NASA Wants to Haul Space Cargo

June 3, 2010

By Chris Dolmetsch June 3 (Bloomberg) — Elon Musk changed the way people shop on the Internet when he helped start the online-payment service PayPal. Tomorrow, he will try to take a step toward changing the way NASA carries supplies and people into space. Musk’s Hawthorne, California-based Space Exploration Technologies Corp. is scheduled to launch its Falcon 9 on an initial test flight from Cape Canaveral, Florida, during a four- hour window that begins at 11 a.m. The company plans to use the rocket to carry into Earth orbit its Dragon spacecraft, which is intended to take cargo to the International Space Station after the space shuttles are retired and may later ferry astronauts. “If it is successful, it is an important initial step toward the creation of a new kind of industry,” said John Logsdon , founder of the Space Policy Institute at George Washington University in Washington. SpaceX’s vessels are part of President Barack Obama ’s new strategy for the National Aeronautics and Space Administration, which calls for the agency to develop systems capable of taking humans to Mars while helping entrepreneurs build vessels to carry astronauts to the space station. NASA Administrator Charles Bolden told a Senate panel last month that he expects SpaceX to be able to fly its first manned mission in 2015. Musk said the company may be able to take astronauts to the station as early as 2013 if it receives a contract this year. Obama’s plan scrapped Constellation, the program that would send U.S. astronauts to the moon as a precursor to missions to Mars. The shift drew criticism from space travelers such as Neil Armstrong , the first person to walk on the moon, and lawmakers from states with NASA operations. Musk Companies The South Africa-born Musk, 38, founded closely held SpaceX in 2002 after selling other companies that he helped start — directory provider Zip2 Corp., sold to Compaq Computer Corp. for $300 million in 1999, and PayPal, bought by EBay Inc. for $1.2 billion in 2002. Musk is also chief executive officer of Tesla Motors Inc., an electric-car maker planning to raise $100 million in an initial share sale. Musk helped inspire the film version of Tony Stark, the billionaire in the “Iron Man” movies, director Jon Favreau wrote in Time magazine in April. Musk plays a cameo in “Iron Man 2,” and parts of the film were shot at SpaceX headquarters. Falcon’s Competition The 180-foot-tall (55-meter) Falcon 9 is intended to compete with the Delta IV and Atlas V from United Launch Alliance, a Boeing Co. and Lockheed Martin Corp. joint venture, and Orbital Science Corp.’s Taurus II, set for its first flight next year. The Atlas and Delta rockets have an advantage over the Falcon 9 in the race to become the next vehicle to take astronauts to the space station because they have a track record of successful launches, Logsdon said. The shuttles and European vessels have carried cargo and people to the station since construction began in 1998. The shuttle program is scheduled to shut down this year, and NASA signed a $335 million contract extension with the Russian Federal Space Agency in April to buy transport for U.S. astronauts to the outpost through 2014. In 2008, NASA awarded contracts valued at as much as $3.5 billion through 2016 to SpaceX and Orbital to deliver cargo to the outpost. On Feb. 1, the day Obama announced his new strategy, NASA said it was giving $50 million to a group of companies to develop concepts for a station ferry, including United Launch Alliance and Blue Origin LLC, founded by Jeff Bezos , chairman and CEO of Amazon.com Inc . NASA expects as much as 70 percent of its cargo delivery to the station to be handled by Orbital and SpaceX, with the rest delivered by Japanese and European ships. SpaceX’s 2008 contract calls for at least 12 flights, with an option for more missions. SpaceX launched Falcon 1 in September 2008 after three failed attempts, and Musk said there is likely to be an anomaly that will postpone tomorrow’s test. “There’s a very good chance of something delaying the launch that we just don’t know right now,” Musk, the company’s chief executive, said in a May 26 interview. “That’s just the nature of the beast.” To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net .

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PayPal Founder Musk Tests Rocket NASA Wants to Haul Space Cargo

June 3, 2010

By Chris Dolmetsch June 3 (Bloomberg) — Elon Musk changed the way people shop on the Internet when he helped start the online-payment service PayPal. Tomorrow, he will try to take a step toward changing the way NASA carries supplies and people into space. Musk’s Hawthorne, California-based Space Exploration Technologies Corp. is scheduled to launch its Falcon 9 on an initial test flight from Cape Canaveral, Florida, during a four- hour window that begins at 11 a.m. The company plans to use the rocket to carry into Earth orbit its Dragon spacecraft, which is intended to take cargo to the International Space Station after the space shuttles are retired and may later ferry astronauts. “If it is successful, it is an important initial step toward the creation of a new kind of industry,” said John Logsdon , founder of the Space Policy Institute at George Washington University in Washington. SpaceX’s vessels are part of President Barack Obama ’s new strategy for the National Aeronautics and Space Administration, which calls for the agency to develop systems capable of taking humans to Mars while helping entrepreneurs build vessels to carry astronauts to the space station. NASA Administrator Charles Bolden told a Senate panel last month that he expects SpaceX to be able to fly its first manned mission in 2015. Musk said the company may be able to take astronauts to the station as early as 2013 if it receives a contract this year. Obama’s plan scrapped Constellation, the program that would send U.S. astronauts to the moon as a precursor to missions to Mars. The shift drew criticism from space travelers such as Neil Armstrong , the first person to walk on the moon, and lawmakers from states with NASA operations. Musk Companies The South Africa-born Musk, 38, founded closely held SpaceX in 2002 after selling other companies that he helped start — directory provider Zip2 Corp., sold to Compaq Computer Corp. for $300 million in 1999, and PayPal, bought by EBay Inc. for $1.2 billion in 2002. Musk is also chief executive officer of Tesla Motors Inc., an electric-car maker planning to raise $100 million in an initial share sale. Musk helped inspire the film version of Tony Stark, the billionaire in the “Iron Man” movies, director Jon Favreau wrote in Time magazine in April. Musk plays a cameo in “Iron Man 2,” and parts of the film were shot at SpaceX headquarters. Falcon’s Competition The 180-foot-tall (55-meter) Falcon 9 is intended to compete with the Delta IV and Atlas V from United Launch Alliance, a Boeing Co. and Lockheed Martin Corp. joint venture, and Orbital Science Corp.’s Taurus II, set for its first flight next year. The Atlas and Delta rockets have an advantage over the Falcon 9 in the race to become the next vehicle to take astronauts to the space station because they have a track record of successful launches, Logsdon said. The shuttles and European vessels have carried cargo and people to the station since construction began in 1998. The shuttle program is scheduled to shut down this year, and NASA signed a $335 million contract extension with the Russian Federal Space Agency in April to buy transport for U.S. astronauts to the outpost through 2014. In 2008, NASA awarded contracts valued at as much as $3.5 billion through 2016 to SpaceX and Orbital to deliver cargo to the outpost. On Feb. 1, the day Obama announced his new strategy, NASA said it was giving $50 million to a group of companies to develop concepts for a station ferry, including United Launch Alliance and Blue Origin LLC, founded by Jeff Bezos , chairman and CEO of Amazon.com Inc . NASA expects as much as 70 percent of its cargo delivery to the station to be handled by Orbital and SpaceX, with the rest delivered by Japanese and European ships. SpaceX’s 2008 contract calls for at least 12 flights, with an option for more missions. SpaceX launched Falcon 1 in September 2008 after three failed attempts, and Musk said there is likely to be an anomaly that will postpone tomorrow’s test. “There’s a very good chance of something delaying the launch that we just don’t know right now,” Musk, the company’s chief executive, said in a May 26 interview. “That’s just the nature of the beast.” To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net .

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Russian IPOs Fail to Lure China’s Skeptics as Deripaska Seeks More Sales

May 31, 2010

By Yuriy Humber and Hanny Wan June 1 (Bloomberg) — Billionaire Oleg Deripaska , who listed his United Co. Rusal in Hong Kong this year, says the city is Russia’s best chance to tap into Asian economic growth. Investors, who have watched debt-laden Rusal slump, are yet to be persuaded. “Hong Kong is the gateway to Asia,” Deripaska said in an interview at Hong Kong’s Conrad Hotel. “I focus more and more on Asia because I believe we can do better business in Asia than in struggling economies” such as the U.K. The challenge for the Russian companies seeking to follow Deripaska to Hong Kong will be to show Asian investors why they should care, at a time when initial public offerings worldwide struggle. Funds from RCM Asia Pacific Ltd. to Samsung Investment Trust say Russian IPOs don’t fit with their Asia-focused investment strategy. “Those companies can list here, but who wants to buy them?” said Pauline Dan , Hong Kong-based chief investment officer at Samsung Investment, which oversees about $78 billion. “Our focus is on Hong Kong, China. It’s not as if China doesn’t have resources itself.” That ambivalence may frustrate hopes by Russian companies to avoid European market turmoil by entering Asia, where wealth is accumulating faster than anywhere else, said Chris Weafer , chief strategist at UralSib Financial Corp. Many of them see Hong Kong as an “easy” alternative to London or New York, with regard to its liquidity and trading rules, as they seek to raise $100 billion over five years to repay debt and grow, he said. Faltering Markets Hong Kong, which raised the most IPO funds of any bourse in 2009 according to World Federation of Exchanges data, has not been immune to canceled share sales this year as sovereign-debt concerns in Europe roil global stocks. The MSCI World Index has fallen about 13 percent since its April 15 high. Aluminum maker Rusal has dropped about 31 percent since its $2.24 billion IPO in January, while the benchmark Hang Seng Index fell 1.3 percent. At least 20 companies around the world postponed or withdrew IPOs in May, including three from Russia: Deripaska’s Strikeforce Mining & Resources Plc had sought a listing in Hong Kong, sugar producer OAO Rusagro planned a sale in Moscow and fertilizer maker OAO UralChem had targeted London. Rusal’s IPO, Russia’s first in Hong Kong, relied on support from outside Asia. Vnesheconombank , Russia’s state-run bank, took 30 percent of the offering, and two more of the five cornerstone buyers were U.S. funds, including Paulson & Co. “Is Russia on the radar? Honestly? No,” said Ben Collett , head of equities for Louis Capital Markets brokerage in Hong Kong. “If you want to trade Russia then you’re in Europe.” China Fit Danny Yan , a fund manager at Taifook Asset Management Ltd. in Hong Kong, said unless a Russian company can show how a “significant” part of its business is related to China, he won’t buy it. Wariness among Chinese investors may scupper plans for some of the 40 Russian companies that have met with the Hong Kong exchange or enquired about a listing, according to figures from Igor Vdovin, a member of Russian business lobby RSPP. “Hong Kong is ambitious in trying to attract listings from companies that are domiciled elsewhere, but our view so far is that this is not a natural fit,” said Mark Konyn , chief executive officer of RCM Asia Pacific, which oversees $11 billion. Among the Russian companies with “Asian credentials” are the energy and metals exporters such as state-run oil producer OAO Rosneft , gas-export monopoly OAO Gazprom and OAO GMK Norilsk Nickel , UralSib’s Weafer said. Rosneft, Norilsk Rosneft signed a 20-year supply contract with China last year, while Norilsk sold 30 percent of its nickel to the nation and to India. Rusal plans to boost Asian sales to 30 percent of the total this year from 20 percent in 2009. Rusal set its IPO price on Jan. 22, three days after the Hang Seng began a three-week, 10 percent decline. Rusal fell 11 percent on its first trading day, Jan. 27, a “reasonable” move given global market volatility, Deripaska said that day. “It was priced toward the very top of the institutional demand curve before the market turned,” said Elena Khisamova , head of equity capital markets at VTB Capital, one of Rusal’s IPO managers. Still, Rusal’s sale was “a huge help in creating the path for future listings” from Russia, she said. Deripaska, 42, might have struggled to list Rusal in London, where Russian stocks are traditionally brokered, because the U.K. may have insisted on stricter regulation for the debt- saddled company, Weafer said. Deripaska said in April 2008 he would pick a location based on the most “comfortable solution.” Pay Down Debt Rusal completed Russia’s biggest debt restructuring in corporate history in December, agreeing with more than 70 creditors to extend repayments of about $14 billion over seven years. Net debt shrank to $12 billion as of March 31 as the company used the IPO proceeds to repay lenders. Taking into account the debt and Rusal’s $6 billion loss in 2008, the Hong Kong exchange enforced a minimum trading lot of 24,000 shares when the company went public. That put the stock beyond the reach of retail investors, the city’s most active traders, and Rusal isn’t included in any stock index, said Louis Capital’s Collett. Rusal’s subsequent share slump may have hurt other Russian companies hoping to draw Asian investors, said Alisher Djumanov , CEO of Beijing-based Eurasia Capital. “In Hong Kong, IPOs are associated with big gains,” Djumanov said. “Chinese investors kind of assume that if you invest in IPOs you can expect, at least in the beginning, some positive performance.” Last year, IPOs in the city achieved an average first-day gain of 15 percent, according to data compiled by Bloomberg. Perception Vs. Fundamentals The success of Russian IPOs in Hong Kong will depend as much on perception as fundamentals, Collett said. Samsung Investment, for one, didn’t feel “comfortable” with Rusal’s management during the IPO marketing, fund manager Dan said. “The perception of oligarchs here is bad,” Collett said. “The only thing that people know of Rusal is debt and question marks over Deripaska. They don’t know what those question marks are.” Deripaska, a nuclear physics graduate, became director of a Siberian aluminum smelter in 1994, aged 26. At the time, several groups vied for control of the industry, including with contract killings, which gave rise to the name of the “aluminum wars.” At the Siberian plant, Deripaska was supported by Trans- World Group, a trader part-owned by Uzbekistan-born entrepreneur Michael Cherney, who since 2008 has pursued legal claims for part of Deripaska’s aluminum fortune. Planned Listings Even after Rusal’s share decline and the delay of the Strikeforce listing, Deripaska still seeks more IPOs for his EN+ Group, the holding company for his Rusal stake and power utility OAO EuroSibEnergo. Hong Kong is a “priority” location for EN+ assets because of their geographical proximity to China, EN+ spokeswoman Elena Rollins said. Chinese investors need time to “gain understanding” of Russian companies, said Yonghao Pu, UBS Wealth Management’s chief investment strategist for the Asia Pacific region. That may take as long as 10 to 15 years because Russian companies need to build relationships in Asia, Eurasia Capital’s Djumanov said. Khisamova of VTB Capital disagrees. “When we brought first Russian companies to London for equity-raising 5 to 10 years ago, we got the same type of questions,” Khisamova said. “After three, maybe five deals, London became very familiar with Russia and a platform of choice” for the nation’s companies. To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net ; Hanny Wan in Hong Kong at hwan3@bloomberg.net .

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Russia Reduces Interest Rates for 14th Time in 14 Months to Spur Lending

May 31, 2010

By Maria Levitov May 31 (Bloomberg) — Russia’s central bank cut its main interest rates for the 14th time in as many months to accelerate credit flows, remaining the last of the so-called BRIC countries maintaining an easing cycle. Bank Rossii pared the refinancing rate by a quarter point to 7.75 percent, effective June 1, it said on its website today. It also lowered the repurchase rate charged on one- and seven- day central bank loans by the same amount, to 6.75 percent. The decision was expected by 10 of 23 economists in a Bloomberg survey. It last trimmed rates on April 29. Commercial bank lending remains at a “low” level even after two months of growth, according to central bank Chairman Sergey Ignatiev. Lending grew 0.9 percent last month with corporate and retail loans showing gains, the first time both rose since January 2009. Policy makers have scope to lower rates after price growth eased to the slowest in 12 years in April. Ignatiev expects inflation to stay benign in the coming months. “Banks view lending to the real sector as being quite risky and prefer to purchase securities and build up liquidity,” Ignatiev said in St. Petersburg on May 27. Further cuts have the potential to spur lending, he said. Brazil, India, China Stoking loan growth will “allow the central bank to cancel a number of exemptions given to banks during the crisis,” Natalia Orlova and Dmitry Dolgin, economists at Alfa Bank, wrote in a research note on May 28. The regulator plans to bring back the pre-crisis provisioning regime and tighten the deposit insurance system rules, which would need to be supported by lending growth of 15 percent, they said. Of the other BRIC countries, Brazil’s central bank on April 28 became the first in Latin America to increase borrowing costs in more than a year, raising the Selic rate to 9.5 percent from 8.75 percent. China and India have increased reserve requirements for banks to avoid stoking unsustainable lending. Russia suffered a deeper recession than Brazil and is still trying to recover from last year’s record 7.9 percent economic contraction. That compares with China’s growth of about 9 percent and India’s 7.2 percent. Russian inflation is substantially slower than the 8 percent refinancing rate, in effect from last month, the Alfa economists said. “Given the deflationary expectations for August-September, the central bank has room to cut rates further,” Orlova and Dolgin wrote. Speculators Annual inflation slowed to 6 percent in April and Ignatiev expects it to stay at the April-May level in the next few months as there are no signs of price pressures. Still, a “quick” change of trend is possible if domestic demand picks up, money supply grows and lending expands, he said. Muted inflation allows the central bank to “sharply” lower the refinancing rate to 6 percent to “dampen the desire of speculative investors to play on this market,” said Anatoly Aksakov, head of the Russian Association of Regional Banks, on May 21. High rates “stimulate carry trades and many speculative investors come to us. If some tension develops in the financial markets, they can leave quickly and create volatility.” Russia-dedicated funds had an outflow of about $191 million for the week ending May 26, the biggest loss among the so-called BRIC countries and the third week of negative flows, according to Alfa Bank, citing EPFR weekly fund flow data. ‘New Vigor’ World markets came under “significant pressure” on concerns about Greece’s debt situation, a Spanish regional bank takeover by the country’s central bank, and North Korea’s decision to mobilize its army, UralSib Financial Corp. said in a research report on May 28. “Investors are withdrawing money with new vigor,” it said. Russia’s economy is protected by sufficient liquidity, a “much more flexible ruble” and large international reserves , according to Ignatiev. While the ruble reflects external volatility, it can better withstand external shocks than it did before the global financial crisis, he said on May 27. The ruble lost 4.9 percent of its value to the dollar in May, heading for its worst monthly sell-off since January 2009. The Russian currency fell 0.5 percent to 37.9400 per euro on Friday, trimming its weekly gain to 3.3 percent, the most since February 2009. Lending may begin showing consistent gains from the middle of the year as borrowers improve their finances, cheaper capital becomes available to banks and demand for loans recovers as “the economy begins to breathe again,” Gennady Melikyan, a first deputy chairman of the central bank, said on May 27. Gross domestic product rose an annual 2.9 percent in the first quarter, less than forecast by analysts in a Bloomberg survey, after contracting 3.8 percent in the last three months of 2009. ‘Weak’ Recovery “The recovery remains weak and inflation is low, so there is a fundamental case for further easing,” Win Thin, senior currency strategist at Brown Brothers Harriman & Co. in New York, wrote in an e-mailed note. “With regards to the ruble, we believe that the biggest determinant right now is oil prices.” Oil futures in New York rose above London’s Brent benchmark last week for the first time in seven weeks as inventories at the U.S. delivery hub dropped and on speculation a sovereign debt crisis will crimp fuel demand in Europe. Crude “remains hostage to swings in investor sentiment, so too does the ruble and we would continue to play both from the short side for now,” Thin said. To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

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Satellite-Killing Junk Risks $250 Billion Space Market Ahead of World Cup

May 26, 2010

By Jonathan Tirone May 26 (Bloomberg) — Trash in space may bring commerce and communications on Earth to a halt unless policy makers and executives take steps to prevent satellite collisions with orbiting junk, according to a Pentagon report. Potential crashes between satellites and debris — refuse from old rockets, abandoned satellites and missile shrapnel — are threatening the $250 billion space-services market providing financial communication, global-positioning navigation, international phone connections, Google-Earth pictures, television signals and weather forecasts, the report says. Space is “increasingly congested and contested,” said the U.S. Defense Department’s interim U.S. Space Posture Review , which was sent to Congress in March and not publicly released. Scientists are warning that space collisions could set off an uncontrolled chain reaction that might make some orbits unusable for commercial or military satellites because they are too littered with debris. The February 2009 crash between a defunct Russian Cosmos satellite and an Iridium Communications Inc. satellite left 1,500 pieces of junk, each whizzing around the earth at 7.8 kilometers (4.8 miles) a second and each capable of destroying more satellites. “This is almost the tipping point,” Bharath Gopalaswamy, an Indian rocket scientist researching space debris at the Stockholm International Peace Research Institute , said in an e- mailed response to questions. “No satellite can be reliably shielded against this kind of destructive force.” Chinese Missile Test A Chinese missile test destroyed a satellite in January 2007, leaving 150,000 pieces of junk in the atmosphere, according to Gopalaswamy. That test was a central factor in pushing the U.S. to help the United Nations issue guidelines urging companies and countries not to clutter orbits with junk, the Space Posture Review says. “Nobody recognized this as a big issue until a few years ago,” said Chris Kunstadter, vice president of insurance operations at XL Capital Ltd. , a New York-based company selling satellite policies. “The Chinese interceptor test and the Iridium incident opened our eyes.” In low-earth orbit, between 800 and 1,000 kilometers above the planet, there are now more than 370,000 pieces of junk, compared with 1,100 satellites, Gopalaswamy estimates. The U.S. Space Posture Review, the second produced since 2007, forecasts orbital congestion will worsen. Space needs “policies and laws to protect the public interest,” UN Office on Outer Space Affairs Director Mazlan Othman said in an interview. “We should have all the instruments to make sure that lifestyles are not disrupted because of misconduct in space” when people “switch the television to watch the World Cup next month in Johannesburg.” Avoiding Debris “We are seeing an increasing number of incidents when operators have to maneuver their satellites to avoid a piece of debris,” David Wade, an underwriter at London-based Atrium Space Insurance Consortium , said in an e-mail responding to questions. “Performing these maneuvers consumes additional fuel and reduces the lifetime of the satellite.” XL and Atrium, a partner with Lloyd’s of London, say that the higher risk of satellite collisions with debris hasn’t yet led to higher premium payments. Officials at low-earth orbit satellite operators Dulles, Virginia-based GeoEye Inc. , Longmont, Colorado-based DigitalGlobe Inc. , which provides satellite imagery to Google Earth, and McLean, Virginia-based Iridium Communications , with the world’s biggest satellite constellation, declined to comment. Services Threatened Communications satellites at altitudes of 36,000 kilometers also face space debris problems. Companies sometimes resort to “gentlemen’s agreements” through the UN’s International Telecommunications Union under which they temporarily rely on satellites from competitors when services are threatened, Yves Feltes , a spokesman for SES SA , the world’s biggest publicly traded satellite operator, said in a telephone interview. A satellite operated by Luxembourg-based SES was threatened by an out-of-control Intelsat-Galaxy-15 satellite in May. Intelsat S.A.’s satellite interfered with the transmission frequency of an SES space asset after Earth-bound technicians couldn’t regain control over the Galaxy-15. Intelsat and SES are both pioneers in the commercial uses of space. Intelsat began transmitting signals in 1965, the result of a law signed by President John F. Kennedy giving private companies access to space. SES was launched in 1985 as Europe’s first private satellite network. Impairment Loss “We are working closely with SES, and have been since the early days of the anomaly, to minimize the interference that could be caused by the satellite as it flies by other satellites,” Intelsat spokeswoman Dianne VanBeber said in an e- mail response to questions. The closely held company may have to take an impairment loss for the Galaxy-15 satellite, valued at $142 million, Intelsat said May 12. “Any outage due to an unexpected technical or health problem usually leads to credits to the customers for compensation,” SES says on its website. “An hour of outage for a satellite can cost as much as $150,000.” TV viewers may face programming interruptions unless rival companies adjust to the defunct Intelsat satellite’s orbit, according to the UN. The incident highlights the need for tougher regulations. “Satellites are becoming an ever greater part of our everyday lives,” Wade said. “We certainly hope that there will be no further irresponsible acts such as targeting satellites with weapons which would increase the debris threat even further.” The UN Committee on the Peaceful Uses of Outer Space will debate how best to reduce orbital debris when it meets in the Austrian capital on June 9. To contact the reporter on this story: Jonathan Tirone in Vienna at

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Vekselberg to Revive Soviet Oil Plant as Russia Pushes Rich to Save Towns

May 26, 2010

By Ilya Khrennikov and Anna Shiryaevskaya May 26 (Bloomberg) — Russian billionaire Viktor Vekselberg plans to renovate a money-losing, Soviet-era synthetic oil plant as President Dmitry Medvedev demands the rich invest in towns left impoverished by dying industries. Vekselberg’s Renova Group is set to bid for the state’s stake in the factory at Slantsy near Prime Minister Vladimir Putin ’s hometown of St. Petersburg, said Yakov Tesis, the holding company’s director for the project. Russia’s 16th richest man would spend $40 million immediately to get the plant producing oil again, Tesis said. Russia’s billionaires doubled in number last year, while unemployment rose as high as 9.4 percent and the economy shrank the most since 1991. Political leaders are pushing the wealthy to invest in what are known as “mono-cities” from the Stalin- era, where a single company would provide most of the jobs and housing and fund schools. Such struggling towns are home to about 12 percent of Russia’s 142 million people, according to the Independent Institute for Social Policy. “Today this asset is loss-making, there are thousands of people there, and entering this project, you take on serious social responsibilities,” Tesis said in an interview. “You can’t just get out of it.” The government’s offer of state assets to private industry will be “hard to refuse” politically, said Natalya Zubarevich, head of regional studies at the Moscow-based institute. State Sale Renova owns 40 percent of the Zavod Slantsy plant, which was built to produce a petroleum-like fuel from shale rock containing oil. Renova has mines near St. Petersburg that contain oil shale and plans to buy the state’s 56 percent stake in the factory. The government will auction its share on May 31, according to the Federal Property Agency’s website . Putin publicly berated Oleg Deripaska and other business owners in Pikalyovo, a town of 23,000 near St. Petersburg, in June last year for “lack of professionalism and perhaps simply greed” after idled factories and wage arrears sparked protests. Russia will spend 27 billion rubles ($878 million) this year to support single-company towns, Putin said at a government meeting in Moscow on May 20. While the Zavod Slantsy plant is the only hope for the town’s economy, the potential for “innovation and efficiency” sparked Vekselberg’s interest, Tesis said. Renova aims to upgrade the plant and produce synthetic fuel that can compete with petroleum, he said. About 35,000 people live in the town. Vekselberg, 53, said in April he will step down as executive director of BP Plc’s Russian venture after Medvedev asked him to lead a new technology center near Moscow. Fuel-oil Alternative Shale oil is a cheaper alternative to fuel oil, at about 8,000 rubles a metric ton, freezes at lower temperatures and contains less sulfur, Tesis said. By 2012, Renova plans to produce 1 million tons of shale a year and process that into 140,000 tons of shale oil at Slantsy, where production has been suspended since 2004. OAO Inter RAO UES spokesman Anton Nazarov said the state- run power utility is interested in shale projects. The press office at OAO Rosneft, another potential bidder, declined to comment. Renova, which bought into Slantsy in 2007, resumed mining that had been shut in for three years at Leningradskoye, Russia’s largest shale mine. The deposit holds reserves of as much as 1 billion tons. Unlike U.S. shale projects, Leningradskoye holds no natural gas reserves, Tesis said. The country has 37 billion metric tons of shale reserves while Russia’s total shale gas reserves were never counted, he said citing data from 1981. Buyer Interest OAO Lukoil , Russia’s biggest non-state oil producer, and Polish, Finnish and Estonian companies have expressed interest in buying the fuel, Tesis said. Lukoil spokesman Dmitry Dolgov declined to comment. Estonia, the only country that now uses oil shale as a primary energy source, stopped buying Russian shale in 2005, Tesis said. The Nazi army used Estonian shale oil to fuel battle tanks and air bombers during World War II. During the Soviet era, as much as 9 million tons of shale a year was extracted at Leningradskoye and turned into fuel for ships and boiler houses. Renova sees the sale of the state’s stake in the plant as the first step to reviving the local economy, Tesis said. “Without a private investor in the plant, the town will die, there is nothing else there.” For Related News and Information: Top stories from eastern Europe: EEUT Credit crunch page: WWCC Emerging market view: EMMV

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Russia Drops `Bellicose’ Dollar Challenge as Greenback Reserves Increase

May 20, 2010

By Paul Abelsky May 20 (Bloomberg) — The dollar’s ascent against the euro may be stifling Russian efforts to challenge the greenback’s dominance as a reserve currency, with policy makers in Moscow allowing the dollar’s share of foreign reserves to swell. Russia’s central bank “changed the currency structure of reserves” last quarter, raising the U.S. currency’s share by 3 percentage points to 44.5 percent, BNP Paribas said May 18, citing Bank Rossii numbers. The euro’s portion fell 3.7 points to 43.8 percent. The figures, part of the central bank’s annual report to parliament, aren’t official yet, said a Bank Rossii spokesman who declined to be identified, citing bank policy. It’s “very much a case of economic rationalism trumping bellicose politics,” said Neil Shearing , a London-based emerging markets economist at Capital Economics Ltd., in an e- mailed response to questions. “With the euro likely to fall further over the coming quarters and a general retreat to safe havens likely to boost the dollar, expect more of the same.” The euro has dropped 18 percent against the dollar since Nov. 25 on investor concern that policy makers may fail to contain Europe’s debt crisis. Central banks have probably lost $300 billion this year on the euro and may consider cutting holdings of the currency, Stephen Jen , a managing director at hedge fund BlueGold Capital Management LLP, said May 6. The dollar’s share in Russian reserves will probably account for “50 percent, maybe more” of the total by the end of this year, said Julia Tsepliaeva , head of research at BNP Paribas in Moscow, in a phone interview. Supranational Currency Russian policy makers have been devising alternatives since the credit crisis erupted that would allow the world’s biggest energy supplier to reduce its reliance on the dollar. Officials in Moscow have been backed by BRIC peers seeking to limit the dollar’s dominance in the $8.36 trillion of global reserves. India said in July that the world economy was too reliant on the dollar. China and Brazil in April last year joined Russia in discussing the creation a new supranational currency. Russian President Dmitry Medvedev has pushed for the creation of regional reserve currencies and in July produced a prototype coin for a “world currency,” which he said was needed to stabilize the global economy. “Common sense tells you that Russia’s rhetoric doesn’t always correspond to reality,” said Nikolai Kashcheev , head of research at the treasury department of Moscow-based OAO Sberbank, Russia’s biggest lender. “What we are seeing now is the central bank trying to balance reserves after skewing them toward euros.” Wipe Out Gains A euro decline to $1.2150 would wipe out gains from reserve managers’ efforts to diversify away from the dollar into the European currency, Jen wrote in a May 6 report. China may have lost $80 billion and Russia $14 billion, according to that note. The euro traded as low as $1.2144 yesterday. Arkady Dvorkovich , an adviser to Medvedev, said May 12 it would be “absolutely incorrect” to assume the central bank had suffered losses on the scale suggested by Jen and said returns must be calculated over a longer timeframe. Russia’s foreign reserves reached $458.2 billion in the week ended May 14. The stockpile peaked at $598.1 billion in August 2008 before the central bank was forced to spend a third of the holdings to manage what it called a “gradual” ruble devaluation against the dollar sparked by a 54 percent slump in Urals crude , Russia’s main export, in 2008. “The euro’s depreciation will be the central bank’s best argument for increasing the dollar’s share in reserves,” Tsepliaeva said. “Because of the restrictions on the quality of the assets into which the central bank can invest, the central bank will tend to focus on dollar assets in the near future.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net .

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Iran Draft Accord Is Reached at UN as Russia, China Back Nuclear Sanctions

May 18, 2010

By Nicole Gaouette and Bill Varner May 18 (Bloomberg) — Secretary of State Hillary Clinton said Russia, China, the U.S. and the other permanent members of the United Nations Security Council have reached a draft accord on sanctions designed to pressure Iran over its nuclear program. The measure would bolster an arms embargo, enhance authority to seize Iranian cargo suspected of ties to nuclear or missile programs, restrict financial transactions and impose travel bans and asset freezes on Iran’s Revolutionary Guard Corps, two UN diplomats who asked not to be identified said. Clinton’s announcement came just a day after Iran said it agreed to a nuclear swap that made sanctions unnecessary. Turkey and Brazil, the nations that brokered the deal, immediately rebuked Clinton, saying sanctions are “ineffective” and a vote on them would be “dangerous.” The draft accord will be circulated to the entire Security Council today and will “send an unmistakable message about what is expected” from Iran, Clinton told the Senate Foreign Relations Committee in Washington. Iran said yesterday it agreed to hand over to Turkey about half its enriched uranium stockpile in exchange for 20 percent- enriched nuclear fuel to run a reactor for medical isotopes. The swap would be supervised by the Vienna-based International Atomic Energy Agency. As the deal was announced, Iran said it would continue to pursue its enrichment program, which the U.S. has said is aimed at creating a nuclear arms capability. ‘Convincing’ Answer Clinton said the draft sanctions announced today are “as convincing an answer to the efforts undertaken in Iran in the past few days as any we could provide.” “With the cooperation of Russia and China,” the U.S. created “a strong draft” of a new sanctions resolution, she told senators when asked to react to Brazil and Turkey’s deal. Brazil and Turkey hold rotating seats on the 15-nation Security Council. Marco Aurelio Garcia , special adviser on foreign affairs to Brazilian President Luiz Inacio Lula da Silva , responded within minutes at a news conference in Madrid. Sanctions are “totally ineffective,” and Clinton’s statement about the draft accord was “her problem,” he said. Turkey’s Response The chief of the Turkish parliament’s foreign relations committee, Murat Mercan , said on state-run television that his country expects that Security Council members will not vote on the sanctions draft. A vote would “create tensions” and be “dangerous,” Mercan said. The permanent members of the Security Council — China, France, the U.K., the U.S., and Russia — along with Germany make up the “P5 plus one” group that has been working on sanctions. A Chinese diplomat at the UN, who asked not to be identified, said the aim of the draft resolution is to push Iran into talks on its nuclear program. Clinton said she spent the morning talking to her Russian counterpart, Foreign Minister Sergei Lavrov , on the final elements of the sanctions resolution. Adversaries are “not happy” that Russia and China have signed on with the U.S. and its allies, Clinton said. ‘This is a real setback for them,” Clinton told the committee. Separately, a senior U.S. lawmaker said the U.S. House of Representatives should act on an Iran sanctions resolution this month. Majority Leader Steny Hoyer , a Maryland Democrat, said today that the accord brokered with Iran by Turkey and Brazil still leaves Iran free to pursue its “nuclear armed intentions,” and “we think that’s unacceptable.” To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net ;

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Demand for Dollars Exceeds Estimates as China Leads $140 Billion Purchases

May 18, 2010

By Daniel Kruger and Vincent Del Giudice May 18 (Bloomberg) — “Reverse diversification” boosted global demand for long-term U.S. financial assets to a record as the European fiscal crisis may be beginning to translate into increased demand for dollar assets. Purchases of equities, notes and bonds totaled $140.5 billion in March, more than double economists’ projections, after net buying of $47.1 billion in February, the Treasury Department said yesterday. Treasury purchases rose by the most since June as China, the largest lender to the U.S., added to its holdings for the first time since September. “Diversification was a major deadweight on the dollar last year and reverse diversification is now a major source of vulnerability for the euro,” said Alan Ruskin, head of foreign- exchange strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. The crisis may result in 2 percentage points of “growth divergence in the U.S.’s favor,” he said in a telephone interview yesterday. Signs of a sustained economic recovery, including a rebound in earnings and stock prices, may increase demand for U.S. investments as concerns mount about the sustainability of government debt in Europe. The world’s largest economy has expanded for three consecutive quarters and added 573,000 jobs in the first four months of the year. Russia cut the share of euros in its international currency reserves to 43.8 percent at the end of 2009 from 47.5 percent a year earlier, Interfax reported yesterday, citing central bank data. ‘Fear Was Misplaced’ The dollar has strengthened 7.2 percent so far this year while the euro has slumped 8.7 percent, according to Bloomberg Correlation-Weighted Indices. The euro dropped to $1.2235 yesterday, the lowest level since April 2006. The Standard & Poor’s 500 Index in March rose 5.9 percent, its biggest gain since July 2009, while the Dollar Index , a gauge of the U.S. currency’s strength against six other major currencies, gained 0.9 percent. Treasuries declined 0.9 percent in March, according to an index compiled by Bank of America Corp.’s Merrill Lynch unit. “Foreign institutions and individuals are still turning to the U.S. as a safe haven,” said Paul Christopher , senior international investment strategist at Wells Fargo & Co. in St. Louis. “There was some concern foreigners were abandoning the U.S. currency. That fear was misplaced.” Europe’s debt crisis is prompting some of the Treasury market’s biggest bears to reverse calls for Federal Reserve interest-rate increases this year. Morgan Stanley, Wrightson ICAP and Pierpont Securities LLC say the Fed will keep interest rates near zero percent after the European Union unveiled an almost $1 trillion loan package to halt a slide in the euro and sovereign bonds that threatened to shatter the currency union. ‘Years to Resolve’ Futures show traders place a 40 percent likelihood that the central bank will raise borrowing costs by December, down from 58 percent a month ago. “What we are seeing in Treasuries is ongoing concern in Europe,” said Guy Lebas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “The problem with sovereign debt crises is that they take years to resolve. The risk aversion bid is likely to continue for weeks and maybe months.” Treasuries, the benchmark for everything from corporate bonds to mortgage rates, have returned 3.4 percent since December through March 14, including reinvested interest, the most at this point in a year since gaining 8.48 percent in 1995, according to Bank of America Merrill Lynch indexes. Analysts have also become more bullish on the dollar since it touched a high for the year of $1.4513 per euro on Jan. 11. The median year-end forecast for the dollar has dropped from $1.45 to $1.24, according to Bloomberg News surveys. Dollar Forecasts Including short-term securities such as stock swaps, investors abroad purchased a net $10.5 billion, compared with net buying of $9.7 billion the previous month. Economists in a Bloomberg News survey forecast a $50 billion net increase in long-term U.S. financial assets in March, according to the median of seven estimates. Treasury holdings by China rose 2 percent in March to $895.2 billion, the biggest increase since July. China added $18.7 billion in notes and bonds, bringing the total to $854.4 billion. The country’s holdings of bills fell by $1 billion to $40.8 billion, the smallest decline in the shortest-term securities since China added $8.8 billion of bills in July 2009. Japan, the second-largest holder, increased its holdings by $16.4 billion to $784.9 billion in March. Holdings in the U.K. gained $45.5 billion to $279 billion, the fifth straight monthly increase. The Organization of Petroleum Exporting Countries increased its position by $10.7 billion to $229.5 billion. Dollar Appreciation Total foreign purchases of Treasury notes and bonds were $108.5 billion in March compared with purchases of $48.1 billion in February. The dollar’s share as a percentage of Russian currency reserves rose to 44.5 percent from 41.5 percent, the Russian news service Interfax said. Some of that shift likely reflects the appreciation of the dollar versus the euro rather than active trading, RBS’s Ruskin said. Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac registered net buying of $22 billion in March, the biggest gain since June 2008. Net foreign purchases of equities were $11.2 billion in March after net purchases of $12.9 billion in February. Investors bought a net $16 billion in U.S. corporate debt in March, the first increase since May 2009, after net sales of $12 billion in February. To contact the reporters on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net ; Daniel Kruger in New York at dkruger1@bloomberg.net

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Russia’s Economy Expanded 2.9% Last Quarter, Biggest Increase Since 2008

May 14, 2010

By Paul Abelsky May 14 (Bloomberg) — Russia’s economy expanded for the first time since 2008 in the three months through March as the world’s biggest energy producer rebounds on an oil-funded stimulus program and record-low borrowing costs. Gross domestic product rose an annual 2.9 percent in the first quarter after contracting 3.8 percent in the last three months of 2009, Economy Minister Elvira Nabiullina said at a meeting in Moscow today. The median estimate in a Bloomberg survey of 12 economists was for 4.8 percent growth. GDP shrank 7.9 percent in 2009, the biggest decline since the collapse of the Soviet Union in 1991. The statistics office is due to publish official GDP data later today. Prime Minister Vladimir Putin last month said Russia’s recession “is over” after 3 trillion rubles ($99.6 billion) in stimulus spending left the economy “confidently showing signs of recovery.” Russia is poised for the world’s “biggest bounce,” Bank of America Merrill Lynch said last month, and estimates output may grow 7 percent in 2010 as companies rebuild stocks and stimulus spending supports demand. “We see the economy recovering relatively briskly this year, as the strengthening global economy and reviving domestic demand support the revitalization,” Annika Lindblad , economist at Nordea Bank AB, wrote in a report before the release. “The economic environment has improved faster than expected, largely due to a recovery in the global economy and commodity prices.” BRIC The four so-called BRIC economies are leading the global recovery, with growth in China exceeding 10 percent. The world’s second-largest economy expanded an annual 11.9 percent in the three months through March. Brazilian output grew 4.3 percent in the fourth quarter while the economy of India expanded an annual 6 percent in the same period. Brazil and India have yet to release first-quarter GDP data. The recovery is gaining steam as some of Russia’s biggest companies rebound from last year’s slump. Sales at OAO AvtoVAZ, the country’s largest carmaker, are rising while commodity producers OAO Severstal and OAO Mechel have increased output . Businesses are benefitting from record-low borrowing costs as banks resume lending. The central bank has cut its main interest rates 13 times in as many months to spur credit flows, helping manufacturers and driving household confidence. Lending may grow 15 percent this year, bank Chairman Sergei Ignatiev said on April 9. Ruble The ruble slipped 0.3 percent against a basket of dollars and euros to trade at 33.5853 at 4:31 p.m. in Moscow. Russia’s RTS Index of the country’s 50 most-traded stocks was trading 2.1 percent lower, after a 55 percent gain over the past 52 weeks. The ruble’s real rate is back at pre-crisis levels, Nabiullina said today. “The Russian economy will continue to recover rapidly in 2010 and 2011,” said Odd Per Brekk , the International Monetary Fund’s senior representative in Russia. Europe’s rescue package, worth almost $1 trillion, designed to counter a spreading debt crisis “has increased the upside potential” to the IMF’s forecast for 4 percent growth in Russia’s GDP, he said. A return of economic growth won’t prevent inflation from easing to 5 percent this year, central bank First Deputy Chairman Alexei Ulyukayev said. That compares with a 12-year low of 6 percent in April. The economy may grow more than 5 percent this year, while the country’s budget deficit probably won’t exceed 5 percent of GDP, according to Ulyukayev. An 88 percent surge in Urals crude prices since the end of 2008 allowed the government last year to increase spending by 27.3 percent. Oil averaged more than $75 a barrel in the first quarter, 70 percent more than during the same period last year. Energy Boost Income from oil and gas, which account for about 25 percent of GDP, reached 1.1 trillion rubles in the first four months, or 36 percent of the government’s target for the year, Finance Ministry data show. Russia earns $2 billion in extra revenue every time the price of oil rises by $1, Deputy Finance Minister Dmitry Pankin said last month. The budget deficit may be between 5.2 percent and 5.4 percent of GDP this year, Finance Minister Alexei Kudrin said in Moscow today. That compares with the government’s latest official forecast for 6.8 percent. If oil continues to average higher than $70 a barrel, the deficit may narrow to 4 percent in 2011, Kudrin said. Crude will probably average $76 a barrel this year and next, Nabiullina said. Higher incomes, a revival in bank lending and stabilizing unemployment are boosting consumer confidence and spending. Consumer demand rebounded last quarter, Nabiullina said. The Economy Ministry said on April 29 it may raise its official forecast for economic growth this year to 4 percent from 3.1 percent. Last year’s record economic slump, which President Dmitry Medvedev has called the “hardest year” since the country’s 1998 default, pushed the government into its first budget shortfall in a decade. To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net .

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Russian Sugar Producer Rusagro Cancels Initial Offer on Market Volatility

May 13, 2010

By Maria Kolesnikova May 13 (Bloomberg) — Sugar producer OAO Rusagro became the second Russian company in two weeks to postpone an initial public offering, citing “market volatility.” Russia’s largest producer of the sweetener confirmed the move in a one-sentence statement sent by e-mail today. The Moscow-based company had sought to raise $246 million to $309 million by selling 18.2 million shares. Russian companies, holding IPOs for the first time since 2007, are struggling to attract investors. Fertilizer producer OAO UralChem postponed an offer last month while OAO Russian Sea Group sold stock at the bottom of its price range. Russian billionaire Oleg Deripaska’s Strikeforce Mining & Resources Plc has delayed a Hong Kong IPO until equity markets stabilize, a person familiar with its plans said last week. Rusagro’s decision came even after the Micex Index of 30 Russian stocks had its biggest two-day gain in almost a year, including an advance of 4.3 percent yesterday. That pared Micex’s decline since its April 15 peak to 9.1 percent. State-run lender Sberbank, Rusagro’s largest creditor, said in a note to investors last week it would buy as much as $200 million of stock, or as much as 81 percent of the total to be sold in the sugar producer’s IPO. Sberbank was managing the postponed sale along with Credit Suisse Group AG, Renaissance Capital and Alfa Capital Markets. Sberbank spokesman Alexander Baziyan couldn’t immediately be reached for comment. Moshkovich’s Stake Russian state development bank VEB bought almost 30 percent of United Co. Rusal’s $2.2 billion IPO in Hong Kong in January. Rusal, Deripaska’s aluminum maker, has slumped 23 percent after the listing. Vadim Moshkovich , a lawmaker in the parliament’s upper house, and his family owns Rusagro. The company said in April that it would sell new and existing shares, including a 14 percent stake Moshkovich controls. “Moshkovich was probably concerned by unsuccessful IPOs by UralChem and Russian Sea, which fell short of demand,” said Ilya Brodsky , vice-president of the Specialized Research and Investment Group in Moscow, before the cancellation. Rusagro accounted for 18 percent of Russian sugar production last year, according to the company. Rusagro has seven plants that can process either 30,000 metric tons of raw sugar beets or 5,350 tons of raw sugar cane a day. To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

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Brazil Bonds Offer `Safe Haven’ as Spread Drops Below Russia on EU Crisis

May 5, 2010

By Veronica Navarro Espinosa May 6 (Bloomberg) — Brazil’s benchmark borrowing costs slid below Russia’s for the first time this year as investors bet the South American country is less at risk of contagion from the Greek debt crisis than Eastern European nations. Brazilian dollar bonds yielded 2.18 percentage points more than U.S. Treasuries yesterday, compared with 2.19 percentage points for Russia, according to JPMorgan Chase & Co.’s EMBI+ index. Brazilian yields last were below those on Russian debt, which is rated one level higher by Standard & Poor’s and two by Moody’s Investors Service, on Dec. 21. “Brazil offers a safe haven for investors that are concerned about market volatility and contagion related to Greece,” David Bessey , who helps manage more than $10 billion of emerging-market debt at Prudential Financial in Newark, New Jersey. “It’s not obvious to me that the distortion couldn’t last for a long time given what’s going on in Eastern Europe.” Investors view Brazilian debt as safer than Russian bonds after S&P’s rating cuts of Greece, Portugal and Spain last week threatened to crimp growth in Europe. Russia’s gross domestic product will expand 4 percent this year, the Economy Ministry forecasts. Growth in Latin America’s biggest economy, by contrast, will surge to 6.1 percent this year, according to a central bank survey of analysts published this week.     It costs 0.43 percentage point more to protect Russian bonds against default for five years than Brazilian debt, the biggest gap since Feb. 26, according to data compiled by CMA DataVision. Russia is ranked BBB by S&P, the second-lowest investment grade level. Brazil is rated BBB-. The South American country’s swaps are also less expensive than Bahrain, which is rated A, or four levels higher, as well as South Africa, two steps higher. Brazil’s Domestic Demand Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. Russia’s bond yield spread over U.S. Treasuries widened 18 basis points, or 0.18 percentage point, yesterday while Brazil’s spread climbed 12 basis points. The yield premium on developing- nation debt overall swelled 15 basis points to 2.95 percentage points, the widest in two months. Brazilian bonds yielded 41 basis points more than Russian debt on April 20. While Brazil’s economic growth is driven by domestic demand, Russia is more dependent on exports to European countries, said Paul Biszko , an emerging-market analyst at RBC Capital Markets in Toronto. ‘Under Siege’ “The perception of risk has changed,” Biszko said. “These problems in Europe are sustainability problems, longer- term problems. Russia in terms of trade, financial linkages, is much closer to the euro zone than Brazil is.” Investors should buy Latin American currencies if concern about contagion from the Greek financial crisis continues to put Eastern Europe and its currencies “under siege,” Guillaume Tresca , an emerging-market strategist at Credit Agricole CIB in Paris, wrote in a note to clients yesterday. “Since the current issue is seen as a pure European debt problem, it should mean that Latin American countries are less affected,” Tresca wrote. The real dropped 1.7 percent to 1.7951 per dollar yesterday. The decline pared its rally over the past three months to 4.7 percent, the second-best performance among emerging-market currencies after the Malaysian ringgit. The Hungarian forint, Polish zloty and Czech koruna plunged more than 2 percent against the dollar yesterday, leaving each of them down at least 6 percent in the past three months. Brazil Elections The yield on Brazil’s overnight interest-rate futures contract due in January fell six basis points yesterday to 11.13 percent. Shareholders of Rossi Residencial SA , Brazil’s third- biggest homebuilder, approved the sale of as much as 500 million reais of bonds due May 2015, according to a regulatory filing. Brazil’s bonds may slump as the October vote to replace President Luiz Inacio Lula da Silva nears, RBC’s Biszko said. Former Cabinet Chief Dilma Rousseff and former Sao Paulo Governor Jose Serra are the main contenders in the race to succeed Lula, whose second term concludes at year-end. “What complicates Brazil is that you have elections coming,” Biszko said. “The market is priced for no noise and a very stable process. There could be some not necessarily market friendly comments coming from them as we get closer to the elections.” Bond Sales Delayed Brazil’s dollar debt returned 2.4 percent this year, beating the 2.2 percent gain in Russian bonds, according to JPMorgan. Emerging-market bonds overall are up 3.1 percent. Concern about the spreading of Greek debt crisis pushed the average yield on emerging-market bonds to 6.51 percent from a record low of 6.18 percent on April 15, persuading Czech Republic, Albania and Indonesia to delay planned debt sales. Russia sold $5.5 billion of bonds on April 22, its first international issue since defaulting in 1998. That sale has also caused the country’s debt to underperform by swelling the supply, Prudential’s Bessey said. The yield on the 5 percent bonds due in 2020 has jumped 47 basis points since the offering to 5.55 percent, according to Bloomberg data. “The heightened amount of supply has made a difference,” Bessey said. “Russia priced the deal without a lot of concession to investors.” To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

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Austria to receive Russian gas

April 26, 2010

Austria to receive Russian gas

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Mittal Tops U.K. Sunday Times Rich List, Buoyed by Metals, Mining Recovery

April 25, 2010

By Michelle Fay Cortez April 25 (Bloomberg) — The fortunes of the richest people in the U.K. rose at a record pace last year, with the 1,000 wealthiest experiencing a 30 percent increase in their net worth, according to the annual Sunday Times Rich List. Lakshmi Mittal , the 59-year-old chief executive officer of ArcelorMittal , the world’s largest steelmaker, topped the list for the sixth straight year. His fortune doubled to 22.5 billion pounds ($34.6 billion) as the recovering economy bolstered orders from automakers and builders, according to the Rich List, published today. Roman Abramovich , 43, the Russian-born billionaire, remained in second place after adding 400 million pounds to his net worth. The cumulative wealth of the U.K.’s richest people rose to 333.5 billion pounds ($512.8 billion) during the year. The total fell short of the record 413 billion pounds reached in 2008, according to the rankings compiled each year by Philip Beresford . None of the top 10 lost money during the year, while the number of billionaires on the list rose 10 to 53. The list has been compiled for the past 22 years and is based on identifiable wealth, including property, art, racehorses and shares in publicly-held companies. It excludes bank account balances. The 30 percent increase in combined wealth in the last year is “easily the biggest annual rise” in the history of the list, Beresford said in an e-mailed statement. The year before, the net worth of those on the list had plunged 37 percent, in the depths of the global financial crisis Joseph Lau, Duke of Westminster The highest new entry was Joseph Lau , the 58-year-old chairman and CEO of Hong Kong-based Chinese Estates Holdings Ltd., who took the 12th spot. Lau, with a fortune calculated at 3.8 billion pounds, recently paid 33 million for a house in London’s Eaton Square. The Duke of Westminster , the highest-placed British-born billionaire, remained in third place. His ancestral land holdings in central London are among the most expensive properties in the nation and helped boost his net worth by 4 percent. It was the smallest gain seen among the wealthiest 10 people in the U.K. The Queen, 84, ranked 245 with a fortune of 290 million pounds. New to the 10-top list were Alisher Usmanov , who made his money in steel and mines, Galen and George Weston , whose wealth from retailing was combined this year, and Indian-born Anil Agarwal , who had an increase of 583 percent in his fortune thanks to the skyrocketing price of his London-based mining group Vedanta Resources Holdings Ltd. ArcelorMittal Falling from the top 10 were Hans Rausing and family, whose fortune is in packaging; Sammy and Eyal Ofer, and John Fredriksen in the shipping industry; Joe Lewis in investments; and Kirsten and Jorn Rausing in inheritance. Mittal holds a 41 percent stake in Luxembourg-based ArcelorMittal, which he formed through the takeover of Arcelor SA by Mittal Steel Co. in 2006. The stock surged 89 percent in 2009 as it boosted output of the metal as the world economy recovered and automakers and builders increased orders. The steel industry is recovering faster and stronger than expected, the World Steel Association said April 20. The group, whose members include nineteen of the world’s 20 top steelmakers, forecast that steel consumption will increase 10.7 percent this year. European hot-rolled coil, a benchmark product used in cars and appliances, increased 41 percent in the first quarter as raw material prices surged, according to Metal Bulletin data. Abramovich Abramovich, owner of the Chelsea football club, accrued his wealth after the fall of the Soviet Union by building up Russia’s fifth-largest oil producer. His oil business, OAO Sibneft, was bought by OAO Gazprom in 2005 as then-President Vladimir Putin moved to return the country’s oil wealth into state hands. The billionaire, once Russia’s richest man according to Forbes, has since bought into metal producers. Millhouse LLC, which manages his assets, has stakes in Evraz Group SA, Russia’s second-largest steelmaker, and Highland Gold Mining Ltd. Britain’s 10 Largest Fortunes (in billions of pounds) To contact the reporter on this story: Michelle Fay Cortez in London at mcortez@bloomberg.net

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Geithner Urges EU, IMF to `Move Quickly’ With Aid to Greece After Meetings

April 24, 2010

By Theophilos Argitis and Shamim Adam April 24 (Bloomberg) — U.S. Treasury Secretary Timothy F. Geithner urged European governments and the International Monetary Fund to “move quickly” to support cash-strapped Greece as its finance minister held aid talks in Washington. “Secretary Geithner encouraged them to move quickly to put in place a package of strong reforms and substantial concrete financial support,” the Treasury said in a statement after Geithner met with his counterpart George Papaconstantinou , IMF Managing Director Dominique Strauss-Kahn and European officials. Papaconstantinou arrived in Washington early this morning, hours after Prime Minister George Papandreou sought a financial lifeline of as much as 45 billion euros ($60 billion) this year as investors question whether the country can finance itself. The government is negotiating loan terms likely to require it to do more to slash a budget gap that totaled 13.6 percent of gross domestic product in 2009, more than four times the European Union limit. Papaconstantinou also met with European Central Bank President Jean-Claude Trichet and EU Economic and Monetary Affairs Commissioner Olli Rehn with discussions centering on the appeal for cash and “the progress of work under way in Athens for the preparation of the medium-term economic program of reforms supporting EU and IMF financing,” the Greek finance ministry said in a statement. Even with outside help, investors are signaling concern about the country’s ability to end its fiscal crisis. A rebound in Greek bonds after the government’s request fizzled out yesterday with the yield on the two-year note rising to 10.23 percent, after falling to 9.63 percent. Not Buying “We are not buying Greek debt while so many problems remain unsolved,” said Ralf Ahrens , who holds Greek bonds as part of the about $20 billion he manages as head of fixed-income at Frankfurt Trust. “Asking for the package will not calm down the market.” European policy makers have only spelled out the aid that Greece would receive over the next year, sparking concern about how the country will finance itself beyond 2011. While Greece has pledged to lower its budget deficit below the EU’s 3 percent limit by 2012, Goldman Sachs Group Inc. says the country’s challenge is so great the nation may cut or delay payments to bond investors. Late Arrival “We wouldn’t touch Greece at the moment,” said Rod Davidson , head of fixed income at Alliance Trust Plc in Dundee, Scotland. “The market needs some clarity on whether or not there will be some kind of restructuring of Greek bonds. There’s too much uncertainty and volatility.” Rehn told reporters late yesterday in Washington that an aid program will likely be agreed by early May and extend over three years. Greece faces 8.5 billion euros of bonds maturing May 19. Papaconstantinou arrived at his hotel about 2 a.m. today dressed in black tracksuit bottoms and a hooded top. He arrived to find the reception unstaffed and declined to comment when asked by Bloomberg News about his plans in Washington. He is also set to meet Russian Finance Minister Alexei Kudrin , Brazilian Finance Minister Guido Mantega today and Chinese Finance Minister Xie Xuren tomorrow, according to a statement yesterday from the Greek embassy in Washington. A press conference is scheduled for tomorrow. Mantega said today that the Greek turmoil “is not big enough to threaten” the global recovery, while Brazilian central bank President Henrique Meirelles said it served as a warning to other governments to cut their budget deficits. Alert to World “The whole world will have to face the fiscal issue, even larger countries have public debts substantially above what they had before the crisis,” Meirelles said. “This was an alert in the sense that we have a problem ahead.” European central bankers in Washington played down speculation that Greece’s woes could spill over to other high- deficit countries such as Spain or Portugal. Trichet said yesterday that “Spain is not Greece.” “Is there a risk for other countries in the zone? No, the other situations have absolutely nothing to do with that of Greece,” Bank of France Governor Christian Noyer said. To contact the reporters on this story: Theophilos Argitis in Washington at targitis@bloomberg.net Shamim Adam in Washington at sadam2@bloomberg.net

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Russia Prices $5.5 Billion of Eurobonds in First Offer Since 1998 Default

April 22, 2010

By Denis Maternovsky, Sonja Cheung and Caroline Hyde April 22 (Bloomberg) — Russia priced $5.5 billion of bonds, the second biggest emerging-market dollar debt offering on record, as the country seized on all-time low yields to return to world capital markets for the first time since defaulting in 1998. The government priced $2 billion of five-year bonds at a yield of 3.741 percent, or 1.25 percentage points above similar- maturity U.S. Treasuries and $3.5 billion of 10-year notes at 5.082 percent, or a 1.35 percentage-point spread. The five-year yield is below the rate of 4.5 percent on bonds with the same credit ratings sold by European Union member Lithuania. Russia is luring investors, driving down its debt costs, as a rebound in commodity prices helps the economy recover from its worst recession since the fall of the Soviet Union. The nation last borrowed abroad in July 1998, less than a month before its $40 billion domestic debt default and ruble devaluation sent yields as high as 80 percent and world markets tumbling as hedge fund Long-Term Capital Management LP collapsed. “Nobody would have believed that Russia could sell debt at these levels,” said Vladimir Gersamia , senior portfolio manager at Fortis Investments, who helps manage $3 billion of emerging- market debt in London. “Eighteen months ago everyone thought that emerging markets was a dead asset class.” Egypt, Albania Faster growth in developing economies and near-zero benchmark U.S. interest rates reduced the average emerging- market government yield to a record low 6.12 percent last week, half the peak in 2008, JPMorgan Chase & Co.’s EMBI+ index shows. The International Monetary Fund projects developing economies will expand three times faster than advanced nations this year. Pacific Investment Management Co., manager of the world’s largest bond fund, recommended a shift away from the U.S., U.K. and Europe debt this week. Investor demand spurred Egypt to return to the dollar debt market for the first time in nine years today, increasing its sale to $1 billion of 10-year bonds and $500 million of 30-year notes. Albania plans its first international bond issue, a banker involved said today. Russia’s sale is the second-largest public offering of dollar debt in emerging markets after Qatar’s $7 billion issue in November, Bloomberg data show. The yield on Russia’s dollar bonds due 2018 fell 3 basis points, heading for an all-time low of 4.653 percent, according to Bloomberg prices at 12:47 p.m. in London. The yield has tumbled from 9.769 percent in November 2008 as a surge in oil prices to $83.90 a barrel from as little as $33.87 revived the world’s biggest energy exporting economy. 1998 Crisis Prime Minister Vladimir Putin said this week the country’s recession “is over” and the economy is likely to expand more than the government’s 3.1 percent forecast for this year after a record 7.9 percent contraction in 2009. Higher wages and slowing inflation are fueling domestic demand, spurring growth in retail sales and industrial output. Russia last sold five-year bonds in June 1998 yielding 6.5 percentage points more than U.S. Treasuries and 20-year notes the next month at a 9.4 percentage-point spread, Bloomberg data show. The government defaulted a month later, on Aug. 17, and devalued the ruble, triggering the collapse of LTCM and its bailout by more than a dozen banks. Investors hoarded the safest assets, causing yields on 10-year Treasuries to plunge 1 percentage point by October 1998. The new five-year Russian securities will yield about 15 basis points more than comparable Mexican securities, which have the same credit ratings. The 10-year yield is about 20 basis points above Mexico’s equivalent notes, Bloomberg data show. Both countries are rated BBB by Standard & Poor’s, two levels above non-investment grade, and a further step higher at Baa1 at Moody’s Investors Service. ‘Not Screaming Buy’ “It’s not a screaming buy as the five-year is probably going to be something that’s more suitable for central banks who are looking to park their assets into what they consider to be a safe, low-yielding credit,” Kevin Daly , an emerging-markets money manager in London at Aberdeen Asset Management Plc, which oversees about $249 billion worldwide, said in an interview. “You’re not going to see spreads narrow any time soon” for the five-year or the 10-year, he said. Yields on company bonds are more likely to fall, with the new government benchmark set to lower yields on bonds sold by OAO Gazprom and Russian Railways by 30 to 40 basis points, according to Renaissance Capital. “At last there will be a liquid tradable benchmark for Russian risk, acting not only as an indication for sovereign creditworthiness, but just as importantly providing a reference point for the wide variety of Russian quasi-sovereign and corporate issuers,” said Gersamia at Fortis. Russian officials, including Finance Minister Alexei Kudrin , met investors in New York yesterday in the last leg of a series of Eurobond meetings organized by Barclays Capital, Citigroup Inc., Credit Suisse Group AG and VTB Capital. The government has pared the amount it planned to borrow abroad this year. Russia may offer more ruble debt domestically and will probably sell “considerably less” than the planned $17.8 billion of foreign bonds this year as higher oil price reduces borrowing needs, Deputy Finance Minister Dmitry Pankin said earlier this year. Russia’s budget is based on crude oil averaging $58 a barrel. To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net ;

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Polish-Russian Reconciliation Highlights Kaczynski’s Funeral in Krakow

April 18, 2010

By David McQuaid and Nathaniel Espino April 18 (Bloomberg) — Poland bid farewell to President Lech Kaczynski and his wife in the country’s ancient capital of Krakow as the leaders of the country’s two historic enemies, Germany and Russia, prayed amid calls for reconciliation. Russian President Dmitry Medvedev lit a candle at the service for presidential couple, who died on April 10 when their plane crashed in Smolensk, Russia, on the way to a ceremony in Katyn forest honoring 22,000 Polish officers and officials killed in 1940 by Soviet dictator Josef Stalin ’s secret police. Medvedev and German President Horst Koehler were among 700 foreign guests, Polish government officials and family members gathered at the 14th-century St. Mary’s Basilica on the medieval Market Square, where a Mass led by Cardinal Stanislaw Dziwisz , archbishop of Krakow and the former secretary to Pope John Paul II , opened to the strains of Mozart’s Requiem. “Seventy years ago Katyn divided two nations,” Dziwisz said at the beginning of the Mass, addressing his words directly to the Russian president. “The tragedy eight days ago has released stores of good will in individuals and nations, and the sympathy and support we have received from our Russian brothers revives hope for reconciliation.” Closed Airspace Ash from Iceland’s 5,500-foot Eyjafjallajökull volcano closed airspace over Europe and led U.S. President Barack Obama , German Chancellor Angela Merkel and French President Nicolas Sarkozy to cancel plans to attend. Other delegations struggled to arrive on government planes with clearance to fly at low altitudes, or by helicopter, rail or road. Georgian President Mikheil Saakashvili flew to Rome and Istanbul, then made stops in Bulgaria and Romania before his plane made it to Krakow in the late afternoon, his spokeswoman Manana Manjgaladze said by phone from the capital Tbilisi. During Georgia’s 2008 military conflict with Russia, Kaczynski collected the presidents of Estonia, Lithuania and Ukraine for a joint trip to the country’s capital, Tbilisi, in a show of support. The call for improved ties between Russia and Poland overshadowed disruptions from the volcano. ‘Respect’ “President Medvedev and Prime Minister Vladimir Putin get a lot of respect from us, both for their solidarity and because they acknowledged the Katyn crime. I think Polish-Russian relations may really get better,” said Radoslaw Kruszak, 30, who waited with thousands of others to watch the funeral via a telecast. Medvedev, who is making his first official visit to Poland, met with Polish Prime Minister Donald Tusk and parliamentary speaker Bronislaw Komorowski at Wawel Castle before the funeral Mass began, PAP newswire reported. Kaczynski, his wife Maria, and 94 other officials including central bank Governor Slawomir Skrzypek and the top four leaders of Poland’s armed forces were victims of the April 10 crash. The Kaczynskis’ remains were moved at a slow walk after the Mass through the streets of the city’s Old Town on a military caisson followed by the country’s political elite and heads of state. Crowds stood three- and four- deep as the procession passed, clapping or standing in respect. A military band played somber marches and dirges as it moved through Krakow’s ancient cobblestone streets and up the slope of Wawel hill to the Royal Castle and Cathedral, where Cardinal Dziwisz was to lead a funeral ceremony. Church bells tolled throughout the city in tribute. Condolences After the bodies are placed in a sarcophagus of honey- colored onyx imported from Turkey, leaders of foreign delegations will present messages of condolence to the president’s family, including his twin brother Jaroslaw , the leader of Poland’s largest opposition party. People wishing to pay tribute to the fallen president began gathering in Krakow’s Old Town at 6 a.m. City officials estimated Market Square held about 15,000 onlookers, with another 100,000 watching on special television screens set up at the Lagiewniki sanctuary and the 48-hectare Blonia meadow, south and west of the city center. The Berlin Philharmonic played Richard Strauss ’s Metamorphosen, an elegy for central Europe’s destruction in World War II, for the crowds on Market Square. “Even though we’re the same age, for me President Kaczynski was a teacher of patriotism,” said Bozena Nowak, who drove overnight from Szczecin, 700 kilometers away in northwest Poland with her husband, Wieslaw, and son, Robert. “We would have come on foot if we had to,” said Wieslaw, as the family headed for Market Square. Reconciliation Sought At a ceremony yesterday in Warsaw honoring Kaczynski and the crash victims, Tusk, whose ruling Civic Platform party had often clashed with the president and his brother, called for Poles to overcome their political differences in what has been called the country’s greatest disaster in generations. “This is a serious test for all of us,” Tusk told a crowd in Pilsudski Square that police estimated at about 100,000. “Like the passengers on that airplane, we differ by background, political views and age. Our sense of community can only be preserved within us.” Poland must hold an early election by the end of June to fill the empty post of president. Komorowski, who has assumed Kaczynski’s duties and is the ruling party’s candidate for president, said he will set a date on April 21. Poland’s opposition parties and a legal opinion prepared by parliamentary experts give June 20 as the preferred election date. To contact the reporters on this story: David McQuaid in Warsaw dmcquaid1@bloomberg.net ; Nathaniel Espino in Krakow at nespino@bloomberg.net

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Fernandez Says Doubting Investors Will `Do Well’ With Argentina Debt Swap

April 16, 2010

By Matt Winkler, Adriana Arai and Richard Jarvie April 16 (Bloomberg) — Argentine President Cristina Fernandez de Kirchner , locked out of international capital markets since taking office, said an offer to holders of $20 billion of unpaid debt marks a “turning point” in her country’s history and will be a good deal for investors. “I thought that if I could get us out of the default, I’d feel I’ve done something for this country,” Fernandez said in an interview yesterday, one hour after her government unveiled terms for the new debt swap. “We’re back in the world.” A successful exchange of the bonds would enable Argentina, South America’s second-largest economy, to tap global markets after a record $95 billion debt default in 2001. This is the last opportunity for bondholders to accept an exchange and profit from an annual economic growth rate of 6 percent, Fernandez said. Sitting in the Casa Rosada , the pink government palace in downtown Buenos Aires where former President Juan Peron and his wife Evita addressed supporters six decades ago, Fernandez said her priority is to preserve and create jobs. Policies including loans to General Motors Co. and accords with unions helped skirt a recession during the global economic crisis, she said. “Come, and you will do well,” Fernandez said when asked what message she had for creditors who rejected the first bond offer from her husband and predecessor Nestor Kirchner . “This is a second opportunity and they shouldn’t miss it because the same train won’t be leaving the station a third time.” Terrorism, Lehman In a 40-minute interview with Bloomberg News, the 57-year- old lawyer talked of subjects ranging from terrorism and global warming to the collapse of Lehman Brothers Holdings Inc . and religious conflict. Lehman exposed the need for global controls on capital flows and greater regulation, Fernandez said. Argentina last year had a record trade surplus of $17 billion because of import restrictions and an exchange rate policy that favored local industry, Fernandez said. The economy expanded 0.9 percent, compared with a 0.2 percent contraction in neighboring Brazil and a 1.5 percent decline in Chile. Fernandez, a former senator and the first woman to be elected president of Argentina, began her four-year term in December 2007. Kirchner, 60, took office when Argentina was recovering from the late-2001 financial meltdown that led to violent street protests, attacks on banks and five presidents in two weeks. In 2002, the peso, which had been pegged 1-to-1 to the dollar, declined 70 percent, unemployment peaked at 21.5 percent and the economy shrank 10.9 percent. Bond Yields Argentine dollar bonds yield 5.92 percentage points more than U.S. Treasuries, compared with a spread of 1.67 percentage points for Brazilian debt and 3.79 percentage points for Iraqi bonds, according to JPMorgan Chase & Co. Only Venezuela and Ecuador pay more than Argentina to borrow in dollars among all developing economies. Earlier this week Fernandez met Russian President Dmitry Medvedev in the first visit by a head of state from that country in the 125 years since diplomatic relations were established. Russian and Argentine officials signed a nuclear-energy co- operation accord that may open the door for billions of dollars in investments in the South American country, Medvedev said. Since taking power in 2007, Fernandez nationalized about $24 billion of pension funds and imposed taxes of as much as 45 percent on soybean exports, prompting strikes, roadblocks and declines in output. Argentina, the world’s third-largest shipper of soybeans, counts U.S. companies Cargill Inc. and Bunge Ltd . among its largest exporters. Inflation Calculations Inflation, calculated at 9.7 percent in the 12 months through March by the government, is running at about 25 percent, according to Alfonso Prat-Gay , an opposition leader in congress and former central bank president. Economy Minister Amado Boudou said in an interview this week the inflation data accurately captures a basket of goods consumed by low-income families. This year, Fernandez ousted central bank president Martin Redrado , after he refused to follow an order to transfer $6.6 billion in international reserves to the Treasury to pay debt.     “I had to leave the bank because I wasn’t very obedient,” Redrado said in an interview at the Bloomberg office in Buenos Aires yesterday. Ford Motor Co.’s April 7 announcement that it will invest $250 million in Argentina to produce a new vehicle for export is a sign of growing confidence in the economy, its human resources and policies. White Marble “Argentina is undergoing a transformation in which we are seen not only as a market, a customer, but as a partner,” Fernandez said from inside the Casa Rosada, a 19th century palace with white marble staircases protected by red carpets. Guards stand outside in the Plaza de Mayo, frequent site of demonstrations against the 1976-1983 military dictatorship. Fernandez said her decision in June 2009 to lend $70 million to General Motors to complete a new car model in the river port city of Rosario led her to reflect on how she has changed since her student days, when she shouted “Yankees, go home” in defiance of U.S. influence in Latin America. “These are the things that crises teach you,” said Fernandez. “Nothing is ever the same and one has to keep an open mind.” To contact the reporter on this story: Richard Jarvie in Buenos Aires at rjarvie@bloomberg.net

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Former NASA Head, Astronauts Ask Obama to Drop Plan to Kill Moon Missions

April 13, 2010

By Chris Dolmetsch April 13 (Bloomberg) — Former NASA officials and astronauts called on President Barack Obama today to keep the U.S. on course to return to the moon, saying his plan to kill the effort would sideline the American space program. Michael Griffin , who led the agency from April 2005 to January 2009, and Gene Kranz , flight director during the Gemini and Apollo missions, were among those who wrote in the Orlando Sentinel that Obama’s proposal would “reduce to mediocrity” the U.S. human space program. “NASA’s human space program has inspired awe and wonder in all ages by pursuing the American tradition of exploring the unknown,” the group wrote in an open letter to Obama posted on the Sentinel’s Web site. “We strongly urge you to drop this misguided proposal that forces NASA out of human space operations for the foreseeable future.” The letter comes two days before Obama is scheduled to travel to the Kennedy Space Center in Florida for a conference on the future of the U.S. space program. The president announced a plan in February to end the National Aeronautics and Space Administration’s Constellation program to develop rockets and spacecraft for a return to the moon by 2020. Former Johnson Space Center director Chris Kraft also signed the letter, along with astronauts including Jim Lovell , the commander who helped save the Apollo 13 mission in 1970, Gene Cernan, the last man to walk on the lunar surface, and former U.S. Senator Harrison Schmitt , another Apollo astronaut. Obama’s budget , which must be approved by Congress, would increase fiscal year 2011 NASA funds by 1.5 percent and back the development of rocket systems that eventually might take U.S. astronauts back into deep space. In preparation for those trips, Obama envisions using robotic craft to find locations for future landings and test out new technology. Under the proposed budget, rockets made by companies would be used to ferry astronauts to the International Space Station, which would have its life would be extended five years to 2020. Currently, the shuttles and Russian Soyuz vessels take astronauts to and from the outpost, which orbits more than 200 miles above Earth. To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net .

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Ukraine Accord to Relinquish Uranium Gives Obama First Result from Summit

April 13, 2010

By Viola Gienger and Kate Andersen Brower April 13 (Bloomberg) — Ukraine’s agreement to relinquish its entire stockpile of highly enriched uranium gave President Barack Obama the first concrete result for a summit he convened on securing the world’s atomic material. Under the terms of the accord, Ukraine will dispose of roughly 90 kilograms of the uranium, “enough to construct several nuclear weapons,” and convert nuclear research reactors to use lower grade fuel, White House press secretary Robert Gibbs said. The move was announced yesterday after Obama met with Ukraine’s President Viktor Yanukovych , their first face-to-face discussion since Yanukovych took office in February. “I think that at the end of this we’re going to see some very specific concrete action that each nation is taking that will make the world a little bit safer,” Obama said after he wrapped up a series of individual meetings with some of the leaders and representatives of nations in Washington for the summit. Obama’s stated goal for the event is a plan of action for locking down global nuclear stockpiles within four years to prevent al-Qaeda or other terrorist groups from getting the material through theft or illicit sales to fabricate a weapon. The United Nations atomic energy agency has documented 18 cases of theft or loss of highly enriched uranium or plutonium, not counting incidents that individual countries haven’t confirmed, according to Matthew Bunn , an associate professor at Harvard University who once worked as an adviser on U.S. nuclear controls. Al-Qaeda’s Interest “Al-Qaeda has been engaged in the effort to acquire a nuclear weapon for over 15 years, and its interest remains strong today,” John Brennan , Obama’s adviser on counterterrorism and homeland security, said at a briefing. In another step toward eliminating such material, Secretary of State Hillary Clinton and Russian Foreign Minister Sergei Lavrov are scheduled to sign a deal today in which each side agrees to dispose of 34,000 metric tons of weapons-grade plutonium, enough material for about 17,000 nuclear weapons. “These are both very significant measures and exactly the kind of thing that we hoped would be stimulated by holding this conference,” said Gareth Evans , a former Australian foreign minister who is co-chairman of the International Commission on Nuclear non-Proliferation and Disarmament . “It was a matter of this conference actually being the occasion to get people to the line on very specific commitments.” The U.S. and Russia’s Plutonium Management and Disposition Agreement was agreed to in principle by then-Presidents Bill Clinton and Vladimir Putin in June 2000. Disputes between the two governments over protocols to implement the accord delayed action until now. Extended Negotiations The agreement with Ukraine also is the result of years of negotiations. “This is something that the United States has tried to make happen for more than 10 years,” Gibbs said. The U.S. will provide some technical and financial assistance to dispose of Ukraine’s stockpiles by 2012, the date of the next nuclear security summit, Gibbs said. Canada’s Prime Minister Stephen Harper , who is in Washington for the summit, separately announced his country will send spent highly enriched uranium to the U.S. for processing to make it unusable for a weapon. Evans said he expects the communiqué from the summit to commit each country to take steps toward securing stockpiles and include support for ratifying various international agreements that have been stalled. Issues Unresolved Neither the summit nor the resulting statement will deal with radiological materials used for so-called dirty bombs, nor the disputed issue of recycling fuel already used in reactors for further use, he said.     “I think we all do anticipate that the summit will leave a substantial amount of unfinished business that will need strong, continued attention,” Evans said. Two potentially high-risk sources of illicit nuclear materials, Iran and North Korea, weren’t invited to the summit and aren’t specifically part of the agenda.     While Iran isn’t known to have succeeded in enriching uranium to weapons grade, its suspected support for militant groups raises the specter that it ultimately also might slip material to terrorist allies, said Robert Gallucci , a former U.S. special envoy on the spread of missiles and nuclear weapons. North Korea     In North Korea, Kim Jong-Il’s government has plutonium and said last year that it has almost succeeded in developing highly enriched uranium.     “We should not limit our concern about the nuclear programs in Iran and North Korea to their acquisition of nuclear weapons,” said Gallucci, now president of the John D. and Catherine T. MacArthur Foundation , which supports projects to reduce the risk of nuclear weapons.     Tracing material back to its source may be difficult and even tracking movement of nuclear supplies across the globe presents challenges, Gallucci said. He cited North Korea’s suspected role in helping Syria construct a nuclear reactor that the Israelis bombed in September 2007.     “To the best of my knowledge, the United States government was surprised to learn that the North Koreans were building a plutonium-production reactor in Syria,” Gallucci said. “That tells me that, if we are looking for relatively small amounts of material, we should not expect to catch that movement.” To contact the reporters on this story: Viola Gienger in Washington at vgienger@bloomberg.net ; Kate Andersen Brower in Washington at Kandersen7@bloomberg.net .

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Ukraine Agrees to Dispose of Enriched Uranium Stockpile by ’12, Gibbs Says

April 12, 2010

By Edwin Chen and Roger Runningen April 12 (Bloomberg) — Ukraine agreed to get rid of its stockpile of highly enriched uranium, enough for several nuclear weapons, in an agreement the White House announced as President Barack Obama opens a nuclear security summit in Washington. Obama expressed confidence that the summit will produce progress on checking the spread of nuclear weapons. “I think that at the end of this we’re going to see some very specific concrete action that each nation is taking that will make the world a little bit safer,” the president told reporters. On Ukraine, White House press secretary Robert Gibbs said its stockpile will be disposed of by 2012 under the agreement. Some of it may be shipped to the U.S. for storage as part of an effort to keep it out of the hands of terrorists. Russia also will have a role in disposing of the material. “This is something the United States has tried to make happen for more than 10 years,” Gibbs said at a briefing. Heading off the potential for nuclear terrorism is the top priority in Obama’s nuclear strategy, and the two-day Washington summit involving 46 nations and the U.S. is focused on steps toward the president’s goal of securing nuclear stockpiles worldwide within four years. Obama and Ukraine’s President Viktor Yanukovych met earlier today as the summit was getting under way. Gibbs said Ukraine will convert its civil nuclear research facilities to operate with low-enriched uranium fuel. Significant Measures In another step toward disarmament, Secretary of State Hillary Clinton and Russian Foreign Minister Sergei Lavrov are scheduled to sign a deal tomorrow in which each side agrees to dispose of 34,000 metric tons of weapons-grade plutonium, enough material for about 17,000 nuclear weapons. “These are both very significant measures and exactly the kind of thing that we hoped would be stimulated by holding this conference,” said Gareth Evans , a former Australian foreign minister. “It was a matter of this conference actually being the occasion to get people to the line on very specific commitments.” Evans, co-chairman of the International Commission on Nuclear non-Proliferation and Disarmament, is attending a conference of experts in Washington that is being held in parallel with the Nuclear Security Summit. John Brennan , Obama’s homeland security adviser, said at the briefing that al-Qaeda is determined to gain the material to make a nuclear device and such a weapon is the “most prized goal of terrorist groups.” “We cannot wait any longer before we lock down those stockpiles,” Brennan said. The consequences for failure would be “devastating.” Gibbs said the U.S. is “absolutely” willing to offer technical or financial assistance to other countries that want to unload their stockpiles. He said he had no estimate on what the cost of the Ukraine agreement would be to the U.S. Ukraine follows Chile, which was among the first to surrender highly enriched uranium, about 40 pounds, or 18 kilograms, that it got from Britain and France for two research reactors, the Associated Press reported today. The material was shipped last month to the U.S. after the country’s earthquake. The summit is the latest effort by Obama on one of his foreign policy goals, laying the groundwork for someday eliminating nuclear weapons. He signed a treaty with Russia last week to further cut their atomic weapons and the release of an administration doctrine that reduces the role of nuclear arms in U.S. defense strategy. The possibility of a terrorist group getting a nuclear weapon is “the single biggest threat to U.S. security” in the near and distant future, Obama said yesterday before meeting with South African President Jacob Zuma . Along with al-Qaeda, groups that have sought nuclear weapons include the Aum Shinrikyo cult that killed 12 people in a 1995 sarin gas attack on the Tokyo subway, according to Matthew Bunn , an associate professor at Harvard University who once worked as an adviser on U.S. nuclear controls. The United Nations atomic energy agency has documented 18 cases of theft or loss of highly enriched uranium or plutonium, not counting incidents that individual countries haven’t confirmed, Bunn said. The U.S. and Russia’s Plutonium Management and Disposition Agreement, to be signed tomorrow, was agreed to in principle by then-Presidents Bill Clinton and Vladimir Putin in June 2000. Disputes between the two governments over protocols to implement the agreement delayed action until now. Step in Process A White House fact sheet said the deal represents a step toward nuclear disarmament because weapon-grade plutonium will come from each nation’s stockpile. Disposal prevents “the plutonium from ever being reused for weapons or any other military purpose,” according to the National Security Council fact sheet. Each country will dispose of the plutonium by using it as fuel in civilian reactors to produce electricity, the council said. An initial pledge of $400 million in U.S. funds to help Russia dispose of its plutonium has been reduced to $100 million, the NSC said, and the amount will be spread over decades of verified disposal. To contact the reporters on this story: Edwin Chen in Washington at echen32@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net .

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Kaczynski Death to Aid Pro-Euro Tusk’s Grip on Poland

April 12, 2010

By David McQuaid April 12 (Bloomberg) — Polish Prime Minister Donald Tusk’s pro-euro Civic Platform party is likely to cement its grip on power in a presidential election that must now be held by June after President Lech Kaczynski died in a plane crash. Polls taken before the April 10 accident showed Civic Platform’s candidate, Bronislaw Komorowski , was running ahead of Kaczynski and other contenders in an election originally scheduled for October. The tragedy, in Smolensk, western Russia, killed all 96 passengers on route to commemorate the 70th anniversary of the massacre of thousands of Polish officers by Soviet forces. Following the crash, in which Left Democratic Alliance party candidate Jerzy Smajdzinski also died, Komorowski is left as the sole surviving contender of Poland’s three major parties. The only significant impediment to a Civic Platform victory may be the possibility of a wave of sympathy for the dead president, political commentators said, and that still probably won’t be enough to prevent Tusk extending his control over the political system. “This changes the whole political dynamic,” said Marek Matraszek, Warsaw based head of CEC Government Relations, which advises companies dealing with the government. “Does it cement Civic Platform’s dominance? That’s a very strong possibility.” With control of the government and the presidency, Tusk’s party would have more freedom to pass legislation needed to keep the budget in check and satisfy investors focused on fiscal health. ‘Hostile Figures’ Kaczynski, who over the past three years had tried to block government efforts to overhaul Poland’s debt-ridden healthcare and pension systems, was also the last EU leader besides Vaclav Klaus of the Czech Republic to sign the Lisbon Treaty, and opposed Tusk’s euro adoption goal. Kaczynski placed a euro-skeptic ally in charge of the central bank, Slawomir Skrzypek , who was also killed in the crash. “Investors viewed President Kaczynski and Skrzypek as hostile figures,” said Preston Keat , the London-based research director of Eurasia Group, a political risk consulting company. “What kept coming up in client meetings is that they were the two blocking forces to market reform.” Zloty Interventions Under Governor Skrzypek, Poland’s central bank last week intervened to cap zloty gains for the first time in 12 years. The currency is up 6 percent against the euro this year, making it eastern EU’s best performer in the period. The bank appointed Skrzypek’s deputy Piotr Wiesiolek as acting governor and will hold a meeting today to discuss how to proceed. “My sense is that the view that the zloty is appreciating too far and too fast is widely held in the central bank, so there’s no reason to believe they won’t come back into the market again next week or the week after,” said Blaise Antin , managing director of TCW Group Inc. in Los Angeles, which has $115 billion under management, including $4 billion in emerging market assets. The zloty lost as much as 0.7 percent against the euro today before recovering to trade at 3.873 at 10:04 a.m. in Warsaw. The currency will probably stabilize after investors digest the initial shock of the plane crash, Citigroup Inc. and RBC Capital said. ‘Out of the Way’ The central bank had also signaled it was deciding when to start raising interest rates from a record low 3.5 percent. “Uncertainty should be out of the way by June and we stick for now with our call of three rate hikes from July, but with risks to the downside given prospects of further intervention,” said Peter Attard Montalto , an emerging markets economist at Nomura International Plc, in a note to clients. He expects the country to join the pre-euro Exchange Rate Mechanism, a prelude to adopting the euro, in 2011. Poland abandoned its 2012 euro adoption target last July after it became clear it would miss the bloc’s fiscal targets. Tusk now says 2015 is a “realistic” date. Though polls show Komorowski was likely to win the October elections, an earlier presidential victory may allow the Civic Platform more time to push through policy changes. Longer Rule “There is now likely to be a longer period of Civic Platform presidential rule before the parliamentary elections in 2011,” Montalto said. “This should allow the privatization program, the passage of other laws and fiscal reforms to progress more smoothly through the second half before campaigning for the parliamentary elections starts next year.” Support for Civic Platform party rose to 53 percent from 50 percent, Rzeczpospolita reported on March 11. Support for Kaczynski’s Law & Justice, was unchanged at 27 percent, while the Left Democratic Alliance increased its support to 8 percent from 7 percent, according to a poll of 1,000 adults by researcher GfK Polonia. Poland, the biggest of the EU’s eastern members and the only EU economy to have avoided a contraction during the credit crisis, will post a budget deficit of 7.5 percent of gross domestic product this year, with debt of 57 percent of GDP, the European Commission estimates. Economic output will expand 3 percent in 2010 after growing 1.7 percent last year, the government estimates. Poland may also improve its ties with Russia after the disaster. Kaczynski, an advocate of extending North Atlantic Treaty Organization membership to Russia’s borders by including Georgia and Ukraine, didn’t attend an April 7 reconciliation meeting with Tusk and his Russian counterpart Vladimir Putin to mark the 1940 Katyn massacre, flying instead with his own delegation three days later. Russian Efforts Since the crash, Russia’s political leaders have taken pains to demonstrate their sympathy and assist Poland. President Dmitry Medvedev appointed Putin the head of the special commission looking into the crash and made an address to Polish citizens expressing his condolences. Today is a national day of mourning in Russia to mark the Polish deaths. “The momentum that’s been generated over the past few days is just astounding,” said Bartlomiej Sienkiewicz, who heads Othago, a Warsaw-based consultancy that helps firms do business in former Soviet Union countries. “It means the possibility of doing serious business with Russia and breaking the mold of 20 years of strained relations.” To contact the reporter on this story: David McQuaid in Warsaw dmcquaid1@bloomberg.net .

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Obama Signals End to Cold War in Deal With Medvedev to Cut Nuclear Arsenal

April 8, 2010

By Julianna Goldman April 8 (Bloomberg) — U.S. President Barack Obama and Russian President Dmitry Medvedev , pledging to cut their countries’ nuclear arsenals by about a third, put their signatures to an arms-reduction treaty that opens a new chapter in relations between the two former Cold War enemies. Obama and Medvedev sealed the agreement in a ceremony in Prague. U.S. officials have said the new Strategic Arms Reduction Treaty demonstrates the American commitment to reducing the spread of nuclear weapons and will encourage other countries to work toward that goal. “Today is an important milestone for nuclear security and non-proliferation, and for U.S.-Russia relations,” Obama said in remarks after the signing. The treaty, he said, “will set the stage” for further cuts in nuclear weapons. The U.S. president is seeking to use the accord in his effort to build international support for tougher sanctions against Iran over its nuclear development program and to get a global consensus on steps to prevent terrorists from getting atomic material. The arms treaty was signed just days after Obama released a document outlining U.S. policies on nuclear weapons that marked a shift in doctrine to focus more on the threat from extremist groups and nations such as Iran and South Korea rather than confrontation with nuclear powers such as Russia. Missile Defense The two sides remain at odds over the missile defense system the U.S. plans to deploy to guard against an attack by rogue nations, such as Iran. Russia issued a separate statement reiterating its position that it reserved the right to withdraw from the START Treaty if there was a “qualitative or quantitative” buildup.     The White House rejected that position and played down the differences, arguing that such statements have been part of arm- reduction treaties dating to the Nixon administration. Brian McKeon, deputy national security adviser to Vice President Joe Biden , wrote on the White House Web site that “each side is making its intentions clear — to the other party and to the world.” The U.S. remains “committed to continuing to develop and deploy” the missile defense system, McKeon, who will be leading the effort to win U.S. Senate ratification of the treaty, wrote. Obama said he and Medvedev will continue discussions on the defense system. To contact the reporter on this story: Julianna Goldman in Prague at jgoldman6@bloomberg.net

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Obama Will Use Russia Arms Accord as Leverage to Curb Iran Nuclear Program

April 7, 2010

By Julianna Goldman April 8 (Bloomberg) — President Barack Obama signs a nuclear-arms treaty with Russia today that he will try to use to build international support for increasing pressure on Iran and preventing terrorists from getting atomic material. Obama and Russian President Dmitry Medvedev will gather at noon for a ceremony in Prague to cap the deal. U.S. officials have said the new Strategic Arms Reduction Treaty, which trims the U.S. and Russian arsenals by about 30 percent, bolsters the American commitment to Non-Proliferation Treaty obligations and will encourage other countries to demand compliance. The accord “shows the world, particularly states like Iran and North Korea, that one of our top priorities is to strengthen the global nonproliferation regime and keep nuclear materials out of the wrong hands,” Secretary of State Hillary Clinton said March 26, when the deal was announced. Iran has rebuffed calls to stop what the U.S. and its allies say is the Islamic republic’s pursuit of a nuclear- weapons capability and to engage in negotiations. Obama, who said March 30 he would push for tougher United Nations Security Council sanctions on Iran “within weeks,” needs broad international enforcement of potential new measures such as authority to seize Iranian cargoes and cut off credit. “If the U.S. and Russia did not get moving together on reducing nuclear weapons, nobody else in the world is going to,” former U.S. Defense Secretary William Perry said in an interview. “The whole issue of trying to contain nuclear proliferation and trying to deal with rogue states would have a huge setback.” It was in Prague a year ago where Obama articulated a vision of a nuclear-free world that won him a Nobel Peace Prize. Obama’s Summit The message will carry over to Obama’s April 12-13 summit in Washington, where he will host representatives from 46 nations, including Medvedev and Chinese President Hu Jintao , to seek consensus on steps to halt the spread of nuclear material. Obama’s strategy to build on START may have limits, said Sam Greene , deputy director of the Carnegie Moscow Center, a public-policy institution. “While the U.S. may try to make the most of the momentum it has gained with Russia, Moscow will want to maximize its room for maneuver in each specific case, whether on Iran, Afghanistan or any other major issue of concern to the U.S.,” Greene said in an e-mail. “Moscow will not want to feel tied down.” Obama made the prevention of nuclear terrorism a top goal of U.S. atomic policy this week as he revamped Cold War-era guidelines in the Nuclear Posture Review that defined limits on the role of nuclear weapons in defense. ‘Making Good’ “This signing of the treaty and this Nuclear Posture Review are two very tangible steps that, in effect, are making good on the promise of the vision” Obama described last year, Perry, who served in former President Bill Clinton ’s administration, said. The U.S. will set an example through START, said one advocate for eliminating nuclear weapons, Joseph Cirincione , who heads the San Francisco-based Ploughshares Fund , a nuclear policy group. “In order to get the cooperation you need to stop Iran from getting nuclear weapons, you’ve got to restore the credibility of the U.S. by reducing its own stockpile of weapons,” Cirincione said. The arm-reduction treaty also helps to lay the groundwork for next month’s non-proliferation treaty review talks in New York, analysts said. ‘Light Tower’ “It’s the light tower that tells the rest of the world what is the role of nuclear weapons,” said Micah Zenko , a fellow at the Center for Preventive Action at the Council on Foreign Relations . “The U.S. and Russia are not particularly safer because of this agreement, but because of the other sort of cooperation that it leads to, we are safer.” Some critics contend Obama should be focused less on incremental cuts in nuclear stockpiles and more on efforts to prevent countries, such as Iran, from gaining a weapon. The new START agreement doesn’t take into account “that we’re adding another country to the list of those who have nuclear weapons,” said Lawrence Eagleburger , who was secretary of state under former President George H.W. Bush. “Once Iran is a nuclear weapon state, there are bound to be other countries who look at this and say, ‘They are, we should be too,’” Eagleburger said in an interview. “Then it’s off to the races.” Administration officials counter that START is the latest effort to reset relations with Russia and say they hope it opens the way to greater cooperation to stop Iran’s nuclear ambitions. Russian View The U.S. says the treaty doesn’t restrict missile defenses to thwart an attack by states such as Iran and North Korea. That issue remains a sticking point with Russia, which has said it reserves the right to pull out of the accord if a U.S. system posed a threat to its nuclear arsenal. Foreign Minister Sergei Lavrov said April 6 Russia could exit the treaty if “the U.S.’s build-up of its missile defense strategic potential in numbers and quality begins to considerably affect the efficiency of Russian strategic nuclear forces.” To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

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