Russia 01 (May 08 - Jul 10)

[millionairemind]

Russians issue legal threat to TNK- BP's Robert Dudley
By Russell Hotten, Industry Editor
Last Updated: 10:51pm BST 23/07/2008

The Russian billionaires fighting BP for control of their joint venture, TNK-BP, have turned up the heat on its chief executive, Robert Dudley, accusing him of breaching his duties and warning they may seek damages running into hundreds of millions of pounds.

In a letter to Mr Dudley, seen by The Daily Telegraph, the Russians claim Mr Dudley approved investments despite their opposition, and so they "reserve the right to seek all available remedies against you personally...because you have failed to act in the best interests of all shareholders".

Mr Dudley has for months been at the centre of a power struggle between BP and the Russians, who operate under a consortium called AAR. His visa expires next week, and, with AAR opposing its renewal, it looks likely that Mr Dudley will have to leave the country. It is understood that AAR is already making preparations to run the company should he leave.

AAR - controlled by Mikhail Fridman, Viktor Vekselberg, and Leonid Blavatnik - claims Mr Dudley sanctioned capital expenditure above an agreed $3.5bn (£1.75bn) limit. The letter to Mr Dudley says spending is at least $900m higher. "Such action on your part represents a serious breach of your duties to TNK-BP," it says.

The Russians want higher dividend payments and for TNK-BP to seek out new investment opportunities abroad. But the letter, from AAR's chief executive, Stan Polovets, accuses Mr Dudley of focusing on increasing TNK-BP's oil and gas reserves. "While the emphasis on reserve replacement may be in the interests of BP, it is not in the interest of AAR and TNK-BP's minority shareholders," Mr Polovets writes. Last night, a BP spokesman rejected the allegations: "We are confident TNK-BP's capital spending plan is being carried out according to a plan agreed by the TNK-BP board."

BP, like all major oil companies, is trying to bolster its reserves, and cutbacks on capital expenditure could be damaging for all TNK-BP shareholders, analysts said yesterday. However, this latest pressure on Mr Dudley is seen as part of a wider long-term battle for control of Russia's third largest oil producer, which last year made profits of $5bn on sales of $38bn.

BP has been under siege in Russia for months, with police raids on its Moscow office, problems getting visas for staff seconded to TNK-BP, and legal action from a minority investor. On Wednesday, the UK company withdrew its remaining 60 engineers.

Last month, AAR tried to sack Mr Dudley, a move blocked by BP. But a dispute over whether he has a valid employment contract threatens his right to a work visa, which expires next Thursday. BP says it will not be "bullied" out of Russia and that it will use legal action to retain its assets.

However, AAR is already making plans for a new management team at TNK-BP. It expects Timothy Summers, TNK-BP's chief operating officer, to take over until a new chief executive is found. Until joining TNK-BP in April 2006, Mr Summers was executive assistant to Lord Browne of Madingley, BP's former chief executive.

Under the joint venture terms, BP has the right to nominate a chief executive, which AAR can approve or reject. But BP said yesterday that even if Mr Dudley leaves Russia, he will still be TNK-BP's legal chief executive and so there is no need for a new candidate.

[winston]

In 1998, Moscow was in crisis. More than 100,000 Russians took to the streets as a slew of banks – and the life savings of millions of citizens – went bust.

But just a decade later, the global commodities boom has made Russia flush with cash, and Moscow has become a pricey place to live.

That's the finding in Mercer's 2008 Worldwide Cost of Living Survey. Moscow tops the list with a score of 142.4, up 6% from last year – and 42% higher than New York, the most expensive city in the U.S.

The Russian capital is followed by Tokyo; London; Oslo and Seoul, South Korea.

Moscow is home to 74 billionaires, the most of any city in the world.

– Forbes

[winston]

Russian Steel, Coal Shares Plunge After Putin Criticizes Mechel
By William Mauldin

July 25 (Bloomberg) -- Russian steel and coal stocks plunged after Prime Minister Vladimir Putin called for antitrust authorities to investigate OAO Mechel for its pricing of raw materials in Russia.

OAO Severstal, Russia's biggest steel producer, tumbled 22.40 rubles, or 4.9 percent, to 436.01 rubles on the Micex Stock Exchange as of 11:31 a.m. local time. OAO Raspadskaya, a coking coal producer, fell 11 percent to 169 rubles. The Micex Metals and Mining Index sank 6.4 percent to its lowest level since October.

Putin criticized Mechel's billionaire shareholder Igor Zyuzin for not appearing at a meeting with steelmakers yesterday and said the company should be investigated because it sold raw materials in Russia in the first quarter at twice the price of exports.

Mechel's New York-traded American depositary receipts plunged 38 percent to $22.84 yesterday. The stock lost $14.10, or 39 percent, to $22.50 on Moscow's RTS Index today. Mechel is more heavily traded in New York than in Moscow.

[millionairemind]

Russia reaches investors' tipping point after BP affair sours

After TNK-BP's president Robert Dudley fled Russia earlier this week, foreign investors fear they are witnessing a return to the dark days of the 'Wild East'. Adrian Blomfield reports from Moscow

Not since the arrest of Yukos proprietor Mikhail Khodorkovsky in 2003 - perhaps not even since the rouble crash of 1998 - have foreign investors been so dejected about Russia.

Consider these comments from leading western fund managers, bankers and strategists in the hours since Robert Dudley, the chief executive of TNK-BP, was forced to flee Russia on Thursday:

"The last train carrying the optimists out of Russian equities has just left the station," was one reaction.

"The place looks rotten to the core," was another.

"There is no longer an investment case for Russia now," opined a third. "Russia has reached tipping point."

A fourth agreed: "The Russian government doesn't care about foreign investors. If foreign investment gets stomped on, then so be it."

For businessmen whose attitude towards the country has generally been one of extreme optimism, often in defiance of political trends and the counsel of those whose fortunes do not depend on Russia, this is despondent stuff.

Dudley is a symptom rather than a trigger for the gloom.

Four months after Dmitry Medvdev became president vowing to inculcate in his people a respect for the rule of law, the country's already tarnished investment climate has once again taken on the hue the lawless 1990s, a decade when Russia was known as the Wild East.

Nor has it just been BP, through its 50 per cent stake in TNK-BP, which has been caught up in what looks like a state-sanctioned assault on private property rights.

In recent months William Browder, who ran what used to be Russia's largest foreign portfolio investment fund, has revealed a staggering fraud in which three of his companies were stolen with the apparent collusion of interior ministry officials.

More recently, Mechel, a large steel firm, fell victim to what critics claim is a politically motivated campaign by the state anti-monopoly authorities.

On Thursday, Vladimir Putin, who gave up the presidency to become prime minister in May but remains Russia's most powerful man, launched a chilling attack on Igor Zyuzin, Mechel's owner.

Zyuzin had failed to turn up to a meeting with the prime minister, purportedly to explain improper pricing practices, because he had been admitted to hospital with heart failure. It was not an excuse that impressed Putin, who summoned up all the menace of his KGB past to deliver a warning to the hapless tycoon.

"Of course, illness is illness," the prime minister announced in a televised meeting with officials in the city of Nizhny Novgorod. "But I think Igor Vladimirovich (Zyuzin) should get better as soon as possible otherwise a doctor will have to be sent to see him to clear all these problems up."

Putin then ordered the state prosecution service to look into bringing a criminal investigation against the company. Investors, remembering similar assaults on Yukos in 2003, quickly took the hint and shares in Mechel fell 30 per cent on Friday.

But it is the saga of TNK-BP, and the murky role the state has played in it, that has spooked foreign investors so much.

BP's Russian billionaire partners, who own the other 50 percent of the TNK-BP joint venture, have clearly used highly unorthodox tactics that could have only been sanctioned at state level to gain an upper hand in their shareholder dispute.

Since things began to get nasty between the two sides, BP has faced a cocktail of lawsuits from obscure minority shareholders, labour investigations, an industrial espionage enquiry and visa hassles that have forced the withdrawal not just of Dudley but also of all the company's 148 specialist contractors.

Truncated...

To read the rest of the story http://www.telegraph.co.uk/money/main.j ... cbp127.xml

[winston]

For people from countries where the "Rule of Law" is practised, the situation in Russia is incomprehensible

For people from countries where "connections matters", the situation in Russia is just everyday life.

[kennynah]

For people from countries where the "Rule of Law" is practised, the situation in Russia is incomprehensible

so, we become food in russia....

[LenaHuat]

2day I bought a Nike sports shirt (Made in Cambodia...first time I see this) and also 2 Adidas T-Shirts (Made in Thailand and China). Adidas is cutting back production in China becuz of costs. It announced that it is looking to Cambodia, Laos and Vietnam. But see how the Russians luv Adidas :

MOSCOW, May 20 (Reuters) - German sports goods maker Adidas (ADSG.DE: Quote, Profile, Research, Stock Buzz) expects sales in Russia to reach $1 billion in 2009, Chief Executive Herbert Hainer told reporters on Tuesday. "Russia and China are the most profitable and dynamically developing regions for Adidas Group in the world," he said.

Hainer declined to give a forecast for this year neither did he disclose the company's sales in Russia in 2007.

He said Adidas' Russian sales have been growing by an annual 50 percent in the past seven years.

At the end of 2007, Adidas operated over 460 stores in Russia and the former Soviet Union states and is planning to take that number to more than 750 stores in 2008, Hainer said.

Adidas is the world's second-biggest sports goods maker after Nike (NKE.N: Quote, Profile, Research, Stock Buzz). It expects Russia and the CIS countries to become its biggest market in Europe by 2010. (Reporting by Maria Plis; Writing by Maria Kiselyova; editing by Sue Thomas)

[winston]

Tough talk on one resources company and inaction toward chaos at another have dealt a harsh blow to Russia's investment case, as investor concern turned toward the political environment.

Russia's failure to cool the gloves-off battle for control over oil company TNK-BP, coupled with Prime Minister Vladimir Putin's outburst toward miner Mechel, slammed the Russian stock markets Friday.

That left the benchmark RTS index, already stuttering amid falling commodities prices, languishing at a six-month low and in bear-market territory, with investors jumping for cover and some even drawing comparisons to market situation of a few years ago surrounding now-bankrupt oil producer Yukos.

"The last train carrying the optimists out of Russian equities has just left the station," said UralSib strategist Chris Weafer.

– Wall Street Journal

[winston]

Emerging-market stock investors should sell holdings in Russia and Brazil and buy Chinese shares as the global economic slump reduces profits at energy companies and cools inflation in China, JPMorgan Chase & Co. said.

Russian equities were cut to "underweight" from "neutral" today by JPMorgan strategists including Adrian Mowat, who cited slowing demand for commodities and the risk of "unconventional" government policies to stem price increases.

Russia's Micex Index has declined 24 percent this year and plunged 5.5 percent on July 25 after Prime Minister Vladimir Putin called for an investigation of prices charged by steelmaker OAO Mechel.

– Bloomberg

[winston]

Russia must stop 'terrifying' business: Medvedev

Russian President Dmitry Medvedev has told officials the state must stop "terrifying'' business, following controversies over British-Russian oil firm TNK-BP and other companies.

"We've had enough of inspections and all sorts of raids . . . In general, our law enforcement and state institutions should stop terrifying business,'' Medvedev told ministers at a meeting broadcast on state television.

Medvedev spoke days after his mentor, Prime Minister Vladimir Putin, accused a Russian mining company, Mechel, of price-fixing and tax evasion in scathing comments that wiped billions of dollars off the publicly listed company's capitalisation.

And last week Robert Dudley, chief executive of TNK-BP, was forced to flee Russia amid a bitter boardroom battle between British oil giant