In February, the dispute over the group of enterprises belonging to “Bashneftekhim” was brought to an end. As early as 2003, the controlling block of shares in these businesses had passed free of charge to the structures owned by U. Rakhimov, son of the President of Bashkortostan, and in 2006 the Federal Tax Service had initiated legal proceedings against the owner demanding that the shares be recovered to the revenue of the State under Article 169 of the RF Civil Code (The Invalidity of a Transaction Concluded for a Purpose Contrary to the Fundamental Principles of Legal Order and Morality).
Initially, the legal cases were won by the Federal Tax Service, but in 2008 the situation changed with the Supreme Court of Arbitrations clarifications having considerably aggravating the legal process.
As a result, the Federal Tax Service withdrew the action. Some experts believe that “Bashneftekhim” will be sold, possibly to the existing minority shareholders – the structures belonging to the Joint – Stock Financial Corporation “Sistema”. We think that there is an equally strong possibility that “Bashneftekhim” will continue to be owned by the Rakhimov family, known for its unexpected political maneuvering.In February, the jury in the Anna Politkovskaia murder trial acquitted former Ministry of Internal Affairs officer S. Hadzhikurbanov, charged with organizing the murder of the journalist, and the brothers D. and I. Makhmudov and former FSB (Federal Security Service) officer P. Riaguzov, charged with direct involvement in the murder. (Yet another Makhmudov brother, charged with perpetrating the murder, is wanted by police). The trial was very tense. The defendants all pleaded not guilty; while at the same time there was a lot of indirect evidence incriminating them (for example, telephone calls from the crime scene, made both on the day of murder and previously – from the district where the victim resided). So far as the investigation was concerned, its story was full of weak points, such as contradictions in the descriptions of the murderer appearance and height, in the descriptions of the get-away car, etc. The collected evidence could point to the defendants complicity in surveillance of Politkovskaia, rather than in her murder (by the way, a similar situation had arisen with regard to the investigation in the Deputy Chairman of the Central Bank A. Kozlov murder case, when the defendants pleaded guilty to carrying out surveillance, not murder). In accordance with the sad tradition, the court proceedings were marked by the withdrawal of five jurors on dubious grounds (forSome of the enterprises where Deripaska is the controlling shareholder - for example, GAZ - are already in default.
In late 2003, when M. Rakhimov was facing the prospect of defeat after the first round of Bashkortostan’s presidential election, the local leadership expressed its readiness to reach a compromise with the central authorities – the readiness that rapidly waned to zero after Rakhimov’s victory.
tunately, the remaining jurors formed a minimum quorum for rendering a verdict). Although the Investigation Committee at the RF Prosecutor Generals Office promised to file an appeal against the verdict, this judicial denouement signified yet another considerable failure of the Committee to adequately collect evidence in celebrated cases.
In February, the judicial authorities announced that yet another legal proceedings against M. Khodarkovskii and P. Lebedev would start in Moscow on 3 March. These criminal proceedings were initiated several years ago. Lengthy and slow, they offered a lot of possibilities for the case to be developed in one direction or another. According to the investigation, in the period between 1998 and inclusive the defendants have laundered illegal incomes in the amount of 450 billion rubles and 7.billion dollars, stole oil and shares belonging to the State, etc. These charges do nor deserve serious consideration for various reasons. Firstly, it is the precedent set by the previous trial, when Khodarkovskii and Lebedev were convicted, among other things, for inflicting damage to the Yukos company which they owned (that is, to themselves – if we are to follow the logic of the prosecution). Secondly, it is the amount of “damage inflicted” on the State, unprecedented in world history. Thirdly, it is for the second time that one and the same period of the economic activity of the companys leaders is to be considered. Essentially, the new trial of Khodorkovskii and Lebedev is a demonstration of the authorities resolution not to release its political opponents3, as well as of the regimes general policy with regard to business – every entrepreneur should beware of the risk of being convicted. Nothing has changed in Russia in this respect.
In February, there was a number of interesting appointments to high positions. In Voronezh Oblast, V. Kulakov was replaced in the position of Governor by A. Gordeev, heretofore Minister of Agriculture; in Orel Oblast, Ye. Stroev was replaced by Deputy Minister of Agriculture A. Kozlov; in Nenets Autonomous Okrug, V. Porapenko was succeeded by Vice-Governor of Archangelsk Oblast, responsible for the fuel and energy complex, I. Fedorov: and in Pskov Oblast M. Kuznetsov was replaced by Andrei Turchak, the Federation Council deputy from that region. The new RF Minister of Agriculture has not yet been appointed. In February, Governor of Vladimir Oblast N. Vinogradov and President of Udmurtia A. Volkov were reappointed to their respective positions.
So far as the deposed governors are concerned, no clear tendency can be detected. Both Kulakov and Stroev were rather unpopular heads of administration of depressed territories, but the same can be said about Vinogradov and Volkov, who have retained their positions. Nenets Autonomous Okrug is “politically suspicious” – thus, it was there that United Russia achieved its worst result in the parliamentary elections; and it should also be remembered that V. Potapenko, an official from St. Petersburg appointed Nenets governor in 2006, has preserved the rich okrugs independence from the poor Archangelsk Oblast in defiance of the Presidential Administrations policy for enlarging Russian regions. At one time, one of the last elected governors, M. Kuznetsov, had won at the ballot box despite strong opposition from the Kremlin, and then resisted the repeated attempts to convert him into one of the flock. Thus, it can be said that the case in point is first of all to clear the ground for the “right candidates” – the team of Minister Gordeev; Andrei Turchak, the 32-year-old son of St. Petersburg businessman Anatolii Turchak, known for his friendship with B. Gryzlov; and I. Fedorov entrusted with the political task to promote the merger of the Federations subjects. By the way, it is interesting that in the latters case the federal center is risking to produce a new “hot spot”, because the Nenets Okrugs elites and the influential oil companies working in the Okrug are not interested in its merger with Archangelsk Oblast.
It is likely that we should expect further personnel changes in the second and third echelons of power, because the above–mentioned dismissals and appointments have been publicly presented as those designed to replace inefficient top officials: bearing in mind the current crisis, one can be sure that there will no shortage of reasons for such personnel changes.
In February, the potential for protest in the regions manifested itself by the noisy scandal dealing with the outsider V. Radchenko having been appointed head of the Tax Service of Dagestan. Radchenko was abducted at gun point from his office at the Ministry and received an ultimatum to leave the republic. Radchenko laid the blame for his abduction on G. Aliev, son of Dagestans President Arrested in 2003, Khodarkovkii was sentenced in 2005 to nine years’ deprivation of freedom, served two-thirds of his term and now has the right to ask for parole. In any case, he has to be released in 2012 – by coincidence, the Presidential election year.
Mukhu Aliev, but was unable to take office, and no measures against the reputed perpetrators of the crime were taken by the authorities. Moreover, Dagestans President Mukhu Aliev openly took the side of Radchenkos opponents, appealing to some “traditions” (absolutely irrelevant to Russian legislation), according to which appointments to this position should be made on the basis of ethnicity. In February, there was a meeting between D. Medvedev and M. Aliev, which resulted in the latters statement that Dagestan would have a different minister. The federal center was forced to succumb.I. Kriskovets became general director of the federal state unitary enterprise “Rosspirtprom” (his predecessor, I. Chuian, had been promoted to the position of head of the Federal Service for Alcohol Market Regulation).
In February, two notable resignations took place in the judicial corps: the Supreme Qualification Collegium of Judges cancelled the powers of L. Maikova, Chairman of the Federal Court of Arbitration of Moscow District, in connection with her having violated ethical standards (Maikova, without being in need for better housing conditions, had obtained an apartment from the Government of Moscow and then sold it). This case had been dragging on for nearly a year – Maikovas resignation had been initiated as early as last May, but the judicial community did it best to hamper the consideration of the case by submitting various inquiries to the Supreme Court with regard to the consideration procedure. The case was of symbolic importance, because one of the parties to the dispute, A. Ivanov, is believed to be one of the few protgs of D. Medvedev. Finally, Ivanov won. The second resignation, that of A. Karpov, Deputy Chairman of the Supreme Court., was voluntary (his elder son had been arrested in Orel for having offered assistance in resolving some issues in the Supreme Court – for a bribe).
Inflation and monetary and credit Policy N.Luksha In January inflation in Russia has accelerated: within the month, the CPI has reached 2.4 per cent.
Herewith, foreign currency reserves continued to decrease, their volume amounted to USD 386.9 bln as of February 1, 2009 and made USD 386.9 bln, as compared with USD 427.1 bln a month before.
RUR real effective exchange rate decline was continued: In January, the decline has reached 7.4 per cent. To curb the inflation and support the RUR rate, the Bank of Russia has adopted a more tough credit and monetary policy and has upgraded the interest rate twice. To expand the capabilities of the large Russian companies in terms of funds attraction, the RF CB has extended its lombard list. Moreover, the Bank of Russia has educed requirements to the own capital of the banks, which have the right for recovery of a part of their losses, incurred in the interbanaking market.
The consumer price index in January made 2.4 per cent (against 2.3 per cent in the relevant period of preceding year) (Fig. 1.). The utmost growth rates were observed in prices for commercial services (by 6.3 per cent), including municipal housing services (+14.4 per cent), international tourism (+6.per cent), pre-school education (+4.6 per cent) and public transportation (+ 4.3 per cent). There was no reduction in prices in any public services in January.
In January the high growth rates were observed in prices for food stuffs (+1.4 per cent). In particular, high growtn was demonstrated for granulated sugar (+11.5), fruit and vegetables (+4.7 per cent), fish and seafood (+ 1.7 per cent). Herewith, continued further downgrading in was observed in regard to sunflower oil (-1.4 per cent). As opposed to that, grits and beans, which prices were growing within the last monhs of the past year, have downgraded in Janaury by 0.4 per cent. Prices for eggs stopped growing (their cost decline has made -2.2 per cent).
In January, the growth was observed also in regard to non-food items, which prices have increased by 0.8 per cent on average. The highest growth rates were noted for medicines (+3.1 per cent), tobacco (+1 per cent), knitwear and cleaning agents (by 0.8 per cent each). Herewith, the price for gasoline was further downgrading (-4.2 per cent).
Therefore, in January the rate of consumer prices remained at rather high level. Within two weeks of February prices have grown by another 0.8 per cent, having exceeded the indicator of the past year (3.2 per cent since the 2009 beginning, against 3.1 per cent a year earlier). As a result, despite the Otherwise there would have been M. Aliev’s resignation.
crisis and the sharp decline in producers prices (for example, 7,6 per cent in December 2008, 2.7 per cent in January 2009) and the decrease in aggregate consumer demand, the consumer prices are still growing. In our view, the significant factors, contributing to inflation, such as the RUR devaluation, a significant increase in iflation expectations and, therefore, reduced monetary demand are the resullts of dollarization of the economic agents. In our estimates, the CPI5 in January 2009 made 1.3 per cent (versus 1.3 per cent in the relevant perios of preceding year).
Source: Rosstat Fig. 1.
Within January 2009, the monetary base (in broad definition6) has decreased by RUR 1247,6 bln, to RUR 4331,1 bln (-22.4 per cent). The volume of the monetary base in broad definition made RUR 5578,7 billion as of January 1, 2009. Let us consider the dynamics of the monetary base in broad definition by components.
As of February 1, 2009, cash in circulation with regard to the fund balances in credit organizations made RUR 3.7 trillion (14.5 per cent decline against January 1), correspondent accounts of credit organizations in the Bank of Russia made RUR 471.2 billion (-54.1 per cent), mandatory reserves made RUR 29.5 billion (- 01.3 per cent), banks deposits in the Bank of Russia made RUR 81.1 billion (- 40/6 per cent), the value of shares of the Bank of Russia with credit organizations made RUR 12.billion (-2.4 per cent). Reduction of the monetary supply was provoked on the one hand, by the seasonal factor (resumed growth rate of monetary base due to the year-end trend of traditional increase of budget expenditures growth) and on the other hand, by extensive foreign currency purchases by both, individuals and banks in the situation of RUR.