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. Last Updated: 07/27/2016

BUSSINESS WEEK IN REVIEW: November 29 to December 5

'98 Budget Accord

Long-time rivals moved closer to accord last Friday when the State Duma passed the first reading of the 1998 budget, following an unprecedented personal appeal in the chamber by President Boris Yeltsin.

Communists in the Duma had long vowed to block the government's draft spending plan. Although the first reading is the most substantive, the document must pass three more Duma readings before going to the upper house.

Markets Recover

Following weeks of losses and slow trading, Russia's markets gained 16 percent last week amid higher trading volumes. Foreign and domestic government debt prices recovered somewhat, with yields on three-month treasury bills dropping to 33 percent, down from 41 percent Wednesday.

Russia's Central Bank said Friday it had stopped intervening on the foreign currency market to protect the ruble, as the rally on the T-bill market staunched the demand for dollars. Central Bank reserves have fallen to approximately $18 billion, down from $22. 6 billion at beginning of November. Another $5 billion is expected to be withdrawn from the market by end of year.

Financing Holes

The government has reportedly approached four Western banks -- Salomon Brothers, Credit Suisse First Boston, Chase Manhattan and Deutsche Morgan Grenfell -- for a credit line worth some $2 billion, reportedly secured by shares in state oil company Rosneft.

The Central Bank said Monday that Russia was likely to receive a delayed $700 million tranche from the International Monetary Fund, but the IMF said last Tuesday that it is conducting a week-long review of Russia's ability to meet the $10 billion loan.

London Club Deal

Russia and the London Club of creditor banks finalized a landmark $32.3 billion deal Tuesday that structures the repayment of Soviet-era debt to 423 Western banks.

Alfa Bank head Pyotr Aven said Friday that top Russian banks would be able to cover losses they incurred speculating on the final value of the London Club deal, as well as losses incurred during recent market chaos, but smaller banks may have trouble covering unhedged positions.

Wooing the Swedes

During Yeltsin's state visit to Sweden last week, automaker Volvo announced it would produce trucks and buses with an as-yet-undecided Russian enterprise, and telecoms giant Ericsson announced a JV deal with Russian financial company Sistema and a second JV to produce equipment with Nizhny Novgorod Svyazinform and Russian telecoms vendor Nitel.

The head of Swedish forestry group AssiDoman blamed bribery and bureaucratic red tape for holding down its projects in Russia.

Gazprom Looks Ahead

Gazprom aims to invest $40 billion over the next eight years to fund global expansion plans. Gazprom deputy chairman Pyotr Rodionov said the company will seek to raise $9 billion to $12 billion before the end of the decade through American Depositary Share placement, convertible bonds, loans and Eurobonds.

Yeltsin intimated that Gazprom head Rem Vyakhirev has been dragging his feet on signing a new agreement that would give the government more control over the state's 35 percent stake, which he currently manages in trust.

Corporate Watch

Uneximbank has signed an agreement with Unikombank, Vozrozhdeniye Bank and the Moscow regional government to form a new banking group, the United Banking Group.

California-based ICN pharmaceuticals said it will switch its Eastern European headquarters from Belgrade to Moscow by the end of December to boost its Russian presence.

Good News?

The Organization for Economic Cooperation and Development forecast Friday 3 percent growth in the Russian economy next year. The body's prediction for ruble and GDP growth rates were more optimistic than those of the Russian government.

The Federation Council voted overwhelmingly against a draft law that would have compelled retailers to notify the tax office when consumers made purchases of $14,000 or more.