. Last Updated: 07/27/2016

Business in Brief

Reserves Hit High

MOSCOW (Reuters) -- Foreign exchange reserves leapt by $700 million to hit an all-time high of $65.4 billion, suggesting that capital flight may not be as high as initially anticipated, economists said Thursday.

The previous week reserves fell by $200 million, raising fears that investors were taking money out of Russia amid a perceived crackdown on business heralded by the arrest of Russia's richest man Mikhail Khodorkovsky in late October.

"That is good news which means that capital flight is increasing less than generally expected after Khodorkovsky's arrest," said Al Breach a chief economist at Brunswick UBS.

Khodorkovsky is the top shareholder in oil major Yukos, but resigned as CEO after his arrest.

The Central Bank forecasts a net private capital outflow of some $3.0 to 4.5 billion in the fourth quarter, down from $7.7 billion in the third quarter of 2003. Some economists say the estimate is overly optimistic.

Analysts said that the rise of reserves was in line with market perceptions that the Central Bank was buying dollars from the market last week to curb the rise of the ruble, which is trading at about a two-year high against the dollar.

Menatep Won't Appeal

JERUSALEM (Interfax) -- Menatep sees no point in appealing to Russian courts against the seizure of its shares by the Prosecutor General's Office, one of the shareholders, Leonid Nevzlin, has said.

"I don't know if there's any sense in disputing the seizure of the shares with Russian courts. We haven't even discussed the subject," Nevzlin told Interfax.

"There will be lawyers working with courts in Cyprus, Maine and Gibraltar. Defense is a matter of the judge's prerogative, and there's no sense for us to make this public. Nothing will help us except for a normal legal procedure. And we still don't know for sure what form it will take.

"We have a plan, but it's secret. We don't want to disclose it, otherwise we'll give our adversary an advantage. This situation will be becoming public on its own as applications and suits are filed."

Oil Case Thrown Out

MOSCOW (MT) -- A court in the British Virgin Islands has dealt a blow to a $380 million lawsuit filed by TNK-BP minority shareholders against the oil major by ruling the case does not fall under the islands' jurisdiction.

A court representative said the shareholders, Virgin Islands-based Astian Group Ltd. and Seychelles-based Indian Ocean Petroleum Services Ltd., should seek to defend their rights in the Russian court system instead, Vedomosti reported Thursday.

The shareholders claim that TNK Industrial, between 2000 and 2002, "deliberately and unlawfully" purchased crude oil and refined oil from two subsidiary companies at below-market prices.

Both subsidiaries, Saratovneftegaz and the Saratov Refinery, are units of Sidanco, a Russian oil company 57 percent-owned by TNK Industrial, which is now part of TNK-BP.

Representatives of the shareholders were unavailable for comment Thursday on whether they would appeal the ruling.

Airport Bid Blunder

MOSCOW (MT) -- The government told Vedomosti on Thursday it has recognized it made a mistake when drafting tender conditions for the companies that are bidding to manage Sheremetyevo Airport and has promised to make changes.

The mistake, which industry analysts have dismissed as "dumb," was the government's insistence that bidders' annual accounts be audited by one of the "big four" professional services firms, including Ernst & Young, KPMG and PricewaterhouseCoopers.

The fourth firm, Deloitte & Touche, was accidentally substituted by international law firm Baker & McKenzie, which meant that contenders such as City Hall-connected AFK Sistema and Aeroflot, whose books are audited by Deloitte & Touche, were automatically excluded from the tender.

Vedomosti quoted a government source Thursday as saying that "a sorry technical blunder" had occurred, adding that the Property Ministry, which had drafted the conditions, will soon publish a relevant amendment in Rossiiskaya Gazeta.

Meanwhile, Moscow's acting mayor Valery Shantsev said Thursday that City Hall no longer wanted to claim responsibility for Sheremetyevo, stepping away from a long-standing debate over whether the airport belongs to the City or the Moscow region, Interfax reported.

Shantsev's announcement came a day after President Vladimir Putin decreed that the federal 60 percent stake in Vnukovo Airport will be sold to City Hall. Shantsev said that maintaining both airports would be too costly for the city.

Russian WTO Support

MOSCOW (Interfax) -- More than half of Russians would support the country's entry into the World Trade Organization and only 15 percent are against it, a poll has found.

Of the 1,500 Russians polled in 44 regions, 54 percent think Russia should enter the WTO, the Obshchestvenoye Mneniye fund found, according to Interfax.

Forty percent of respondents said joining the organization would be good for the economy, while 20 percent said joining would hurt it.

Asked how joining the WTO would be advantageous to Russia, 16 percent said it would help solidify trade relations with other countries by giving Russia access to new markets, increasing Russia's exports and trade and helping develop trade inside the country.

Fourteen percent of respondents said joining would strengthen the economy as a whole, by strengthening the ruble and lowering prices, creating new jobs and improving living standards.

Thirteen percent of those polled said joining would hurt the economy by causing production to slump, unemployment levels and prices to go up, leading to a decline in living standards.

Trans-Siberian Offer

MOSCOW (Bloomberg) -- Trans-Siberian Gold Ltd., which owns rights to Siberian gold fields, is offering a 30 percent stake in the company to the public in London to fund plans to boost output in Russia after gold surged this week to a seven-year high.

The Cambridge, England-based company plans to raise $30 million on London's Alternative Investment Market, managing director Jocelyn Waller said. It is the third gold miner with Russian assets to hold an initial share offering on the AIM in 19 months, after Peter Hambro Mining and Highland Gold Mining.

Gold exceeded $400 an ounce yesterday for the first time since March 1996. The metal regained its status as a haven from global turbulence after the Sept. 11, 2001 terrorist attacks, prompting companies to invest in new mines.

"Russian gold will become more and more attractive,'' said Ian Hague, who manages $410 million at Firebird Management LLC in New York and bought 10 percent of Trans-Siberian in a private placement. "Russian extraction costs are relatively low and the metal itself is shining amid the U.S. dollar's weakness.''

Rostik to Invest $2M

MOSCOW (Prime-Tass) -- Rostik Restaurants plans to invest more than $2 million in development of the Loca Moca cafe chain in Moscow and the regions in 2004, a source with the company told Prime-Tass on Wednesday.

The company plans to open 10 Loca Moca cafes in Moscow and four to five cafes in the regions in 2004, the source said. Currently, the company has three Loca Moca cafes in Moscow, and plans to open two more by the end of the year, the source said.

Also Wednesday, Rostik Restaurants signed an agreement with Germany's leading household product retailer OBI to open two cafes at the first OBI stores in Russia, one in Moscow and one in Khimki, north of Moscow.

Lenenergo Profit Cut?

MOSCOW (Reuters) -- Utility Lenenergo said Thursday it would ask its shareholders to approve a massive net profit cut and lower dividend for 2003 to help build up a provision for doubtful accounts.

The firm's head, Andrei Likhachev, told an investment conference the company would propose to its shareholders that it should fix the firm's net profit at a level of $10 million despite the fact that it was set to be bigger.

He declined to specify the level of real net profit the firm planned to post this year, but said that operational profit would remain flat compared with last year. Last year, the company posted a net profit of $40.8 million under Russian accounting standards. In October, Lenenergo's board asked the firm's management to close this year with a net profit of at least 1.364 billion rubles.