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. Last Updated: 07/27/2016

Business in Brief

Ustinov Warns of New Cases

The country's top prosecutor warned of possible new corruption investigations as he steps up a fight against graft demanded by President Vladimir Putin.

"The fight against corruption in Russia remains urgent," Prosecutor General Vladimir Ustinov said Thursday in remarks broadcast by Rossia. "Don't be surprised if in the near future you see new, major cases opened."

Ustinov's comments came a day after his office detained Alexei Barinov, governor of the Nenets autonomous region, and Thursday's arrest of Chelyabinsk region Deputy Governor Konstantin Bochkarev on corruption charges, state television reported. (Bloomberg)

Gazprom '20 Output Target

Gazprom plans to boost oil production to 1.6 million barrels per day by 2020 from the current 700,000 bpd, implying a healthy 6.1 percent annual growth, the firm said on Thursday.

The world's largest gas producer also said its management had decided against integrating oil firm Sibneft, which it bought for $13 billion last year and has renamed Gazprom Neft, into its structure.

"Neither our managers nor our consultants have even considered this option [merging with Surgut]," Gazprom deputy chief Alexander Ryazanov said at a news conference that was held after Citigroup and McKinsey presented their oil strategy recommendations to Gazprom's board.

Gazprom has repeatedly denied market talk of a possible Surgut buy in the last two years, when bankers and consultants told it to diversify into oil by buying Sibneft and Surgut, turning the firm into a rival to oil majors such as BP. (Reuters)

Rosneft Unit's Tax Bill Cut

Rosneft's production unit, Yuganskneftegaz, has had $4 billion from a tax claim against it cut by a Moscow court, the Financial Times said, citing a financial statement from the Russian state-owned oil company.

The tax bill of Yuganskneftegaz, which Rosneft bought from Yukos, was reduced to $760 million from $4.7 billion, the FT said.

The Moscow Arbitration Court made the cut in April, the FT said, citing the statement by Rosneft. (Bloomberg)

LUKoil Seeks $600M Loan

Top oil producer LUKoil may raise a $600 million bridge loan to fund the purchase of U.S. oil firm Marathon's Russian assets, Prime Tass news agency reported on Thursday.

The agency quoted banking sources as saying LUKoil could in the longer term raise more money via loans and Eurobonds to refinance previous borrowings, which mature in 2008. LUKoil declined to comment on the report.

Marathon agreed in May to sell its oil fields in Western Siberia to LUKoil for $787 million.

Marathon estimates the fields' total proven oil reserves at 250 million barrels, while LUKoil has said they could be seven times bigger. (Reuters)

Alrosa Valuation Disputed

A $6.4 billion valuation of diamond monopoly Alrosa has been disputed by the Sakha republic, also a shareholder in the company, Kommersant reported, without saying where it got the information.

The republic sent a letter to the Finance Ministry complaining the valuation was too high, the newspaper said. The federal government is seeking to increase its stake in the miner to 50 percent from about 37 percent.

Alrosa is based in the Far Eastern republic, which owns about 32 percent of the company. Employees and eight district governments own the rest.

A lower evaluation would favor the Sakha republic, allowing the region to increase its stake to about 40 percent, Konmmersant said. (Bloomberg)

Imperial Finds Oil in Tomsk

LONDON -- Imperial Energy, an oil and gas explorer in Russia and Kazakhstan, said it discovered oil at its Snezhnaya prospect in the Tomsk region of Western Siberia.

Initial test data indicate the potential for "good commercial production'" at the block 77 site and is the latest in a series of discoveries in the area that will allow the company to exceed its current production targets, Imperial said Thursday in a statment.

The Leeds, England-based company expects to produce 2,500 barrels of oil equivalent a day in July, a 25 percent increase from previous expectations, and remains on track to produce 25,000 barrels per day by 2008. (Bloomberg)

Drug Firms Flood Russia

LONDON -- Russia is emerging as one of Europe's fastest-growing pharmaceutical markets, with sales having tripled since 2000 and demand increasing for innovative drugs, according to a report released on Thursday.

Consultancy PricewaterhouseCoopers said sales were forecast to increase by around 10 percent per year, reaching about $6 billion in 2010, fueled by rising incomes as the economy picks up.

At the same time, the federal government has lifted funding on the health care system to $3.6 billion this year from $1.9 billion allocated in 2005.

Most drugs in Russia currently originate from overseas suppliers. Sanofi-Aventis is market leader in Russia with a 6.6 percent share, while Novartis ranks second, with 4.5 percent. (Reuters)

MICEX to Offer Futures

MICEX, the country's largest bourse by transactions, will next week start offering futures contracts on ruble interest rates.

The contracts, which let investors bet on or guard against changes in overnight and three-month ruble lending rates, will start trading May 29, said Alexei Gerasyuk, a spokesman for MICEX. Options on the contracts will start next month.

MICEX is boosting derivatives trading as Russia's eighth year of economic expansion spurs demand for contracts to hedge price fluctuations. More than $10 billion of futures contracts based on the dollar-ruble exchange rate changed hands at MICEX this year, a ninefold jump from 2005, the exchange said May 22. (Bloomberg)

Moody's Ups Ratings

Moody's Investors Service upgraded the foreign-currency credit ratings of several Russian companies this week.

The foreign currency issuer rating of Russian Railways, or RZD, was upgraded to A3 from Baa2, Moody's said Wednesday night in a written statement. Gazprom was upgraded to Baa1 from Baa2, Transneft was upgraded to A2 from Baa2, and Sovcomflot was upgraded to Baa1 from Baa2.

The Moody's upgrades follow the company's re-examination of corporate ratings in Europe, the Middle East and Africa. (MT)

New U.S.-Russia Carrier

Baltia Air Lines, a start-up U.S. airline based at New York's JFK Airport, will begin nonstop flights to St. Petersburg to profit from a growing market.

Baltia Air, which is publicly traded on the Nasdaq Bulletin Board, will operate flights using Boeing 747 airplanes, the company said in a statement Thursday, without saying when the flights will begin. The airline also plans to fly to Riga, Kiev and Minsk.

Foreign carriers saw passenger volumes on their Russian routes surge 20 percent last year, according to government figures.

Delta Air Lines is the only U.S. carrier operating flights to Moscow, Baltia said. (Bloomberg)

New RusAl Board Member

Andrew Michelmore, the CEO of En+ energy holding, joined Russian Aluminum's board as deputy chairman, the aluminum producer said Thursday in a statement.

En+ holds several metals, coal, oil and energy assets owned by billionaire Oleg Deripaska, including the world's third-largest aluminum producer, Russian Aluminum.

Michelmore, and En+ vice president Horst Peters, will replace Gulzhan Moldazhanova and Stalbek Mishakov on RusAl's board, which is chaired by Deripaska. En+ holding was registered this year as part of Deripaska's restructuring of his assets. The billionaire aims to transform his original holding vehicle Basic Element into an investment fund, repackaging all its assets into five sector-specific holdings. (MT)

UGMK to Build New Plant

Urals Mining & Metallurgy, or UGMK, the country's second-largest copper producer, will build a $386 million steel plant in the republic of Bashkortostan, the company said Thursday.

The copper producer first venture into the steel sector will involve building a plant in the town of Agidel by 2008 to produce annually 600,000 tons of steel and 545,000 tons of rolled steel products, a spokesman said. The output capacity is an initial figure put forward until a "confirmation of the energy and water resources" available in the region is made, head of UGMK, Andrei Kositsin told a media briefing on Thursday, Interfax reported. (MT)