The BBC has put together a fascinating statistical analysis of Russia during the Putin years.

The analysis has graphs aplenty, covering the Russia’s economy, Energy, Population (including a revealing statistic about HIV prevalence in Russia) and the Military.  Sometimes the stats are standalone, sometimes in comparison to other countries.  But all are well worth a quick look.

Russia’s Gazprom are to cut off gas to Belarus, in a row over unpaid bills.  According to Gazprom, Belarus are more than $450 million behind in payments, and so they are left with no choice but to cut supplies by 45% from Friday (August 3rd).

As this cutoff seems to be related to Belarus’ reluctance, or inability to pay its bills, rather than a direct political crisis, I don’t really have a problem with this.  Business is business. 

I’m more worried about whether this will impact on supplies to downstream customers.  Approximately 20% of all the gas that Gazprom supplies to EU countries goes through Belarus. 

According to Gazprom, plans are in place to ensure supplies:

Gazprom spokesman Ilya Kochevrin said: “Should Belarus start illegal offtake of gas, we have a concrete plan so customers get their gas. If they do that, we will go to court and increase supplies via alternative [routes].”

I will be impressed if Gazprom manage to pull this off without compromising the supplies to their other customers.

Not only did I see big, bold Baltika adverts in each of the free London papers earlier this week, but they’ve taken to advertising on the London Underground:

In an interesting ruling, a Russian court has ordered Visa to process payments to Internet Audit, the owners of Allofmp3.com.  This presents something of a problem for Visa, as Allofmp3.com has been declared illegal by another Russian court and shut down.

According to Internet Audit, the court ruled in their favour because:

“the decision on whether copyright has been violated or not can only be taken by court based on a suit filed by exclusive copyright holders, but neither IFPI nor Visa own such rights”.

I don’t even pretend to understand the mechanics of Russian law that allow this, but there seem to be some pretty interesting implications. 

Firstly, Visa must process credit card payments to other Russian music download sites running on the same legal basis as Allofmp3.com, but which have not (yet) been declared illegal.  This includes mp3Sparks.com, which is a virtual clone of Allofmp3.com, and the Alltunes software, both of which are owned by Internet Audit, and both of which seem to run the exact same database and underlying software as Allofmp3.com

And, secondly, this ruling would seem to mean that Visa might well be obliged to continue processing payments to any poker websites operating out of Russia, which would put it in an interesting dilemma with regard to the recent US ban on poker. 

A law backed by 341 lawmakers in the 450-seat State Duma lower house of parliament gave Gazprom, and oil pipeline monopoly Transneft, special exemption from strict limits on private businesses wielding arms.

The two state-controlled companies will for the first time be allowed to employ their own armed operatives instead of contracting an outside security firm. Their armed units will also have access to more weapons and more freedom to use them than private security companies.

The stated reason: to ensure the protection of gas pipelines and facilities from militants.

My cynical response: so much for the mighty Russian army.

Anyway, opponents of the bill are warning that today’s move risks opening a pandoras box, as they believe that where Gazprom leads, other Russian companies are sure to follow.

The only silver lining, I suppose, is that the bill still has to pass the Federation Council, and be approved by Putin before it becomes law.

The site, Allofmp3.com, was quietly closed as the Kremlin sought to end criticism from the United States that Russia was failing to clamp down on music and video piracy.

However, an alternative site run by the same Moscow company has already emerged. MediaServices says that mp3Sparks.com is legal under Russian law, using many of the same arguments advanced in support of allofmp3.com.

Somehow, I don’t really see this phoenix-from-the-ashes tactic fooling anyone in the record industry…

Anyway, I had a few dollars tucked away on Allofmp3 for a rainy day (I know, foolish when you consider the ongoing uncertainty over its future) so took a quick trip over to see what has changed.

I was amused to see that mp3Sparks.com is an exact replica of allofmp3.com - same catalogue, same basic design, same user IDs, it’s even transferred across every single allofmp3 user’s account!

My account, sadly, wasn’t working properly when I visited, so I’m not quite sure that my money is still mine, but when I emailed the mp3Sparks.com to check whether my password was still valid, a reply came back within minutes, which is a fairly positive sign.

Update 4 July:  In the comments Михаил has pointed out that mp3Sparks has gone the way of its older brother and is, itself, no more.  I guess someone sent the heavies round.

In a move that many are condemning as a climbdown in the face of Kremlin pressure, PricewaterhouseCoopers has withdrawn all of the Yukos audits it undertook between 1995 - 2004:

“PwC now believes that information and representations which was provided to PwC by Yukos’ former management may not have been accurate,” the firm said in a statement issued Sunday.

I don’t really want to focus on whether PwC decided pleasing the Kremlin was more important than its long term integrity. Iinstead, I’m more interested in the longer term impact of PwC’s decision to withdraw its Yukos audits, and whether it will turn out to be a pyrrhic victory for the Russian government.

I don’t think there is any doubt that this tactical victory for Yukos’ prosecutors - PwC’s decision adds yet more weight to evidence against Yukos, and I’d imagine that more charges may well result from the allegation that the auditors were misled.

But, in the longer term, I think today’s news may well present a larger strategic problem for business in Russia.

If PwC can be so easily fooled by one company - ‘but Yukos executives lied to us’, the auditors indignantly claim - then one must surely assume that any other Russian company could have also pulled the wool over the eyes of PwC’s naive auditors.

If some of the biggest, and supposedly best auditors in the world can be so easily deceived, then there is absolutely no reason why anyone should trust their audits of any other big Russian firm.

And if an auditor can be deceived, why not an investor?

Update: A Fistful of Euros are also unimpressed, although they detect the heavy hand of the Russian state at work, rather than lying Russian businessmen and naive auditors:

At any rate, the message is clear: Audits of businesses that are important to the Russian state will say what the state wants them to say. Caveat lector.

Either way, not a good day for PwC.

Last month I reported that the Mosnews website was no longer being updated with new stories.

Sadly, it looks as though Mosnews has now finally gone to the great newsroom in the sky, as their website - www.mosnews.com - has been completely closed.

Ladies and Gentlemen, I’d ask you to stand for a moment’s silence, to pay your respects to Mosnews, and to mourn all the bizarre stories we will now never hear about.

Would you believe that the largest single investor in Russia so far this year is Holland?

Direct investment to Russia from the Netherlands in the first quarter of this year hit $7.76 billion, the Russian agriculture minister said Wednesday.

The majority of this investment is, as you’d imagine, in the energy sector, (Royal Dutch Shell are investing heavily in Sakhalin, as I’m sure Tim knows), but agricultural trade is also a big player.

Russia has decided to ban the export of biological specimens, but nobody seems to be able to figure out quite why.  Cyrill Vatomsky runs through some of the possible reasons.  My favourite:

According to Kommersant Daily, the report claims that the supposed biological weapon is designed to be ethnically specific and will target health of Russian people including causing infertility among Russian women.

Does anyone know if there was a sensible rationale behind this decision, or is it just down to bureacratic meddling taking on a life of its own?

Russia is to invest more than $1 billion into nanotechnology research and development over the next three years.

Business Week reports First Deputy Prime Minister (and until recently, Defense Minister) Sergei Ivanov as saying that 90% of the benefits will be economic, while the remaining 10% will have military application:

“(Nanotechnology) is a very promising scientific and technical field, capable of fundamentally changing the model of the Russian economy … from a fuel economy to an economy of the future”.

RIA Novosti, on the other hand, has to put the story’s focus on President Putin’s comments about the military potential of the research:

“It is an area of activity in which the state is ready to invest on a grand scale. The only question is that this work should be well organized and effective, yielding practical results,” Vladimir Putin told a meeting at the Kurchatov Nuclear Research Institute in Moscow.

He said nanotechnology will lay the groundwork for new weapon systems, both offensive and defensive, adding that nanotechnology is already being used in high-tech sectors of industry, medicine, transport, space research, and telecommunications.

Russia clearly needs to catch up with the US in areas like this, both in the military and economic arenas, so it’s clearly sensible for them to invest some of the oil revenues in this area.

I’d imagine, though, that the overall amount Russia is investing is still relatively small compared to that of its competitors.

Story initially found at Nanodot, via Instapundit.

The International Air Transport Association released its 2006 Air Safety report yesterday.  It makes glum reading for Russia and the CIS:

Russia and other members of the Commonwealth of Independent States (CIS) had the highest accident rate of all the regions in 2006, with 8.6 Western-built hull losses per million flights—13 times the global average. 

That’s not just 13 times the global average - it’s almost twice as many losses per million flights as Africa, the poorest continent on the planet.

But, looking on the bright side, IATA notes that the losses are for Western built hulls, rather than Russian built.

Ozon.ru, Russia’s largest online bookstore, has received $18 million in venture capital funding from Cisco systems and German firm Index Ventures.

The money will go primarily on expanding Ozon’s logistical infrastructure, by allowing them to establish new distribution centres. In a country as big as Russia, you can see why this kind of investment is necessary…

Currently Ozon’s turnover is over $50 million per year, and this is expected to double over the next couple of years. It looks to me like they have pretty similar business model to Amazon.com - most of their income comes from books sales, but they’ve also diversfied into DVDs and electronics.

Apparently Cisco’s move is their first into Russia, but it looks like the Ozon.ru deal is the first of a number they will be striking in Russia and the wider region:

“As any strategic investor we intend to develop the main business of our company. After Russia we intend to move on to Ukraine and Belarus, probably Kazakhstan”.

Read/Write.web has more on the Ozon story, plus the interesting statistic that Russia has the third largest overall number of internet users in Europe. They also have a fascinating roundup of Russian Web 2.0 applications.

Rumours are swilling around that PricewaterhouseCoopers may lose their license to practice in Russia, after PwC were found guilty of violating professional standards while auditing Yukos, and have been fined $480,000.

PwC’s current license expires on 20th May, and a number of news agencies are suggesting that the Finance Ministry may use the ruling in order to justify not granting an extension.  At the moment, though, it’s not clear whether this is just rumour-mongering, or if there is actually any substance behind the stories.

PwC themselves are pretty upbeat about the whole thing.  They plan to appeal the verdict and, in a press statement, said:

“We have no reason to believe that the application for our licence prolongation will be impacted based on the resolution of the court.

“We fully expect it to be renewed in accordance with existing procedure and legislation.”

Condoleezza Rice has weighed in on behalf of the US government, pointing out to Sergei Lavrov that any move against PwC, or auditors in general, could damage the confidence of foreign investors, and even Russia’s World Trade Organisation application.

One to watch.

In a surprise move, Aeroflot have made a bid for the Italian flag carrier Alitalia:

Aeroflot joined with the largest Italian bank, UniCredit, on Monday to bid for most of the 49 percent stake in Alitalia held by the Italian Finance Ministry, which is selling its shares in hopes that a private owner will have better luck reviving the money-losing airline.

Experts seem to think that it’s a bit too much for Aeroflot to take on just after a major restructuring of its own.

A part of me thinks, if they’ve got the money, they might as well spend it on expansion. But I also wonder whether Aeroflot is following the recent Russian trend of making high profile purchases, with more of an eye for their international image than their long-term profitability.