Rosneft have taken out a loan of $13 billion.   Mosnews reports that the loan is to:

to finance large acquisitions in Russia and abroad.

I wonder what they plan to spend it on.  Anyone got any ideas?

Vladimir Kuznetsov, at Russia Blog, writes about the rise of home-grown auditing firms in Russia:

In our day-to-day operations our clients find it very practical to use a Russian firm, rather then spend more money to hire one of the Big Four. I have been working for a number of years with a couple of these Russian firms (e.g. BKR-Interkom-Audit) which do an excellent job and satisfy all the international auditing standards.

My guess is that we are now witnessing a gradual shift from the Big Four foreign accounting firms to domestic auditors. As one Russian business owner recently complained to me: “Well I asked one of the big guys [to do our auditing], and we need to stand in line for about three months, pay a lot and them wait another three months for the results. This is no good.”

In the light of the recent investigations of PricewaterhouseCoopers activities in Russia, I’m not all that surprised.  I suspect that the Big Four firms activities in Russia for the forseeable future will be restricted to the larger firms who, with an international outlook, need the international credibility that a Big Four audit provides.

Vladimir Kuznetsov, by the way, writes the “Equity Financing in Russia” blog.

The Moscow offices of PricewaterhouseCoopers, the largest of the Big Four global accounting firms, were searched by Russian tax police yesterday.

PwC are accused of failing to pay 243 million rubles (about $9.3 million) in back taxes:

Russian tax authorities are accusing PwC’s Moscow branch of deliberately underestimating profit tax on sums it allegedly paid to offshore PricewaterhouseCoopers Resourses B.V., which was supposed to provide financial consultations to clients in Russia. Tax officials said the consultations were provided by the Moscow branch of the company instead.

A separate investigation of PwC is also ongoing. The auditors are suspected of assisting Yukos - for whom PwC were auditors - to cover up “illegal financial schemes” and of drawing up two different audit reports for the now bankrupt energy giant.

The tax service is seeking to invalidate Yukos-PwC contracts for 2002-2004 and to charge $480,000 from PwC. Tax authorities said Yukos failed to correct violations discovered in 2002 in the following two years.

This is an interesting development, not only because it demonstrates once again that Russia is unafraid of taking on even the biggest foreign firms operating in Russia today, but because it may well have the effect of scaring away a major auditor from the Russian market.

Which, in a market that should be crying out for the transparency and respectability that professional audit can bring, is most definitely not a positive development.

[Full disclosure: I have worked for PwC in the past, although was not in any way connected to their Russian operations].

News is beginning to surface of the mysterious cancellation of a scheduled tv show about Roman Abramovich.

Kommersant reports that, after running the first part of a series of programmes about Roman Abramovich, the NTV Director General suddenly decided to pull the second episode from the Sunday evening schedule without any notice.

NTV Director General Vladimir Kulistikov offered the following explanation which - frankly - baffles me:

“It was absolutely my decision. Announcements often run ahead of the director general’s thought, and then I suddenly make different decisions. It is common practice in our work: we let something into broadcasting, and we take something out,” he said. Kulistikov was surprised to hear speculations that it was Abramovich who asked not to let out the story: “First story was all right, there was nothing bad in it! Unfortunately, I’m not personally acquainted with Roman Arkadievich. We showed reports about him many times, and never got any objections from the governor”.

No word yet from the Abramovich camp, but the Kremlin have been quick to deny any involvement:

“We absolutely deny the very thought about possible interference into NTV’s editorial policy and specifically into Anton Khrekov’s program.”

Who knows - perhaps NTV had advance word that Abramovich was no longer Russia’s richest man, and decided that no-one would ever want to watch a tv show about a has been Chelsea boss….

It’s been a bad day for Roman Abramovich - he’s not only been unseated at the top of Russia’s richest man league, but he’s been told by Putin that he cannot resign as governor of Chukotka because he’s doing too good a job.

Russia’s richest man is now Oleg Deripaska, an aluminium magnate.  He’s one of four men in the top five who have made their fortunes from minerals of some kind or another.  So much for the myth that Russia’s economy runs only on oil and gas…

Russia’s economy may have its problems, but the country’s size, plus the enormous boom its energy industry has enjoyed have combined to make Russia the 10th largest economy in the world, by overall size.  The Economist Intelligence Unit (they of The Economist magazine fame) estimate that Russia’s economy in 2006 was worth $986.6 billion, a startling $223.3 billion increase on the previous year.

The Russian government is, as you’d expect, bullish:

Russian First Deputy Prime Minister Dmitry Medvedev said Saturday, Jan. 27, that the nation’s GDP topped $1 trillion and it will become the world’s 6th largest economy, overtaking Italy, France and Britain in two years.

Presumably he’s basing this prediction on a continued rapid increase in oil and gas revenues.  I think he’s perhaps being a little too optimistic (to put it mildly), but we’ll see.  Check back in 2009. 

A depressing 57% of all Wordpress comments spam comes from Russia, concludes the Tribble Ad Agency.  Their solution:

If you just ban .ru and .info from your comments, spam would be cut down in dramatic figures.

Given the subject matter of Siberian Light, I’m not entirely sure that’s a practical solution for me…

We spend a lot of time criticising Russia for bad economic policies so it’s nice to see what looks like a sensible policy coming out of the Kremlin - they’ve scrapped the export quota on precious metals, including diamonds:

“The cancellation of the quotas will help mining companies organize a long-term strategy for extraction and sales, strengthen their positions on the market… The move will also bring diamond prices in Russia into line with world market prices and “lower the market’s dependency on speculative players,” said a Russian Finance Ministry statement.

I wonder if this affects Tim, the blogging mineral export mogul?

A new law means that Gazprom is now free to buy any gas producing company in Russia:

There are now no obstacles for Gazprom to set up monopoly not only on exports but also on the whole gas production in Russia.

I imagine that the shareholders in a lot of Russian gas companies are about to be made offers that they cannot refuse in the coming months, as Gazprom digs into cash reserves that are almost as substantial as its gas reserves.

(Thanks to Ruminations on Russia for the heads up). 

US record companies Arista, Capitol, Warners, Capitol and Universal Music Group have announced that they are suing allofmp3.com, the Russian music download site, for a staggering $1.65 trillion.

The astounding $1.65 trillion figure was calculated by multiplying the statutory damages of $150,000 per infringement (provided for in the No Electronic Theft Act) by the 11 million songs that AllOfMP3.com has sold.

Did someone point out to them, I wonder, that this is more than twice the GDP of Russia itself?

This strikes me as nothing more than grandstanding on the part of the US record industry. If it thought it had a realistic chance of winning, surely they would sue for an amount that they could hope to win?

Despite being founded by a Russian, Google is only the eighth largets search engine in Russia:

Leading the pack was Yandex, a privately held Russian search engine that was visited by 64 percent of Internet users; Mail.ru, an e-mail service, came in second at 56 percent, and Rambler was third at 53 percent.

But even in its share of revenue from ads linked to searches, the lucrative Internet business model pioneered by Google, the company lags. Yandex controls 50 percent of the Russian market for such ads, according to analysts at ING, a Dutch bank. Rambler is second, with 41 percent, and all other companies, including Google, fight over the remaining 9 percent.

The article goes on to suggest that the complexity of the Russian language is holding the internet giant back, but I’m not so sure this is the biggest reason.  Wouldn’t this complexity affect the domestic Russian search engines as well?  I prefer their explanations about the ability of Russian companies to adapt to the economics of the Russian market, and the difficulties Russians face paying for goods over the internet.

Also tucked away is some good news about the freedom of the internet in Russia, compared to countries like China.  There’s no difficulty in getting hold of news about polonium, for example.

Russian company towns are similar to the US company towns of fifty years ago. But today, they’re dying too:

Gazprom has quietly begun cutting back on the Soviet-style paternalism for which it is renowned, hiving off “social assets” such as nurseries, subsidised housing and sanatoriums. Already almost half of its 9,320 “social properties” have been handed to local authorities. The mothership is sailing, and some of her dependants are to be left to fend for themselves.

Gazprom is under pressure from its shareholders (yes, there are some that aren’t based in the Kremlin) to cut such generous subsidies. They don’t look good on the end of year balance sheet.

The problem is, towns in the frigid Russian Arctic, like Novy Urengoy, traditionally attracted workers to their harsh climate by offering high wages, and the prospect cradle to grave support for workers and their families.

If that support goes, who actually will work the world’s coldest oil and gas fields?

If you live in the UK, you might want to check out Russian Godfathers, which will air on BBC2 this Thursday. Basically it looks like it will be a 50 minute roundup of who’s who in Russia, who is on the up, and who has recently come crashing down to earth.

Putin, able to see matters rather straighter than Yeltsin, realised two crucial things about the oligarchs: that they were potentially more powerful than him, and that they were about as popular with your average Russian as a man idly burning bundles of £50s outside an orphanage (according to one 2004 poll, only 18% of Russians opposed wholesale renationalisation of the country’s resources). In a country in which anti-semitism never quite went out of fashion, the fact that many of the oligarchs are Jewish makes them an even more tempting target for a populist like Putin (after the arrest of arch-oligarch Mikhail Khodorkovsky, Putin’s already high approval rating was measured at 80%).

I doubt it’ll reveal anything particularly startling, but it should be a quite interesting way to while away hour or so.

Good old Vladimir Zhirinovsky - he’s such a generous man. His latest wheeze is to help out a small Scandinavian furniture company that is struggling to enter the Russian market - IKEA.

IKEA’s trademark is quite similar to LDPR’s, Zhirinovsky explained in an e-mail to Lennart Dalgren. Both IKEA and LDPR are four-letter words and both have yellow and blue as their corporate colors.

Considering the two brands’ obvious similarity and the historical justice, the MP went on to say, IKEA should change its name to LDPR. The company would anyway benefit from the rebranding, for it would boost the company’s sales enormously.

Besides, Zhirinovsky suggested widening IKEA’s product range by offering the customers the Zhirinovsky perfume, Zhirinovsky vodka, caps and t-shirts with LDPR’s logo.

As a bonus, every customer would receive an LDPR booklet and a record of Zhirinovsky’s songs for free, the suggestion reads.

I don’t know about you, but I’d certainly pop down to my local IKEA more often if I could be sure of picking up a bottle of Zhirinovsky perfume for my girl.

This post was brought to you under the kind auspices of the Mosnews Appreciation Society.

The EU’s Trade Commissioner, Peter Mandelson, has announced that the EU is considering sanctions against Russia in response to the Russian ban on Polish food exports:

Mandelson, quoted by the British Financial Times told members of the European parliament that the Commission was investigating the Russian ban and expected to end that probe “speedily”. He said he had “doubts” about the reasons given by Moscow earlier this month for introducing a temporary ban on Polish meat, a move that has been condemned by Warsaw.

Russia announced a ban on Polish beef, pork and poultry products, saying there were “frequent violations of [Russian] veterinary legislation”. It has also separately blocked Polish exports of plant products. The ban has strained an already tense relationship between the two countries and has been widely seen in Poland as a political rather than sanitary move designed to test the new government.

Going by past experience, any EU sanctions (if, indeed, the dispute ever gets that far) would probably be closely targetted at the Russian agricultural industry, rather than at Russia as a whole. The value of any sanctions is also extremely unlikely to amount to anything more than the value of Poland’s loss of income.

But, still, if ever an indication of why countries like Ukraine are desperate to join the EU were needed, this is it. Once a state becomes an EU member, it doesn’t have to take on the bear alone.