November 27, 2009

March 21, 2010 This is bne's weekly newsletter covering FDI and investment plans in Eastern Europe. You can receive the list as a plain text or html email or as a pdf file. To manage your delivery options: http://businessneweurope.eu/users/subs.php

TOP STORY INVESTMENT 1. Russia rejects calls to merge South Stream, Nabucco gas pipelines 2. Greece agrees to sign South Stream contract, possibly in exchange for implementation of the Burgas-Alexandroupolis oil pipeline project 3. Russia may cap timber export, Russia going green 4. Kremlin to launch Russia's Eurobonds road show on April 21-22 5. Medvedev wants tighter control over industry; to monitor Shtokman, Kovykta projects 6. Russia's fixed investments down 8% in 2M10 7. Vladimir Putin to head Commission on High Technology and Innovation RUSSIA-FOREIGN INVESTMENT 8. Mechel opens representative office in China 9. Russia to sign infrastructure deal with Abkhazia FOREIGN-RUSSIA INVESTMENT 10. Putin sells plane ñproof reactors to New Delhi 11. Russia's Renova, Chinese co to invest in gold, platinum projects 12. Sweden's SCA launches 93mn euro paper plant in Russia 13. Switzerlandís Nestle sales in Russia up 12% on year in 2009 RUSSIA-RUSSIA INVESTMENT 14. Russia may start building Soyuz tourism spacecraft in mid-2010 15. Russian company seen launching RUB5.5bn Omsk Reg glass plant 16. Severstal to launch Russiaís Sheksna pipe plant by end of March SECTOR Gas 17. Azerbaijan and Bulgaria to discuss the transportation of compressed natural gas to Europa 18. Gazprom given Bulgarian gas field license 19. Gazprom starts drilling its first exploration well in Africa 20. Gazprom, Bulgaria to sign deal to clear way for South Stream 21. GAZPROM: positive view maintained on recovery and long-term prospects 22. Kovykta discussions envision cost recovery from potential buyer, not the state 23. Ministry proposes giving oil, gas field to Gazprom-Lukoil JV 24. Nabucco’s managing director: "Work on Nabucco will begin in 2011, the supply of gas - in 2014" 25. Nord Stream inks deal to borrow 4bn euros for pipeís 1st stage 26. Turkmen leader reassures Moscow on natural gas supplies SECTOR Oil 27. China builds underwater tunnel for Russian oil pipeline 28. China seeks to double the volume of Russian oil supplied through East Siberian link 29. East Siberian crude zero export duty regime still in limbo 30. Greek premier says Burgas-Alexandroupolis oil pipeline plan to go ahead

31. IEA increases prognosis on oil consumption 32. LUKoil to drill first exploration well at Iraq's West Qurna-2 33. Rosneft exports are safe 34. Rosneft might get increased access to Gazprom's gas pipeline in 2014 - long-term implications 35. Rosneft returns license for East-Shmidt on Sakhalin shelf 36. Russia now has enough oil reserves for 25-35 years 37. Russia to sell strategic oil fields for the first time 38. Tengizchevroil halts exports via BTC pipeline - energy minister 39. TMK signs supply contract with LUKOIL 40. TNK-BP to Invest $1.3bn by 2015 41. Zero export duty for East Siberia might be prolonged until the end of 2010 - decision could be taken this week - if so, would be positive for sentiment SECTOR High Tech 42. Russian 'Silicon Valley' to be built in Skolkovo SECTOR Metals and Natural Resources 43. Chinese industrial growth surging about 20% YoY 44. Gold: A Healthy Rebound, But Upside Remains Capped 45. NLMK may increase slab supply to the EU as Corus mothballs UK site 46. Platinum and Palladium: Moving Into the Spotlight 47. Severstal continues expansion in gold segment 48. Steel prices on the rise 49. Steel sector: Rally in Russian export steel prices SECTOR Nuclear 50. Greenpeace urges France's Areva to stop nuclear waste exports to Russia 51. –œ‡°±·>˛ˇ #%˛ˇˇˇ"ˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇÏ•¡a øÁ

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R∏≤© *äääää© ∂**ääæ ∂∂∂ä 52. Russia to build 26 new nuclear power fast 53. Tianwan NPP 2nd phase will start in 2010 54. Russia and India sign NPP constuction contracts: Russia and India sign contracts to build third and forth block of 55. Second power unit launched at Volgodonsk nuke power plant SECTOR Power 56. Economy Ministry sees electricity tariffs doubling over next three years 57. New deputy energy minister affirms Russia's commitment to long-term generation capacity market 58. Price review period for distcos to be extended to five years 59. Putin approves launch of market for generation system services SECTOR Telecom, Internet 60. AFK Sistema: Government confirms plans to invest in Indian project 61. Rostelecom to build LTE networks using its 2.3-2.4GHz frequencies in 38 regions 62. Svyazinvest: Interview with CEO confirms restructuring is on track 63. VimpelCom residential broadband user base up 79% in 2009 SECTOR Transport 64. Container traffic recovers in January-February 65. Investments in Russiaís transport sector total RUB800bn in 2009 SECTOR Agriculture 66. Uralkali lowers prices for domestic farmers 7% 67. Zubkov calls for import substitution of fish products SECTOR Automotive 68. GAZ Group targets 25% sales increase in 2010 69. Kamaz truck sales up 19% on year in January-February 70. Sollers to launch UAZ assembly in Egypt 71. Some 7,000 cars sold in Russia since car scrapping program launched 72. Yarovit-Motors to finish building truck plant in St Pete by 2013 SECTOR Aviation and defence 73. Aeroflot: Unfasten Your Seatbelts 74. Russia's share in global arms business falling 75. Prices for airplanes could go down 76. Russia might cancel import duty on aircraft through 2015 77. Russia, Saudi Arabia in talks on major arms deal 78. UAC to build plant for composite aircraft parts 79. Ulan-Ude Aviation Plant: Positive outlook for 2010 SECTOR Media 80. Arabic-language Moscow News proves huge success in Mideast 81. France's historic national daily, France-Soir, is back 82. Russian TV Ad: Prices Set to Grow from Mid-2010 83. Ten largest Russian TV advertisers post 3% YoY growth in ad spend in 2009 SECTOR Coal 84. Coking coal becoming even tighter 85. Coking Coal: Another domestic coal price improvement in the offing 86. Sberbank says total invest of bids for carbon credits at 3.3bn euros SECTOR Chemicals, Fertliser 87. BPC concludes contract with Indian Potash at $370/tonne CFR

88. PhosAgro negotiated $1.5bn LT contract for DAP with India 89. Uralkali: Next contract with India signed on expected terms GOVT REFORMS, REGULATIONS, ECONOMICS, REGIONS 90. Medvedev inks decree to promote high-speed trains 91. Russia may gradually raise tax burden on rich UKRAINE INVESTMENT 92. ArcelorMittal Kriviy Rih could more than double capex in 2010 93. Astarta Holding [Buy; FV $23.53] plans to increase 2010 sugar output by 42% y-o-y 94. AvtoKrAZ January output grows 76% m-o-m to 109 trucks 95. Ukraine's coking coal prices skyrocket in Ukraine on domestic deficit 96. Global sugar prices plunged 28% from January's peak to August 2009 level 97. Ukraine drafts bill to transfer pipes to consortium with Russia, EU 98. Ukraine looks to make gas transport system more competitive 99. Ukraine's gas transport system will be inoperative in 20 years 100. Ukraine's agricultural output up 5.2% y/y in 2M10 101. Ukraine's coke - back on track 102. Ukraine's Freight transportation up 12.5% y/y in 2M10 103. Ukraine's passenger transportation on downward track 104. Ukrproduct group to attract investor to develop raw materials base 105. Ukrproduct to attract strategic investors to develop own milk base 106. USDA downgrades world sunflower seeds ending stock forecast KAZAKH INVESTMENT 107. Kashagans 2010 approved budget capped at US$8.7bn 108. KazakhGold CEO announces modest production target for 2010E, reiterates company's solid potential 109. KazakhGold may invest up to US$600m in the period to 2015 110. Kazakhmys Plans to Raise US$2bn for Aktogay 111. Kazakhmys plans to start Boschecul development in 2011 112. Kazakhstan's copper cathode output set rise 24% by 2014 113. Kazakhstan creates new oil and gas ministry in a major government reshuffle 114. Kazakhstan oil PSA renegotiation 115. Kazakhstan plans to boost uranium production by 30% in 2010 116. Kazakhstan to create new Ministry of Oil and Gas 117. Kazakhstan - MXP reports Borkyldakty exploration well success 118. Kazatomprom and Solvay sign partnership deal 119. New Kazakh National Champion for precious metals 120. Russian-Kazakh JV to produce 3,000 tonnes of uranium in 2015 CENTRAL ASIA INVESTMENT 121. Cherta to present farming machinery spares in Uzbekistan 122. Estonia LNG project fails to qualify for EC funding 123. Kazakhstan, Kyrgyzstan and Tajikistan may create new common power system 124. Kyrgyzstan still waiting for Russian aid 125. Rio Tinto looking at opportunities in Kyrgyzstan and Uzbekistan 126. Tajikistan starts construction of Chormaghzak tunnel 127. Tajikistan: ADB completes power rehabilitation project 128. Tethys updates on Uzbek and Tajik assets 129. Turkmenistan: EBRD supports ice-cream producer in Turkmenistan 130. Turkmenistan: Japanese loans to fund chemical plants construction BELARUS INVESTMENT 131. Belarus 20% less gas in 2009 than agreed 132. Belarus close to joining Eurasian Development Bank, Kyrgyzstan applies for membership

133. Belarusian committee says price of Russian gas at $171 134. Belarus' fixed investment down 9.9% on year in 2M10 135. Belenergo invest program may reach BR2.3 trillion in 2010 136. Chinese Huawei to supply equipment for upgrade of Belarusí MTS 137. Belarus to build MAZ trucks, tractors plants in Venezuela EURASIA INVESTMENT 138. Armenia: ACBA Leasing to fund energy saving technologies 139. Armenia: FREDA is planning to invest $5mln in agri-business development 140. Armenia: Gazprom Company's subsidiary in Armenia assembles the largest in the South Caucasus chimney on 5th power unit of Hrazdan TPP 141. Armenia: GeoProMining Gold plans for increase of processing volumes 142. ˇ˛Armenia: GPM Gold plans increase of production volumes 143. Armenia: National Competitiveness Foundation of Armenia to invest 200 thsd EUR in pilot projects on promoting Armenia as a tourism direction in Germany and Great Britain 144. Armenia: National Competitiveness Fund of Armenia studies justification of air ticket prices 145. Armenia: Wine export from Armenia grew by 7% in 2009 146. Armenian Molybdenum Production company increases production of ferromolybdenum in 2009 by 1,8% 147. Azerbaijan to limit car import 148. Azerbaijan to start whisky export 149. Azerbaijan, Romania and Georgia to sign trilateral memorandum of understanding on power engineering 150. Azerbaijan: Industry production 7% rise in Azerbaijan 151. Azerbaijan: UniNet Company modernizes technical basis 152. Azerbaijan: Volume of service on Azerbaijani transport sector 2.5% increases 153. Azerbaijani main line to be modernized till 2013 154. Azerbaijani President participates in opening of dry-cargo port station constructed in Baku bay 155. Georgia exports brandy products to 5 countries in January-February 156. Georgia exports vodka to eight countries in January-February 2010 157. Georgia - FY09 net FDI falls 51% y/y 158. Georgia, Azerbaijan and Romania to sign memorandum on implementation of project worth 4-6 billion EUR 159. Georgia: 2009 investment inflows marked 759.1 million USD, down 51.4 percent versus 2008 160. Georgia: BTC oil pipeline records rise in oil transportation volume, while BTE gas pipeline marks decline in gas transportation in January-February 161. Georgia: Canadian and Israeli companies show interest in Republican Hospital acquisition 162. Georgia: EBRD provides €80m loan for Black Sea High Voltage line 163. Georgia: Energo-Pro Georgia to export Enguri HPP excess electricity 164. Georgia: Formation of counter-monopoly office will substantially change Georgia’s economic development course, says economic expert 165. Georgia: Italian Ferrero plans to enlarge filbert plants in Samegrelo region 166. Georgia: January-February marks a 47 percent rise in Georgian wine exports year on year 167. Georgia: Madneuli profits record 3 million USD in 2009 168. Georgian Insurance Association and Georgian insurance industry to develop automobile owner civil responsibility insurance bill

169. Government to toughen control over content of dairy products despite no laboratory uses method for natural milk powder identification 170. Korea to extend the collaboration in the sphere of transport with Azerbaijan 171. Mongolia: Tavan Tolgoi proceeds to fund processing capacity construction 172. Thomas Mirrov: EBRD to allocate $200 mln for Azerbaijan SOUTHEAST INVESTMENT 173. Bulgaria PM says potential investors in Belene nuclear plant to decide in 2-3 weeks 174. CEZ said plans to build gas-fired plant in Turkey 175. Czech/Bosnian consortium to build motorway Interchange 176. Romanian - Pirelli makes Romanian plant its top investment target in Europe 177. Turkey - Exporting and investing in Turkey CENTRAL EUROPE INVESTMENT 178. Hungary opposition leader warns foreign utilities over review of contracts 179. Magyar Telekom and Cisco establishes joint innovation centre in Budapest 180. S. Korean carmaker Kia Motors to invest EUR100m in new plant in Slovakia

TOP STORY INVESTMENT 1. Russia rejects calls to merge South Stream, Nabucco gas pipelines Ria Novosti March 16, 2010 Russia is not considering a proposal to combine part of its South Stream gas project with the Western-backed Nabucco pipeline, Energy Minister Sergei Shmatko said on Monday. "We are not discussing such issues," Shmatko said. Shmatko commented on a recent suggestion by Italy's Eni SpA, Gazprom's partner in the South Stream gas pipeline project, that combining some sections of the pipelines would cut costs and boost profits. Eni CEO Paolo Scaroni was reported to say at a Cambridge Energy Research Associates conference in Houston on Wednesday that if all the partners decided to merge the two pipelines for part of the route, "we would reduce investments, operational costs and increase overall returns." Shmatko also said Russia welcomed Europe's desire to diversify gas supply routes but did not consider the South Stream and Nabucco as rival projects. Both South Stream and Western-backed Nabucco aim to supply natural gas to Southern and Central Europe. The South Stream project is designed to deliver up to 63 billion cubic meters of Central Asian and Russian natural gas under the Black Sea while Nabucco is intended to pump 31 billion cu m of natural gas from the Caspian region via Turkey. Russian experts, however, are skeptical about the prospects of merging the two pipelines as Nabucco was originally designed to cut Europe's dependence on Russian natural gas deliveries. MOSCOW, March 15 (RIA Novosti)

2. Greece agrees to sign South Stream contract, possibly in exchange for implementation of the Burgas-Alexandroupolis oil pipeline project VTB Capital, Russia February 17, 2010 - agreement with Bulgaria would be an important step News: Greek Prime Minister George Papandreou has said that Greece is ready to sign a contract with Russia for the construction of the Greek section of the South Stream pipeline project. According to Kommersant, the contract might be signed during the next few months. The paper speculates that Greece agreed to participate in South Stream in exchange for implementing the Burgas- Alexandroupolis oil pipeline project. The last country with which Russia needs to agree the conditions for participating in South Stream is Bulgaria. Negotiations are under way. Gazprom plans to start constructing South Stream in 2012-13. Our View: We did not anticipate any difficulties over the agreement with Greece and so the news was largely expected. Should Bulgaria sign an agreement on constructing South Stream in the near term, that would be marginally positive for Gazprom and make it more likely that the project will be implemented. Back to top Lev Snykov 3. Russia may cap timber export, Russia going green bne March 21, 2010 There is a new theme in Russia's economic development policy - go green. Russian Natural Resources Minister Yury Trutnev suggested last week that the government may restrict the amount of timber the country exports as response to the "carbon protectionism" being displayed by a number of importers. "Forests play an important role in absorbing CO2, and if there are carbon protectionism measures that are not quite correct, we might respond by considering measures in relation to timber export, since forests must be taken into account in the general climate balance," Trutnev told journalists after a Security Council session. Most of Russia is little more than one huge forest that stretch across 11 time zones. Russia has the world's largest forest reserves, which account for about a quarter of the global forest resources Trutnev said. The Kremlin is starting to see that in addition to exporting oil and arms, selling its carbon credits could well be a good little earner too. "We have long been postponing the introduction of export duties, that is a mechanism that would allow to process a large amount of timber in Russia. We are doing it at the request of our economic partners, but if, in response, they protect themselves from our products, we might not continue to protect them just as carefully," Trutnev said.

Among the countries considering imposing a carbon quota is the United Kingdom, Trutnev said, and similar measures are also being discussed in Europe and the United States. "A number of countries are introducing carbon protectionism measures, trying to restrict the freedom of trade by using a carbon quota mechanism. This is unacceptable. We believe preparation of such mechanisms are detrimental for the economy and for reaching a common agreement on climate change," the minister said. Talks on the signing a global agreement on climate change prevention have been very difficult, he said. "Reaching common global agreements is a fragile matter in general, and by breaking it with protectionist measures one might never see it happen, the Kyoto Protocol will be over and there will be nothing else," Trutnev said. 4. Kremlin to launch Russia's Eurobonds road show on April 21-22 bne March 21, 2010 The Russian government will start its road show for Russia's Eurobonds in New York on April 21-22 before moving on to London, says Russian Deputy Prime Minister and Finance Minister Alexei Kudrin reports Interfax. The government has said it could borrow up to $17.8bn on foreign markets in 2010 although analysts widely expect the amount to be half as much. 5. Medvedev wants tighter control over industry; to monitor Shtokman, Kovykta projects Unicredit February 15, 2010 Topic: President Dmitry Medvedev directed his staff to study the feasibility of the Shtokman project and wants greater control over "middlemen" at Russian oil terminals in order to avoid a shortfall in budget revenue, Vedomosti writes today, commenting on the results of Friday's meeting on Russia's energy complex in Omsk. The newspaper writes that TNK-BP core shareholder Victor Vekselberg reminded the president of the upcoming review of TNK-BP International's license to develop the Kovykta gas field in East Siberia, while Gazprom Neft representatives again raised the topic of unifying the oil product export duty. Our view: The revived attention from the president's office to Russia's largest upstream gas projects underlines the seriousness of Gazprom's struggles for its share of the export market. The review of the Kovykta license is due this Thursday, and while withdrawal is potentially on the cards, the discussion in Omsk appears to have highlighted the possible damage to the investment climate that such a decision could do. We expect a decision on the oil products export duty in 1H10, and the latest news flow appears to confirm our expectations. Conclusion: We reiterate our recommendations pending decisions on the above matters.

6. Russia's fixed investments down 8% in 2M10 bne March 21, 2010 Russia's fixed investments fell 8% on the year over the first two months of this year, the Federal State Statistics Service said in Friday reports Interfax. In February, capital investments amounted to RUB418.7bn, down 7.4% on the year and up 23.1% on the month, the service said. 7. Vladimir Putin to head Commission on High Technology and Innovation VTB Capital, Russia February 16, 2010 - Prime Minister enters President Dmitry Medvedev's 'modernisation' domain - this area of state activity to see increasing activity in the future News: Vedomosti reports that Prime Minister Vladimir Putin will personally head the Commission on High Technology and Innovation which had been headed by Sergei Ivanov since its creation in 2008. Putin is likely to be officially appointed on 4-5 March. Our View: Until now, aspects of modernising Russia (including innovations) were considered the sole domain of President Dmitry Medvedev. The fact that Putin will be actively involved suggests that the priority assigned to this national project has now been changed to the highest level. We believe this could be a positive development. Putin's authority will in our view help the strategic management of the innovation process and control over it, especially given the scope of the programme (according to Medvedev, the initial budgets of just the state-owned companies for the innovation programmes is close to RUB 620bn). This would likely help to promote high growth rates.

RUSSIA-FOREIGN INVESTMENT 8. Mechel opens representative office in China bne March 12, 2010 Russian mining and metals group Mechel has opened a representative office in China, reports Prime-Tass. Citing the company, the news agency says that the office will work on expanding Mechelís business in the country and perform studies on the marketís dynamics. 9. Russia to sign infrastructure deal with Abkhazia bne February 18, 2010 Russia and Abkhazia are planning to sign an agreement on the development of transportation infrastructure in the self-declared republic.

Abkhazia’s government plans to put its rail network under the trusteeship of Russian Railways, and to sign additional agreements on Sokumi port and airport, Interfax reported. A deal has already been signed on the establishment of a Russian military base in the breakaway republic, which has been strongly opposed by Georgia. In a statement issued February 17, the Georgian Foreign Ministry accused Russia of "attempting to increase its military presence in Georgia's occupied territories.” The statement called on the international community to take steps to prevent Russian actions in Abkhazia.

FOREIGN-RUSSIA INVESTMENT 10. Putin sells plane ñproof reactors to New Delhi bne March 12, 2010 Russian Prime Minister Vladimir Putin won support for Rosatom to build a dozen ultrasafe nuclear reactors in India, part of more than $10bn in deals in energy, arms, telecoms and other cooperation signed during his visit to India, reports The Moscow Times. The newspaper report says that the trip, Putinís first to India since December 2007, came as Moscow is driving to maintain its position on the lucrative markets for arms and nuclear energy, even as India boosts cooperation with rival suppliers like the United States and France. In the meantime, Russia's largest producer of phosphate-based fertilizers has agreed on a $1.5bn three-year supply deal with India to compete with North American producers, reports The Moscow Times. The newspaper report says that PhosAgro signed the agreement with the Indian Farmers Fertiliser Cooperative and Indian Potash, India's biggest importers, during Prime Minister Vladimir Putin's visit. 11. Russia's Renova, Chinese co to invest in gold, platinum projects bne February 17, 2010 Alexei Belokrys, a spokesman for Russia's Renova, says that Renova group and China National Gold Group Corporation (CNGGC) plan to jointly invest "hundreds of millions of dollars" in gold and platinum projects, reports Prime-Tass. The news agency quoted Belokrys as saying that these may include gold and platinum exploration, ore dressing plants, infrastructure and public service facilities. In the meantime, Ruslan Zalivatsky, the economic development minister of Russiaís Kaluga Region, says that Mexicoís Metalsa and Chinaís Fuyao Group are considering setting up auto components production in the Region, reports Prime-Tass.

The news agency quoted Zalivatsky as saying that talks are currently being held with these companies. 12. Sweden's SCA launches 93mn euro paper plant in Russia bne February 17, 2010 Swedish paper maker Svenska Cellulosa (SCA) has invested 93mn euros to launch the first stage of a toilet paper plant in the city of Sovetsk in the Tula Region, reports Prime-Tass. Citing the company, the news agency says that the plant was a greenfield project. In the meantime, Valentina Matviyenko, governor of St. Petersburg, says that Russia's Federal Grid Company (FGC) and engineering company Power Machines plan to start jointly building an electric power equipment plant in the city of St. Petersburg in June, reports Prime-Tass. The news agency says that Power Machines said earlier that $2bn would be invested in the project. 13. Switzerlandís Nestle sales in Russia up 12% on year in 2009 bne March 18, 2010 Stefan de Loecker, CEO of Nestle Rossiya, says that Switzerland-based food and beverage company Nestle increased its sales in Russia 12% on the year to RUB57bn in 2009, reports Prime-Tass. The news agency says that in 2009, the company controlled around a 19% share of the Russian chocolate market over 40% of the coffee market, a 25% share of the baby food market, and over a 50% share of the Russian breakfast cereals market. In the meantime, Stefan de Loecker says that Nestle plans to build a RUB7bn plant to produce freeze dried coffee Nescafe Gold in Russiaís Krasnodar Region, reports Prime-Tass. The news agency quoted Loecker as saying that all preparatory works have been completed and construction of the plant is already starting.

RUSSIA-RUSSIA INVESTMENT 14. Russia may start building Soyuz tourism spacecraft in mid-2010 bne March 18, 2010

Vitaly Lopota, president and chief designer at Russian spacecraft maker RSC Energia, says that construction of a Soyuz spacecraft intended for tourism services could start in the middle of 2010, reports Prime-Tass. The news agency quoted Lopota as saying that construction of the spacecraft is expected to take two years. In the meantime, Russian Railways President Vladimir Yakunin says that state-owned railroad monopoly Russian Railways now plans to set up Second Cargo Company by the end of June, reports Prime-Tass. The news agency says that initially, Russian Railways planned to set up the company by the end of 2009, but it later pushed back the deadline till January-March 2010. In another development, Sergey Sobyanin, Deputy Prime Minister and Head of the Governmental Staff, says that the Russian government suggests cutting the number of strategic enterprises nearly by a third, reports local media. 15. Russian company seen launching RUB5.5bn Omsk Reg glass plant bne March 18, 2010 Russian glass container manufacturer RusGlass is expected to launch a RUB5.5bn glass plant in the Omsk Region in May, reports Prime-Tass. Citing a statement issued by the Omsk Regionís ministry of industrial policy, transport and communications, the news agency says that the plant is expected to annually produce up to 700 million units of glassware. In the meantime, Russiaís United Metallurgical Company, or OMK, plans to invest a total of RUB18bn in construction of a steel rolling mill at Vyksa Steel Works in 2010-2012, reports Prime-Tass. Citing the government of the Nizhny Novgorod Regionís Vyksunky district, the news agency says that as of January, the companyís investment totaled RUB16.5bn since the launch of the project in June 2007. In another development, the government of Russiaís Krasnodar Region has concluded nine investment agreements worth 973.3mn euros during the MIPIM-2010 real estate exhibition in the French city of Cannes, reports Prime-Tass. Citing the regional government, the news agency says that Russian real estate developer Hermitage Construction and Management will invest in the construction of Tonky Mys recreation complex in the resort city of Gelendzhik, where the company Kubanskaya Marka will invest in the construction of a residential district, and Stenos will build a hotel complex. In another development, U.S. agribusiness conglomerate Cargill plans to start building a poultry processing plant in Russia's Tula Region in July, reports Prime-Tass.

Citing the regional government, the news agency says that the plant's capacity is projected at up to 18,000 tonnes per year, Cargill also plans to build a plant in the region to produce 400,000 tonnes of wheat products per year. 16. Severstal to launch Russiaís Sheksna pipe plant by end of March bne February 17, 2010 Russian steel maker Severstal plans to launch its $100mn pipe plant Severstal TPZ Sheksna in the Vologda Regionís Sheksna Industrial Park by the end of March, reports Prime-Tass. Citing the plantís press office, the news agency says that Severstal TPZ Sheksna has finished testing the slitting unit. In the meantime, the Center for Market Research at the State University The Higher School of Economics found out on the basis of the company polls held by Rosstat, that the number of companies making investments remained almost unchanged: 90% compared with 93%, reports local media. Reports suggest that the rate of investment is forced in many ways. Most of the funds (64%) was spent on the replacement of worn-out equipment which further operation was simply impossible.

SECTOR Gas 17. Azerbaijan and Bulgaria to discuss the transportation of compressed natural gas to Europa APA-Economics March 15, 2010 The State Oil Company of Azerbaijan Republic (SOCAR) continues negotiations on the transportation of compressed natural gas (CNG) through Bulgaria to Europe. Baku hosted a meeting of a joint working group on the project. According to SOCAR representatives of the project partners to develop the Shah Deniz gas condensate field in Azerbaijan sector of the Caspian Sea also attended the meeting. The parties discussed the economic profitability of the project delivery of the Azerbaijani compressed gas to Bulgaria and other European countries via the Black Sea, as well as the technical possibilities of the project. The next meeting of the working group will be held in Sofia in late April. 18. Gazprom given Bulgarian gas field license bne March 21, 2010

Bulgarian gas trader Overgas ,50% owned by Gazprom, has received a license to develop the Provadia gas field block in eastern Bulgaria reports Lenta.ru. No figures are available for Provadia's reserves or prospective production rates. The consortium to develop the field also includes Britain's JKX Oil & Gas and Balkan Explorers, a subsidiary of Aurelian Oil & Gas (Bulgaria). Their stakes in the consortium will be 64%, 18%, and 18% respectively. 19. Gazprom starts drilling its first exploration well in Africa Ria Novosti March 16, 2010 Gazprom has started drilling its first exploration well in Africa in the El Assel onshore region in Algeria, the Russian energy giant said in a statement on Monday. Under a contract signed with the Algerian National Hydrocarbon Agency (ALNAFT), Gazprom began drilling the Rhourde Sayah-2 well in the Berkine Basin in Algeria, the statement said. The drilling is part of Gazprom's obligations in regard to the terms of a tender for hydrocarbon exploration and drilling of four wells on the El Assel onshore area, which was won by the Russian energy giant. According to provisional estimates, the recoverable oil reserves of El Assel should average 30 million metric tons (220 million barrels). El Assel includes three blocks covering a total of 3,083 square kilometers (1,190 square miles). Algeria's proven natural gas reserves account for 4.58 trillion cubic meters and are the second largest in Africa after Nigeria (5.15 trillion cubic meters). The bulk of the country's natural gas reserves are concentrated in the central and eastern parts of the country. The country's proven oil reserves amount to 1.58 billion tons (11.6 billion barrels) and are the third largest in Africa after Libya and Nigeria. Gazprom intends to complete the drilling of the first exploration well in June 2010 and the other three over the next two years, the statement said. 20. Gazprom, Bulgaria to sign deal to clear way for South Stream Ria Novosti February 17, 2010 Gazprom and Bulgaria are set to sign an agreement on a joint venture that will clear the way for the construction of the South Stream gas pipeline across the southeast European state, the Russian energy giant said on Tuesday. Russia signed an intergovernmental agreement on the South Stream gas project with the Socialist-led Bulgarian government in January 2008. In May 2009, Russia's Gazprom and state-run Bulgarian Energy Holding (BEH) agreed to set up a joint venture on a parity basis to build the Bulgarian section of the South Stream pipeline by mid-2010.

However, the country's new government, which came to power in the summer of 2009, announced its plans to review the deal and diversify gas suppliers following a dispute between Gazprom and Ukraine in January 2009 over unpaid bills and gas prices that left most European countries without gas deliveries for two weeks in freezing temperatures. Following the talks, held with Gazprom in late 2009, the new Bulgarian government announced its support for the project, intended to reduce the dependence of European consumers on gas transit countries. Gazprom said in a statement that during a working visit by Gazprom CEO Alexei Miller to Bulgaria on Tuesday and his meeting with Bulgarian President Georgi Parvanov and Prime Minister Boyko Borisov, the parties discussed the pre-investment stage of the project. "The preparation of a feasibility study for the Bulgarian part of the gas pipeline and the creation of a joint project company between Gazprom and the Bulgarian Energy Holding were named as top priority measures," the statement said. The South Stream project, designed to annually pump 31 billion cubic meters of Central Asian and Russian gas to the Balkans and on to other European countries, involves Bulgaria, Serbia, Hungary, Italy and Greece. The pipeline's capacity could be eventually increased to 63 billion cubic meters annually. The gas pipeline is expected to start operating in late 2015. The project is part of Russia's efforts to cut dependence on transit nations. It is a rival project to the EU-backed Nabucco, which would bypass Russia. MOSCOW, February 16 (RIA Novosti) 21. GAZPROM: positive view maintained on recovery and long-term prospects UralSib, Russia February 17, 2010 Optimistic guidance set by strong recovery. Gazprom (GAZP RX - Buy) provided promising preliminary operational data for 2009 and a positive long-term strategic outlook at meetings with analysts during investor days held in Moscow, London, and New York. The company emphasized full recovery of production and exports to the EU and CIS in late 2009, and gave fairly optimistic guidance for 2010-30. Positive view confirmed; Buy recommendation retained. We have updated our company model for production as well as domestic and international sales of gas. We increased the production forecasts in our DCF-based valuation, but also increased our capex expectations. Thus our target price remained nearly unchanged: $8.4/share, with 54% upside from the current price, with Buy recommendation for the stock. Gazprom remains our favorite oil & gas stock, and our overall view is that gas is preferable to oil in the current business, tax, and price environment. Gazprom remains one of the cheapest stocks relative to oil & gas peers on 2010-11E EV/EBITDA and P/E.

SIX REASONS TO BUY GAZPROM Solid production. The production cut in 2009 was done wisely, the decline was controllable, and recovery is rapid. No politics regarding non-purchased gas. The company's reaction to the fall in demand was flexible and unaggressive; with take-or-pay clauses may be adjusted. Market share not lost to LNG. LNG is the core competing commodity for pipeline gas, however Gazprom does not target countries exposed to LNG deliveries (Spain, France, Italy, Turkey). Gazprom uses trading operations to retain its market share. Its target is not to increase its market share in Europe, but to at least preserve it. Ukraine problem settled, export routes to be diversified. Gazprom did not bump heads with Ukraine this winter. Nord Stream construction starts in April. South Stream negotiations are positive. Shale gas no big risk thus far. Shale gas lifting costs are too high, drilling is slowing in the US, if shale gas flows to Europe it will squeeze LNG, meaning political difficulties with Qatar. Snow good for revenues. Cold weather in Europe and the US has meant a strong seasonal boost in gas sales. AWAKE FROM HIBERNATION Impressive recovery. Production was down YoY in 2009, but QoQ trends show a full recovery in daily gas production. The production recovery stemmed from a recovery in exports driven by cold weather in the EU in 3Q-4Q09 and early 2010. The daily production recovery was impressive at 1 bcmpd in 2Q09, 1.1 bcmpd in 3Q09, 1.55 bcmpd in 4Q09, and 1.65 bcmpd in January 2010. Production was cut wisely. Gazprom was able to cut production artificially at the greenfields without affecting geological pressure (unlike at the oil greenfields). The most substantial cuts were at the Zapolyarnoye field and at Gazprom's Dobicha Noyabrsk greenfields (particularly the Eti-Purovskoye field). Brownfields cuts were mainly at the Cenomanian deposits. We were impressed by Gazprom's geologists for cutting production wisely. The decline and recovery at these fields are reflected in our DCF. See the per-field production forecast table at the back of the note. Long-term growth sustainable. Gazprom has three long-term production growth scenarios, with varying economics and rates of bringing new gas fields on stream. Our forecast (production profile) on average is between the aggressive and medium (closer to medium) scenarios: __ Aggressive: production from this scenario was referred to by the company during the investor day presentation when talking about 2010 targets. 2010 - 520 bcm, 2015 - approximately 570 bcm, 2020 - 660 bcm, 2030 - 675 bcm. __ Medium: 2010 - 475 bcm, 2015 - 550 bcm; 2020 - 610 bcm; 2030 - 630 bcm.

__ Conservative: 2010 - 475 bcm, 2015 - 520 bcm; 2020 - 585 bcm; 2030 - 600 bcm. Long-term production growth is to be supported by three core gas sources: North Yamal first stage; Shtokman project; and North Yamal second-stage (offshore) projects. In our DCF model, we kept the first-stage Yamal projects - the Bovanenkovo and Kharasavey fields - unchanged, believing that the company will be committed to bringing them on stream in time in 2012. __ Bovanenkovskoye field. Production is expected to start in 2012 with drilling at the Cenomanian and Aptian deposits, adding the Valanzhinian deposits by 2019. We expect peak production of 140 bcm in 2024. The Kharasavey field is expected to be brought on stream by 2016, the Cenomanian/Aptian deposits first and the Valanzhinian deposits from 2019. Peak production of 32 bcm is expected in 2020. __ Shtokman project. The start of production of pipeline gas was shifted from 2013 to 2016; LNG production was postponed from 2014 to 2017. This postponement has no impact on our model, as we expected such a delay. We still expect approximately 24-25 bcm to be reached in 2018 and to be maintained until 2025; __ Second stage of Yamal development. This will include development of the Tambey group of fields and of the Ob and Taz river-mouth fields (Severo-Parusovoye, Yuzhno-Parusovoye, Kamennomysskoye, Severo-Kamennomysskoye, Obskoye and Semakovskoye fields), and the Kara sea projects (the Kruzenshternovskoye and Leningradskoye fields). Capex guidance unchanged. Gazprom expects capex to rise 27% YoY in 2010 from RUB483.5 bln ($16.1 bln) to RUB 613.8 bln ($20.5 bln). The overall investment program (net of the RUB138.5 bln cost of purchasing a 20% stake in Gazprom Neft) should increase by 20.7% from RUB623.1 bln (20.8 bln) to RUB 752.6 bln ($25.1 bln). This is fairly in line with our forecast, as the company had previously provided adequate guidance at investor meetings. The 2010 capex priorities are drilling at the Cenomanian and Aptian deposits of the Bovanenkovo field and the Bovanenkovo-Ukhta pipeline. In the long run, Yamal and Shtokman should cover 40% of total 2010-30E. According to Gazprom's guidance, it's investment program will remain around $20-23 bln for the next five years, dedicated namely towards the above mentioned projects.

22. Kovykta discussions envision cost recovery from potential buyer, not the state Unicredit, Russia March 18, 2010 Topic: TNK-BP International would have to recover its costs at the giant Kovykta gas field through arrangements with the eventual buyer of the asset, Russian Minister of Natural Resources Yury Trutnev stated yesterday to Interfax. The Russian government offers no mechanism for cost recovery if a license is withdrawn, nor do we expect it to offer restitution to the company should the recently re-initiated license withdrawal process result in TNK-BP losing the asset. Our view: We note that publicly traded TNK-BP Holding does not consolidate the legal entity holding the Kovykta license; however, we believe a proper cost process should generate positive momentum for the company and would likely help Russia's image as a market-oriented country with a sound investment climate. Trutnev's statement follows similar comments by First Deputy Prime Minister Igor Sechin, who last week ruled out "forceful expropriation" of the asset from TNK-BP. Conclusion: We reiterate our Buy recommendation and 12M TP of USD 2.08 for TNK-BP Holding. 23. Ministry proposes giving oil, gas field to Gazprom-Lukoil JV bne March 18, 2010 Denis Kharmov, head of the mineral resource policy department, at Russia's Natural Resources Ministry says that the ministry has submitted a proposal to the government to grant Tsentrkaspneftegaz a license for the Tsentralnaya offshore oil and gas structure in the Caspian Sea, reports Prime-Tass. The news agency says that oil major Lukoil and gas giant Gazprom hold 50% each in Tsentrkaspneftegaz. In the meantime, Russian natural gas giant Gazprom and German energy company Wintershall plan to start producing oil and gas in the North Sea in 2011, reports Prime-Tass. Citing a report issued by Wintershall, the news agency says that Wintershall and Gazprom hold, respectively, 49.5% and 20% in the 44/24b (Dimple) block in the North Sea. 24. Nabucco’s managing director: "Work on Nabucco will begin in 2011, the supply of gas - in 2014" APA March 19, 2010 Construction of the southern gas pipeline "Nabucco" transporting natural gas from the Caspian basin to Europe by passing Russia, is scheduled to begin in 2011, said

managing director of an international consortium established for the construction of highways Reinhard Mitschek, APA reports citing RIA Novosti. The project "Nabucco" is estimated at 7.9 billion dollars and involves the transport of gas to Europe via Azerbaijan, Georgia, Turkey, Bulgaria, Hungary, Romania and Austria. The line length of 3.3 thousand kilometers a continuation of already constructed Baku-Tbilisi-Erzurum gas pipeline and is designed to transport an annual 20-30 billion cubic meters of gas. Two-thirds of the pipeline will be built through Turkish territory. In the consortium to build a gas pipeline involving the Turkish company Botas, Bulgaria Bulgarian Energy Holding, Hungary’s MOL Plc, the Austrian OMV Gas & Power GmbH, Germany RWE and Romanian Transgaz. Each of the project has his share of 16,67%. "This year will be important for the project, an intergovernmental agreement was signed a year ago in Ankara, said Mitchek after the meeting in the Turkish capital, representatives of countries participating in the project. In particular, it will begin the engineering work, as well as taken steps associated with financing the construction of the pipeline and fill it with gas, he said. Turkish Energy Minister Taner Yildiz said that the Nabucco project is a "commercial project received political support." The head of the Turkish Ministry of Energy also announced the intention to create a national company “Nabucco”. The head of the Austrian company OMV Werner Auli (Werner Auli), for its part, noted that the potential gas suppliers for Nabucco are Azerbaijan, Iraq and Turkmenistan. "Iran in the long run may be an option of gas supplies, but not at the present time" - he said. 25. Nord Stream inks deal to borrow 4bn euros for pipeís 1st stage bne March 12, 2010 Nord Stream AG says that its shareholders had signed a deal to borrow 3.9bn euros to finance construction of the first stage of the Nord Stream gas pipeline project, reports Prime-Tass. The news agency says that Nord Stream AG is the operator of a project to build a 1,200-kilometer pipeline that will carry Russian gas under the Baltic Sea to Germany. In the meantime, Russian Energy Minister Sergei Shmatko says that the Russian government expects talks on Austria joining the South Stream natural gas pipeline project to be completed soon, reports Prime-Tass. The news agency quoted Shmatko as saying that the next round of talks on building a branch of the pipeline to Austria is expected in the coming one or two weeks. In another development, Russian natural gas giant Gazprom has started drilling the first exploration well Rhourde Sayah-2 at the El Assel license area in Berkine Basin in Algeria, reports Prime-Tass.

Citing a statement issued by the company, the news agency says that the geological exploration program of the El Assel area envisages drilling of four wells, in accordance with the terms of the tender won by Gazpromís subsidiary Gazprom EP International B.V. In another development, Russian Foreign Minister Sergei Lavrov says that Russian and Turkmen companies are in talks on increasing Turkmen gas supplies to Russia, reports Prime-Tass. The news agency says that Turkmenistan plans to export 10 billion cubic meters of gas to Russia in 2010. 26. Turkmen leader reassures Moscow on natural gas supplies Ria Novosti March 17, 2010 Turkmen President Gurbanguly Berdymukhammedov on Tuesday confirmed the Central Asian republic's readiness to supply the required gas volumes to Russia, Russian Foreign Minister Sergei Lavrov said. "There will always be enough Turkmen gas for Russia. This is what the [Turkmen] president told me," Lavrov said upon his return from a two-day visit to the ex-Soviet republic. Lavrov said the required volumes or gas supply increases were issues for the two countries' respective energy companies. Problems with Turkmen gas deliveries to Russia began in April 2009 when an explosion and ensuing fire forced Turkmengaz, the country's state-run gas company, to suspend supplies to Russia. Turkmenistan then accused Russia of failing to give warning that it was reducing gas imports, resulting in a buildup of pipeline pressure that caused the blast. Gazprom reduced gas imports after a drop in demand from European consumers amid the global economic crisis. Russia and Turkmenistan agreed in December 2009 that the Central Asian state would resume natural gas supplies to Russia from January 2010 to deliver up to 30 billion cubic meters annually at European-level prices. Before the April 2009 pipeline explosion, Gazprom imported 50 billion cubic meters of Turkmen gas. MOSCOW, March 16 (RIA Novosti)

SECTOR Oil 27. China builds underwater tunnel for Russian oil pipeline Ria Novosti March 18, 2010

China has finished the construction of a tunnel under the Amur River to accommodate an extension of a pipeline intended to pump millions of tons of Russian oil to the energy-hungry country every year, the Xinhua news agency said Thursday. More than 80 Chinese workers have been involved in the drilling of a 1,900-meter tunnel on the Russian-Chinese border since September last year, Xinhua said. Russia and China signed cooperation deals on the construction of a branch of the Eastern Siberia-Pacific Ocean pipeline (ESPO) toward China and long-term Russian oil supplies to China in February 2009. The branch, which runs from Skovorodino in Russia's Far East to China's northeastern city of Daqing, is expected to become operational in 2011. Russian officials earlier said the construction cost of the branch had been estimated at 11-12 billion rubles ($377 mln - $410 mln), while the annual revenues from oil sales to China could reach 57 billion rubles ($1.9 bln). Russia is scheduled to export annually 15 million tons of crude oil to China over the next 20 years. BEIJING, March 18 (RIA Novosti) 28. China seeks to double the volume of Russian oil supplied through East Siberian link Unicredit February 16, 2010 Topic: China may seek to double the volumes supplied by Russian oil companies through ESPO in order to satisfy the growing demand for crude and feed the planned Tyanzin refinery, Kommersant writes, citing CNPC. The 15mn tons of oil currently planned for annual delivery to China from ESPO through Skovorodino could then be directed to other regions of the country. Our view: We believe the statements further underline the need to continue the current duty holiday for East Siberian upstream projects, whose development does not make economic sense without them. We expect the announcement to be used as an additional argument in the ongoing debate inside the government over the structure and length of the duty holiday. Conclusion: We continue to see the tax holiday as a key tool to allow the companies to recover their initial investments, and believe it will remain in place, likely matched against the total saving of start-up costs to develop the new fields. 29. East Siberian crude zero export duty regime still in limbo Renaissance Capital, Russia Monday, February 15, 2010 Event: Kommersant reported this morning (15 Feb) that the Russian government may not be able to reach a decision in February on the earlier proposed revamp of the export duty regime for East Siberian crude, extending the current zero duty rate for March. It was previously expected that the special working group set up by Finance Minister Alexei Kudrin and Deputy Prime Minister Igor Sechin would analyse

the economics of East Siberian oil field developments and would propose methods to compensate the state budget for lost revenues associated with the zero export duty regime by February, with a view of making these changes from March. Action: This news suggests that the decision on the fate of the export duty holiday for the East Siberian oil fields may take another month, but does not provide materially new information. Rosneft is currently the main beneficiary of this tax holiday, which alone accounts for 25% of Rosneft's 2010E net income, followed by Surgutneftegas (18%) and TNK-BP (8%). Rationale: We continue to think the possibility of this tax holiday being abolished, amended or substituted with another tax is very high, as we see little economic rationale for this measure. The original decision to introduce the tax break was made in Feb 2009, when the oil price was hovering around $44/bbl, making oil exports from East Siberia unprofitable. However, with the oil price above $70/bbl, the rationale for this tax holiday is less obvious to us, as it fails to send the right investment incentives to the industry, while depriving the state budget of substantial tax revenues. Alexander Burgansky 30. Greek premier says Burgas-Alexandroupolis oil pipeline plan to go ahead Ria Novosti February 16, 2010 Greek Prime Minister George Papandreou said on Monday the construction of the Burgas-Alexandroupolis oil pipeline project could start in six months, dropping his doubts about the project. In the fall of 2009, Papandreou said on the eve of parliamentary elections that he supported the project but would seek better terms if he became premier, primarily those concerning environmental protection. The Greek premier told RIA Novosti the necessary procedures, "including research into the impact on the environment and a transit agreement, are expected to be completed in the next six months." "Construction should begin immediately after that," he added. Burgas-Alexandroupolis is a project between Russia, Greece and Bulgaria to pump Russian and Caspian oil from the Bulgarian Black Sea port of Burgas to the Greek Aegean port of Alexandroupolis. The three countries signed an agreement to build the 280-km (174 mile) Trans-Balkan pipeline in 2007, following several years of talks. Papandreou's latest statement comes as he heads to Russia on Monday for a two-day working visit to discuss issues of bilateral cooperation, including joint energy projects. Once completed, the pipeline will pump 35 million metric tons of oil a year (257 million bbl), a volume that could eventually be increased to 50 million metric tons

(368 million bbl). Under an inter-governmental agreement signed in 2007, Russia holds 51% in the project company, while Greece and Bulgaria hold 24.5% each. ATHENS, February 15 (RIA Novosti) 31. IEA increases prognosis on oil consumption APA-Economics March 15, 2010 Oil is gaining strength in early morning trade Friday, with the International Energy Agency lifting its outlook for energy demand worldwide in 2010, Eastern Standard Time reported. The Paris-based agency raised its forecast for global oil needs by 70,000 barrels a day to 86.6 million barrels. The increase represents a gain of 1.6 million barrels a day, or 1.8%, from levels reached in 2009, according to the IEA. The agency said that the greatest demand for energy will come not from mature economies, but from emerging markets. 32. LUKoil to drill first exploration well at Iraq's West Qurna-2 Ria Novosti March 18, 2010 Russia's largest privately held oil company, LUKoil, plans to drill the first exploration well at the West Qurna-2 oil field in Iraq, LUKoil CEO Vagit Alekperov said on Wednesday. "We'll start drilling the first exploration well at the end of the year," Alekperov said, adding that the company's specialists were already working at the site. On January 31, LUKoil signed a 20-year contract to develop Iraq's massive West Qurna-2 oil field. LUKoil will develop the 12.88 billion-barrel oil field in the Basra province in southern Iraq as a consortium with Norway's StatoilHydro. The consortium, in which the Russian company holds 56.25% and StatoilHydro 18.75%, won the tender for the oil field in December 2009. The Iraqi National Oil Company will also join the consortium and hold a 25% stake in the project. LUKoil was involved in the development of the first phase of West Qurna and signed a contract with the Saddam Hussein regime to develop the second stage, but the deal was frozen in 2002. Alekperov earlier said that the international consortium led by LUKoil would invest some $30 billion in the development of the West Qurna-2 oil field. MOSCOW, March 17 (RIA Novosti) 33. Rosneft exports are safe Renaissance Capital, Russia

Thursday, March 18, 2010 Event: Yesterday (17 Mar) Reuters reported that Rosneft's exports could be in deadlock following a reported injunction won by YUKOS Capital in the US and UK courts over the alleged receivables unpaid by Rosneft. YUKOS's claims relate to the 2006 decision by the arbitration court of the Russian Chamber of Commerce to make Rosneft pay an unsettled debt liability to YUKOS in the amount of RUB13bn (approximately $450mn). In 2007, this decision was revoked by the Moscow Arbitration Court with revocation further confirmed by other superior courts in Russia (such as Supreme Arbitration Court). YUKOS Capital did not accept Russia's Supreme Courts's overrulings, claiming an unfair judicial system in Russia and filed a countersuit in the Netherlands, which ruled in its favour. Since Rosneft does not have any assets in the Netherlands, YUKOS Capital filed a request to execute the decision with US and UK courts. Action: We retain our HOLD rating on Rosneft and regard yesterday's concerns as unlikely to have a material impact on Rosneft exports or earnings. Rationale: While the US court is currently investigating the matter, the UK judicial system generally allows receiving advance fulfillment of obligations, which means effectively freezing Rosneft's assets in the UK (limited to the maximum amount of potential liability, or less than 1% of its market cap). We understand that Rosneft can make a pledge to avoid the freezing of its assets and that this legal issue does not put Rosneft's existing exports or payment procedure in danger as was originally reported by newswires (including Reuters). Alexander Burgansky 34. Rosneft might get increased access to Gazprom's gas pipeline in 2014 - long-term implications VTB Capital, Russia March 17, 2010 News: According to Bloomberg, Rosneft might get greater access to Gazprom's natural gas pipeline network in 2014, enabling the company to start gas production at the giant Kharampur field. Rosneft's Vice President Peter O'Brien stated in an interview that Rosneft could pump 40-50bcm of gas a year, if it had access to the pipeline and customers. Previously, the company had stated that it could start production at Kharampur field in 2012-13, with gas supplies running up to 30bcm per annum, though limited by the gas pipeline's transportation capacity. As of 31 December 2009, Rosneft had proved gas reserves of 816bcm. Our View: Over the last several years, Rosneft has been in talks with Gazprom to get access to the pipeline but without any visible progress. One of the company's strategic targets was to boost gas production from 13bcm in 2009 to 55bcm in 2020. This is hardly achievable, in our view, if Rosneft only gets fullscale access to Gazprom's pipeline in 2014. Thus, we believe that the company's gas strategy will remain a very optional value, realised only in the long run. 35. Rosneft returns license for East-Shmidt on Sakhalin shelf UralSib, Russia February 17, 2010

Another license dropped in Far East. Rosneft (ROSN - Hold) has returned the exploration license for the East-Shmidt block on the Sakhalin shelf, Interfax reported today. The East-Shmidt block was part of the Sakhalin 5 project developed with BP. Rosneft has historically controlled six exploration and production projects on the Okhotsk Sea shelf. This is the third license - after the West Kamchatka block and West-Shmidt block (Sakhalin 4 project) - cancelled by Rosneft in the past two years. All were returned because the exploration wells drilled appeared to be dry. This news will have no effect on Rosneft, as this was still an exploration project and the company was not incur to capex expenditures due to the specific arrangements of financing exploration operations. Sakhalin remains strategic ... The Sakhalin shelf remains a strategic offshore exploration zone and Rosneft development. The company still controls exploration blocks at the Sakhalin 3 project (developed with Sinopec) and the Kaygano-Vasyukanskiy block of the Sakhalin 5 project (developed with BP). Both projects are run under carry-finance arrangements, when the second party is responsible for financing the exploration (Rosneft does not incur any exploration capex). If oil is discovered, the second party is reimbursed from the cashflow generated by the project. In addition, Rosneft controls 20% of Sakhalin 1 production-sharing agreement, which is the second production growth source for Rosneft in 2010 after Vankor. ... but priority is Eastern Siberia. Eastern Siberia remains Rosneft's priority, with the Vankor project (in the northern part of Eastern Siberia) already on stream, and the Yurubcheno-Takhomskoye field (the southern part of Eastern Siberia) to be brought on stream by 2012. Both fields are included in the list of 22 fields exempt from export duty. According to Rosneft, the Vankor field's production will reach 10-11 mtpa in 2010 and might plateau at 25 mtpa by 2015. We expect operations at Yurubcheno-Takhomskoye to commence in 2012 and to peak at 5-7 mtpa by 2017. We believe that the exploration and development of greenfields both around Vankor and in the south of Eastern Siberia, will be key priority in Rosneft's upstream strategy in the next three-five years. We reiterate our Hold recommendation on Rosneft with target price of $8.7/share. Victor Mishnyakov 36. Russia now has enough oil reserves for 25-35 years bne March 18, 2010 Russian Natural Resources and Environment Minister Yury Trutnev says that Russia now has enough oil reserves for at least 25-35 years, reports Prime-Tass. The news agency says that the estimation is based only on the countryís existing oil reserves and doesnít include reserves of new fields that could be discovered in the period. In the meantime, Yury Trutnev says that oil major TNK-BP won't be compensated for its investment into the Kovykta gas field should its license be revoked, reports The Moscow Times.

The newspaper report quoted Trutnev as saying that the company] will not receive compensation for nonfulfillment of the license. In another development, Yury Trutnev says that the government may raise its export tax on timber in response to protectionist measures taken by its trading partners, reports The Moscow Times. The newspaper report quoted Trutnev as saying that Russia has put off raising the tariff, originally planned for Jan. 1, 2009, as well as ëthe introduction of a mechanism that would allow for more timber processing in Russiaí. In another development, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin says that Russia is expected to switch to an "added income tax" on oil and gas from the current royalty tax in 2012 or later, reports Prime-Tass. The news agency says that previously the switch was scheduled for 2011. In another development, the International Energy Agency (IEA) has released another encouraging oil consumption forecast, reports local media. Reports suggest that according to the IEA, the world will need 86.57 million barrels per day (bpd) in 2010 (this figure was 70,000 bpd lower in the IEA's previous forecast). 37. Russia to sell strategic oil fields for the first time bne March 21, 2010 The government is considering two oil fields that have been deemed strategic and so off limits to investors until now. The two fields that may go under gavel are Trebs and Titov in the Nenets autonomous district, which have reserves of more than 200m tons. The Natural Resources Ministry said the sale may go ahead in late March or early April via a tenders, rather than an auctions, process. The favoured candidates to buy the fields are Rosneft and LUKoil (who is expected to bid together with Gazprom Neft). Trebs and Titov are among the largest of Russia's explored continental fields. They have reserves of 78.12m tons (Trebs) and 132.8m tons (Titov), Kommersant reports. 38. Tengizchevroil halts exports via BTC pipeline - energy minister SRI February 18, 2010 Tengizchevroil, the Chevron-led joint venture developing the giant Tengiz oil field, has stopped pumping oil through the Baku-Tbilisi-Ceyhan (BTC) pipeline, Kazakhstan’s Energy Minister Sauat Mynbayev said on Wednesday.

Mynbayev said the move could be linked to disagreement over transit fees charged by BTC but gave no details. “If Chevron does not like the fees, it is up to Chevron to use the routes it likes better,” Mynbayev told reporters. “Which is precisely what they have done.” According to Mynbayev, Tengizchevroil is BTC’s only Kazakh supplier and shipped “insignificant” volumes through the pipeline. In 2009, Tengizchevroil shipped 1.951 million tons of crude oil via the CPC pipeline, according to the Azeri State Statistics Agency. The company ships most of its crude using the Caspian Pipeline Consortium (CPC) pipeline, the Atyrau-Samara pipeline, and a rail link to the Black Sea port of Batumi. Tengizchevroil produced 22.53 million tons of crude oil in 2009. Kazakhstan plans to significantly increase its exports via the BTC pipeline as its largest oil field, Kashagan, comes online in 2013. 39. TMK signs supply contract with LUKOIL Renaissance Capital, Russia Thursday, March 18, 2010 Event: Yesterday (17 Mar) TMK announced the signing of a supply contract agreement with LUKOIL. TMK will supply LUKOIL's Yuri Korchagin offshore field development in the Caspian Sea with OCTG pipes with premium connections (N80 grade 88.9mm OD TMK FMT seamless tubing pipe). According to a press release issued by the company, TMK Premium Service was preferred to other global pipe producers and won the LUKOIL tender. Shipments to LUKOIL are scheduled for June through July 2010. The contract volumes were not specified in the press release. Action: The news is positive for TMK, in our vew. Rationale: TMK remains the leading supplier of OCTG pipes to the Russian oil and gas sector. The company significantly upgraded its production facilities in 2006 - 2008, investing approximately $1.7bn in growth capex. One of major projects was the commissioning of a 600k tpa capacity premium quality finishing mill at the Tagmet site in 2H08. The mill is specifically designed to produce high quality premium connections OCTG pipes. Taking into account the rising activity in the Russian oil and gas sector TMK is beginning to benefit from its ambitious growth capex programme implemented before the crisis. The TMK Premium Service division is also able to provide post-sales support to customers and provide unique customised solutions for specific projects, enabling the company to fully compete with major international peers. Boris Krasnojenov 40. TNK-BP to Invest $1.3bn by 2015 bne February 17, 2010

British oil company TNK-BP is likely to invest $1.3bn over the next five years to improve refining rates, reports The Moscow Times. The newspaper report quoted TNK-BP executive vice president for downstream, Didier Baudrand, as saying that the company was looking at opportunities to improve refining and bring it into line with new standards. In the meantime, Vladimir Nazarov, First Vice President of Russian oil product pipeline operator Transnefteproduct, says that the company expects the northern oil product pipeline to reach full capacity in 2013, reports Prime-Tass. The news agency says that the pipeline, called Sever (North), runs from the city of Kstovo in the Nizhny Novgorod Region to the port of Primorsk in the Leningrad Region. It has a projected annual capacity of 8.4 million tonnes of oil products. In another development, Herve Madeo, first deputy CEO of Shtokman Development, the operator of Russiaís Shtokman natural gas project, says that the company plans to hire contractors to build a facility to produce gas for pipeline delivery from the field in late 2010, reports Prime-Tass. The news agency says that the company plans to make a final investment decision in March 2011 on the production of gas for pipeline delivery. Menawhile, Yury Komarov, CEO of Shtokman Development, says that the company plans to start delivering natural gas supplies from Russia's Shtokman gas field sometime in October-December 2015, reports Prime-Tass. The news agency quoted Komaro as saying that the launch of supplies would depend on the companyís final decision on the amount of investments in the project that is to be made sometime in January-March 2011. Menawhile, the federal government intends to put an end to a drawn-out dispute over one of Russia's largest gas fields: Kovykta, located in the Irkutsk region, with reserves of 2 trillion cubic meters, reports Prime-Tass. The news agency quoted Natural Resources Minister Yuri Trutnev as saying that inspection results may lead to the Kovykta field license being revoked and transferred back to the unallocated resources fund. 41. Zero export duty for East Siberia might be prolonged until the end of 2010 - decision could be taken this week - if so, would be positive for sentiment VTB Capital, Russia March 16, 2010 News: Minister of Energy Sergei Shmatko told reporters that he favoured longterm export duty exemptions for East Siberian oil. He said that the regulations concerning export duties for these fields, which are currently reviewed on a monthly basis, should be maintained for longer periods in order to allow oil companies to make more stable investment decisions regarding the fields.

Shmatko added that the Energy Ministry was currently discussing the issue with the Ministry of Finance. On a separate note, according to Kommersant, the zero export duty for East Siberia will be active for the next several months, possibly until the end of 2010. The paper speculates that the decision will be announced this week. Deputy Minister of Finance Sergei Shatalov said on the sidelines of an economic forum that a decision to keep the zero export duties on East Siberian oil could be made by this week. Our View: The zero export duty for East Siberia is currently set on a monthly basis, which means that there is little visibility and confidence on the market and for oil companies over possible medium term tax payments/savings (which influence field development economics). Should the government prolong the zero export duty until the end of 2010, that would add more clarity over oil companies' tax savings during the year, which would be positive for sentiment. However, the market currently implies three-year tax holidays for East Siberia. Thus, the question about tax savings in 2011 and 2012 might remain unclear. We remind investors that the main beneficiary of the zero export duty for East Siberia is Rosneft. Based on our estimates, it might lose around 10-12% at the EBITDA level in 2010, around 22% in 2011 and 23% in 2012 were the zero export duty to be cancelled in the near term. Back to top Lev Snykov

SECTOR High Tech 42. Russian 'Silicon Valley' to be built in Skolkovo bne March 19, 2010 The Kremlin will bolt a high tech park on the back of the country's leading business school at Skolkovo in the Moscow suburbs, Russian president Dmitry Medvedev said on Thursday Interfax reports. "I would like to inform you about the decision to build the centre in the place, where the appropriate ground has been laid, i.e. in Skolkovo," he said.

SECTOR Metals and Natural Resources 43. Chinese industrial growth surging about 20% YoY VTB Capital, Russia March 18, 2010 All Chinese macro data releases in the first two months of the year have pointed to industrial activity growing at its fastest rate for 5-6 years, with little likelihood of any significant slowdown in 1H10. The government stimulus from 2009 is combining with sharply increased private sector growth in a powerful way, and the very low base effect is driving a strong outlook for commodity demand growth this year. Industrial production rose 20.7% YoY in the first two months (the data are combined for comparison purposes to eliminate the distortions due to the different timing of the New Year holiday), the fastest for five years, while power generation/consumption

(usually a good proxy for industrial activity) has increased 25-27% YoY for the past four months (Figure 1). Indeed, this is by far the fastest rate for about six years, and we believe the government's proposed policy to accelerate urbanisation over the next 5-10 years is likely to lead to a higher normalised rate of power demand, which in turn will pressure the global seaborne thermal coal market to boost imports sustainably. In terms of the key downstream markets, new housing starts in January-February were up 37.5% YoY, while new floor space under construction was 26.8% higher YoY. China became the largest global car economy in September 2008, and sales were up 116% YoY in January and 55% YoY in February, although adjusting for New Year timing differences and the short month suggests that February sales were only some 4% below January. Domestic appliance sales were up about 35% YoY through most of 2009, due to government incentives, and we expect a similar growth in 2010 as the incentives have been extended. All of this is clearly very positive for steel demand growth, which we expect to average about 15%/year in 2010 and 2011 (Figure 2). In turn, this would require crude steel production of about 640-650mnt in 2010 and as much as 720- 730mnt in 2011. The key question is, will China be able to produce and import enough iron ore and coking coal to maintain this level of steel output growth. Given recent coking coal production constraints in Australia, long-term underfunding of the transport infrastructure, a global geological shortage of high quality hard coking coal, delayed or postponed investments in production growth in the past 12-18 months and sharply declining domestic output (particularly of iron ore), the answer is not at all clear. However, what is quite clear is that it remains very positive for coking coal, iron ore, and steel prices, and that backwardly-integrated steel producers will have an increasingly large advantage over their non-integrated peers in the short to medium term. 44. Gold: A Healthy Rebound, But Upside Remains Capped VTB Capital, Russia February 16, 2010 Gold prices pushed higher over the past week, recovering from heavy losses at the start of the month. Bullion was still trading in line with the broader market, while the dollar index stalled in a tight range just below strong resistance at 80.5. At the same time, the euro consolidated near new lows, having suffered since the very start of 2010. The rebound in gold was very positive and we have seen some evidence of physical buying in Asia following the February dips. However, gains were limited and bullion still fell in a general trend with, paradoxically, risk jitters still dictating direction. The markets continue to be gripped by concerns over Greece's debt problems and the lack of details on a potential rescue deal from the EU. In addition, China's central bank surprised markets on Friday by hiking the reserve requirement for commercial banks 50bp, effective from 25 February, as authorities continue to seek ways to curb lending and contain growth. All these persistent worries are beneficial for the US dollar, supporting the US currency and depressing gold that continues to trade against it. Amazingly, the SPDR Gold Trust, the world's largest exchange traded gold fund, still reported net physical holdings unchanged at 1,106.38 tonnes as of 14 February, with its gold inventories remaining the same for the past week, despite recent price

action. Retail investors continue to sit on the sidelines, unwilling either to liquidate or build up positions following the January correction. In contrast, the latest data set from the CFTC shows an astonishingly quick contraction to net speculative longs on COMEX/NYMEX futures in the week to 9 February. Total net speculative lengths came off to levels not seen since May 2009 at just below 39% of total open interest. An almost 5% weekly decline was largely due to yet another contraction in non commercial longs that coincided with newly opened non commercial short positions, as bears continue to overwhelm gold bulls. At the same time, open interest in gold futures continues to decline. The substantial dip in gold futures positions is reflective of the heavy sell off we saw on COMEX/NYMEX at the start of the month, coinciding with a correction on the LBMA on 4 February. So, we expect speculative gold positions to level out here, especially after all the action in the past week. In fact, a price recovery here would force some of the recently built spec shorts, while short covering could exaggerate a potential rally. Elsewhere, global ETF positions were only a little lower while the largest ETF book, held by the SPDR, was unchanged. So, we think that investment demand will stabilise for now as speculators who were giving up had plenty of opportunities to do so. It seems that the market has found a bottom, at least in the short run, but we are more concerned about the upside as it could remain limited with only moderate gains in the long run. As ever, we believe that the ECB is likely to lag behind the Fed with its future monetary tightening. If the pace of the US economic recovery quickens, it will cause the Fed to move sooner, leaving less room for the upside in gold as bullion continues to trade against the dollar. However, we expect recovering jewellery demand to help this spring and, more importantly, during the traditionally demand-intensive autumn period in India ahead of the Diwali celebrations. In the meantime, a sustained break above the December downtrend and USD 1,100 would see gains all the way to USD 1,120 and then, potentially, USD 1,160 were the US dollar to see a substantial depreciation before the spring months. On the downside, our intermediate support remains unchanged at USD 1,060 and there is plenty of support at our key downside target of USD 1,027. For the moment, we prefer the upside and then a return to sideways trading as the rest of the month will in our view remain quiet after volatility settles later in the week. 45. NLMK may increase slab supply to the EU as Corus mothballs UK site Renaissance Capital, Russia Wednesday, February 17, 2010 Event: According to the Financial Times yesterday (16 Feb), Corus is to begin mothballing its Teesside Cast Products site, in the UK, this Friday (19 Feb), threatening an end to more than 150 years of steelmaking at the site and resulting in about 2,000 job losses. The company says mothballing will allow the Redcar blast furnace and its dependent plants, which make steel slab, to resume production if a buyer can be found, but anxiety is reportedly high on Teesside that it will pave the way to permanent closure. Action: News is positive for NLMK.

Rationale: NLMK is a major global slab supplier. The total commercial slab market is quite narrow and may be estimated at 30-40mn tpa. Corus Teesside's slab capacity is approximately 3.5mn tpa, so its closure clearly implies stronger demand for CIS-made slab, and particularly NLMK slab which shares its core markets with Corus in this segment. The news supports our view that the recent crisis was more damaging to commercial slab supply than it was to demand. Overall, we think idling BOF-based steel production in developed countries and buying in cheaper semi-finished product should result in a strong flow of slab and billet (on which there are no trade restrictions) from Russia to European markets in 2010. Boris Krasnojenov 46. Platinum and Palladium: Moving Into the Spotlight VTB Capital, Russia February 16, 2010 We are launching our coverage of platinum and palladium with very positive short-term and long-term views on both metals, and price forecasts for 2010 of USD 1,650/oz for platinum and USD 480/oz for palladium. The PGMs (platinum group metals) are our top picks in the precious metals sector and amongst our top five preferred commodities for 2010. Palladium substantially outperformed the other precious metals in 2009, up 120% YoY, with platinum second best (+59% YoY), but in 2010 we expect the relative performance to be considerably closer (although still well ahead of gold and silver). With the long-awaited launch of the US ETFs on 8 January 2010, we expect investment demand to be the key driver in 2010. Indeed, just to the end of January alone net purchases were 225koz of platinum and 330koz of palladium. As a result, we forecast the platinum market to record a deficit of 262koz in 2010, while of greater interest is our forecast of a balanced market in palladium in 2010 followed by small deficits in 2011-12 (the first for about ten years). We expect both platinum and palladium prices to benefit from a significant global recovery in automotive sales in 2010, coupled with the ongoing tightening of emission standards. We believe the Chinese automotive market will remain the best performer in 2010, after rising over 40% YoY in 2009, particularly as the government stimulus to boost sales has been increased and extended for this year. On the supply side, South African PGM producers face a particularly challenging year ahead. We believe there is a strong likelihood that power shortages will once again be making headlines this year, and in 2011-12 as well, since Eskom has warned of the risk of rolling blackouts, resulting in reduced availability to industrial users and hence lower production of platinum (and other metals). 47. Severstal continues expansion in gold segment Renaissance Capital, Russia Monday, February 15, 2010 Event: According to Reuters on Friday (12 Feb), Severstal acquired a 15.7% stake in Crew Gold raising its stake in the company to 19.7%. Severstal said in a statement that it had paid $51.14mn for the stake. Crew Gold is located in Guinea.

FY09 output was 179koz. Crew Gold Corp is valued at $325mn under the stated purchase price reflecting $1,800/oz of FY09 production which is roughly in line with our estimates of Severstal's existing gold operations. Action: The news is neutral for Severstal as Crew Gold results are not consolidated in the company's financial accounts. Rationale: Since mid-2007, Severstal has built up a portfolio of gold production and development assets. The asset base comprises gold assets of Celtic Resources based in Kazakhstan, two producing assets of private Russian group Arlan in Yakutia and Chita and a current 50.1% stake in High River Gold (HRG) which has two operations in Russia (Buryatia) and one in West Africa (Burkino Faso) plus advanced-stage exploration assets in Russia and Africa. Severstal may consider consolidation of 100% of HRG which is also 19% owned by Russian investment bank, Troika Dialogue. The company is now debt free and with production of around 340koz per annum at a cash cost of $465/oz for 3Q09. On our numbers, we believe that the value added so far for Severstal shareholders is in the region of $500mn, the spread between acquisition cost and our estimate of fair value today. However, how these assets stack up against the global mid-tier producers and Russian peers remains to be seen. Boris Krasnojenov 48. Steel prices on the rise VTB Capital, Russia March 16, 2010 - driven by increase in raw materials prices and the end of seasonal weakness - positive News: According to Metal-Courier, export prices for Russian steel slabs have risen 10% in the last week to USD 550/t, while billet increased 5% (to USD 520/t) and rebar prices posted 10% growth (to USD 550/t). Our View: The statistics clearly indicate that steel prices are on the rise. We see this being driven by several factors. Firstly, by price increases for raw materials. The recent news about BHP signing coking coal contracts for 1Q10 at USD 200/t, as well as iron ore spot prices in China at over USD 140, set strong support for steel prices on the global markets. We are also seeing the steel sector coming out of the seasonal weakness and starting to see additional demand pushing prices up as well. Clearly, steel makers are more confident about market conditions in the near future as they are cutting upfront sales in order not to give up potential sales at a higher price. We believe the developments in the sectors to be very positive. Back to top Alexander Pukhaev 49. Steel sector: Rally in Russian export steel prices UralSib, Russia March 15, 2010

Export HRC price hits $650/ton. Metal Courier has reported this week that the export price for Russian HRC for April has increased by $50/ton WoW to $650/ton FOB Black Sea, driven by improved demand and higher raw materials prices. The export price for slab also rose 10% WoW (up $50/ton) to $550/ton FOB Black Sea. Export prices for long products are also up: billet and rebar prices increased by 5-10% WoW ($20-$45/ton) to $520 and $550/ton, respectively. The higher export steel prices were also supported by price increases in other regions: Japanese HRC is now being sold to Asia at $700/ton FOB (up $50/ton WoW). We expect the news to be a major catalyst for Russian steel stocks. MMK testing new levels for HRC and CRC. We are hearing that MMK traders are testing $50-$105/ton price increases for exports of flat products for April: they are reportedly offering HRC at $655/ton FOB Black sea (up $75/ton MoM) and CRC for $740/ton (up $70/ton). Our understanding is that the new price levels are only producers' offer prices. Russian export steel prices' have significantly lagged the rally in global spot coking-coal and iron-ore prices over the past two months. We expect domestic steel prices, which are currently at a10% discount to export prices, also to follow the same positive trend, but with a onetwo month delay. Key catalyst for Russian steel stocks. As we predicted earlier, the 55% YoY increase in the coking-coal price and the expected 50-80% YoY rise in iron-ore prices could translate into a $100-$150/ton increase in steel-production costs for non-integrated steel producers starting from 1 April, and we thus expect Russian export steel prices to increase more in the next few weeks. We note that our current projections for average 2010 steel prices - export HRC at $590/ton and a billet price of $490/ton - are perfectly achievable at this stage, and even suggest some upside. We would be Buyers of Russian integrated steel names such as Evraz and Mechel on the back of this news, which could also be positive for semi-integrated flat steel producers MMK and NLMK, as growth in export and domestic steel prices should more than offset the surge in raw materials. Michael Kavanagh

SECTOR Nuclear 50. Greenpeace urges France's Areva to stop nuclear waste exports to Russia Ria Novosti March 18, 2010 MOSCOW, March 17 (RIA Novosti) - Greenpeace activists are calling on French company Areva to cease nuclear waste exports to Moscow ahead of another train delivery of spent nuclear fuel on Wednesday. Protestors rallied outside Areva's Moscow office and displayed a banner reading "Russia is not a dump". Contracts between Russia and European countries on the delivery of nuclear waste to Russia were signed in the mid-1990s. The deal runs until at least 2014. The uranium is subsequently enriched in Russia, which boasts superior enrichment technology to its European partners.

"We are extremely concerned about the security requirements during the realization of these nuclear contracts. This is mainly linked to the fact that [Russia's state-controlled nuclear power corporation] Rosatom enterprises have cut down on radiation security in order to lower the net cost of nuclear production," a letter from the Greenpeace activists to Arevas's management said. 51. –œ‡°±·>˛ˇ #%˛ˇˇˇ"ˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇˇÏ•¡a øÁ

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developing alternative power sources and stay as a major exporter of power even once its oil and gas run out. And its not just the power that will be exported but the technology too. Russia could win at least 25% of the world market of services to build and operate nuclear power plants, Prime Minister Vladimir Putin has announced. "We have formed a solid package of orders. But we must move on. I think we are strong enough to win at least 25% of the world market of services to build and operate nuclear power plants," Putin said at a meeting on the development of the nuclear energy sector. "This segment is only 17% today. We must not stop at this figure neither in terms of the balance of domestic energy, nor in terms of our share on the world market," Putin said reports Interfax. 53. Tianwan NPP 2nd phase will start in 2010 bne March 21, 2010 Prime Minister Vladimir Putin said the preparation for the construction of the second phase of the Tianwan Nuclear Power Plant in China will begin in 2010, Interfax reports. "The two-year guarantee operational period of the newest Tianwan NPP in China built with Russian technology was successfully completed in 2009. The NPP has become the most powerful in China. Preparation for construction of the NPP second phase - the third and fourth power units - will begin in 2010," Putin said. 54. Russia and India sign NPP constuction contracts: Russia and India sign contracts to build third and forth block of UralSib, Russia March 15, 2010 Kudankulam. Interfax reported on Friday that Russia had signed an agreement with India to build the third and fourth nuclear energy blocks of the Kudankulam nuclear power plant (NPP), which are to have a total capacity of 2.4 GW. Construction is likely to start in 2010-11 and to be completed in 2016-17. Russia's Atomstroyexport is already building the first and second blocks at Kudankulam with total capacity of 2 GW (the launch is scheduled for 2010 and 2011, respectively). India has also asked Russia to build another six energy blocks at the Haripur NPP which are to have a total capacity of 7.2 GW. According to Rosatom General Director Sergey Kirienko, the first two blocks are to be build by 2017. Model incorporates supplies to Kudankulam. TVEL Corporation - the major shareholder of Mashinostroitelny Plant (MASZ -Buy) and Novosibirsk Chemical Concentrates Plant (NZHK - Buy), the only nuclear fuel producers in Russia - recently signed contracts to supply nuclear fuel for the third and fourth energy blocks of Kudankulam in 2016-17, and our model already incorporates this. No information is currently available on whether TVEL Corporation has signed nuclear fuel supply contracts with India for the Haripur NPP, and we have not incorporated this into our model of nuclear fuel producers in Russia. However, if the contracts are signed, this could lead to higher production volumes for both Mashinostroitelny plant and Novosibirsk Chemical Concentrates Plant after 2017.

Positive outlook reaffirmed. We view this news as confirmation of our positive outlook on the nuclear power sector and nuclear fuel producers in Russia, which we expect to benefit from growing global interest in nuclear power, and thus nuclear fuel. We expect overall demand for nuclear fuel supplied by TVEL subsidiaries to increase by 27% by 2017 following the launch of NPPs in Russia, India, and Slovakia, among others. We thus reiterate our Buy recommendations on Mashinostroitelny plant and Novosibirsk Chemical Concentrates Plant. Anna Kupriyanova 55. Second power unit launched at Volgodonsk nuke power plant bne March 18, 2010 A second power generating unit was launched Thursday at the Volgodonsk nuclear power plant in Russiaís Rostov Region, reports Prime-Tass. Citing earlier reports, the news agency says that the unit has a capacity of 1,000 megawatts (MW). In the meantime, Russian Prime Minister Vladimir Putin has said that Russian state-owned nuclear conglomerate Rosatom plans to invest RUB175bn in the construction of nuclear power plants in 2010, reports Prime-Tass. The news agency quoted Putin as saying that the government also plans to provide over RUB68bn for the construction projects from the federal budget this year. In another development, Vladimir Putin says that Russia is prepared to invest in the construction of nuclear power plants in countries which allow foreign ownership of nuclear power plants, reports Prime-Tass. The news agency quoted Putin as saying that they are prepared to invest in the construction of power units in those countries that changed their legislation and now allow foreign ownership of nuclear power plants. In another development, Vladimir Putin has said that private investors, including some foreigners, may cover half the cost of building the Baltiyskaya nuclear power plant in the Kaliningrad Region and in return get a 49% stake in the plant, reports Prime-Tass. The news agency says that the project is expected to cost a total of over RUB190bn. Meanwhile, Sergei Kiriyenko, the CEO of Russian nuclear monopoly Rosatom says that the company expects to sign a contract in March-April to build the second stage of Chinaís Tianwan nuclear power plant, reports Prime-Tass. The news agency says that the second stage involves construction of the third and fourth units at the power plant.

SECTOR Power

56. Economy Ministry sees electricity tariffs doubling over next three years Renaissance Capital, Russia Monday, February 15, 2010 Event: Speaking at a conference on Friday (12 Feb), Deputy Minister of Economic Development Andrei Klepach, disclosed the government is forecasting that in the near term domestic prices for energy will rise faster than inflation. "Electricity tariffs have already reached $0.05 per kWh and will reach $0.09 to $0.10 in 2012-2013". Klepach also said that the domestic gas price would reach $180/mcm in 2014-2015. Action: Positive for the power sector, in our view. Rationale: Despite plentiful and frequent evidence of the Russian government's apparently strong commitment to price liberalisation in the power sector, we have hitherto detected a reluctance by ministers to publicly acknowledge that price liberalisation inevitably means higher electricity tariffs for consumers. Klepach's conference comments not only acknowledge the fact of impending increases, but even go a step further to quantify the overall size of the increases. For us, this is all the more reassuring, given the Economy Ministry's earlier advocacy for using utility tariffs as a tool to keep the lid on inflation. Vladimir Sklyar 57. New deputy energy minister affirms Russia's commitment to long-term generation capacity market Renaissance Capital, Russia Tuesday, February 16, 2010 Event: Speaking yesterday (15 Feb) to the Duma committee for the power sector, Andrei Shishkin, Russia's newly-appointed deputy minister of energy, with lead responsibility for the power sector, reaffirmed the government's commitment to finalising legislative changes to allow the launch of a long-term capacity market by end-1Q10. Among other government priorities listed by Shishkin were legislative amendments to strengthen payment discipline for electricity supplies, and another look at the state guarantee mechanism to promote investment in new electricity generation capacity. Action: Positive for the Russian power sector, in our view. Rationale: We think investors will welcome confirmation that a change of the top government official for the power sector has not entailed any change to previous priorities. Indeed, with electricity demand so far this year up 6.5% on the same period in 2009, and new records for demand being set in regions throughout Russia, we believe the government's strategy of creating investment incentives by means of rational price reform may even be given higher priority. Vladimir Sklyar 58. Price review period for distcos to be extended to five years Renaissance Capital, Russia

Monday, March 15, 2010 Event: Reuters reported on Friday (12 Mar) that the Federal Tariff Service (FST) is preparing legislative amendments that would extend the initial price review period to five years for electricity distribution grids that have not yet adopted rate-of-return (RAB) regulation. Current legislation, which has been applied to the Federal Grid Company and 17 pilot MRSKs, establishes an initial price review period of three years, with five-year periods thereafter. Action: Strongly positive for MRSKs, in our view. Rationale: In our view, the extension of initial price review periods to five years will significantly improve MRSK profitability by allowing the companies to carry through any cost savings for a longer period. Experience elsewhere in the world is that the incentives for regulated utilities to cut costs, inherent in a move from a cost-plus tariff formation to rate-of-return tariffs inevitably produce savings compared with historical costs, which are the basis for regulatory allowances. Furthermore, a longer price review period will create more predictable revenue streams and hence allow the distcos to access debt markets at more attractive rates. Typically, cost-savings and low cost of debt are factors which allow regulated utilities to outperform their allowed financial returns and hence achieve enterprise values at a premium to their regulated asset bases. EV/RAB comparison

59. Putin approves launch of market for generation system services Renaissance Capital, Russia Thursday, March 18, 2010 Event: Reuters reported yesterday (17 Mar) that Prime Minister Vladimir Putin had signed a decree to establish a market for generation system services. Although the decree does not set out a pricing formula, it establishes the principle that both generators and large consumers will be eligible to participate in the new market. Action: Positive for Russian gencos, in our view. Rationale: In our view, the launch of a system service market is the next logical step in the development of Russia's new generation markets and likely to be welcomed by operators and investors. Payment at market prices for services such as voltage regulation and load-shedding is already well established in electricity markets elsewhere and will provide generators with a new source of income to further strengthen rapidly-improving levels of profitability.

Vladimir Sklyar

SECTOR Telecom, Internet 60. AFK Sistema: Government confirms plans to invest in Indian project UralSib, Russia March 15, 2010 Confirmation from the highest level. Last Friday Russian Prime Minister Vladimir Putin confirmed that the Russian government is ready to allocate funds to Sistema Shyam Teleservices Ltd (SSTL) - in which AFK Sistema (SSA - Buy) owns a 74% stake - which should encourage the further development of operations in India. Earlier this month the Russian government approved amendments to the 2010 federal budget and allocated $676 mln for SSTL. The Russian government is expected to purchase a 20% stake in SSTL through an additional share placement, however, this will effectively be debt financing, as the government will have an option to receive the amount invested plus interest over five years in exchange for the stake. Sistema seeks financing for further expansion into India. SSTL has expanded its CDMA mobile network to 11 out of 22 Indian licensing districts and plans to attract $2.3 bln by 2018 to expand coverage to the entire country, focusing on data transmission services. Currently SSTL had a mobile client base of 3 mln subscribers in India. Sistema purchased a 10% stake in SSTL in 2007 and increased its stake to 74% in 2008. The company's expects a positive OIBDA for SSTL in 2013. Marginally positive for Sistema. We view this news as slightly positive for the development of Sistema's India project, as well as marginally positive for AFK Sistema's share price performance. We believe PM Putin's statements signal government readiness to invest in Sistema's Indian project, and government participation appears to be a feasible strategy for its development. Timing is critical in India, where non-saturated mobile market is rapidly growing, thus a delay in financing for SSTL could set back previous attempts to create a leading operator in the country. Sistema's stock is undervalued providing a 18% upside to our target price of $31/GDR. We reiterate our Buy recommendation for the name. Konstantin Chernyshev 61. Rostelecom to build LTE networks using its 2.3-2.4GHz frequencies in 38 regions VTB Capital, Russia March 16, 2010 - neutral for MTS and Vimpelcom so far - in the worst case scenario the Big Three might lose share in the Russian wireless broadband market News: Vedomosti has this morning quoted a Svyazinvest representative as confirming that Rostelecom plans to build LTE networks using the 2.3-2.4GHz frequencies for 38 regions which it recently won at tenders.

Our View: At this point, the news is fairly neutral for MTS and Vimpelcom as we do not expect Rostelecom will be able to run LTE services commercially within less than 1-1.5 years. Our base case is that we expect the Big Three operators will be able to get LTE frequencies by then and, in the best case, run LTE services as well. However, we see a risk that the government might temporarily limit the Big Three's access to other frequencies in the LTE band. Hence, Rostelecom might have the advantage of being the sole provider of LTE services in Russia for some period of time and increase its market share in the wireless broadband market (data modems), which we expect to reach USD 2bn by 2012. We note that Rostelecom won WiMax service tenders for 38 Russian regions in February-March 2010 (and another licence in the Tomsk region went to Siberia Telecom, which will likely to be merged with Rostelecom). However, the terms of the tenders are technologically neutral. This means that the operator might use other wireless broadband technologies (including LTE) in this frequency band. We also note that Rostelecom's licences do not include Moscow, St Petersburg, Yekaterinburg, Samara, Kazan and some other major Russian cities. Back to top Victor Klimovich 62. Svyazinvest: Interview with CEO confirms restructuring is on track UralSib, Russia March 17, 2010 IR prefs to be discounted by 15-25% to commons during consolidation. In an interview today with Kommersant, Svyazinvest General Director Evgeny Yurchenko confirmed key points of the upcoming reorganization of Svyazinvest's subsidiaries into a new Rostelecom; he indicated that the holding is firmly set on proceeding with restructuring. Both ordinary and preferred shares in inter-regional telecoms (IRs) will be exchanged for shares of Rostelecom, which will be the basis for a new integrated operator. The swap ratios will be based on DCF valuations, 2009 RAS financials and market prices (however, it is not clear for which period). These terms were announced previously and are in line with our expectations. Evgeny Yurchenko expects preferred shares in all IRs to be valued at a 15-25% discount to commons (the discount will be the same for all IRs). The release of swap ratios is expected shortly, and the restructuring process itself will begin with Far East Telecom's board meeting scheduled on 26 April. Rostelecom may issue $870 mln in bonds to complete a deal with AFK Sistema. Yurchenko admitted that an asset exchange deal with AFK Sistema (SSA - Buy) is in progress, and it is expected to be settled in April-May. Yurchenko also mentioned that VEB, which had been expected to take on the debt of Sistema's subsidiary, Comstar-UTS, totaling RUB26 bln ($870 mln), will probably not participate in the deal. An alternative plan involves the placement bonds by Rostelecom itself for repaying Comstar's debt. This would increase the debt load of Rostelecom and make entry into the new consolidated company through IRs less attractive.

Short-term investors can start fixing profits. The interview clearly indicates that the Svyazinvest restructuring is on track. In today's trading session we may see adjustments of IRs' pref prices, which are to be valued at 15-25% below commons. Currently only Uralsvyazinform prefs are traded with a smaller than the expected discount. We recommend investors with a short-term investment horizon to fix profits on the announcement swap ratios. For those investors ready to wait until the end of the restructuring process, we recommend playing the theme through Uralsvyazinform (URSI - Buy), Sibirtelecom (STKM - Buy), VolgaTelecom (VTEL - Buy) and Far East Telecom (DLSV - Buy). Konstantin Chernyshev 63. VimpelCom residential broadband user base up 79% in 2009 bne March 18, 2010 Major Russian telecommunications company VimpelComís residential broadband subscriber base, which includes both wireline and mobile broadband users, rose 78.6% in 2009 to 2.111 million subscribers as of December 31, reports Prime-Tass. Citing a statement issued by the operator, the news agency says that of the total, the wireline residential broadband subscriber base rose 39.4% in 2009 to 1.073 million subscribers as of December 31, while the number of subscribers to mobile broadband services provided through USB modems more than doubled to 1.038 million users as of the end of 2009 from 412,000 as of December 31, 2008. In the meantime, Russian fixed-line and broadband operator Comstar United TeleSystemsí (Comstar UTS) broadband subscriber base rose 40% in 2009 to 1.3 million subscribers as of December 31, reports Prime-Tass Citing a statement issued by Comstar UTS, the news agency says that the companyís revenue from broadband services rose 7% on the year to RUB3.465bn in 2009.

SECTOR Transport 64. Container traffic recovers in January-February VTB Capital, Russia March 16, 2010 - railway transportation up 18% YoY - port handling up 37-47% - containers generate healthy margins - positive for NCSP, FESCO News: According to Kommersant, in January-February railway container transportation increased 18% YoY to 298,700 TEU, while import and export container handling at Russian ports increased 47% YoY (to 2.4mn tonnes) and 37% YoY (to 1.4mn tonnes), respectively. Our View: While the volumes of container transportation are still well below precrisis levels, the container market's ongoing recovery bodes well for those operators which

are exposed to container transportation and handling (in particular NCSP and FESCO). We also note that containers generate healthy margins. Back to top Elena Sakhnova 65. Investments in Russiaís transport sector total RUB800bn in 2009 bne March 18, 2010 Russian Deputy Prime Minister Sergei Ivanov says that investments in Russiaís transport sector totaled about RUB800bn in 2009 under a preliminary estimate, reports Prime-Tass. The news agency says that the government allocated 280 billion rubles of the total sum from the federal budget in 2009, up 10% on the year. In the meantime, Igor Komarov, the President of Russian carmaker AvtoVAZ says that the number of employees at the company is expected to amount to around 69,000 by 2020, reports Prime-Tass. The news agency quoted Komarov as saying that the number of employees at the company in 2020 is expected to correspond with its plans to produce 1.2 million vehicles per year at that time. employees. In another development, Russian Deputy Transportation Minister Valery Okulov says that the total passenger traffic of all Russian airlines could rise 14%-15% on the year in 2010 and 3%-4% compared to the level of 2008, reports Prime-Tass. Citing the Federal Air Transportation Agency, the news agency says that in 2009, the total passenger traffic of all Russian airlines fell 9.4% on the year to 45.108 million people.

SECTOR Agriculture 66. Uralkali lowers prices for domestic farmers 7% VTB Capital, Russia March 18, 2010 --- represents 1% of total sales --- minimal impact on revenues --- symbolic support to domestic farming --- main issue of prices for complex fertiliser manufacturers still pending News: Yesterday, Uralkali announced that it was reducing its potash prices for domestic farmers 7% to RUB 4,250/t (USD 144) until 1 July 2010. Our View: Sales to domestic farmers represent roughly 1% of Uralkali's sales in terms of volume. Furthermore, RUB 4,250/t is still 15% higher than the price level that was valid throughout 2009. Hence, the impact of the reduction on Uralkali's revenues is minimal. On the other hand, lowering prices at a critical time of the year (the spring field works period) is a symbolic gesture of support to domestic farming.

The major questions regarding the domestic market are what will the price be for producers of complex fertilizers and how long will the potash industry be subsidising the manufacturers of complex fertilizers? Given the latter's strong lobbying capabilities, we think that this issue could well take a few years to resolve. Back to top Elena Sakhnova 67. Zubkov calls for import substitution of fish products bne March 12, 2010 Russian First Deputy Prime Minister Viktor Zubkov has called for import substitution of fish products, reports Prime-Tass. The news agency quoted Zubkov as saying that import substitution is among the key tasks of the countryís fish industry in 2010.

SECTOR Automotive 68. GAZ Group targets 25% sales increase in 2010 Renaissance Capital, Russia Wednesday, March 17, 2010 Event: Reuters yesterday (16 Mar) cited GAZ Group President Bo Andersson as saying the revenue of the group will increase 25% this year to RUB84bn. He also added GAZ is in talks with more than one potential Western partner. Andersson said the group's work force was cut by 36% during the crisis, and added that while passenger cars remained an issue facing the GAZ Group, its larger vehicles and bus businesses were in good shape. Action: We reiterate our BUY rating on the stock. Rationale: Andersson's RUB84bn revenue forecast is slightly less than our RUB86bn, but given the very low visibility due to debt restructuring (the latest publically-available accounts are as of 1H08) this is a positive number, in our view. We expect improvement in transparency since GAZ restructured its debt earlier this year, which we think will be one of the major stock catalysts going forward. We find Andersson's comments regarding commercial vehicles and buses, which confirm our view that commercial vehicles are doing better than passenger cars, positive for GAZ Group. Ivan Kim 69. Kamaz truck sales up 19% on year in January-February bne March 12, 2010 The truck sales of Russian truck maker Kamaz rose 19% on the year to 3,090 units in January-February, reports Prime-Tass.

Citing a statement issued by the company, the news agency says that Kamaz produced 51,005 vehicles in 2008, almost flat on the year, and planned to produce 47,000 trucks this year under an optimistic forecast. In the meantime, Opel workers demanded reassurances that their European brand would not be disadvantaged at the expense of sister brand Chevrolet, after Opel lost responsibility for the Russian region to an Asian arm of General Motors, reports The Moscow Times. The newspaper report says that GM transferred responsibility for Russia to GM International Operations, based in Shanghai, sparking fears that Opel could lose access to a key growth market, which almost overtook Germany by size in 2008, before collapsing last year. In another development, the Arbitration Court for Russiaís constituent republic of Udmurtia has opened a bankruptcy case against Russian automaker IzhAvto, reports Prime-Tass. Citing a statement issued by the company, the news agency says that IzhAvto filed for bankruptcy on August 6, 2009 and was put under supervision till March 4, 2010. 70. Sollers to launch UAZ assembly in Egypt Renaissance Capital, Russia Monday, March 15, 2010 Event: According to Vedomosti today (15 Mar) Sollers plans to launch an assembly of UAZ vehicles in Egypt. Sollers plans to assemble 1,500 vehicle sets per annum (the classic model as well as the UAZ Patriot and UAZ Pickup). Sollers is also considering localisation of ZMZ engines in the longer run. Action: We reiterate our BUY rating on the stock. Rationale: Given the 135% car import duty in Egypt, we think Sollers' plans to localise UAZ vehicles are reasonable. Sollers does not plan to make a substantial investment - it will provide necessary licences, deliver vehicle sets and provide technical support. Sollers said its Egyptian partner should not have to invest much as well, as there are enough car assembly production lines in Egypt. According to the Automotive Marketing Information Council, there were 200,000 cars sold in Egypt last year. We think the organic growth prospects in the market are appealing and Sollers' cheap SUV proposition will be attractive to the customers. Ivan Kim 71. Some 7,000 cars sold in Russia since car scrapping program launched Ria Novosti March 17, 2010 Russian dealers have sold some 7,000 cars as part of a new car scrapping program since it was launched a week ago, an Industry and Trade Ministry official said Tuesday.

Following the example of many Western countries, Russia launched a program on March 8 offering 50,000 rubles ($1,680) for the recycling of old vehicles in a bid to support Russia's ailing car industry. "Last week some 7,000 were sold in line with this program," Alexei Rakhmanov, the head of the ministry's automotive industry department, said, adding that most applications (54%) were for Russian-made Lada cars. The disposal program's money is provided to those ready to have their 10-year-or-older car scrapped and buy a new one from an Industry and Trade Ministry-compiled list of over 60 Russian and foreign car brands produced in Russia. However, Industry and Trade Minister Viktor Khristenko earlier said the weak point of the plan, that could theoretically expand to Russia's estimated 14 million 10-year-or-older cars, is the lack of a developed car scrapping infrastructure, with a mere 153 disposal stations having so far been licensed. The scrapping experiment will take place in 49 Russian regions out of more than 80 and will last until November 1, 2010. Khristenko also said a smoothly functioning scrapping program should be ready by September. The government has allocated some 10 billion rubles ($370 mln) to the program and predicts that some 200,000 new cars, mainly domestically produced Ladas, Chevrolets and Opels, will be sold in 2010 by more than 1,500 authorized dealers in line with the program. MOSCOW, March 16 (RIA Novosti 72. Yarovit-Motors to finish building truck plant in St Pete by 2013 bne February 17, 2010 Andrei Biryukov, chairman of the board of directors of Russiaís Yarovit-Motors says that the company plans to finish by 2013 building a plant in St. Petersburg for production of trucks that will be powered by liquefied gas, reports Prime-Tass. The news agency says that the company plans to start building the plant sometime in June-August 2010. In the meantime, Biryukov says that investments in the construction of a plant to produce low-end cars being designed by Russiaís Onexim Group and Yarovit Group are expected to amount to 150mn euros, reports Prime-Tass. The news agency quoted Biryukov as saying that the start of commercial production of cars is slated for the end of 2012. In another development, Avtovaz says that Europe was the destination for 21% of car exports by Avtovaz in 2009, up from 9% in 2008, Citing the company materials, the news agency says the Lada 4x4 was the most popular export model.

In another development, Ruslan Zalivatsky, the Kaluga Region's economic development minister, says that the alliance of French automakers Peugeot and Citroen is expected to start testing automobile assembly in its Russian plant in the city of Kaluga in March, reports Prime-Tass. The news agency says that the plant is expected to be launched in mid-April.

SECTOR Aviation and defence 73. Aeroflot: Unfasten Your Seatbelts VTB Capital, Russia February 17, 2010 Initiation with a BUY recommendation. We are initiating our coverage of Aeroflot with a BUY recommendation. Our 12-month Target Price of USD 2.65 implies 58% upside potential from current levels. Aeroflot trades at a reasonable 2011F EVR/EBITDAR multiple of 6.7x, implying a double-digit discount to emerging market peers. As the largest, and most financially robust, airline in Russia, Aeroflot provides a unique opportunity to benefit from the rapid catch-up growth of the Russian aviation industry and its consolidation. Centre of industry consolidation. The government has recently supported a merger between Aeroflot and six Rosavia airlines. We see this as the first step in the long-awaited era of consolidation based on the national carrier. The deal makes Aeroflot the unassailable Russian industry leader, with a passenger flow of almost 18mn and a 41% share of passenger turnover on the Russian market, which we think has excellent development prospects. Growth supported by fleet expansion and new terminal. Aeroflot operates over 140 aircraft and plans to expand its fleet 50% by 2019, focusing on medium- and long-haul planes. The company has launched the new Terminal-D at Sheremetyevo airport, which will boost domestic-international and Europe-Asia transit traffic. We forecast the company's revenues to grow at a 12% CAGR in 2010-19F. Pushing up profitability: fleet modernisation and new management. Aeroflot operates one of the youngest, and thus most fuel efficient, fleets in Europe and plans to continue modernising it in the future. The new management team has very ambitious development plans and is focused on improving profitability. Risks. The key downside risks to our valuation are the Russian economy recovering slower than expected, fuel prices rising sharply, the increase in fare growth lagging expectations, slower changes in the government regulations supporting the purchase of Russian aircraft and the competitive environment changing dramatically. 74. Russia's share in global arms business falling bne

March 21, 2010 Despite the growing volumes of arms that Russia exports its overall share of the global arms market is falling, says Natalia Kalinin of the Russian Institute of Global Economy and International Relations reports Interfax. "The U.S. has been leading for years, with its arms sales taking up 50% of global sales. Russia has been second for many years, but Russian sales account for approximately 30% of the U.S. sales. So, our second place in terms of money looks fairly nominal," she said at the presentation of the Russian version of the SIPRI Yearbook 2008 titled, "Armaments, Disarmament and International Security." "The past two years saw Russia slipping to third, fourth and even possibly fifth place [in the global rating of arms exporters]," Kalinina said. In particular, according to the SIPRI 2009 report, the U.S. share on the global arms market is 30%, and Russia's 23%, she said. "The actual arms trade figures are different," Kalinina said reports the newswire. 75. Prices for airplanes could go down Renaissance Capital, Russia Friday, March 19, 2010 Event: According to Vedomosti today (19 Mar), the Ministry for Economic Development and Federal Customs services are in talks to eliminate import duties on foreign airplanes until 2015. The import duty on mid-haul foreign airplanes is currently 20%, for instance. Action: The news is potentially positive for Aeroflot, in our view. Rationale: Aeroflot's strategy is the unification and expansion of its fleet. Last year, Aeroflot RA sold or retired all old Russian airplanes. We forecast the company will obtain 10 Airbus aircraft (A320 configurations) in 2011-13 under a financial lease programme and if the current negotiations regarding import duty elimination materialise, indeed Aeroflot will benefit. According to a previous Vedomosti report, Aeroflot would pays zero duty on 10 Airbus-330s, as a way of settling an issue regarding the late delivery of the Sukhoi Superjet 100. Ivan Kim 76. Russia might cancel import duty on aircraft through 2015 VTB Capital, Russia March 19, 2010 --- Aeroflot could save USD 360mn on duties --- but will it actually happen? News: Vedomosti has quoted industry sources as saying that Russia might cancel the 20% import duty on foreign aircraft through 2015 within the framework of the Customs Union with Belarus and Kazakhstan. According to the paper, the decision is expected to be made by mid-April. Our View: The decision, if approved, would be positive for the domestic aviation industry, as companies would be able to save on renewing their fleets.

According to our forecasts, Aeroflot is expected to purchase 10 A-330s and 36 A- 320s in 2010-15, implying a cost savings on the duty of up to USD 360mn. Additional cost savings might also arise from the lower base for calculating VAT (18%). Having said that, we remain slightly sceptical that duties will indeed be eliminated. Supporting the domestic aircraft industry has always been a priority for the government and even during WTO discussions the duty was supposed to be left. Hence, we would not be particularly surprised were the decision not to go through. Elena Sakhnova 77. Russia, Saudi Arabia in talks on major arms deal Ria Novosti February 16, 2010 Russia and Saudi Arabia are finalizing an array of agreements on the sale of Russian armored vehicles anti-aircraft systems and combat helicopters, a Russian defense industry official said on Monday. "We are actively working along three lines - helicopters, armor and air-defense systems," said Alexander Fomin, first deputy director of the Federal Service for Military and Technical Cooperation. He added that several delegations from various branches of the Russian defense industry were negotiating with their Saudi partners. "The negotiations are largely centered on prices. A contract has been drawn up. Our proposals are very specific, and our respected partners are considering them," Fomin said. Russian and foreign media earlier reported that Russia and Saudi Arabia were drafting an arms contract to a tune of $4-6 billion. NEW DELHI, February 15 (RIA Novosti) 78. UAC to build plant for composite aircraft parts bne February 17, 2010 Russiaís United Aircraft Corporation (UAC) and its subsidiary Aerokompozit are expected to build a plant for the production of aircraft parts from composite materials in the city of Ulyanovsk in accordance with an agreement signed by the subsidiary and the Ulyanovsk regional government, reports Prime-Tass. The news agency says that the plant is expected to be launched in 2014 and to start production in 2015-2016. In the meantime, United Aircraft Corporation (UAC) President and CEO Alexei Fyodorov announced that the Ulyanovsk aircraft plant is restarting production on the Antonov An-124 Ruslan heavy military-transport plane, reports Interfax.

The news agency quoted Fyodorov as saying that they plan to make the first upgraded An-124 by 2014-2015. 79. Ulan-Ude Aviation Plant: Positive outlook for 2010 UralSib, Russia March 19, 2010 Plans to increase production by 25%. Interfax reported yesterday that Ulan-Ude Aviation Plant (UUAZ - Buy) plans to increase production by 25% in 2010, mainly on the back of increased demand for the Mi-171 helicopters produced by the company. The company announced that it is fully booked for 2010 and has also signed contracts for 2011. Risks on the upside. Earlier Helicopters of Russia (the hub for consolidation of helicopter production assets in Russia) announced that Ulan-Ude Aviation Plant produced 60 helicopters in 2009 (up 20% YoY), which was in line with our forecasts. Thus, according to the announced plans, production should reach 75 units in 2010. Our current model for Ulan- Ude Aviation Plant implies flat YoY production in 2010 (60 units) and an 8% YoY increase in production for 2011 to 65 units. If we incorporate the company's announced production plans into our model, this results in a 28% increase in revenues, a 37% increase in EBITDA and a 39% increase in net income for 2010. At this stage, we continue to be conservative on our assumptions for 2010, and have not incorporated the announced figures into our model, as we wait for the company's 2009 financial results (likely to be announced at the end of April) and more details on the current book order. Positive sentiment for the stock likely. We think this news might generate positive sentiment for the stock. We also note that the news fully supports our positive view on the company, as we expect Ulan-Ude Aviation Plant to be one of the main beneficiaries from increased demand for Mi-type helicopters, which is supported by competitive prices (compared to international peers) and sufficient quality. We reiterate our Buy recommendation for the stock. Anna Kupriyanova

SECTOR Media 80. Arabic-language Moscow News proves huge success in Mideast Ria Novosti March 16, 2010 The Arabic edition of the Moscow News, Anbaa Mosku, re-launched three months ago after a 17-year break, is being extensively read across the Middle East, the MENAFN news agency reported on Monday. Anbaa Mosku began in the Soviet Union, which at that time cultivated close ties with the Arab world, but printing stopped shortly after the collapse of the Communist regime in 1991.

RIA Novosti resumed publication of the Arabic edition of the Moscow News in November 2009 after a 17-year break as part of the Russian government's strategy to step up relations with the Middle East. "It can be seen all around the Middle East," Anbaa Mosku editor Raed Jaber was quoted as saying by the news agency. "The announcement of the newspaper's re-launch was met with widespread support both in Russia and in the Arab world, which hope that it will contribute to the maintenance of strong political and economic ties of the old partners for many years to come," he added. Anbaa Mosku is currently a monthly publication with a circulation of 150,000 copies in 15 Arab countries and Israel. Jaber said the paper could soon switch to weekly editions. MOSCOW, March 15 (RIA Novosti) 81. France's historic national daily, France-Soir, is back Sfnblog.com March 18, 2010 France-Soir, a historic title with its roots dating back to the French resistance, was re-launched today by Alexander Pugachyov, the son of Russia's most influential billionaire oligarchs, Business Week reported. An extravagant 20 million euro have been invested in the newspaper's publicity efforts to announce the launch and claim a spot beside competitor titles like Le Parisien, Le Monde and Le Figaro, according to Business Week. The launch will see 500,000 printed copies at an initial price of 50 cents, which is exactly half the price of competing newspapers like Le Parisien and Aujourd'hui en France. Posted by Savita Sauvin on March 17, 2010 at 10:15 PM 82. Russian TV Ad: Prices Set to Grow from Mid-2010 VTB Capital, Russia February 17, 2010 Kommersant has this morning quoted Andrey Braiovich, CEO of Aegis Media (the Russian subsidiary of British Aegis Group) as saying that: __ Gazprom Media, the second largest Russian TV ad selling house (that sells TV ads for NTV, TNT and TVC with a combined YTD audience share of 25%), has sent letters to advertisers suggesting a TV ad price rise from mid-2010 (he did not specify the extent of the increase); and __ the TV advertising time for most Russian broadcasters is almost 100% sold out for 1Q10, with sales of TV GRP up 20-30% YoY as of today. Braiovich's comments underpin our bullish view on the Russian TV ad market recovery in 2H10 and on two public Russian media stocks, CTC Media and RBC (which derive 96% and 15% their top lines, respectively, from TV ad). Furthermore, we believe that Video International, the selling house for CTC Media's three Russian

networks and another ten Russian FTA broadcasters, is likely to follow Gazprom Media and might also increase inventory prices this summer. CTC Media trades at 7.2x 2010F EBITDA (a 25-30% discount to developing and developed EU peers), while its exposure to a premium audience and ability to price in inventory at a premium to the market make its top line more resistant. The YTD combined 4+ audience share of CTC Media's CTC, Domashny and DTV averages 13.1% vs. the 13% FY10F we project in our US GAAP model. As per today's TNS-Russia numbers, these solid ratings are driven by the continuing success of the domestic and in-house content (series, sitcoms and shows). Moreover, Domashny and DTV benefit from re-running CTC's content (e.g. 6 Frames, a sketch show made in-house and premiered on CTC, now aired at DTV, ) both at the top-line (they still derive high audience share ratings) and at the margins. 83. Ten largest Russian TV advertisers post 3% YoY growth in ad spend in 2009 VTB Capital, Russia February 15, 2010 --- in line with CTC Media's advertisers mix --- underpins CTC Media's ability to price in at a premium to the market News: Aegis Media agency estimates that in 2009, the ten largest Russian advertisers increased their TV ad budgets 3% YoY (in rouble terms) compared with the 19% YoY fall on the Russian TV ad market. This came on the back of the increases in air time purchased by the top ten advertised segments and the top ten TV advertisers (13% YoY and 23% YoY, respectively, as estimated by TNSRussia). Our View: The data underpins our bullish view on CTC Media, which trades at 7.1x 2010F EBITDA (a 25-30% discount to developing and developed EU peers), confirming the resistance of its top line, supported by the exposure to a premium audience and ability to price in inventory at a premium to the market. In 2009, the top ten Russian TV advertisers accounted for 23% of total Russian TV ad spend (up from 18% in 2008). The mix of sectors advertised on CTC Media's channels in 2009 likely reflects the structure of the top ten sectors advertised on TV as a whole that year, as it has been historically. Back in 2008, CTC, Domashny and DTV sold advertising time to about 200 advertisers, of which the top ten accounted for 40% of advertising time sold. For more details, see our Russia's Top 10 TV Advertisers Increased FY09 TV Ad Spend, of 12 February.

SECTOR Coal 84. Coking coal becoming even tighter VTB Capital, Russia March 16, 2010 The seaborne coking coal market has continued to tighten in the wake of the USD 200/t settlement for 1Q JFY shipments between BHP and the Japanese steel mills, with news yesterday that operations at the Hay Point Coal Terminal (HPCT) in

Queensland were suspended in the latter half of last week due to strong winds and high tides. At present there is no date scheduled for a restart, and as the vessel queue was about 20 (average wait time 10-14 days) at the time of the suspension, there is likely to be an extended period of disruption. Last week was already the sixth consecutive week of weather problems in Queensland, with speed restrictions and shutdowns on the rail systems, and almost all mines showing some operational problems. As we discussed yesterday, the port queue at Dalrymple Bay is back up to 62 vessels with an average wait time of 25-35 days, so coking coal availability is becoming a genuine issue in Asia. With Chinese crude steel production surging some 25-28% YoY in January and February, and raw material stocks currently low (as we reported yesterday), this could result in a growing supply squeeze in the weeks ahead, with implications both for coking coal prices and, in turn, steel prices. Freight rates have surged in the past 4-5 days with the Baltic Capesize Index up 20% to its highest level in two months, as both iron ore and coking coal demand from China has sharply increased (Figure 1). Meanwhile, TEX Report reported yesterday that the tightness in the hard coking coal market was also beginning to impact semihard, PCI and semi-soft grades, with a considerable narrowing of the price spreads compared with a 'more loose supply position' in 2009. This suggests that if hard coking coal prices average about USD 220/t for 2010, semi-hard prices (which is the benchmark Russian coking coal) could rise as high as USD 170-180/t if availability remains constrained for the remainder of the year, as we expect (Figure 2). Indeed, there could be a significant potential demand pull for Russian coking coal from China as the year progresses if hard coking grades from Australia remain in short supply. 85. Coking Coal: Another domestic coal price improvement in the offing UralSib, Russia March 17, 2010 Domestic coking coal price to increase by $10/ton in April. We have heard from several market sources that the average domestic coking coal price could increase by $10/ton after 1 April from the 1Q10 price of $120/ton. Raspadskaya in particular is reportedly in talks with its customers over a $10/ton increase to $120/ton for its semi-hard GZh-grade coal in 2Q10. This is mostly in line with our expectations (10-15% increase) and should be accepted by steelmakers. This increase is likely to become the benchmark for Russian coal producers, shifting the average domestic blended coking coal price for 2Q10 to $130/ton. International contract pricing remains strong; further improvements in spot market. In terms of international pricing, Asia continues to enjoy positive price trends after BHP Billiton set a $200/ton contract price for 2Q10. Minor Australian (Queensland- based) producers have negotiated prices with India at $220/ton FOB for April-June and $250/ton FOB for the remainder of the year. Chinese customers are buying some volumes at $240/ton. Although the next round of negotiations between majors is likely to occur only in June (for 3Q10 or 2H10 prices and volumes), these recent developments create a solid basis for further price increases from the current $200/ton. Positive view reiterated, Buy Mechel and Raspadskaya. A $10/ton increase for 2Q10 equates to an average price of $118/ton for Raspadskaya (versus our current assumption of $109/ton), which results in an 11% growth in 2010E EBITDA to $796 mln. We believe that the expected 10% increase in the domestic coal price is easily

achievable by domestic miners. Moreover, should Chinese customers continue to buy at $220-240/ton and 3Q10 contracts are set at a premium to current contracts, we may see another $10-15/ton increase in the domestic coking coal price in July (for 3Q10). We see upside to our 2010 pricing assumptions and believe that the new pricing levels are likely to unlock additional upside in coal names, including Mechel, Raspadskaya, and Belon. Michael Kavanagh 86. Sberbank says total invest of bids for carbon credits at 3.3bn euros bne March 18, 2010 Vsevolod Gavrilov, director of the Sberbankís department for energy savings and the use of natural resources, says that total investments in projects that were submitted at state-controlled Sberbankís tender for carbon emission credits amount to 3.3bon euros, reports Prime-Tass. The news agency says that Sberbank has received a total of 44 bids from 35 companies for 77 million tonnes of CO2 equivalent, while the only 30 million tonnes of CO2 equivalent were offered. In the meantime, Vsevolod Gavrilov says that Russia could obtain 10% of the global market to sell quotas for carbon dioxide gas emissions within three to five years, reports Prime-Tass. The news agency says that Sberbank was tasked last year with the sale of credits for greenhouse gas emissions.

SECTOR Chemicals, Fertliser 87. BPC concludes contract with Indian Potash at $370/tonne CFR Renaissance Capital, Russia Monday, March 15, 2010 Event: Belorussian Potash Company (BPC), the distributor for Uralkali and Belaruskali, has signed a contract with Indian Potash Ltd (IPL), India's largest fertiliser importer, for 2010-2011 deliveries at a potash price of $370/tonne CFR. Deliveries under the new contract are to run from Apr 2010-Mar 2011. BPC deliveries under the new contrct with IPL will total 900kt. The contract price is fixed at the level at which Canpotex (the districutor for Canadian companies) fixed the contract for 2Q10 earlier this year. Action: The price level of the new BPC/IPL contract is in line with market expectations, following the Canpotex settlement. We regard the agreement as positive. We see no great uncertainty for Uralkali stock in light of the contract, and given comments by Russia's Deputy Prime-Minister Igor Sechin that there had been no governemnt decision on a 15% export duty.

Rationale: The speed of negotiations for India this year is positive, after the Chinese contract was settled at $350/tonne CFR. The contract price is $20/tonne higher than we had expected for India. IPL delivers about 80% of India's potash imports. Accordingly, in negotiating contracts with other indian customers, we think BPC could take more than a 25%-plus market share assuming pro-rata contracting and about 4.5mnt of annualised potash consumption. Marina Alexeenkova 88. PhosAgro negotiated $1.5bn LT contract for DAP with India Renaissance Capital, Russia Monday, March 15, 2010 Event: PhosAgro, the largest Russian phosphate holding, has negotiated with Indian fertiliser company IFFCO a three-year $1.5bn contract for DAP supply to India. PhosAgro will deliver to India approximately 20% of its imported DAP, which amounted to 6.6mnt in 2009 according to the International Fertiliser Industry Association (IFA). Total Indian DAP/MAP consumption was estimated by IFA at 11mnt of product for the 2009/10 fertiliser year. Mikhail Safin 89. Uralkali: Next contract with India signed on expected terms UralSib, Russia March 15, 2010 Belarusian Potash Company signed deal with India at $370/ton. On Friday Interfax reported that Belarusian Potash Company (BPC), the joint export trader for Uralkali (URKA LI- Buy) and Belaruskali, signed a contract with India for 900,000 tons of potash at $370/ton (on CFR terms), with deliveries starting in April 2010 and ending in March 2011. The last contract between BPC and India was signed in mid-July 2009 and ends in March 2010 for 675,000 tons of potash at $460/ton (on CFR terms). In February Canpotex, the joint export trader for Potash- Corp, Mosaic and Agrium, also signed a deal with India for 600,000 tons of potash at $370/ton (on CFR terms), with deliveries starting from the end of February through June 2010. We now expect International Potash Company (IPC), the export trader for Silvinit (SILV - Buy), to follow suit and sign a contract at the same price in the near-term. No changes to our projections. India was expected to sign its next contract with BPC before the end of March at a price similar to that of recent contracts between India and Canpotex. We estimate Uralkali will supply 450,000 tons of potash for this contract (33% more than the previous contract and nearly the same if adjusted for a monthly basis). As our current model for Uralkali implies an average export price of $380/ton in 2010 (the company is expected to supply part of the volumes at spot prices nearly 10-15% higher on average than the contract prices) and up to a 50% increase in export volumes, we feel comfortable with our assumptions and have made no changes to our model.

May add positive sentiment to the stock. We view this news as fully supportive for our positive fundamental outlook on the potash sector in 2010 with demand likely to be up 40% YoY on average in 2010. Despite the fact that both the price and timing of the contract were expected, we think the news might generate positive sentiment for Uralkali stock, given that it was recently under pressure from both export duty and tax issues. We reiterate our Buy recommendation on Uralkali and Silvinit commons and prefs.

GOVT REFORMS, REGULATIONS, ECONOMICS, REGIONS 90. Medvedev inks decree to promote high-speed trains bne March 12, 2010 Russian President Dmitry Medvedev has signed a decree to promote high-speed train services in the country, reports Prime-Tass. Citing the president's press service, the news agency says that the government is scheduled to adopt safety regulations for high-speed trains, approve a plan for launching high-speed train projects, and determine tools of government and private financing of such projects by December 31. In the meantime, Russian Deputy Finance Minister Alexei Savatyugin says that the Russian government will submit a bill on microfinance institutions to the State Duma in late March or early April, reports Prime-Tass. The news agency quoted Savatyugin as saying that the bill stipulates the creation of non-banking institutions which will provide loans worth up to RUB1mn. 91. Russia may gradually raise tax burden on rich bne March 18, 2010 Russian Deputy Prime Minister and Finance Minister Alexei Kudrin says that the aggregated tax burden on rich people in Russia could be gradually raised, reports Prime-Tass. Te news agency quoted Kudrin as saying that the divide between the rich and poor is greater than acceptable. In the meantime, the number of daily users of instant messaging service ICQ in Russia amounts to 8.8 million users, reports Prime-Tass. Citing ICQ, the news agency says that Russian users send daily 700 million messages via ICQ.

UKRAINE INVESTMENT 92. ArcelorMittal Kriviy Rih could more than double capex in 2010 bne

March 12, 2010 ArcelorMittal Kriviy Rih plans to more than double capex this year to UAH1.7bn, from UAH782mn in 2009, reports Interfax. Citing a statement issued by Ukraine's biggest steel mill, the news agency says that the company did not say how much was invested in production in 2008. 93. Astarta Holding [Buy; FV $23.53] plans to increase 2010 sugar output by 42% y-o-y Dragon Capital, Kyiv March 15, 2010 WSE-listed Astarta Holding, the largest sugar producer in Ukraine with last year's market share of 18%, plans to increase sugar output in 2010 by 42% y-o-y to 320 kt, which is 14% higher than our forecast. (Company) Astarta plans to increase the area sown with sugar beet by 27% y-o-y to 43,000 ha this year (11% above our projections). The reported operating plans support our positive financial outlook for Astarta and we reiterate our Buy recommendation on the stock. Tamara Levchenko 94. AvtoKrAZ January output grows 76% m-o-m to 109 trucks Foyil Securities, Ukraine February 16, 2010 AvtoKrAZ (KRAZ UZ, Under Review), the country's largest heavy-duty truck producer, has reported that its January output grew by 76% m-o-m to 109 trucks, allowing the Company to produce 39% of last year's output in just the first month of this year. Our view: We see this as positive for the Company, since in our view such a positive tendency in AvtoKrAZ's output, triggered by improving macroeconomic conditions both in the CIS and Asia, as well as broader access to corporate loans for KRAZ's clientele, should help grow its output 4.3x to 1,200 trucks this year. At the same time, we are still cautious about the management's output projections of 2,400 units for 2010, or double of what we are expecting, since historically these forecasts have been much higher than the actual results of the Company. This said, we expect AvtoKrAZ to grow its top line by 111% to UAH 460m, bringing approximately UAH 27m in profits for the Company, compared to the estimated loss of UAH 16m in 2009. As a result of this, we improve our outlook for AvtoKrAZ for 2010 and put the Company Under Review. Ruslan Patlavskyy 95. Ukraine's coking coal prices skyrocket in Ukraine on domestic deficit Astrum, Kyiv February 16, 2010 According to the Metall Expert, on February 12, 2010, prices for coking coal (grade K) reached UAH 1,229 (USD 153) per tonne, excluding VAT. This is 38% above the

price of UAH 896 per tonne which had been stable since early November'09. One week ago, prices for coking coal in Russia had grown by 24% to RUR 3,196 (USD 103) per tonne. Significantly lower coal extraction in Ukraine expected in March'10-May'10 and growing demand for coal should keep domestic coking coal prices high in 1H10, according to the Metall Expert. Astrum's perspective: We believe that this news is STRONGLY POSITIVE for Ukrainian companies extracting coking coal. We reiterate our BUY recommendation for the Pokrovske Mine (SHCHZ: BUY) with a target price of USD 0.954 per share. We expect that in 2010, SHCHZ will boost its raw coal output by 15% to 6.3 mln tonnes, and that its EBITDA will grow by 100% to UAH 665m (USD 79m). Yuriy Ryzhkov 96. Global sugar prices plunged 28% from January's peak to August 2009 level Foyil Securities, Ukraine March 15, 2010 Increased expectations for the sugar harvest in India from 16.0m tons to 16.8m this year has caused global white sugar prices to plunge for the third day at a row, down on average 28% to USD 545/ton. Our view: Although we treat the steep decline in global sugar prices as an overreaction by the market, since the Indian sugar harvest forecast was increased by only 5%, we see this as negative for the largest Ukrainian sugar producers Astarta and Ukrros, cumulatively covering 29% of the total sugar market in Ukraine. In our view, this might unleash a flow of imported sugar to the Ukrainian market, as based on our information the average domestic retail price in February reached USD 1,080/ton, building up a larger supply of sugar on the local market and thus driving Ukrainian retail sugar prices down 20%-30% short-term. Therefore, we put Ukrros shares Under Review. Ruslan Patlavskyy 97. Ukraine drafts bill to transfer pipes to consortium with Russia, EU bne March 21, 2010 Ukrainian authorities have drafted a bill to transfer the country's gas pipelines to Ukrainian, Russian and E.U. companies under a concession agreement, Ukrainian First Deputy Prime Minister Andrei Klyuyev said Friday, ITAR-TASS reported. Newly elected Ukrainian President Viktor Yanukovich has repeatedly called for reviving talks on a Russian-E.U.-Ukrainian consortium to manage the country's gas pipeline system. In 2003, Russian natural gas giant Gazprom, Ukrainian state-owned oil and gas company Naftogaz Ukrainy, and German energy company E.ON Ruhrgas concluded a preliminary agreement to run Ukraine's gas pipeline system. However, the agreement has not yet been finalized.

98. Ukraine looks to make gas transport system more competitive Ria Novosti March 17, 2010 Ukraine is seeking to modernize its gas transportation system to make it more competitive, Prime Minister Mykola Azarov said on Tuesday. "The building of gas piping routes skirting Ukraine is a fact, so we realize that only extensive modernization... will make our truly reliable route competitive," he said during a meeting with Jose Manuel Pinto Teixeira, the European Commission's ambassador to Ukraine. Azarov said Ukraine would negotiate with the European Bank for Reconstruction and Development and the World Bank on cooperation in the implementation of infrastructure and investment projects. He added that Ukraine would have to raise at least $15-20 billion for such projects. In March 2009, Ukraine's previous government led by Yulia Tymoshenko signed a declaration with the EU on the modernization of its gas transportation system, a project which would not have involved Russia. However, Kiev and Brussels subsequently said they would be happy to see Moscow take part. The new Ukrainian government is seeking closer cooperation with Russia, in particular in creating a gas transport consortium to operate the national gas transportation system. KIEV, March 16 (RIA Novosti) 99. Ukraine's gas transport system will be inoperative in 20 years bne March 18, 2010 German chancellor Gerhard Schroeder says that the gas transport system of Ukraine will be inoperative in 20 years' time unless it's modernized, reports local media. Schroeder was quoted as saying that the condition of transit routes is unsatisfactory. 100. Ukraine's agricultural output up 5.2% y/y in 2M10 Astrum, Kyiv March 17, 2010 According to the State Statistics Committee, agricultural output grew by 5.2% y/y in 2M10. Agricultural companies posted an increase in output of 12.4% y/y, while household farms experienced a decline of 0.8% y/y. Astrum's perspective: Winter is a "dead season" in terms of agriculture, with the sector basically running on one "engine", that is, animal husbandry. Thus, winter's

results are not representative in terms of the sector's overall trends. We expect that the agricultural sector will not be a contributor to 2010 GDP growth, as the grain harvest should be lower than the 46 mln tonnes gathered in 2009. Although the animal husbandry segment continuously provides growth, this conceals a serious issue, as the number of livestock has been falling, with no sign of the trend's reversal (see Astrum Daily of February 18, 2010 for more detail). Oleksiy Blinov 101. Ukraine's coke - back on track Sokrat, Ukraine February 16, 2010 Ukraine's coke sector appears to be ahead of the whole domestic metallurgy sector. Increased coke consumption per tonne of pig iron, which should remain at the same level for at least one year, and further steel sector recovery should boost coke output by 5.4% in 2010. At the same time, driven by the global coke shortage and increased raw materials' prices, the average domestic coke price in 2010 should increase by 25-30%. These factors should help Ukraine's coke makers to boost FY2010 net revenues, making the coke sector a most attractive investment target. Executive summary: • Domestic coke makers successfully withstood a challenging year. Coke and gas are major raw materials used in steelmaking. In 2009, Ukraine's steel producers partially substituted expensive gas with cheaper coke. Increased coke consumption per tonne of pig iron and the slowdown in coke import have softened the decline in coke output to 11% despite a 17% drop in pig iron output. • The modernization of Ukraine's metallurgy should not restrain industry growth in 2010. The financial crisis and resultant drop in steel demand did not force Ukraine's metallurgical companies to refuse their modernization programs. Instead, they moved forward the terms of their completion. In 2010, only individual companies will enjoy the use of PCI technology, while mass modernization will only be reach its final stage only in 2012. Given this fact, we expect that the coke use ratio will remain almost flat in 2010, thereby helping domestic coke makers to boost coke production by 4.5% YoY in 2010. • Driven by internal and external factors, the 2010 domestic coke price should rise. The global steel industry's recovery and resultant boost in coke demand, together with the fact that China's high export duty on coke transformed the country from coke export leader into net coke importer, should create a global coke deficit of about 190 mln tonnes. At the same time, the domestic coking coal price should rise given the revived coking coal demand. These two drivers should boost the domestic coke price in 2010 by 25-30% YoY. • Metallurgical groups with coal resources should help related coke makers avoid output fluctuation. Despite the fact that all coke makers in Ukraine are integrated into metallurgical groups, only Avdiivka Coke and Yasynivka Coke have excess in-house coke supplies, since the related groups - SCM (controls Metinvest) and Donetskstal - are 100% and 70% self-sufficient in terms of coking coal. This should help these coke makers to achieve stable coke output despite coking coal shortages.

• Valuation. Our valuation shows that, among Ukrainian traded coke makers, a BUY recommendation is deserved by Avdiivka Coke, Alchevsk Coke, and Yasynivka Coke due to their rapid net income growth and support in raw materials' supplies from their parent holdings. At the same time, we do not issue any recommendation for Zaporizhcoke because of contradictory valuation results and uncertain Company's prospects. 102. Ukraine's Freight transportation up 12.5% y/y in 2M10 Astrum, Kyiv March 17, 2010 According to the State Statistics Committee, freight transportation volumes grew by 12.5% y/y in February'10. Freight transportation by railways grew by 8.8% while pipeline transit volumes grew by 25.8%. Astrum's perspective: The most significant factor behind freight transportation growth was the 70.6% y/y increase in gas transit volumes. This was largely due to an ultra-low baseline factor, as in January'10 Russia cut gas supplies to Ukraine and Europe during a gas dispute. At the same time, railway transportation volumes grew by 8.8% y/y. This rate of growth is the same as for industrial output (see related story in this Astrum Daily), supporting our view that railway transportation is a good proxy indicator for industry trends.

103. Ukraine's passenger transportation on downward track Dragon Capital, Kyiv March 17, 2010 Passenger transportation in Ukraine declined by an estimated 3.9% m-o-m and 7.3% y-o-y in February. (SSC) Disregarding seasonal factors, February data indicate passenger transportation remained on a downward track. This, along with earlier released retail turnover data (another indicator we use to track the development of domestic consumption demand), supports our view that a rebound in domestically oriented sectors is yet to come later this year. Olena Bilan 104. Ukrproduct group to attract investor to develop raw materials base bne March 18, 2010 Ukrproduct Group, one of the leading producers and distributors of branded dairy products in Ukraine, expects to attract an investor to create its own raw materials base, reports Interfax. The news agency quoted Ukrproduct Group Director General Serhiy Yevlanchyk, as saying that theyíre looking for a partner to develop a raw materials base. In the meantime, the Ukrainian Agriculture Ministry expects that Ukraine would harvest 48 million tonnes of grain in 2010 against 46 million tonnes harvested last year, reports Interfax. The news agency quoted Ukrainian deputy agriculture minister Serhiy Melnyk as saying that they have the plan for 48 million tonnes this year in the Ukraine's Grain program and the program on social and economic development. In another development, Russian oil major TNK-BP plans to invest $137mn in developing its business in Ukraine in 2010, reports Prime-Tass. Citing a statement issued by the companyís press office, the news agency says that of the total, TNK-BP plans to invest $107mn to upgrade the Lisichansk Oil Refinery and $30mn to develop its oil products retail chain in the country. In another development, Ukrainian Deputy Prime Minister Sergei Tigipko says that the Ukrainian government intends to negotiate a lower price for Russian natural gas, reports Prime-Tass. The news agency quoted Tigipko as saying that the price of gas (for Ukraine) should not be substantially higher than the price for Belarus. (Ukrainian and Belarusian) economies are very similar. 105. Ukrproduct to attract strategic investors to develop own milk base Astrum, Kyiv March 18, 2010

Ukrproduct (UKR LN: BUY) is eyeing a strategic investor to jointly develop cattle breeding in those regions where the Company has a presence in order to ensure milk supplies. This development was announced by the Company's CEO at the Adam Smith Conference in Kyiv. The project is estimated at a value of USD 160m, with USD 120m of that amount expected to be attracted through credit. Astrum's perspective: The news is POSITIVE for the stock as in the case the Company develops its own milk base it could substantially boost top line and margins due to vertical integration. On the back of milk shortages in the Country due to a gradual decline in cattle number of heads, in 2009 milk prices surged more than 130% and gross margins in the cattle farming sector jumped to 50%-60%. Thus, the cattle breeding sector is gradually coming back into investors spotlight. Dmytro Ushenko 106. USDA downgrades world sunflower seeds ending stock forecast Astrum, Kyiv February 17, 2010 The U.S. Department of Agriculture (USDA) has downgraded its forecast for world sunflower seeds' ending stock in 2009/2010 by 3% to 2 mln tonnes. This represents a 28.9% y/y drop. At the same time, USDA's world sunflower seeds harvest forecast rose by 1.3% to 30.75 mln tonnes (down 6.9% y/y). USDA also increased its projections for the export volume of world sunflower seeds by 8.9% to 1.83 mln tonnes (down 16.8% y/y). As well, it raised its estimates for world sunflower seeds' processing volume by 0.4% to 27.67 mln tonnes (down 3.4% y/y). Astrum's perspective: We regard this news as POSITIVE for the Ukrainian sunflower oil producer Kernel (KER PW:BUY), as the expected decline in global sunflower seeds ending stock should accelerate world sunflower oil prices. Furthermore, given the good sunflower seed harvest in Ukraine in 2009/2010, which was flat y/y, we expect that domestic sunflower oil producers will have the opportunity to strengthen their positions on key export markets. Dmytro Ushenko

KAZAKH INVESTMENT 107. Kashagans 2010 approved budget capped at US$8.7bn Visor Capital March 15, 2010 Last Friday (12 March) newswire sources reported that Kazakh government had approved the budget of the Kashagan project for 2010 at US$8.7bn. The figure is below the level reported to have been targeted by the project partners of US$10.5bn for the year. Although we believe the news is negative for the oilfield service sector, we believe that the market is already aware of the reduced 2010 budget following

earlier Government comments. We do not expect any share impact for any of the listed companies involved. 108. KazakhGold CEO announces modest production target for 2010E, reiterates company's solid potential Unicredit, Russia March 18, 2010 Topic: Speaking at the Minex conference in Astana yesterday, newly appointed KazakhGold CEO Alexei Teksler unveiled the company's targets for 2010E. KazakhGold plans to spend USD 66mn on capex in 2010E, of which USD 30.5mn may be spent on drilling works, as a result of which the company should obtain a JORC reserve base of at least 8mn oz. The company intends to spend another USD 35.4mn on production facilities to raise output by 81% yoy from 2009's 72,800oz to 132,000oz in 2010E. The company also plans to spend as much as USD 600mn on capex over 2010E-2015E to increase output substantially. Teksler also said that the company is almost ready to conduct the planned USD 100mn SPO. Our view: We see the news as positive for the company, as it indicates that KazakhGold's new management is actively working on increasing production volumes and reserves, which should result in a significant increase in the company's value. However, with Polyus Gold's plans to conduct a reverse takeover, any increase in KazakhGold's value is likely to happen once the company would be fully consolidated in Polyus Gold. Conclusion: We maintain our Buy recommendation and 12M TP of USD 30.3 for Kazakh- Gold. 109. KazakhGold may invest up to US$600m in the period to 2015 Visor Capital March 18, 2010 Yesterday, KazakhGold said it plans to invest US$65.5m in 2010 and up to US$600m in the period 2010-2015. The Company plans to increase its production of gold by 60-70% in 2010 from its 2009 levels. We do not expect a significant share impact as the Company had previously announced guidance on the potential production increases and investment plans for 2010. Yesterday, Alexey Teksler, the COO of KazakhGold (KZG LI), said the Company plans to invest US$65.5m in the development of KazakhGold in 2010. Investments may total US$600m for the period to 2015, he added. For this year, the Company's major plans are the reconstruction and modernisation of existing production and processing units. The Company is currently in the process of approving the development strategy for the period of 2010-2015, which is to be approved by major shareholder, Polyus Gold (PLZL LI) by the end of April, and subsequently announced to the public. We do not expect a significant share impact on this news as the Company has previously announced its plans to increase its production level to 120koz, which is a 65% increase from its 2009 level. Its investment plans were also previously

announced together with an additional shares issue announcement. We currently do not have KazakhGold under formal research coverage. Madina Dameshova 110. Kazakhmys Plans to Raise US$2bn for Aktogay Visor Capital March 18, 2010 Yesterday, Oleg Novachuk, CEO of Kazakhmys (KAZ LN)(GB_KZMS KZ), said that the Company is looking for partners to develop its Aktogay copper project, which needs US$2bn in financing. The partners may purchase a stake in the project or sign an off-take agreements. We expect no significant share impact on Kazakhmys, since we believe the news was already anticipated by the market. We currently have Kazakhmys under formal research coverage, available to our clients. 111. Kazakhmys plans to start Boschecul development in 2011 Visor Capital February 15, 2010 After commencement of operations, which is planned in 2014, Boschecul is expected to produce 100ktpa of copper concentrate. We expect no significant share impact for Kazakhmys. According to Kazakhmys (KAZ LN), the Company will start development of its major growth project, Boschecul in 2011. After commencement of operations, expected in 2014, Boschecul is set to produce 100ktpa of copper concentrate. Late in 2009, the Company announced the allocation of a US$2.7bn unsecured loan facility from the China Development Bank for its growth projects. The Facility agreement will provide US$2.1bn of the allocated funds for development of the Boschekul copper project (US$2.0bn), Bozymchak gold-copper project (US$100m) and potential expansion of several existing mines (US$200m). The remaining US$400m is available for withdrawal over the following three years, and is to be allocated to other growth projects. As we believe the news has already been anticipated by the market, we expect no significant share impact for the Company. We currently have Kazakhmys under formal research coverage, available to our clients. 112. Kazakhstan's copper cathode output set rise 24% by 2014 Visor Capital March 18, 2010 The Kazakh Minister of Industry expects growth of new Kazakhmys and Kazzinc projects to boost national production of copper cathode production by 24% over the next five years. We do not expect significant share impact on Kazakhmys. Yesterday, Aset Isekeshev, the Kazakh Minister of Industry, said that Kazakhstan's annual copper cathode output will grow by 95ktpa during the next five years, equivalent to a 24% increase on Kazakhstan's current output of 400ktpa. According to Mr Isekeshev, Kazakhmys (KAZ LN)(GB_KZMS KZ) would account for 25ktpa of

the total increase, whilst Glencore-controlled Kazzinc was expected to raise production by 70ktpa. We do not expect any significant share impact on Kazakhmys, since we believe its growth projects are already anticipated by the market. Indeed, Mr Isekeshev's figures regarding Kazakhmys look very conservative, since the Company itself expects growth in copper concentrate production of around 100ktpa by 2014. We currently have Kazakhmys under formal research coverage, available to our clients. Stanislav Chuyev 113. Kazakhstan creates new oil and gas ministry in a major government reshuffle SRI March 15, 2010 In a government reorganization last Friday, Kazakhstans president Nursultan Nazarbayev created a new oil and gas ministry and reshuffled the cabinet. Sauat Mynbayev , the former Minister of Energy and Mineral Resources, was appointed to head the new Ministry of Oil and Gas. The new ministry will take over a regulatory role of the oil and gas sector; a role which had been largely exercised by the national oil company KazMunaiGas. The ministry will relieve KazMunaiGas of inappropriate functions that create a conflict of commercial and state interests. The activities of KazMunaiGas should be purely commercial, Nazarbayev said. Mynbayev was instrumental in renegotiating the agreement on the development of the giant Kashagan field with a consortium of international oil companies two years ago. Currently, he is spearheading Kazakhstans efforts to win more advantageous terms at foreign-led oil and gas projects, including the Karachaganak gas condensate field. Bakhyt Sultanov, the former Minister of Economy and Budget Planning, has been dismissed from his post and replaced by former Deputy Minister of Industry and Trade Zhanar Aitzhanova. The Ministry itself has been renamed the Ministry of Economic Development and Trade. While its budget planning role has been moved to the Ministry of Finance, the new Ministry will take over responsibilities for trade. In her earlier role, Aitzhanova was responsible for trade issues, including Kazakhstans accession to the World Trade Organization (WTO). Nazarbayev thanked Sultanov for his work at the Ministry of Economy and Budget Planning and said that he would shortly obtain a new post indicating that more government changes were planned. The Ministry of Industry and Trade has been reorganized to oversee Kazakhstans industrial-innovative development and has been renamed the Ministry of Industry and New Technologies. The ministry continues to be headed by Asset Isekeshev who also serves as Deputy Prime Minister.

The Ministry of Culture and Information has been split into two separate ministries - the Ministry of Culture and the Ministry of Communication and Information. The Ministry of Culture will be headed by the former Minister of Culture and Information Mukhtar Kul-Mukhammed, while the Ministry of Communication and Information will be led by Askar Zhumagaliyev. 114. Kazakhstan oil PSA renegotiation Renaissance Capital, Russia Tuesday, February 16, 2010 Credit-irrelevant, but may be negative for bond pricing PSAs in spotlight. Over the past week (8-12 Feb), newsflow (Interfax and Bloomberg) on Kazakh government initiatives to renegotiate the fiscal environment for the largest production sharing agreements (PSA) has intensified materially. The push follows a statement by President Nursultan Nazarbayev on 22 Jan, in which he called on the government to address the multiplicity of tax regimes applicable to legacy PSAs and, in particular, to ensure that future changes to the tax system will also apply to PSA operators. Nazarbayev's comments explicitly included a caveat that all amendments must be done within a negotiations framework. Last Friday (12 Feb), Daulet Yergozhin, the head of the Ministry of Finance's tax committee, said there are "few concerns regarding procedures of contract-signing, and there are legal questions to the lawfulness of some contracts", which further increased attention on the issue. Irrespective of how the revisions affect the general perception of Kazakhstan's investment climate, we believe any realistic changes are unlikely to be material for currently tradable credit - i.e. Tengizchevroil (TCO) and Kazmunaigaz (KMG) bonds. Yet, given their tight spreads, we think pricing risks are on the negative side now. __ Who's affected? When the new Tax Code was introduced from 1 Jan 2009, the government effectively cancelled most PSAs' tax-stabilised status, so the remaining PSAs already operate on exceptional terms. We are confident that Yergozhin's comments on Friday were not meant to include Tengiz, Karachaganak, and Kashagan, and that the government is not disputing the validity of their legal status. Yet they may be subject to revision as well - this is implied by comments from Sauat Mynbayev, the minister of energy and mineral resources, in late January, when he said that if the government were to abolish tax stability in those agreements, then they would better to be cancelled completely, since the changes are likely to be very significant. __ TCO: Higher tax take against lower capex? TCO (Baa3/BBB-) is not legally a PSA at all, it is just a concession with very strong and wide-ranging grandfathering clauses. TCO has always been treated in the most favourable way, despite the environmental charges that the government periodically brings forward. Tengiz was the only project that managed to receive an exemption from the export duty unexpectedly introduced by the government in 2008. However, 2009 was the last year Tengiz posted very significant crude output growth, and we forecast its output to plateau in the next few years before another development phase kicks in. We do not think any reasonable increase in the tax take from Tengiz will hurt its creditworthiness much, given lower capex going forward and a declining amount of publicly traded debt (less than $800mn now) and despite the non-recourse structure

of the bond issue. Chevron's annual 10-K filing is expected soon, from where - however fragmentary - inference on the most recent financial performance of TCO is possible. __ KMG: No cash-flow effect. KMG's (Baa2/BB-/BB+) core business is not reliant on any PSA and is subject to common regulations. KMG is currently a party to five PSAs, all off-shore Caspian. None of them represents KMG's core fields, and none will be operational any time soon. Kashagan, by far the most important of these, went through a very material tightening of its fiscal regime and ownership aimed at ensuring a faster launch of commercial production and safeguarding against further delays and cost escalation, in late 2008. Given the complexity and capital intensity of the project in the next three years, we do not think another tightening of the state's grip over the project is likely now. Changes in the exploration-stage PSAs alter the economics to the parties involved, but are neutral from a credit perspective, as of now. KPO at stake. In a wider context, we believe the situation is triggered by the Karachaganak (KPO) status. KPO is the only large project in which the government currently holds no stake. It also happens to be the largest suitor against the government with regard to the aforementioned export duty which it initially paid as required, but later filed more than a $1bn international arbitration claim to Kazakhstan to recoup these payments. There are currently negotiations with regard to a potential sale of a share in the project. Mynbayev recently said sorting out KPO's outstanding issues will be a key task for 2010. Incidentally, production at KPO is expected to decline 5% in 2010, according to KMG CEO Kairgeldy Kabyldin, which is a situation the Kazakh side is unlikely to tolerate. The government is clearly looking for stronger commitment among KPO participants for Phase III development (a $14.5bn project) to push the project ahead. 115. Kazakhstan plans to boost uranium production by 30% in 2010 Visor Capital March 18, 2010 Vladmir Shkolnik, CEO of Kazatomprom, Kazakhstan's State mining company, announced plans to produce 18kt of uranium this year with no intention to sell on the spot market. In 2009 Kazakhstan produced 13.7kt of uranium. We expect no share impact as NAC Kazatomprom is not listed, and is 100% State-owned. Stanislav Chuyev 116. Kazakhstan to create new Ministry of Oil and Gas Visor Capital March 16, 2010 Aside from the President's announcement, few further details have been announced on the new ministry, or its interaction with the MEMR, Government, and NC KMG. Given the limited details so far available, we do not expect any share impact for any listed companies at this stage. The President of Kazakhstan, Nursultan Nazarbayev, on Friday announced that a new Ministry of Oil and Gas is to be created.

The main aim of the new ministry will be the development of the oil and gas sector in the country. The President added that the ministry will also release NC KazMunaiGas from some functions that have to-date created conflict between commercial and governmental interests. The head of new ministry will be Sauat Mynbayev, who was previously the head of the Ministry of Energy and Mineral Resources (MEMR). Aside from the President's announcement, few further details have been announced on the new ministry, or its interaction with the MEMR, Government, and NC KMG. Given the limited details so far available, we do not expect any share impact for any listed companies at this stage. Zhanar Nazkhanova 117. Kazakhstan - MXP reports Borkyldakty exploration well success Renaissance Capital, Russia Tuesday, February 16, 2010 Event: Yesterday (15 Feb), MXP said its Borkyldakty exploration well had reached a total depth of 1,755 metres, with the electric log indicating 38 metres of net pay of oil over five Triassic sandstone reservoirs at a depth of 1,357-1,536 metres. MXP plans to run production casing and test this over the next two weeks. The exploration drilling rig at Borkyldakty is due to be moved to the North Kyzylzhar II East Block to spud an exploration well over the next few weeks. After drilling is finished there, the rig will be returned to Borkyldakty to drill a confirmation well. MXP has indicated production test results will be released soon. Action: We do not cover MXP but view the news as positive. Rationale: MXP has a fully funded exploration programme for 12 shallow targets covered by 3D seismic for the next 15-18 months. We think 2P reserves are likely to increase over the next few years as MXP drills appraisal wells on prospects with successful exploration drilling. After MXP finishes appraisal drilling and receives all necessary approvals at Borkyldakty, production may significantly increase from the current 2.1kbpd at Zhana-Makat. Success at Borkyldakty indicates the good quality of MXP's 3D seismic interpretation, although it does not affect the probability of success at other shallow prospects. We expect intensive newsflow on MXP regarding drilling and production test results at shallow prospects over the next 15 months. Tatyana Kalachova 118. Kazatomprom and Solvay sign partnership deal bne March 19, 2010 Kazakhstan’s national nuclear company Kazatomprom has signed a strategic partnership agreement with Belgium’s Solvay. The two companies plan to cooperate on the construction of a hydrogen peroxide plant in Kazakhstan, Interfax Kazakhstan reported. 119. New Kazakh National Champion for precious metals Visor Capital March 18, 2010

Yesterday, Bolat Svyatov, the Chairman of the Kazakh National Mining Company Tau-Ken Samruk, announced the launch of a new subsidiary Tau-Ken Altyn. The newly created Company is to be focused on exploration, mining and refining of precious metals in Kazakhstan. Tau-Ken Samruk is wholly-owned by the Kazakh National Welfare Fund Samruk Kazyna. Mr Svyatov commented that several key projects had been identified for the new subsidiary. He added that Tau-Ken Samruk is currently intensively searching for funding sources for Tau-Ken Altyn. We do not expect any share impact for gold mining companies in Kazakhstan. We believe that the creation of Tau-Ken Samruk is positive for the industry as it could help to rehabilitate several abandoned projects in combination with existing industry players. Madina Dameshova 120. Russian-Kazakh JV to produce 3,000 tonnes of uranium in 2015 bne March 18, 2010 Alexander Boitsov, deputy CEO of Russian state-owned uranium producer Atomredmetzoloto, says that Russian-Kazakh uranium mining joint venture Akbastau is expected to start annually producing up to 3,000 tonnes of uranium in 2015, reports Prime-Tass. The news agency says that Atomredmetzoloto and Kazakh state-owned nuclear company Kazatomprom own the joint venture on a parity basis. The joint venture was established in 2006, while commercial uranium production started in February 2009.

CENTRAL ASIA INVESTMENT 121. Cherta to present farming machinery spares in Uzbekistan RIA Novosti March 15, 2010 The CHETRA-SPC company will present for the first time SISU diesel motors assembled with Finnish technology at the AgroWorld Uzbekistan 2010 exhibition. The international exhibition will be held in Tashkent on March 24-26. SISU motors are assembled in a joint venture between Concern Tractor Plants and AGCO in the Russian city of Vladimir. These motors can be used in several models of tractors (DT-75, VT-100, T-85) and combines (Yenisey-950), popular in the CIS. Apart from diesel motors the company will display a wide variety of spares for different types of farming machines. CHETRA-SPC provides spare parts for industrial, agricultural and skidding tractors. It also supplies locks, radiators, forgings and steel and iron castings.

Concern Tractor Plants unites more than 20 enterprises in Russia, Denmark, Germany, Austria, the Netherlands, Serbia and Ukraine. The holding’s production is used in mining, oil and gas, transport and defense industries, metallurgy, road and infrastructural building, energy and agriculture. Machinery produced by the group is exported to more than 40 countries. 122. Estonia LNG project fails to qualify for EC funding bne March 16, 2010 European Commission (EC) has designated funds in total worth of EUR 1.39bn for 31 gas infrastructure investments in Europe, whereas Estonian Balti Gaas and LNG Estonia, set up for the project to build a LNG terminal in Estonia, failed to rank to EU support, Esmerk reported. According to Einari Kisel of the Ministry of Economic Affairs, EC neglected to add Estonian gas projects in the shortlist ranking to investment support because the development of LNG terminal projects in Estonia still being in the initial phase. Mr Kisel says the Baltic LNG terminal developers have to face the fact that only one LNG terminal, with the capacity to store gas to meet the demand in the Baltics and in Finland will be built in the region with the the EU financial support. Mr Kisel says Estonia's advantages are the option to build a gas pipeline to link Estonia and Finland as well as developed infrastructure. Sergei Zagrebailov of Eesti Gaas, the natgas distributing company in Estonia, doubts the feasibility of a LNG terminal as natgas accounts for only 12% to 14% of the energy balance. 123. Kazakhstan, Kyrgyzstan and Tajikistan may create new common power system bne February 15, 2010 Kazakhstan, Kyrgyzstan and Tajikistan are to consider setting up a new interconnected electricity system, Kazakhstan’s ambassador to Tajikistan, Abutalip Ahmetov, has said. Speaking to journalists in Dushanbe, Ahmetov said he hoped the breakup of the Common Central Asian Electricity System would be a temporary phenomenon. The system has been idle since December 2009, when Uzbekistan withdrew. Kazakhstan’s state electricity grid operator Kegoc had also complained about unauthorised withdrawals from the common grid by Tajikistan. However, the energy ministries from Kazakhstan, Kyrgyzstan and Tajikistan are now in negotiations over the construction of a transmission line between Osh in south Kyrgyzstan to Khujand in north Tajikistan. This would allow the electricity systems of three countries to be re-integrated without Uzbekistan. 124. Kyrgyzstan still waiting for Russian aid bne February 17, 2010

Kyrgyzstan has not yet received a $1.7bn loan promised by Moscow for the construction of the Kambarata hydropower plant, Eurasia.net reports. The loan was to be provided as part of a $2.15bn package agreed between Kyrgyzstan and Russia in February 2009. At the same time as the Russian support package was announced, Kyrgyz President Kurmanbek Bakiyev said he would close the US and NATO military airbase near Bishkek. However, the base was given a reprieve later in the year, reportedly after the US pledged additional funding. While some of the $2.15bn promised by Russia has been supplied to Kyrgyzstan, Russian officials are understood to be unhappy about how the money has been disbursed. There are also concerns over the Kambarata project, which is strongly opposed by neighbouring Uzbekistan. 125. Rio Tinto looking at opportunities in Kyrgyzstan and Uzbekistan bne March 17, 2010 Rio Tinto is highly interested in Central Asia and is already reviewing opportunities in Kyrgyzstan and Uzbekistan, according to the international mining company’s exploration director for Central Asia Chris Welton. “Central Asia is a highly prospective terrain. The region has significant mineral endowments and is relatively underdeveloped, so there is still the possibility of tier 1 discoveries. In much of the world such opportunities are long gone,” Welton told the Minex Central Asia conference in Astana today. “Our priorities are copper and uranium but we are interested across the commodities board,” Welton added. “We are interested in both exploration and commercial entry including in advanced projects or even production.” Rio Tinto is already developing the Oyu Tolgoi copper-gold deposit in Mongolia alongside Ivanhoe Mines. 126. Tajikistan starts construction of Chormaghzak tunnel bne March 16, 2010 Construction of the 4,450-metre long Chormaghzak tunnel started yesterday March 15, Asia-Plus reported. The tunnel is part of the Dushanbe-Vahdat-Danghara highway construction project, which is being built with Chinese help. "One of our strategic goals is to get rid of the communication isolation and extricate Tajikistan from it,” President Emomali Rakhmon said at the groundbreaking ceremony for the tunnel. 127. Tajikistan: ADB completes power rehabilitation project bne February 17, 2010

The Asian Development Bank (ADB) has completed the repair and upgrade of power transmission and distribution facilities in Dushanbe and the Khatlon Region. Two hydropower plants have also been rehabilitated. The projects were carried out with a $40m loan from the ADB, as well as $17m from the Islamic Development Bank, $8.7m from the Swiss government and $9.6m from Tajikistan’s state energy company Barki Tojik. "The energy sector is vital for Tajikistan,” said the ADB’s country director for Tajikistan, Makoto Ojiro. "Our support will focus on enhancing the country's institutional and physical capacity —first, to help meet domestic energy needs, including narrowing the winter energy deficit; and secondly, to expand Tajikistan's hydropower export potential in the regional energy market." 128. Tethys updates on Uzbek and Tajik assets Visor Capital March 18, 2010 The Company yesterday released an operational update at the North Urtabulak field, with new well testing results of 610bpd of oil in Uzbekistan, and announced its first oil sales contract signed for Beshtentak in Tajikistan. We do not expect significant share impact on the news. Tethys Petroleum (TPL CN)(GG_TPL KZ) yesterday gave an update on its oil production activities in Uzbekistan and Tajikistan. The Company reported test results between 403-610bpd for its NUR116 well drilled at the North Urtabulak field in Uzbekistan. The well was drilled to a total depth of 2,484m and has been put on production. The variability of the test figure is due to a variable gas list pressure, which is currently affecting the field. Tethys commented that is was looking into a reservoir simulation model to try to understand the field better. Current production attributable under the North Urtabulak PEC is 2,000bpd. Tethys announced that it has signed its first oil sales contract off-take oil from the Beshtentak in Tajikistan. The price realised under this contract is reportedly over 60% Brent, with the buyer buying at the field. Tethys expects margins will improve as production ramps-up. The Company also reported that it was achieving 50bpd from the BST20 workover, after it had installed a beam-pump. Tethys next plans to commence doing a workover of BST85 on same the field. We do not expect significant share impact on the news, given the materiality of the wells. We currently do not have Tethys Petroleum under formal research coverage. Zhanar Nazkhanova 129. Turkmenistan: EBRD supports ice-cream producer in Turkmenistan EBRD February 15, 2010 $1.2 million loan to Salkyn to diversify production

The EBRD is lending $1.2 million to Salkyn, one of the largest ice cream producers in Turkmenistan, to help the company expand its distribution network and build up its brand. Salkyn is a privately-owned ice-cream producer located in Mary region, in the south-east of Turkmenistan. The company produces over 70 types of ice-cream for a range of various segments and aims to further expand its product variety. The proceeds of the EBRD loan will help Salkyn to purchase new retail fridges with the view to strengthen Salkyn’s distribution network, as well as refrigerated chambers, which will be located in the company’s regional distribution hubs. In addition the EBRD financing will support the development and the implementation of Salkyn’s branding strategy. “Supporting the development of the private sector in Turkmenistan is one of the EBRD’s key priorities. We are pleased to provide the much needed financing for further development of Salkyn in the current market conditions,” said Honma Masaru, EBRD Director for Central Asia. “The EBRD loan will support our strategy to widen Salkyn’s distribution network with the view to bring quality produce at affordable prices to consumers throughout Turkmenistan”, said Orazdurdy Mantyev, Salkyn Chief Executive Officer. Since the beginning of its operations in Turkmenistan the EBRD has invested close to €110 million in the country’s corporate, energy, infrastructure and financial sectors, mobilising additional investments worth close to €390 million. To date the EBRD has invested more than €5 billion in over 360 agribusiness projects in countries of its operations. 130. Turkmenistan: Japanese loans to fund chemical plants construction bne March 16, 2010 The Bank of International Cooperation of Japan is to provide a loan to Turkmenistan’s Bank of Foreign Economic Activity to fund the construction of chemicals plants in Mary, Turkmenistan.ru reports. Plants to produce ammonia and urea are due to be constructed in the western Turkmenistan city.

BELARUS INVESTMENT 131. Belarus 20% less gas in 2009 than agreed bne February 17, 2010 While the Ukraine got roasted by the Kremlin for importing less gas than it asked for at the start of 2009 and the EU had to pay penalties for doing the same under take-or-pay deals, Minsk looks like it will be let off the hook for importing 20.4% of gas than it signed up for under contract with Russia's Gazprom at the start of 2009. The Belarusian government signed a deal with Russia's gas monopolist but imported 17.6bcm less gas than agreed at a price of $148 per 1000 cubic meters, the National

Statistics Committee told Prime-Tass - well below the price Russia charges Ukraine and even less than the Russian company got for gas from the EU counties. Belarusian imports of gas decreased 16.4% in 2009 from the 2008 level due to the economic crisis. As of January 1, 2010, Belarus had no overdue debt for Russian gas supplied in 2009. However, Russian Ambassador to Belarus Alexander Surikov told Prime-Tass that Russian gas giant Gazprom was unlikely to fine Belarus for importing less natural gas than the contracted volume. 132. Belarus close to joining Eurasian Development Bank, Kyrgyzstan applies for membership bne February 18, 2010 Belarus is expected to become a member of the Eurasian Development Bank within a few weeks. “Belarus is currently implementing the last internal procedures, and I hope that in a few weeks it will become a full member of our bank,” the bank’s chairman Igor Finogenov told bne. Kyrgyzstan has also sent an official application to the bank’s Council, requesting that the country be considered for membership. The Eurasian Development Bank was founded by Kazakhstan and Russia in 2006. Armenia and Tajikistan joined in 2009. Finogenov said that more countries were expected to join the bank in future. “Our results have been very positive, which has generated great interest from other countries so I believe the membership will expand,” he said. “There has not yet been an official application from Azerbaijan or Moldova, but I feel there is a great interest on the part of those two countries to work with our bank. We have also had close contact with the government of Mongolia regarding issues of cooperation with our Bank.” 133. Belarusian committee says price of Russian gas at $171 bne March 18, 2010 The price of Russian gas supplies to Belarus amounted to $171 per 1,000 cubic meters in January, says a spokesperson for Belarus' National Statistics Committee, reports Prime-Tass. Citing the committee, the news agency says that Belarus' Russian gas imports rose 93.3% on the year to 2.4 billion cubic meters in January. 134. Belarus' fixed investment down 9.9% on year in 2M10

bne March 21, 2010 Belarus' fixed investments were down 9.9% on the year in over the first two months of this year to BYB4.443 trillion, Prime Tass reports. Of the investment: industrial projects got BYB2.618 trillion (down 19.2%); social projects got BYB1.825 trillion (up 5.2%); acquisition of machinery got BYB1,547 trillion (down 26.4%); and construction got BYB2.272 trillion (up 0.9%). 135. Belenergo invest program may reach BR2.3 trillion in 2010 bne February 17, 2010 The investment program of Belenergo association may total BR2.3 trillion in 2010, reports Prime-Tass. Citing a statement issued by Belenergo, the news agency says that in 2010, Belenergo plans to reconstruct the fifth unit of Berezovskaya GRES power plant, launch two 32.5-MW units at Minsk TETs-2, upgrade the fourth unit of Lukomlskaya GRET power plant, launch Grodno GES station, replace turbine-generator 2 at Vitebsk TETs, launch mini-TETs in Rechitsa, in the Gomel Region, and launch a 110-MW combined-cycle plant at Grodno TETs-2. In the meantime, Architecture and Construction Minister Alexander Seleznev says that German Knauf plans to invest about 40 million euros in a new gypsum plant in Belarus, reports Prime-Tass. The news agency quoted Seleznev as saying that they have made up our mind to implement the project together with Knauf, and we are preparing an investment agreement. In another development, the Trade Ministry says that Belarusian state-run Belresursy will hold a tender for Belarusian and foreign companies to find investors in the construction of a glass-sorting factory in Minsk requiring an estimated 10 million euros in investments, reports Prime-Tass. The news agency bidders are invited to finance the project independently or for a shareholding together with Belresursy. In another development, Deputy Foreign Minister Andrei Yevdochenko says that Belarus objects to the monopoly of Gazprom in Russian gas supplies in the framework of the single customs area that will start working on July 1, 2010, reports Prime-Tass. The news agency says that the governments of the three states have instructed experts to eliminate all barriers by July 1. Meanwhile, the National Statistics Committee says that Belarus in 2009 imported 17.6 billion cubic meters of Russian natural gas, reports Prime-Tass.

The news agency says thattThe originally contracted volume included in the so-called Union State balance was 20.4%, or 4.5 billion cubic meters above actual imports. 136. Chinese Huawei to supply equipment for upgrade of Belarusí MTS bne March 12, 2010 Chinese Huawei Technologies Co. Ltd has been awarded a contract to supply equipment for modernization of COOO MTS, reports Prime-Tass. Citing a statement issued by Belarusí largest cellular carrier, the news agency says that Huawei Technologies Co. Ltd will supply equipment and Packet Switched Core Network infrastructure elements, as well as RAN and transport system. 137. Belarus to build MAZ trucks, tractors plants in Venezuela bne March 21, 2010 Belarusian President Alexander Lukashenko said that his country will set up factories to make the giant MAZ truck as well as a tractor plant in Venezuela next year, reports Interfax, during his visit to Venezuela last week. "Belarus will build two plants on turn-key terms. Their total cost will be $55 million," an Interfax correspondent reported from Caracas. The plants will be ready by June 1, 2011, and annually will produce up to 5,000 MAZ trucks and up to 10,000 tractors.

EURASIA INVESTMENT 138. Armenia: ACBA Leasing to fund energy saving technologies Arminfo February 16, 2010 ACBA Leasing is expected to fund energy saving and energy-efficient technologies, Arsen Bazikyan, Deputy Director, ACBA Leasing, told ArmInfo. He said ACBA Leasing is currently negotiating with a world-known company engaged in funding energy-saving projects. "Presumably in mid 2010 we will become a partner of that company to fund acquisition of modernized power saving technologies that preserve ecological balance and saving fuel and electricity," A. Bazikyan said. ACBA Leasing was founded in 2003. Out of 4 leasing companies, ACBA Leasing has the leading positions in the market. The company's strategy is to ensure dynamic growth and extend the spectrum of leasing services. ACBA Leasing is a universal leasing companies engaged in all the economy sectors. Any type of equipment may become subject of leasing transaction. The founder of the leasing company is ACBA-Credit Agricole Bank, the holders of a 54% pct stake in the company. ACBA-Leasing services are available also at all the 36 branches of ACBA-Credit Agricole Bank in Yerevan (31) and in the regions (5).

139. Armenia: FREDA is planning to invest $5mln in agri-business development Arminfo February 16, 2010 The Fund for Rural Economic Development in Armenia (FREDA) is planning to shortly invest $5mln in agri-business development, says Director General of the Fund Armen Khanikyan. If this money pays off, the Fund will attract additional financing. Presently, FREDA has one approved project and is considering five more. Among the potential customers are over 50 SMEs working in the field of agriculture. This number may grow if the company see the difference between bank loan and capital investment. "Our businessmen should understand that capital investments are a more flexible instrument for enlargement than credits are," says Khanikyan. FREDA was established in Aug 2009 on the initiative of the Government of Armenia and IFAD. The global mission of the Fund is to reduce poverty in Armenia's rural areas by ensuring long-term capital investments in companies processing agricultural products, producing milk, fish and wine as well as entities whose work fosters the development of agri-business. 140. Armenia: Gazprom Company's subsidiary in Armenia assembles the largest in the South Caucasus chimney on 5th power unit of Hrazdan TPP Arminfo February 18, 2010 CJSC ArmRusgasprom has completed assembly of the largest in the South Caucasus chimney on the 5th power unit of Hrazdan thermal power plant (TPP), the compay's press release says. The metallic pipe is a 9-point earthquake resistant. It has 270 m height and 11400mm diameter and 8mm wall thickness. It was made in the area of Hrazdan-5. Specialists say that Hrazdan-5 chimney is thermally insulated and designed to exhaust gases discharge to reduce ecological tension both in the Hrazdan industrial unit and the nearby environment, the press release says. Armenia sold Hrazdan-5 to Gazprom OJSC for $248.8 million in 2006. Nearly $180 million will be invested in reconstruction and modernization of the power unit/ Gazprom OJSC holds 80% stake in ArmRusgasprom CJSC and Government of Armenia - 20% stake. 141. Armenia: GeoProMining Gold plans for increase of processing volumes Arminfo February 18, 2010 GeoProMining Russian Group, which owns GPM Gold Company in Armenia, exploiting Sotk gold mine and Ararat processing plant, intends to mine and process 575 850 ton of ore and produce 1 ton 190 kg of gold (38 234 ounces) in 2010 according to the budget plan.

As the press service of GeoProMining in Armenia told ArmInfo, during the year of 2009 GPM Gold mined 476 200 ton of ore and produced 944 369 gram of gold, which is equal to 30 362 troy ounces. Presently the Company is mining and processing, on average, 40 000 ton of ore monthly, which annually makes 30-40 000 troy ounces. According to the message, realization of investment projects will provide GPM Gold (which is part of GeoProMining Group) a possibility to increase mining and processing volumes of Armenian gold ore three times during the coming years, from 45 000 ton to 150 000 thousand ton monthly. Presently the Company is conducting negotiations with planning organizations on construction and reconstruction of the existing plant. New concentration technologies will be installed. During the current year, the Company will change its strategic plans at Sotk mine. The mine will be reconstructed, which will include underground mining. "Regardless of the fact that Sotk mine comprises high-grade ore, it is a complex ore - stripping coefficient is high, the ore is hard and a multi-step processing system is required, which entails considerable investments, technological and structural changes. Here it is required to install complex technologies. Those new technologies will pave the way for more effective extraction results. In the near future the researches on technological options will be finalized. The next stop will be design project preparation, for which it will be necessary to attract funds", the company message says. Russian GeoProMining Group acquired 100% shares of Sterlite Gold Ltd. from Vedanta Resources International Company in September of 2007. Sterlite Gold was the sole owner of AGRC LLC. Presently AGRC is renamed GeoProMining Gold. GeoProMining Group is an International private company with a portfolio of diversified metal resources, founded in 2001. Company specializes in mining and processing of metaliferous ores (copper, molybdenum, antimony, gold, silver). The GPM group of companies are engaged in metal mining in Russia, Armenia and Georgia. Company's main assets in Armenia are: Sotk gold mine, Ararat processing plant, Agarak Copper- Molybdenum Combine. 142. ˇ˛Armenia: GPM Gold plans increase of production volumes Arminfo February 18, 2010 GeoProMining Gold LLC is the biggest gold producing company in Armenia. The Company is a part of Group GeoProMining Group International Company, and owns country s gold production main assets Sotk gold mine and Ararat gold recovery plant. The GeoProMining Gold LLC announced his ambitious

plans on development and modernization of production processes. ArmInfo reporter interviewed the General Director of the Company about the Company s achievements in past year and plans of the near future. Mr. Vetik, your Company resumed production processes in 2008, what is the dynamics of growth, how much gold was produced last year and what is the prognosis of production volumes for the current year? During two months of 2008 the Company produced 135 893 gram of gold (4369 ounces). In the first month after the plant was restarted (December of 2008) the Company mined 21 473 ton ore, in December - 30 410 ton, in January of 2009 mining volumes increased up to 31 285 ton, and in February 38 000 ton. During the whole 2009 GPM Gold mined 476 200 ton ore and processed 4486 067 ton (difference is because of remainder ore). As a result, the Company produced 944 369 gram of gold in 2009, which form 30 362 troy ounces. Presently the Company mines and processes on average 35 000-40 000 ton of ore monthly. In 2009 the dynamics of growth is obvious average monthly growth has formed 10%. This result is achieved both, through installment of new machinery, which

contributed to mine operation efficiency growth, as well as through regular increase of production capacities. Could you tell about gold production plans in 2010? 2010 budget plan suggests mining and processing of 575 850 ton of ore and gold production of 1 ton 190 kg (38 234 ounces). It is also planned to carry out stripping works of 14 million 940 thousand ton of ore. Mining and transportation volumes will be held the same as in 2009 (500 000 ton ore), the main increase shall be reached at the expense of stripping works. During the current year, the Company will change its strategic plans at Sotk mine. The mine will be reconstructed, which will include underground mining. Regardless of the fact that Sotk mine comprises high-grade ore, it is a complex ore - stripping coefficient is high, the ore is hard and a multi-step processing system is required, which entails considerable investments, technological and structural changes. In the first place, we are interested in increasing of the volumes of the received metals. If antimony content is high in the ore, it negatively influences gold extraction. What steps are you going to tak5 for plant modernization?

We have commissioned specialized companies research of Sotk mine, in order to finally understand what type of technology must be used for gold extraction. Sotk mine ore types are different, and in that relation metal extraction technologies must be complex. Eg. Australians have a patented process - Albion . Possibly, with its help we will be able to reach effective extraction. In the near future the researches on technological options will be finalized. The next step will be project design preparation, for which it will be necessary to attract funds. In 2010 Sotk mine will be technically re-equipped, which will provide a possibility to considerably increase mining volumes. Capital investments will be made also at Ararat plant. In the medium-term perspective we expect, that realization of our investment programs will provide a possibility to raise mining and processing volumes of ore, in the coming several years, from 45 000 ton to more than 100 000 ton monthly. Growth, most likely, is connected with modernization plans of Ararat plant? Undoubtedly, we plan not only reconstruction, but also partial construction of a new processing plant in 2012. Presently GeoProMining is conducting

negotiations with planning organizations on construction and reconstruction of the existing plant. New concentration technologies will be installed at the plant the best gold ore concentration technologies, which nowadays exist in the world. What about exact terms of realization of the project, it will take about two years. It consists of several phases. Project design involves also the issue of land allottment for construction of a new plant, which, I think will take some time. State institutions are also interested in realization of the project, which will increase production efficiency and will raise social-economic conditions of the region. What countries is the valuable metal exported to? Final product of the Company Dore, alloy of gold and silver is exported to a Canadian refinement plant for receiving of a final product. Artur Yerinjakyan, ArmInfo, 16.02.2010 143. Armenia: National Competitiveness Foundation of Armenia to invest 200 thsd EUR in pilot projects on promoting Armenia as a tourism direction in Germany and Great Britain Arminfo February 18, 2010 The National Competitiveness Foundation of Armenia is going to invest 200 thsd EUR in pilot projects on promoting Armenia as a tourism direction in Germany and Great Britain, Executive Director of the Foundation Bekor Papazyan told journalists, Tuesday.

According to him, Germany and Great Britain, as well as France and Italy are considered as the priority markets for travelling to Armenia. These countries show a big demand for the products that Armenia can offer. "The tourists there want something new. This means that some of them will probably choose not a trip to the seaside, but travelling to Armenia, for instance, in search of impressions from national cuisine",- said Papazyan. For her part, Head of the Tourism Department of the Foundation Hasmik Antonyan said that "the tourism of cuisine" is now one of the most intensively developing fields of tourism industry. "This is not just visiting a restaurant, but also participating in food making, studying of the recipe, and ingredients. According to our assessments, such impressions are in a quite big demand in the West, and a number of countries are visited for such impressions",- said Antonyan. Papazyan pointed out that the specified funds will be directed to the market research and work with German and British partners. "We are already taking such measures in Berlin, with participation of approximately ten tour operators, which will work directly with their clients. As you understand, 100 thsd EUR is not such a big amount, therefore, these are pilot projects. But we want to show the expedience of such investments",- said Papazyan. The National Competitiveness Foundation of Armenia operates as a joint project of the state in person of the Armenian government and representatives of the private sector from the USA, Russia,, Europe and Near East. The Foundation works out and coordinates investment programs to enhance the foreign competitiveness of Armenia. The Foundation focuses on education, healthcare and tourism. 144. Armenia: National Competitiveness Fund of Armenia studies justification of air ticket prices Arminfo Febuary 18, 2010 National Competitiveness Fund of Armenia is studying justification of air ticket prices, Executive Officer of the Fund Bekor Papazyan told media on Tuesday. At present there are two contradictory viewpoints regarding this problem. First, the price of air tickets is justified since Armenia is a small and non-transit country. Therefore, the air traffic market is very small and lowering the prices through increasing the number of flights is difficult. The second opinion says that ticket prices are overvalued. We will have own opinion only after conducting survey. But one thing is clear: reducing ticket prices even by 10% will bolster tourism like it was in the case of extension of flight destinations in Armenia, B. Papazyan said. Earlier the monopoly sale of JP fuel in Armenia was mentioned as one of the reasons of high prices of air tickets. In October 2008 the State Commission of Armenia on Protection of Economic Competition surveyed this topic. Afterwards the company selling aviation fuel, the International Airports - Armenia, reduced the price for JP fuel nearly by 30%. 145. Armenia: Wine export from Armenia grew by 7% in 2009 Arminfo March 18, 2010 The Wine export from Armenia grew by 7% in 2009 having amounted to 518 thsd liters, chairman of Armenian Wine Producers' Union Avag Harutyunyan said at today's press-conference.

He also added that wine import to Armenia reduced by 32% in 2009, having amounted to 141 thsd liters. <One should not forget that only 10% of the grape processed in Armenia are used for wine production. For this reason, if we speak about the whole dynamics of alcohol made if grape, it should be mentioned that brandy export reduced by 39% in 2009>, - Harutyunyan said. He also said that recession of the imported wine consumption is evidence of reduction of paying capacity of the middle class, as just this group of people are the key consumers of the imported wine which is more expensive than the local one. The imported brandy consumption reduced by 2-2,5 times. <This may be evidence about reduction of revenues of rich citizens>, - he said and added that during the first months of 2010 Armenian citizens drank two times less vodka than during the same months of 2009, and more local production wine and brandy. <This tendency may be considered publicly positive taking into consideration social backgrounds of vodka and wine drinking: the first drink to forget everything and the second - to get real pleasure>, - Harutyunyan said. 146. Armenian Molybdenum Production company increases production of ferromolybdenum in 2009 by 1,8% Arminfo February 15, 2010 Armenian Molybdenum Production (AMP) company produced 2380 tons of ferromolybdenum in 2009, that exceed the indicator of 2008 by 1,8% in natural terms, AMP Director Karen Karapetyan told ArmInfo. Meanwhile, the gross product volume in money terms in 2009 made up 51,4% of the level of 2008, the director said. According to him, this circumstance is explained by sharp drop of the world prices fro molybdenum in view of reduction of demand for this product in the crisis year. This could not but affect the company's financial activity and, as a result, the year 2009 was completed with losses being currently under calculation", Karapetyan said. Slump in the metal prices in the world market caused an economic inexpediency to keep on working in such conditions. The agenda included several versions of solutions for coming out of the developed situation. In particular, it was offered to reduce the staff, revise the employees' salary towards reduction or timely stop production at the plant. However, despite the difficulties, the company Board of Founders made a decision to continue working, perfectly realizing that the plant would work with losses. "We succeeded to preserve the skeleton staff and the working capacity of the personnel, and this is the main achievement of the past year", the director said. He added that the number of employees remained at the level of 2008, and the average monthly salary increased by 2,4%. Moreover, the company kept on providing a wide social package, including charge-free delivery of employees to the enterprise by buses, free organization of feeding and medical aid. To note, AMP company has been created in 2003 on the outskirts of Yerevan. The enterprise started stably operating from 2004. The production capacities make up 5,000 tons of ferromolybdenum per year. The company produces ammonium perrhenate, the volumes of which in 2009 made up 400 kg. Residents of Armenia are the company shareholders. 147. Azerbaijan to limit car import APA-Economics

February 15, 2010 Azerbaijan will ban the import of cars, not meeting Euro 2 standards to the country, said Ramiz Hasanov, chairman of State Committee for Standardization, Metrology and Patent. 2010 was declared as the year of Environment and the Committee is considering several issues including adaptation of fuel and vehicle wastes to European standards. “5 standards are applied in Europe. Euro 2 standard is coming to force by July 1, 2010 in Azerbaijan and the import of vehicles, not meeting Euro 2 standards, will be banned. The new rule will be applied only for imported vehicles, that are the ones which are already in Azerbaijan have already been registered”, he noted. Mr. Hasanov also mentioned that mainly 10-15 years old vehicles do not meet standards. The exact year of production of the vehicles to be banned is being identified. 148. Azerbaijan to start whisky export APA-Economics March 15, 2010 Azerbaijan will start whisky export to Europa, for the first time, Naig Mammadhasanov, general director of Tovuz-Baltiya Co.Ltd told to APA. According to N. Mammadhasanov the company plans to export whisky to Germany, soon, and to India at the end of the year. It has already signed a contract with these two countries. He also noted that, the company has already started to export vodka made of pomegranate and liquor to Japan. 149. Azerbaijan, Romania and Georgia to sign trilateral memorandum of understanding on power engineering APA March 16, 2010 Work continues on the trilateral memorandum of understanding on power engineering among Azerbaijan, Romania and Georgia, Azerbaijani ambassador to Romania Eldar Hasanov told journalists in Baku, APA reports. According to him, the preparation of the text of the memorandum is about to finish. Romanian State Secretary Tudor Serban said in February that Azerbaijan, Romania and Georgia would sign a trilateral memorandum on the construction of two compressed natural gas terminals. One of the terminals will be constructed in Georgia, the other in Constanta, Romania. The project costs $4-6 billion. 150. Azerbaijan: Industry production 7% rise in Azerbaijan APA-Economics March 17, 2010

The productive capacity in industry 6.7% increased to AZN 4.7 bln, in January-Februaru, 2010, State Statistical Committee told to APA. The crude oil production was 8 mln ton, natural gas production 2.9 bln cubic meter. In private sector productive capacity 8.8% increased. 151. Azerbaijan: UniNet Company modernizes technical basis APA-Economics March 19, 2010 UniNet Company has finished the works about the modernizing of technical equipments. According to the head office of the company, UniNet has put into use SUP720 modules, CISCO 7603, CISCO 6503 and 3750 10 Gbits Commutators for the first time across the country. 152. Azerbaijan: Volume of service on Azerbaijani transport sector 2.5% increases APA-Economics March 18, 2010 The volume of transport service on Azerbaijani transport enterprises 2.5% has increased in January-February, compared with last year. According to the State Statistical Committee, carry freight 4.5, freight turnover 2.2% increased. Volume of rendered services passengers 2.6% increased to 205.6 mln person. 153. Azerbaijani main line to be modernized till 2013 APA-Economics March 18, 2010 Today a seminar was held about the Project of Azerbaijan Railway Trade and Support of Transport which organized by Azerbaijan Government and World Bank, in Baku. According to Musa Panahov, deputy of transport Minister World Bank allowanced $450 mln for this project. According to Gurban Nazirov, deputy of chief of Azerbaijan Rail Ways, this project is consisting of 3 components. The 1st component is about the rehabilitation of East-West main line. On the frame work of the 2nd project which named New Main Locomotives, 50 electric locomotive will be purchased to serve in East-West corridor. On the frame work of 3rd component Modernization, is consisting of the supply of system of international finance accounting. According to G. Nazirov, Czech Republic’s bank Eximbank will allowance 215mln euro for the project. It’s planned to sign an agreement between ARW and Czech bank.

154. Azerbaijani President participates in opening of dry-cargo port station constructed in Baku bay APA March 17, 2010 Azerbaijan’s President Ilham Aliyev participated in the opening of dry-cargo port station constructed in Baku bay, APA reports. The head of state cut the red ribbon and acquainted himself with the conditions created in the administrative building of the station. The construction of the port station began in May, 2008. Only dry cargo will be transported from the station. Several bridges and depots have also been built in the territory. 155. Georgia exports brandy products to 5 countries in January-February GBC March 17, 2010 In January-February 2010 Georgia exported brandy products to 5 counties. The country exported total of 347 388 bottles of brandy the reporting period, the Agriculture Ministry says. Ukraine is leader in Georgian brandy experts with a 8.5 percent share, which is 307 668 bottles. Belarus is second with 37 500 bottles. The USA is third with 1 200 bottles. Bulgaria is fourth with 540 bottles and England is fifth with 480 bottles. A total of 1 242 500 bottles of Georgian brandy was exported to 16 countries. Ukraine was leader with 1 096 3896 bottles (88 percent). 156. Georgia exports vodka to eight countries in January-February 2010 GBC March 19, 2010 Georgia exported vodka to eight countries in January-February 2010. Georgia exported 34 318 bottles of vodka in the reporting period, including 27 480 bottles were exported in February 2010, that is, 80 percent. Israel is leader in Georgian vodka exports with the mentioned index. Ukraine is second with 3 960 bottles. Latvia is third with 1 443 bottles. Poland is fourth with 912 bottles. England ranks fifth with 480 bottles. Airport ranks sixth with 24 bottles. Italy ranks seventh with 10 bottles and the USA ranks ninth with 9 bottles. February records a 24 percent rise in Georgian vodka exports versus January 2010. A Total of 1 411 bottles were exported in January 2010.

Georgia exported vodka to 14 countries in 2009. The country exported total of 73 946 bottles in 2009. 157. Georgia - FY09 net FDI falls 51% y/y BG Capital, Kyiv March 18, 2010 Georgia's FY09 net FDI declined 51.4% y/y to US$ 759mn, while 4Q FDI recovered for the fourth consecutive quarter, up 14% q/q to US$ 254mn. 4Q net FDI inflows to the transport and communications sector nearly doubled to US$ 124mn, while banks saw US$ 38mn in net FDI inflows after US$ 12mn in net outflows in the 3Q. Banks' FY09 FDI inflows recovered sharply to US$ 45mn from US$ 9mn in 2008, but remain suppressed from the US$ 137mn in 2007. In FY09, the United Arab Emirates was the top investor into Georgia at US$ 170mn, followed by Egypt (US$ 168mn), the Netherlands (US$ 106mn), and Turkey (US$ 90mn).

158. Georgia, Azerbaijan and Romania to sign memorandum on implementation of project worth 4-6 billion EUR GBC March 17, 2010 Georgia, Azerbaijan and Romania plan to sign a mutual understanding memorandum in Bucharest on construction of two liquid petroleum gas terminals in Georgia and Romania, the APA Azerbaijani news agency reports. One terminal will be reportedly constructed in the Black Sea Oil Terminal of Kulevi, the Samegrelo Region. Projection works have been already underway. The project is preliminarily valued at 4-6 billion EUR. 159. Georgia: 2009 investment inflows marked 759.1 million USD, down 51.4 percent versus 2008 GBC March 17, 2010 A total of 759.1 million USD is said to be invested in Georgia in 2009, down 51.4 percent compared to 2008, when the figure made up 1.564 million USD, GeoStat, the National Statistics Office of Georgia, says. United Arab Emirates ranks first among Georgia’s investment donor countries with a 22.4 percent share totaling 169.8 million USD. Egypt ranks second with a 22.1 percent share and 167.5 million USD. The Netherlands is third with a 13.9 percent share and 105.7 million USD. Turkey is fourth with an 11.8 percent share and 89.5 million USD. Panama ranks fifth with a 9.7 percent share and 73.4 million USD. The

United Kingdom is sixth with a 8.4 percent share and 63.5 million USD. Other countries’ share makes up a 1.8 percent, which is 89.6 million USD. Major part of investment was made in the industry sector (204.1 million USD) and the share makes up 26.9 percent. The transport and communications sector ranks second with a 20.2 percent share and USD 153.6 million USD. The hotel and restaurants sector ranks third with a 17.7 percent share and USD 134 million USD. The real estate sector ranks fourth with a 17.4 percent share and 132 million USD. The housing sector ranks fifth with a 10.5 percent share and 79.7 million USD. The bank sector ranks seventh with a 6 percent share and 45.3 million USD. It should be noted major part of foreign direct investments (FDI) of 253.9 million USD was made in 4Q09. In the reporting period the Netherlands ranks first in terms of investment volume with 59.5 million USD. Egypt is second with a 23.4 percent share with 52.5 million USD. The USA is third with a 13.6 percent share and 34.6 million USD. United Arab Emirates is fourth with a 9.8 percent share with 24.8 million USD. Turkey is fifth with a 71. Percent share with 18 million USD. Other countries’ share makes up 25.8 percent with 65.4 million USD. The transport and communications sector ranks first with a 48.9 percent share (124.3 million USD). The Industry sector is second with a 23.7 percent share (60.3 million USD). The bank sector is third with a 14.9 percent share (37.7 million USD). The real estate sector is fourth with a 11.2 percent share (28.5 million USD), the housing sector is fifth with a 5.5 percent share (14 million USD) and other sectors have a 4.8 percent share (12.2 million USD). 160. Georgia: BTC oil pipeline records rise in oil transportation volume, while BTE gas pipeline marks decline in gas transportation in January-February GBC March 19, 2010 In January-February 2010 the Baku-Tbilisi-Ceyhan (BTC) oil pipeline transported total of 5.7 million tons of Azerbaijani oil, up 0.3 million tons year on year, the trends.az news agency reports. BTC oil pipeline handled total of 38.2 million GEL in 2009. At the same time, the Baku-Tbilisi-Erzurum (BTE) gas pipeline transported 833.7 million cubic meters of gas in January-February 2010, while the figure made up 1 billion cubic meters in the same period of 2009. BTE handled total of 5.2 billion cubic meters of gas in 2009. 161. Georgia: Canadian and Israeli companies show interest in Republican Hospital acquisition GBC February 17, 2010 Canadian and Israeli companies have submitted interest expressions for acquisition of LLC Academician N. Kipshidze Central University Clinic, that is, Central Republic Hospital.

The deadline of applications expired on February 15. Canadian Interpelle Canada and Israeli Shebma have submitted applications to the Economic Development Ministry. The privatization auction will be held in a month. The starting price makes up USD 12m. Total value of the hospital assets equals USD 20m. Under the privatization terms, the investor must organize a modern multifunctional hospital with at least 430 beds. “The investor must complete the hospital rehabilitation in 38 months following the agreement conclusion and maintain the asset profile for 15 years following the rehabilitation stage completion. After this period, the investor is authorized to change the hospital profile”, the Ministry statement reads. 162. Georgia: EBRD provides €80m loan for Black Sea High Voltage line bne March 19, 2010 The European Bank for Reconstruction and Development (EBRD) has provided an €80m sovereign loan to Georgia to build the Black Sea High Voltage line, which will interconnect Georgia and Turkey. The loan has been to state-owned electricity transmission company Georgian State Elektrosystem (GSE), which will construct the 315 km high voltage electricity line. The line will run from Zestaponi in western Georgia and Gardabani in the eastern part of the country. The project also includes construction of a back-to-back converter station in Akhaltsikhe, near the Turkish border, which will connect the Georgian and Turkish power systems. The EBRD is financing the project alongside the European Investment Bank, the European Union Neighbouring Investment Facility and the German Kreditanstalt für Wiederaufbau (KfW). According to the EBRD, the new power line will considerably improve the reliability of electricity supply and boost energy security in Georgia, as well as in the wider region. Georgia will also be able to export excess electricity to Turkey in the summer months. “The Black Sea High Voltage line will increase the reliability of power supply in the Caucasus and will provide a new opportunity for electricity trading in the region,” said EBRD president Thomas Mirow. “Moreover this project will open the door to future investments in the electricity generation sector, in particular in renewable energy, for which the Caucasus region has huge potential,” 163. Georgia: Energo-Pro Georgia to export Enguri HPP excess electricity GBC March 16, 2010 Energo-Pro Georgia, electricity distributor company, will export excess electricity generated by Enguri Hydro Power Plant.

Several days ago Energo-Pro Georgia started electricity exports to Turkey and Russia. Namely, the company exports 6 million kw/h a day. Enguri HPP has generated excess volume of electricity because of rise in water level. Supposed daily exports of electricity makes up 4 960 million kw/h, while maximum generation makes up 270 megawatts. Georgia exported 747 million kw/h in 2009 to Russia, Armenia, Azerbaijan and Turkey. 164. Georgia: Formation of counter-monopoly office will substantially change Georgia’s economic development course, says economic expert GBC February 15, 2010 Economic expert Shota Murghulia gives a positive evaluation to the new initiative of the President of Georgia on the counter-monopoly office restoration. The move will make radical changes in the economic development course of Georgia, he said. The initiative is tailored to the current realities contrary to the Economic Liberty act, which bars the creation of a new regulatory structure, the expert says. “The document introduction has raised certain doubts in the society that Georgia could had swerved from the European course of development, because the establishment of the counter-monopoly office is a key precondition for inauguration of negotiations with European Union on free trade agreement conclusion. It is interesting how the Government will manage to regulate these two documents and what a status will be given to the Agency for Free Trade and Competition, because the formation of the office anew comes into conflict with the state constitution”, Murghulia noted. The Government should develop market regulation mechanisms and these mechanisms should be incorporated in the law on Free Trade and Competition, Murghulia told GBC. “The office is to explore the current situation on the market. For instance, the office is to control whether major companies violate antitrust regulations or artificially grow prices. The authorities the Government will confer to the agency are vey important, but the man task consists in execution of the law-provided regulations”, the expert notes. These mechanisms are to protect the private business sector so that the judiciary system be responsible for releasing decisions and the agency be not authorized to impose penalty sanctions, he said. There is high probability of creation of a strong counter-monopoly system today in Georgia, because the corruption level has been reduced in the country. Volatile regulations provide the ground for corruption bargains to the detriment of the consumer rights, Murghulia said. 165. Georgia: Italian Ferrero plans to enlarge filbert plants in Samegrelo region GBC

March 18, 2010 Agri Georgia, Ferrero branch in Georgia, plans to introduce a new project Forest Organization through Filbert Plants in Western Georgia. The project calls for organizing filbert plants on abandoned land plots in the Samegrelo Region, Agri Georgia told GBC. As a result, local population will have pretty opportunity to earn living stably for al long period, the company says. Agri Georgia acquired 2 821 hectares of agriculture land plots in 2007 in Zugdidi and the neighboring towns. Filbert plants have been already organized on 2 539 hectares. The company plans to acquire 4 000 hectares in addition. The project calls for organizing wind belts on 10 hectares. Agri Georia has signed an investment agreement with the Government of Georgia, under which the project implementation will end in 2012. At this stage, Ferrero has already invested 18 million USD in Georgia. 166. Georgia: January-February marks a 47 percent rise in Georgian wine exports year on year GBC March 17, 2010 January-February 2010 marked a 47 percent rise in Georgian wine exports year on year. Georgia exported total of 1 349 688 bottles in January-February 2010, while the figure made up 918 180 bottles in the same period of 2009, the Agriculture Ministry told GBC. Ukraine remains leader in Georgian wine exports with a 51.83 percent share. A total of 699 546 bottles were exported to Ukraine. Kazakhstan is second with 154 860 bottles, up 53.6 percent. Latvia is third with 95 880 bottles, while the figure marked 52 756 bottles in the same period of 2009. Poland is fourth with 86 954 bottles, China is fifth with 15 192 bottles, Lithuania is sixth with 62 028 bottles, Belarus is seventh with 46 500 bottles, the USA is eighth with 40 044 bottles, Turkey is ninth with 36 924 bottles and Azerbaijan is tenth with 32 544 bottles. Georgian wines were exported to 23 countries in January-February 2010. 167. Georgia: Madneuli profits record 3 million USD in 2009 GBC March 19, 2010 JSC Madneuli profits made up 3 million USD in 2009. The company plans to increase the figure 5 times.

Last year Madneuli sold 71 000 tons of copper concentrates worth 61 million USD. The company exports 100 percent of its products to several countries, including Bulgaria, Germany and Spain. At this stage, Madneuli is carrying out search works on the fields. Therefore, gold mining has shrunk currently, Giorgi Devidze, a company director general, told GBC. Medneuli plans to spend total of 4 million USD on the search works. After the project completion, the copper extraction works will be extended for 10 years, Devidze noted. Madneuli carries out copper extraction in Kazreti, the Bolnisi District. Madneuli enterprise launched operation in Georgia in 1975. GeoProMining acquired the asset in 2005. 168. Georgian Insurance Association and Georgian insurance industry to develop automobile owner civil responsibility insurance bill GBC February 16, 2010 The Georgian Insurance Association (GIA) and Georgian insurance companies have submitted a proposal to the Government of Georgia with concrete outlines for an automobile owner civil responsibility insurance bill. GIA and insurance companies are consulting German experts on the issue, Nika Gamkrelidze, the director general of Aldagi BCI, told GBC. “The country should exercise the law on Obligatory Civil Responsibility Insurance of Automobile Owners. The country needs efficient mechanisms of management unlike the previous experience”, Gamkrelidze noted. As reported, the law on civil responsibility insurance of automobile owners has been abolished, as, according to the statement of the Government, the requirement for technical checkup was removed in 2004 and there is no need that the civil responsibility of automobile owners be insured. At the same time, Georgia may be refused to become the European Green Card member in the aftermath of the law abolition. The bill GIA plans to develop jointly with Georgian insurance companies will meet international standards, Devi Khechinashvili, the association president, told GBC. 169. Government to toughen control over content of dairy products despite no laboratory uses method for natural milk powder identification GBC February 16, 2010 The National Service of Food Safety, Veterinary and Plant Protection of Georgia plans to toughen control over the content of dairy products starting March 1, 2010. Namely, the Service will check whether the product content corresponds to the label description. The Service has underway negotiations with laboratories on the issue.

“Georgia-based laboratories do not use methods for identification of the milk and milk powder content”, the Service says. The Body is ready to sign cooperation agreements with the laboratories, which manage to introduce required methods. The enhancement of control over dairy product content is in line with the bill of amendments to the law on Consumer Rights Protection, which was brought into force on January 1,2 010. 170. Korea to extend the collaboration in the sphere of transport with Azerbaijan APA-Economics March 15, 2010 South Korea intends to extend the collaboration in the sphere of transport, Minister of Land, Transport and Maritime Affairs--Chung Jong-hwan told to APA. Korean minister was received by the Minister of Environment and Natural Sources Huseyn Bagirov, minister of Transport Ziya Mammadov and President Ilham Aliyev. Well try to extend the relations between Azerbaijan and South Korea told Chung Jong-hwan According to him, Korean Companies participate on road building, the construction of Intellectual Management System of Transportation Operations, equipment with buses And etc. projects. He also noted that, the construction of Intellectual Management System of Transportation Operations will be finished in 2011. 171. Mongolia: Tavan Tolgoi proceeds to fund processing capacity construction bne March 17, 2010 The Mongolian government plans to use proceeds from the Tavan Tolgoi coal deposit to fund the construction of an ore processing facility and other processing infrastructure, Khashchuluuk Chuluundorj, chairman of the National Development and Innovation Committee of Mongolia, has said. “This is the first time the Mongolian government has decided to keep ownership of a large project, invest in it itself and use the proceeds to build downstream infrastructure,” Chuluundorj told the Minex Central Asia conference in Astana. “An agreement on Tavan Tolgoi is likely to be reached in the first half of this year. That decision must be for the benefit of the entire Mongolian population.” However, Chuluundorj added that “the decision to keep 100% government ownership will not hurt private investors as much as expected”, since construction work, including the construction of transport links to export coal to China, will be outsourced to the private sector.

172. Thomas Mirrov: EBRD to allocate $200 mln for Azerbaijan APA-Economics March 17, 2010 Today, Thomas Mirow, president of EBRD(European Bank for Reconstruction and Development) held a press conference about his visit to Azerbaijan. Accordin to T.Mirow, he has met with the head of state, minister of finance and Chairman of the Central Bank. After conference, he will meet with minister of economic development. According to Thomas Mirow, EBRD has financed 100 projects of which total amount is 1.4 bln euro. Last year, bank allocated 230 mln euro for Azerbaijan, including 120mln euro for Garadagh Cement. Current Year, The bank will allocate $100-200 mln for finance and real estate.

SOUTHEAST INVESTMENT 173. Bulgaria PM says potential investors in Belene nuclear plant to decide in 2-3 weeks bne March 17, 2010 Potential European strategic investors in Belene NPP project expected to reply within two-three weeks, Prime Minister Boyko Borisov told journalists, cited by FOCUS News Agency. He visited the construction site of the nuclear power plant. He added that the project would not continue without a European strategic investor, who would guarantee that what was built would not be destroyed. Another option is to halt all construction works under the project, pay BGN 1,1 billion in penalty and BGN 0,5 billion more under loans, he added. He announced that all activities under the project so far would be referred to the Prosecutor's Office. 174. CEZ said plans to build gas-fired plant in Turkey KB March 19, 2010 Bloomberg reported that CEZ intends to build a gas-fired power plant in Turkey too, near the border with Syria. CEZ expects to receive the building permit for a 800-900 MW plant by the year-end. This is no new information as CEZ has previously reported it, for example, in its latest corporate presentation for equity investors. This CCGT plant in the Hatay region is expected to be commissioned in 2013. Reuters reported that the Czech Environment Minister Jan Dusik resigned Thursday, saying the prime ministed had put pressure on him to make a hasty decision on plans to upgrade CEZ´s coal plant in Pocerady. Environmental activists call for the use of best-available technology in Prunerov, which would likely increase costs of this project above the CZK 25bn budgeted by CEZ. The ministry has yet to decide on the project, but now it seems CEZ´s chances of keeping to the proposed solution are high. 175. Czech/Bosnian consortium to build motorway Interchange bne

March 18, 2010 Bosnia's Serb Republic said on Wednesday it has signed an 11.5 million euro ($15.8 million) contract with a Czech-Bosnian consortium for the construction of a motorway interchange, SeeNews reported. The contract for the Mahovljani Interchange was signed on Tuesday by state-owned firm Motorways of Republika Srpska as an investor and a consortium of Czech construction firm OHL ZS and Bosnia's Laktasi-based Niskogradnja, the Serb Republic government said on its website. The project is financed by the European Bank for Reconstruction and Development which approved a 21 million euro loan in December. The project is co-financed with a 5.0 million euro European Commission grant. The interchange lies on the motorway from Banja Luka to Gradiska, which links the capital Banja Luka with international transport Corridor X. Mahovljani Interchange is also part of the Banja Luka-Doboj motorway which provides a link towards eastern neighbour Serbia. The Serb Republic is one of Bosnia's two autonomous parts. The other one is the Muslim-Croat Federation. 176. Romanian - Pirelli makes Romanian plant its top investment target in Europe Mirzon March 19, 2010 Pirelli tyre manufacturer could bring almost 150 million euros to Romania this year, half of the overall budget allocated by the Italians for investments in 2010, according to ZF estimates.__Italian-held Pirelli will make its biggest investments this year at its Slatina facility, to develop its second plant, company representatives say. Francesco Gori, chief executive of Pirelli Tyre said this year 300 million euros would go to production facilities in Romania, China, Egypt, and South America, according to Italian daily Il Giornale. "The growth of the (tyre) market is a two-digit one. These will be the four leading areas (China, Egypt, Romania, and South America), which we will focus on this year and in 2011," Gori said. He did not specify what amounts were allocated for Romania, but the project for the local base entails 250 million euros in investments by the end of 2011 when the second stage of the Slatina project is expected to be completed.__Pirelli representatives had previously announced that 50 million euros had been allocated for China, 45 million dollars (32 million euros) for Egypt, and 100 million dollars (72 million euros) for Brazil. According to ZF estimates, the remaining 145 million euros could go to developing local production activities. Pirelli representatives, however, have not confirmed the sum. 177. Turkey - Exporting and investing in Turkey Unicredit February 16, 2010 At time when people are worrying about their futures, and in the midst of a serious international crisis, whose worst effects may still yet to be seen, Italian SMEs seem

to be looking with renewed interest at expanding into foreign markets, whether for business or industrial projects. The internationalisation projects that in the past were not afforded the interest they merited, now seem increasingly frequently to be the last chance for seeking new market outlets or for reducing production costs: an imperative condition for competing successfully on the global market, particularly for labour intensive businesses. The geographical areas of greatest interest to Italian businessmen, both as production platform and market outlet, certainly include Turkey, which stands out for its openness to international business and foreign investment. With a GDP of 659 billion dollars, a relatively young population (61% are under 34 years of age) numbering 76 million, and a average GDP growth rate of 6.8% in 2002-2007, Turkey is the second most important economy after Russia in Emerging Europe. Thanks also to the reforms of recent years, the main Western nations now look at Turkey as one of the most interesting areas for investment in production, particularly since the regulations that favoured local companies over foreign businesses were scrapped in 2003. Those sectors with good investment and marketing opportunities for Italian SMEs are tourism, furnishing, cuisine, fashion, renewable energies, the pharmaceutical and chemical sectors, and that of machine tools. Why invest in Turkey The notable streamlining of bureaucratic and administrative procedures in recent years means that it is now possible to obtain a license to start a business in Turkey in an average of 6 days, as compared with 30 in India and 40 in China. Labour, which compared with international standards stands out for its excellent level of specialisation with an average hourly cost of 3.33 euro, is at a level well below those found in the majority of Eastern European countries. Numerous different tools are used to promote foreign investment. These include a reduction in corporation tax, VAT and customs tax exemptions, land assignments, and specific support for R&D activities. A population of over 76 million, whose per capita income is continuously on the rise and with consumption models strongly influenced by Western habits, is a highly interesting market. As such, with respect to its principal global competitors, 'made in Italy' seems to benefit from the fact that Turkish consumers view the Italian cultural and development model with great admiration. Italy in Turkey 2010 One of the initiatives to mark Istanbul's nomination as European Capital of Culture 2010 will be the Italia in Turchia 2010 project, which will involve the organisation of 120 corporate, commercial and cultural events in the main regions of Turkey. The initiative, just like similar events organised in other countries, will not only seek to improve the understanding of Italian culture, but will also attempt to promote the

spread of Italian products, setting itself the goal of - as well as improving the already optimum relations between Italy and Turkey - supporting Italian presence in the country at both industrial and commercial level. It is an extremely important occasion for Italian companies already present in the area or those that intend to further their knowledge prior to future commercial or production commitments. The economic situation After those of 2005/2006, in the next few months the Turkish Government intends to launch a major privatisation programme focusing on the relaunch of foreign investments, which in 2009 dropped significantly, coming to 7 billion dollars (-59.2%) in the first nine months of the year. Turkey was also affected by the major international crisis, with the GDP falling by 8.4% in the first 9 months of 2009. In the same period there was also a sharp fall in trade with Italy (over 30% compared with the previous year), which remains fourth behind Germany, Russia and China, and ahead of France. Although not in favour of Turkey's entry into the Economic Community, the latter has enjoyed a notable improvement in bilateral trade relations. Although Italian trade with Turkey runs the risk of slipping in importance if it is not protected, direct investments between the two did buck current trends. In January-November 2009, Italy was the only foreign country to increase its direct investments, which came to 253 million dollars, up 4.6% on the same period the year before. A particularly significant achievement when you consider that we have been in the middle of a major recession. There are presently around 730 Italian businesses in Italy. These include high profile groups such as Finmeccanica, Merloni, Fiat, Magneti Marelli, Eni and Astaldi. The Italian banking industry has strong presence in Turkey in the shape of the UniCredit Group, which holds a major stake (50%) in Yapi Kredi Bank. Founded in 1944 and with over 17,000 employees and 844 branches, it is one of the biggest banks in Turkey and offers the widest range of services in the corporate, retail and private sectors. The widespread presence, albeit indirect, of an Italian bank of international renown known for its services targeted at SMEs and strongly committed to assisting them in the internationalisation process, is without doubt a further reason to look with growing interest at the interesting opportunities that the Turkish market appears to hold, even during one of the most difficult periods in the international economic scenario.

CENTRAL EUROPE INVESTMENT 178. Hungary opposition leader warns foreign utilities over review of contracts bne March 19, 2010 Fidesz leader Viktor Orbán met with the ambassadors of EU member states on Thursday, and said the contracts with public utility companies owned by foreign

companies were concluded more than 10 years ago, and should therefore be reviewed one by one and, if necessary, new agreements should be concluded, Hungary Around the Clock reported. Millions of people in Hungary pay 70-80% of their wages to utility companies, Orbán declared, adding that this is unacceptable, therefore his government will to ensure that people will have pay less for public utilities. 179. Magyar Telekom and Cisco establishes joint innovation centre in Budapest Equilor March 19, 2010 Magyar Telekom, Hungarian telecommunications company and U.S. based Cisco Systems agreed on Tuesday to establish a joint innovation centre in Budapest worth of HUF 50 million (EUR 190,058). The innovation centre, which will focus on the development and testing of IP network solutions and virtual data-centre technology for corporate users, will be opened at the beginning of the summer. Magyar Telekom and Cisco will split the cost of the investment evenly. Christopher Mattheisen, Magyar Telekom's President and CEO told a local newspaper that the centre's initial developments would likely be introduced to Hungary's business communications market this year. 180. S. Korean carmaker Kia Motors to invest EUR100m in new plant in Slovakia bne March 19, 2010 South Korean car maker Kia Motors decided to build another plant for engine production in Slovakia, president of Kia Motors Slovakia In-Kyu Bae announced, IntelliNews reported. He underlined that the project confirmed the long-run interest of the company in its Slovak operations and noted that the investment would have a positive effect on employment and economic growth in the country. Total investment cost of the new facility would be more than EUR 100mn and it would provide capacity for the production of 150,000 engines. Overall production capacity of Kia in Slovakia would thus expand by 50%. Output of the new plant would be exported to the Czech Republic to supply the car producing plant of parent Korean company Hyundai. Construction of the engine hall should be completed by March 2011 while commercial operations were planned for launch in the end of 2011 with full capacity to be reached in 2012. The project should open up directly 270 new job positions and would be supported by the government with EUR 15mn of investment aid under the form of tax relief.