By John Helmer in Moscow

Far Eastern Shipping Company (Fesco), Russia’s fleet leader for dry cargo and containers, is headed for an even bigger year-end loss than industry analysts or the company have acknowledged before.

A new report, issued on August 7 by Moscow investment bank Renaissance Capital, predicts that group revenues will fall 41% to $1.2 billion; earnings down by 61% to $128 million; and the net income line will turn to a loss of $72 million. This is double the loss estimated by Troika Dialog bank in June.

Owned and managed by Sergei Generalov, Fesco’s struggle with fleet writedowns and net debt of $934 million has postponed a new loan approval by the European Bank for Reconstruction and Development; and triggered, according to Rencap analyst Kirill Kazanli, “a breach of some [loan] covenants…While we believe FESCO is likely to successfully renegotiate those, it has essentially cut capex [capital expenditure] to zero, not making any acquisitions, selling some of its assets (mostly ships) and trying to hoard cash.”
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by John Helmer - Sunday, August 23rd, 2009
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By John Helmer in Moscow

The last time Russia was obliged to teach strategy to the ruling powers of the Baltic Sea — in the 18th century, they were the Swedes – at the Battle of Grengam (pictured), the Russians claim they won. But so do the Swedes. The outcome, however, was that the Swedish navy could no longer hope to bottle up the Russian fleet in the Gulf of Finland.

For the next three hundred years, there have been two constants in Russia’s Baltic Sea strategy that don’t change with the vicissitudes of who’s in or out of power in the Kremlin, or along the Baltic littoral.

One is that for its economic prosperity and security, Russia must find as many alternatives as possible to the high seas of the Baltic for getting its goods to and from market. As volumes of energy exports rise, that means finding ways around, under, or over the NATO-controlled chokepoint of the Danish Straits.
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by John Helmer - Sunday, August 23rd, 2009
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by John Helmer - Saturday, August 22nd, 2009
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by John Helmer - Sunday, August 2nd, 2009
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By John Helmer in Moscow

“Mr Deripaska is a man who denies everything”.

This was said in the Court of Appeal in London on July 21, by Geoffrey Vos QC, arguing the case on behalf of Deripaska’s former patron and founding stakeholder, Michael Cherney (Mikhail Chernoy), that Deripaska should face trial in England on Cherney’s charges that Deripaska has violated their contract, and improperly taken Cherney’s 20% stake in the founding company of the Russian Aluminium (Rusal) group.

Deripaska is chief executive and controlling shareholder of Rusal. He had sought a ruling from the appeal court to withdraw jurisdiction over the case from the UK to Russia. London jurisdiction is claimed by Cherney, an Israeli citizen, because his shareholding agreement with Deripaska was negotiated and signed there; because the contract specified the application of UK law; because both he and Deripaska have homes and businesses there; and because UK law provides for jurisdiction when a litigant would be deprived of a fair trial if the litigation was held elsewhere. The ruling, against which Deripaska was appealing, said: “Neither party has suggested that they will suffer significant prejudice if the trial takes place here…I am persuaded that the risks inherent in a trial in Russia (assassination, arrest on trumped up charges and lack of a fair trial) are sufficient to make England the forum in which the case can most suitably be tried in the interests of both parties and the ends of justice and, accordingly, the proper place for the determination of this claim.”
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by Editor - Sunday, August 2nd, 2009
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By John Helmer in Moscow

At 2:30 pm, London time today, Oleg Deripaska lost his appeal of the July 3, 2008, ruling by the High Court Justice Christopher Clarke, ordering him to face trial by the UK High Court on charges of defrauding his patron and business partner, Michael Cherney. Four of the most senior judges in the British courts have now ruled that Deripaska is not to be believed. Here is the court ruling that was issued today: link

by John Helmer - Friday, July 31st, 2009
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By John Helmer in Moscow

Three Japanese grain traders — Itochu, Sojitz, and Mitsui — are competing to establish the first major Russian grain export terminal at a Russian port on the Sea of Japan.

Rapid growth of demand for wheat in the Asian markets, and the price and transport advantages of Russian grain, have been stimulating Asian imports from Russia over higher-priced Canadian or Australian grains that require longer and costlier voyages. Traditionally, Russia has despatched its grain surpluses to the west, and to the southern edge of the Mediterranean. In recent years, Egypt has been the biggest buyer of Russian wheat; as well as the one of the largest importers of wheat worldwide. But for the past three months, Egyptian manipulation of incoming Russian cargoes — ostensibly to deal with weevil infestation but in reality to drive the price lower — has encouraged Russian exporters to reconsider their market strategy. Most Russian wheat bound for Asia is currently shipped from the Black Sea ports via the Suez Canal, and then through pirate-infested waters.

A source at the Russian Grain Union told Fairplay that if there were grain terminals on Russia’s eastern coast, the export capacity would run into millions of tonnes per annum. In the grain season that ended on June 30, Alexander Korbut, Vice President of the Union, said Bangladesh was the biggest Asian buyer from Russia, importing 509,000 tonnes over the year. India bought none this past year, he noted, but in the year before, 1 million tonnes. In 2007-2008, Japan bought 57,400 tonnes; this past year, just 4,800 tonnes. Malaysia is another potentially large importer of Russian wheat; this past season, it imported 10,000 tonnes. Korbut explained the dramatic fall-off in the past season’s exports to India and Japan as the result of falling wheat prices, and for Russia, rising shipment costs, making exports unprofitable. “Earlier there was a deficit of grain, now it’s rather cheap”, Korbut said.
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by John Helmer - Friday, July 31st, 2009
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Compiled by John Helmer in Moscow

The Financial Times
Gunvor, Putin and me: the truth about Russian oil trader

May 22 2008 03:00
From Mr Gennady Timchenko.

Sir, Your article “On the offensive” (Analysis, May 15) purported to explain the rise of the oil trader Gunvor. However, it contained many inaccuracies and false claims. In fairness, your reporter attempted some balance, allowing our chairman to challenge some of the falsehoods. I would like to challenge some that went uncontested.

The article devoted much space to me as one of Gunvor’s founders. You wrongly suggest that ties between me and the former Russian president, Vladimir Putin, underlie Gunvor’s success. In fact, media suggestions about the extent of any ties between me and Mr Putin are overblown.
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by John Helmer - Thursday, July 30th, 2009
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By John Helmer in Moscow

Evraz, Russia’s largest steelmaker, has received its first rating downgrade from an international ratings agency. It also is the first time Roman Abramovich and Alexander Abramov, who share control of the Evraz group’s Russian and international assets through Mastercroft Limited, a Cyprus registered company, have been downgraded.

According to an announcement and brief report by Fitch Ratings on July 29, both Evraz and Mastercroft, which holds the controlling stake of Evraz shares, were hit with a downgrade of the long-term foreign currency Issuer Default Rating (IDR) and the senior unsecured rating to ‘BB-‘ from ‘BB’. Fitch’s last rating was an upgrade for Evraz, issued in July of 2007. No further action was taken by the agency until three months ago, when Fitch announced it was putting Evraz on a Rating Watch Negative, one step short of the downgrade that was announced yesterday. Fitch’s latest announcement says that the company is still under Rating watch Negative, in the event that fresh news might impact on the group’s revenues.

Fitch’s rating move reflects the assessment that there is a growing probability that Evraz will breach its borrowing covenants because third-quarter and fourth-quarter sales revenues and profitability are no longer judged likely to improve as much as had been hoped. If, as Fitch now expects, the second-half financial results will be flat, the scope for improving earnings and lowering debt will dwindle.
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by John Helmer - Thursday, July 30th, 2009
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By John Helmer in Moscow

Under pressure of regional politicians, prosecutors and courts, Vadim Varshavsky (pictured left), owner of the Estar group of midsized and specialty Russian steelmills, has eliminated his legal liability for another one of his lossmaking, idled units, but the terms remain unclear. Varshavsky, who avoids press contact unless it is advertorial, may count himself unlucky that among the enormously indebted of Russia’s metal magnates, the finger of selective justice is pointing only at him. For the time being.

A spokesman for Varshavsky at Estar headquarters in Moscow told CRU Steel News that Estar has signed what it calls a leasing agreement with Metallservis, a metal trading company owned by Oleg Tyurpenko (pictured right). This, Estar claims, gives the latter the run of the Novosibirsk Metal Works (NMZ) for five years. Metallservis has acquired an option at the end of the lease period to buy the now heavily indebted plant. If Tyurpenko exercises the option, he will be the first Russian steel distributor to attempt to move upstream, and incorporate steelmills in his chain of supply.

The Novosibirk regional government has also signed the agreement with an undertaking to underwrite debt restructuring. As of April 1, NMZ, which is also known in the region as the Kuzmin plant, owes Rb2.2 billion ($71 million). How much state budget money will be channeled through Tyuprenko’s hands to keep the mill in operation has not been announced. What seems certain is that noone wants to channel these funds through Varshavsky.
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by John Helmer - Wednesday, July 29th, 2009
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