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RODIONOVSKAYA-SUHODOLNAY PIPELINE OPERABLE (2 October) Russian pipeline operator Transneft has put the RodionovskayaSuhodolnay oil pipeline into operation, A&G News reported. The pipeline is a 253-kilometer stretch around Ukraine. The estimated cost of the project is $180 million. According Semen Vineshtok, Transneft's head, his company expects to receive $70 million annually from the pipeline while transporting 26 million tons of oil per year.
ALFA'S NEW YORK SUBSIDIARY HIRES TWO SALES DIRECTORS (2
Alfa Bank's New York subsidiary Alfa Capital Markets has hired two sales directors for North America to join its rapidly expanding global-equities business, PR Newswire reported. Nick Beech joins as director of sales trading and Diana Imperatore as director of research sales. Beech was previously head of emerging markets trading at Schroder Salomon Smith Barney in London, and Imperatore was vice president for Emerging Europe equity research sales at ING Barings in New York. "These two high-caliber appointments are another key step in our strategy to create a global equities business," said Alfa Bank's head of equities, Dominic Gualtieri. Alfa Capital Markets is the New York arm of Alfa Bank's international-equities business. Alfa Capital Markets is regulated by the NASD and will operate on the same lines as Alfa Banks London FSA registered subsidiary Alfa Securities, providing brokerage and investment services for foreign investment in Russia. Alfa Bank is Russia's largest private bank and is active in investment banking, commercial banking, asset management, and insurance. It has more than 70 branches in Russia and subsidiaries in Ukraine, Kazakhstan, London, Amsterdam, and New York, according to PR Newswire.
FERANE - ACHIEVING BUSINESS SUCCESS IN RUSSIA Ferane, Vladimir Bryntsalov's pharmaceutical firm, has the reputation of being an aggressive company, able to survive in a difficult business environment by exploiting opportunities, including those outside its core business. According to "Intercon," Ferane represents a new brand of Russian companies born during the privatization of government property in the early 1990s. Naturally, it absorbed both the best and the worst aspects of privatization in Russia. With access to important political and business circles, Ferane has built a reputation as a solid and reliable partner. Ferane will act strongly to protect its interests.
Ferane was created during the first stage of privatization in 1990, on the basis of government-owned Karpov Medical Ingredients Plant, one of the largest producers of antibiotics in the USSR. The name of the company comes from Moscow's oldest and best-known drug store on Nikolskaya Street near the Kremlin, which was owned prior to the 1917 revolution by an individual named "Ferrane." The drug store was later bought by another pharmaceutical company that wanted to retain the old name of the drug store. This conflict was resolved by Ferane leaving only one "R" in its name and the drug store using two "R"s. The present owners of Ferane are Bryntsalov's company, Pchelka (Little Bee), and the Economic Association of Support for Handicapped Children, Youth, and Sport Veterans - ASID. There are strong indications that ASID's name was used to secure some tax exemptions from import duties, which were issued to non-profit and sports organizations.
Commercially, Ferane is a very successful company. It has passed through all the turbulence and economic hardships of perestroika without losing much of its highly qualified workforce or industrial potential. Observers believe the key to Ferane's success lies in its opportunistic, but well chosen, management strategy, which was developed and implemented by Bryntsalov himself.
When Bryntsalov came to Moscow in 1988, he rented industrial space at the Kulakov Pharmaceutical Plant to develop production of bee-based medications in Pchelka's name. Within two years, he was able to take over the plant and its privatization program, establish a new company -- Ferane -- and assume the position of president without opposition. It is thought that Bryntsalov has good contacts with powerful Moscow bureaucrats who helped him get through difficult privatization procedures. According to Ferane employees, he is an aggressive, authoritarian-style manager who keeps tight control over all business operations. He is respected for his business skills but feared by his subordinates. Security at Ferane is tight. Employees value their jobs and are easily manipulated by management. They are forbidden to discuss anything related to Ferane activities with outsiders.
Bryntsalov's initial strategy was to limit production, concentrate on the packaging of imported or Russian-made medications, and sell them through a chain of dealers in different part of Russia. He immediately created a separate commercial department, dealing with trading operations and other business ventures, which generated funds instrumental to the company's survival in 1991 and 1992. Ferane produces little, but buys a lot of cheap medicines in the West and packages them locally, putting Ferane's name on the label. By some estimates, this practice allowed Ferane to sell medications at up to 25 percent above the average market price. Another successful line of business, initially the company's most profitable, was the largescale bottling of medical alcohol and its distribution through a network of drug stores. The alcohol was bought cheaply in Ukraine or Belarus, bottled by Ferane, and sold as medication. Back in the 1990s, medicinal alcohol was untouched by taxes imposed on consumer alcohol producers. However, it became popular among customers who used it for more than just medical purposes. Later, Ferane developed the capability to produce and bottle vodka.
Bryntsalov is perceived as skillfully utilizing, when necessary, the status of Ferane as a former government-owned company involved in a socially important industry. Ferane regularly pays taxes and completes records truthfully. Bryntsalov pursues a "closed-door" policy of self-containment and self-sufficiency. To support Ferane's operations and isolate it from outsiders, he has established several entities that are well integrated into Ferane's activities. These are Medinvestbank; insurance company Status-S; Bryntsalov, Yumanov, & Co; and consultancy Glossa Lawyers Bureau. All these entities are registered at Ferane's legal address and their primary purpose is to support Ferane's operations, making them hard for outsiders to monitor or control. It appears that the bank and the insurance company are increasingly becoming the most important assets within Bryntsalov's powerhouse. Bryntsalov's success is attributed both to his business acumen and his ability to deliver what he sets out to do and what he promises.
MOSCOW PRESSES KYIV TO TAKE RESPONSIBILITY FOR DOWNING PLANE. Aviation Marshal Yevgenii Shaposhnikov, the head of the RussianUkrainian commission investigating the 4 October crash of a Tu-154 in the Black Sea, said on 9 October that his group has found evidence that the plane was downed by an S-200 missile launched by the Ukrainian military, RTR television reported. Meanwhile, RIA-Novosti reported the same day that Moscow officials hope that Kyiv will "make the difficult but only correct decision and accept responsibility for the downing of the plane." VY
UKRAINIAN PRESIDENT READY TO ACCEPT ANY CONCLUSION IN PLANE CRASH PROBE. Leonid Kuchma promised on 10 October to accept any conclusion in the ongoing investigation into the crash on 4 October of a Russian passenger plane that was allegedly shot down by a Ukrainian missile, AP reported. Ukrainian officials have thus far denied that missile-firing exercises in Crimea are responsible for the crash. However, Ukraine's stance appears to be shifting after former Russian air force commander Yevgenii Shaposhnikov, a member of the investigation team, said on 9 October that small metal balls found in the bodies of those killed and in fragments of the plane's sheet metal resemble the S- 200 missile payload. JM
U.S. PLANES USE UKRAINIAN AIR CORRIDOR. Interfax reported on 10 October that U.S. military cargo planes have already taken advantage of Kyiv's permission to use Ukrainian airspace in connection with the U.S. operation in Afghanistan. Kyiv also agreed that U.S. planes may land in emergency situations at selected Ukrainian airfields. JM
LITHUANIA TO IMPOSE ENTRY VISAS FOR KALININGRAD IN 2003. On 9 October, the Government European Integration Commission (VEIK) endorsed the Schengen draft action plan, which must be in force before Lithuania can join the European Union, ELTA reported. The plan will require citizens of Belarus and Ukraine, including train passengers and truck drivers, who are traveling to Kaliningrad Oblast through Lithuania to obtain visas beginning on 1 January 2003. Kaliningrad residents will need visas for any travel to or through Lithuania beginning on 1 July 2003. However, Lithuania plans to issue long-term and low-cost visas to Kaliningrad residents, who would otherwise be isolated from the rest of Russia. VEIK also expressed the opinion that Lithuania should ask the EU to lengthen by two years (until 1 January 2010) the transition period for building up the required 90-day oil stocks, which will cost some $125 million. SG