MOSCOW - The chief economist at the European Bank for Reconstruction and Development (EBRD) said on Wednesday it was unlikely Russian economic growth would be less than 3.5 percent next year.
Willem Buiter, making a presentation in Moscow of the bank's annual Transition Report on the economies of eastern Europe and the former Soviet Union, published on Tuesday, said he expected oil prices for Russia next year to be at $18-$20.
"If we talk about $15-$14 (per barrel of oil) it (GDP growth) could go down to 3.5 percent, " he told reporters.
"I would be very surprised to see growth edging towards three percent, it would have to take a dramatic collapse, a lasting collapse of the oil price to do that, which I do not anticipate," he added.
The bank's current forecast for Russia in the Transition Report is for its gross doemstic product to expand by four percent.
Buiter said any dramatic collapse in oil prices would be mitigated in economic terms by a probable accompanying slide in the value of the rouble against the dollar.
"Should the price of oil really come down that far (to $12 a barrel) and stay that low for some time there would be adjustments of the exchange rate," he said.
"The exchange rate would weaken and then non-oil competitiveness would improve, non-oil exports would increase and imports would go down."
"You have a big, big cushion on the fiscal side and the external side. I am not saying it is not going to hurt if the oil price stays low but the country is now in a position to manage it," he added. //Reuters

MOSCOW - Russian President Vladimir Putin agrees with a plan to increase the number of professional soldiers in Russia's army and reduce dependence on the draft, Russian news agencies reported Wednesday.
Alexei Gromov, Putin's press secretary, was quoted by the ITAR-Tass news agency as saying that the president, during a meeting with Prime Minister Mikhail Kasyanov, had given his approval to a proposal to gradually hire soldiers on a contract basis.
"Vladimir Putin agreed ... to manning part of the Russian Armed Forces on a contractual basis, instead of the conscription system," Gromov said.
Putin has made the modernization of Russia's declining armed forces a major goal of his administration.
Putin's Cabinet has approved a 15-year weapons program that is intended to upgrade or replace Soviet-designed military hardware. Earlier this month, he said that he also wants to increase payments to servicemen, boost financing for military housing and make the Russian military more transparent.
In spite of resistance from the military top brass, Putin has championed plans to trim the 1.2 million-member military by nearly one-third in the next three years, abolish the draft and radically change the armed forces' structure. However, analysts say that the plans have not begun to be implemented.
All Russian men over 18 years of age are required to serve a minimum of two years in the army or three in the navy, but widespread draft evasion has left the military so desperate for new soldiers that the army sometimes drafts men with a history of mental illness or drug abuse.
The armed forces are plagued by hazing, corruption and miserable living conditions. //AP

MOSCOW - Sonic Duo, formed by Finland's Sonera and a Russian partner, launched a new mobile phone network for Moscow on Wednesday, but analysts saw it hardly denting competitors.
Sonic's investors, Sonera and Russian investment banking boutique LV Finance, said they were confident they would challenge the current stranglehold of Vimpelcom and Mobile TeleSystems in Russia's most lucrative market.
The newcomer said it would launch competitive tariff plans and unique services, such as quick retrieval of shop, bank, and restaurant addresses.
"We do seriously intend to fight for leadership in the Russian mobile communications market," Sonera Vice President Marti Huttunen said in a statement.
Sonic duo is the Moscow foothold of the pan-russian Megafon mobile phone alliance, which groups Sonera, Sweden's Telia, LV Finance and St Petersburg's Telekominvest. Megafon has staked a claim to Russia's vast and largely untapped national market.
Moscow is still growing at rates long unseen in more saturated European markets. When Sonic received Moscow's third GSM licence in May last year, analysts feared it would steal market share from the two New-York listed operators MTS and Vimpelcom and start a price war.
But analysts said that now looked unlikely.
"Unless Sonic Duo's tariffs are extremely aggressive, which we understand is not the case, the operator's launch in Moscow will not have any significant detrimental impact on MTS' and Vimpelcom's operations," Renaissance Capital analyst Andrei Braginsky wrote in a research note.
He said monthly fees looked higher than MTS' and Vimpelcom's and per minute charges would be similar or higher.

HARD SCRABBLE FOR MARKET SHARE
LV Finance chief Leonid Rozhetskin told Reuters Sonic would invest $100 million in the Moscow area by the end of the year out of $260 million planned by 2004.
Spokesmen for the Moscow operators said they were unruffled by the impending launch, saying their older, larger GSM networks would give them an edge over the new competitor.
Analysts say Megafon is growing rapidly in the regions, but Sonic's coverage will not be strong enough, especially in the region surrounding Moscow where Muscovites depend on mobiles while at their country houses, or dachas.
Sonic's statement said the network now covered the entire city of Moscow but Sonic is building an average 15-20 base stations a week, faster than Vimpelcom and MTS.
"MTS and Vimpelcom have shown the key to market share is quality of service," Troika Dialog analyst Tom Adshead said. "The specific for Russia is the need to cover the (region)."
"I think they'll be doing well to get 10 percent (market share) in two years," Adshead added. //Reuters

MOSCOW - Russian shares closed narrowly lower on Wednesday as investors moved to cash in recent gains and waited for more news on oil and the economy, traders said.
The RTS index closed 1.22 percent lower at 218.370 on turnover of $14.2 million while the broader Reuters Russian Composite fell 1.69 percent to 1,461.12.
The Moscow Interbank Currency Exchange (MICEX), dominated by local investors saw its index fall 2.03 percent to 1,030.09 on trade of 3.8 billion roubles.
"It's a gentle correction, the positive trend is still in the market. People have a lot of free cash because they sold out of the market when it was rising," said Andrei Galperin, a trader at Prospect.
Another trader said he believed a drop in oil prices had already been factored into the Russian stock market, which tends to track crude as many of its blue chips are oil firms.
"It is hard to forecast what will happen as the market has become so news-driven," Galperin said.
"It will either stay where it is to the end of the week or fall by maybe two percent," he added. Russian shares have been nervously following oil all week as Russia and OPEC remain locked in a stalemate over oil production cuts.
OPEC has made a proposal to cut output by 1.5 million barrels a day from January 1 conditional on non-cartel members Russia, Norway and Mexico slashing by 500,000 barrels a day.
So far Russia has only laid a token 30,000 barrels on the table, but comments from Deputy Prime Minister Viktor Khristenko that the country could cut further heartened the market and sent benchmark Brent crude higher.
Metal firms Norilsk and Severstal made gains, closing up 1.13 percent and 0.27 percent at $15.250 and $37.100, respectively.
Most liquid oil and utilities stocks fell, with bellwether UES losing 1.83 percent to close at $0.1340.
Russia's biggest oil producer LUKOIL fell 2.45 percent to $11.15 due to a conversion of its preferred shares to ordinary stock.
Trade will likely be thin on Thursday as U.S markets will be closed for the Thanksgiving holiday, which removes potential investors from the market, traders said. //Reuters

MOSCOW - Russian Defence Minister Sergei Ivanov said on Wednesday Moscow wanted an overhaul of its existing relationship with NATO so it could influence decision-making.
His comments on Russian television, hours before NATO Secretary-General George Robertson was due to arrive in the country, pressed home a campaign by President Vladimir Putin and other officials to form new guidelines for cooperation.
Ivanov said the current framework, established four years ago as NATO undertook its first eastward expansion, had outlived its usefulness.
"The essence of our proposals is to create a completely new mechanism to act together as equals - NATO members and Russia," Ivanov said on the sidelines of a meeting of defence ministers from ex-Soviet states.
"This would enable Russia to have, if you like, voting rights, the right to take decisions, and abandon all current forms of cooperation within the Permanent Joint Council (PJC). The mechanism is not really working. Everyone recognises this."
The PJC accord, signed by former President Boris Yeltsin in 1997, provided for monthly meetings, though Russia suspended these in protest at the NATO bombing of Yugoslavia in 1999. It has little political clout in its present form.
With Russia fully backing the U.S.-led anti-terrorist campaign in Afghanistan, Putin has in recent weeks sought to establish closer ties with the alliance.
British Prime Minister Tony Blair, writing to Putin after the president's summit talks in the United States last week, proposed setting up a new body to deepen cooperation.
Putin noted in Brussels last month that Russia would no longer oppose further NATO enlargement if it were involved in the process.
During his visit to the United States, Putin acknowledged Russia had no means of opposing expansion but said NATO could count on Russian support on issues like anti-terrorist cooperation if relations were strengthened.
The president has even said he sees no reason why Russia should not join NATO at some point.
The head of Russia's Security Council, Vladimir Rushailo, speaking in Paris on Tuesday, also said NATO and Russia were "rethinking their relations" and called for "a new mechanism and new forms of cooperation".
Some European NATO countries have expressed unease at the prospect of Robertson's talks with Putin and Ivanov, and Russia's calls for more concrete benefits from cooperation.
Robertson arrives on Wednesday evening in Volgograd, site of the Soviet army's epic World War Two victory in the battle of Stalingrad, before continuing his trip to Moscow. //Reuters

MOSCOW - Russia's biggest oil producer LUKOIL said on Wednesday it would raise crude output in 2002 to 80.2 million tonnes (1.6 million barrels per day) from 78 million tonnes this year.
The company said in a statement, released after a board meeting, that LUKOIL had factored an average benchmark IPE Brent crude price of $16 a barrel into its accounts.
"We expect that in 2002 production from all the company's subsidiaries, including participation in production sharing agreements, will be 80.2 million tonnes, with 39.8 for processing," the statement said.
LUKOIL produced 78 million tonnes of crude in 2000.
Oil cartel OPEC and Russia are currently locked in a stalemate over oil production cuts.
OPEC has made a proposal to cut output by 1.5 million barrels a day from January 1 conditional on non-cartel members Russia, Norway and Mexico slashing by 500,000 barrels a day.
Earlier on Tuesday LUKOIL said it had not yet been invited by the government to discuss output cuts.
Russian Deputy Prime Minister Viktor Khristenko was quoted as saying on Wednesday the country could make further cuts in exports, but so far Russia has laid only a token 30,000 barrels a day output cut on the table.
Norway and Mexico made positive statements on the possibility of a cut on Tuesday.
LUKOIL also said it would invest 46.4 billion roubles in 2002, including 7.6 billion in foreign projects.
"We expect our 2002 budget to be in the black," the statement said.
It added that the company intended to improve standards of corporate governance next year, including drawing up a code of conduct and gaining a listing in London. //Reuters

ALMATY - Kazakhstan is forming a special government commission to deal with a massive anthrax dump left over from the Soviet Union's biological weapons program, the Foreign Ministry said Wednesday.
The Soviet Union tested biological weapons on Vozrozhdeniye island in the Aral Sea. The island, which is shared by Kazakhstan and Uzbekistan, is growing as the sea dries up, and there are fears that anthrax spores or other pathogens could spread to the mainland.
U.S. experts have found live anthrax spores upon visiting the island in 1995 to examine the site where the Soviets also buried tons of weapons-grade anthrax soaked in a decontaminant solution to kill the germs.
Kazak scientists are developing a research and cleanup program for the northern part of the island, which belongs to Kazakhstan, the Foreign Ministry's press service said in a statement. U.S. experts are expected to take part in the program, it said.
In October, the United States and Uzbekistan, to which most of the contaminated area belongs, signed a dlrs 6 million agreement to clean up the island.
Kazak officials have insisted that anthrax spores sent through the mail in the United States did not originate in Kazakhstan.
"Kazakhstan has taken and continues to take all necessary measures to ensure the security of elements the former Soviet defense infrastructure," the ministry said Wednesday.
Russian scientists say the anthrax strain used by mail terrorists in the United States appears to be the usual strain from American research labs. //AP

ASTANA - Kazakh President Nursultan Nazarbayev dismissed two senior officials on Wednesday amid a row over the pace of political reforms in the oil-rich former Soviet state.
The president's press secretary, Asylbek Bisenbayev, told a news conference in the capital Astana that Uraz Dzhandosov, a deputy prime minister and former central banker, had been sacked along with deputy defence minister Zhanat Yertlesov.
The two men, who had earlier offered to step down if the president so wished, were part of a political group formed last weekend with a pledge to deepen political reforms. A third reformer, a regional leader in Northern Kazakhstan, was also replaced by Nazarbayev.
"It is with considerable regret that the head of state has done this," Bisenbayev said.
He said Nazarbayev had consulted Prime Minister Kasymzhomart Tokayev, who had threatened to quit himself on Tuesday if the president did not sack officials linked with the new movement.
Kazakhstan has one of the more successful records of economic reform in former Soviet central Asia, but critics say political change has lagged.
NEW MOVEMENT SPLITS KAZAKHSTAN
The creation of the new movement, Kazakhstan's Democratic Choice, has split Kazakhstan into two camps - one promoting faster reforms, the other sticking to Nazarbayev's vision of a firm hand on state affairs.
Four dissenters, including Dzandosov and Yertlesov, had earlier put their political future in the hands of Nazarbayev.
"All four of us seated here have informed the president that we consider it impossible to work under Kasymzhomart Tokayev after yesterday's statement," Dzhandosov said.
"Pending (Nazarbayev's) decision, we will perform our duties with discipline and order."
Also offering to resign were Labour and Social Security Minister Alikhan Baimenov and First Deputy Finance Minister Kairat Kelimbetov.
In his statement on Tuesday, the prime minister had urged Nazarbayev to dismiss "unprofessional workers and intriguers in his entourage" and said he would otherwise step down.
He accused those demanding reforms of exploiting democratic rhetoric and waging a "state information war" to build on fortunes made in the decade since the fall of communism.
The group had called at its foundation for deeper political reforms and greater independence for parliament and the courts. The name, Kazakhstan's Democratic Choice, borrowed the name of the party of reformers in Russia that conducted "shock therapy" economic and political reforms in the early 1990s.
Under Kazakhstan's constitution, the president is empowered to appoint the prime minister and cabinet. The prime minister's resignation entails the fall of his entire government. //Reuters

MOSCOW - Ukraine's new defense minister said Wednesday that his nation was determined to avoid a repeat of last month's accident in which a Ukrainian missile downed a Russian passenger plane.
"We intend to do everything possible to rule out similar tragic incidents," Ukrainian Defense Minister Vladimir Shkidchenko said in Moscow on Wednesday.
The Tu-154 airplane involved crashed into the Black Sea on Oct. 4, killing all 78 people on board. Russian investigators concluded that the plane was downed by a Ukrainian S-200 missile launched during military exercises on the Crimean peninsula.
Shkidchenko attended a Moscow meeting of defense ministers from the former Soviet republics united in the loose Commonwealth of Independent States (CIS) group. The ministers were to discuss ways to increase military and technical cooperation among their 12-nation alliance.
Tatyana Anodina, head of the CIS interstate aviation committee, presented a report on the accident to the meeting, Shkidchenko said.
Shkidchenko replaced Defense Minister Oleksandr Kuzmuk, who was fired along with his aides on Oct. 24 over the Russian plane's catastrophe.
Kuzmuk was popular in Ukraine but has been under some pressure to resign ever since a separate missile accident in April 2000, when a defective missile fired during exercises slammed into an apartment building near Kiev, killing three people. //AP