Business in Brief

Reserves at $112.8Bln

MOSCOW (Bloomberg) -- Foreign currency and gold reserves rose for the 11th straight week to a record $112.8 billion, nearing the country's total hard currency debt.

The Central Bank said the reserves rose $5.5 billion in the week ending Nov. 5, the largest jump since July 1998.

The country's foreign currency and gold reserves are surging as the Central Bank buys dollars being brought into the country by oil and gas exporters to prevent the ruble from strengthening, which would make imported goods cheaper and hurt domestic producers, the government has said.

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11.5% Inflation Rate?

MOSCOW (Bloomberg) -- The 2004 annual inflation rate may reach as much as 11.5 percent, said Andrei Illarionov, an economic adviser to Russian President Vladimir Putin.

"So far there are no reasons to expect a slowdown in inflation soon," Illarionov said Thursday at a news conference. He forecast this year's inflation to range between 10 percent and 11.5 percent. The rate in 2005 will probably be similar, he said.

The government's initial target was 10 percent for inflation this year.

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Arms Sales Stay Strong

MOSCOW (MT) -- Russian arms sales may reach $7 billion per year, a senior Russian defense official told Vremya Novostei newspaper Thursday.

"Our niche has not been taken by anyone yet and we can [export arms] worth $6 billion, or even $7 billion per year," director of the Federal Service for Military and Technical Cooperation Mikhail Dmitriyev told the newspaper.

In a fourth straight year of growth in weapons sales abroad, last year Russia exported $5.3 billion worth of arms and received revenues of nearly $5.6 billion, of which state-owned arms-selling agency Rosoboronexport accounted for $5 billion and $5.1 billion respectively.

China and India remain prime clients for Russian arms.

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Italy Sells Russian Debt

LONDON (Bloomberg) -- Italy sold debt owed to it by Russia to a state-controlled export credit agency as part of efforts to bolster the government's finances, the Financial Times reported Thursday, citing the Italian Finance Ministry.

Prime Minister Silvio Berlusconi's government yesterday said it sold the 1 billion euros ($1.3 billion) of securities to the agency, which would "settle the transaction by drawing upon cash resources available," the newspaper quoted a statement as saying.

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Ruble, Dollar Forecast

MOSCOW (Bloomberg) -- Morgan Stanley & Co. International raised its forecast Thursday for the ruble versus the dollar by year-end 2005 amid expectations the U.S. currency will extend declines after the re-election of President George W. Bush.

Morgan Stanley raised its end-2005 ruble forecast to 27.50 per dollar, from 28.00 previously. The ruble will reach a 2005 high of 27.20 per dollar in the second quarter, the bank said in a report by economist Riccardo Barbieri Hermitte.

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Sedmoi Kontinent IPO

MOSCOW (Bloomberg) -- Supermarket chain Sedmoi Kontinent on Thursday became the eighth Russian company to sell shares in an initial public offering since the collapse of the Soviet Union, as executives take advantage of rising stock prices.

Sedmoi Kontinent said it raised $80.7 million to finance new stores. The grocer was among more than a dozen companies lining up to sell $4 billion of stock in IPOs over the next year, almost twice the total number of sales in Russia since communism ended 13 years ago, according to broker Troika Dialog.

Sedmoi Kontinent was the first initial share sale by a Russian food retailer. The company said in a statement it sold 8.42 million shares, or a 13 percent stake, at 275 rubles ($9.59) each.

The stock will start trading in Moscow in December. Sedmoi Kontinent will likely become members of the RTS index.

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RZD to Borrow $352M

MOSCOW (Bloomberg) -- Russian Railways, or RZD, the country's rail monopoly, will borrow 10.1 billion rubles ($352 million) next year to finance upgrades to rail links and to buy rolling stock.

The federal government, which fully owns the monopoly, approved Thursday's RZD plan to invest a total of 148.1 billion rubles in 2005. Of that amount, 138 billion rubles will come from the company's existing funds and the rest will be borrowed, RZD said in a statement.

The monopoly is planning upgrades to meet rising demand from commodity exporters amid higher sales abroad, including a surge in exports to China.

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Sistema's Profit Up 85%

MOSCOW (Bloomberg) -- Sistema, a group with assets from telecommunications to finance, said first-half profit soared 85 percent, driven by expansion of telephone companies Mobile TeleSystems and Moscow City Telephone.

Net income totaled $171 million, up from $92.4 million in the year-earlier period, the company said Wednesday. Revenue rose to $2.43 billion from $1.47 billion, under U.S. generally accepted accounting principles.

"The telecommunications segment continued to be the largest revenue contributor and represented 87 percent of total aggregated revenue," Sistema said.

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Norilsk Nickel in Asia

MOSCOW (Bloomberg) -- Norilsk Nickel, the world's biggest supplier of nickel and palladium, has set up a distribution unit in Hong Kong, to market the company in Asia.

Setting up Norilsk Nickel Asia completes Norilsk's reorganization of its supply network, the company said in a statement Thursday.

"Reorganization will raise the level of our work with clients and the quality of services provided to them," Victor Sprogis, deputy general director of Norilsk, said in the statement.

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MegaFon Delays Bond

MOSCOW (Reuters) -- Cellphone company MegaFon has decided to postpone a debut $375 million eurobond until 2005, a company official said Thursday.

"The [eurobond] placement is planned for the start of 2005 and will take place depending on market trends," the official said.

The company, controlled by Swedish TeliaSonera, had previously planned to sell the bond at no more than 10 percent in the fourth quarter of this year.

The official said that next year MegaFon will also place 6.8 billion rubles ($237.2 million) of local bonds.

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VTB $500M Eurobond

MOSCOW (Reuters) -- Vneshtorgbank, or VTB, announced Thursday borrowing plans worth more than $1 billion, including a $500 million eurobond issue in 2005.

"I think it will be early next year ?€¦ We are not going to issue less than $500 million," deputy chief executive Vadim Levin told reporters, referring to the eurobond.

Levin spoke after VTB announced Thursday it had borrowed $300 million from a syndicate of 40 foreign banks to boost trade operations funding for Russian clients.

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Sberbank Profit to Rise

MOSCOW (Bloomberg) -- Sberbank expects 2004 profits to rise by per fifth to exceed 40 billion rubles ($1.4 billion) as it lends more to individuals and companies.

Sberbank's net income to Russian accounting standards rose 27 percent during the first nine months to 33.7 billion rubles, chief executive officer Andrei Kazmin said Thursday. That equals the bank's total 2003 profit.

In June and July, Russia's banking industry suffered its biggest test of confidence since the government defaulted on $40 billion of domestic debt in 1998 after about eight banks halted customers' withdrawals, sparking a run on deposits.

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Statoil Urges Talks

OSLO (Bloomberg) -- Statoil, Norway's largest oil company, said the country's politicians should seek a resolution with Russia on cooperating to develop petroleum resources in the Barents Sea area, the Dagens Naeringsliv newspaper reported Thursday.

Norwegian companies such as Statoil may lose out to foreign rivals seeking to join forces with the Russians to exploit energy resources in Russia's part of the Barents Sea if a political solution is not found, Erling Oeverland, a Statoil executive, told the paper.

The two nations have been in talks for three decades to develop natural resources in the arctic waters, which is home to a Statoil natural gas project.