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IN BRIEF
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*** The frozen conflicts in the breakaway Georgian regions of South Ossetia and Abkhazia turned hot this week. Georgian forces launched an operation to bring the South Ossetia back under Tbilisi's control on August 7, sparking a conflict which saw Russian operations on Georgian territory as it backed the regime in Tskhinvali. The outbreak of hostilities rocked the Russian stock market, which fell to its lowest level in two years, and hammered the ruble, although losses were by-and-large regained with a ceasefire on August 12. Investor confidence in Russia was rocked by the conflict, but it is believed that no long-term damage has been suffered and that Russia's key financial indicators should remain largely unaffected.
*** Vladimir Potanin got his candidate, Vladimir Strzhalkovsky, elected to run MMC Norilsk Nickel this week, a move that Oleg Deripaska's aluminum giant RUSAL, a Norilsk shareholder, said would not help the world's biggest nickel and palladium producer, which it described as crisis-stricken. In further developments, Interros said it does not view RUSAL as its sole partner for the development Arctic metals and smelting giant. RUSAL said it would convoke an extraordinary meeting of shareholders in Norilsk, with the aim of electing a new board of directors and could ask the Federal Financial Markets Service to intervene. Interros has also transferred part of its stakes in the charter capital of Polyus Gold and MMC Norilsk Nickel to offshore companies.
*** United Company RUSAL has come up with an initiative for a large-scale environmental program aimed at modernizing plants owned by MMC Norilsk Nickel and has offered assistance in drawing up a free feasibility study for the project. Norilsk and Nickel, the two Arctic centers of the mining and smelting giant's operations, are frequently listed among the most polluted towns on the planet. RUSAL, which has a history of successfully implementing environmental upgrades at aluminum smelting facilities, said it had proposed the study in an open letter due to "Norilsk Nickel's practice of decision making behind the scenes."
*** After a brutal dressing down from Russian Prime Minister Vladimir Putin saw billions wiped off of it's share price, Mechel's fortunes continue to take a hit. Russian's number one coking coal producer and number six steelmaker has been found guilty this week of breaking competition law by the Russian Federal Antimonopoly Service. Mechel has also again postponed the placement of preferred shares.
The FAS is also looking into pricing practices by two other Russian coking coal producers, Raspadskay Coal and Evraz, and will push for maximum fines if the companies are found to have abused their domineering market positions.
*** Russia's Natural Resources and Environment Ministry has drafted a list of deposits with strategic status, which it expects to receive government approval within six weeks. The list includes about 2,000 deposits, including all those already on the list, such as the Sukhoi Log and the Udokan copper field. According to amendments to the law on subsurface resources, strategic deposits will be handed over to resource developers by government decree. The new version of the law stipulates defines as strategic all deposits with deposits of uranium, diamonds, especially pure quartz, yttrium group of rare-earth metals, nickel, cobalt, tantalum, niobium, beryllium, lithium and platinum group metals, vein gold deposits with upwards of 50 tonnes and copper deposits with upwards of 500,000 tonnes of metal
*** London-listed NLMK this week signed a definitive agreement to acquire U.S. steel pipe and tube manufacturer John Maneely Company, the largest independent tubular manufacturer in North America, from a shareholder group including global private equity firm The Carlyle Group and the Zekelman family for $3.53 billion, acquiring the company on a debt free, cash free basis, subject to regulatory approvals and is expected to close in the fourth quarter of 2008. The transaction will be financed from available bank commitments, including the recently established $1.6 billion Pre Export Finance (PXF) facility and a $2 billion bridge commitment provided by Merrill Lynch, Deutsche Bank and Societe Generale.
*** A subsidiary of steelmaker Severstal has acquired 100% of Kazakh gold producer Balazhal. The Balazhal field has total gold reserves of 20 tonnes with a potential increase to 30-40 tonnes and will become part of Severstal's upstream division - Severstal-Resurs. Production at the deposit is currently suspended, but Severstal hopes operations can be resumed by 2009.
*** S-Group Capital Management, which manages Severstal owner Alexei Mordashov's investments, has purchased a large portion in an additional share issue placed by Innolume, the German diode laser and laser module producer as Mordashov seeks to pursue a long held interest in the use of nanotechnologies in steel production.
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Georgia launches offensive to reclaim S. Ossetia, Russia reacts
MOSCOW. (Interfax) - Georgian forces launched an operation to bring the breakaway province of South Ossetia back under Tbilisi's control on August 7, sparking a conflict which saw Russian operations on Georgian territory as it backed the regime in Tskhinvali.
Below is a day-by-day account of developments in the conflict.
August 6 - Calls for restraint
Shooting with large-caliber weapons was registered in numerous locations in the Georgian-South Ossetian conflict zone amid fears of a de-escalation of the situation in the volatile region.
Tbilisi claimed Georgian villages in the region were under attack and the South Ossetian authorities claimed their capital had been shelled by Georgian forces.
Moscow called on both sides to exercise restraint as both Georgian and Ossetian forces struggled for control of the Nul heights.
South Ossetia also claimed Georgia had disrupted water supplies to its capital.
The first major gun battles in some time were registered around the province.
August 7 - Peacekeepers barracks shelled
Tskhinvali claimed Georgian forces had burnt down the summer's harvest and that they expected a full-on assault by Georgian forces on the breakaway province by September. Several exchanges of artillery fire caused casualties on both sides, before full-on hostilities commenced in the evening.
Several peacekeepers were killed and injured in a direct attack on their barracks, while Georgian forces opened massive fire on the Georgian capital after a number of skirmishes in border villages.
Georgian President Mikheil Saakashvili offered South Ossetia a broad autonomy within a united Georgia as reports of Georgian troop movements in border areas intensified. There were reports Georgian troops were carrying out scorched earth policies in South Ossetian villages under there control and a number of flights of unidentified aircraft over the region were registered by Russian peacekeepers.
August 8 - Stock market slumps on outbreak of conflict
Russian heavy armored vehicles, including tanks, entered the capital of the self-proclaimed republic of South Ossetia, Tskhinvali, which the South Ossetian authorities said was under fire by Georgian warplanes on Friday.
Heavy shelling and large-caliber gunfire was reported in the region all day.
Russia sent reinforcements to South Ossetia to help the Russian peacekeepers stationed there prevent bloodshed, the Russian Defense Ministry reported.
"The Russian peacekeepers, the citizens of the Russian Federation living in South Ossetia, and the citizens of the unrecognized republic itself will be provided with all essential aid. We will not allow the deaths of our fellow-countrymen and peacekeepers to go unpunished," the ministry said.
Many casualties were reported, and with most South Ossetians holding Russian passports, Russian President Dmitry Medvedev issued a stern warning after a direct shelling of a peacekeeping barracks left Russian servicemen dead.
"In line with the Constitution and with federal laws, my duty as Russian president is to safeguard the lives and dignity of Russian citizens, wherever they are. This is what is behind the logic of the steps we are undertaking now. We will not allow the deaths of our compatriots to go unpunished. Those guilty will receive due punishment," Medvedev said.
"The Georgian side's actions have resulted in human victims, among them Russian peacekeepers," Medvedev said.
"The situation has reached a point where peacekeepers on the Georgian side have been shooting at Russian peacekeepers, with whom their mission was to maintain the peace in the region," he said.
Civilians are dying in South Ossetia, Medvedev said. "And most of them are Russian citizens," he said.
Georgia on the night of August 7/8 launched military operations against the breakaway republic after a series of disturbances in the last week saying it wished to remove the "criminal regime" and "restore constitutional order."
Georgian forces continued their offensive, with Russia calling on the United Nations Security Council to demand an end to hostilities, but the Moscow-drafted document failed to be endorsed by the United Kingdom and the United States at Security Council level.
Speaking in an interview with CNN, Georgian President Mikheil Saakashvili said Russia was fighting a war with Georgia on its own territory, fuelling further fear that all out conflict could be sparked in the volatile flashpoint region.
Georgia claimed the Russian Air Force was shelling its territory, and has also said two Russian jets have been shot down, claims Moscow denies. Saakashvili earlier said any involvement of Russian forces in the conflict would result in a state of war.
The conflict had an inevitable economic effect with the Russian stock market falling to its lowest levels for two years and Georgia suffering long-term ratings downgrades. Moscow has stopped all air traffic between Russia and Georgia and Georgia has blocked all .ru Internet addresses and Russian television broadcasts.
August 9 - Saakashvili declares Georgia in state of war
Georgian President Mikheil Saakashvili imposed martial law and a state of war in Georgia for 15 days, effective immediately, after Georgian media alleged that the country's key Black Sea port of Poti, the provincial town of Gori, and several military targets on Georgian territory had been hit in a number of airstrikes by Russian combat aircraft. Government facilities in Tbilisi were evacuated and the Georgian Foreign Ministry said the country "is in fact at war with Russia."
Saakashvili later declared that Georgia is ready to stop fighting in South Ossetia and start talks with Russia, however the Russian side denied any such approach has been made to them through official channels.
The South Ossetian authorities claimed that the capital of Tskhinvali had been liberated with the help of Russian paratroopers and Land Forces and a second attempt by Georgian forces to seize the city had been rebuffed. The city, believed to have been gutted by the two days of conflict, is still under constant shelling at the time of press.
South Ossetian casualties were believed to number in the thousands, and several Russian peacekeepers and Georgian servicemen were also reported to have died in the conflict.
A humanitarian crisis was seen to be erupting in the region, with more than 30,000 refugees, almost half of South Ossetia's population said to have crossed into the Russian republic of North Ossetia-Alania since fighting began on Thursday night. President Dmitry Medvedev ordered all measures be taken to provide the refugees with aid and shelter.
Prime Minister Vladimir Putin was in Vladikavkaz to discuss assistance measures. Journalists in the region urged for a corridor to be formed to allow for their evacuation, along with women, children and elderly citizens.
The conflict saw South Ossetia renew calls to Russia and the international community for recognition of its independence.
Medvedev slammed Georgia's actions in South Ossetia, saying Tbilisi had committed an act of aggression targeted against civilians and peacekeepers. Putin said that by its operations in South Ossetia, Georgia committed a crime against its own people and delivered a deadly blow to its territorial integrity.
Allegations have been thrown back and forth between Moscow and Tbilisi, with Russia claiming its actions are a response to Georgian violations of its non-use of force commitments and Georgia claiming Russia is engaged in acts of aggression on its sovereign territory.
Despite the conflict, Moscow and Tbilisi did not sever diplomatic relations.
Meanwhile, Georgia's second and larger breakaway republic of Abkhazia conducted air and land operations in the Kodori Gorge, the only piece of Abkhaz territory under direct Georgian control, and Sukhumi claimed that it has launched a rocket strike on military facilities in West Georgia amid fears Georgian troops are massing near its borders. Georgia claims the Kodori airstrikes were carried out by Russian jets.
Tensions between Russian and Georgian ally Ukraine also increased over the conflict, with Moscow accusing Kyiv of facilitating Georgia's offensive against South Ossetia by selling Tbilisi arms. Ukraine responded by dismissing Russia's role as a peacekeeper in the conflict, saying it is instead a direct party to it.
August 10 - Abkhazia threatens to boil over
There remained optimism for a ceasefire in South Ossetia on August 10. Georgia said it had sent a proposal for a ceasefire to the Russian side, but Moscow maintained no request for talks had been received through official channels. Representatives from European countries and organizations, including the OSCE and the Council of Europe, headed to the region to try and broker talks. Russia said no talks could be held until Georgian forces return to the positions they held before August 6, and Russian forces on the ground claim Georgian forces continued aggression in the region despite Tbilisi's ceasefire proposals.
The situation in the South Ossetian capital of Tskhinvali returned to a relative calm, although sporadic artillery fire could still be heard. A Grad multiple-missile attack claimed the lives of three Russian peacekeepers on Monday, adding to a total death toll in the region claimed to exceed 2,000. Georgian forces are confirmed to have been forced out of the city, which is now again under the control of Ossetian forces.
Claims continued to be made by Georgian media of airstrikes by Russian jets on targets in Georgia proper, claims denied by the Russian Defense Ministry, which says civilian facilities and populated areas have not been targeted. Georgian media claims that Tbilisi Airport has been bombed, and that a factory that produces Su-25 fighters was hit. Georgian media also reported that the provincial town of Gori had been hit, causing a mass evacuation.
The international community was united in calling for an end to hostilities.
The conflict threatened to spill over into Georgia's other breakaway republic of Abkhazia. Abkhaz forces launched an air and ground offensive on the Kodori Gorge over the weekend in an attempt to regain control of the one piece of Abkhaz territory still under Tbilisi's direct control. Districts bordering Georgia were put under martial law as Abkhaz troops moved to guard the frontier in the Gali district and quell suspected disturbances in Georgia's neighboring Zugdidi district. The Russian Defense Ministry confirmed that an ultimatum to lay down arms had been handed to the Georgian forces in the safety area in Zugdidi, where Tbilisi earlier agreed to the stationing of Russian peacekeepers in an attempt to prevent an escalation of the conflict in the region.
With tensions mounting, several ships belonging to the Russian Black Sea Fleet left port in Sevastopol for waters off Abkhazia on Sunday. The Abkhaz leadership and the peacekeeping command requested the presence of the vessels to prevent a repeat of the South Ossetia scenario. There have been conflicting reports as to whether the ships are there to impose an arms blockade, or merely to support peacekeeping operations. One Georgian missile ship was reportedly sank when it tried to attack the flotilla. Meanwhile, tensions with Ukraine continued to escalate after comments by the Ukrainian Foreign Ministry were issued implying that ships involved in operations off Abkhazia would not be allowed to return to their Crimean port.
The presidents of South Ossetia and Abkhazia said that the conflict in Tskhinvali showed that their republics cannot be integrated into Georgia and again called on the international community to recognize their independence. Russian Prime Minister Vladimir Putin said that the conflict had "dealt a fatal blow to Georgian territorial integrity". Other officials suggested the peace process aimed at settling the region's frozen conflicts had been set back decades.
Russian President Dmitry Medvedev, Putin, Kokoity and Bagapsh, and Moscow Mayor Yury Luzhkov all accused Georgia of the genocide of the Ossetian people. Medvedev has bound the Prosecutor's Office to collect information on Georgia's alleged crimes in the conflict.
Concern continued to mount over the growing humanitarian crisis in the region. Russia is sending food and medicinal aid into the region and Vladikavkaz in North Ossetia continued to accept refugees displaced by the fighting.
Putin defended Russia's role in the conflict, saying its actions were "absolutely justified." He called Georgia's NATO ambitions "an attempt to drag other countries and nations into its own bloody adventures," and for an immediate halt to aggression in the region.
The conflict hammered the Russian stock markets and saw the ruble plummet nearly 50 kopecks against the dollar and Azerbaijan was set to decide on measures to be taken on the export of its oil products across Georgia through the Baku-Tbilisi-Ceyhan pipeline and further from the ports of Poti - allegedly bombed over the weekend - and Batumi.
August 11 - Ceasefire plan held back by fresh attacks
The foreign ministers of France and Finland, the countries holding the European Union and OSCE presidencies, arrived in Georgia on Monday to present President Mikheil Saakashvili with a three-step settlement plan. The details of the plan are as yet unclear, although Saakashvili did sign a ceasefire document. However, Russia says it has yet to see this, and said that Tbilisi's ceasefire proposals were "not worth a penny" as hopes for a ceasefire suffered a setback amid claims heavy bombardment of the South Ossetian capital Tskhinvali by the Georgian side had resumed.
With attention around the world focusing on the region, rifts between Russia and the West resurfaced, with Prime Minister Vladimir Putin slamming the United States for flying home Georgian soldiers stationed in Iraq and lambasting the "cynicism" of western observers. He said Russia would see its peacekeeping mission in South Ossetia through to the end, after having warned its Western partners that Georgia had been preparing for acts of aggression, saying that Saddam Hussein had been hanged for crimes similar to those which he accused the Georgian president of committing.
Russian President Dmitry Medvedev likened the West's policy regarding the conflict in the Caucasus to the appeasement of Germany in 1938. He pledged that Russia would continue to play the role of guarantor of stability in the region and would never leave South Ossetia in trouble. He also said he had received reports suggesting Russian citizens were being detained in Georgia.
Russia categorically denied that carpet bombing had taken place in Georgia and said Tbilisi Airport had not been hit. The Russian General Staff said its units will not go beyond South Ossetia's borders and enter Georgia proper and said there would be no additional mobilization in response to the crisis.
Russia moved to calm fears it is bombing oil facilities in Georgia, after reports were made by the Georgian media over the weekend that Russian jets had bombed an oil terminal in the key port of Poti. Moscow also denied it had targeted the Baku-Tbilisi-Ceyhan pipeline, the one major pipeline in the region to bypass Russia. Concerns over the instability in Georgia has seen Russian pipeline operator Transneft and Azerbaijan agree to double the flow of Azeri oil along the Baku-Novorossiisk pipeline for the time being.
Meanwhile, Tbilisi announced plans to take Russia before the International Court in The Hague for what it called the genocide of Georgians in Abkhazia, seen as a response to Russia's earlier accusations that Georgians had carried out genocide against Ossetians in Tskhinvali.
Russia's Federal Security Service (FSB) alleged that foreign nationals have been fighting with Georgian forces in South Ossetia...
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