RUSSIA – UPPER VOLGA NEWS REPORT

June 30, 2007

Author: Roman Vvedensky, BISNIS representative in Nizhny Novgorod, Russia

The report summarizes commercial, political and business development news in the Nizhny Novgorod region, and Republic of Tatarstan in June 2007. The information is received from the Russian news agencies (INTERFAX, AK&M, NTA), TATAR-INFORM.RU, INTERTAT.RU, REGNUM.RU, regional periodicals, PR departments, and web-cites of regional governments and local companies.

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The report highlights:

Nizhny Novgorod Region:

· Nizhny Novgorod region’s government signs agreement with Garbe World Cargo Center to build logistics center

· Japanese company to set JV with GAZ Group to produce automotive coolers

· SIBUR Holding and SolVin set JV to produce PVC in Nizhny Novgorod region

Republic of Tatarstan:

· Tatneft announces deal with Continental tire producer

· German automotive company to set JV in Alabuga

· Schneider Electric launches licensed production in Tatarstan

· Kazan Compressor Company considers JV projects with Siemens and Solar Turbines

NIZHNY NOVGOROD REGION

Nizhny Novgorod region’s government signs agreement with Garbe World Cargo Center to build logistics center

The Nizhny Novgorod region’s government signed an agreement with Garbe World Cargo Center, Germany, to build a multimodal logistics center next to Nizhny Novgorod International Airport. The project was developed jointly with representatives of Russian Railroads, and it provides for a good access to local railways, highways, water- and airways.

The land site for the project is over 22 acres; the total area of the buildings is 485,000 – 538,000 square feet. Total investment in the project is estimated at US$ 35-40 million. The project will be launched in late 2009 – early 2010.

Japanese company to set JV with GAZ Group to produce automotive coolers

According to RM Systems, a subsidiary of GAZ Group, it concluded an agreement with T.RAD Ltd., Japan, to build a plant in Nizhny Novgorod. The plant would produce radiators and coolers for cars, light commercial vehicles (LCVs), and medium trucks, assembled at GAZ automotive works. Total investment in the project is estimated at US$ 30 million.

The new plant will be launched in early 2009, and its annual sales are estimated at US$ 30 – 35 million. The design production capacity of the new plant is 600,000 units per year. The plant plans to expand its range of products with cooler units for heavy trucks and buses, sold to local and foreign automotive companies, which run assembly projects in Russia.

RM Systems also plans to develop a partner project with Decoma International (www.decoma.com), a subsidiary of Magna International automotive holding, to produce plastic components for a new Class D car, assembled at GAZ automotive works in Nizhny Novgorod.

SIBUR Holding and SolVin set JV to produce PVC in Nizhny Novgorod region

On June 28, SIBUR Holding and SolVin, which is a subsidiary of Solvay (www.solway.com), Belgium, and BASF, Germany, signed an agreement to set a joint venture RusVinyl.

The agreement provides for construction of a new plant, which will produce 330,000 tons of PVC annually. RusVinyl will buy licenses from Solvay to produce PVC in suspension and emulsion. Sibur will ensure supply of ethylene from its plants in the Nizhny Novgorod region as a raw material for the joint venture. Total investment in the project is estimated at Euro 650 million.

REPUBLIC OF TATARSTAN

Tatneft announces deal with Continental tire producer

Tatneft, a major oil development company of Tatarstan, announced a deal with Continental, Germany, to buy its technology for production of metal-chord tires.

NizhnekamskShina, co-owned by Tatneft, will produce the new tires. The design production capacity of the project is 600,000 metal-chord tires per year at its first stage (in 2008-2009), and 1,200,000 metal-chord tires annually at the second stage of the project (in 2010-2011).

In early June, NizhnekamskShina launched a new rubber mix plant to produce rubber mix according to Pirelli standards. The rubber mix plant will produce 21,000 tons of rubber mix annually. Pirelli signed an agreement with NizhnekamskShina to produce 100,000 Pirelli tires on the off-take terms.

German automotive company to set JV in Alabuga

Under the economic cooperation agreement between Saxony, Germany, and Republic of Tatarstan, Lomma GmbH (www.lomma.de) and ELAZ automotive company signed charter documents to set a JV Lomma-Alabuga in the Alabuga free economic zone, Tatarstan. The joint venture would produce agricultural vehicles and vehicles for airports.

Schneider Electric launches licensed production in Tatarstan

Tatarstan Electro-Technical Company (TATEC) was officially launched in Tatarstan under the license agreement with Schneider Electric (www.schneider-electric.com). TATEC would produce package transformer substations (PTS) and their components.

Tatenergo, the leading electricity company of Tatarstan, is the major consumer of PTS, produced by TATEC. TATEC is the second manufacturing company in Russia after a factory in Moscow, which operates under the license agreement with Schneider Electric. TATEC plans to expand its sales further to other Russian regions. The factory is equipped with three elevating tables for substation assembly. The production capacity of the plant is 100 PTS annually at the first stage and 200 PTS annually at the second stage.

Schneider Electric plans to launch two more licensed projects in Tatarstan, engaged in production of low-voltage and medium voltage electrical equipment, and production of equipment for power substations.

Kazan Compressor Company considers JV projects with Siemens and Solar Turbines

Kazan Compressor Company KMPO announced plans to start a joint project with Siemens, Germany. The JV would produce gas-compressor units and gas-power plants for major oil and gas companies of Russia, including Gazprom. The latter requires that machinery, purchased by the company, should report minimum 75% localization in this country.

The senior management of KMPO also met with representatives of Solar Turbines (http://mysolar.cat.com/cda/layout?m=6637&x=7) to discuss plans for production of Solar Turbines equipment under its license.

For more information on Upper Volga region, Russia, visit BISNIS online at http://www.bisnis.doc.gov/bisnis/country/volga.cfm

BISNIS (www.bisnis.doc.gov) is part of the U.S. Commercial Service (www.export.gov).