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High – foreign investors and MOD

Econ growing- foreign investors and modernization.

Bridge 7/16 (Robert, the former editor-in-chief at The Moscow New, “Russia acquires the soft touch”, July 16, 2010, RT,

But the real story is not the dozen suburban spies who, after a 10-year FBI investigation, were not charged with a single incident of espionage. No, the real story is how Washington and Moscow worked together to resolve a rather embarrassing rift between them without either side resorting to Cold War posturing and hysterics. Moscow for its part even offered “consular assistance” as opposed to some Soviet-style Siberian deportation for its detained “spies”. Even the traditional knee-jerk critics of Russia could not deny that something was very different this time around. “When its Cold War spies got caught in the West, Moscow 's usual response was silence. The Kremlin refused with rare exceptions to acknowledge its undercover agents,” wrote Richard Boudreaux in The Wall Street Journal. “But after the U.S. arrested 10 members of what it called a deep-cover Russian espionage ring, Moscow was quick to admit that at least some were Russian citizens—a shift that offers an intriguing subplot to the spy story itself.” This new approach to politics is apparently reflected in the Program for Effective Use of Foreign Policy in the Long-term Development of Russia, recently published in the Russian edition of Newsweek magazine, which sets out to reinvigorate relations in dozens of diverse countries. The policy was drafted by Russian Foreign Minister Sergey Lavrov in response to President Medvedev’s demand for the nation’s foreign policy to support his main goal of rebuilding the national economy, and energizing relations with other countries. Russia’s interests, according to the new policy, are served best by modernization, which requires Russia to forge powerful – and peaceful – alliances with major European countries, the United States, as well as rising economic powers like Brazil, China and India. The Medvedev Method On Monday, Medvedev called for alliances with the US and European Union in a new strategy aimed at attracting investment to the Russian economy at a time when "modernization" is high on the to-do list. Russia is trying to wean itself from its over-dependence on oil, gas and metals exports, while attempting to streamline aging infrastructure, some of it left over from the Soviet period. "We need special alliances for modernization… first of all with Germany, France, Italy, the EU in general, and with the United States," Medvedev said in a speech to Russian ambassadors. "The foreign policy of our country… pursues one sole aim: to promote the growth of our citizens' prosperity in every way possible," he said. Medvedev's Peter-the-Great-style modernizing efforts went to work on Thursday when he invited German companies to participate in the modernization of Russian companies. "I hope that German structures will participate in the modernization of [Russian] companies, which are interesting to them, taking into account my decision on reducing the number of strategic enterprises," Medvedev said at a meeting with representatives of German business circles. President Medvedev and German Chancellor Angela Merkel were in the Russian-German St. Petersburg Dialogue forum in the Russian city of Yekaterinburg. Medvedev stressed that many Russian companies have been removed the list of the country's "strategic enterprises" and are being privatized, which makes investing into these ventures much easier. In conclusion, it will be interesting to see how the western political think tanks – which seem to maintain their relevancy, not to mention government grants, when their subjects are large and threatening – will spin the new face of Russian politics to fit their desired worldview. Moeover, how will the Russian economy fare in the near future with Moscow more actively embracing potential partners and investors around the world?

High – growth underway

Russia on fast track to recovery.

Eurasia Review 7/16 (European and Asian News Paper, “Fortum Posts Strong First Half Earnings”, July 16, 2010, Euroasia Review,

Fortum's President and CEO Tapio Kuula on Fortum's January-June 2010 results said the company "had a good first half of the year considering the exceptional market conditions. The Heat, and Russia Divisions as well as Distribution business area were able to clearly improve their profits from a year ago. Electricity Sales had a poor first quarter, but achieved better results in the April-June reporting period. The Power Division's second quarter financial results were not quite at the same level as in the excellent first quarter" The overall Nordic and Russian power consumption figures continued to increase from last year during the first two quarters of 2010. Industrial activity is clearly picking up in Fortum's key market areas. The Russian economy sustained its fast path of recovery. The first quarter of the year was characterised by an unusually cold winter and power price peaks at Nord Pool. The market environment was less extreme during the second quarter, although water and snow reservoir levels remained low and nuclear modernisation programmes in Sweden still decreased the availability of nuclear capacity. Nord Pool spot prices stayed at a higher level in January-June than in the same period 2009. Also Power Division's achieved Nordic power price increased by EUR 1 per megawatt-hour (MWh) from year ago. However, the achieved Nordic power price in the second quarter decreased by EUR ~3 per MWh from a year ago. The decline in the division's profitability stems from the lower achieved price in the second quarter, less benign power generation mix and also from an increase in the costs of Fortum's associated (co-owned) nuclear generating companies. The Russian wholesale power sector reform is progressing. Starting 1 July 2010, 80% of all produced power in Russia was sold on the competitive market. The wholesale power market is expected to be fully liberalised from the beginning of 2011. The regulation for new capacity is expected to significantly increase the capacity payments for new capacities to Fortum. "I am satisfied with the results achieved in the first half of 2010, still remembering there are areas where results could have been better. Thus, the first priority is to steadily improve our long term performance," Kuula said.

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