CBR lowers discount rate to record-low since 1992 as of Dec 28.

MOSCOW, December 26 (Itar-Tass) -- The Bank of Russia board of
directors on Friday made a decision to lower the discount rate by 0.25
percent to annualized 8.75 percent as of Monday, December 28.
Simultaneously, the interest rates on the Bank of Russia's transactions
are to go down by 0.25 percent, the CBR's public relations department said.

The Bank of Russia's discount rate is down again to a record-low since
1992. This is a tenth reduction of the rate in the outgoing year.
The discount rate is an instrument of monetary and credit control used
to set caps on interest rates in the money market. With it the CBR
influences inter-bank interest rates, rates on the deposits of corporate
and retail clients and on loans extended by lending institutions.
The CBR's public relations department has said that on December 1-21
of this year the consumer price index was up by 0.4 percent. Annualized
inflation kept declining and on December 21, 2009 it ran at nine percent,
while on the same date last year the parameter stood at 13.5 percent. In
view of the favorable inflation expectations and the Bank of Russia's
decision to lower interest rates the risk the official inflation forecast
for 2010 will be exceeded is estimated as insignificant.
November 2009 saw further rise in the industrial production index and
there was observed industrial production growth in real terms for the
first time over months. At the same time there were no signs of a tangible
improvement in Russian banks' lending activity. The decision to lower
interest rates is expected to ease the factors restricting economic growth
and to support the GDP's newly-developed uptrend, Prime-Tass reports.
Further steps by the Bank of Russia to alter interest rates will
depend on inflation trends, industrial and lending activity parameters and
the condition of the domestic financial market, the Bank of Russia said.
CBR President Sergei Ignatiev said on September 30 the bank had the
potential to lower the discount rate proportionately to the reduction of
inflation.
"If inflation goes down, so will the discount rate," he said.
Ignatiev voiced the hope that the lowering of the discount rate would
encourage banks to reduce their interest rates on loans, and this will
cause the amount of lending to grow.
"The way I see it, the normal growth rate in the lending sector is
1-1.5 percent a month, or 10-15 percent over several years to come,"
Ignatiev said.

.Yanukovich vows to expand relations with RF, Belarus, Kazakhstan.

DONETSK, December 26 (Itar-Tass) -- Viktor Yanukovich, one of Ukraine'
s leading candidates in the ongoing presidential election race, has
promised that in case of his victory he will step up relations with
Russia, Belarus and Kazakhstan.
"Russia is one of the main partners for us," Yanukovich said in a live
television broadcast late Friday evening. He recalled that Ukraine's
current leadership that had risen to power after the dramatic election of
2004 never invited opposition representatives to participate in the
dialogue with Russia.
The leader of the Party of Regions pointed to the need for advancing
closer cooperation with Russia, and also with Belarus and Kazakhstan,
which are in the process of creating a common economic space.
Yanukovich believes that Ukraine should join them at least in a
three-plus-two format, thereby promoting their early admission to the
World Trade Organization, which would make it possible to jointly defend
the interests of each of the partner states.

.Ukrainian leadership harmed relations with Russia - Yanukovich.

DONETSK, December 26 (Itar-Tass) -- The Ukrainian leadership's
policies towards Russia have caused considerable economic harm to the
country, presidential candidate Viktor Yanukovich said in a live broadcast
on the Ukraina television news channel on Friday
On one hand, he said, this is seen in the slump of bilateral trade,
which has been down from 40 billion dollars to 13 billion dollars. On the
other, and this is most important and terrible, says the leader of the
oppositional Party of Regions, Ukraine sustained strategic losses over
these years. As an example he mentioned the South Stream and Nord Stream
pipelines, which are to be completed by 2015. Yanukovich said that those
two projects would turn Ukraine, with its gas pipeline system, into a
second-rate gas transiter.
"For this reason negotiations must be started at once with Russia and
the European Union with the aim to conclude a long-term contract on the
transit of guaranteed amounts of gas. Otherwise, Ukraine will have nobody
else to blame. We are yet to assess the real size of the economic damage
caused to the country. But it has certainly lost credibility with its
partners, including European ones, who found the Ukrainian authorities'
unpredictable actions really scaring," Yanukovich said.

.Ukraine must seek long-term gas transit contract with RF-Yanukovich.

KIEV, December 26 (Itar-Tass) -- Ukraine must enter into negotiations
with Russia and the European Union on a guaranteed amount of gas to be
transited through its territory, the leader of the oppositional Party of
Regions, Viktor Yanukovich, said in live television broadcast on Friday
evening.
"Question number one that must be resolved is that of starting
negotiations with Russia and the European Union at once on transiting
guaranteed amounts of gas in the long term," Yanukovich said. "Otherwise
it may turn out that today we are used by both Europe and Russia, and
tomorrow nobody will need us."
Yanukovich believes there is a great risk Ukraine's gas pipeline
system may prove unnecessary for Europe, or it will be necessary only to
move minimal amounts of gas.
He is certain that bypass pipelines being laid around Ukraine would
spell tangible political and economic losses for Ukraine.
"We have not yet sized up the damage we have suffered from the lack of
confidence in Ukraine from Russia and our European partners," Yanukovich
said.
"Two of the past five years Ukraine has kept Europe strained," he
added, bearing in mind the gas crises of the winters of 2005-2006 and
2008-2009.
The oppositional leader believes that Ukraine must demonstrate to one
and all it is a reliable partner.

-0-str