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The Russian Armed Forces consume huge amounts of oil and petroleum products
Deputy Defense Minister and General of the Army Vladimir Isakov, who commands the logistics-support department, recently signed a cooperation agreement with LUKoil president Vagit Alekperov. This document in particular stipulates cooperation to upgrade the material and technical base of the department's military units. More intensive cooperation means that LUKoil may soon start delivering the bulk of all petroleum, oil and lubricants under Defense Ministry contracts, thus completely ousting Yukos from this market. All major Russian companies are invited to bid at official trading sessions organized by the logistics-support department, as well as by its central rocket-propellant and fuel administration. However, Rosneft, TNK and some other companies do not take part in these sessions because of fixed prices that the Defense Ministry cannot exceed under current legislation. However, market prices have been rising constantly, especially over the last year. Naturally, oil companies cannot make super-profits by providing the army with oil. Nonetheless, LUKoil and Yukos take part in these trading sessions. Talking to Nezavisimaya Gazeta, LUKoil sources noted that, although the prices for army deliveries did not correspond to market levels, it did not mean that the company was operating at a loss. Yukos said that they maintained large and stable supplies, which meant that the company could plan production a quarter in advance. However, Yukos is not the state's favorite partner today. The company's cooperation with the Defense Ministry, as well as other military departments and law-enforcement agencies, therefore seems quite strange in this context. According to Nezavisimaya Gazeta's sources, Yukos provides the Defense Ministry with nearly 30% of all its petroleum, oil and lubricants. In political terms, a more loyal company should replace it and LUKoil seems to be the perfect candidate, all the more so as it has confirmed its interest in providing fuel to the military.
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