Russian uranium may be traded on American market
The United States Court of International Trade has lifted the 118% duty on the import of uranium fuel from Russia. The court instructed the U.S. Department of Commerce to specify the commodity range of the antidumping procedure within two months, and to exempt Russian low enriched uranium from it.
The decision opens the door to uranium deliveries from Australia, which plans to enrich its fuel in Russia.
The antidumping investigation, which resulted in the approval of the prohibitive 118% duty on the import of low enriched uranium from Russia, was initiated in 1991, when the global markets almost folded owing to the inflow of cheap uranium from Russia.
In 1993, Russia and the Untied States signed an intergovernmental Agreement Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons (the HEU-LEU Agreement), valid until 2013. As many as 44% of America's 103 nuclear power plants currently use uranium fuel supplied under that agreement.
The United States imports 23.5-24 million pounds of uranium oxide from Russia. Although a pound of uranium costs about $85 on the spot market (the price soared to $138 last summer), Russia supplies the fuel at fixed non-market prices.
Information about prices is confidential, but sources in the Russian Nuclear Energy Ministry said Russia annually earned $400-$800 million under the agreement with the United States, which is considerably lower than it could earn by selling uranium at market prices.
In 2006, Russia's state-controlled nuclear equipment exporter Techsnabexport (Tenex) said it was $1.1 billion short in revenues due to the antidumping measures.
At the same time, the decision taken by the U.S. Court of International Trade will not give Russia full access to the American market, because the two countries have not signed an agreement on the peaceful use of nuclear energy.
Trade in fuel for nuclear power plants usually proceeds within the framework of such agreements, but Russian-U.S. trade is governed by the HEU-LEU agreement, which prohibits uranium fuel deliveries outside its framework.
Tenex may get a bypass into the U.S. market in two months. The Russian Federal Nuclear Power Agency (Rosatom) has signed a nuclear cooperation agreement with Australia, under which it can process 4,000 tons of Australian uranium a year.
Australian uranium processed in Russia may reach the Untied States because the antidumping duty has also been lifted from uranium enrichment services.
Gazeta, RBC Daily
Russia forging energy dialog with China
Amid its cooling relations with the EU, Russia has so far failed to make China an alternative market for shipping its fuels. Beijing, in turn, is reluctant to meet Moscow half-way and pay a better price for Russian oil, gas and electricity. Without this, Chinese exports would never be as economically efficient for Moscow as the traditional Western routes.
Chinese Prime Minister Wen Jiabao will visit Moscow in November to meet with his Russian counterpart Viktor Zubkov and sign an intergovernmental agreement on the Eastern Siberia-Pacific Ocean (ESPO) pipeline. On Friday, Russian Deputy Prime Minister Alexander Zhukov tried to make it clear to the Chinese partners that an agreement on the Skovorodino-Daqin oil link would not necessarily imply cheap oil shipments.
State-run Rosneft, which is authorized to export hydrocarbon resources to China, said it saw no reason to sell cheap oil when Western partners showed extensive demand and were making much better offers. Beijing, on the contrary, is expecting cheap oil to flow through the proposed pipeline once it is completed. (As of now, oil is shipped to China by railway tanks).
Zubkov has finally achieved a vague compromise: Russia and China sign a pipeline agreement with Beijing shouldering all costs of the Skovorodino-Daqin link construction, but the agreement does not guarantee cheap oil exports. In other words, he arranged for China to take on all the risks and then have to negotiate a pricing policy which would suit Rosneft, making its eastern exports quite as lucrative as western ones. The two prime ministers are expected to make the final decision in Moscow in November, but arrangements are subject to change by then.
"Economics compels us to firmly uphold our position," said Igor Nikolayev, director of strategic analysis for the auditing consultancy FBK. "Our oil and gas production dynamics is less than impressive, while the domestic market demand is on the rise. Politically, we would be happy to agree to China's offer, but economically, it is unrealistic for Russia today," he added.
Sergei Sanakoyev, head of the Russian-Chinese Center of Trade and Economic Cooperation, said he doubted that the November meeting would achieve any progress on oil and gas issues. "The meeting will simply increase awareness because Russia has a new premier, that's all," he said.
Russia could export $6.5 billion worth of arms in 2007
State arms export monopoly Rosoboronexport will sell over $400 million worth of weapons in 2007, which is more than last year, mainly thanks to aircraft sales.
According to its general director Sergei Chemezov, the state agency will set a new record this year despite all the problems facing the monopoly - financial, technological and personnel.
The fall in the dollar rate alone has caused $45 million in losses for just one air defense contract. A manager of one of the plants said it concerned the supply of S-300 mobile launchers to China.
According to Chemezov, Rosoboronexport will sell $6 billion worth of weapons this year and; together with companies licensed to export spare parts and services, the total value of deliveries may amount to $6.5 billion ($6.13 billion in 2006).
What makes these plans realistic is large deliveries of aircraft, said Konstantin Makiyenko, an expert at the Center for Analysis of Strategies and Technologies.
He estimates that Russia will supply more than 50 Su-type planes this year: 12 Su-30 MKMs to Malaysia, 12 Su-30 MK2Vs to Venezuela, six Su-30 MKAs to Algeria, 12 Su-30 MKIs to India and about 10 Su-30 MKI kits for licensed assembly in India.
Russia will also sell about 10 MiG-29 fighter jets; and together with aircraft equipment, grounds systems, simulators and helicopters, deliveries may exceed half of Chemezov's quoted figure.
Deliveries of S-300 PMU2 air defense systems could start under a new contract with China, and small quantities of short-range AD systems could be delivered to the United Arab Emirates, Syria and other Arab countries, while among naval armaments one diesel submarine could be handed over to Algeria, the expert said.
As follows from a recent article in the Indian magazine India Today, one of the most secret Russian arms deals to lease a Project 971 nuclear submarine to the country for $650 million will be realized in June 2008, and therefore 2007 promises to be modest in naval equipment sales.
Marat Kenzhetayev, an expert at the Center for Disarmament Studies, said growing prices for military products are also contributing to Russian exports.
Business & Financial Markets
Celtic rejects Severstal's "unsolicited offer"
The board of Irish mining company Celtic Resources Holdings Plc has unanimously rejected the second acquisition offer from Russian steel giant Severstal, as it considered the price "very significantly undervalued the company and its prospects."
The board's decision was not influenced by a 40% growth of Celtic securities due to the proposition, or Severstal's generous offer of 270 pence per share.
Celtic has three operating mines with cash flow in Kazakhstan: the Suzdal (100% owned) and Zherek (100% owned) gold mines, and the Shorskoye molybdenum mine (50:50 joint venture with KazAtomProm), and one development project in Russia - the Tominskoye copper/gold project (74.51%).
In July 2007, Celtic sold 100% of Mikheyevskoye, the second of the Chelyabinsk projects, for $33 million.
Severstal announced Friday that it had increased its share in Celtic from 26.6% to 29.7% by buying shares from DWS Investments. It also sent a second offer to Celtic for the acquisition of the remaining shares, upgrading the price from 220 to 270 pence in cash "for all of the issued and to be issued share capital of Celtic."
The Russian company, which offered ?161 million ($327 million) for Celtic, said in a press release that it had "secured a letter of intent to support its offer from Barrick Gold Corporation for its 6.6% shareholding in Celtic."
Severstal's interest in Celtic boosted the Irish company's securities by more than 40%, to ?2.84 on September 28 (a growth of 23% from the day before). Celtic reported that it had received an acquisition offer from one more potential buyer, which further spurred the growth of its securities. However, it refused to name it.
Experts say Celtic rejected Severstal's offer because the Russian company had miscalculated.
Dmitry Kolomytsyn, an analyst with the Aton investment company, said: "It should have first agreed with the [Irish] company's managers."
Stanislav Fomenko, an analyst with Veles Capital, supports that view, saying that coming to terms with the managers "would have been a shorter and cheaper way to reach their goal."
According to experts, the management of Celtic, seeing the interest of Severstal's chief beneficiary, Alexei Mordashov, in the company and the gold-mining business in general, will haggle over the price to the last.
Kolomytsyn said Severstal should not raise the price until it becomes clear who can pay more.
Fomenko believes that Severstal will raise the price to 300 pence per share and then wait to see Celtic's reaction. "The more Severstal pays Celtic, the worse effect this will have on the effectiveness of the deal and the cost of the company as a whole," he said.
According to Aton, the target price of Celtic share is now 237 pence ($4.81).
Russia's neighbors to channel Kazakh oil to Poland
Lithuania, Azerbaijan and Georgia are to sign an agreement on joining the project to extend the Odessa-Brody pipeline to Poland. The proposed pipeline is to link the existing routes, thus reducing Eastern Europe's near-total dependence on Russian imports.
Experts however describe this project as political and unlikely to be materialized soon.
The pipeline extension project, which has been discussed for the past few years, involves the construction of a 250-kilometer oil link to connect Odessa-Brody, which is a branch of the Druzhba Pipeline's southern line, and Poland's Adamow on the Druzhba's other branch. Once laid, the new link will connect the Caspian and Black Sea regions with the Baltics, a new route to ship crude on to Europe. As of now, the financing for the $400-million project by EU Structural Funds is under negotiation.
The Odessa-Brody pipeline was built in 2001 to channel 9 million metric tons of oil a year as part of a bigger system to ship Kazakh oil to Europe via the Black Sea. As none of the exporters volunteered to use it, it was eventually reversed to pump Russian oil arriving through Druzhba from Brody to the Black Sea.
"There are no resources to fill the pipeline. Without that, only politicians can evaluate the project's feasibility," said Mikhail Perfilov, Petroleum Argus analyst. Admittedly, Russia is currently negotiating the expansion of the Caspian Pipeline Consortium (CPC), which pumps oil from Kazakhstan to Novorossiysk, from 31 million to 67 million metric tons a year. Along with that, Russia is planning to build a 35-50 million metric ton pipeline from Bulgaria's Burgas to Greece's Alexandroupolis, which would also ship Kazakh oil to the Mediterranean bypassing the busy Turkish straits.
In addition, as East European refineries are technologically adjusted to processing Urals grade oil, they will have to be re-equipped to refine other kinds of crude, said Valery Nesterov from the Troika Dialog brokerage. But companies might still do it to diversify energy supplies, reducing the present "Russian threat," he added.
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