MOSCOW, January 29 (RIA Novosti) Putin's chosen successor cancels TV debates with rivals/ Kremlin discards youth movement it fostered/ Russia ready to pay for independence from transit countries/ TNK-BP benefits from warmer relations with Gazprom/ Russia may lose lucrative Chinese arms market/ PricewaterhouseCoopers ends dispute with tax service
Putin's chosen successor cancels TV debates with rivals
First Deputy Prime Minister and presidential candidate Dmitry Medvedev has officially refused to participate in pre-election TV debates. His decision disappointed his opponents and over 70% of Russians, who wished to see their candidate on TV.
Medvedev probably decided to follow the example of current President Vladimir Putin and the party in power, United Russia, who have also refused to engage in TV debates. According to the Levada public opinion center, which surveyed 1,600 people in different regions on January 22, 73% of respondents said Medvedev should participate in debates.
Medvedev, however, preferred to listen to professional political strategists. "A decision to appear at the debates would have been a charitable act in favor of Medvedev's rivals. When a highly popular candidate agrees to debate with opponents with lower ratings, some of his votes go over to those opponents. No elections professional would ever have advised Medvedev to share his votes," said political analyst Sergei Markov, a United Russia lawmaker.
Independent political analyst Stanislav Belkovsky cited other reasons behind Dmitry Medvedev's refusal to appear on TV. "Medvedev would have looked weak in comparison to other candidates," the expert said. "He is not good at rhetoric, a bureaucrat rather than a public politician, and even Andrei Bogdanov, leader of the Russian Democratic Party, one of the Kremlin's anti-liberal spoilers, is much better at public speaking. Taking part in live debates could have exposed Medvedev's weaknesses. Nothing could be more damaging for a candidate running for a top post than showing the Russian people his weaknesses, his inability to hold his own in a public debate."
Kremlin discards youth movement it fostered
The youth political movement Nashi (Ours) will be radically reorganized and will no longer function as a centralized federal project. There are no plans to liquidate the pro-Kremlin movement's brand, but Kremlin sources said Nashi will no longer be employed as a political rent-a-crowd.
The movement will have only five regional offices left out of 50. "There is no longer an Orange Revolution threat, so we can give more attention to other things now. We aren't going to disappear. We have simply grown up," said the movement's leader Nikita Borovikov, in what sounded like a brave attempt to reassure himself rather than anyone else. Borovikov became the leader after his predecessor Vasily Yakemenko was appointed to head the state committee for youth affairs. Kremlin sources said Nashi wouldn't be officially closed, because the authorities could not just leave young crowds without supervision and guidance.
"Their services certainly wouldn't have been requested during this election campaign anyway," said one of the Kremlin supervisors of the movement, adding that with the current political lineup and with the high popularity of the party in power, a loud street mob would be the last thing they needed.
"[President Vladimir] Putin was dissatisfied with how Nashi was faring, they were causing tensions with the West. [Dmitry] Medvedev positions himself as a friend of the West, and aggressive national patriotic support does not fit in with that image," political analyst Stanislav Belkovsky explained.
"When Nashi members were first denied Schengen visas, it became like playing with fire, because Russia was compelled to react proportionately, which was of course not in our interests. The Nashi movement was launched as an antidote to the Orange threat. Its job was to carry anti-Western slogans, quickly fill a square, and prevent a revolution if need be. Now the Orange fears have subsided, and Nashi has found itself at a loose end," Belkovsky said.
"Nashi was an expensive toy designed for election purposes. Now there is no need to finance such a cumbersome structure," said Ilya Yashin, leader of the youth division of the Yabloko party. "I do not think they will close it down though. They will probably freeze it for later use."
Russia ready to pay for independence from transit countries
Polish media assume that during his February 8 visit to Moscow, Prime Minister Donald Tusk will propose that Russia build a new export gas pipeline across Estonia, Latvia, Lithuania, Poland and Germany.
Analysts say Moscow will accept the offer only if the underwater Nord Stream pipeline project encounters major problems, such as sky-high costs or political differences.
In the past, Poland proposed building a new offshoot of the Yamal-Europe pipeline as an alternative to Nord Stream, which is to be laid from Russia to Germany along the bed of the Baltic Sea. Belarusian President Alexander Lukashenko supported the idea, which Moscow nevertheless rejected.
Polish government experts have calculated that the pipeline they propose will cost half as much as Nord Stream, which is assessed at $11.8 billion. Unlike the Yamal-Europe pipeline, the project proposed by Poland will run only across Russia and European Union countries.
The Polish government says this will prevent illegal gas tapping and unpredictable increases in transit tariffs. The governments of Estonia, Latvia and Lithuania have approved the idea.
Jerzy Rutkowski, head of the economic section at the Polish Embassy in Moscow, said the idea is based on the forgotten Amber onshore project, which has the required infrastructure.
"We assess it at $3 billion, whereas Nord Stream may cost as much as $12 billion if not more," Rutkowski said.
However, analysts are skeptical about the alternative pipeline.
Svetlana Savchenko, head of investment projects at independent Russian consulting group 2K Business Audit, said: "The Amber pipeline has few advantages over Nord Stream. In fact, its only advantage, and a not very large at that, is its cost. The underwater part of Nord Stream has been assessed at $5.7 billion and the onshore part at $6 billion."
"In other words, the onshore part of the pipeline toward the Baltic Sea will have to be built anyway, which cuts the difference between Amber and Nord Stream to less than $2.7 billion," Savchenko said. "This is how much Russia will have to pay for gaining independence from transit countries, which it seems willing to do."
TNK-BP benefits from warmer relations with Gazprom
After four years of negotiations, Russian energy giant Gazprom has approved the terms for connecting Rospan International, the largest remaining gas asset of Russian-British oil venture TNK-BP, to its pipelines.
TNK-BP is celebrating the event as a big victory and hopes to triple deliveries this year. But Gazprom will also benefit from the deal, as Rospan may be contributed to its potential joint venture with TNK-BP and BP.
Rospan International, a company wholly owned by TNK-BP, was established in 1992 to develop the Achimovsk gas formations of the East Urengoiskoye condensate fields in the Yamal-Nenets Autonomous Area (northeast Urals).
It received the technical terms for connecting the Novo-Urengoiskoye and East Urengoiskoye fields to the Unified Gas Supply System on January 25.
Alexander Berezikov, TNK-BP vice president, said: "The document specifies two crucial things: the point of connection and the volume of deliveries. For TNK-BP this amounts to a possibility of comprehensive development of Rospan's fields."
The Russian-British venture will now begin designing a pipeline and relevant infrastructure, and may start building them in 2009. The project is to be completed by 2012.
Berezikov said Gazprom had agreed to receive 3.4 billion cubic meters (bcm) of gas from Rospan starting in 2008, although the earlier approved volume was only 1.2 bcm. The gas monopoly will annually receive 3.4 bcm by 2012, when Rospan plans to produce about 9 bcm. By 2017, it will increase deliveries to Gazprom's pipeline to 17.4 bcm.
Denis Borisov, an analyst at Solid brokerage, said the decision to connect Rospan to the pipelines was part of broader agreements between Gazprom and TNK-BP to set up a trilateral alliance with BP, which made the news last summer.
When negotiating the acquisition of a 62% stake in the Kovykta gas condensate field in East Siberia from TNK-BP, Gazprom agreed to give it an option to buy back a 25% stake if they set up an alliance.
TNK-BP expects the establishment of the strategic alliance to be completed by April. Viktor Vekselberg, its executive director for gas business development, said TNK-BP might contribute Rospan to the joint venture.
Experts agree that the connection of Rospan to the Unified Gas Supply System is a major success for TNK-BP.
Valery Nesterov, an analyst with the Troika Dialog brokerage, said: "Before that, Rospan could not properly plan production, which sometimes differed by 50% year on year."
Russia may lose lucrative Chinese arms market
Moscow is greatly concerned about the prospect of losing the lucrative Chinese arms market. Independent sources said Russian Defense Minister Anatoly Serdyukov would focus on this issue during his upcoming visit to Beijing.
Anonymous Defense Ministry officials said Serdyukov could visit China, but declined to give an exact date. It appears that the Russian and Chinese Defense Ministers will not meet before the Russian presidential election, and their talks are scheduled to take place not later than the new president's inauguration.
A few years ago, Russia annually sold $1.8 -2 billion worth of weapons to China, and this accounted for 40% of Moscow's foreign-currency earnings. However, Russia and China currently have no major defense contracts.
The most serious problem is that Beijing no longer needs the military equipment offered by Russia. The Chinese People's Liberation Army's General Armament Department wants to buy rocket-launched flame-throwers, long-range bombers, nuclear-powered submarines and other weapons systems from Rosoboronexport, Russia's main state-controlled arms exporter.
Moreover, Beijing wants to receive Russian weapons-production licenses.
Mikhail Dmitriyev, head of the Federal Service for Military and Technical Cooperation, said Russia was unable to fulfil some Chinese requests for various reasons. One of them is that Russian military leaders are divided on product range.
However, Russia has no misgivings about supplying the most sophisticated weapons to India, another major customer - for example the Su-30MKI Flanker multi-role fighters featuring French and Israeli avionics.
Beijing has proposed a break in the talks and would like Moscow to assess the content of future arms contracts, because Chinese generals are disappointed with the Russian approach. However, Moscow could lose billions of dollars if the European Union abolishes the current moratorium on military cooperation with China.
PricewaterhouseCoopers ends dispute with tax service
An appeal of PricewaterhouseCoopers Audit (PwC division in Russia) against a decision by the Moscow Arbitration Court was dismissed on Monday. The court had recognized as illegitimate the Yukos audit performed by the company in 2002-2004. This will probably be the end of PwC's plight in Russia: after having paid to the federal budget the 16.76 million rubles received for the Yukos audit, the company will probably be allowed to continue operating in Russia, despite ominous forecasts.
The Moscow Arbitration Court agreed with all the arguments of the Federal Tax Service and with the auditor's complicity in Yukos's illegal tax schemes, thus essentially accusing PwC of violating professional standards. The tax service successfully proved that in performing the oil company's audit in 2002-2004, PwC produced two different documents. In the official version, it said that Yukos adequately reflected its financial status, but pointed out certain indicators which had been tampered with in the copy labeled "for management only." As a result, the court ruled that the auditor should remit to the federal budget the income from the deal, 16.76 million rubles.
PwC was not content with the court ruling, and appealed against it, but initiated the dismissal of the appeal on Monday. A spokesperson for the auditor cited a law stating that if one of the defendants in a litigation is liquidated (Yukos in this case), the case must be closed. But the company still has to pay the amount received from Yukos to the federal budget.
Under law, consciously producing a false audit statement entails the loss of the auditing company's license, and for the executive who signs the false statement, a cancellation of his or her auditor's qualification certificate, and a lawsuit against them, according to Sergei Shapovalov, general director of the company Tax Assistance.
A source in another major auditing company who spoke on condition of anonymity said that after the first court decision is enforced and the auditor remits the amount to the federal budget, the conflict will most likely be over. Otherwise, PwC would never have been selected as the auditor for major state-run companies such as Gazprom and Sberbank this year.
"The auditor and the government must have reached some sort of a silent compromise after many months of haggling," echoed Dmitry Putilin, manager partner of consulting company Tax Group.
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