What the Russian papers say

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MOSCOW, June 10 (RIA Novosti)

Vedomosti

Investors study president's news course

The latest developments in Russia under President Vladimir Putin have prompted investors to ask the same question they asked years ago: "Who is Mr. Putin?"

Vedomosti, a leading business daily, reported today that investors now know he is not the Western-leaning reformer they once thought he was, while his current image as a politician more interested in his ratings and television's omnipotence is not a source of boundless enthusiasm. However, most of them still say Russia is somewhere you can earn good money.

Three years ago, the answer to the question: "Who is Mr. Putin?" which was first posed at the World Economic Forum 2000 in Davos, seemed to be clear. Liberal economists claimed Putin was on their side and described him as a Western-looking reformer, despite the ongoing campaign in Chechnya and the unfolding war on oligarchs Boris Berezovsky and Vladimir Gusinsky.

However, the dismemberment of oil giant Yukos, the imprisonment of its owners Mikhail Khodorkovsky and Platon Lebedev, broader use of the tax agencies, and end to gubernatorial elections, led investors to have second thoughts about the future of Putin's Russia.

The investment community is beginning to take a more cynical view on Putin. When talking about the apparent difference between Putin's liberal declarations and authoritarian practices, Goldman Sachs analyst Rory McFarquhar said that although Putin seemed to respect his "head" - speechwriting liberal technocrats, - he could not help following the advice of his "heart" - nationalist politicians and authoritarian economists.

Nevertheless, the paper reported that the new Putin mythology had not put investors off.

Peter O'Kelle, CIS executive director at Germany's HypoVereinsbank, said that journalists should worry about democracy, whereas businesspeople cared about profit-to-risk ratios. Peter Westin, an analyst with Aton brokerage, agreed that Russia was becoming more attractive to investors, despite the whims of its leadership. He said the reforms were moving ahead, even if they were moving slowly.

Argumenty i Fakty

Is there a conspiracy against Russia?

Many Russians view the eastward advance of NATO and "color" revolutions in former Soviet countries of the CIS as interconnected events. Is there a conspiracy against Russia?

Writer Alexander Prokhanov and Alexander Yakovlev, head of the Democracy foundation, shared their opinions on this score in a weekly, Argumenty i Fakty, in the run-up to Russia Day on June 12.

The West's geostrategic objective is to weaken Russia, to prevent it from becoming a superpower again, and to turn it into a compliant donor. This is why Russia is being surrounded by security cordons and "hostile regimes" are being established around it. "So, there are all the elements of a conspiracy," Prokhanov said.

According to him, the attack against Russia includes the introduction of foreign standards and values in Russian society. "Hollywood is as important as the CIA in this attack, and the eastward advance of NATO is as important as young Russian men wearing T-shirts with the American flag," the writer said. "And the consequences of this attack are unpredictable."

Yakovlev said there was certainly a conspiracy against Russia, but it involved Russian bureaucrats who were "greedy, corrupt and despised their own people." He said the goal of this collusion was personal power and enrichment.

"In the past, we blamed everything on the Jews, [but] now it is the turn of Americans," said Yakovlev, a "hero" of Mikhail Gorbachev's perestroika. "If you watch Russian television regularly, you get the impression that the U.S. has nothing to do other than plot against Russia."

Yakovlev was shocked by the results of a poll according to which 80% of Russians view America as the country's main enemy. "Russia and the Soviet Union never fought the U.S. Not a single Russian soldier was killed by an American and vice versa," he said. "And now this shocking result. But if you ask anyone what the U.S. did to him or her personally, they will have no answer."

On the whole, if there is a conspiracy against Russia, "the main conspirators are we ourselves," Yakovlev said.

Gazeta

Subsidiary undermines LUKoil's reputation

Russian regional oil company Naryanmarneftegaz (NMNG), a subsidiary of current leading national oil producer, LUKoil, was slapped by a $1.46-million tax bill for February-March 2004 Thursday - something likely to lead to a criminal investigation against NMNG's top management - and could undermine LUKoil's plans to convert NMNG into a joint venture with its U.S. shareholder ConocoPhillips, Gazeta, a daily, reported.

Tax authorities say NMNG had knowingly provided false information to minimize its tax claims, something the oil giant will contest in court. LUKoil spokesman Dmitry Dolgov said the dispute had been brought to the arbitration court.

LUKoil chairman Vagit Alekperov admitted for the first time in April that back tax claims for 2002-2003 against his company were a possibility. Later he claimed nothing illegal was found in LUKoil's statements, but the tax authorities landed a punch via his subsidiary.

Though Alekperov's April announcement cost the company $900 million in market capitalization, the stocks did not respond to yesterday's calamities and closed up at an increase of 0.43%. NMNG's tax bill is grossly overshadowed by those of Sibneft ($300 million), TNK-BP (around $1 billion) and Yukos ($27 billion).

However, the bill could affect LUKoil's reputation as a company that, according to vice president Leonid Fedun's announcement last year, dropped all, including legal, tax optimization schemes - a commitment the subsidiary's managers seem to have overlooked.

ConocoPhillips promised to invest $500 million in a joint venture on the basis of NMNG. Conoco is unlikely to retract its promise, but could be more cautious about its future dealings with LUKoil.

Nezavisimaya Gazeta

Political parties lose much of their financial weight

Political parties in Russia have calculated the fiscal year's results and concluded that their budgets are dwindling rapidly, a possible sign of the political process' devaluation, Nezavisimaya Gazeta, a daily, reported.

The parties' financial reports were published by the Federal Registration Service, which has been controlling political parties and public associations since 2004. It turns out that the parties lost much of their financial weight in 2004. United Russia is a relative exception - its budget in the past year, though it failed to reach the 2003 level of 1.17 billion rubles ($1 = 28.45 rubles), remained at just more than 915 million rubles.

The liberal parties had the least of all to work with. The Union of Right Forces (SPS) (which invested 218 million rubles in parliamentary elections-2003) had about 49 million rubles, and Yabloko had only 42 million. Funding for the Communist Party (KPRF) dropped, though not significantly, from 112 million to 73.1 million. And The Liberal Democratic Party (LDPR) budget also shrank from 121 million to 91 million.

Donations by citizens and organizations remain the main source of income for most of the parties. However, United Russia supporters contributed only 157 million rubles, while the party received more than 713 million from legal entities.

The parties' spending is also of some interest. LDPR spent most of its money on elections and on its own popularization, and merely 672,000 was spent on supporting party leadership. KPRF and SPS spent nothing on their leaders, but United Russia spent 209 million on its leadership, 10 times as much as it spent on all elections combined.

While the parties have to pay much for the maintenance of their regional departments (SPS spent a quarter of its budget on them and United Russia spent 402 million), the elections in the regions cost next to nothing as usual.

The Chechen presidential elections, however, cost United Russia 95% less than the election campaign of the governor of Bryansk. It spent 87,000 rubles in Chechnya and 1.5 million rubles in Bryansk.

Biznes

Cheap Volkswagen set to hit Russian market

Volkswagen is planning to make a car selling for 3,000 euros, Biznes, a daily for the business community, reported today.

Although the model is primarily designed for China and poorer Asian countries, market players said it could also be successful in Russia.

The "3K" vehicle is a response to the Renault Logan, which costs 5,000 euros. If the design is successful, VW will sell the car in East Asia and China, where the German concern has lost its market share because it sells more expensive cars. The company is completing talks on building a car plant in India, where the 3K may be assembled.

The paper reported that the model might also appear in Russia. Volkswagen is currently in talks with the Economic Development and Trade Ministry on building a plant in Stupino near Moscow. But a company spokesman in Russia told Biznes that VW did not have any official information on the 3K project.

"Cheap cars are popular here," a senior VW dealership manager said. "Classic Ladas still sell well. But the new VW cars will feature solutions of the 1990s as compared with Lada vehicles based on the Fiats of the 1960s."

However, according to Russian carmaker AvtoVAZ, the market share of cheap cars is declining. Cars in the $3,000-$4,500 price bracket accounted for 25% of the Russian market in 2003 and fell to 19% in 2004. Cars in the $4,500-6,000 bracket tumbled even further from 30% in 2003 to 7% in 2004.

The paper was told that if VW wanted to sell the 3K in Russia, it would begin by importing cars from China. However, the company would have to lobby legislative amendments, as VW exports from China are currently prohibited.

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