What the Russian papers say


MOSCOW, June 21 (RIA Novosti)

Rossiiskaya Gazeta

What is preventing Russia from joining the WTO before Ukraine?

The decisive round of the talks on Russia's accession to the World Trade Organization opened in the Swiss capital, Geneva, today. Curiously, many people are not so much concerned about when Russia will join the WTO, but whether it will do so before Ukraine.

Margarita Maximova, a professor at the Russian Academy of Sciences' Institute of the World Economy and International Relations, picked up the theme today in the government daily, Rossiiskaya Gazeta.

From now on, Russia and Ukraine will be rivals rather than partners in Geneva, because the country that joins the WTO first will be able to make demands on the other accession candidate. In addition, many problems complicate Russian-Ukrainian relations.

The United States has the final say on when Russia and Ukraine join the WTO. Although President Bush has repeatedly stated he intends to support both countries' accession this year, in reality, the situation is much more complicated.

The principled differences in the demands made by the U.S. and other WTO member countries on Russia and Ukraine are obvious. They demand that Russia apply WTO rules on state trade enterprises to all the other Russian companies with state participation, whereas no such demands are made on Ukraine. Russia should raise domestic prices for natural gas and bring them closer to world prices, but Ukraine does not need to do this. The list could go on. This is a clear case of double standards, which clashes with the main principle of the WTO: non- discrimination.

Economic reasons cannot explain this strange situation. On the contrary, the key WTO member countries are trying to use the talks for political purposes.

America's readiness to support Russia's accession to the WTO is dependent on Russia's position on the political resolution of international problems, and the terms of accession are seen as part of political horse-trading in general.

Meanwhile, the tactic of dragging out the talks with Russia and simultaneously granting a carte blanche to Ukraine is not productive, to say the least, above all for the U.S. In a bid to save sectors of its own industrial base, Ukraine may take the most unpredictable and unpopular measures.

Vremya Novostei

Arms market for Russia expanding -- exporter

The arms market for Russia is expanding, with India and China set to remain long-term partners for Russia, Sergei Chemezov, the head of Russia's leading arms exporter, Rosoboronexport, said today in a newspaper interview.

He told Vremya Novostei, a popular daily, that the company was gaining more partners, reaching 59 in 2004 in comparison with 53 countries in 2003. Rosoboronexport's order book remains at $12 billion plus or minus $1 billion. Aircraft generally represent the chief export item (about 60%), but this year the navy is predominating.

Out of the $5 billion earned by the agency over the last year $3 billion came from India and China. "The share of these two major buyers will fall to some extent next year, because we have concluded major deals in other regions - with Malaysia, for example," said Chemezov. "We are not ruling out reopening in Algeria." Contracts that have already been drawn up with Algeria are worth about $3 billion.

Rosoboronexport's annual sales will continue to be worth just more than $5 billion. And all parties to military-technical cooperation could provide the country with around $6 billion.

The past year has seen a dramatic rise in military technical cooperation with Latin America. "We have attended all the exhibitions in that region, in Chile, Brazil and Venezuela, to promote our weapons," the head said. "And they are gradually emerging on this market, above all small arms and helicopters. The feedback has been very positive." This year's supplies to Latin America will double.

Chemezov mentioned contract payments with goods produced in the country supplied with arms as a new form of cooperation. At the last meeting of Russia's military technical cooperation commission, he proposed that the president advance tied loans to several Latin American countries. "No decision has yet been made on this region, but Jordan has been allocated about $500 million for a period of five to six years," the Rosoboronexport head said.


Capitalization of Russian companies to surge - Stepashin

The market value of the Russian economy will surge in the next five years to between $5 trillion and $6 trillion from the current $350 billion, Audit Chamber Chairman Sergei Stepashin said yesterday.

"In the early days of privatization, property was not described and valuated, which led to erratic evaluations and massive transfers to offshores," a daily, Gazeta, quoted the official as saying. Therefore, a large part of these assets are either in no way involved in economic activity, or are at least not reflected in legal accounting, which grossly understates Russia's GDP.

Stepashin said that a re-evaluation of assets would raise the real value of Russia's economy, which would mean it could become a full member of the G8 club of advanced nations. (For the record: the United States economy is worth $14 trillion.)

Analysts were stunned by Stepashin's remarks. Yevgeny Gavrilenkov, the chief economist with Troika Dialog, a Russian brokerage, said: "In terms of market value, Russian companies are indeed way behind similar companies in other countries - by 30% to 40%. However, it is up to the market, not the government, to set the market value."

Alexander Golovtsov, the chief analyst with Uralsib, an asset management company, said the market set lower values for Russian companies because of the higher risks involved. He said it was pointless speaking about higher capitalization without reducing political and corporate risks.

When it comes to decision-making, foreign investors look at the level of corruption, bureaucracy and the judicial system in a country, as well as its fundamental indices. Therefore, Vadim Kleiner, the director of corporate research with Hermitage Capital Management Investment, said the capitalization of Russian companies could be higher with a better legal system, greater protection of property rights, and better corporate management - especially in state-owned companies.


European bank delays Sakhalin oil project financing

The European Bank for Reconstruction and Development (EBRD) has decided to delay a loan to the Sakhalin II energy project amid environmental concerns over a ground oil pipeline.

A business daily, Biznes, reported today that environmental issues had become a genuine battleground for Sakhalin II. In the last few years, environmentalists have waged a battle against project operator Sakhalin Energy in a bid to save endangered gray whales near the island. The campaigners say that seabed oil and gas pipelines do irreparable damage to the whales' habitat.

Sakhalin Energy announced in March that pipelines would bypass the areas, but now environmentalists claim that the new pipeline routes may damage sturgeon-spawning areas.

"We are continuing successful negotiations with the EBRD and a series of other credit agencies," Sakhalin Energy spokesman Ivan Chernyakhovsky said. "We hope to resolve the financing issue by the end of the year." Sakhalin Energy is also holding talks with Japan's Bank for International Cooperation, America's Eximbank and Britain's Export Credit Guarantee Department. In all, the company wants to borrow $5 billion for foreign organizations.

MDM-Bank analyst Andrei Gromadin said he did not think that the $12-billion Sakhalin-II project would face financial problems. "Western banks are unlikely to overlook this project," he said. "Sakhalin Energy will soon start delivering gas to Asian customers. Moreover, Gazprom should soon join the project, as it is in talks with Shell about exchanging a controlling share in Sakhalin II for 50% of the Zapolyarnoye-Neokom joint venture. The project will then become virtually risk free."

Royal Dutch/Shell owns a 55% stake in Sakhalin Energy. Japan's Mitsui and Mitsubishi own 25% and 20% correspondingly.


Integration unpopular in Russia - survey

Russians do not want to unite with anyone, a leading business daily, Vedomosti, reported today.

Referring to a survey conducted by the Eurasian Monitor organization, the paper wrote that Russians did not find attractive the Common Economic Space (CES), the Commonwealth of Independent States (CIS) or even a united Europe.

The survey showed that Russia was the most isolationist country of the four CES member states (Russia, Belarus, Kazakhstan, and Ukraine). A total of 30% of the Russian respondents said they preferred to live "in their own country, without unions with other countries," whereas 27% said they dreamed about a "revived U.S.S.R."

People in the other CES countries were more enthusiastic about integration. In Belarus, 24% were in favor the Common Economic Space, and 22% a united Europe, whereas only 21% said Belarus should live on its own. In Kazakhstan, 27% voted for the Common Economic Space and 25% for living on their own. Ukraine turned out to be the most integrationist state with 30% of respondents in favor of integrating with a united Europe and 26% with the CES.

Valery Fyodorov, the director of All-Russian Center for Public Opinion Studies (VTsIOM), explained, "Russia is the only self-sustained country," whereas the other three countries "have to look for integration options." The paper also wrote that Fyodorov had said Russians had heard a great deal about various integration projects in the last 10 years, but they had had little effect on people's lives.

VTsIOM polled 1,600 people in Russia for the Eurasia Monitor project; the Novak social laboratory polled 1,100 in Belarus; the Donetsk Information and Analysis Center polled 2,100 in Ukraine; and in Kazakhstan, the think tank TsESSI-Kazakhstan polled 1,500.

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