Kasyanov tries to rally democrats without creating party
The Kremlin has been broadly hinting that it would never let former Prime Minister Mikhail Kasyanov into politics as a presidential candidate. After failing to win the leadership of the Democratic Party of Russia, Kasyanov is looking for other public fields where he can rally democratic forces, most probably for the local elections in March 2006.
"We will not wait to see which party the Justice Ministry will re-register; we will unite without forming a party," a source on Kasyanov's team said. The chosen forum is the all-Russia Civil Congress Democratic Russia Against Dictatorship, co-chaired by Georgy Satarov, head of the INDEM Foundation, Lyudmila Alekseyeva, head of the Moscow Helsinki Group, and Garry Kasparov, leader of the United Civil Front. They are expected to sign an agreement on coordinating the actions of the democratic movement after the New Year holidays.
This is a key issue for Kasyanov because his joining a party would incite Kremlin opposition. Staying outside the party process while the political system is being adjusted in favor of existing parties means political suicide. And following in the footsteps of former world chess champion Garry Kasparov and forming a non-partisan movement would mean joining the ranks of Kremlin critics.
Dmitry Oreshkin, director of the analytical center Mercator, said the regime had to reduce Kasyanov to the level of Kasparov, turning him into one more man who "expresses his dissatisfaction with the regime out loud."
Boris Nemtsov quits Neftyanoi
Neftyanoi Chairman Boris Nemtsov has announced his resignation from the bank after deeming it impossible to combine a business and political career. Few believe the recent raids of the bank were politically motivated, something Nemtsov initially claimed.
Previously, combining right-wing politics with business did not embarrass the former first deputy prime minister. While remaining a public politician in Russia and in the wake of the Orange Revolution in Ukraine, he became a non-paid economic adviser to President Viktor Yushchenko, which, however, did not stop him from being a "front man" in various commercial structures.
In February 2004, Neftyanoi owner Igor Linshits invited his friend to the company. He said that in view of the former SPS head's political past, the invitation had certain risks. "But we will be trying to avoid them. We are not in politics, we are in business. And politics is not among my top five priorities, that I am sure of," Linshits said at the time. This did not prevent him, however, from subsidizing the Communist Party (KPRF).
Although helping to lobby the interests of companies, "well-known politicians, as a rule, do not exercise substantial influence on business. The risks to their reputations are too high. Besides, the bank's activity is now the focus of its clients' attention," said a source close to Neftyanoi.
A week and a half ago, police raided Neftyanoi, and following the searches the Prosecutor-General's Office announced that the bank office's vaults were found to contain documents and computer servers used for illegal banking operations.
Russia gains nothing from paying its debts ahead of schedule - experts
While Russia's external sovereign debt is decreasing, its internal debt and the liabilities of Russian enterprises to foreign creditors are sharply increasing.
Russian authorities are planning to spend a large part of the Stabilization Fund, which is expected to reach 1.466 trillion rubles ($51.19 billion) by January 1, 2006 (nearly 6% of GDP), on repaying the country's external debt, and if possible, ahead of schedule. It is believed that doing so will save on interest payments. Independent Russian experts, however, consider that Russia's international ratings are raised not because it pays off its debts in advance, but because it does so on time.
Experts never tire of saying that leading world powers do well despite having multi-billion external debts. "It is an absolutely normal situation when a country has external and domestic debts whose size is matched against its economic ability to service and repay it," says Olga Shirokova, head of liabilities at the Vedi think tank.
"The United States has an external debt more than 50 times greater than Russia's," said Mikhail Delyagin, head of research at the Institute of Globalization Studies. "And our government is simply unable to invest the windfall of petrodollars without losses to the economy."
The state, while paying off its external debt, has neglected domestic debt. According to the Finance Ministry, internal debt as of November 1, 2005 stood at 841.33 billion rubles ($29.38 billion), a rise of 15% since the beginning of the year. According to most experts, this 15% growth is not critical, but the trend is dangerous.
"Internal debts are made to meet a budget deficit," explains Mikhail Chistyakov, an analyst with Obraz brokerage. But, he denied the deficit. "We do not have a budget deficit in this country. On the contrary, politicians and economists are constantly arguing where to spend the unexpected petrodollars.
"It is absolutely unclear why the state is borrowing money from individuals and legal entities and for what," Chistyakov said.
United Russia introduces new rules for gambling industry
The presidium of the United Russia faction decided that taxes on the gambling industry should be doubled. Following the amendment's introduction, the Russian parliament's budget and tax committee reviewed its previous decision about leaving the tax burden intact. In addition, it endorsed the amendment proposed by the party's leaders that would increase the state duty for a gambling license 10,000-fold, from 3,000 rubles ($105) to 30 million rubles ($1.05 million).
This year, the industry's turnover is projected at $5.3 billion, from which gambling machines will account for $4.5 billion. Russia currently has 360,000 such machines. The market is growing fast and already contributes nearly 1% to the GDP. The medication market in Russia is estimated at $6 billion.
In addition to the federal license on gambling networks, regional licenses will also be introduced. They will cost 300,000 rubles ($10,475) and be issued to each gambling establishment by regional authorities. Regions have worked several years to introduce this "two-key principle," which allows for the choosing of locations for such establishments.
"This is not re-distribution, this is the humiliation of the gambling business," said Samoil Binder, deputy executive director of the Russian Gambling Association. "Only three to four players will be left in the market." Another industry representative described the decision as "absurd," because it envisaged charging 15,000 rubles ($524) per month for machines that yield just 18,000 rubles ($628).
The authors of the amendments are not concealing their intent. "We are seeking to shrink the market," says Valery Draganov, chairman of the parliament's committee for economic policy. "We want to eliminate gambling halls that are randomly placed, badly equipped and not always legal."
Deputy Igor Dines, chairman of the gambling business committee of the Russian Chamber of Commerce and Industry, says that the decisions "are definitely political and have been influenced by the opinions of regions and the public." He says the federal authorities are to blame for the conflict because earlier they abolished the regional system of control over the industry.
Auchan to spend $250 million in Moscow region
The French Auchan group of hypermarkets will spend more $250 million to build five additional stores in the Moscow region. Auchan, which has its sites on downtown Moscow and beyond the ring road, has outstripped all other foreign retailers. IKEA, for one, began in the region and is still trying to get a site in Moscow.
According to a cooperation agreement effective until 2010, the group will build five more hypermarkets along the ring road worth more than 7 billion rubles ($244.41 million). Auchan President Christophe Dubrulle and Moscow Region Governor Boris Gromov have also agreed to build supermarkets in the regional towns 40-50km from the capital. The group has opened five hypermarkets worth 7.3 billion rubles ($2.55 billion) in the region since 2002.
Foreign retailers have suffered from the rivalry of the Moscow and regional administrations. "A company building in the [Moscow] region has few chances of moving into the capital," a spokesman from the German train Metro Cash and Carry said.
Auchan became an exception to this rule because of Dubrulle's visit to Moscow Mayor Yury Luzhkov that resulted in the allocation of several sites in the capital, including almost in the center of the downtown area. The French group plans to build 7-8 hypermarkets in Moscow (one of which has already opened).
"Auchan is the most successful (foreign company in Russia) because it knows how to negotiate," said the head of a Moscow development consulting company. "Real came to Russia at the same time, but Auchan has scored better, thanks to a correct policy of relations with the local authorities."
Other foreign companies are not so lucky. The Swiss furniture concern IKEA is still trying to get a site in Moscow. "The city wants a stake in the company, a seat on the management team and access to financial flows, which contradicts company policy," wrote the German magazine Die Welt, quoting a member of the IKEA management, who works in Russia.
German publishers to build paper factory in Russia
Four large German publishers intend to build a European-style paper factory with an annual capacity of 300,000 tons in Russia. Analysts are surprised that the German publishers intend to find investors in Moscow.
The project was initiated by the Federal Association of German Newspaper Publishers (Bundesverband Deutscher Zeitungsverleger -BDZV) and the Eastern Committee of the German Economy. Michael Harms, a member of the Eastern Committee Board, said the representatives of the publishing houses Axel Springer, Holtzbrinck, WAZ and Madsack would leave for Moscow Wednesday in order to establish contacts with investors. To accelerate the process, the Eastern Committee of the German Economy has even applied to former Chancellor Gerhard Schroeder for assistance in the hope that his friendly relations with Russian President Vladimir Putin will be helpful. The German publishers intend to hold talks with operating enterprises and investors from other industries.
Rising paper prices in Germany are the main reason for the German publishers' initiative. According to forecasts, they will continue to rise in the future. The Germans want to build a paper factory meeting western standards because, in Harms' opinion, the quality of paper currently supplied from Russia leaves much to be desired.
RAO Bumprom leading analyst Viktor Loginov says establishing large and ecologically harmful production facilities abroad has become a common practice. "The Europeans are trying to locate the majority of their pulp-and-paper plants in underdeveloped countries," Loginov says. "Judging by everything, they consider Russia to be such a country."
Experts estimate the construction of a paper factory to be at least $1billion. "It would be logical to look for funds in Western Europe," Alexei Bogatyrev, managing partner of the Lesprom Industry Consulting Company, says. In his review of existing Russian enterprises, he says the Kondopoga pulp-and-paper combine (Karelia) is the most promising in such a venture because it is close to the border.