MOSCOW, November 21 (RIA Novosti) Euro-bureaucrats cause Gazprom to pull back on investment plans in Germany /Basic Element to invest in Afghanistan/Foreign companies set to take over Russian aircraft market - experts/Evraz ready to expand further in U.S. /Russia gets money back through offshore zones
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Euro-bureaucrats cause Gazprom to pull back on investment plans in Germany
Hans-Joachim Gornig, managing director of Gazprom's German subsidiary, GAZPROM Germania GmbH, said the Russian gas concern has decided to freeze its investment plans in Germany. Branch experts, however, do not rule out that the Russian giant may resume asset buying in Germany.
According to Gornig, Gazprom's waning interest in German investments is due to "the political climate, " because in Germany the energy markets are becoming increasingly state-regulated.
In his view, separating gas and power networks from owner-enterprises represents the selling and socialization of the means of production in the socialist spirit.
As of July 1, 2007, European officials are planning to start a state-enforced monopolization of the energy market that will destroy the vertically integrated chains linking production with final end-users, and officials in Berlin are not yet ready to make any exceptions for Gazprom.
Denis Ignatyev, a Gazprom spokesman, said that "no investor is likely to buy assets dearly that he will have to sell under duress and for a negligible sum the next day."
Sergei Chelpanov, deputy director general of another of Gazprom's subsidiary, Gazpromexport, said that "non-market methods, as practiced by European governments, are threatening the stability of power supplies and energy security in Europe."
"Gazprom has decided to halt its investments until Russia and the EU can agree on terms and conditions for a new framework agreement on partnership and cooperation," said Alexei Belogoryev, an analyst with the Institute of Natural Monopolies Research.
"Europe is not the only place where Gazprom can channel its investments," said the expert. "Russia has wide-ranging investment opportunities on the Asian market, including such leading countries as China, Japan and India. Investments can also be made in the more exotic energy markets of Africa and Latin America."
But in the foreseeable future, Belogoryev said, Europe's gas sector will remain the most attractive and most predictable destination for Russian investments. Alfa-Bank analyst Konstantin Batunin thinks that Gazprom, while showing indifference, "may be forcing down the price of the asset it seeks."
Basic Element to invest in Afghanistan
Private Russian investment fund Basic Element, owned by aluminum king Oleg Deripaska, has chosen a new object of investment in Afghanistan. Its subsidiary, SoyuzMetalResource, will bid for the right to develop the Aynak copper deposit, which has proven reserves of 240 million tons and a copper content of 2.3%.
A spokesman for Afghanistan's Ministry of Mines and Industries said tender participants include Canadian Hunter Dickinson, Chinese China Metallurgical Group and Zijin Mining Group, India's Hindalco Industries, U.S. Phelps Dodge Corporation, Kazakhstan's Kazakhmys, Russian state-controlled foreign trade company Tyazhpromexport and Deripaska's SoyuzMetalResource.
The results of the tender will be announced in two months.
The Aynak copper deposit is very rich, "with a high copper content and ores located close to the surface, and therefore easy to mine," said Viktor Kargun, head of the Afghan section at the Institute of Oriental Studies of the Russian Academy of Sciences.
"In the 1970s, Soviet specialists helped to explore it, and in the 1980s they planned to build a copper mining and processing works there jointly with Afghan colleagues, and export its production to Europe," he said.
Political and economic risks are high in Afghanistan. Kargun said that groups of fighters loyal to the former premier, Gulbuddin Hekmatyar, one of the strongest opponents of President Hamid Karzai, are frequently sighted in Lohar, the province where the deposit is located.
Hekmatyar was the most ruthless mujahideen leader during the Soviet occupation of the 1980s.
However, foreign companies work in unstable Nigeria, Congo and Ghana, where armed guards protect operations, said Denis Nushtayev, an analyst with the Metropol brokerage.
There are even riskier countries to work in, such as Bolivia, where the government has decided to nationalize its oil industry, and later its mining industries, he said. As to Afghanistan, its authorities are working towards "a civilized state," Nushtayev said.
Licenses for deposits in high-risk countries sometimes cost little, he said, and the winner of the Aynak tender will earn the right to develop the copper deposit for several million dollars.
Vladimir Katunin, an analyst with the Aton brokerage, said a deposit with such large reserves would be able to produce about 220,000 tons of copper over 20 years.
He said construction of the works will cost more than $200 million, and that production can start in five years. Katunin said the deposit's development would be profitable with copper prices at $1,100-$1,200 per ton.
According to him, the average copper price in 2006 will be $6,800 per ton and $3,300 in 2011, when production could start in Aynak.
Foreign companies set to take over Russian aircraft market - experts
Under the Russian-U.S. agreement on Moscow's WTO accession, Russia agreed to charge much lower import duties on foreign aircraft and their components, and experts have said that Western companies will take over the Russian civilian aircraft market in the next few years.
Moscow will reduce customs duties on foreign wide-body airplanes from 20% to 7.5% within four years of joining the WTO.
Moreover, customs duties on their components, including engines, will be reduced from 20% to 5%, while duties on leased airliners seating not more than 50 passengers, or 115 to 160 passengers, will be reduced considerably between now and 2011.
Current Russian duties and VAT charged on foreign aircraft total 40% of their cost.
By excluding airliners seating between 50 and 115 passengers, Moscow has virtually saved the $1.6 billion SukhoiSuperJet project, which will produce airliners seating 75 to 110.
The state has undertaken to finance about 50% of the project's costs.
Only the Ilyushin Il-96 Camber jumbo jet will be directly affected by the reduced customs duties. Under the federal target program for developing Russia's civilian aircraft, 37 Il-96s were to have been sold by 2015.
The international company Deloitte & Touche said few Il-96s are produced, and estimated production losses at $10 million apiece.
The Boeing B-737 and the Airbus A-320 are mostly vying with each other in the 115-160-seater aircraft segment.
Supplies of the Soviet-made Tupolev Tu-154 equivalent stopped in 2003. Moreover, the 126-seater Tu-334-200 and the Tu-204-300, which seats 160 passengers, are not mass-produced.
The Russian government expects the MS-21 aircraft to compete against the A-320 and the B-737 by 2016. However, most independent experts said Russia is unable implement the program without foreign assistance.
Boris Alyoshin, head of the Federal Agency for Industry, said the program will involve either Airbus or China.
The non-profit partnership United Aircraft Consortium said Western companies will take over the Russian civilian aircraft market in the next few years.
In all, 678 passenger airliners will be scrapped in 2006-2015, to be followed by another 111 planes in 2015-2020. New foreign airliners will account for 67% of long-range and 85% of medium-range planes.
Evraz ready to expand further in U.S.
Russian steelmakers have pulled off another big international deal: news broke Monday that the Evraz Group will buy American company Oregon Steel Mills for $2.3 billion.
The ambitions of the steel holding, which purchased U.S. vanadium producer Stratcor this year, feed on the money of new Evraz shareholder Roman Abramovich.
Of the $2.3 billion, $500 million will be provided by Evraz, and about $1.8 billion will be borrowed. The bid will be made next week and will follow the usual run of approvals, including permits from anti-monopoly and other regulating bodies.
As the deal is finalized, the American company will join Evraz Group. Its headquarters is expected to remain in Portland, Oregon. The physical output of the merged company will reach over 16.8 million tons this year.
Commenting on the deal, Alexander Frolov, Evraz chairman, said: "Acquisition of Oregon Steel Mills will give Evraz a firm foothold on the North American market. We will have a considerable presence on an attractive plate steel market and in a growing tube business in the U.S. and Canada. The united company will also be a leading world rail producer."
In turn, Jim Declusin, president and chief executive officer of Oregon Steel Mills, said he was pleased that his company will be part of a leading global steel producer.
He said the merger will give the company much of what is vital for its further development, including additional financial resources needed for successful competition on new and growing markets.
The president is clearly hinting at Evraz's increased financial possibilities after the Millhouse Capital investment company, controlled by Roman Abramovich, bought a 41% stake in the group.
Evraz made its first "inroad" into America in April of this year when with its own $110 million it purchased Stratcor Inc., one of the world's biggest vanadium products manufacturers.
In the first nine months of this year, Oregon Steel Mills posted $127.9 million in net profit on $1.13 billion earnings. Evraz Group's 2005 earnings were $6.5 billion and net profit, $905 million.
Russia gets money back through offshore zones
Russia received $35,320,000,000 in foreign investment between January and September 2006 and invested $34,600,000,000 into foreign economies. However, Russian funds are promptly returned through offshore zones.
Russia's foreign investment programs have made it possible to equalize capital exports and imports. The Federal State Statistical Service said Monday that Russian investment abroad soared by 51.4% between January and September 2006 on the same period in 2005.
At the same time, foreign investment increased by 31.7% in Russia.
Experts have noted balanced mutual investment for several years. "This shows that the open Russian economy is ready to send and receive funds," said Trust investment bank economist Yevgeny Nadorshin.
However, the indices do not adequately reflect the real situation. "These gross indices also include short-term loans," said Yelena Matrosova, head of the BDO-Unikon macro-economic research center.
Experts said data on accumulated capital - foreign investment volumes and repaid loans, as well as reassessed assets and obligations - is more authentic.
"Despite considerable two-way gross investment, the Russian economy receives long-term foreign investment in the form of loans," Matrosova said.
As of late September 2006, the Russian economy accumulated $129,998,000,000 in foreign investment, an increase of $18,163,000,000 on early 2006.
As of late September, Russian investment abroad totaled just $10,020,000,000, and increased by $2,745,000,000 since early 2006.
Matrosova said Russia tends to accumulate foreign investment, whereas Russian investment abroad is eventually returned.
Nadorshin said that Russian capital flows are dominated by tax-evading companies.
As of late September 2006, Russia accumulated $28,096,000,000 worth of Cypriot investment, whereas the breakdown for the Netherlands and the U.S. Virgin Islands is $22,488,000,000 and $3,199,000,000, respectively, he said.
"These are previously exported Russian funds, rather than foreign capital," Nadorshin told the paper.