MOSCOW, February 27 (RIA Novosti) Oil and gas conflict with Russia may cost Lukashenko dearly/ CPC gets more time for bargaining/ Norilsk Nickel investors to earn over $1 billion/ Merrill Lynch buys into key greenhouse gas market operator in Russia/ Russian prosecutors scrutinize Kasyanov
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Vedomosti
Oil and gas conflict with Russia may cost Lukashenko dearly
The Economics Ministry of Belarus, worried by the destabilizing effect of dearer Russian oil products on its foreign trade, has drawn up a detailed privatization program for state-owned enterprises. This may put an end to the present Belarusian economic model, experts warn. Moscow does not believe Minsk is ready to part with large-scale assets.
Cases of privatization under Alexander Lukashenko, who has been president since 1994, are few and far between. All big plants and factories are still state-owned. If the Ministry's program comes into force, the entire economic policy of Belarus will be overhauled, said Alexander Gotovsky, head of economic analysis at the Ministry's Economic Research Institute.
Belarus remains a hostile country for foreign investments, said Alexander Chubrik, of the Minsk-based Institute of Privatization and Management. According to national legislation, the government could regain control of previously privatized enterprises at any time just by introducing the "golden share", so large-scale privatization will be impossible without changing the legislation. And, although political factors will work against structural reforms in the Belarusian economy, the end of Russian subsidies has made sweeping privatization in Belarus over the next few years inevitable, Chubrik said.
For Lukashenko, state control over the largest plants is above all an instrument of power, said Yaroslav Romanchuk, head of the Minsk-based Mizes Research Center. According to his information, the Belarusian government is so far only considering the sale of minority stakes in large operations (the Minsk Auto Plant, for example).
A source close to the Kremlin also believes that the Belarusians are unlikely to sell worthwhile assets: "Russia is interested in mutual economic penetration on market conditions, but Minsk may again advance socialist-cum-bandit terms for sale and up the asset prices tenfold. Russian companies are not foolish to cough up such large sums."
Kommersant
CPC gets more time for bargaining
The shareholders of the Caspian Pipeline Consortium (CPC) have received an opportunity to continue bargaining with the Russian government over plans to extend the Kazakhstan-Novorossiisk pipeline, which has been on the table for more than two years.
Italian energy company Eni, the operator of Kashagan, one of the largest oil deposits in Kazakhstan, plans to dramatically increase investment and production, and postpone the implementation deadline for the project, which should supply oil to the CPC.
Kashagan is the largest oil deposit discovered since 1977. Its recoverable reserves were estimated in 2000 at 13 billion barrels of oil and resources at up to 40 billion barrels.
Agip KCO, a company fully owned by Eni via Agip Caspian Sea BV, is the operator of the appraisal, development and future production operations in the Kazakhstan sector of the Caspian Sea. It is acting on behalf of seven international companies and under the North Caspian Sea Production Sharing Agreement (PSA).
Eni, Shell, ExxonMobil and Total each own 18.25% of shares in the company, while ConocoPhillips owns 9.26%, Japanese Mex 8.33%, and Kazakhstan's KazMunaiGaz 8.33%.
Agip KCO intends to once again postpone the date set for the commercial production of oil at the field, this time from early 2008 to late 2010. It also plans to increase the project's budget to $19 billion, according to The Financial Times.
Initially, commercial production at Kashagan was to begin in 2005, and the last time the deadline was postponed was the spring of 2006. At the shareholders' meeting it was also decided to increase the development costs from $10.3 billion to $14 billion.
The private shareholders of the CPC (the largest of them, Chevron, holds 15%) are at loggerheads with the largest state shareholder, Russia (24%). Russia's Federal Customs Service said the CPC was using an illegal tax optimization scheme. The Federal Property Management Agency (Rosimushchestvo) insists that the consortium should accept higher oil transportation tariffs and cut debt interest for its non-state shareholders.
The structure of the CPC capital may change, for the first time for a few years, as the Oman-controlled 7% stake in the CPC will be put up for sale.
According to several sources in Kazakhstan, ONGC Mittal Energy, a joint venture of India's ONGC and Mittal Steel, could buy the stake for the relatively modest sum of about $200 million.
Changes in the parameters of the Kashagan project could force the regional players to revise their plans. A two-year delay in its implementation will give time for more negotiations to all members of regional projects, including in Kazakhstan, Azerbaijan and Russia, in the Bourgas-Alexandroupolis pipeline project of Russian state oil pipeline monopoly Transneft, and in the Baku-Tbilisi-Ceyhan project.
Biznes
Norilsk Nickel Investors to earn over $1 billion
Norilsk Nickel, the world's largest producer of nickel and palladium, announced its preliminary profits for 2006 according to international financial reporting standards.
Its net profits exceeded $5 billion slightly less than predicted by experts. Despite the disappointment, analysts said that the company's shares would remain among the most attractive on the Russian stock market.
They predict that quotations for Norilsk Nickel will grow by 18%-20% in 2007, to $223 per share. They were traded at $189 on February 26.
In 2006, the company's net profit more than doubled (from $2.35 billion in 2005) and dividends reached $3.5 per share.
Tav Morgan, deputy director general and a member of the Management Board of Norilsk Nickel, said investors would receive more than $1 billion in 2007. The company's dividends amount to 20%-25% of net profits. This year's dividends are expected to be approved at a shareholder meeting at $6 per share.
"Norilsk Nickel shares are among the most liquid on the Russian market, as demonstrated by the company's profits for 2006," said Yury Vlasov, an analyst with Renaissance Capital brokerage. According to him, the figures cited by Morgan coincided with Renaissance Capital's evaluations, which means that the value of Norilsk Nickel shares will not be revised.
Experts from Alfa Bank, which is on the Central Bank's list of Russia's 30 largest banks, expect that non-ferrous metals prices will continue to grow in 2007, allowing Norilsk Nickel to post even more spectacular financial results.
"A minor correction is expected, but the average annual prices will remain very high," said Vladimir Zhukov, an analyst with Alfa Bank.
According to Broker Credit Service, the relatively high dividends of the metals giant were due not only to management policy, but also because its chief beneficiaries, Vladimir Potanin and Mikhail Prokhorov, need to accumulate funds for the division of the business.
Nezavisimaya Gazeta
Merrill Lynch buys into key greenhouse gas market operator in Russia
The requirements of the Kyoto Protocol to limit greenhouse gas emissions have created conditions in Russia for a business which is proving very attractive to foreigners.
The reduction in emissions and the sale of greenhouse gas emission "credits" are not yet up and running, but already foreign banks are willing to pay no small sum for the right to join in future environmental projects. It was reported on Monday that Merrill Lynch has purchased a controlling stake in the Danish company Russian Carbon Fund. The company promises to implement technological projects to cut back emissions at Russian enterprises. This purchase will make the American investment bank an intermediary in selling Russian greenhouse gas allowances to the Europeans. The deal is estimated at $200 million.
This will allow foreign companies to formally meet the Kyoto requirements, but not in their country, yet in Russia, where this is simpler and more cost effective to do.
The "Kyoto business" looks very unusual at first sight, because to cut emissions the Russian plants will not invest a single kopek in the first phase. All expenses involved in designing, importing and assembling equipment, and the auditing of the project are to be borne by foreign companies. But this kind of "Kyoto charity" has its own logic for both sides. To begin with, foreign companies undertake to carry out technological expansion, which may bring them sizeable benefits in the future. Secondly, foreign governments do not have to pay fines for violating the Kyoto agreement and are not required to impose strict environmental demands on their own companies.
The RCF plans to carry out 82 projects to reduce gas emissions from oil and metal companies, in the chemical industry, and in the utilities sector in Russia. These projects can reduce emissions by 140 million metric tons in 2008-2012 and ensure funding for the sale of "credits" valued at about two billion euros.
Gazprom and national power grid Unified Energy Systems plan to join the market as major players. In November 2006, Gazprombank and Germany's Dresdner Bank registered a joint venture in Luxembourg and UES held tentative talks with Danish and Finnish companiesin 2005-2006.
Gazeta
Russian prosecutors scrutinize Kasyanov
Mikhail Kasyanov, the former prime minister turned opposition politician, was summoned to the Prosecutor General's Office on February 26 for questioning in the Andrei Vavilov case,a former top official in the Finance Ministry and current member of the upper house of Russia's parliament said.
Political analysts said Vavilov's case, for which the period of limitations is due to expire in a month, had political connotations.
Vavilov, who was first deputy finance minister in 1997 in the government of Victor Chernomyrdin, is suspected of involvement in the embezzlement of $231 million from the federal budget. This case was dismissed in 2000, but the Prosecutor General's Office decided to reopen it in 2006.
Kasyanov, who began his career in the Finance Ministry in the 1990s and became its head in 1999, has not been charged so far.
Commenting on yesterday's interrogation, a source close to the investigation said: "Ten years ago, Finance Minister Anatoly Chubais, his deputy Alexei Kudrin, Deputy Minister of Foreign Economic Relations Mikhail Fradkov, and other senior officials were summoned for questioning in the Vavilovcase. It should be closed in April 2007 because its period of limitations is due to expire. Therefore, Kasyanov's summons for questioning can be viewed as the prosecutors' desire to comply with procedures."
Kasyanov, who currently leads the opposition Russian People's Democratic Union and movement Different Russia, believes that the summons was a political decision.
"The Prosecutor General's Office wants to implicate me, to tarnish my image before the 2008 presidential elections," he said.
The majority of experts agree that there is a selective interest in the prosecution actions.
"When somebody wants to rise to the political top, he or she should be ready to be scrutinized by the press and prosecutors," said Vyachedslav Nikonov, head of the Politics foundation.
Sergei Markov, director of the Institute of Political Studies, said the prosecutors' goal is to discredit Kasyanov. "A case in which a former premier is involved is a combination of a trial and political contract," Markov said. In his opinion, the point at issue is getting balance right.
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