MOSCOW, June 19 (RIA Novosti) Russia, Turkmenistan disagree on Caspian gas pipeline/ Moscow resumes arms supplies to Middle East/ Alrosa to sell diamonds in Moscow/ Possible financial crisis in China will affect Russia/ Russians become election-weary
Russia, Turkmenistan disagree on Caspian gas pipeline
Caspian gas pipeline negotiations are being hampered by disagreements. Russia, Turkmenistan, and Kazakhstan agreed to lay a gas pipeline around the Caspian Sea in early May. Next Friday, a Russian delegation led by Deputy Prime Minister Sergei Naryshkin was due to fly to Ashgabat to take part in the meeting of an intergovernmental commission. The visit was cancelled on the initiative of the Turkmen side Monday.
Ashgabat's decision was news to Moscow. Monday afternoon, President Putin had a meeting with the government where he promoted the upcoming trip by the deputy prime minister, whom some observers tip as a possible successor to President Putin.
The Caspian pipeline agreement is still in the initial stages and is due to be concluded by September 1. Experts suggest Ashgabat will try to use the time as a bargaining tool to secure more favorable conditions in the project.
"The leaders of Russia and Turkmenistan have made a political decision to lay the Caspian pipeline," expert Konstantin Cherepanov from investment company Rye, Man & Gor Securities told the newspaper. "The project details will be discussed by experts, as Turkmenistan needs to work out its position first."
Cherepanov said that a model for gas transportation had not been chosen yet. The choice is between transit, which means the Turkmen gas will be channeled to Europe across Russia, and the purchase-based model, which means that Gazprom will buy gas from Turkmenistan and then export it to Europe. "Each of the options will raise the question of prices," Cherepanov added. "How much will it cost to pump gas across Russia? Or how much will Gazprom pay for Turkmen gas?"
Turkmenistan's new president, Gurbanguly Berdymukhammedov, knows only two well that Moscow's stake in the project is greater, says Arkady Dubnov, an expert in Central Asian countries. "Ashgabat is playing a game, with its president wanting to scoop more commitments from Moscow," the expert says.
The late Turkmenbashi often employed political blackmail, and the new president must have learned from him, he adds.
Moscow resumes arms supplies to Middle East
According to several sources in the defense sector, Russia has started fulfilling a contract to deliver five MiG-31E Foxhound interceptor fighters to Syria. The contract concluded by Rosoboronexport this year indicates Moscow, following an interval last year caused by the war in Lebanon, is resuming arms supplies to the Middle East. Another country to benefit from the deal may be Iran, which, under the Iranian-Syrian mutual defense treaty, finances Damascus' arms purchases.
Boris Alyoshin, head of the Federal Industrial Agency, confirmed that such a contract exists, but declined to name the buyer. Syria was also sold a quantity of MiG-29M/M2 Fulcrum fighters: they are being exported for the first time and are similar in performance to MiG-35 Fulcrum Fs, which Russia is now offering to India. The total value of the contract for the MiG-31s and MiG-29M/M2s for Syria is estimated at $1 billion.
The sale of Russian fighters to Syria could no doubt cause reverberations in the West. But currently Moscow is unlikely to feel "bugged" by American criticism, because missile defense is a key factor in the current Russia-United States dialogue. The two issues will perhaps now be discussed together.
An indirect indication that Tehran might profit from the deal is its position on missile defense. After Vladimir Putin proposed to George W. Bush that they join forces in dealing with the Iranian threat by making joint use of the Gabala radar in Azerbaijan, the Tehran authorities suddenly declared they did not consider Russia's initiative hostile, adding that Putin's proposal would not affect friendly Russian-Iranian relations.
Russia-Syria military cooperation was put on the back burner in the early 1990s over debts for Soviet supplies. With contacts resumed in 1996, the Syrian army took delivery of Russian Kornet-E and Metis-M anti-tank rocket systems, RPG-29 grenade launchers, Bastion, Sheksna, and Refleks guided tank rockets, and small arms. In 2004-2005, the two countries signed contracts for Strelets ground-to-air missile systems with Igla-S missiles, and about 50 Pantsyr-S1 ground-to-air missile gun systems to a value of $730 million. In 2006, they concluded an agreement for Russia to upgrade Syria's 1,000 T-72 tanks. Russia is also planning to improve Syria's air defenses.
Alrosa to sell diamonds in Moscow
Alrosa, the world's second-largest diamond producer, plans to sell 80% of its output in Moscow. De Beers can purchase diamonds there, because the Moscow floor is not subject to European legislation.
Diamond giant De Beers based in South Africa has been Alrosa's main buyer for 50 years, although the European Commission has made two attempts to interfere.
First it instructed Alrosa to reduce supplies to De Beers by $75 million annually (from $800 million in 2003 to $275 million by 2010). In 2005, the European Commission decided that Alrosa should cut deliveries to De Beers from $600 million to $400 million in 2006-2008 reducing them to zero by 2009.
At this point the Russian diamond producer decided to revise its sales policy.
Alrosa's president, Sergei Vorobyov, did not elaborate when the new floor would start working, but pointed out that a substantial part of diamonds would be sold under long-term contracts.
Alrosa will reduce the number of its clients, "keeping only the big ones, whose policy is understandable and who will really support the market," Vybornov said. He refused to name the potential buyers or their number.
Alrosa's constant Russian clients, which annually buy more than $13 million worth of uncut diamonds, are the Smolensk-based Kristall factory, Ruiz Diamonds (which represents the interests of Israeli businessman Lev Leviev), Mosalmaz, and Alpro.
Vybornov said up to 80% of the company's diamonds could be sold in Moscow, with the rest distributed among its foreign offices to monitor the market of one-off sales.
The company's top manager said the decision to sell the bulk of its raw materials on one trading floor was logical. De Beers, which has trading sites in Britain and South Africa, is doing the same. Vybornov said Alrosa could do without De Beers, unless it makes gross mistakes in its new sales policy.
There are legal ways to give De Beers an opportunity to continue buying Alrosa's diamonds, if it wants to, he said. Russia is not a member of the European Union and the diamond trading floor in Moscow will not be regulated by European legislation, Vybornov said.
Possible financial crisis in China will affect Russia
The Russian government has promised foreign companies that it will maintain macroeconomic stability and fight red tape and corruption. But foreign investors say the growth in Russian companies' equity capitalization is being hindered, among other things, by problems in other countries.
Deputy Prime Minister Sergei Naryshkin told the annual conference of Renaissance Capital investors, which began in Moscow yesterday: "Potential investors overestimate risks and underestimate the profitability of doing business in Russia."
Stephen Jennings, CEO of the Renaissance Group, said the Russian stock market fell by 10% in 2007, the second-deepest fall (after Venezuela) among the emerging economies. According to him, political uncertainty in Russia and political differences abroad are increasing market instability.
Jennings invited conference participants to ponder a possible bursting of the Chinese stock market bubble, which would harm emerging economies like the East Asian financial crisis did in 1998.
The CEO believes that the Russian market will not see sustainable development, but will remain volatile until the elections.
Not all experts share Jennings' view. Besides, the inflow of foreign investment in Russia keeps growing and could reach a record $70 billion this year.
Anton Tabakh, senior analyst with the Uralsib financial corporation, said: "High oil and metal prices provide fundamental conditions for the growth of Russian companies' securities."
He said a possible financial crisis in China would be "dramatic" for Russia, but its effects would not last long. In addition, long-term demand for basic Russian exports would facilitate a fast recovery on the market.
Russians become election-weary
As many as 34% of those surveyed by the All-Russian Public Opinion Research Center (VTsIOM) do not believe that ordinary voters have any say in deciding who will come to power in the country and what decisions will be made. Experts are unanimous in putting the reason for the disillusionment down to the absence of real political competition.
Valery Khomyakov, general director at the National Strategy Council, said: "The number of people who don't believe that they have a vote is actually higher than 34%, because people lost an effective instrument for expressing their civil dissatisfaction using the 'none of the above" option on ballot papers.
"Only intrigue, competition, and fresh ideas could lead to higher voter turnout and interest in elections. Over the past 10 years, every election has had its element of serious conflict. In 1996, the image of the enemy went to the Communists, or the Red-Browns as they were called then; in 2000, regional barons took their place: and in 2004, plotting oligarchs. It seems the list of possible enemies has run dry and it is time to cast about for new ones. For example, to start a real fight against corruption at all levels. And if the drive is a success, then interest in elections will shoot up."
Alexei Makarkin, deputy general director of the Center for Political Technologies, said: "The percentage of those disaffected is more than 34%. Russians have long been losing interest in elections. In most cases the winner is a foregone conclusion, and the result already known. The upcoming presidential ballot is no big puzzle either. Any discussion of a successor, if we get down to brass tacks, really appeals only to the establishment - politicians, social experts, or journalists. Most of the Russians are ready to vote for whoever the incumbent suggests they should.
"Clearly, voters are losing the feeling that their vote can shape their future. This is the flip side of disillusionment in politics. People see no one worth turning to look after their interests, needs, and wishes. It is too early to talk about the protest potential of this section of the Russians. It is rather an electoral 'backwater.' Society will only come out in protest if the social and economic situation drastically worsens. Either a real alternative to the current residents of the political Olympus appear, but currently this is nowhere in sight."
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