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What the Russian papers say


MOSCOW, August 16 (RIA Novosti) China strengthens its foothold in Kyrgyzstan / Rosneft scared by Dutch trial prospect / Government shows business its place through the "Yukos affair" / Russian court acquits businessman charged with selling pirated music files online / Gazprom managers ditch their shares


China strengthens its foothold in Kyrgyzstan

Chinese President Hu Jintao promised to invest millions of dollars in Kyrgyzstan during his first visit to the Central Asian country. Beijing may build a gas pipeline from Turkmenistan to China across Kyrgyzstan, and plans to push for the removal of a U.S. air force base from Manas airport in Bishkek.
The Chinese and Kyrgyz leaders have signed 12 agreements.
The president of Kyrgyzstan, Kurmanbek Bakiyev, said: "We in Kyrgyzstan say that a good neighbor is better than a relative. I am very much satisfied with the results of the talks."
His enthusiasm is understandable, as the majority of the documents he has signed stipulate Chinese investment in the economy of Kyrgyzstan.
The two countries are planning an even more ambitious project.
Kyrgyz Prime Minister Almazbek Atambayev said yesterday: "We have asked for the natural gas pipeline route from Turkmenistan to China to be plotted across Kyrgyzstan, and may invest in the project."
The agreement on the construction of a pipeline from Turkmenistan to China was signed in Beijing in late July. The project should be completed in 2009, although the route has not yet been mapped. The pipeline will run across Uzbekistan, but from there could be directed into either Kyrgyzstan or Kazakhstan.
If Bishkek wins the battle for the gas pipeline, the route will be plotted across the Fergana Valley, which Beijing considers a major breeding ground of regional instability and terrorism. The declaration signed by Hu Jintao and Kurmanbek Bakiyev was therefore amended to include a clause on the joint struggle against terrorist groups in Eastern Turkestan. Concern over the pipeline's security could strengthen Chinese influence in Kyrgyzstan.
The Chinese government is using Bishkek's dependence on its financial and political assistance to gradually turn Kyrgyzstan into the main bridgehead for strengthening its influence in Central Asia.
Beijing provided the bulk of funds for the summit of the Shanghai Cooperation Organization (SCO), which opens in Bishkek Thursday, in the hope that Bakiyev would force the U.S. to pull out of Manas airport. Moscow apparently likes this idea.
The SCO comprises Russia, China and the four ex-Soviet Central Asian republics, and has Iran, India, Pakistan and Mongolia as observers. Its summit provides a good opportunity to thank Kyrgyzstan's patrons.

Business & Financial Markets

Rosneft scared by Dutch trial prospect

The bankruptcy liquidation of Yukos, once Russia's biggest oil company, was completed yesterday.
Despite many forecasts, state-owned Rosneft did not take over the disgraced company's foreign assets, as Yukos Finance BV was fully acquired by Promneftstroi, a company recently bought by a U.S. company. However, the Russian oil giant still can buy Yukos's Dutch subsidiary from its new owners once certain disputes are settled.
The lot went for 7.8 billion rubles with a starting price of 7.6 billion. Stephen Lynch, founder of the Russian subsidiary of U.S.-based Monte-Valle, said the company had bought Promneftstroi before the auction to take part in the bidding. It also won the bid for Yukos's debt-laden assets in Russia in April, offering 3.562 billion rubles. Experts then believed Monte-Valle was acting in Rosneft's interests.
Yukos Finance BV's main asset is a 49% stake in Slovakian pipeline company Transpetrol. The assets had for some time been under the management of Stichting Administratiekantoor Yukos International, a Dutch fund owned by former managers of Yukos. Therefore court-appointed bankruptcy receiver Eduard Rebgun's right to sell Yukos Finance is questionable. Promneftstroi may still have to sue out its interests.
Yukos Finance press spokesperson Claire Davidson said the asset had been put up for sale illegally. The acquisition will be disputed in a Dutch court and in the European Court of Human Rights. In addition, the bankruptcy receiver had warned bidders that the claims by Yukos Finance BV's creditors had been recognized by the Dutch court too, she said.
Analysts believe Rosneft's decision to sell Promneftstroi was a tactical move. "Monte-Valle could be fronting for a larger player, possibly Rosneft," says Irina Furst, expert with the independent group 2K Audit-Business Consulting. She thinks the state-owned company did it to avoid appearing in European courts.
Rosneft preferred not to take part in the bidding because Transpetrol stocks would have to be claimed in court of law, agrees Natalia Milchakova, chief analyst at the Otkrytiye financial corporation. "The auction winner will have to do this now. Once the asset is no longer 'difficult,' Rosneft can simply buy it out," she added.


Government shows business its place through the "Yukos affair"

The last auction to sell Yukos assets is over. But is this the end of the Yukos story?
Alexander Temerko, former deputy board chairman at Yukos, said: "Yukos has fulfilled its historical role. For business it became the first public company to accept international standards of corporate practice. The government, however, by launching the "Yukos case" has shown business its place. The Yukos example has saved a string of companies from harsh reprisals."
Eduard Rebgun, the Yukos bankruptcy receiver, said: "The company's false tax policy was the root cause of what has happened. And that is the main lesson of Yukos."
Mikhail Delyagin, director of the Institute for Globalization Studies, said: "The episode is not over yet. Criminal cases connected with the company will no doubt be reviewed, but not in the immediate future. This will happen when this country becomes a law-governed state."
"The Yukos affair is of key significance, and will be among the first to be revised. In addition, the case is symbolic, epitomizing a new stage in business-state relations. While earlier business was a cash cow, now it is becoming a cashless cow. A fitting inscription on the Yukos tomb could be: 'It tried to be civilized under Putin.'," he said.
"It cannot be said that the company played its role perfectly, but at least it tried to be transparent, not oligarchic. Russian business, on the other hand, has grasped well the difference between 'the rules of the underworld' and laws: the rules are altered without prior notification," Delyagin said.

Russian court acquits businessman charged with selling pirated music files online

A Moscow district court has acquitted Denis Kvasov, the owner of the site, charged with selling pirated music files online, citing lack of evidence. The verdict against Kvasov was to be the last blow in a large-scale offensive against the notorious net resource.
The U.S. administration said Kvasov's site was one of the reasons the World Trade Organization was unwilling to admit Russia.
The Recording Industry Association of America (RIAA) said American copyright owners lost $300 million in profits every year because of the site. It charged only $0.20 per music track, while the price at Apple iTunes, a licensed reproducer of music, was $0.99.
Anatoly Semyonov, a member of the Expert Council on Copyright Legislation, said the decision of the Cheryomushki court was "formally correct, but is actually spearheaded against legal copyright owners."
He said that operated in strict compliance with Russian legislation that applied at the time, but that generally speaking the practice of uploading music on Russian sites was not quite legal.
In the opinion of Semyonov, the decision of the court is not very important, because the site was closed long ago.
Kirill Orlov, a partner with the IT-Counsel legal bureau, said: "This is an important decision," because Russia does not have a precedent law, yet courts often take into account precedents when considering similar cases.
All lawyers interviewed by the newspaper mentioned a political aspect of the case. However, Alexei Makarkin, chief analyst with the Center for Political Technologies, said politics were not crucial.
"The court decision suits Russia," he said. "On the one hand, the executive authorities satisfied the Americans' request by closing the site and therefore removing one of the biggest obstacles to Russia's accession to the WTO. On the other hand, Russia has demonstrated to the world that its courts are independent."


Gazprom managers ditch their shares

Not even Gazprom's own staff now believe that the company's capitalization will reach $1 trillion, as has been repeatedly promised by its top managers. Statistics show that between May 2006 and May 2007 the company's managers sold four times as much stock as they bought.
In one year, senior company officials (members of boards of directors and managements of the parent company, its subsidiaries and subordinate companies), sold 0.019% of stock (the average weighted value of this amount of securities was about $48.5 million) and purchased only 0.004%, to a total of about $11.3 million. Remarkably, a year ago the investment behavior of Gazprom's top management was directly opposite.
The natural gas monopoly's executives are sure that the company's current capitalization - almost $249 billion - is far from the limit. According to its CEO Alexei Miller (who owns a mere 65 shares purchased with privatization vouchers), the holding's capitalization may reach $500 billion in the near future. And in the opinion of Gazprom Export chief Alexander Medvedev, in 10 to 15 years' time the holding's capitalization will be as high as $1 trillion. But judging by everything, colleagues do not share the optimism of the company bosses.
Neither do experts. "To judge from the company's current financial and reporting figures, it continues to be buoyed up only by exports and high gas prices on foreign markets," said Yekaterina Kravchenko, an analyst with BrokerCreditService.
"Moreover, the company is caught in a production stalemate, and is mainly buying up all sorts of assets, i.e. it is acting as an instrument of economic policy. The management is unable to change the situation: key decisions are made at the top. One cannot expect considerable growth in such a situation: so the decision to sell and take profits is completely justified," she said.
However, analysts still advise their clients to keep Gazprom and other shares close to their chests. "You should buy Gazprom shares purely for political, rather than fundamental, considerations," said Yevgeny Tyapkin, an analyst with the Entente Capital brokerage. "Political considerations make them more attractive ahead of elections." He holds the same opinion about securities traded by "the people's" Vneshtorgbank, Sberbank and Rosneft. After the elections they will be the first to start growing, Tyapkin said. Provided the elections do not spring any surprises, of course.

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