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What the Russian papers say


MOSCOW, August 22 (RIA Novosti) Expert says no real firsts at MAKS-2007 / Poland changes Russian pipeline route / Cost of East Siberia-Pacific pipeline rises again / Hyundai moves to retain its share of the Russian market / Americans push Russians out of Ukraine's political consulting market



Expert says no real firsts at MAKS-2007

The first day of the MAKS-2007 air show in Zhukovsky near Moscow has brought substantial dividends for Russia.

Russia's Sukhoi signed a contract with Indonesia to deliver six multi-role Su-27SKM and Su-30MK2 jets worth $350 million. Boeing and VSMPO-Avisma signed an agreement to set up a parity joint venture to process titanium stamps for the latest Boeing 787 Dreamliner. Experts are certain that the coming days will be no less fortunate for Russian companies.

But some exhibits raise doubt. These are the upgraded Smerch multiple launch rocket system and the Meteorit-A cruise missile. The presence of the Smerch land forces weapon (a successor to the well-known Grad and Uragan systems, which derived from World War II Katyusha missiles) appears to be unwarranted. Yet the air-launched cruise missile is a real puzzle.

"It is strange to call the Meteorit the latest development," said Alexander Khramchikhin, head of the analytical department at the Institute of Political and Military Analysis.

It began to be developed in the mid-1970s, out of step with global trends. By that time, ballistic missiles and high-altitude air defense systems seemed to have buried the idea that a cruise missile in the stratosphere would have a chance of penetrating defenses.

After many abortive tests (the last one took place in 1984 when a missile was launched from a Tu-95 Bear bomber, strayed from course at once and had to be liquidated) the Meteorit project was abandoned. Nevertheless even in the 1990s, some military experts forecast attempts to revive the dead-end project.

"There are no real firsts at the show. But this is not because of somebody's ill intent, simply nothing new has been developed," said Andrei Ionin, an analyst with the Center for Analysis of Strategies and Technologies.


Poland changes Russian pipeline route

Swiss-registered company Nord Stream AG, the operator of the Nord Stream natural gas pipeline project, has announced a change in the pipeline's route, which is largely explained by the Russian-Polish political conflict. As soon as Russian gas monopoly Gazprom reported that the Nord Stream pipeline would run south of Bornholm Island, the Polish authorities objected to it.

The Swiss company explained that the gas pipeline would run in Swedish territorial waters, as the route was laid as far as possible from a dangerous zone where WWII munitions had been sunk. Besides, Sweden also has several underwater gas pipelines.

Apart from this, when the pipeline route became known, Poland and Denmark resumed their legal dispute on maritime boundaries (this has been going on since the early 1970s and remains unsettled). For this reason, Nord Stream shareholders decided to move the pipeline from the disputed Danish-Polish seabed section to Swedish territorial waters.

Gazprom's latest concession to EU countries will cost the Russian company an additional 8 km of the gas pipeline. Earlier, Nord Stream AG complicated the project by rejecting a compressor station in the Northern Sea (Sweden feared that the station could become a base for Russian secret services).

Gazprom had to give up the idea of building an offshore platform in EU territorial waters. Valery Nesterov, an analyst with the Troika Dialog investment company, explained that in the end Nord Stream would have to look for unprecedented technical solutions. Whereas a gas compressor station usually services 100-120 km of onshore gas pipelines, a Nord Stream compressor station will have to service 1,200 km of the underwater pipeline.

Nord Stream is a gas pipeline that will link Russia with the European Union via the Baltic Sea. According to forecasts by Global Insight, the world's leading company for financial and economic analysis, the European Union's demand for natural gas imports will surge from the 2005 level of 336 billion cubic meters to 536 billion cubic meters in 2015. By linking the world's largest Russian gas fields to the European gas pipeline system, Nord Stream will meet about 25% of the EU's demand for additional gas imports.


Cost of East Siberia-Pacific pipeline rises again

Russian pipeline monopoly Transneft announced Tuesday that it had again increased the planned construction cost of the first leg of the East Siberia-Pacific Ocean oil pipeline. It will now cost nearly double the initial figure, which amounts to $12.5 billion.

The project to build a pipeline from Taishet in the Irkutsk Region to Skovorodino in the Far East via Ust-Kut, Kazachinskoye and Tynda initially cost $6.65 billion (in prices of the second quarter of 2004).

In April 2006, the route was moved away from the water intake area of Lake Baikal, at the request of President Vladimir Putin. This increased construction costs by 20% and stipulated building an additional 460 km (286 miles) of the pipeline and an oil-pumping station, as well as laying additional power and communication lines.

This and the growing price of pipes increased the cost of the project's first leg to $11.2 billion (in prices of the second quarter of 2006). Transneft planned to spend 46.5 billion rubles ($1.8 billion at the current exchange rate) on pipes in 2004, but the price went up to 95.8 billion rubles two years later. The pipeline monopoly also said construction and assembly prices went up by 34%.

Glavgosekspertiza, the state body in charge of building permits, examined the revised calculations and approved them. Transneft explained that the growth of the project's cost to $12.5 billion was due to inflation.

Maxim Shein, an analyst with Broker Credit Service, said the project's cost could grow by $1 billion by its completion in 2008. "But this will not slow down construction," the expert said.

Transneft vice president Sergei Grigoryev said the new cost of the project was only hypothetical, because contracts for construction and supply of equipment were signed long ago. In other words, the actual cost of the project has not changed from $11.2 billion.

Business & Financial Markets

Hyundai moves to retain its share of the Russian market

South Korean carmaker Hyundai plans to boost supplies of car parts for assembly by Russia's auto plant TagAZ.

In 2008, the factory plans to assemble 80,000 cars, and 120,000 in 2009. Analysts say this must be enough to satisfy Russia's demand for Hyundai cars until the company builds it own assembly plant in Russia. However, the projected output will certainly not be enough to win back leadership on the Russian market.

Greater supply of components will have the Hyundai assembly line working at full capacity, the TagAZ press office said. To date, sales are limited only by Hyundai's supply of components. In January through June 2007, TagAZ sold 30,141 vehicles, of which around 25,000 were cars. Overall, the factory plans to assemble 75,000 Hyundai vehicles this year.

It was reported earlier that Hyundai planned to build an assembly plant in Russia. In early August, Dmitry Levchenko, deputy director of the investment policy department at the Economic Development and Trade Ministry, said they planned to sign a deal with Hyundai before September 15.

Boosting production at TagAZ is unlikely to affect the plans to build the plant, according to Konstantin Romanov, an analyst with investment company Finam. Official agreement and construction will take a few years, while demand for the cars must be met right away, he added.

Once established, the Hyundai plant in Russia will be producing newer models, while TagAZ is currently assembling models already taken off production lines in South Korea, said Gennady Sukhanov, an analyst with investment company Troika Dialog.

Hyundai topped the Russian market in terms of new car sales in 2005. Today, it ranks fourth after Chevrolet, Ford and Toyota.

According to Romanov, boosting production at TagAZ will help the company increase sales, but the projected output will still not be enough to win back its leading position. Ford also plans to boost production in Russia to 125,000 cars a year, the expert said.

Nezavisimaya Gazeta

Americans push Russians out of Ukraine's political consulting market

American specialists, who have been promised several million dollars for providing consulting services to the three key participants in the early parliamentary elections in Ukraine, have pushed Russians out of Ukraine.

The three main players are the Party of Regions led by Prime Minister Viktor Yanukovych, the Yulia Tymoshenko Bloc, and the pro-presidential Our Ukraine - People's Self-Defense.

Observers say Russian consultants came to Ukraine not so much in search of money as to test new election strategies. However, the 2006 parliamentary elections showed that strategies that succeed in Russia do not always work in Ukraine.

Kost Bondarenko, director of the Kiev-based Institute for Management Problems, said: "It has become fashionable to hire Americans as instruments of intimidation designed to show that we have a defender."

Vadim Karasev, the head of the Ukrainian Institute of Global Strategies, said: "Americans have exclusive areas of knowledge in which local political experts cannot rival them. For example, they write fantastic political speeches."

He said Russians "have good technology for creating situations, notably a negative image of the adversary and a positive image of the client."

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