MOSCOW, September 6 (RIA Novosti) Latvia unwilling to sacrifice profits from Russian oil transit / Gazprom may divide 24% stake in Shtokman between Americans and Norwegians / Siemens set to take over Silovye Mashiny / African swine fever threatens southern Russia / Five million Russian families are now middle-class - insurer
Vremya Novostei
RBC Daily
Latvia unwilling to sacrifice profits from Russian oil transit
The State Duma, Russian parliament's lower house, ratified an agreement on the Latvian-Russian border Wednesday.
The document is believed to prevent Latvia from putting forth any more territorial claims. Latvia's Foreign Minister Artis Pabriks has for the first time called on Moscow to forget old grudges and abandon the spirit of revenge. Unlike Estonia, Latvia seems unwilling to sacrifice profits from Russian oil transit to national chauvinism, although this would hardly make the life of local Russian-speaking non-citizens much easier.
"Modern Russian-Latvian relations are dominated by pragmatism," said Andris Berzins, chairman of the Latvian Seim's commission on foreign affairs.
Latvian political scientist Karlis Dauksts especially emphasized that Russia's economic influence in the region was only naturally growing due to its energy resources. "There is still a risk that 'gray' or 'black' capital would flow into Latvia from Russia. From this perspective, the ratification of the border agreement is extremely important, as it can help curb the inflow of 'dirty' cash," the expert said.
"Latvia has finally sobered a little after the long euphoria caused by its newly-gained independence," said Vladimir Zharikhin, deputy director of the Institute of the CIS countries, a Moscow-based think tank. "They must have been discouraged by the results of expelling ethnic Russians. The government used a policy of making obstacles for Russians who applied for Latvian citizenship, in the hope of forcing them out. A number of Russian families have indeed left, but a large group preferred to stay, and the government has to put up with them. Moreover, they must be viewed as potential voters, too."
"The economy often dictates tough decisions. It would be extremely unwise for the Latvian government to quarrel with Moscow and not use the country's advantageous geographic location between Russia and the EU," Zharikhin said. Still, this does not mean that "Latvia will ever miss a chance to jab at the 'big neighbor,' safely covered up by NATO and the U.S. Also, the border agreement will hardly improve our compatriots' position in that country," the expert concluded.
Vedomosti
Gazprom may divide 24% stake in Shtokman between Americans and Norwegians
Apart from France's Total, USA's ConocoPhillips and Norway's Statoil and Norsk Hydro may become Gazprom's partners in developing the huge Shtokman gas condensate deposit in the Barents Sea.
In July, Russian natural gas monopoly Gazprom announced that it would keep a 51% stake as the company-operator of the Shtokman project and might give up to 24% in the project to foreign partners. A 25% stake was reserved for Total, the first foreign partner with which Gazprom signed a framework agreement in July.
Gazprom may divide the 24% stake in the project between U.S. oil company ConocoPhillips and Norway's Statoil and Norsk Hydro, which initially sought participation in the project, said a source close to a member of the Gazprom board of directors and another source close to Russia's Sevmorneftegaz (set up in 2002 to develop oil and gas fields of the Russian Arctic shelf), holding a license for developing the Shtokman deposit. According to those sources, the U.S. company may get a 14% stake and the Norwegian companies a 10% stake in the project. This is the most acceptable scenario for Gazprom, the source close to Sevmorneftegaz said.
Gazprom will not be able to cope with the project on its own, as it lacks experience and investment, said an official from the Russian Ministry of Natural Resources. Total alone would be unlikely to take upon itself 49% of investments and all risks; other partners are also needed, he said.
ConocoPhillips, Norsk Hydro, Statoil and Gazprom declined to comment. Inessa Varshavskaya, Total's vice-president, does not know anything about Gazprom's talks with other companies.
The division of shares in the project between ConocoPhillips and the Norwegian companies is a matter of politics, said the source close to Sevmorneftegaz. It was clear from the start that Norwegians would participate in the project: Statoil is developing the Snow White shelf deposit where the development conditions are the same as at Shtokman. However, if Americans are left overboard, this would be another blow to U.S.-Russian relations, the source said.
It is important that ConocoPhillips has vast experience in LNG production, the source said. He could not explain why the Americans would have a bigger stake in the project. Konstantin Batunin, an analyst with Russia's Alfa Bank, explains this by the U.S. company's ability to finance the project: its yearly turnover ($188.5 billion in 2006) exceeds by 50% the total annual earnings of the two Norwegian companies.
Business & Financial Markets
Siemens set to take over Silovye Mashiny
German engineering giant Siemens AG, which failed three years ago to take over Silovye Mashiny (Power Machines), the largest Russian manufacturer of power-industry equipment, plans to bid once again.
But victory will not be easy because the Federal Anti-Monopoly Service (FAS) has already approved petitions to buy the company by aluminium tycoon Oleg Deripaska, owner of industrial holding Basic Element, and Alexei Mordashov, owner of steel giant Severstal.
In 2004, FAS decided that Siemens, which owns a 25.1% stake in Silovye Mashiny, should not take over the strategic company because of its foreign-investor status.
On Wednesday, Siemens informed of its priority right to purchase a 30.4% Silovye Mashiny stake and submitted an official request to FAS, which said it had allowed Cyprus-based Highstat Ltd., controlled by Mordashov, to buy up to 100% in Silovye Mashiny. Deripaska's offshore holding Stephens Capital Ventures S.A. was also allowed to bid for up to 82% of the company's voting shares.
In July, major Russian investment company Interros and power grid giant Unified Energy Systems (UES) said they intended to sell their stakes in Silovye Mashiny. The UES strategy and reform committee recently announced a decision to auction off a 25% stake (plus one share) worth over $460 million.
Interros should offer its stake to UES and Siemens in line with the right of pre-emption clause. Unlike the German company, UES did not take advantage of this right.
Analysts said Siemens could pay as much as $530-550 million for the Interros stake. President of Siemens Russia Dietrich Moeller declined to comment on the auction's prospects.
However, experts said Siemens was likely to lose this time, as well. Konstantin Romanov, an analyst with Finam brokerage, said the current national power industry reform facilitated high demand for Silovye Mashiny products, and that Siemens had few chances of receiving a FAS permit.
Ilya Makarov, an analyst with Antanta Capital brokerage, said Silovye Mashiny would go to Mordashov, while Deripaska would merely bid at the auction.
Novye Izvestia
African swine fever threatens southern Russia
Local authorities declared a state of emergency in southern Russia owing to an outbreak of African swine fever in neighboring countries. To prevent the spread of the disease, the Kuban authorities decided to cull pigs in the vicinity of Sochi.
The situation on the Russian-Georgian border is heating up. The Krasnodar Region authorities decided that failure to prevent African swine fever from sweeping the country would be unacceptable.
This virus does not affect humans, but is fatal to pigs. There is no vaccine.
High swine mortality was recorded at the beginning of July in Abkhazia, in one of the villages in the Kodor Gorge. Later, infected carcasses of animals were found in the Kodor River. At the end of August, the epidemic reached its peak. In the second half of August, the virus was detected in Armenia. At the end of the summer, the virus infected pigs in South Ossetia.
It became clear that the disease was threatening Russia. Experts from the Institute for Protecting Animals of the Federal Service for Veterinary and Phytosanitary Supervision came to the same conclusion. The danger might come from the Black Sea as the virus contaminated rivers that flow into it.
Experts say that if the plague reaches Russia, the Russian economy will suffer economic losses. Nobody will want to buy meat from a country where the virus is spreading. There is a danger of ruining Russian pig-raising farms, which were established earlier with great difficulty.
After assessing the situation, the Krasnodar Region authorities decided to clear the area of Russia bordering on Abkhazia of pigs and to prohibit the importing of any products from Abkhazia.
Experts say that none of the precautionary measures are excessive. "The danger of an African swine fever outbreak is giving rise to a recurrent infection. Meanwhile, this virus does not infect people, but viruses can mutate. Thirty years ago, H5N1 [a strain of avian flu] did not affect humans, but now it has 'broken through' our immune resistance," said Valery Klindukhov, head of local branch of the Federal Service for the Supervision of Consumer Protection and Welfare.
Vedomosti
Five million Russian families are now middle-class - insurer
Five million families have annual incomes above $30,000, according to an estimate by Rosgosstrakh's center for strategic research. The number of families with good incomes has grown 60% in the past 12 months, with middle class growing faster than the super-rich group.
Rosgosstrakh, or the Russian National Insurance Company, calculated the incomes of well-to-do families by indirect evidence (such as cars and real estate bought) and by the existing statistics on different groups of families buying cars or apartments (how soon they can afford a better one).
The estimate revealed that Russia, with a population of 142.2 million according to the state statistics service, has 5 million families with annual incomes above $30,000. Assuming the average family includes 2.7 people, 13.5 million Russians are high-income individuals, said Alexei Zubets, director of Rosgosstrakh's center for strategic research. Around 160,000 families have annual incomes above $1 million, and 12,000, above $5 million, 80% of such families living in Moscow and the Moscow Region.
Around 50,000 families in the Moscow Region make over $1 million a year, echoed Natalia Akindinova, executive director of the Development Center, citing her own data.
The middle-income group has grown 60% in 12 months, while the highest-income (above $5 million) group increased by half, Zubets said. The total capital of Russia's 100 richest people grew 36%, according to Forbes. The group with incomes between $30,000 and $100,000 grew the most, by 71%. Russia's middle class is growing faster than the super-rich group, Zubets concluded.
Akindinova expressed doubt that the number of high-income families could grow at this rate. She said many purchases are made with loans - an easily affordable scheme which could have distorted Rosgosstrakh's evaluation.
"Elite" housing (apartments worth $2 million and up) and business-class accommodation ($500,000-$2 million) account for 70%-80% of Moscow's new apartments market compared with mere a 20% a few years ago, according to Oleg Repchenko, head of the IRN.ru think tank. A $300,000 apartment in Ostozhenka, the prestigious Golden Mile area in downtown Moscow, seemed expensive then. It happened because mortgage loans have become more accessible, he said.
Azbuka Vkusa, a supermarket chain serving customers with monthly incomes of $2,000 and up, has steadily posted an average annual turnover growth of 70% in the past three years, while the average bill in its outlets has increased from 780($30.35) to 1,100 rubles ($42.8), according to company representative Nikolai Komarov.
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