What the Russian papers say


MOSCOW, September 7 (RIA Novosti) Russia set to buy Australian uranium/ Rocket failure likely to lead to lower launch prices/ Russian companies to be deprived of cheap electricity/ India suspends payments for upgraded Russian patrol planes/ Russians unhappy with vertical power structure - opinion poll

Nezavisimaya Gazeta

Russia set to buy Australian uranium

Russia, which has insufficient uranium deposits, has signed an inter-governmental nuclear agreement with Australia as an alternative to Ukraine, Kazakhstan, and Uzbekistan, which are trying to independently manage their own uranium deposits.

Australia, which accounts for 40% of global uranium deposits, lacks uranium-enrichment plants, while Russia has the world's largest uranium-enrichment facilities but lacks feedstock.

Sergei Kiriyenko, Director of the Federal Atomic Energy Agency (Rosatom), said in Sydney that Australia's Olympic Dam copper-uranium mine had twice as much uranium as Russia.

Rosatom and Tekhsnabexport, which sells uranium fuel and fuel processing services abroad, said a new version of an inter-governmental agreement stipulating Australian uranium exports to Russia was signed in Sydney. Next year, both sides will negotiate uranium-sale terms and the possibility of establishing a joint venture in Russia and Australia.

Tekhsnabexport sources said Russia would not receive Australian uranium before 2010.

Nuclear industry experts said Russia had problems signing long-term uranium-sale agreements with other CIS countries.

Although Moscow has been negotiating uranium production and sale contracts with Ukraine and Uzbekistan for some time, no joint ventures have been established to date.

Several joint ventures producing up to 6,000 tons of uranium per year operate in Kazakhstan; however, Russia receives only 1,000 tons of uranium from the joint venture in Zarechnoye.

In all, Russia, which annually produces just 3,000 tons of uranium, needs 18,000 tons. However, Kazakhstan has decided to stop uranium-ore exports starting with 2014 and is negotiating with U.S. energy giant Westinghouse, a rival of Rosatom.

Ukraine has also started selling uranium to Westinghouse and is negotiating the subsequent construction of CANada Deuterium Uranium (CANDU) reactors on its own territory. Consequently, Russia would get less uranium from Kazakhstan and Ukraine.


Rocket failure likely to lead to lower launch prices

A Proton-M launch vehicle yesterday failed during lift off from the Baikonur space center. It was due to take a Japanese telecoms satellite JCSat 11 into orbit. The accident will lead to a 10% to 15% cut in Proton launch prices and push up insurance premiums by 3% to 4%. But commercial launches, with steady orders worth $1.7 billion, will continue because of high demand on the launch service market.

The Proton launch was insured with the Russian Insurance Center for $300 million. Market players now expect a rise in Proton-M insurance rates. "Lately they have been around 16% to 18%," said Alexander Khomyakov, director of AVICOS aviation and space insurance company. "The space insurance market is stable and capacious enough. So the rates are likely to grow by 3% to 4% in the wake of the accident." With a launch costing $70 million, insurance fees will increase from $11 million to $14 million. The overall income of the provider - International Launch Services Inc. - a joint venture of American Space Transport Inc., Khrunichev Center and Energia Corporation - could drop by $10 million to $13 million per launch.

Rocket launches after the accident will, on the contrary, get cheaper. "But the fall will be no more than 10% to 15%," said Maxim Pyadushkin, editor of Russia/CIS Observer. "This is the standard practice of launch providers in such cases." Last year the price tag on one Proton-M launch was raised from $50 million to $70 million. "Clients took a long time to get used to our new prices before their minds were made up. Since January of this year we have concluded 14 contracts," Vladimir Nesterov, general director of the Khrunichev Center, said recently. Now the price may slip down to $60-63 million.

Experts believe that the Proton-M will remain one of the main offers on the commercial launch market. "Few rockets are currently available: Russia's Proton-M, the Ukrainian-Russian Zenit-3SL and Europe's Ariane," said Igor Lisov, a commentator with the trade journal Novosti Kosmonavtiki. "We are not ruling out that some customers may wish to abandon the ILS for another provider either without waiting for a full investigation, or believing the Proton is not reliable enough." But the expert is sure these will be isolated cases and the ILS's order book, which now stands at $1.7 billion, will not suffer much.


Russian companies to be deprived of cheap electricity

By 2011, all Russian companies must be prepared for threefold rises in gas prices. On September 6, the Russian Federal Tariff Service (FTS) estimated for the first time possible rises in domestic gas prices if they depended on Gazprom's European contracts already this year. The rise in gas prices will deprive Russian companies of cheap energy, which is their last competitive advantage.

At present, the FTS estimates will be used only as indicators for market players. They will be officially applied only from January 1, 2011, and by that time Russian government officials hope to balance export and domestic gas prices.

Due to the absence of transportation costs, gas prices will be 40%-50% lower for Russian consumers than for European companies. Nevertheless, many analysts predict that the planned price rise will deprive Russian industrialists of a serious competitive advantage. Gas-burning power plants account for about 57% of electricity generation by Russian energy monopoly RAO Unified Energy Systems (UES). Even now electricity prices on the free market of European Russia are quite comparable with, or even higher than, European prices.

Because of high gas prices, many strategic partners of wholesale and territorial generating companies (OGKs and TGKs) withdrawing from RAO UES are making plans to build coal-fired power plants. Such plans were announced by KES-Holding, which owns TGK-5 and intends to obtain control over TGK-6, TGK-7 and TGK-9, and the Italian energy company Enel which owns OGK-5. Norilsk Nickel, Russia's largest metals and mining company, and OGK-3 controlled by it have gone farther than that and are launching construction of two coal-fired power units in the Tula Region, 225 MW each, next week.

RAO UES could not forecast the exact increase in electricity prices under the FTS scenario of gas price rises. However, the energy holding hopes that by the time the new gas prices are introduced, the wholesale electricity market will be liberalized (by early 2011), which means electricity prices will depend on the market.

Semyon Birg, an analyst with the Finam investment company, forecasts a 2-2.5 times increase in electricity prices by early 2011, if gas prices rise by 3-3.5 times. Whether this will boost production growth, as Russian government officials expect, is a debatable issue. Most probably, the companies will choose a traditional way of compensating for their losses - at the expense of end consumers.


India suspends payments for upgraded Russian patrol planes

India refused to accept five Russian-made Ilyushin Il-38 May patrol planes with the Sea Dragon new navigation system and suspended payments under a $150 million contract signed in 2001 by Rosoboronexport, the main state arms exporter, and carried out by the Ilyushin Aircraft Construction Company.

Due to the delay, Rosoboronexport could lose an Indian Navy tender for the purchase of eight new antisubmarine jets worth $400 million.

A source in the defense industry said New Delhi believed that the Sea Dragon system did not perform adequately during recent tests in the Barents Sea and could not detect a submarine at sufficient range. "However, Russian experts believe that the system operated appropriately for Arctic weather conditions," the source told the paper.

A spokesperson for a Russian aircraft manufacturing company in India said that as a way of compensation the Russian side offered to install Russian-Indian BrahMos cruise missiles on the Il-38 aircraft. So far the missile has only been adopted by the Indian Land Forces and Navy.

If New Delhi turns down the Rosoboronexport offer, it would then have to pay up to $1 billion for Lockheed Martin Orions worth $120 million each or Boeing Poseidons costing $133 million per plane.

The new aircraft are to replace eight to 10 Tupolev Tu-142 Bear F reconnaissance planes which are now being scrapped after talks between Russia and Israel to upgrade them were called off.

Experts said Russia had a good chance of winning the Indian tender. Russia/CIS Observer editor-in-chief Maxim Pyadushkin said that although Lockheed Martin and Boeing offers were better, India had been using Il-38 planes for some time and had ample experience of flying them. The possibility of installing BrahMos missiles on Russian aircraft is also a competitive advantage, as these missiles are unlikely to be installed on Orion and Poseidon aircraft.

Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies, said Russia's chances could increase if Moscow teamed up with Israel as regards avionics manufacture.


Russians unhappy with vertical power structure - opinion poll

Most Russians support the current isolationism policy and increasing government regulation of the economy, but do not want a stronger vertical power structure, a recent VTsIOM public opinion survey said. Many of the respondents said they would prefer more democratic governance.

The National Public Opinion Center interviewers asked 1,600 respondents how they would correct President Vladimir Putin's political course. The majority said they wanted to intensify the domestic and foreign-policy trends that were a feature of Putin's tenure: 51% said Russia needed to preserve and promote its unique identity; 56% said they would like to see stronger government's role in the economy, while 49% said Russian citizens should be better protected from illegal migrants.

Only 26% supported a stronger vertical power structure, and 30% said they wanted greater democratic freedoms, free elections and media freedom. Another 27% proposed continuing the same political course without change, while 18% failed to answer the question.

The people trust their president so much that they do not want to change the political course he is pursuing. Their only suggestion was to intensify it, said VTsIOM director general Valery Fyodorov. He said the discrepancy in answers to the question about power vertical arose because most people were unconcerned by the issue.

As for the respondents who chose broader democratization, they could have been confusing terms, Fyodorov said, adding that many people still thought the current regime much more democratic than, say, Boris Yeltsin's one.

Experts from the Levada Center, another public opinion agency, have also noticed the discrepancy in respondents' views of the vertical power structure. Expert Alexei Grazhdankin said the public had never seen the "power vertical" as something positive, and was not enthusiastic about the replacement of independent institutions by institutions of sovereign democracy.

The discontented 30% are consolidating and will grow to 50% in two or three years, political scientist Dmitry Oreshkin predicts. It is becoming obvious that the power vertical is not very effective. Educated urban people will be the first to become aware of the problem, as they realize how important pluralism and competition is. This will eventually lead to a reconstruction of Russia's political system, the expert said.

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