MOSCOW, September 14 (RIA Novosti) Zubkov will warm the presidential chair, not press buttons - expert/ Russian banks funding dries up/ Seoul steps up talks on Russian gas supplies/ LUKoil set to invest $9 billion in European assets/ Honda says no to Russian plant, plans to up imports
Vremya Novostei, Moskovskiye Novosti
Zubkov will warm the presidential chair, not press buttons - expert
Viktor Zubkov is the first government official to say he would run for Russian president next year.
Speculations are rife among political experts that his nomination as prime minister is the first phase of a plan to bring Vladimir Putin back to the Kremlin after four years.
Yevgeny Yasin, research head at the Russian Higher School of Economics, who was Russia's minister for economy in 1993 through 1997, has expressed his own view of the latest cabinet reshuffle.
He said Prime Minister Zubkov, the president's confidant, had emerged on the stage to oversee Putin's re-election as president in 2012. Zubkov's job will be to control all the government and business organizations for four years, while Putin is away. His financial monitoring background will be of great help, as he knows how to pull strings.
However, Russian history knows of no precedent where a leader handed over the reins and got them back again. On the other hand, it is an unpredictable country where everything is possible, he added.
Alexander Konovalov, president of the Institute for Strategic Assessments, said: "It is possible that Zubkov plans to become president for the time of Putin's absence from the Kremlin. However, Russia has never known a leader who would just keep the top post safe and not touch anything. Zubkov would be trusted with keeping the chair warm but not pressing any buttons, and would be punished if he misbehaves. But once he realized what powerful tools he had, he could beat all the knights and bishops who had put him there.
"Putin is doing preparatory work now, appointing 'his men through and through' to all the key posts, including regional governors and board of directors and heads of major companies. Leonid Brezhnev, too, was once appointed as an 'interim' head-of-state, until 'stronger ones' settled their accounts and decided what to do next. But Brezhnev occupied the post for 18 years, and as for the 'stronger ones,' nobody knows now what became of them."
Alexei Makarkin, deputy director at the Center of Political Technologies, a Moscow think tank, said he did not think any major conclusions should be made from Zubkov's statement. Zubkov is the president's closest confidant. While most officials avoid discussing the issue, saying they are happy with their current jobs when asked about the presidential elections, Zubkov can afford to speak more freely, that's all. Putin will not take offense, the expert added.
Kommersant
Russian banks funding dries up
Russian banks have been hit by the repercussions of the U.S. subprime mortgage crisis, which began in February. Opportunities for Russian banks to obtain credit from foreign sources dwindled in the summer, and almost dried up completely this month. The banks still do not know how to compensate for the liquidity deficit. If they fail to figure that out, the rate of growth rate for banking system's assets will plummet by at least by half.
"Investors are scared, that's why there is no demand for bank securities," said Natalia Orlova, chief analyst with Alfa Bank. Russian banks have lost access to western debt markets, which they had used as the key means to attract financing for the past few years. Long and relatively cheap western loans, obtained by issuing Eurobonds and through securitization of loans, were used to propel the Russian banking system's growth. The banks channeled the money attracted from foreign countries to develop the credit market.
The liquidity crisis is constricting the windpipe of the Russian banking system. An ING Bank report predicted a decrease in the growth of banking sector assets from 46% to 22%. With the lack of demand for debt securities, banks are forced to cancel or delay their scheduled Eurobond issues and securitization deals.
Experts say the situation is due to go from bad to worse. "With the mortgage crisis coupled with political instability caused by the recent government resignation, foreign investors are unlikely to buy even 20% of bonds issued by a Russian bank," said Anatoly Maksakov, deputy chairman of the board of Absolut Bank.
Banks are no longer in any position to use traditional financing instruments because of the unfavorable market situation and, more importantly, the packed debt risks basket.
First deputy chairman of the Bank of Russia Gennady Melikyan warned banks in August against overusing international loans. According to his estimates, up to 20% would be a "more or less normal" share of foreign loans, while over 30% would be "practically unacceptable." He then proposed to bankers to "sit down and put their heads together" to find a way how to restructure their financing schemes in favor of domestic borrowing.
Vremya Novostei
Seoul steps up talks on Russian gas supplies
Within a week Soo-Ho Lee, president of the Korea Gas Corporation (KOGAS), twice met with top managers of Russia's gas monopoly Gazprom.
In a break between the two meetings, South Korea's Ambassador to Russia Lee Gyu-Hyung paid a visit to Gazprom's CEO Alexei Miller, probably, in order to prepare concrete commercial talks.
South Korea has stepped up its activities after Viktor Khristenko, Russian industry and energy minister, signed a decree endorsing a program for establishing an integral system of gas production, transportation and supplies in Eastern Siberia and the Russian Far East, with due consideration given to possible gas exports to Asia Pacific countries.
Seoul is most interested now in new gas supply channels because of the expiration of its largest contracts with traditional suppliers, primarily with Indonesia, whose potential for long-term gas exports has shrunk tangibly recently. Russia, which is quite close to South Korea geographically, is a rather attractive option ensuring the diversification of gas supplies, including LNG supplies, and possibilities to organize pipeline gas imports.
South Korea has a contract for annual purchases of 2.1 billion cubic meters of Russian LNG from the Sakhalin-II project. There are contracts for the total LNG output from the plant, which is nearly completed now (with a capacity of 9.6 million metric tons of LNG a year).
However, possibilities are currently being discussed for building another production line with an annual capacity of 4.8 million metric tons after 2015.
According to the Russian government's Eastern program, KOGAS is regarded as the buyer of a larger portion of Sakhalin additional LNG production. In the opinion of the authors of the program drafted by Gazprom, South Korea will buy about 6 billion cubic meters of Russian LNG a year by 2020, i.e. 4 billion cubic meters a year from the new line.
LNG exports to China and Taiwan (up to 2.5 billion and up to 1 billion cubic meters a year, respectively) are also under consideration (albeit theoretically). Such contracts are not likely to be signed because of low prices in China and political risks of cooperation with Taiwan.
As regards pipeline gas, the route for its supplies has not yet been determined, as there are numerous technical and political barriers in the way. It is expected that the pipeline gas will flow from Russia to Korea via the Primorye Territory. There are two versions for its further transportation: via North Korea and across the seabed of the Sea of Japan, but both are highly questionable. If political risks for the pipeline construction across North Korea are not removed, South Korea is unlikely to have access to Russian pipeline gas. As for LNG, it is more convenient and cheaper to transport it across the seabed.
Vedomosti
LUKoil set to invest $9 billion in European assets
Gennady Krasovsky, the head of investor relations for Russian oil giant LUKoil, said the company is to buy $9 billion worth of European refining assets in the next decade. He said specific projects could be implemented in the next few years.
Krasovsky said European refineries would soon be less profitable due to a number of factors, and that potential partners would be more willing to sell them.
European refineries using the Druzhba pipeline network pay less for Urals Blend oil. But Krasovsky said the discount would soon be abolished, because Russian oil companies were now able to choose other export routes.
Alfa Bank analyst Andrei Fyodorov said LUKoil downstream investment abroad was quite logical. He said oil companies now doubted whether they should develop new deposits because of exorbitant taxes, but that the refining and sales sector was a good strategy for offsetting price fluctuations.
Fyodorov said the loss-making European refineries charged up to $3 more per barrel, while the average 2006 Russian price margin was $9 and had reached $15 per barrel last fall.
In the last few years, LUKoil has made abortive attempts to buy the Gdansk refinery in Poland, Lithuania's Mazeikiu Nafta and Hellenic Petroleum of Greece.
In 2006, the company ceded Libya's Tamoil, which owns three refineries and a gas station chain in Western Europe, to other companies.
Last year, LUKoil won a tender for the purchase of the Europoort refinery in Rotterdam, the Netherlands, from Kuwait Petroleum International. But the Kuwaiti company backed down on the deal.
This year, the company wanted to buy a 17% stake in two refineries owned by Ceska Rafinerska of the Czech Republic from its partner ConocoPhillips. But Italian energy giant Eni, another stockholder, used the right of first refusal and bought the stake instead.
Business & Financial Markets
Honda says no to Russian plant, plans to up imports
The Honda Motor Company plans to double its car sales in Russia in 2007. The company wants to reduce the waiting time for buying cars and increase sales by exporting cars from Turkey.
Honda has a good chance not only of increasing its market share but achieving greater profitability, say analysts.
According to Honda Europe president Shigeru Takagi, the company plans to sell at least 370,000 cars in Europe instead of 350 000. The Russian market will provide sales growth: 35,000 cars will be sold here this year compared with 15,700 cars in 2006.
In 2008, the Russian car market will grow by 40%. Honda's car sales, however, will rise faster than the market average, said Takagi. He added that to increase car sales in Russia, Honda plans to increase its number of dealerships in Russia from 40 to 60 over the next two years.
According to Honda representatives, 19,770 Honda cars were sold in Russia in the first eight months of 2007. Buyers are having to wait as long as six months for many car models.
Car delivery problems to Russia could be solved in the near future. According to a source close to the company, Honda plans to export cars from its plant in Turkey, where it is currently expanding its production facilities, says a source. Honda does not plan to construct a plant in Russia.
Exporting cars from Turkey will allow Honda not only to increase sales but make them more profitable, say experts.
Car production in Turkey is cheaper than in Japan, says Mikhail Ganelin, an analyst at Troika Dialog.
Moreover, transportation expenses are lower if cars are delivered from Turkey than from Japan, says Yevgeny Shago, an analyst at Trust Bank.
However, prices for Honda's Turkish- and Japanese-built cars will be the same, say experts.
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