U.S. to deploy missile defense elements in Georgia\ Market must be happy with Cabinet reshuffle - experts\ Nord Stream chooses pipe manufacturers\ Celtic's bargaining with Severstal\ Suzuki obtains more land to increase production in Russia
Vremya Novostei
U.S. to deploy missile defense elements in Georgia
The United States may deploy elements of its anti-ballistic missile (ABM) system in Adzharia, a breakaway republic of Georgia.
Georgian media yesterday reported that a group of American air navigation specialists had visited the republic. They were part of a group of Russian, U.S. and Azerbaijani experts who visited the Gabala radar on September 19.
The Kremlin has said that these are not ABM plans but designs to encircle Russia.
U.S. experts reportedly traveled at the invitation of Georgian air navigation agency Gruzaeronavigatsiya.
"We have not invited U.S. experts, and have no official information about [U.S.] plans to deploy missile defense elements in Georgia," a spokesman of the Georgian Defense Ministry told the popular daily Vremya Novostei.
Georgy Karbelashvili, head of Gruzaeronavigatsiya, said: "Such visits are never a random decision," adding that the Americans have been working in Adzharia for about a week.
They are studying the modern air traffic radar, which Georgia is building on the Black Sea coast 400 km (249 miles) west of Tbilisi in compliance with recommendations of the International Civil Aviation Organization (ICAO). Another such radar is to be built in eastern Georgia in 2008.
Leonid Slutsky, first deputy chairman of the Russian parliamentary committee on international affairs, said yesterday that Moscow was unlikely to support plans to deploy ABM elements in Georgia, especially if they are considered as complementing the U.S. ABM elements in Eastern Europe.
Lieutenant General Nikolai Rodionov, former commander of Russia's missile defense corps, said the radar in Adzharia "will certainly threaten Russia's security, because it could be used to track the takeoff of our strategic missiles deployed in the European part of the country."
According to him, "any types of antennas could be mounted next to the radar, to cover Iran or northern territories, meaning Russia."
Shalva Pichkhadze, board chairman of the non-governmental organization Georgia for NATO, said: "ABM elements are likely to be deployed in Georgia. If Russians can do it in Azerbaijan, why can't Americans do the same in Georgia? This would accelerate Georgia's advance to NATO. As for Iran's possible negative reaction, I believe that Georgian leaders consider ABM deployment in the country as a positive, rather than damaging event."
Vedomosti
Market must be happy with Cabinet reshuffle - experts
Analysts at Russian investment company UBS say the new government is more reform-oriented than any of cabinets of the past five years, while all of the recent ministerial appointments reflect a well-thought-out, more aggressive and competent personnel policy.
Rory MacFarquhar, chief economist with the Moscow Division of Goldman Sachs, hailed the promotion of Alexei Kudrin to deputy prime minister - a man who has been the guarantor of Russia's conservative financial policy for the past seven years.
Alfa Bank strategists seem convinced that Russia will stick to effectively using its Stabilization Fund.
Kudrin will not allow problem-solving methods to threaten the tight fiscal regime, echoes Chris Weafer, chief strategist at Moscow investment bank Uralsib.
Elvira Nabiullina is known to be an experienced and reliable professional, so no changes are expected to economic policies following German Gref's departure, Weafer said.
The Ministry of Economic Development and Trade will be relieved of part of its authority, in particular on regulating tariffs' rise, so monopolies will be pushing for harmonization of Russian and European prices more confidently, Alfa Bank analysts believe.
Tatyana Golikova and Dmitry Kozak will run their ministries better than their predecessors, said Andrei Kuznetsov of the Troika Dialog brokerage.
We do not have to worry about the use of the funds allocated for social needs in the run-up to the elections, echoed Yaroslav Lisovolik, chief economist with Deutsche UFG.
Dmitry Kozak's return will consolidate the reformers' positions in the new Cabinet, and his Ministry of Regional Development will become the most influential economic body. Weafer expects it to control the bulk of Russia's infrastructure spending in 2008.
Analysts only seem to disagree on how long the new Cabinet will survive.
Alfa Bank strategists believe President Putin wants to preserve the status quo in the run-up to the elections.
The new government will lead Russia through the elections and the first few years of the new president's tenure, according to Lisovolik.
"Putin is putting together a team to carry on his economic goals through the next president's term," Weafer said.
The experts are convinced the market will be glad of the changes.
Kommersant
Nord Stream chooses pipe manufacturers
Nord Stream AG, a Russian-German consortium set up to build and operate the planned Nord Stream natural gas pipeline under the Baltic to Germany, has announced the winners of an international tender for the delivery of steel pipes worth 1.5-1.8 billion euros for the pipeline's offshore section.
Europipe GMBH, the world's largest pipe producer based in Mulheim an der Ruhr, Germany, will provide 75%, or 1.1 million metric tons of pipes; the rest will come from Russia's Vyksa Steel Works in the Nizhny Novgorod Region.
Vyksa Steel Works, part of the United Metallurgical Company (OMK), a major national pipe maker, will have to meet high maritime quality standards envisaged by Det Norske Veritas (DNV), a leading Norwegian provider of risk-management services.
The price of pipeline delivery contracts is not known because they will be signed this October. The entire Nord Stream pipeline project is estimated at $5-$6 billion. A source familiar with the terms of the tender said first-stage pipes would cost $2.1-$2.5 billion.
A source close to the tender said the initial quota for Russian pipeline manufacturers was much higher than that received by OMK. He said steel giant Severstal, controlled by oligarch Alexei Mordashov, could have joined the project, but that its Izhora Pipeline Plant did not meet DNV's quality standards.
On Tuesday, Severstal said it had applied for a DNV certificate, and that it planned to bid in a tender to build the second Nord Stream Pipeline section.
Nord Stream hinted that it had been using Europipe products to lay underwater gas pipelines for a long time, and that a trial batch made by OMK had not yet been certified in line with DNV standards.
The OMK press service said the Vyksa plant had won a tender for the delivery of 280,000 metric tons of 1,220mm pipes from June 2008 till October 2009. The company also supplies pipes for the Nord Stream Pipeline's ground section.
Kirill Chuiko, an analyst with Uralsib Financial Company, said the OMK contract was worth $400 million at current prices, but that the Nord Stream contract could be more profitable.
Olga Okuneva of Deutsche Securities said the Izhora Pipeline Plant, with design capacity of 600,000 metric tons per year, was still manufacturing 20,000 to 30,000 metric tons because Russian producers still lack the required resources.
Gazeta, Vedomosti
Celtic's bargaining with Severstal
Ireland's Celtic Resources Holdings Plc, which mines gold in Kazakhstan, has deemed the price offered for a stake in the company by Russian steel giant Severstal to be too low. Its board of directors decided that $248 million was not a favorable estimate. Following a jump in the Celtic share price provoked by interest from the Russian company, Severstal's proposal fell below the market level. But sooner or later the parties will reach a bargain, because neither has an alternative partner.
In a preliminary takeover bid announced on September 18, Severstal offered 2.2 pounds per share. Celtic said the proposed price fell wide of the company's current and prospective worth. Indeed, the two transactions already conducted with Irish company shares have cost the Russian miner more than planned (in the second case the price was 2.32 pounds per share).
At bidding time, the company's stock was trading on the London Stock Exchange at 2.05 British pounds per share, and Severstal's bid (2.22 pounds) was 8.7% higher than the market value. But the interest in the Irish company provoked a rise in the share price. While the bid was being considered, Celtic securities shot up by 11.4%, and the Severstal's offer price found itself below market value.
Since mid-August, when Severstal was already among Celtic's shareholders, its value has gone up 23.5%. Severstal now has a 26% stake in Celtic via its subsidiary, Bluecone Ltd.
No experts view Celtic's refusal as final. "We see a bargaining process starting," said Boris Vagner, a metals expert at the independent consulting group 2K Audit-Business Consulting.
"If the holding turns its gaze away from Celtic, the company's shares could again slip to the previous level. The company realizes this and is unlikely to push the price too high."
In the view of Alfa-Bank analyst Valentina Bogomolova, Severstal can well afford a 10% premium on Celtic's market capitalization. "There are not too many companies in Russia and Kazakhstan with developed deposits, and their capitalization is higher than Celtic's," she said. "On the other hand, the Irish company has not yet had a stronger bidder than Severstal."
Business & Financial Markets
Suzuki obtains more land to increase production in Russia
St. Petersburg authorities have agreed to double the size of the land plot for the future Suzuki Motor Corp. plant. The company had intended to produce 30,000 cars a year, but the site expansion will let Suzuki increase its production, according to analysts.
In July 2007, Suzuki signed an agreement on building a plant in Russia. According to this agreement, Suzuki will construct the plant with its partner, Itochu Corp. Investment in the joint venture will total $115 million, and the parties are going to work on the basis of post-sharing financing. The plant is expected to begin operations at the end of 2009.
Initially, the company planned to produce 30,000 cars a year in Russia. Suzuki expects its annual sales, including cars assembled in Russia and imported cars, to reach 50,000 cars by 2010. According to a Suzuki representative, the company has not changed its plans yet.
The additional land for Suzuki will help it increase its production, say analysts. Foreign car producers traditionally do not take a large risk and start with a small production output, then gradually increase production capacity, said Ivan Bonchev, automotive analyst at Ernst & Young.
"Suzuki is not the only company expanding the site of its future plant. Toyota has reserved land that doubles the land area of its plant," says Yevgeny Bogdanov, head of engineering and transport in Russia and the CIS countries at A.T. Kearney. According to Bogdanov, the companies guarantee there will be no problems with expanding their plants, even if they need to do it in 2015-2020.
The land near the Suzuki plant will be used to increase car production but not to produce auto parts, say experts. The production volume announced by Suzuki makes the localization of auto parts manufacture inefficient, says Bogdanov.
According to Bonchev, Suzuki will deal with Toyota suppliers that are building plants in the region.
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