MOSCOW, October 3 (RIA Novosti) Putin scheming legitimate power comeback - expert / President signals fewer political risks to investors / New IMF head takes revenge on Russia / There is no new government in Ukraine, but Russia already does not like it / Norilsk Nickel subsidiary buys into Canadian Royalties
Vedomosti
Putin scheming legitimate power comeback - expert
President Vladimir Putin has agreed to head the election list of the pro-Kremlin United Russia party. He still hasn't ruled out becoming prime minister. What is the key reason behind these decisions - overconfidence or concern?
Nikolai Petrov, an expert at the Moscow Carnegie Center, said both could be true. Putin is confident and he still fears that if he stops pulling all the strings for a while, he might partly lose control. We have been witnessing the appointment of people who are personally loyal to Putin to all the key positions in the past 12 months. He is building up a perfect 100%-fault-proof scheme. Since personal loyalty does not provide a 100% guarantee, he is making it legally impeccable as well. If, for example, he plans to become prime minister, temporary or permanent, he will have to amend the Constitution so as to ensure that the new president could not fire him.
As for confidence, Putin is certainly confident of his strengths and ability to carry the weight of running the country. He is also confident that his strategy is effective.
According to Olga Kryshtanovskaya, head of the department of elite studies at the Russian Academy of Sciences Institute of Sociology, in Russia loss of power often implies the loss of freedom, and sometimes the loss of life. This is what [Boris] Yeltsin feared. Putin, unlike Yeltsin, is accused of stripping people of property and homeland; he has deadly enemies, and therefore cannot afford to lose power at all.
Alexei Makarkin, an expert at the Center of Political Technologies (a Moscow think tank), said Putin's appearance on top of the United Russia party list was his way of procuring additional resources - the party, parliament and government - for the period of his absence from the Kremlin. Russian history lacks examples of powerful political leaders who leaned on their personal influence alone, like Deng Xiaoping or Nelson Mandela. In 2012, it would be more preferable to be a government official running for president, than an ordinary citizen, ex-president and historic celebrity.
Putin, 55, is popular with almost 70% of the population. He is obviously confident of bright prospects looming ahead. He probably sees himself as a member of the international political leaders' club, G8, where extending tenures is inappropriate. One the other hand, there is [Silvio] Berlusconi, who left power and then made a comeback after winning another election.
Kommersant
President signals fewer political risks to investors
Foreign investors are staging a comeback on the Russian market following a protracted pause provoked by a liquidity crisis. The aggressive buying of shares by overseas funds has triggered a record growth of the RTS index, which has shot beyond 2100 points. In that way, investors played on a statement by Vladimir Putin that he would top the United Russia election list, which, in their view, is a sign of reduced political risks.
Russian investors, however, are not yet ready to draw serious conclusions and buy up domestic securities.
"The inflow of Western investments was felt particularly strongly in Gazprom and Sberbank stock," said Alexei Golubykh, a trader with Troika Dialog brokerage. During the crisis, American investment funds that operate in developing countries retrenched their positions.
"Now they are restoring them," said Andrei Kilin, Alfa-Capital manager.
The signal to buy up Russian stock was given to foreign companies by President Vladimir Putin. The market, tired of bad news, yesterday made full use of his statement that he would head the United Russia list in the December 2 parliamentary elections.
The president also aired the possibility of his future assumption of the premiership. "Investors have taken the Russian president's remarks as evidence of diminishing political uncertainty and continuity of the existing political line," said Yaroslav Lisovolik, chief economist with Deutsche Bank.
"The market has been long waiting for some positive sign, and that is why there was such a rally yesterday," Golubykh said.
Russian investors are for the time being holding off from large investments. "Our players have reacted more calmly than foreign ones: the day before they were taking profits and today they found it hard to make up their minds to re-enter the market," said Alexander Krapivko, portfolio manager with Renaissance Investment Management.
The market is growing on the coat-tails of external liquidity, Kilin agreed. He said that Russian banks, which shortened their positions on stock during the crisis, are in no hurry to invest.
Analysts are sure that before the end of the year Russian fund indices will show new peaks. According to Deutsche Bank forecasts, the RTS index could reach 2600 points.
Nezavisimaya Gazeta
New IMF head takes revenge on Russia
A week into his appointment as head of the International Monetary Fund, former French finance minister Dominique Strauss-Kahn proposed an IMF quota reform, which boiled down to Russia giving up part of its meager quota in favor of others. That Russia had put up its own candidate for the post, former Czech prime minister and central banker Josef Tosovsky, truly adds salt to the situation.
The IMF managing director said that EU countries and Russia should give up some of their IMF quotas in order to allow emerging and developing countries to increase their share of IMF quotas and votes. "To give greater representation to some countries, other countries must give up some of their share of representation at the IMF," he said.
The EU's summary quota (33%) and the U.S. share (17%) enable them to virtually dictate decisions to the other members. For example, Europe and the United States have a silent agreement that an American is always slotted into the World Bank, whereas a European gets to run the IMF (usually a French candidate). Last July, representatives of Australia, Brazil and South Africa proposed abandoning the scheme of appointing candidates to key positions according to nationality. In August, Russia nominated its own candidate for the first time. However, Europe and the U.S. supported Strauss-Kahn, and he was appointed without even a vote.
Following his appointment, Russia's Deputy Premier and Finance Minister Alexei Kudrin published an article in the Financial Times. "We sincerely hope that the new IMF managing director will be able to put into practice his declared program. Should he fail, we will have to forget about the IMF as a serious global institution regulating international finance," he wrote.
But the IMF PR department said Kudrin's criticisms were quite in line with the reform concept projected by the organization.
On the other hand, economics experts do not rule out that shrinking Russia's IMF quota indeed looks like an attempt to crack down on a country which has stopped behaving in the "proper" way. But they cite the slow-down of Russia's economy as a more important reason.
"We are proud of Russia's economic growth today, but compared to countries like India and China, Russia has nothing much to boast of," said Ruslan Grinberg, director of the Economics Institute of the Russian Academy of Sciences. He said its relative size in the global economy is shrinking considerably compared to China.
Andrei Illarionov, president of the Institute of Economic Analysis (a Moscow think tank), said Russia's share in the global GDP has reached an all-time low of 2.5%. Russia (the area within the present-day border) accounted for 5.2%, 5.7% and 5.3% of the global GDP in 1913, 1950 and 1973, respectively.
Gazeta.ru, Gazeta
There is no new government in Ukraine, but Russia already does not like it
Experts interpret Russian energy giant Gazprom's remarks about problems with gas delivery to Ukraine as discontent with the neighboring country's future policy. It may lead to a "gas war" and cause displeasure in Europe.
According to Gazprom, Ukraine does not want to pay for gas and owes the company more than $1.3 billion. This might have meant nothing to Europe if the main oil pipeline delivering Russian gas to the EU did not run through Ukraine.
If the problem is not solved right now, Russian-Ukrainian relations will turn into a "gas war." "Gazprom's remark is a warning sign and a display of military force. We should take into account Gazprom's new, more aggressive policy, as well as the Ukrainian parliamentary election," says Artyom Konchin, an analyst at Aton Investment Company.
Gazprom's aim is clear enough: to influence the formation of a coalition in the Ukrainian parliament. Eventually, parliament will appoint a government, and Gazprom will have to deal with it to settle debts and negotiate the gas price for next year. Naturally enough, in 2006 the energy giant agreed to sell cheap gas from Central Asia to Viktor Yanukovych's government at $135, almost without a mark up. Now, it does not like the idea of working with a Yulia Tymoshenko government. She has said several times that she wants to cut out the middlemen in dealings with Gazprom.
Russia expressed its wishes before the elections. "The price for next year will be discussed at negotiations. That's why everything depends on the composition of the government and the conduct of negotiations," Viktor Chernomyrdin, Russia's ambassador to Ukraine, undiplomatically commented at the Strategic Partnership between Ukraine and Russia meeting.
Before the vote, several media sources cited a top level source from Gazprom saying that if the Ukrainian government did not change, the gas price for Ukraine would be $145-$175 per 1,000 cubic meters. Otherwise, "we will be looking at a price of $230," the source said, according to the media reports.
Business & Financial Markets
Norilsk Nickel subsidiary buys into Canadian Royalties
Norilsk Nickel has purchased a 7.2% stake in Canadian Royalties for $25 million CAD. It spent a similar sum on an option realizable as additional funding for the Nunavik project. Experts are certain that the mining company will seek to increase its stake to a controlling one.
Canadian Royalties Inc. (CRI) and Norilsk Nickel Harjavalta (NNH) in Finland yesterday reported signing several agreements. Their aim is to speed up the Nunavik nickel project owned by the CRI. Production in this project is expected to begin in the second quarter of 2010. The CRI will sell nickel concentrates to the NNH from this site, with purchases totaling $466 million CAD.
The price of the deal is 6% to 7% higher than the price of CRI ordinary shares at the close of yesterday's trading.
Tav Morgan, Norilsk Nickel deputy director, told the paper that "the company will use the option only at the final stage of Nunavik if it requires extra financing." He said that thanks to the agreements concluded Norilsk will acquire a source of raw materials for its Finnish assets. In particular, the mining company will be able to run its Harjavalta plant at full capacity, or 60,000 tons.
Experts are sure that the company will realize its option by 2010, with the result that Norilsk's share in the CRI will amount to 10%-12%. "The company will make use of its option in a year or two. In the intervening period, CRI shares could rise by about 30%, and accordingly for its $25 million CAD Norilsk Nickel will get another 4%-5% in the company," said Sergei Krivokhizhin, an analyst with the Otkrytiye brokerage.
"This purchase is most likely to be a trial balloon for the mining company. Some time later one must expect an absorption of the CRI, or Norilsk increasing its stake in it to 50%," said Nikolai Sosnovsky, an analyst with Sobinbank. "Canadian Royalties posted $10 million CAD in net losses in 2006, but the company is just only building up a portfolio of its projects. In view of the dynamic growth at such an early stage of development, these will be entirely different assets in several years' time. This is what Norilsk Nickel hopes for as it buys into the CRI so early."
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