MOSCOW, November 19 (RIA Novosti) Deputy minister's arrest a chip in election game/ Kremlin considers backing more than one presidential candidate in 2008/ Moscow says West finicky over Russian election methods/ Surgutneftegaz to sharply increase investment in production/ Russia: workers at Ford plant to go on strike
Deputy minister's arrest a chip in election game
Moscow's Basmanny court sanctioned on Friday the arrests of Deputy Finance Minister Sergei Storchak, Chairman of the Inter-Regional Investment Bank (IIB) Vadim Volkov and Viktor Zakharov, head of a client company of Sodexim Bank.
They were all detained the day before and are suspected of attempted embezzlement of federal budget funds under a deal connected with the Soviet-era debt to Algeria.
The case is going to be highly politically-motivated and could affect Deputy Prime Minister Alexei Kudrin and Rosoboronexport, the state arms-exporting agency.
Against the background of political and bureaucratic infighting at the White House and the Kremlin, the arrest of a Kudrin subordinate is easy to explain.
After becoming a deputy prime minister, Kudrin boosted his influence in the distribution of budget funds and turned in effect into an independent political figure in the Viktor Zubkov government.
Sources in foreign trade organizations believe the prime minister could be expected to turn the "Storchak affair" into a pretext for a major anti-corruption drive capable of neutralizing Kudrin's increased political weight.
Now that Storchak cannot continue his work of dividing the Stabilization Fund into a Reserve Fund and a Fund for Future Generations, lobbyists are provided with a new chance to implement their initiatives categorically opposed by Storchak.
He, for example, was against the idea of investing FFG money in more risky instruments than those proposed by the Finance Ministry and the Central Bank, including bonds issued by state monopolies and index funds.
The arrest of other suspects in the "Storchak case" from IIB must also worry Rosoboronexport - the bank does almost all its business with Rosoboronexport's companies.
However, sources at Rosoboronexport said yesterday they did not see it as a "war of structures" nor as a political attack on its head Sergei Chemezov.
"IIB does not play a major role, and we regard the event as a traffic accident - it is unpleasant but not fatal," a source in Rosoboronexport said.
Dozens of influential figures could bear a grudge against Storchak - in November alone the deputy minister mentioned publicly the Indian debt, the Soviet-era debt to the former Yugoslavia, the Central Bank's monetary policy, the Stabilization Fund, and Russia's debt to the World Bank.
Still greater occasion for the "arrest hint" have been provided by Storchak's present and former heads and counter-agents - from Kudrin to Chemezov and ex-finance minister and ex-prime minister Mikhail Kasyanov.
In this situation what motivated the "Storchak affair" does not matter really. But it will be used in a big political game by the near-Kremlin structures ahead of elections as an excuse for new measures.
Kremlin considers backing more than one presidential candidate in 2008
One of the possible scenarios for next spring's presidential campaign currently being contemplated by the Kremlin involves at least two pro-Kremlin candidates. The Kremlin is presently analyzing the ratings of politicians who could possibly succeed Vladimir Putin, but no decision has been made yet, according to a Kremlin source.
Neither FOM, Russia's public opinion foundation close to the Kremlin executive office, nor the VTsIOM national public opinion center operating on its orders, agreed to disclose the ratings of various presidential hopefuls calculated on the assumption that Putin himself does not run. A source at one of the social poll organizations has hinted that the clients who ordered the surveys asked them not to do so.
If at least two pro-Kremlin candidates run in the upcoming presidential election, one of them may still be there simply to make up the numbers, unless Putin himself prefers the staging of a real election race.
"If the president clearly indicates the successor he would prefer, a second round will not even be needed," said VTsIOM Director General Valery Fyodorov. Still, even if there is a second round, a scenario involving two equally strong pro-Kremlin candidates is unlikely because it is fraught with too many risks, he went on. This scenario would break "the Putin majority," as all candidates are so far seen as belonging solely to Putin's team.
A source close to the president's executive office also sees flaws in the two Kremlin-backed candidate scenario. "Experience shows that fixed matches rarely work out in Russia," the source said, warning of a possible split at the very head of the Russian political vertical.
However, sociologists and experts agree that the new head of state's result will be considerably lower than that of United Russia at the December parliamentary vote, which has been dubbed a national referendum of trust in the incumbent president. Therefore, a second round is still likely to be held at the presidential election, if a "real" Kremlin-backed candidate runs against a second, weaker figure.
Knowing Putin's knack for unexpected moves, we can hardly rule out some yet unknown hopeful emerging soon. "[Viktor] Zubkov's case is evidence that it doesn't take more than two months to promote a new successor," Fyodorov said.
"The president has not made a decision yet," said a highly placed Kremlin source. "He has simply broadened his own room for maneuver by appointing Zubkov and heading United Russia's party list."
Moscow says West finicky over Russian election methods
The refusal by the OSCE's Office for Democratic Institutions and Human Rights to send a mission to Russia to monitor the parliamentary elections is one of the results of certain developments observed in relations between Russia and the West.
The nature of this process was described in no uncertain terms by Vladimir Putin in his Munich speech. The Russian president more than bluntly signaled to Western partners that Moscow does not want to be treated as a second-class power.
Clearly, the reference was also to the obsessive and overzealous way in which Western institutions observe the election methods used in Russia.
When, in October, OSCE officials sounded the alarm saying that Moscow had sent no invitations to its parliamentary elections it became clear that these were more than mere technical delays.
And when the number of OSCE monitors was reduced by the Russian side several times and limited to 70, ODIHR headquarters in Warsaw evidently understood: Moscow was making an offer which they could not refuse.
This "pre-planned scandal" in relations between Russia and the OSCE will no doubt spread to that part of the CIS which, on the one hand, takes its guidance from Moscow and, on the other, has problems establishing international credibility for its electoral procedures.
For example, Uzbekistan, which is going to hold presidential elections on December 23, which local wits have christened as "another election for President Islam Karimov," has, according to Warsaw, already called back its consent given a few weeks ago to accept without any prior conditions a small OSCE mission to estimate election monitoring requirements.
But the real moment of truth in relations between the OSCE and the post-Soviet countries will come ten days later in Madrid, at a meeting of the OSCE Foreign Ministers Council, which will decide the future of Kazakhstan's bid for the organization's chairmanship in 2009.
Astana's allies in the Collective Security Organization Treaty - Russia, Kyrgyzstan, Armenia, Belarus, Tajikistan and Uzbekistan - will help it to meet the refusal staunchly.
They are preparing to present in Madrid the basic principles of organization of general elections monitoring through the ODIHR.
Since it is 100% certain that these will fail to satisfy the Western group of OSCE members, the refusal to grant the chairmanship to Kazakhstan as a collective candidate from the CIS could be suitably presented as western revenge for the East's just demands.
Business & Financial Markets
Surgutneftegaz to sharply increase investment in production
On November 16, 2007, preference shares in Surgutneftegaz, a Russian oil major based in Surgut (Tyumen Region) and one of the least transparent Russian oil companies, surged by 3.2% on the Moscow Interbank Currency Exchange (MICEX), despite a drop in the stock index by 1.22%. The surge was caused by the company's declared intention to boost investments in production.
This year, investment will reach $3 billion, though over the past five years only $1.5 billion was channeled into production, that is, no more than $300 million a year. Experts think this is a catastrophically small figure for a large vertically integrated oil company.
Sergei Fyodorov, deputy director general of Surgutneftegaz, said that investment would be channeled into oil exploration and production in Western and Eastern Siberia and the Nenets Autonomous Area, and also into oil refining and improvements in the methods of using associated petroleum gas.
In 2008, the company will launch commercial oil production in the Talakanskoye field in the Republic of Sakha (Yakutia), where it plans to produce 1 million metric tons of oil in 2008, and 3 million metric tons a year by 2010. After 2010, Surgutneftegaz is going to annually produce up to 7 million metric tons of oil in its largest Talakanskoye and Alenskoye oil fields in Eastern Siberia. In addition, it recently discovered three new deposits with total oil reserves of up to 130 million metric tons.
In recent years, Surgutneftegaz could be blamed for small investments in production compared to other oil companies. The company's funds were not put to use and this could not have a positive effect on its indicators, said Professor Ivan Andriyevsky, a managing partner to the NKG 2K Audit - Business Consultating company.
According to Natalia Milchakova, head of the fundamental analysis department at the Otkrytie financial company, returns on the company's increasing investments may be seen as early as 2008-2009.
The company's decision to invest sizeable funds in developing new fields in Eastern Siberia and increasing output in the old ones (primarily, in the Talakanskoye and Alenskoye oil fields) is explained by the forthcoming commissioning of the Eastern Siberia-Pacific Ocean oil pipeline.
"Investments in developing deposits in this region cannot be called very promising. Besides, one should not forget about tax benefits granted to oil companies operating in Eastern Siberia," Andriyevsky said.
According to the results of the first nine months of 2007, Surgutneftegaz had $2 billion in its bank accounts and $9 billion in money equivalent (in the form of long-term financial investments).
Russia: workers at Ford plant to go on strike
On November 7, a one-day strike was held by 1,500 Ford Motor workers in Vsevolozhsk near St. Petersburg, northwest Russia, who demanded wage increases and shorter night shifts. And another strike is scheduled for November 20.
Months of negotiations with the plant's management this October produced no results, the workers' union said in a statement, and that if the demands were not met, a second strike would begin on November 20 and continue until a satisfactory agreement was reached.
Theo Streit, general director of Ford St. Petersburg, said the management could not meet workers' demands and would not negotiate under possible strike conditions.
The company needs stability and should discuss the terms of a new labor contract in order to expand annual production in Vsevolozhsk from 72,000 to 125,000 vehicles and to invest $100 million in the program.
The plant is to start assembling Ford Mondeo cars by late 2008; and 25,000 vehicles will be manufactured in 2009.
Union leader Alexei Etmanov said his position remained unchanged, and that the union would go on strike after the court deadline expired on November 19. He said the workers would strike if their demands were not met.
Etmanov said Ford Russia would receive enough profits to implement its investment program, to expand production, to manufacture Ford Mondeo vehicles and to meet workers' demands. He said the plant was currently expanding production, and that the company would not kill the goose that was laying golden eggs.
Mikhail Pak, an analyst at the Moscow-based Capital investment group, said the union was taking high risks because Ford Russia could curtail or stop its investment program completely. He said substantial wage raises would increase production costs.
Alexander Agibalov, managing director of AG Capital brokerage, said the Vsevolozhsk plant currently employed 2,000 workers annually receiving 430 million rubles ($17.54 million) in wages, and that per-capita wages totaled 18,000 rubles ($734).
He said the company would have to raise annual wages to 560 million rubles ($22.85 million) and would lose over 130 million rubles ($5.3 million), but that this was not sufficient reason to get rid of its investment program.
Ernst & Young automotive expert Ivan Bonchev said the plant administration would, nonetheless, have to defend its positions because it was paying some of the highest wages in the industry. He said the workers would eventually hold another strike if they were not satisfied.
Pak said the management and the union could agree to link wage raises with production-expansion plans.
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