MOSCOW, November 29 (RIA Novosti) Russia will refuse to recognize Kosovo / Storchak's arrest may hinder repayment of Libya's debt / Transneft not to make concessions to CPC private shareholders / Potanin looks for money to buy Norilsk Nickel / Volkswagen has no plans for price cuts on Russia-assembled cars / A Just Russia will get seats in parliament
Russia will refuse to recognize Kosovo
The last round of talks on Kosovo's status ended on Wednesday in Baden, Austria, in failure. Representatives of Serbia and Kosovo Albanians remained at loggerheads. According to experts, the UN Security Council will not be able to decide on Kosovo either. Things are moving towards a unilateral declaration of independence by the province. Russia, backed by China, will insist on further dialogue.
Before Christmas the Security Council will examine a report by the troika of international mediators (Russia, the U.S. and the European Union), but diplomats are not expecting a decision on Kosovo.
The day before, Russian Minister Sergei Lavrov, while in Washington, said that only a negotiated decision suiting both sides was possible on Kosovo.
Moscow again dropped a broad hint that it was ready to use its Security Council veto right if the independence issue was raised and would not recognize a new state should it unilaterally declare its independence.
Russian diplomats, who do not really believe in a compromise between the Serbs and ethnic Albanians, will be insisting on continued dialogue.
A high-ranking diplomatic source said: "Russia does not think everything will end on December 10. We will not support a resolution backing independence, and will push for further talks."
A scenario by which key world countries could recognize the province's independence does not intimidate the diplomats either.
"It would be illegitimate even if dozens of countries recognize Kosovo. Russia is not going to recognize it," they said.
In the diplomats' opinion, "Western countries feel that one-sided recognition is a slippery slope, and that was why in the past they have agreed to resume negotiations."
In the view of many experts, Kosovo will in one way or another move towards independence. Whether or not the new state is recognized in the foreseeable future will largely depend on the European Union's position, where there is still no consensus.
Storchak's arrest may hinder repayment of Libya's debt
Finance Minister Alexei Kudrin, deputy prime minister of Russia, yesterday said that he needs to promptly speak with his deputy, Sergei Storchak, who was arrested for alleged attempts to embezzle $43 million from the federal budget.
According to the ministry, Storchak's arrest has disrupted talks on the repayment of Libya's debt to Russia, which stands at some $3.5 billion including interest.
In fact, the arrest has put pressure on talks with three countries. A source at the Finance Ministry said the talks had been disrupted, which is especially bad in the case of Libya, in whose case talks reached the final stage.
Another source at the ministry said the negotiations with Libya were problematic from the start. Libya refused to recognize the debt because in the early 1990s Russia joined UN economic sanctions against it. Tripoli authorities said that they had borrowed from the Soviet Union and refused to recognize Russia as its legal successor in the sphere of foreign debts.
"It was largely thanks to Storchak's efforts that we found a way to deal with Libya," the source said.
He said the Finance Ministry proposed writing off a substantial part of the debt if Libya signed contracts on the acquisition of Russian arms. The remaining debt would have been restructured as oil cooperation, as Libya is one of the world's 10 largest oil producers.
The ministry source said that the long and difficult talks "had reached the final stage when the man crucial for the talks, who the other party knew well, was arrested."
Experts say they cannot predict the outcome of the talks because relations with Libya are shaky, and Russia's Western rivals are showing an interest.
Transneft not to make concessions to CPC private shareholders
Russia's state-run pipeline monopoly Transneft has not made any concessions to private shareholders of the Caspian Pipeline Consortium (CPC) in exchange for an increase in CPC tariffs approved by them in October and reductions in interest rates on loans granted to them.
On November 28, the CPC board of directors refused to discuss the consortium's expansion and the issue of the company's Eurobonds after discussions were voted down by Kazakhstan and U.S. oil major Chevron.
In 2008, Chevron and Kazmunaigaz (managing the state-owned stake in the Kazakh CPC) may start discussing a similar expansion project with the managers of the Baku-Tbilisi-Ceyhan pipeline, CPC's rival.
On September 18-19, western shareholders in the consortium approved an increase in the CPC tariff (from $24.5 to $38 per one metric ton/100 km), which had been lobbied by Russia for over two years, as well as cuts in interest rates on CPC western shareholders' loans granted in the mid-1990s to the market level.
Transneft, which had been managing the government stake since September 2007, was expected to make reciprocal concessions, primarily regarding CPC's expansion.
A source familiar with the results of the board's session said the discussion of the agenda was practically halted following the report delivered by the head of the consortium, Vladimir Razdukhov. He confirmed Russia's position that an increase in CPC's capacity must be tied to the construction of the Bourgas-Alexandroupolis oil pipeline. However, the governments of Russia, Bulgaria and Greece have not yet taken a final decision on the pipeline.
The exact time of the two projects' simultaneous launch is not yet known.
According to the source, the projected CPC tariff after its expansion is $52 per one metric ton. This tariff is higher than the estimated tariff of the Baku-Tbilisi-Ceyhan rival pipeline ($45-$47 per one metric ton with tanker shipments across the Caspian).
An increase in tariff rates may force CPC shareholders, primarily Chevron and Kazmunaigaz, to discuss shipments of new oil from the Tengiz field (in western Kazakhstan) via the South Ñaucasus and Turkey, not via Russia.
Last week, the companies' representatives discussed this option with Transneft CEO Nikolai Tokarev. The next attempt to come to terms will be made on February 5, 2008, at a regular session of the CPC board of directors. By that time, Chevron and Kazmunaigaz may have started their talks with the Baku-Tbilisi-Ceyhan project managers.
Potanin looks for money to buy Norilsk Nickel
Vladimir Potanin, head of the Interros holding company, is looking for money to buy a stake in metals giant Norilsk Nickel.
Mikhail Prokhorov and Vladimir Potanin, the two key shareholders of the metals giant, announced early this year their plans to divide assets. Prokhorov held 28.2% and Potanin 25.3% of Norilsk Nickel's shares as of October 26.
Though Potanin seems ready to team up with Rio Tinto, the main rival of the Russian nickel producer, experts believe the stake will be taken over by Oleg Deripaska's RusAl.
Last week Prokhorov's Onexim investment fund made a $15.7 billion offer to Interros to buy out Prokhorov's stake in Norilsk Nickel at $330.3 per share. Potanin is to pay in cash within 45 days.
He has said he is ready to buy the shares but did not specify the date or the sum. However, it will be difficult for him to find the money for the transaction because of the global liquidity crisis.
Potanin apparently expects to take out a loan from Rio Tinto against the pledge of his shares in Norilsk Nickel. In this case, the Anglo-Australian mining company will become a blocking shareholder in the Russian metals giant.
Yevgeny Ryabkov of the Antanta Capital brokerage said: "Rio Tinto is now considering a merger with BHP Billiton, and so is unlikely to want to buy into Norilsk Nickel."
Experts also say that the Russian government will not approve the sale of a stake in one of Russia's most profitable companies to a foreign shareholder.
Deripaska, who agreed with Prokhorov that RusAl would buy a 25% stake plus one share in Norilsk Nickel from Onexim, needs to borrow only $9-$11 billion, and, unlike Potanin whose stake will be smaller than 30%, will not have to make an obligatory buyout offer to Norilsk Nickel's shareholders.
Analysts say the deal between Deripaska and Prokhorov and a subsequent merger of RusAl and Norilsk Nickel will benefit the Russian steelmaking sector. A mining and steel holding could later spin off from the united company, to become one of the world's five leaders in the sector.
But this outcome is also possible if Potanin buys Prokhorov's stake, since Deripaska will be able to use revenues from RusAl's flotation to buy a controlling stake in Norilsk Nickel.
The market capitalization of Norilsk Nickel, which accounts for more than 20% of global nickel output, over 10% of cobalt and 3% of copper, and 96% of Russia's nickel production, has risen 40% since the start of the year, to about $40 billion.
Volkswagen has no plans for price cuts on Russia-assembled cars
Volkswagen cars assembled in Kaluga, Russia, will not be sold at lower prices, Martin Winterkorn, chairman of the German auto-maker, told this newspaper.
Yesterday he attended the official inauguration of the conveyor line at the VW Kaluga plant. Experts do not believe that the planned output will be able to be realized on the Russian market without price cuts.
Volkswagen is to invest $750 million, syndicated by the European Bank for Reconstruction and Development (in exchange for 20% of factory stock). Another $280 million will come from suppliers, Winterkorn said.
The manufacturer plans to build a car factory with an output of 115,000 vehicles a year, to be later increased to 150,000.
No decision on an engine plant has yet been taken, although a separate venue has been set aside, added Volkswagen Rus general director Friedrich Lenz.
This will become possible when 300,000 single modification engines a year are required.
At the moment the conveyor is set to turn out 40,000 vehicles, while the planned output for 2008 is 66,000 units of three models. But prices for Kaluga-made cars will not be reduced, Winterkorn said. The plant is to initially turn out cars assembled from imported components, Lenz added.
That policy is not typical for the Russian market, said Mikhail Pak, a Capital brokerage analyst. A Ford Focus assembled in Russia, for example, costs less than an imported one.
Yevgeny Bogdanov, head of the mechanical engineering and transport branch at A.T. Kearney, said that it was impossible to release so many cars onto the Russian market without bringing prices down.
Volkswagen and Skoda cars are not over-popular with Russians - they rank 14th and 16th in sales among foreign makes. "Perhaps Volkswagen expects to export some of its cars from Russia to other CIS countries," Bogdanov said.
When producing in Russia, foreign makers usually cut their prices by an average of 15%, he said. But in order to sell 115,000 vehicles a year in Russia after 2009, even such a discount will not be enough for Volkswagen, the analyst said.
"In a few years' time, the explosive demand for cars will cease, and manufacturers will be simply bound to undercut rivals," he said.
A Just Russia will get seats in parliament
The Kremlin, which has appointed a member of its staff to head the administration of the A Just Russia party, apparently wants it to get seats in the next parliament.
When President Vladimir Putin agreed to head the election list of the pro-Kremlin party United Russia, many analysts said that A Just Russia stood no chance in the December 2 elections. But now a source in the leadership of United Russia has said: "The Kremlin needs A Just Russia to overcome the barrier. It will have a small representation in parliament, not more than 35 seats."
Alexei Mukhin, director general of the Center for Political Information, said: "The [Kremlin] administration has been instructed to ensure that A Just Russia overcomes the election barrier."
According to the popular daily Nezavisimaya Gazeta, Vadim Konovalov, the new chief of A Just Russia's administration, heads the coordinating and planning department in the Kremlin administration. Vadim Solovyov, a consultative member of the Central Election Commission, has confirmed this.
But Ivan Kharchenko, deputy head of the A Just Russia group in parliament, has denied the rumor about the Kremlin's interference. He said the group's head, Alexander Babakov, who knows Konovalov very well, had proposed him for the post.
There are former members of the Kremlin staff among candidates in Vladimir Zhirinovsky's Liberal Democratic Party, which has apparently passed the loyalty test. This means that the Kremlin will strengthen its control of the new State Duma, the lower house of parliament, to which elections will be held on December 2.
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