MOSCOW, December 17 (RIA Novosti) Moscow may have to choose between WTO and gas cartel / Will Russia have a responsible left-wing opposition? / Communist presidential hopeful an acceptable rival for authorities / Investors sense political stability in Russia / Russian company urges import ban on Chinese trucks / Komatsu interested in Russia’s market for road construction machinery
Moscow may have to choose between WTO and gas cartel
Saudi Arabia mucked up Moscow's plans just as the future gas cartel was virtually up and running and the European Union was left to wait for price directives. The country which is a newcomer to the WTO demanded trade concessions at the talks on Russia's accession to the World Trade Organization (WTO).
Russian negotiators were surprised by Saudi complaints because Russian-Saudi trade is almost nonexistent.
They did not expect Saudi Arabia, which merely asked questions about the legal aspects of regulating the fuel and energy sector and has more than enough energy resources, to consider major investment in the production and transportation of Russian energy.
However they were mistaken, because this is what Saudi Arabia is demanding, free access to Russia's strategic deposits and pipelines, and is recommending that Russia cut customs duties on some industrial goods that are not even produced in Saudi Arabia.
Riyadh most likely is aware that Russia will not open the doors to its deposits and Gazprom's pipes, as this contradicts the provisions of Russian legislation. Besides, Brussels failed to secure lesser concessions from Russia when Moscow signed an agreement with the EU on terms of access to goods and services within the framework of Russia's WTO accession.
Saudi Arabia does not have the experience and technology to operate in the extreme north and offshore fields. Moreover, it must know that if Moscow has to choose between the WTO and a gas cartel, it would go for the latter.
Russian negotiators believe that Riyadh is simply playing for time, and is probably acting on behalf of the United States, which does not want to let Russia join the WTO before Ukraine. However, political scandals in Ukraine are preventing its parliament from approving the necessary legislation.
This is the most likely scenario, as demonstrated by the fact that envoys from the United Arab Emirates have expressed support for Saudi Arabia. Maxim Medvedkov, chief Russian WTO accession negotiator, had a hard time with them last Friday in Geneva.
No practical agreements have so far been reached, and Russia may be forced to choose between the WTO and a gas cartel with Qatar and Iran.
Will Russia have a responsible left-wing opposition?
The recent success of Russia's Communist Party, KPRF, is evidence of stability. With its former leader re-elected, the party has retained the old level of public support, 11.6% of the vote at the recent parliamentary election (compared to 12.6% in 2003).
However, to make forecasts about the future of Russia's left factions, one must understand whether or not the heirs of the former Soviet Communist Party (CPSU) are set to develop into a modern social democratic party embracing the interests of all age and occupation groups.
With its current membership and composition, the party will hardly be able to do this. It has decreased from 559,000 in 1997 to 165,000 in 2007, and is now exceeded not only by the pro-Kremlin United Russia party (1.26 million members), but also by A Just Russia (309,000). People older than 55 accounted for 67% of KPRF supporters at the recent elections, voters aged 40-54 for 24%, and among under- 39's a mere 9%, according to the Levada research center's figures.
Can it be that there is no demand for Western-style social democratic ideology in Russia today? According to a recent survey by the VTsIOM public opinion center, 38% of respondents support the idea of building a social model similar to Sweden's, with a market economy combined with a high level of social security; 20% believe that socialism is not a good choice for Russia; 12% want the Soviet regime back; and 6% advocate a Chinese path of development.
Russia does not have a sufficient number of independent trade unions, which form the foundation of European social democracies. They have 1.5 million members, as opposed to 30 million in the official Federation of Independent Trade Unions. The situation may change when they grow, and when their leaders go beyond simply bargaining with corporations and demand institutional changes. Then they may be joined not only by hired employees but also by self-employed persons, or possibly associations of motorists dissatisfied with the frequent abuses of law and order. It will only happen when all Russians realize that problems which only seem individual can be solved more successfully by joint efforts than through private deals with officials.
Communist presidential hopeful an acceptable rival for authorities
Communist Party leader Gennady Zyuganov, nominated at a party congress on Saturday to run for president, promised two rounds of voting and his man for prime minister. But according to sources in the party, he had been doubtful over whether to fight for the Kremlin even before it was understood that First Deputy Prime Minister Dmitry Medvedev would succeed Vladimir Putin.
"It is in Putin's interest that Medvedev should score less than United Russia," said political analyst Alexander Kynev. "Otherwise it could mean that Medvedev's rating is higher than Putin's at the top of the party of power."
In the analyst's view, authorities need to "build up Zyuganov," because "Kasyanov, if he is registered, will act as a decoration, while Zhirinovsky cannot produce more than he has - and what he has is an anti-rating."
"Zyuganov is a very acceptable partner for the authorities, because the Communists have problems venturing beyond their steady electorate," said Mikhail Vinogradov, head of the Center for Current Politics.
"Therefore Zyuganov will find it difficult to play the role of a non-Communist opposition candidate. Consequently, Zyuganov is not the kind of person who can win in the first round."
A source in the Communist Party said that at a party meeting ahead of the congress, after a meeting with the president, the Communist leader said that under strong pressure he would pull out and brand the election as unlawful. The source thought this was what Zyuganov discussed with Putin.
But even if Putin promised Zyuganov "that everything will be good and fair at the presidential ballot," Kynev does not think it will be.
"At the parliamentary elections the authorities issued an anything-goes license. So at a presidential election, even if the command is given not to interfere, local authorities will behave in the same way. It is a genie released from a bottle: a person who has been able to doctor the results once and return with impunity will never stop even if there is no order to stuff boxes."
Investors sense political stability in Russia
The inflow of resources into funds that invest in Russia and the CIS has grown dramatically since President Vladimir Putin announced his support for First Deputy Prime Minister Dmitry Medvedev as a presidential candidate.
Experts believe that political stability will propel Russia to second place after China in terms of foreign investment in emerging markets.
According to U.S.-based Emerging Portfolio Fund Research, inflows into funds investing in Russia and the CIS amounted to $267.7 million between December 5 and 12. This is considerably more than in the last two weeks of November ($54 million and $23 million respectively).
Experts say that dwindling political risks are among the main reasons for the increased financial inflow into Russia.
Yaroslav Lissovolik, chief economist at Deutsche Bank, said: "The nomination of Dmitry Medvedev convinced investors that the political situation in Russia will be stable for the near future."
The October events showed that political stability is one of the main reasons for investing in the Russian stock market. During the week following Putin's agreement to head the election list of the pro-Kremlin United Russia party, inflow into the above funds amounted to $140 million, or more than double the inflow over the previous month ($65 million).
One more factor, apart from Medvedev's nomination, is the traditional yearend growth of investment.
Mikhail Semyonov, managing director of Alliance Continental Ltd, a recently established asset management company, said: "Money traditionally flows not only into Russia, but also into many other emerging markets in December and the first two weeks of January."
However this year the flow of funds into Russia is considerably higher than into India ($116.93 million) or Brazil ($181.28 million). China remains the leader ($611.08 million), but Russia has surged ahead of it in terms of investment pace.
Ovanes Oganisyan, strategic analyst with Renaissance Capital, said: "In terms of percentage, the inflow into Russia is higher than into China, 4.01% and 1.75% respectively."
Business & Financial Markets
Russian company urges import ban on Chinese trucks
Russian truck giant KamAZ, based in Naberezhnye Chelny in Tatarstan in the Volga area, said it would urge for an import ban on heavy-duty Chinese trucks. The company said its findings showed that Chinese vehicles did not match national quality standards.
Analysts said the government would doubtless support KamAZ.
KamAZ experts have studied several Chinese trucks whose maximum braking distance and other specifications do not match Russian quality standards.
The Dmitrov auto testing range near Moscow plans to hold an independent expert check in order to confirm KamAZ data. After that, Kamaz will ask the Association of Russian Automakers not to certify Chinese vehicles.
If a ban is put in place, it will be impossible to import them, to pass technical inspections at local traffic police divisions, and to operate the trucks.
Russia currently has a simplified motor-vehicle certification system. KamAZ CEO Sergei Kogogin said many car-and-truck parameters were not being checked, that his company advocated equal rules for all market players, and that other manufacturers had to abide by quality standards.
KamAZ said not all Chinese trucks matched Russian quality standards and that the axle loads of U.S. and Korean vehicles were not meant for local roads. Only European and Russian trucks fully conform to national standards, Kogogin told the paper.
Broker Credit Service analyst Sevastyan Kozitsyn said Chinese trucks were the main rivals of their Russian equivalents, that KamAZ had good chances of banning their imports, if not operations.
He said the government planned to sell its stake in KamAZ and that it wanted to create favorable market conditions for the company.
Kirill Tachennikov, an analyst with Otkrytie brokerage, said the cheaper Chinese trucks were inferior to their KamAZ equivalents. Although Chinese companies can upgrade them, their price would then go up, he told the paper.
Komatsu interested in Russia's market for road construction machinery
Japan's Komatsu, the world's second-largest manufacturer of construction machinery and equipment, wants to produce excavators and loaders in Russia for building and mining companies.
With this aim in view, Komatsu is planning to build an assembly plant in Yaroslavl worth $60 million. The plant, to be commissioned in 2010, will assemble 3,000 excavators and 7,000 loaders in the first year of operations and will reach its full design capacity in the 2011-2012 financial year.
Vasily Kuzmenkov, deputy chairman of the board at the Komatsu office for Russia and the CIS, confirmed the company's plans to build the plant but refused to give any details.
According to Komatsu's Russian division, in 2006 the company sold 999 machines worth $402 million. In 2007, the company's sales may surge to 1,600 units of machinery ($473 million).
At present, Russia's largest producer of similar machinery is the GAZ group, which manufactures light commercial vehicles, trucks, buses, cars, diesel engines, power-train components and road construction machinery and equipment.
Natalia Alekseyeva, director for strategic development at the GAZ Spetstekhnika (special machinery) division, says there will be enough buyers to go round because the Russian market of road-building machinery and equipment is growing 25%-30% a year. She estimates the size of this market at $4 billion a year. Alekseyeva is not afraid of competition because GAZ plants produce cheap machinery, while Komatsu is operating in a high-price niche.
The demand for road-building machinery and equipment will be very high in recent years, says Pavel Lezhnev, supplies director at Severstal-Resurs, which manages mining companies of the Severstal group. According to him, the iron ore and coal mining sectors are on the rise now and the company is renovating its old park of machinery. Lezhnev expects that Komatsu will have more competitive prices and convenient services in Russia.
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