MOSCOW, December 19 (RIA Novosti) Kosovo is an unwanted precedent for Russia / Presidential campaign needs more exciting plot / Russia must step up Bourgas-Alexandroupolis project / LUKoil does not have enough funds to pay dividends / Evraz successfully enters U.S. market/ Kazakhstan threatens to halve Russian rocket launches
Kosovo is an unwanted precedent for Russia
With several self-proclaimed states on the territory of the former Soviet Union eager to make use of the Kosovo precedent for their own benefit, Russia does not want to be faced with a dilemma of whether or not to recognize their independence yet.
Sergei Karaganov, deputy director of the Russian Academy of Sciences' Institute of Europe, believes that both options are undesirable for Russia at the moment.
The United States and some European nations probably want to turn the Kosovo page at any rate, because they need to prove that the de-facto isolation of Kosovo by NATO bombs was the right thing to do, the expert said. They are also eager to take the political logic and pattern of the 1990s, in which the U.S. and NATO, believed to have won the Cold War, could dictate their terms, into the next century.
However, the expert said, the arrogance of force shown lately by the U.S. has resulted in the Iraq fiasco and all but led to WWIII, which would inevitably have followed any attack on Iran.
Seeing that Russia's spirit was not to be broken, the European Union, which was slowly pulling itself out of a crisis through the Lisbon agreement, decided that preserving the fragile unity was more important than recognizing a criminal republic. European capitals are also aware that the latter will be fraught with additional intractable problems, as they will have to restore Kosovo and make efforts to prevent the emergence of a great and powerful Albania.
Russia is in no hurry, and has no reason to cede its positions, which are almost perfect from the political and moral standpoints, Karaganov said.
So is there a solution? There certainly is, and incidentally more than one. The first option for the West is to try and persuade Serbia to change its position by offering it a package of economic and political privileges which would suit the majority of the Serbs and would come across as an apology and reparation for the damage done by the war unleashed by NATO.
Another option, according to Karaganov, is to offer a package of privileges along with the annexation of parts of Kosovo where Serbian population prevails to Serbia, possibly along with some other territories.
If Serbia agrees to one of the options and recognizes Kosovo's independence, international law will be observed, and Russia and China will have to lift their vetos in the UN Security Council, satisfied by at least a moral victory.
But Russia has in any case won a small foreign political victory by proving it is strong enough to fight unilateral and unlawful decisions, Karaganov concluded.
Presidential campaign needs more exciting plot
The President-Medvedev-Premier-Putin tandem has been already dubbed a "dream team." This dream certainly sounds like it has already come true and we do not have to do anything else to help it materialize. So what would rouse the voters now and motivate them to actually turn up at the polls in March?
This is no small task in fact. With the earlier requirement for minimum voter turnout gone, the president elect will still not feel like a generally elected leader if the turnout is shamelessly low. Around 60% is a traditional turnout level at federal elections, which means that 60 million people must still feel on election day that going to the polls is more important than the other Sunday pastimes available. A more interesting plot in the presidential campaign is something that would motivate them.
One tried-and-true scheme is creating the "image of an enemy." Communist leader Gennady Zyuganov has worked well in the role for some time - a personification of a persistent "Red threat." As of now, however, few would still believe he is any threat to the overly influential Putin-Medvedev tandem.
The final days of the recent parliamentary campaign saw a small level of intrigue built around "an oligarchic revenge threat." But this card cannot be played again in the upcoming presidential campaign, because for that we would need a strong rival candidate whose victory would have led to that "revenge."
"The lack of intrigue is really a problem," comments Valery Khomyakov, director general of the Council for National Strategy. "The government will certainly have to use a motivating technique of some sort. One step, I think, was made at the congress of United Russia, where Putin as good as said to the voters they should go and vote for Medvedev if they wanted to keep Putin as prime minister and to have things more or less unchanged. But will this be enough to obtain convincing figures in the end?"
"Medvedev so far lacks ideological integrity, so he could expect 50% simply by the 'leftover' principle, because there are no strong rivals," said Gleb Pavlovsky, Russian political analyst and president of the Effective Policy Fund.
"But 50% is not enough to run the country confidently. Voters might still have doubts about whether they have done the right thing. A candidate in the campaign should make some important moves which would cause an emotional stir in voters," he said.
Russia must step up Bourgas-Alexandroupolis project
On December 18, 2007, participants in the Bourgas-Alexandroupolis pipeline project signed an agreement to set up an international project planning company that will act as the project's operator. The implementation of this project will allow Russia to take the decision to expand the Caspian Pipeline Consortium. Experts are of the opinion that Russia must step up the Bourgas-Alexandroupolis pipeline project as alternatives to it exist.
Mikhail Barkov, vice president of Russian pipeline monopoly Transneft, one of the shareholders of the project, hopes that the registration of the international project planning company in the Netherlands will be completed by late January. Then it will be able to start work on the feasibility study for the project and calculate oil transportation tariffs.
According to Viktor Khristenko, Russia's industry and energy minister, this will take about six months "if there are no delays in land allocation" and "another 18 months to build the pipeline."
Current plans are for the 285 km-long pipeline to annually pump 35 million metric tons of oil and for its capacity to be expanded to 50 million metric tons in the future. The cost of the project is estimated at 1 billion euros.
According to calculations made by Nikolai Seregin, head of the department of strategy and overseas projects of Gazprom Neft, the oil producing arm of the Russian gas giant Gazprom, oil companies' losses caused by delays in the Bosporus and Dardanelles straits amount to $700-$750 million.
Russia and Britain's TNK-BP, U.S.-based Chevron and Kazakhstan's Kazmunaigaz have already expressed interest in purchasing a stake in the pipeline project from the Greek or Bulgarian partners in the project but no agreement has been reached yet. Besides, the shareholders of the project will not receive quotas for oil transportation via the pipeline.
Valery Nesterov, an analyst at the Troika Dialog investment company, notes that Russia must step up the implementation of the project for geopolitical considerations because there are some alternative routes that bypass the Turkish straits.
Apart from this, Russia promised to increase the capacity of the KTK private pipeline running from Kazakhstan to the Russian port of Novorossiisk (with Russia holding a 24% stake in KTK) from its present 30 million metric tons. In turn, KTK's western shareholders have changed the structure of the company's management and raised tariffs from $30.24 to $38 per metric ton, something which Russia has long insisted on.
LUKoil does not have enough funds to pay dividends
Russia's largest independent oil producer LUKoil may face a shortage of funds to pay out dividends for 2007. The company will have to take a loan or even sell shares.
In 2003, LUKoil promised its shareholders to use no less than 15% of its net profit (calculated to U.S. GAAP) for the payment of dividends. The company has not broken its promise since that time.
Over the first nine months of 2007, LUKoil used 89% of its operating money flows, much more than other oil majors (the figures for Gazprom Neft and Tatneft are 39% and 41%, respectively), said analysts at the Troika Dialog investment company in their review of December 18.
According to Troika Dialog's calculations, LUKoil had 7.5 times less money by the end of the third quarter of this year ($835 million) than its reported net profit over January-September 2007 ($6.3 billion).
According to the forecasts by the Troika analysts, LUKoil's dividends for 2007 will amount to no less than $1.3 billion, so the company will find it difficult to pay them from its own funds. This means that within the next six months LUKoil may float shares, sell its assets or borrow funds, the experts conclude.
Denis Borisov, an analyst with the Solid investment and financial company, agrees that according to the 2007 yearend results LUKoil's money flows may not be enough for the expected dividend payments (he projects them at about $1.4 billion). As a result, the company will have a deficit of $100-$400 million.
"However, I doubt that LUKoil will take a loan to pay dividends because this will prevent it from reducing the company's taxable base by the amount of interest on loans taken for production purposes," Borisov said.
According to him, this is one of the reasons why Russian companies do not pay dividends from borrowed funds. Most probably, he thinks, the company will use part of its operating funds to pay dividends and borrow money to finance its investment program.
Borisov is convinced that LUKoil will not reduce its capital investments as this could lead to violation of the terms of license agreements and, consequently, to problems with the control agencies. The market will not like it better than an increase in debts.
"This is all the more so because LUKoil can yet borrow about $20 billion before the debt to EBITDA ratio reaches its upper limit of two," the expert says.
Business & Financial Markets
Evraz successfully enters U.S. market
On Tuesday, Titan Acquisition Sub, a subsidiary of Evraz Group, Russia's largest steel and rolled-stock producer, offered to buy Claymont Steel Holdings of the United States for $23.5 per share or a total of about $564.8 million through a cash tender offer.
Experts said corporate shareholders would not turn down this lucrative offer, due to expire on January 16, 2008.
The Claymont Steel board of directors had previously unanimously voted to recommend that shareholders accept the Titan Acquisition Sub offer.
HIG Capital LLC, a leading international private equity firm owning a 42.6% stake in Claymont Steel, said it would agree.
Yevgeny Ryabkov, an analyst with the Antanta Capital brokerage, said the Evraz price stipulated a 50% premium, and that Evraz considered the deal profitable because there were few inexpensive companies left on the global steel market.
He said the deal would enable Evraz to consolidate its positions on one of the most promising markets.
Steel demand has dwindled because of the U.S. mortgage crisis. Bank of Moscow analyst Dmitry Skvortsov said Evraz had successfully entered the U.S. market and that Claymont Steel would have cost more in better times.
Experts said Evraz would export more slabs for subsequent processing at Claymont Steel.
Evraz said the deal would be financed out of corporate profits and previously attracted loans. The company will spend $1.8 billion out of a recently borrowed $3.2 billion syndicated loan for servicing a previous loan used to buy Oregon Steel Mills.
Claymont Steel, located in Claymont, Delaware, is a carbon plate producer with an annual capacity of over 500,000 tons. It manufactures and sells custom-order discrete steel plate in the United States and Canada.
Kazakhstan threatens to halve Russian rocket launches
Moscow and Astana have agreed on the compensation Russia will pay to Kazakhstan following an accident with the Proton-M launch vehicle on September 6. Although the initial figure Kazakhstan had insisted on was $60.7 million, Russia managed to get it reduced to $2.5 million.
A displeased Astana is threatening to halve Proton launches scheduled for 2008, and have Russia suffer losses over unfulfilled commercial contracts.
A source in the rocket and space industry has said Russia agreed to pay Kazakhstan $2.5 million. "Of that sum, $800,000 will be disbursed by insurance companies, and the remaining $1.7 million by the Khrunichev space center, which manufactured the rocket," the source said.
"The negotiations were very tough, and there were things we both could and could not prove, because Russia requested clear-cut evidence of the damage done," said Vladimir Bozhko, leader of the Kazakh government commission and head of Kazakhstan's Emergencies Ministry.
"Late in December the two countries will sign an agreement laying down the final sum of damages from the elimination of the aftereffects of the Proton accident," Alexander Vorobyov, a Russian Space Agency spokesman, said on Tuesday.
However, a source said Kazakhstan was unhappy about such a drastic cut in the Russian compensation and demanded a halving of launches of rockets using toxic fuel elements, and above all the Proton.
"Next year we have planned not fewer than eight Proton launches with commercial satellites," the source said. "Now Kazakhstan is insisting that we cut them to four, postponing the rest until 2009. But contract defaults will result in heavy penalties from overseas clients."
Russia and Kazakhstan are to agree a 2008 schedule of launches before December 31. Sources at the Russian Space Agency believe Kazakhstan will again try to collect more payment in exchange for schedule approval.
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