MOSCOW, January 17 (RIA Novosti) South Stream pipeline agreement at risk / Ukraine eager to join NATO / Russian-British diplomatic war continues / New Russian-Ukrainian gas war has almost begun / Panic on Russian stock markets / WPP Group aims to raise profits in Russia
Gazeta.ru
South Stream pipeline agreement at risk
Ahead of a January 17-18 visit by Vladimir Putin to Bulgaria, the country's leadership has announced it may delay the signing of an agreement to build the South Stream gas pipeline. Experts say that the pipeline will be built, but that Russia will have to compromise.
According to Bulgarian Minister of Economy and Energy Petar Dimitrov, the sides are now discussing ownership rights. But experts think the true reason lies elsewhere.
"It's a big geopolitical game," said Dmitry Oreshkin, leading research fellow at the Russian Academy of Sciences' Institute of Geography. "Bulgaria is a poor country and is anxious to get the most out of its entry into the European Union, which in turn is seeking to diversify gas flows as much as possible by cutting down Russia's role. But Bulgaria has local interests, and it is trying to derive the most from the transit of Russian fuel, specifically Russian gas."
"Bulgaria will be maneuvering between the European Union and Russia. On the one hand, it is interested in Russian energy supplies, and on the other, does not want to look pro-Russian in Europe's eyes," said Alexei Makarkin, deputy general director of the Center for Political Technologies.
In his view, Sofia's presence in two projects with Russian participation (the second is the Burgas-Alexandroupolis oil pipeline) could mar Bulgaria's image in Europe which seeks to get rid of energy dependence on Russia, and the country's leadership will be stepping very gingerly around South Stream.
Furthermore, the game also involves the United States, which has a direct vested interest in the region - South Stream is a competitor of the pro-American Nabucco project. If South Stream is built, the need for Nabucco will fade.
However, in the opinion of political analysts, Russia has a chance to reduce U.S. influence. "Russia could exert counter-pressure on the U.S. through Russian allies in Europe - Germany and France - closely interested in Russian energy resources," Oreshkin said.
Bulgaria, too, could make major concessions because the project is important for Russia.
In this light, a visit by the Russian president to Bulgaria, in Makarkin's view, increases the chances of the project's success, although does not guarantee them.
Vremya Novostei, Komsomolskaya Pravda
Ukraine eager to join NATO
Ukraine has shaken off the effects of its recent internal political crisis and confirmed its desire to join NATO.
President Viktor Yushchenko, Prime Minister Yulia Tymoshenko and parliament speaker Arseny Yatsenyuk yesterday sent a joint letter to NATO Secretary General Jaap de Hoop Scheffer, asking him to put Ukraine on the Membership Action Plan at the April summit in Bucharest.
Vladimir Gorbach, an expert at the Institute for Euro-Atlantic Cooperation (²EAC), an NGO studying the European and Euro-Atlantic integration of Ukraine, said: "Such an appeal is obligatory for countries willing to join the bloc. Ukraine is likely to be added to the plan in April; the probability is above 50%. The new stage will last two or three years, after which Ukraine will become a NATO member."
However, the majority of Ukrainians are against joining the bloc. According to regular polls, the number of opponents of the idea is as high as 70-80% in some regions of the country.
Vladimir Zharikhin, deputy director of the Institute of the CIS Countries, said: "Filing the request is the biggest step to joining NATO," although it does not ensure membership. "Yushchenko most likely wants to play on Russia's nerves."
Major General Alexander Vladimirov, vice president of the Russian Board of Military Experts, shares this view. He said: "The policy of rapprochement with NATO reflects the personal views of the three leaders, but not the Ukrainian people as a whole."
The general noted that Ukraine's movement toward NATO fits the new concept the bloc is drafting, according to which its survival depends on the admission of new members, such as Ukraine and Georgia.
The Party of Regions is the main opponent of joining NATO. It has accused Ukrainian authorities of violating the Constitution, which describes Ukraine as a neutral state. According to the party, "only the people as a whole may take the decision to join the Membership Action Plan in order to become a NATO member."
"A referendum on the issue is unlikely, because Yushchenko and Tymoshenko would lose it," Zharikhin said.
Russian analysts say Ukraine's NATO membership would affect bilateral relations.
Vyacheslav Nikonov, president of the Politika foundation, said: "If Ukraine joins NATO after all, relations between our countries will deteriorate. But I don't think all relations will be severed, because Ukrainians are a fraternal people who currently have an anti-Russian government."
Novaya Gazeta
Russian-British diplomatic war continues
The political implications of Moscow's decision to ban the activities of the British Council in Russia are quite obvious. Russian authorities had no misgivings about the legality of its work before the mysterious murder of former Federal Security Service operative and dissident Alexander Litvinenko, and Moscow's refusal to extradite multi-millionaire Andrei Lugovoi charged with his murder.
Legal aspects largely influenced the decision of the Russian Foreign Ministry to impose a ban on British Council activities.
Neither Moscow, nor London want to negotiate a possible settlement. Experts at the European law chair of the Russian Academy of Justice said domestic customs, tax, and other legislation had the right of priority in this case and was also an important factor of international relations.
They said this was a typical situation, and that the reciprocity principle had to be applied. For instance, there are Russian cultural centers in Paris and Berlin. The problem could be solved more quickly if London allowed Russia to open similar centers in the United Kingdom.
Moreover, all differences should be resolved through talks. Although the Strasbourg-based Council of Europe sometimes argues with French state agencies, the sides manage to come to terms; and the CE also pays taxes to the French government.
Moscow now wants to freeze British Council activities in Russia pending the conclusion of a special agreement. This problem can be explained by the fact that Russia and the U.K. have not yet settled all aspects of their relations.
It appears that both London and Moscow are in the wrong because, instead of normalizing the situation, they are whipping up tensions.
The most unpleasant aspect of the ongoing diplomatic and legal war is that it has jeopardized numerous educational projects involving thousands of Russians.
Kommersant
New Russian-Ukrainian gas war has almost begun
Ahead of the first meeting between Yulia Tymoshenko as new Ukrainian prime minister and Russian Prime Minister Viktor Zubkov, scheduled for January 23, Moscow and Kiev have virtually unleashed a new natural gas war.
Ukraine has declared its requirements: eliminate natural gas intermediaries and raise transit fees five and a half times over.
Gazprom's immediate answer was that with a shortfall of deliveries of Central Asian gas, Russia was sending its own gas to Ukraine, which is 75% more costly. As a result, the Ukrainian delegation in Moscow will be met with a new demand to repay a debt of $830 million.
A source familiar with the progress of preparations for the visit added that Ukraine wants to raise the fee for pumping 1,000 cubic meters of Russian gas to Europe from $1.7 to $9.32 per 100 kilometers of territory.
With all current fees, pipe length and gas volume considered, Gazprom is now paying Ukraine about $2 billion a year for transit. With the fees raised, additional payments could amount to $9 billion.
What is more, Ukraine's First Deputy Prime Minister Alexander Turchinov hinted that Kiev would press not only for the abolition of Rosukrenergo as natural gas intermediary, but also for restricting the activities of Ukrgazenergo (50% owned by Rosukrenergo) on the domestic market. Ukrgazenergo (25% owned by Gazprom) earned $200 million in profit in 2007.
Gazprom refused to discuss Turchinov's remarks. Instead, Konstantin Chuichenko, Rosukrenergo's executive director, said yesterday that gas deliveries from Central Asia for Ukraine had been cut by 40 million cubic meters per day (or by one third).
Therefore, by January 16 the company had shipped to Ukraine 740 million cubic meters of Russian gas at $314.7 per thousand cubic meters, or for a total sum of $233 million. This is $100 million more than the Central Asian gas Ukraine was to have received under contracts with Rosukrenergo, Naftogaz and Ukrgazenergo.
At the same time, Chuichenko said that Ukrgazenergo's arrears to Rosukrenergo had reached $830 million.
The new natural gas price asked by Gazprom from Ukraine does not look overlarge: Troika Dialog forecasts that the average price of natural gas in Europe this year will amount to $348 per thousand cubic meters.
Vadim Karasev, director of the Kiev-based Institute of Global Strategies, said Tymoshenko was "spoiling for a natural gas war with Russia" deliberately - she "needs an image of the enemy she can beat."
Business & Financial Markets, Vedomosti
Panic on Russian stock markets
Yesterday the Russian stock markets succumbed to the global stock exchange crisis, losing about 4.5%.
Last week analysts described Russia as a possible "safe haven" for global investors, but the situation changed dramatically yesterday. The RTS lost 4.52% and MICEX 4.29%.
Natalia Orlova, chief economist with Alfa Bank, said: "The Russian market had moved against the general trend, but is now catching up with it. Global investors were expected to supply fresh funds, but the situation on the global markets deteriorated and the inflow has stopped. Panic began yesterday, and panic eventually embraces everyone."
The U.S. economy, which all other markets look up to, has apparently entered a new bad patch. Stock market indices in the United States have been declining for three weeks running, with losses reaching nearly $800 billion.
On Tuesday Citigroup announced record losses in its nearly 200-year long history. As a result, by Wednesday the main U.S. stock indices plunged by more than 2%, and the S&P 500 index containing the stocks of 500 Large-Cap corporations, most of them American, posted the worst results since 1978.
Alfa Capital portfolio manager Andrei Kilin explains the plunge on the Russian stock market by a psychological effect: "Yesterday many fund managers yielded to pressure and decided to cut the volume of shares in their companies' portfolios."
Sergei Suverov, vice president of Citigroup's Securities Department, said the Russian market had been growing faster than other markets this year.
Georgy Kartashov, an analyst with Deutsche Bank, said investors used the bad news to book profits.
Christopher Weafer, chief strategist at the Moscow-based UralSib financial corporation, said hedge funds were selling Russian securities at a profit, to make up for major losses on other markets, but there are not enough buyers.
Still, Russian players believe the Russian market has a bright future.
Olga Belenkaya, deputy head of the analytical department at Sovlink, set up to attract foreign investment to the Russian fuel and energy complex, said: "The negative background is very strong, but Russia's fundamental economic results are so far good. Besides, many emerging markets were growing rapidly last year, while Russia was rising only moderately. This may promise a softer correction."
Vladimir Vedeneyev, a market analyst with the Bank of Moscow, said: "Despite current developments, the Russian market is showing better dynamics than other emerging economies (Brazil has lost 8%)."
Kommersant
WPP Group aims to raise profits in Russia
WPP Group, the world's second largest communications services group and one of the big six advertising holding companies, has taken over Russia's Propaganda Ogilvy advertising agency as part of a plan improve its financial performance here.
Group M, a joint venture established by WPP and the Moscow-based Video International Group, estimated the 2007 Indian and Russian advertising markets at $4.5 billion and $8.5 billion, respectively.
Propaganda Ogilvy, whose business is estimated at $8-15 million, fulfils contracts for British Petroleum, Ford Motor Company, Kimberly Clark, Kodak, Kraft Foods and international food manufacturer Unilever.
In 2006, its earnings in line with Russian Accounting Standards totalled about $13.2 million; and the company earned $3.1 million in profits.
Last year, all WPP assets in Russia earned an estimated $125 million, an increase of 35%.
In 2004, WPP bought into Propaganda Ogilvy and increased its stake to 51% in January-June 2005.
Aegis Group, a British multi-functional product and technology development company helping businesses design and build hardware products and custom software solutions, has been using a similar plan to acquire the Russian office of its media network Vizeum since 2005.
The company will pay 16 million euros for a 100% stake to its Russian partners if the agency attains financial targets in 2009.
Oleg Leshchuk, general director of the advertising agency Magic Box, said WPP would continue to take over all companies representing its interests in Russia because it planned to earn more here.
In October 2007, WPP CEO Martin Sorrell said the company planned to earn $500 million a year in Russia by 2012, and that its Indian earnings were much higher so far.
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