MOSCOW, February 15 (RIA Novosti) Saudi Arabia wants to save Middle East from Iranian threat/ U.S. dislikes Russia's energy policy/ Moscow attacks dissenting international organizations/ Russia's new government will be even less efficient/ AvtoVAZ to produce spare parts for Renault-Nissan/ Russia, Ukraine fail to settle gas differences
Saudi Arabia wants to save Middle East from Iranian threat
Prince Saud al Faisal, the Foreign Minister of Saudi Arabia, yesterday tried to convince President Vladimir Putin that the strengthening of Iran could seriously destabilize the Middle East.
Saudi Arabia said that if Russia cut ties with Iran, it promised to make large arms orders and boost bilateral cooperation to $50 billion within five years.
According to the Saudi plan to save the Middle East from the "Iranian threat," Russia should break cooperation with Tehran, primarily in the nuclear and defense spheres. Riyadh also expects Moscow to stop protecting Iran from Western pressure in the UN Security Council and other international organizations.
Saudi Arabia knows that its plan will cause major financial and moral losses for Moscow, and has promised compensation.
According to the business newspaper Kommersant, Riyadh intends to take Tehran's place in military and technical cooperation with Russia. This year, it could sign a contract for the delivery of more than 100 BMP-3 infantry fighting vehicles worth approximately $200 million, and some 150 T-90S main battle tanks for $600 million.
Saudi Arabia is also negotiating the acquisition of 161 helicopters, such as the Mi-17 Hip medium multirole helicopter, the Mi-35 Hind attack/transport helicopter, and the Mi-26 Halo heavy transport helicopter, for a total of $1.6 billion.
Riyadh is planning to create a comprehensive air defense system, which promises major contracts for the Russian defense industry. It is ready to buy nearly everything it needs in Russia, from portable air defense missile systems and the Pantsir-S1 (SA-22 Greyhound) truck mounted system, to the S-400 long-range AD missile system.
Moreover, Saudi Arabia does not intend to limit itself to defense contracts; it has offered Russia strategic economic cooperation. Saud al Faisal proposed in Moscow a major agreement on developing guidelines for economic cooperation, which provides for increasing bilateral trade and mutual investment to $50 billion within five years. It was less than $250 million in 2006.
Saudi Arabia intends to confirm its intentions at an investment forum of the two countries' largest companies, which Riyadh has proposed holding in the near future. And lastly, it is prepared to lift its protests against Russia's accession to the World Trade Organization (WTO).
U.S. dislikes Russia's energy policy
The United States is launching a new diplomatic offensive to undermine Russia's influence in Asian countries within the Commonwealth of Independent States (CIS) and the Bush administration will create the post of a special ambassador for energy, whose main mission will be to counteract Russia's control over oil and gas supplies from Central Asia. Russian analysts consider it a response to Moscow's successes in the region.
Andrei Grozin, the head of the Central Asia and Kazakhstan department at the Institute of CIS Countries, described American-Russian rivalry in Central Asia as an "unending geopolitical game." When the new states gained independence, after the break up of the Soviet Union, the U.S. was ahead in the game. Washington tried to create relationships with them to ensure its political domination through investment. Russia, however, took little advantage of its natural geopolitical and historical preferences. But over the past three to four years it has become more active, using, in fact, the same methods as the U.S.
Kazakhstan and Uzbekistan are now facing a radical change at the top, Grozin said. The ruling elites in both countries want no upheaval they wish to retain the regimes that have existed since independence. Here Russia is at an advantage. It has often officially declared that it works with the "party in power", not opposition forces. American policy, according to Central Asian leaders, is too dangerous. It may lead, if not to an "orange revolution", at least to destabilization.
Mentioning rivaling projects, Grozin described as a success Russia's agreement with Kazakhstan and Turkmenistan in December 2007 to build a Caspian gas pipeline and upgrade the Soviet-era system of gas transportation from Central Asia via Russia. The upgrading will also involve Uzbekistan. If the agreements are implemented, the throughput capacity of these pipelines will grow 33% in five or so years.
The U.S., on the other hand, is lobbying a trans-Caspian gas pipeline from Turkmenistan to Azerbaijan. The pipeline is the main rival of Russian plans. But for the moment the Russian project looks more realistic, the analyst said.
Moscow attacks dissenting international organizations
President Vladimir Putin slammed the OSCE's Office for Democratic Institutions and Human Rights (ODIHR) Thursday, which Moscow earlier accused of applying double standards in monitoring elections in the former Soviet Republics. Now Russia has moved from mere words to action. It is trying to insist on a reduction of the ODIHR's financing as part of the OSCE budget discussion, and on its full subordination to the OSCE Permanent Council.
Every time Russia's relations with any of the international organizations grow tense, Moscow begins lobbying for reforms of the dissenting organization.
There was a time when Russia was all for transforming NATO, and even argued its proposals very convincingly: after the self-liquidation of the Warsaw Pact organization, NATO no longer had an adversary to match its strength, so consequently, there was no more threat, and it was time for reorganization of the military alliance into a political group similar to the OSCE.
Later, Moscow became quite insistent about a radical reform of the OSCE. Its key grudge against the latter is that the organization is far too focused on human rights, while partly neglecting its two other aspects, the military-political and economic ones. That Russia often had no one to support its position in OSCE decision-making was not the only problem. The very establishment of the OSCE, with its so called third (humanitarian) basket, in fact landmarked the Soviet Union's first concession to the West, which Moscow never forgot.
There was another time when Moscow was seriously concerned over PACE's effectiveness, as its members were making no binding decisions. Curiously, those concerns peaked when PACE members harshly criticized the Kremlin's Chechen policy, and even a suspension of Russia's membership was no ruled out.
As of now, Moscow explains its persistent desire to reform the ODIHR by claiming that there has been a need to reform this part of OSCE for ages. However, most of Moscow's complaints took shape after the ODIHR refused to follow the new rules of the game last fall, which seriously restricted its license on foreign observers at Russian elections. The organization said it did not buy it then; otherwise, this urgent need for reform would not have emerged now.
Russia's new government will be even less efficient
The administrative reform has been a failure, as Vladimir Putin admitted. "The Cabinet's structure created over the past four years has not functioned properly," Putin said at his last news conference as Russia's president.
In recent days, Vladimir Putin and Dmitry Medvedev, the candidate for the presidency, have announced new ideas on how to improve the government's structure. They have the same logic: there is a problem, so there should be a separate structure [to deal with it].
Medvedev promises state support for Russian companies' foreign expansion, and a decision has nearly been taken to establish a special agency for the purpose. He also proposed a special environmental control body.
Meanwhile, Putin is worried about the split of functions in land issues, therefore either a special vice-premier should be appointed, or a separate agency established [to tackle the problem]. First Deputy Prime Minister Sergei Ivanov favors a special structure to supervise road construction (he did not specify what will happen to the Federal Highway Agency, or Rosavtodor), while the transport ministry wants to submit to the government its proposal to establish a special agency responsible for traffic safety (the role played by the State Traffic Safety Inspectorate is unclear).
All this gives rise to misgivings that the new government structure will be even bulkier, while decisions will not be made any faster.
However, Medvedev often demonstrates a more modern approach: if there is a problem, there should be a special twenty-four-hour TV channel. Such channels already exist: the Law-TV channel to fight legal nihilism, the Zvezda (Star) channel to discuss military problems, and an agrarian channel is soon to appear.
Business & Financial Markets
AvtoVAZ to produce spare parts for Renault-Nissan
A partnership with France's Renault could make AvtoVAZ a full member of the global auto manufacturing community. Renault, which will acquire a blocking stake in the Russian plant next summer, expects to join in the production of AutoVAZ auto parts and accessories. The deal would benefit both partners: Renault will have low-cost components for its plants throughout the world, and AvtoVAZ will have a good outlet.
According to Carlos Ghosn, Renault's top boss, a final agreement will be signed within the next few weeks. Renault is not only ready to share its technology with AvtoVAZ, but also to use new ideas of the Russian auto-maker. According to Ghosn, the deal with AvtoVAZ is interesting for Renault as a prospect for expanding production capacities and mass manufacture of auto components in Russia.
Gerard Detourbet, Renault X90 (Logan family) project manager, said that after the deal with AvtoVAZ Renault expects to gain access to production of auto parts at the Volzhsky plant itself and at its subsidiaries.
According to him, AvtoVAZ could manufacture pistons or plastic components for Renault-Nissan plants in Russia and the world.
Already the Volzhsky plant is capable of manufacturing around 10% of easy-to-make spare parts, said Sevastian Kozitsyn, an analyst with BrokerCreditService. "It is realistic to launch local production of piston systems and perhaps gear boxes in two years' time. But it must be a setup engineered by Renault," he added.
In countries with developed markets, the main task, owing to high competition, is to reduce production costs. As a rule, outsourced companies supply accessories for world manufacturers. In this respect, an alliance with AvtoVAZ could be profitable for Renault: the Russian plant has from the start had a fully integrated production cycle.
However, Renault's idea of outsourcing the production of parts to AvtoVAZ is in conflict with the strategy of the Volzhsky plant itself, said Bank of Moscow analyst Mikhail Lyamin. A reform of AvtoVAZ presupposes avoiding the production of components and instead using outsourcing. If the plant's capacities are used to make components for Renault-Nissan, that will call for additional investment in equipment.
"It costs $8 million to $10 million to re-engineer a plant for the production of plastic parts and accessories," the analyst said.
Russia, Ukraine fail to settle gas differences
Russian energy giant Gazprom and Ukrainian national energy company Naftogaz have not approved a new agreement on gas supplies to Ukraine. Their deputy CEOs will continue the talks, but Gazprom insists that the new schedule of supplies should be approved by April 1 and $1 billion of Ukraine's debt be repaid by March 14. Otherwise it will review introducing cuts in gas supplies.
The talks are taking too long. "Ukraine has taken time out until next week to review its calculations," said Sergei Kupriyanov, Gazprom's spokesman.
Russian President Vladimir Putin and Ukrainian President Viktor Yushchenko said on Tuesday that the gas conflict had been settled. According to Gazprom, it will soon set up two joint ventures with Naftogaz to replace the current intermediaries, RosUkrEnergo and UkrGazEnergo.
However, Yushchenko said on his return to Kiev on February 13: "The companies that have the contracts will remain the official market players until the end of the year."
The press service of Naftogaz reported that the date for setting up the joint ventures had not been coordinated and the process "could last until the end of the year."
Gazprom said the issue must be decided within two weeks and planned to sign a new agreement with Naftogaz yesterday.
Under the agreements made public on Tuesday, Naftogaz is to register gas supplied under a direct contract with RosUkrEnergo at $179.5 per 1,000 cubic meters (the domestic price is $240), bypassing UkrGazEnergo.
But Putin said yesterday: "We insist that the part of the gas supplied to Ukraine at the beginning of the year be registered at Russian prices ($320, according to the draft agreement), rather than Central Asian ones."
Gazprom wants Ukraine to repay its debts by March 14, or it will consider stopping supplies to Ukraine within a week after the cut off date.
Vasily Kiselev, a member of the Ukrainian parliament (Rada) and special commission investigating the situation on the gas market, said the agreements reached in the Kremlin could drown in red tape. In this case, the agreement on January 6, 2006 stipulating gas deliveries according to the old scheme would remain effective until 2011.
Valery Nesterov, an analyst at the Troika Dialog investment company, said the new scheme, even if introduced, would not last long in conditions of political instability in Ukraine.
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