Registration was successful!
Please follow the link from the email sent to

What the Russian papers say


MOSCOW, March 26 (RIA Novosti) Medvedev will start changing Russia, but softly / Gazprom to invest $15 billion in LNG project / UABC subsidiary buying foreign ship-building assets / LUKoil's contract for Iraq's Western Qurna-2 field may be revived / Medvedev's election speeds up merger of Gazprom with SUEK / Government carries out preventive strike against TNK-BP

Gazeta, Nezavisimaya Gazeta

Medvedev will start changing Russia, but softly

President-elect Dmitry Medvedev tried to answer all questions honestly and at the same time to demonstrate his independence in his first interview with a foreign newspaper. However, he did not - and could not - tell The Financial Times who would make the decisions in his "tandem" with Vladimir Putin.
Medvedev said he was a "lawyer through and through" committed "to embedding the rule of law in Russia." His priority tasks are to turn the Constitution into a direct action law, eradicate legal nihilism, and "create a functioning legal system, with an independent judiciary and courts."
The popular daily Gazeta writes that references to constitutional legislation will dominate the new president's speeches for a year or two. He cannot speak about any other burning problems, although the country needs to monitor the operation of law-enforcement and security structures, state corporations and the big business.
Andrei Ryabov, a scholar-in-residence at the Carnegie Moscow Center, has warned: "We will see what in [Dmitry Medvedev's] policy is new and what stems from [Putin's] policy only after he forms his own team and starts applying his political will."
The Nezavisimaya Gazeta daily writes that the most interesting part of the interview concerns Medvedev's answer to the FT question about "members of the security forces ...fighting each other for wealth and influence in Russia."
The fact that the delicate question had been approved for the interview may show that the Russian authorities are not ready to close their eyes to the problem, the newspaper writes. On the other hand, the new president is unlikely to deal with it radically or soon, its experts write.
Mikhail Delyagin, director of the Institute for Globalization Studies, said decisions concerning the siloviki are unlikely to be taken soon, because "this is not a question in Medvedev's competence, which everyone knows very well."
"He will not be allowed to deal with the problem for at least six months," the analyst said.
Agvan Mikaelyan, director general of the FinExpertiza audit and consulting group, said about FT's question that the West, which considers Putin the patron of the law-enforcement and security forces, wants to know if Medvedev would reshuffle the team.


Gazprom to invest $15 billion in LNG project

Russia's natural gas sector is entering a new stage of technological development, establishing a global LNG production and supply center. Investment in the liquefied natural gas segment may reach $15 billion by 2015. If the Gazprom board approves the "aggressive" version of the gas giant's LNG strategy, its production will exceed 50 million metric tons in 2030.
The "aggressive" strategy involves the establishment of a gas liquefaction center comparable with the world's largest center of its kind, in Qatar. "What we should do now is decide where we will set up the 'new Qatar'," a Gazprom manager said.
It is most probable that Gazprom will choose the Shtokman site for its LNG project. "We will probably build four, or even six gas liquefaction plants each capable of producing 7.5 million tons of LNG, as part of the project," a Gazprom source said. Two more plants will be built for the Sakhalin-2 project, to produce 4.5 million tons of LNG each.
Overall, Gazprom's liquefaction plants will have a capacity of 39-63 million tons by 2030. Another LNG plant, in the Yamal Peninsula, will process the resources of the South Tambeiskoye field.
Valery Nesterov, from the Troika Dialog brokerage, said Shtokman was the best resource base for LNG exports to North America because the product will travel a much shorter way than from Qatar. On the other hand, Qatar's reserves, estimated at 14 trillion cubic meters of natural gas, are far greater than those of Shtokman's 3.8 trillion cubic meters.
"Much will depend on gas prices, on the commitment to the decisions made, and on the demand for Shtokman's gas in the United States and Europe," Nesterov said. If there is no demand on these markets, the LNG will be supplied to Korea, Japan, China and even India instead, he added.
Mikhail Korchemkin, director of East European Gas Analysis, a consulting company, disagreed with this opinion. "The U.S. will buy as much Russian gas as Gazprom offers. Even if the Russian monopoly exports 65 billion cubic meters a year, it will only account for 10% of the U.S. market. I do not see any problem with exports to the U.S. On the contrary, American importers will welcome the diversification of supplies," he said.

RBC Daily

UABC subsidiary buying foreign ship-building assets

The leasing company FLC West will buy a 70% stake in Norwegian-based ship-builder Aker Yards Ukraine Holding AS, which has three business areas: Cruise & Ferries, Offshore & Specialized Vessels and Merchant Vessels.
Its merchant vessels are manufactured in Floro, Norway, Nikolayev, Ukraine, and in Wismar and Warnemunde, Germany.
FLC West will spend 291.9 million euros on the deal, due to be completed in the summer of 2008.
The deal surprised experts and even Russia's United Aircraft-Building Corporation (UABC), consolidating state and private companies engaged in the design and manufacture of airplanes and helicopters.
The Luxembourg-registered FLC is a Russian state-controlled investment company with $1.5 billion in leasing portfolio. The company finances strategic sectors and has recently moved into the Russian shipbuilding and shipping industry. FLC West is 50% owned by FLC. The remaining 50% belongs to the private Cypriot investment company Almiar Investment Ltd, which in turn is owned by FLC private shareholders.
Founded in 1997, FLC won a government tender for the state support of civil-aviation leasing programs in 2001.
The UABC owns a 51.8% stake in the company. Other shareholders include the Federal Agency for Federal Property Management (Rosimushchestvo) and the Ministry of Land and Property Relations of the. Republic of Tatarstan.
Experts could not explain why FLC West, which is part of UABC, decided to purchase shipbuilding assets. UABC officials were also surprised because the corporation now wants to get rid of non-core assets and to sell the leasing company Ilyushin Finance to Vnesheconombank.
Ilyushin Finance co-owner Alexander Lebedev said the UABC was not doing anything to mass-produce planes, and that it was more interested in financial and leasing issues. He said the UABC also wanted to buy into the European Aeronautic Defense and Space Company (EADS) and to acquire foreign shipyards.
FLC has gained notoriety for its failure to supply 10 Tupolev Tu-214 medium-haul airliners to the UABC. The Kazan Aircraft Production Association explained this by the lack of funding and delayed leasing payments.
Oleg Panteleyev, head of research at Aviaport, a Moscow-based aviation analytics firm, said the contract was being implemented rather slowly, and that only one plane had been completed to date.
"The future is bleak because the Kazan plant will probably make only two aircraft in 2008," Panteleyev told the paper.

Business & Financial Markets

LUKoil's contract for Iraq's Western Qurna-2 field may be revived

A brief visit by LUKoil president Vagit Alekperov to Baghdad seems to have brought tangible results: the decision was taken to set up a joint working group "for formalizing the contract for Western Qurna-2."
Analysts estimate investments in the project at $4 billion and annual earnings from oil production at $21 billion.
The Western Qurna-2 field should have been developed under a production sharing contract (PSC), an agreement on which was signed in 1997 and frozen in 2002.
According to LUKoil, Alekperov took to Iraq a "second, adjusted version" of the project to develop Western Qurna-2. The company is being cautious in its comments, saying merely that the sides "have reached a better understanding of the terms and conditions for implementing this project."
Analysts say that LUKoil has made a serious step toward achieving its goal.
Vagit Alekperov visited Iraq together with Russia's Deputy Foreign Minister Alexander Saltanov. They were received by Iraq's president and prime minister.
Shortly before the visit, Russia wrote off $12 billion of the Iraqi debt and declared its readiness to invest $4 billion in Iraq's oil and gas sector.
Analysts estimate investments in Western Qurna-2 at about this amount.
ConocoPhillips (holding a 20% stake in LUKoil) should receive a 17.5% stake in the Iraqi contract under their strategic partnership agreement and help LUKoil.
According to Alexander Shtok, the director of the due diligence department at the 2K Audit - Business Consulting company, U.S. companies rule the roost in Iraq's oil sector, which is a big advantage for Alekperov's company, Russia's largest private oil producer.
The Western Qurna-2 field is unique. Oil lies at small depths there, so its production does not require advanced technology. This makes it possible to annually produce 30 million metric tons of high quality oil.
"With the present level of oil price at $730 per ton, annual earnings from oil sales may reach nearly $21 billion," says Maxim Shein, head of the analytical department at the BrokerCreditService investment company. Last year, LUKoil produced 96 million metric tons of oil.
A law on oil to govern foreign investors' access to Iraq has not been adopted yet. However, the oil sector's experts think that Baghdad will not delay its adoption for the country needs investments in the oil sector. The working group should harmonize the contract for Western Qurna-2 with the new law, LUKoil explained.


Medvedev's election speeds up merger of Gazprom with SUEK

Gazprom has submitted its request for a merger with the Siberian Coal Energy Company, or SUEK, to the Federal Antimonopoly Service (FAS) a year after it made its plans public. It appears that Dmitry Medvedev's opinion has overpowered the arguments of the project's numerous and influential opponents.
The gas monopoly wants to legalize its relations with the country's largest coal producer (SUEK's proven coal reserves are estimated at 5.8 billion metric tons) and assume control over 80% of coal supplies to Russian power plants.
Since February 2007, when the two companies announced their intention to merge their assets, their initiative has been sharply criticized by many.
FAS head Igor Artemyev said: "This is an attempt to monopolize the generating sector by assuming control over the fuel segment. What will energy reform be worth if Gazprom takes over RAO UES?"
He described the merger with SUEK as a maneuver aimed at buying up energy assets.
Anatoly Chubais, CEO of electricity monopoly RAO UES, said the merger would be "a gross mistake" by the government.
German Gref, then the Minister of Economic Development and Trade, said it was "a dangerous practice" that could lead to the establishment of "the state monopoly capitalism of the 19th century."
The main advocate of the merger has been Dmitry Medvedev, chairman of Gazprom's board of directors. He said officially that the appearance of "a leading power generating company" in Russia would strengthen Gazprom's positions in foreign markets. Now that he has been elected president of Russia, the coordination of the merger has gathered speed, possibly because the two companies now think that the FAS will most likely grant their request.
According to the terms of the deal, Gazprom will hold 50% plus one share in the joint venture, while SUEK will hold the rest.
Gazprom is to contribute its stake in RAO UES (10.5%), a 15.61% stake in wholesale generating company OGK-2, a 17.13% stake in OGK-6, a 5.27% stake in OGK-5, and a 5% stake in territorial generating company TGK-5.
SUEK will contribute nearly all of its assets. As a result of the merger, the united capacity of the new company will be 25000 MW and its share on Russia's power generating market will be 12%.
SUEK's capitalization is currently $8-$9 billion, while Gazprom's contribution has been assessed at $4-$5 billion.
Semyon Birg, portfolio manager at the Alfa Capital brokerage, said: "SUEK is unlikely to lose from the deal, because it will get political guarantees for its business."
Gazprom has not included its main energy assets - the fully gas-fuelled TGK-1 and TGK-3 - in its contribution. These assets "can be used to form a European energy holding for operation in Europe," Birg said.

Government carries out preventive strike against TNK-BP

The pressure on TNK-BP is mounting. The Russian-British oil venture's management ended up voluntarily suspending nearly 150 of the company's employees whose documents were found invalid by the Federal Migration Service, after TNK-BP came into the spotlight following a recent spy scandal.
Experts suggest the government is acting in Gazprom's interests.
Dmitry Abzalov, an analyst with the Center for Current Politics think tank, said that TNK-BP, as one of the largest independent gas producers, was considered to be most fervently lobbying for amendments to the gas export law. "State-owned Gazprom is currently the exclusive gas exporter, but it could lose 22% of exports if the amendment distributing export quotas according to production was adopted," he said.
The amendments have been focused on by the Federal Antimonopoly Service (FAS) of late, and Abzalov believes the whole scandal could be a preventive strike against TNK-BP.
Another important reason to attack the Russian-British company could be the well-known Kovykta gas field. It was because it could not export the gas that TNK-BP failed to produce the amount of gas stipulated in its Kovykta license agreement.
"The Irkutsk Region did not need that much natural gas, 9 billion cubic meters a year, we couldn't just extract gas and burn it there on the spot," a company source said.
Neither could TNK-BP export gas, although it had proposed it more than once.
The government warned TNK-BP that its license could be revoked for failure to comply with the license agreement. However, a solution was found then - Gazprom agreed to buy a controlling stake in Kovykta, and analysts then said this had been the gas giant's actual plan.
"The pressure on TNK-BP was stepped up to suit Gazprom's interests," a market expert said. And the company crumbled.
However, the two companies have never reached an agreement on the price. The initial offer was around $1 billion, but the negotiations dragged on. Analysts now say that the latest move against TNK-BP could be meant to force it to lower the price of the Kovykta stake targeted by Gazprom.

RIA Novosti is not responsible for the content of outside sources.

To participate in the discussion
log in or register
Заголовок открываемого материала