MOSCOW, April 17 (RIA Novosti) Putin favors integration of Abkhazia, South Ossetia/ Developing Georgia's unrecognized republics will benefit all sides/ Government divides offshore resources between Gazprom and Rosneft/ United States to help Ukraine attain energy self-sufficiency/ Kaliningrad nuclear power plant to affect Gazprom's export plans/ Germany's Aldi will have to claw back its brand in Russia
Kommersant, Vremya Novostei
Putin favors integration of Abkhazia, South Ossetia
Russian President Vladimir Putin has issued instructions to the government that amount to establishing relations with the breakaway Georgian republics of Abkhazia and South Ossetia as if they were Russian regions.
Although parliament encouraged him to consider recognizing these republics' independence, Putin has opted for a policy of their integration into Russia.
"The recognition [of Abkhazia and South Ossetia], as well as military cooperation are not on the agenda," a high-ranking source in the Russian Foreign Ministry told the popular business daily Kommersant.
"These will not be international treaties, but agreements on the economy, education and investment," the official said, adding that this is being done to facilitate the two republics' economic rehabilitation and development.
"We need Abkhazia because half a million Russians spend their holidays there every year," he said. "South Ossetia is a divided nation that wants to reunite with its northern part."
Sources in the Kremlin administration said Moscow would not recognize the independence of Abkhazia and South Ossetia, because "this would cost us the loss of Georgia."
"We need to coordinate a delayed status [for them] until new people come to power in Tbilisi," said a Kremlin source.
Political analysts polled by the popular daily Vremya Novostei said Russia should not recognize Abkhazia and South Ossetia now.
Sergei Mikheyev, deputy head of the Center for Political Technologies, said: "Russia will not recognize Abkhazia and South Ossetia now, if only because it needs to retain this instrument of influencing Georgia. The two regions are mentioned all the time because this is a political game, part of foreign policy. Besides, there are no new elements [in the latest decisions]; Russia has always maintained direct relations with Abkhazia and South Ossetia."
Dmitry Orlov, head of the Russian Agency for Political and Economic Communications, said: "Russia would not benefit from recognizing these pseudo-states. Why foment a new conflict, in particular with the international community? We should conserve the current situation for as long as possible."
Georgy Satarov, president of the Moscow-based Indem Foundation think tank, said: "We will have a new president soon, who, I hope, will not recognize these republics either. We have quarreled with more than enough countries as it is."
Developing Georgia's unrecognized republics will benefit all sides
The problem of Abkhazia and South Ossetia is a key geopolitical issue for Russia, Europe and the United States. However, it now looks as if the geopolitical approach to maintaining areas of influence by force is outdated, and the solution to the problem of unrecognized countries calls for more pragmatic techniques involving economic measures.
In all its moves Russia is now guided by the formula: "everything except official recognition." Russia will be seeking the widest possible legitimacy for the ruling regimes in Abkhazia and South Ossetia. According to some analysts, their official recognition by Russia is only possible if Georgia joins NATO. Politicians view Abkhazia and South Ossetia as Russia's last outposts in the Caucasus: if it suffers a setback there, it could lose the whole North Caucasus.
Meanwhile, economic development of these territories could benefit all disputing sides. In Abkhazia, its growth points could be health resorts, ports, transport, the construction industry, and power generation; and in South Ossetia, production of minerals (ores).
Naturally, Russia, by recognizing the rights of companies registered under Abkhazia's and South Ossetia's laws, is trying to enforce ownership rules there, which are practically non-existent in the territories. Russia could even pledge unpublicized protection for investments in these regions, just in case.
For Russia, economic support for the unrecognized republics is still politically motivated. Equally politically motivated is Georgia's opposition to Russia's support for them. It's a Catch-22 situation. The parties concerned - above all the leaders of the unrecognized republics, Russia, Georgia, the EU and UN - must realize that a way out cannot be found without diplomatic bargaining over smaller details, including economic ones.
For all its mixed signals, the Kosovo situation could set an example: after all, Serbia, albeit tearfully, parted with that province largely because of a wish to integrate into the EU (after being promised membership).
Government divides offshore resources between Gazprom and Rosneft
State-controlled Gazprom and Rosneft will be developing Russia's offshore resources, divided between the two giants according to their specialization. Gazprom will probably get the lion's share, because experts believe natural gas accounts for 75% of Russia's offshore resources, estimated at almost 100 billion metric tons of oil equivalent.
The Russian parliament's upper house approved on Wednesday amendments to the law on foreign investment in economic entities of strategic importance for the country's defense and security, stipulating that only companies with at least five years' experience in Russia and with an over 50% Russian stake in the authorized capital will be allowed to develop offshore mineral deposits.
However, the new law does not apply to the Caspian Sea, where most deposits are developed by LUKoil. The Natural Resources Ministry said the status of the Caspian and Azov seas is regulated by international law. However, the new law applies to all other Russian offshore deposits.
According to the ministry's information, around 450 offshore areas containing mineral resources have been discovered, with over 100 of them already prepared for deep water drilling; their total reserves are estimated at 98.7 billion metric tons of oil equivalent.
The offshore license areas will be distributed without competition. "Let's just call a spade a spade," said Nature Minister Yury Trutnev. "If our law limits possible offshore operators to two companies, a tender between them will be pointless."
A source close to the ministry said the two state-controlled companies have no conflicting interests. "The southern Barents Sea (the Pechora Sea) is an extension of the Timan Pechora Oil Province, where oil prevails, while the southern Kara Sea definitely contains more gas," said Oleg Suprunenko, deputy director for academic issues at the Russia Research Institute for Geology and Mineral Resources of the World Ocean.
He also believes that the southern parts of the East Siberia and Chukchi seas predominantly contain gas, but that oil could be found in the north. In the Sea of Okhotsk, natural gas most likely prevails, the expert said, confirming that natural gas probably accounts for 75% of Russia's offshore resources.
To drill an exploration well off-shore costs 10 or 20 times more than on-shore, estimated Valery Nesterov from the Troika Dialog brokerage. Developing offshore fields is infeasible without tax breaks. However, he expects foreign partners to shoulder most of the expenses, because without them Russian state giants will not be able to implement their offshore projects.
Rosneft is already cooperating with BP, ExxonMobil, ONGC, Sinopec, KNOC, and Sodeco for its offshore projects; Gazprom's partners in the Sakhalin-II project are Shell, Mitsui and Mitsubishi, and in Shtokman, StatoilHydro and Total.
United States to help Ukraine attain energy self-sufficiency
Washington claims that the Ukrainian sector of the Black Sea shelf contains enough oil and gas to meet the country's growing fuel and energy demand.
Russian analysts say Ukraine still lacks funding and technology to develop deposits, and that coal was the best way to reduce energy dependence.
Gene Van Dyke, Chairman and CEO of the American Vanco Energy Company, said Ukraine would soon attain energy self-sufficiency by developing hydrocarbon deposits on the Black Sea shelf, including a 13,000 square kilometer deposit near the Kerch Peninsula in the Crimea.
Analysts said the Ukrainian sector of the Black Sea and Sea of Azov shelves contained an estimated 1.53 billion metric tons of oil and gas reserves.
In April 2006, Vanco Energy Company won a government tender and received a 30-year license to develop this sector. The company promised to invest $20 billion in the project.
Under a production-sharing agreement, Vanco will receive 50% pending production, and its share will subsequently total 35%.
Nikolai Petrov, an expert with the Carnegie Moscow Center, said Ukraine had to find additional fuel sources because Central Asian gas supplied by Gazprom was becoming more expensive.
He said the country needed 16 million metric tons of oil and 65 billion cubic meters of gas last year, that scant production could not meet domestic demand, and that shelf deposits were not a key to self-sufficiency.
Petrov said Ukraine lacked the technology needed to conduct expensive sea-shelf prospecting operations.
Ukraine could develop the larger and cheaper coal deposits in order to reduce its energy dependence on Russia, Petrov told the paper.
Analysts said Washington would encourage Kiev to develop shelf deposits.
"This is linked with U.S. political interests in Europe. Washington wants to boost its regional popularity because many Europeans do not like the prospect of the U.S. missile defense system in Poland and the Czech Republic," Natalia Milchakova, head of the fundamental analysis department at the Otkrytie financial corporation, told the paper.
Kaliningrad nuclear power plant to affect Gazprom's export plans
Russia's nuclear power agency Rosatom will build a 2300 MW nuclear power plant in the Kaliningrad Region by 2015. This capacity is more than enough for the exclave on the Baltic Sea, so part of the plant's electricity will be exported.
This will make the Kaliningrad plant a direct rival of the second Ignalina nuclear power plant in Lithuania, which is to be built by the same deadline, and also of Gazprom's Kaliningrad-2 thermal power plant. Moreover, the Kaliningrad plant will reduce Europe's dependence on Russian gas.
The two 1150 MW reactors of the plant will cost a total of 5 billion euros. An SPV will be set up to finance the project, and a 49% stake in it might be turned over to an investor, probably a foreign one.
Electricity export-import operator Inter RAO will choose the investor and draft the export scheme on behalf of Rosatom.
The termination of the Ignalina nuclear power plant was one of the conditions for Lithuania's accession to the European Union. Its first reactor was shut down in late 2004 and the second reactor is to be stopped in 2009, which will create a shortage of electricity in the region.
However, Lithuania still hopes to convince the EU to keep the plant running until 2015, when the second plant is to be completed at the site.
Inter RAO is operating in the region through its joint venture with Gazprom. The two companies are parity owners of the Kaliningrad-2 thermal power plant. The plant is increasing its capacity, and so Gazprom has described plans for building a nuclear power plant in the region as "an uncoordinated decision made after the dissolution of the united energy system of RAO UES and Rosatom."
The nuclear power plant, if built, will work in the basic regime, while the thermal plant will be unable to work to capacity, said a source in the Russian gas monopoly.
Dmitry Terekhov, a senior analyst at the Metropol investment and financial corporation, said: "The announced capacity of the nuclear power plant is excessive for the Kaliningrad Region, and so the project is apparently designed for export to electricity-hungry Poland and Lithuania."
According to Terekhov, direct electricity supplies will ease the two countries' dependence on gas imports, which is bound to irritate Gazprom.
The analyst also said that Lithuania might have excessive capacity in the region, which puts in question its second Ignalina plant.
Dmitry Skvortsov of the Bank of Moscow said both projects were designed for export.
"The second Ignalina plant will have sufficient capacity, considering plans for electricity supplies to other East European countries, although Lithuania will have to think about its profitability," Skvortsov said.
Germany's Aldi will have to claw back its brand in Russia
Aldi, a German chain of food discounters, has filed an application with the Federal Service for Intellectual Property, Patents and Trade Marks (Rospatent) to register its brand in Russia. According to a patent attorney, Aldi will have its work cut out to get back its brand in Russia.
Aldi, with an estimated turnover of $67 billion in 2007 according to Forbes, was founded by the Theodore and Carl Albrecht brothers. The name is a portmanteau word for Albrecht Discount.
Aldi is a hard-nosed discount retailer (its marketing margin is 12%), which economizes on everything: shopping area, equipment, personnel.
"The average space of an Aldi store is 1,000 to 1,500 square meters, its range 700 to 800 items, with over 80% of private labels; stores are run by a skeleton staff of three to four," said Alexei Krivoshapko, director of Prosperity Capital Management.
According to him, Russia cannot afford such stores: its Kopeika, Magnit, Pyatyorochka and Dixie chains, which tried to copy Aldi and its main rival, Lidl of Germany, had to give up.
"Their method is good, but is impossible in Russia now," said Renaissance Capital analyst Natalia Zagvozdina. "If the company decides to move into Russia, it will have problems with suppliers and logistics."
A patent attorney familiar with Aldi's claims said that Aldi wants to register its trademark in Russia both in Latin and Russian scripts for most classes of goods and services.
He said Aldi was able to do so only recently: in 1998, its trademark was registered for almost all classes of goods by the St. Petersburg Patent Office; the registration expired on February 26, 2008. The office could not be reached for comment yesterday.
However, in two classes (foods and drinks, finance and real estate) Aldi will still to have to claw back its brand, the attorney said. In 1998, it was registered with Mospatent by Viktor Chernyshov, along with such brands as Forbes, Interbrand, Samsung, Audi, Bridgestone, etc.
Chernyshov said no one had approached him with claims. "What claims could there be when there is no such company on the market? No company no claim," he said, adding that he was "always open to offers."
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