What the Russian papers say


MOSCOW, May 19 (RIA Novosti)
Georgia wants Russia to guarantee its agreements with Abkhazia/ Nagorny Karabakh inspired by Kosovo precedent/ Russia can still pressure Ukraine/ Gazprom to join Canadian project to build LNG terminal/ Goodyear to build tire plant in Russia/ Inflation losses will not affect weapons procurement


Georgia wants Russia to guarantee its agreements with Abkhazia

Georgia and its rebel region of Abkhazia have coordinated the main provisions of a plan for a peaceful settlement of the Georgian-Abkhazian conflict.
Abkhazian President Sergei Bagapsh will arrive in Moscow today to seek the Kremlin's approval for the plan, which reportedly offers Moscow the status of guarantor of the conflicting sides' agreements.
According to sources of the popular business daily Kommersant, the deal, proposed by Georgian President Mikheil Saakashvili, includes signing a binding document sealing Georgia's commitment not to use military force to settle the conflict, and Abkhazia's commitment to allow Georgian refugees to return to the breakaway republic.
Abkhazian Foreign Minister Sergei Shamba said: "We have agreed on the main issues with Georgia; there are only a few details remaining."
The agreement, if signed, will be a breakthrough in settling the Georgian-Abkhazian conflict, but it must be also approved by Russia, because Moscow-Tbilisi understandings cannot be fulfilled without it.
The Abkhazian Foreign Ministry hinted that Bagapsh is going to Moscow to get the approval, and that the Sukhumi authorities have no notion of Moscow's possible reaction.
"We know nothing; we'll see what Moscow says on the issue," Bagapsh said.
It is difficult to predict Russia's reaction, because it has rejected all of Georgia's unilateral initiatives on the settlement of the conflict. Russian Foreign Minister Sergei Lavrov reacted very sharply to Georgia's recent proposal to hold a peace conference on Abkhazia in Moscow.
Sources in the Abkhazian leadership say that to secure the Kremlin's approval, Tbilisi intends to offer Moscow the status of guarantor of Georgian-Abkhazian agreements. If Moscow approves the signing of the agreement, Saakashvili and Bagapsh may sign it in the presence of Russian President Dmitry Medvedev or Prime Minister Vladimir Putin, or both, at the June summit of the CIS in St. Petersburg, or in Sochi.
Russia's approval of the agreement could become evidence of its peacekeeping might, especially since the Kremlin is also considering a solution to the conflict between Transdnestr and Moldova. However, there is a major difference between the two situations, because unlike Saakashvili, Moldovan President Vladimir Voronin has said his country will not seek NATO membership.


Nagorny Karabakh inspired by Kosovo precedent

The government of Nagorny Karabakh, an area disputed by Armenia and Azerbaijan, aims to gain independence recognition by moving half a million ethnic Armenians into the self-proclaimed republic.
The president of Nagorny Karabakh, Bako Saakian, said Nagorny Karabakh should be an independent party to the peace talks with Azerbaijan. The Nagorny Karabakh Republic is the key party to the conflict, having "the same priorities as other foreign states," he said.
For the past 14 years, Armenia has handled the talks for it, while Karabakh only participated in the 1994 truce.
The decision must have been prompted by rumors that Armenia could cede part of Karabakh's territory to Azerbaijan in a bid to accelerate the peace process, said Gegam Bagdasaryan, the only opposition member of the Karabakh parliament.
The Nagorny Karabakh Autonomous Republic announced its secession from Azerbaijan in 1988. The move was followed by a military conflict, in which 25,000-30,000 people were killed and 1-1.5 million refugees fled the area. The current peace talks are arranged by the Minsk Group of the OSCE, co-chaired by the United States, Russia and France.
Even Armenia is still undecided about establishing diplomatic relations with Nagorny Karabakh. The current "no war, no peace" situation is vividly evidenced by white skeletons of destroyed houses in Azeri villages and rusty remains of burnt infantry combat vehicles. Armenian villages, on the other hand, are being restored, supported by foreign Armenian diasporas. Some of their members even build mansions in their native villages, with fountains and zoos.
The army accounts for one-sixth of the republic's population. However, the economy is slowly reviving. Agriculture is growing intensively due to the local fertile lands, and so is the alcohol industry. Also, the Drmbonsky mining and enrichment plant provides for almost a half of Karabakh's GDP.
Stability will enable the self-proclaimed republic's government to draw up a doctrine aimed at populating the area as densely as possible, Karabakh Prime Minister Araik Arutyunyan told Vedomosti. The current population is less than 150,000, according to official statistics; its density is around one-tenth of that in the neighboring Armenia.
The government intends to boost the population to 500,000 in the shortest possible time. The current inflow of migrants is twice as large as the outflow, and the birth rate is growing, too - the current rate is 14 children per 1,000 people. Population growth might also help promote independence, "like in Kosovo," Arutyunyan concludes.
Armenian Foreign Minister Edward Nalbandian said the republic's status should be defined by a national referendum.
Leonid Slutsky, deputy head of the Russian parliament's foreign affairs committee, said Moscow supported a compromise assisted by international mediators.

$martMoney No. 17

Russia can still pressure Ukraine

The April 2-4 NATO summit in Bucharest faced customary Russian protests against the alliance's eastward expansion, brought to light conflicts between alliance members and postponed discussions on Ukraine and Georgia's membership requests until December.
Although many analysts in Moscow said this was a major Russian diplomatic victory, Kiev and Tbilisi may nevertheless eventually join NATO.
In January 2008, 77% of Georgians voted in favor of joining the alliance. However, most Ukrainians oppose NATO membership. Even without popular support, the Ukranian leadership is still pushing for NATO membership. Anatoly Zlenko who was foreign minister under Presidents Leonid Kravchuk and Leonid Kuchma, explained this by the government's failure to ensure real national security.
Under the 1997 friendship treaty, Russia recognizes Ukrainian sovereignty and territorial integrity.
Russian Ambassador to NATO Dmitry Rogozin expressed surprise over the Ukrainian fears but said Kiev still suspects Moscow of regretting the 1954 decision to transfer the Crimea to Ukraine's jurisdiction.
He said Kiev wanted to join NATO in order to retain its own territorial integrity after the break-up of the U.S.S.R.
Kiev is irritated whenever Russian officials make ill-conceived statements. For instance, the Ukrainian Security Service barred Moscow Mayor Yury Luzhkov from entering the country after his recent strong calls for the disputed ownership of a Russian naval base on the Crimean peninsula to be transferred back to Russia.
The deployment of the Russian Black Sea Fleet in Sevastopol is another problem. An auxiliary naval base worth 56 billion rubles ($2.3 billion) will be constructed in Novorossiisk by 2017.
Kiev does not want to prolong the Sevastopol lease contract that will expire that same year. This April, Russia was invited to launch talks on fleet-withdrawal procedures and deadlines.
But Moscow remains adamant. "We cannot withdraw the Black Sea Fleet elsewhere. The historic Sevastopol naval base will remain where it is," Rogozin told the paper.
Russia can still pressure Ukraine because no country with foreign military bases on its territory can join NATO.

RBC daily

Gazprom to join Canadian project to build LNG terminal

Russian natural gas monopoly Gazprom is getting closer to its goal of winning the North American market.
Through its subsidiary in the United States, Gazprom Marketing & Trading USA, Inc., it will join the project to build the Rabaska LNG terminal in Quebec.
GMTUSA will fully supply the terminal with gas to be produced through the Shtokman project. Experts say the North American market is very important for Gazprom in view of the development of the Shtokman gas condensate deposit in the Barents Sea and the Yamal field in the Yamalo-Nenets Autonomous Area in northwest Siberia.
The partners in the Rabaska project (which will be able to receive, store, regasify LNG and supply up to 500 million cu m of gas to the pipeline system) are the Canadian energy company GazMetro, Canada's major pipeline corporation Enbridge and the energy corporation Gaz de France.
The final agreement with Gazprom's subsidiary is to be signed by the end of the year. The terminal, set to cost $840 million, will be built by 2014.
According to Svetlana Savchenko, director of the department for investment projects at the 2K Audit-Business Consultations company, the North American market is acquiring a greater importance for Gazprom developing the Shtokman field. Apart from Shtokman gas, Gazprom intends to supply Yamal gas to the North American market.
Within the Shtokman project, Gazprom is planning to build a gas liquefying plant, and one more plant in the Yamal Peninsula. LNG will be transported to North America by tankers, where it is to be regasified.
By acquiring a terminal which will fully depend on Gazprom's LNG, Gazprom will get a reliable and creditworthy partner whose demand for gas will continue to grow, said Alexander Nazarov, an analyst at the Metropol investment and financial company.
"World LNG production is actively developing now, so the transaction will benefit both Gazprom and Canadian consumers who will have a reliable long-term gas supplier," Nazarov said. Other potential LNG suppliers are concentrated in the Persian Gulf zone, and Canada, like Europe, must diversify it energy resources.


Goodyear to build tire plant in Russia

U.S.-based Goodyear plans to build a $200-250 million plant to produce up to 5 million tires in the Yaroslavl Region, to the northeast of Moscow, the first foreign tire project to be launched in Russia in three years.
The new plant will rival the local facility of Sibur-Russian Tires, the largest tire manufacturing company in Central and Eastern Europe and a subsidiary of the Sibur group, Russia's leading petrochemicals company.
Goodyear is one of the world's largest tire companies, with operations in most regions of the world. Together with its subsidiaries and joint ventures, Goodyear develops, markets and sells tires for most applications.
Sibur-Russian Tires may propose setting up a joint venture at its Yaroslavl plant, but this idea is unlikely to interest Goodyear.
About a fortnight ago, Yaroslavl Region Governor Sergei Vakhrukov "assigned a major land plot (about 173 acres) to Goodyear," said a source of the popular business daily Kommersant, adding that it has no infrastructure.
Another source said the governor had asked President Dmitry Medvedev for investment privileges for Goodyear, and that the president has instructed the Industry and Trade Ministry to consider the proposal. Goodyear's consultant is Ernst & Young.
According to the sources, Goodyear started looking for a site for its plant in 2007. The Yaroslavl Region is located close to the Leningrad and Moscow Regions, where foreign automobile assembly clusters are being formed.
One of the sources said Goodyear tires have been produced at the Yaroslavl plant under the offtake agreement, whereby the concern sold the tires produced in Yaroslavl and paid the plant a commission.
Sibur-Russian Tires will most likely protest against the project. Igor Karavayev, deputy director general of the company, said: "The state should support primarily Russian producers and create conditions for their innovation-based development."
He added that Sibur-Russian Tires could offer Goodyear the infrastructure and premises of its Yaroslavl plant for setting up a joint venture.
Alexander Agibalov, managing director of AG Capital brokerage, said Goodyear was interested in Russia because more foreign automobile assembly plants are being built here, with 30% of auto components to be subsequently produced locally, and because of the growing demand for cars in Russia.
The most attractive segment in the Russian market is the premium segment, where only major western producers are working, Agibalov said.
Mikhail Pak, an analyst at the IFD Kapital financial group operating in Russia and Ukraine, said most likely Goodyear would not set up a joint venture with Sibur. If the Russian company's tire division rallies enough administrative resources to resist the American project, Goodyear will opt for a site in some other region.
According to unofficial Goodyear information, the company is considering sites in several other Russian regions.


Inflation losses will not affect weapons procurement

The Russian government's Defense Industry Commission has decided to spend an additional 117.7 billion rubles ($4.9 billion) on weapons procurement up to 2010. However, 75% of this sum will be used to compensate the military for inflation.
Deputy Prime Minister Sergei Ivanov, in charge of the Defense Industry Commission, said the government had supported several proposals by state clients on increased funding.
In total, 30.1 billion rubles ($1.3 billion) will be spent on new R&D projects and additional military equipment purchases and repairs by the Defense Ministry, the Federal Security Service, the Foreign Intelligence Service and the Federal Guard Service.
A Defense Ministry official said it became necessary to boost funding after the approval of the three-year defense budget in 2007.
The remaining 87.6 billion rubles ($3.7 billion) will compensate for inflation losses and will not be spent on additional purchases. The commission decided to allocate the funds if the Defense Ministry could substantiate price hikes.
In 2008-2010, about a trillion rubles ($42.2 billion) will be spent on R&D projects, weapons purchases and repairs.
The Economics Ministry's annual deflators justify additional spending due to rising prices. The Defense Ministry official said the 6% deflator for 2007 was too low because the price of one T-90 main battle tank soared by 40% last year, and that some other weapons systems had also become far more expensive.
Konstantin Makiyenko, an expert at the Moscow-based Institute for Analysis of Strategies and Technologies, said mere investment could conceal organizational problems in managing the state defense order, which hinder cost-effective weapons purchases.
He said the 6% deflator was too low, that all spending had to be indexed by at least 20%, and that defense industry managers were mostly complaining about rising metals prices.

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