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MOSCOW, May 27 (RIA Novosti)
Putin likes controlling energy best - analyst / Russian weapons: Colombia wants to out-buy Venezuela / Russia's state-run electricity trader admits political engagement / Vekselberg could replace Dudley as TNK-BP chief / Gallup joins Russia-West information battle in South Caucasus / U.S. opens market to Russia's largest fertilizer producer

Vedomosti

Putin likes controlling energy best - analyst

The format of the new Russian government and the Kremlin administration shows that Vladimir Putin still holds the reins of the two branches of power. Why then has he agreed to such a complicated and dangerous move to the post of prime minister, a prominent Russian analyst wonders.
According to Konstantin Simonov, head of Russia's National Energy Security Fund, Putin claims he respects the rule of law and the Constitution. Another argument is that he did not want to anger the West. But there is one more argument: the post of prime minister allows Putin to abandon political responsibilities and to focus on what he likes most - the economy, specifically energy.
Putin is viewed above all as a politician, but he prefers a business approach, Simonov writes in the popular daily Vedomosti. He knows that energy will remain Russia's main competitive advantage for a long time, even though it is developing as a post-industrial economy. Putin will have more room for maneuver in this sector, which is why he has proposed cutting taxes for the oil and gas companies, although earlier this year he spoke about the sector's layer of excess fat.
Putin was allegedly trying to restore the Soviet political empire and use energy as an instrument against the West. At that time, Russia needed to win its neighbors' loyalty with cheap gas, yet it raised prices.
The foreign expansion of Russian energy companies was not an element of political influence but a chance to earn more, the analyst writes. Putin acted as a businessman, trying to raise the price of the entry ticket to Russia's upstream sector for foreign corporations and gain assets in European downstream companies in order to increase Russian companies' revenues.
As president, Putin had to divide his attention between energy and political matters. When he went to the West, he was bombarded with questions about democracy and human rights. Now he can say that politics is the competence of the president, and therefore avoid difficult political issues. The Japanese can discuss the disputed Northern Territories with Dmitry Medvedev and LNG supplies with Putin.
Simonov writes that some people thought Putin would be sorry to lose the right to attend G8 summits. However, the group does not take serious decisions and is nothing more than a club discussing the fight against global hunger. Its politicians usually end up in business.

Kommersant

Russian weapons: Colombia wants to out-buy Venezuela

Francisco Santos, vice president of Colombia, is to visit Russia early in June. The subject matter of the first such call in the history of relations between the two countries will be military-technical cooperation.
Colombia, worried by the Hugo Chavez regime building up its military muscle, is determined to maintain the balance of strength. For this reason it is prepared to buy weapons from Russia. In exchange for contracts, Bogota will try to persuade Moscow to cut its arms supplies to Venezuela.
Analysts agree that Moscow stands to gain from Colombia's proposal. "Russia is interested in a multi-vectored and pragmatic policy in Latin America, and so Moscow is unlikely to focus on any one country," said Vladimir Davydov, director of the Russian Academy of Sciences' Institute of Latin American Studies. "I think Russia will readily respond to Colombia's bid."
Russia's current supplies to Colombia are insignificant. "Over the past five years we have only sent the Colombians a few Mi-17 helicopters. This does not even compare with a three-billion dollar bill for military deliveries to neighboring Venezuela, which also include 24 Su-30MK2V fighters," said Ivan Konovalov, deputy director of the Center for the Analysis of Strategies and Technologies.
In his view, the present situation is a paradoxical replay of the recent Cold War times when the Soviet penetration of the Latin American arms market was dictated by political considerations alone. The U.S. political establishment is sounding the alarm, citing the Latin American case as part of a general trend, of Russia's great-power revival and the Kremlin's wish to again oppose the U.S. in any part of the world.
"There are no political ulterior motives attached here," Konovalov said. "This is mere financial interest. The U.S. itself lost this lucrative market when it embargoed arms supplies to Venezuela in 2005."
"On the other hand," the analyst went on to say, "the tapping of the Latin American market was vital for the development of Russia's defense industry. The Chinese and Indian arms markets - long-time hubs for Russian arms deliveries - are oversaturated with hardware, and cooperation with these countries is turning to high technologies. That is why Russian weapon-makers view South East Asia, North Africa and Latin America, which need robust and not very costly military equipment, as the most promising areas."
The odds are not strong that Moscow is poised to cut cooperation with Colonel Chavez. At least that was the answer given yesterday by a source in Russia's defense industry. "The issue is not commercial, but purely political and will be solved at the highest level," he said.

Vedomosti

Russia's state-run electricity trader admits political engagement

Inter RAO UES, Russia's electricity trader, is the first state-controlled company in this country which is ready to admit that it will act on foreign markets proceeding from the political interests of the state.
The Russian government's interest in this company, considering its scale, share of GDP and geostrategic role, is one of the four criteria for Inter RAO's entry into the markets of other countries. This is written into the company's strategy for the period until 2015. Last week, the strategy and reform committee at the RAO UES board of directors examined this strategy.
On July 1, when RAO UES is to be abolished, Inter RAO will receive part of its assets and become a major state holding. By 2015, its value should increase to $14 billion and assets nearly fourfold. According to the strategy, this could be achieved mostly through purchases abroad (to the amount of $8 billion by 2010) and also assets transferred to the company for management.
Inter RAO has declares its geopolitical strategy against a background of Europe's growing misgivings over sovereign investors.
In February 2008, the European Commission called upon them to voluntarily sign a code of conduct which would specially provide for rejection of politics when making investments. Inter RAO's spokesman declined to comment on this issue. However, a high-ranking official in the company says that its management has not yet finally approved the strategy.
The mention of geopolitical interests also surprised him. Any state-controlled company takes state policy into account but this is not the main thing. Besides, the Kremlin gives no instructions on this issue, he says. Inter RAO's is a strategic business and it is only reasonable that the government should keep some regulating role in it, says Valery Draganov, first deputy chairman of the State Duma energy committee.
The Russian company's acknowledgement that it considers politics when operating abroad may have an undesirable effect on the market, says Katinka Barysch from the Centre for European Reform. This will not tell on electricity exports to Europe, but when a Russian company tries to purchase assets in Europe it will have to prove the absence of political motivation, she adds.
However, all this is not so dangerous for Inter RAO as, for instance, for oil and gas companies, primarily Gazprom, says Alexander Rahr of the German Foreign Policy Council. The EU is primarily interested in the investors' equal access to the partners' markets, and Russia's electricity sector is open for foreign investment, he says.

Kommersant

Vekselberg could replace Dudley as TNK-BP chief

BP has admitted to a damaging conflict between Russian and British shareholders of TNK-BP. According to unofficial information, Russian shareholders think the problem can be solved only if Robert Dudley is replaced as CEO by Viktor Vekselberg, a co-owner of the Russian-British oil venture.
TNK-BP has come under intense pressure from the Russian authorities this year. In March the Federal Security Service searched the company's headquarters and the Moscow office of BP, and carried out new searches at BP last week. In March a TNK-BP employee was arrested on suspicion of industrial espionage.
Yesterday, after Dudley told the daily Vedomosti about the conflict with the Russian shareholders of TNK-BP - Alfa Group, Access Industries and Renova, Alastair Graham, the leader of TNK-BP shareholders' team at BP (which holds 50% in TNK-BP), had to make a statement.
TNK-BP chief Robert Dudley decided to speak up only after his career in the company had been jeopardized.
Two sources close to TNK-BP shareholders say that in mid-May BP chief Tony Hayward met with the heads of two of the three Russian shareholders - Viktor Vekselberg and Mikhail Fridman. According to one of the sources, the Russian shareholders said they were dissatisfied with Robert Dudley, and proposed replacing him with Vekselberg, Kommersant writes.
One of the sources said Hayward rejected the offer, while the other claims "the issue has not been closed yet."
Andrei Shtorkh, a spokesman for Vekselberg, declined to comment.
Analysts say the change of managers will not settle the problem.
Denis Borisov of the Solid investment financial company said: "The government cannot be happy with the conflict, which could affect the company's operations. The sides can still come to terms on the problem; if not, some of the shareholders will have to leave."
Borisov said the shareholders' chances to stay are roughly equal, adding that Gazprom is the main claimant to a share in TNK-BP.
Konstantin Cherepanov, an analyst at the KIT Finance investment bank, said BP could be a better partner for Gazprom, because such partnership promises broader cooperation, including in technology and foreign projects.
The two shareholders continue to deny plans to sell stakes in TNK-BP to Gazprom.

Nezavisimaya Gazeta

Gallup joins Russia-West information battle in South Caucasus

According to Gallup, 62% of people in Armenia, traditionally seen as Russia's strategic ally, have a negative view on the Kremlin's policies. Some experts interpret the poll as part of the information battle between the West and Russia.
Alexander Iskandaryan, director of the Caucasus Media Institute in Yerevan, said: "These are strange results; we have never seen this in Armenia before. The previous such poll, held last year, produced opposite results. Gallup is a respected organization, but methods are also important, because interpretation of sociological data is often affected by political considerations."
"The poll coincided with news of Russia raising gas prices, which dramatically increased food prices and transportation fees, and could presumably provoke an outburst of negative emotions regarding Moscow," Iskandaryan said.
Mikhail Aleksandrov, head of the South Caucasus section at the Institute of the CIS, said the poll results are a typical propaganda move.
"Gallup was contracted to produce this result," he told the popular daily Nezavisimaya Gazeta. "The West was dissatisfied by its failure to bring Levon Ter-Petrosyan to power [in Armenia] in a color revolution."
"To gain access to the Caspian Sea and control over the energy corridor from Central Asia, and to set up bases in Azerbaijan, [the West] needs Azerbaijan to become a NATO member," Aleksandrov said.
"But Azerbaijan said it would join the bloc only if the Karabakh problem is settled in its favor. The forces rallying around Ter-Petrosyan expected to gain power with the support of 30% of the vote, but they haven't succeeded."
"This result has overturned the Western strategy in the South Caucasus," the analyst said. "Ter-Petrosyan would have pulled Armenian troops out of Karabakh without Baku recognizing the region's independence. This would have been the beginning of a gradual reincorporation of Karabakh into Azerbaijan."

Vedomosti

U.S. opens market to Russia's largest fertilizer producer

EuroChem, Russia's largest nitrogen mineral fertilizer producer, has had its way: the United States has lifted duties on the company's carbamide supplies to the country. Russian exports of this fertilizer to the American market were stopped for 20 years.
The U.S. Department of Commerce abolished all carbamide duties for EuroChem, the company and the department both said. The duty was 68.26% of the product's value and was first introduced in 1987. As the Soviet Union broke down, it was extended to all newly independent republics and now applies only to Ukraine (53.23%).
The Russian producer considers the decision important, because Russia consumes no more than 10% of all the carbamide it turns out, with the remaining 90% going for export.
Vladimir Torin, the company's spokesman, did not disclose the amount the company is ready to supply to the U.S.
All in all, Russia produces 5.43 million metric tons of carbamide, with EuroChem accounting for 1.66 million tons. Other producers include Akron and Uralkhim. But their supplies go mainly to Europe and Latin America, said Alfa Bank analyst Andrei Fyodorov.
The carbamide market is interesting in itself, said a spokesman for the Azotecon consultancy: since last year fertilizer prices have more than doubled, climbing to $650 per ton.
American farmers use mainly granulated carbamide, which is not produced in Russia, the Azotecon source added. But in 2004-2008, EuroChem spent $85 million on upgrading its carbamide synthesis plant.
According to Torin, this program will enable Novomoskovsky Azot to start in 2008 producing granulated carbamide (2,000 tons per day), not prilled as now. From 2011 on, the granulated product will also be produced by Nevinnomyssky Azot (1,500 tons per day).
EuroChem turns out 6.1 million tons of fertilizers a year. Its earnings for 2007 were 73.8 billion rubles and net profits were 16.17 billion rubles, according to International Financial Reporting Standards.


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