What the Russian papers say


MOSCOW, May 30 (RIA Novosti) Georgia likely to lose Abkhazia / Greenland conference discusses carve-up of Arctic / Conflict between TNK-BP shareholders turns nasty / PM, not president, could now take over foreign policy / Japan offers its markets to Rosneft / Russian airline to buy 25 Airbus planes for $1.7 billion


Georgia likely to lose Abkhazia

Ambassadors from 15 countries of the European Union will come to Sukhumi, capital of breakaway republic Abkhazia, on Friday to discuss means of resuming Abkhazian-Georgian dialogue.
However, the diplomats' main goal will be to lure Abkhazia away from Russia's influence. Analysts say Georgia, which is eager to join NATO, will have to make major concessions to the breakaway republic.
Igor Akhba, Abkhazia's representative in Moscow, said: "The EU diplomats want to push Russia away from the negotiations, although Russia is successfully fulfilling its tasks, above all peacekeeping ones."
The three-way talks between Abkhazia, Georgia and Russia are proceeding under the auspices of the UN Coordinating Council in Geneva. "We think it would be inefficient to change the format," Akhba said.
Alexei Malashenko, a researcher at the Carnegie Moscow Center, said the EU diplomats would be unable to immediately split Abkhazia from Russia.
"However, this is a serious move showing that the EU is beginning talks with Abkhazia," Malashenko said.
"The triangle may become a square. If Europe acts maximally energetically, Georgia, which is eager to join NATO, will have to make major concessions to Abkhazia."
Malashenko admits that Abkhazia may accept some of the EU's proposals.
"Abkhazia will have quite a few issues to consider, unless it wants to world to see it as merely a Russian protectorate," the expert said. "The EU could tempt Abkhazia with the Kosovo scenario, which promises territorial autonomy under the EU protection, if not full independence. This scenario is quite probable, but in this case Abkhazia will have to cede the Gali District or turn it into an autonomous district within the republic."
"In any case, the EU has apparently decided to deal with Abkhazia, and Georgia is coming to see that it will have to part with the breakaway republic," Malashenko said. "It no longer can stamp its feet and shout 'No independence'."


Greenland conference discusses carve-up of Arctic

Officials from five Arctic coastal countries met in Ilulissat, Greenland, this week to discuss how to carve up the Arctic Ocean, which could hold up to one quarter of the world's undiscovered oil and gas reserves.
Canada, Denmark, Norway, Russia and the United States are squabbling over much of the Arctic seabed and Denmark has called them together for talks in its self-governing province to avert a free-for-all for the region's resources.
Norway and Denmark were represented at the conference, which ended on Thursday, by their foreign ministers, Jonas Gahr Store and Per Stig Moller, respectively, and Canada by Natural Resources Minister Gary Lunn. The United States sent Deputy Secretary of State John Negroponte.
Mikhail Krutikhin, an analyst and partner at the RusEnergy consultancy, said estimates of the Arctic Ocean's oil and gas reserves were mostly far-fetched, and that seismic reconnaissance surveys had only covered the Barents Sea and part of the Kara Sea.
"No drilling operations have been conducted at most new deposits; and the rest is nothing but speculation," Krutikhin told the paper.
The Russian Natural Resources Ministry said the country's Barents, Pechora, Kara, East Siberian, Chukchee and Laptev seas contained an estimated 418 million metric tons of oil reserves, and another 9.24 billion metric tons in unproven reserves.
According to the ministry, studied and unproven gas reserves total 7.7 trillion and 88.3 trillion metric tons, respectively.
Analysts of Russia's largest state-owned oil company Rosneft said prospecting operations until 2030 would require 12.7 trillion rubles ($539 billion), and that it would take another 39.8 billion rubles ($1.7 billion) to develop the deposits.
"Not a single budget stipulates such allocations. And neither energy giant Gazprom, nor Rosneft have the required experience or technology for developing Arctic deposits," Krutikhin told the paper.
He said Gazprom estimated production costs at $91 per 1,000 cubic meters, compared to $7-10 at giant Soviet-era deposits. "Production costs could double or even triple on the Arctic shelf. Consequently, production will only become profitable under a level of growth in hydrocarbon prices that is currently hard to imagine," Krutikhin said.

Vedomosti, Gazeta.ru

Conflict between TNK-BP shareholders turns nasty

The Tyumen Oil Company (TNK) has been charged with 22 billion rubles (almost $930 million) in back taxes for 2001-2003.
Analysts interpret the news as a new stage in the ongoing conflict between Russian and British shareholders of the joint venture. They say this is classical information leakage aimed to weaken the positions of Viktor Vekselberg, who intends to replace Robert Dudley as the company's CEO.
Russian energy giant Gazprom, which has taken the side of British shareholders, could have a hand in the matter.
Two sources in the Russian Interior Ministry and a TNK-BP staffer say the tax charges were brought against TNK, which merged with BP in September 2003, last April.
According to the Interior Ministry sources, the first suspect in this case was Simon Kukes, a Russian-born American who was TNK CEO in 1998-2003 and is now director general of Samara-Nafta, an exploration and production company located in Russia's Volga-Urals region. They cannot say what his current status in the case is.
Viktor Vekselberg, who at that time was board chairman of TNK, is not a suspect in the case.
The company has long settled the tax claims and there are no reasons for criminal persecution, said a source close to TNK-BP.
Analysts explain the tax charges by differences between Russian and British shareholders.
Dmitry Abzalov, an analyst at the Moscow-based Center for Current Politics, said: "The conflict between Russian and British owners is old news; it concerns mostly the company's development strategy."
The latest announcement of new tax charges is a new phase of the information war, a counteroffensive launched by the British shareholders.
"The leakage was apparently engineered by BP, but the involvement of the Interior Ministry's economic security department shows that an influential state-owned company has joined the fighting. It could be Gazprom, which wants to maximally weaken the positions of the AAR alliance of Alfa Group, Access and Renova," Abzalov said.
The three companies are the Russian shareholders of TNK-BP.
Gazprom wants to buy out the Russian part of TNK-BP, contrary to the will of the Russian owners.
"BP would not be harmed by a change of the Russian partner in the joint venture. It might even benefit from it (it has been promised privileges in developing Russian deposits). But the Russian shareholders will lose a highly profitable oil business," Abzalov said. "This would be especially painful for Vekselberg, because raw materials assets provide a considerable part of his income."
Besides, the billionaire wants to become the head of TNK-BP. Therefore, the current attack is most likely directed against Vekselberg, the analyst concludes.


PM, not president, could now take over foreign policy

Russia is posting a new ambassador to the United States. Yury Ushakov, envoy to Washington since 1999, is back in Moscow and may soon be appointed deputy to Sergei Sobyanin, deputy prime minister and government chief of staff.
An independent "foreign policy" unit is being mooted for the government and Prime Minister Vladimir Putin. In the view of U.S. State Department officials, the appointment could mean a "hijacking" of foreign policy powers from President Dmitry Medvedev and his office.
The president is reported to have signed an unpublished decree the other day to terminate Ushakov's powers in the U.S. Three independent sources in the Russian establishment confirmed his appointment as Sobyanin's deputy - two in the government and one in the Presidential Executive Office.
His brief will now be to streamline government foreign policy moves. On the one hand, the Foreign Ministry and President Medvedev coordinate these matters. On the other, the government has until recently been concerned mainly with inter-governmental commissions, which rarely of ever aligned their work and dealt chiefly with economic issues.
A source close to the State Department said that Ushakov's likely new posting would mean the surrender of foreign policy powers from president to premier and the demotion of Foreign Minister Sergei Lavrov.
The source also pointed to Ushakov's close relationship with Igor Ivanov, former foreign minister and former Security Council secretary, and a Yevgeny Primakov protege. In view of this, the source said, Primakov rhetoric could dominate Russian foreign policy now and signal a return of Igor Ivanov to big-time politics.
Russian government foreign policy under Ushakov could get tougher. On February 1 of last year, the Russian ambassador had an article published in The Los Angeles Times, which people that have a knowledge of Ushakov consider to be his manifesto. Although entitled "From Russia with Like," it delivers a stern-worded message to the U.S.
The ambassador wrote that Russia would never let anybody define its foreign and domestic policy for it. He said the view held by some in Washington that Russia could be held to ransom and then dumped and even bad-mouthed when it no longer could serve U.S. purpose was outrageous.

Business & Financial Markets

Japan offers its markets to Rosneft

This July, Russia's state-controlled oil producer Rosneft will start negotiations with Japan Oil, Gas and Metals National Corporation JOGMEC.
Hironori Wasada, JOGMEC's vice president, said the Japanese side was ready to offer access to the end consumer in Japan in exchange for joint participation in downstream projects.
Japan's interest in Russian energy resources is understandable: at present, Japan is heavily dependent on oil imports from the Middle East (up to 90%). The lack of stability in the region makes Japan look for alternative oil suppliers.
According to JOGMEC's vice president, Japan annually needs 200 million metric tons of oil and petroleum products for domestic consumption but it is gradually reduced to save resources. Many oil refineries have been closed and Japan makes offers to American and Chinese companies to process oil at its idle plants and then supply oil products to the Chinese, American and Japanese markets, Wasada said.
JOGMEC thinks that Russia could also take a niche on this market considering the closeness of major Russian oil fields to Japan, especially those of the Sakhalin shelf.
Rosneft told the newspaper that negotiations with the Japanese side are underway. Rosneft's press secretary Nikolai Manvelov added that the company would not give any information on the talks.
According to Svetlana Savchenko, director of the investment planning department at the 2K Audit - Business Consultations company, Japan is the world's third largest oil importer after the United States and China. Therefore, Rosneft cannot but be interested in the Japanese market. However, according to Mikhail Zanozin of Sobinbank, Rosneft is not likely to take a dominant position on that market until the East Siberian-Pacific Ocean (ESPO) pipeline is put into operation.
"The production peak at the Sakhalin-1 fields is 12 million metric tons of oil, and Rosneft has a 20% stake in the project. Consequently, Rosneft's maximum oil exports to Japan may amount to 2.5 million tons (1.2% of the Japanese market)," Zanozin said. According to the expert, after the ESPO pipeline is commissioned, Rosneft's oil exports may be increased to 10-15 million metric tons.
RBC Daily


Russian airline to buy 25 Airbus planes for $1.7 billion

Kaliningrad's KD Avia plans to revamp its entire fleet by swapping its Boeing aircraft for European liners.
Yesterday the carrier announced it signed a contract with Airbus for the delivery of 25 A319 aircraft worth a total of $1.7 billion. Airbus hopes Russian carriers, which are increasingly opting for European airliners, will help it to regain leadership on the Russian market.
The first of the ordered planes is expected to be delivered in the first quarter of 2014, and the last in the third quarter of 2017. "Perhaps the timeline will be moved a year earlier," said Sergei Grishchenko, company chairman.
The manufacturer and the airline are also negotiating supplies of two to six A330-200 long-haul aircraft.
Currently, KD's fleet consists of 16 Boeing 737-300 jet liners. In the future, the company is going to switch to European equipment.
Airbus Vice President Andreas Kramer looks to his company's share of Russian orders exceeding 50% in the next few years.
At the moment, Russia operates 102 European-made and 180 American-made liners. With KD Avia giving up its Boeings, their number will be cut by 16. Airbus, according to its own information, has delivery orders for 145 aircraft. Dmitry Khrol, an official Boeing representative in Russia, doubts the Airbus report on the number of firm orders. He said Boeing had 66 firm orders.
The order for 25 new Airbus planes is one of the largest among Russian airlines, said Boris Rybak, Infomost director-general.
Last year, Aeroflot purchased 22 A350 XWB long-haul planes for a total of $2.9 billion, with Siberia placing orders for 25 A320 medium-haul planes ($1.6 billion).
KD Avia, unlike the overwhelming majority of Russian carriers, finds it profitable to buy foreign-made planes: the company is located in a free economic zone and so need not pay customs duties (20%) and VAT (18%) on imported aviation equipment.
The basic condition is that airliners fly on routes linking Kaliningrad with Russian regions and foreign cities, said Igor Lukyanov, company director for fleet development. If the list price is taken for the benchmark, KD Avia will save $650 million.

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