MOSCOW, July 9 (RIA Novosti) The Caucasus on the verge of new war / It is time Moscow disclosed its "asymmetrical" answer to U.S. missile shield / Gazprom to pay double for Central Asian gas / Russian companies entering Asian cell phone markets / Spain's Repsol looks to part of Sakhalin-3/ Italy's Eni to trade in gas in Russia
RBC Daily, Vedomosti, Moskovsky Komsomolets
The Caucasus on the verge of new war
The U.S. State Department yesterday interfered in the Georgian-Abkhazian conflict by calling on the two sides to "resume direct talks" and noting "the urgent need for an international police presence" in the area.
The State Duma, the lower house of Russia's parliament, thinks Russia will now have to join the military conflict.
Deputy Assistant Secretary of State Matthew Bryza said recently that Georgia and Abkhazia should implement the settlement plan proposed by Georgian President Mikheil Saakashvili.
But since then terrorist attacks directed against civilians and peacekeepers have claimed four lives in Abkhazia. The authorities of the breakaway republic have officially put the blame on Georgia. Abkhazian President Sergei Bagapsh said they would sever all relations with Georgia.
Proposals on peace talks look out of place in this context.
Alkhaz Cholokua, press secretary of the Abkhazian president, said: "All U.S. actions will benefit Georgia, which is staging terrorist attacks in Abkhazia to force Russian peacekeepers to leave. One of the goals of the explosions is to convince the international community that the [Russian] peacekeepers are ineffective. But we think they are controlling the situation completely."
The authorities of South Ossetia, another breakaway republic in the Caucasus, fear Georgia might soon start a military operation against it.
Irina Gagloyeva, chair of the South Ossetian committee for information and the press, said Georgian servicemen withdrew from the peacekeepers' headquarters in the small hours of July 4, and are now evacuating children from the Georgian villages of the Tskhinvali Region.
Arsen Khadzayev, deputy chairman of the State Duma committee for the CIS, said: "There are Russian citizens in South Ossetia, whom Russia must protect. Troops must be deployed there in the event of a conflict."
On July 5 Russia began a multistage military exercise, Caucasus Frontier 2008, in several regions of the Southern Federal District, which includes highly volatile North Caucasus republics. The exercise will involve units of the North Caucasus Military District, mainly the 58th Army and the 4th Air Force and Air Defense Army.
The main goal of the exercise is to practice interoperability in special operations in forested mountains.
A source at the Russian Defense Ministry admitted that the exercise was held because of the deteriorating situation in the region.
Military expert Konstantin Makiyenko said the occupation of South Ossetia and Abkhazia could not be prevented without the direct involvement of the Russian army.
Georgians have improved their military skills during years of training with U.S. and Israeli instructors. Besides, Georgia also has technical superiority. It has recently bought the Israeli GradLar multiple rocket launchers.
It is time Moscow disclosed its "asymmetrical" answer to U.S. missile shield
Russian diplomats have lost the battle against America's missile defenses in Europe, something that marked the end of Vladimir Putin's presidency.
On the first day of the G8 summit meeting in Hokkaido, the Russian and U.S. presidents exchanged a symbolic dialogue. Dmitry Medvedev told George W. Bush that Russia could not accept the recently announced American plans to deploy an anti-missile base in Lithuania, which Warsaw's increased financial appetites are preventing from being sited in Poland. Bush did not disclose to the press what he told the Russian president beyond saying his typical compliment to his counterpart: "A smart guy." A foreign trip by U.S. Secretary of State Condoleezza Rice provided the direct answer to the Russian concerns.
Yesterday the Czech Republic signed an agreement to host a missile defense radar station on its territory. The ceremony took place despite a mass protest demonstration in Prague and overall disapproval of the agreement by the Czech population. Officially uncontested polls showed that 70% of Czechs are against the radar's deployment in their country. But Washington, backed by the pro-Western part of the Czech elite, railroaded through the agreement.
Next in line is an agreement to deploy the second element of the shield - anti-missiles. Rice will not likely visit Poland this time, where the anti-missiles were planned to be sited. But she will visit Bulgaria. This could well be a way of exerting pressure on the Polish leadership, which is refusing to scale down its financial and military-technical requests for missile siting.
Washington's initial readiness to discuss its missile defense plans with Moscow was seen in the world as a sign of "the post-Cold War era." It was followed by discussions - at summits, ministerial meetings, including 2 + 2 ones, and at special consultations attended by diplomats and military experts. The longer they lasted, the more watered down were the pledges made by the Americans.
If an anti-missile base agreement is signed in the near future, Moscow should pause and think if it is worthwhile to continue the consultations. It is no secret that such diplomatic efforts allowed Bush to cover up the line he had pursued over the last six years to curtail disarmament and arms control agreements. The White House has managed to secure Moscow's support for American approaches to a number of problems. It remains only to understand what has been gained in response.
It seems to be time to disclose to the world and the Russian public the "asymmetrical answer" which the Kremlin will give in reply to the threat created by America's third missile deployment area.
Gazprom to pay double for Central Asian gas
Gazprom may have to increase payment for Turkmen, Kazakh and Uzbek gas from $8 billion this year to $20 billion in 2009, to stop them from searching for alternative customers.
However, the Russian energy giant will easily recoup its spending, because it resells Central Asian gas to Europe and Ukraine. It has been forecast that gas prices for the European Union will grow to $500 per 1,000 cubic meters by the end of 2008.
This year, Gazprom will buy 42 billion cubic meters of gas in Turkmenistan at $130 per 1,000 cubic meters in the first half of the year and $150 in the second. It has contracts to buy some 8 billion cu m of gas at $150-$180 in Kazakhstan and over 7 billion cu m at $130-$160 in Uzbekistan.
Overall, it will spend at least $8 billion on Central Asian gas in 2008.
Discussions of prices for next year began during President Dmitry Medvedev's visit to Turkmenistan last week. According to a source in Turkmengaz, Russia was proposed a deal to pay $360 for 1,000 cubic meters of Turkmen gas.
Since Kazakhstan and Uzbekistan usually follow in the wake of Turkmenistan regarding prices, Gazprom may have to spend $20 billion on Central Asian gas in 2009.
A Gazprom representative said yesterday the next round of talks would be held in Turkmenistan soon, but refused to comment on prices.
Maxim Shein, chief analyst at BrokerCreditService, said the late Turkmen President Saparmurat Niyazov and his successor, Gurbanguly Berdymukhammedov, usually demanded double price at the beginning of the talks, but later made substantial concessions to the Russian gas monopoly.
This time Gazprom may agree to raise the price to $280-$300, because its strategic goal is to prevent the regional countries from selling gas to other customers or the Nabucco pipeline bypassing Russia. At this price, Gazprom will spend $15.9-$16.5 billion on Central Asian gas acquisitions next year.
Vasil Kiselyov, a member of the Ukrainian parliamentary commission analyzing the situation on the natural gas market, said the Ukrainian oil and gas company Naftogaz had not been invited to the talks in Turkmenistan, although Ukraine is the main consumer of Central Asian gas.
Gazprom and Naftogaz will resume talks in Moscow today. Ukraine will insist on signing an intergovernmental agreement on gas supplies and a direct contract with Gazprom sealing the price formula, which stipulates a gradual increase in gas prices over four years.
Next year, the gas price for Ukraine should not exceed $250 per 1,000 cubic meters, said a source in the Ukrainian delegation. At present, it is $179.5.
Business & Financial Markets
Russian companies entering Asian cell phone markets
In December 2007, AFK Sistema, a large Russian holding company headed by business oligarch Vladimir Yevtushenkov, bought a 10% stake in the small Indian mobile operator, Shyam Telelink.
On Tuesday, Russian mobile operator VympelKom signed a contract on establishing the joint venture GTel Mobile with Vietnam's state-owned Global Telecommunications Corporation (GTel).
VympelKom, GTel and its subsidiary GTel TSC own 40%, 51% and 9% stakes, respectively.
The company's CEO, Alexander Izosimov, said the VympelKom stake could reach 49%, the maximum ceiling for non-residents.
However, VympelKom has an advantage over other foreign investors because Vietnamese legislation expressly forbids non-residents from buying over 30% of local mobile operators.
Moreover, the company will delegate three representatives to the joint-venture's six-person board of directors and will take part in settling all strategic issues, VympelKom vice president Vladimir Riabokon said.
According to VympelKom, only 30% of the 86 million Vietnamese population used cell phones this June. But Informa Telecoms & Media (IT&M), a leading provider of business intelligence and strategic services to global telecoms and media markets, estimated the local SIM-card to population ratio at 62.5% and said it would reach 77% by late 2010.
Izosimov said he hoped GTel Mobile would start operating by the summer of 2009. VympelKom plans to invest $1.8 billion, including $267 million during the initial stage.
Sistema promises to invest $7 billion into Shyam Telelink, a market newcomer, because India has a much larger population than Vietnam - 1.2 billion.
GTel Mobile plans to increase the number of local cell phone subscribers to 20 million in the next five years, VympelKom's executive vice president Nikolai Pryanishnikov said.
According to Informa, Vietnamese cell phone users spend $7.5 per month; consequently, GTel Mobile's annual proceeds could total about $1.8 billion. But Vietnamese mobile operators have started charging lower rates, Informa said.
Izosimov said VympelKom hoped to develop South East Asian markets together with GTel, and that it was interested in Laos, Myanmar and Cambodia.
The company may enter the Cambodian market in the near future. According to off-the-record reports, the corporate board of directors has approved the purchase of Cambodian mobile operator Sotelco from the Russian investment company Altimo, whichowns a 44.4% stake in VympelKom, for $28 million.
However, Nadezhda Golubeva, equity analyst at UniCredit Aton, said the Russian-Vietnamese joint venture would not interest investors.
"Vympelkom's Vietnamese and Cambodian projects are dwarfed by the scale of its operations and can increase the value of corporate American Depository Receipts by just 60-80 cents," Golubeva told the paper.
Spain's Repsol looks to part of Sakhalin-3
Spain intends to acquire one-quarter of the Sakhalin-3 project, but it looks as if no more foreign companies will be let in on the project. Experts say a Gazprom-Rosneft duel, not foreign companies, will be Sakhalin-3's main problem.
Antonio Brufau, head of the Spanish oil and gas company Repsol YPF, said talks were under way "at an advanced level" to buy a sizeable stake in the project. Foreign media, quoting their sources, say that the figure concerned is 25%. Sakhalin-3's current shareholders are Rosneft, Gazprom, and China's Sinopec.
Russian analysts are skeptical about Spanish prospects. "Repsol's chances of getting in on the act are incredibly small," said Natalia Milchakova, an analyst with Otkrytie Financial Corporation. "The Japanese and India's ONGC have tried, but among foreign corporations only Sinopec has succeeded."
Milchakova said that earlier the Spaniards were wary of working with Russian state companies. "But currently all transnational corporations are producing less and less gas and oil," she said. "In 2007, Repsol's hydrocarbon output dropped by 8%, including an 11% fall in oil production abroad. Repsol seems to have decided to improve the outlook thanks to possible work in Russia, where production is still growing."
Experts estimate a 25% stake in Sakhalin-3 could cost $1.7-2 billion. It cannot be ruled out that Russia might want from Spain access to Spanish gas distribution networks, rather than money. Gazprom has already tried to enter Spain's domestic market by buying Spain's large gas company Indeza. But the Spanish government twice vetoed the deal, making it clear that it will not tolerate the presence of a Russian state company on its territory.
It does not look as if Spain is going to change its stance. "Spain will never sell us its gas distribution networks," Milchakova said. "So no other foreign companies will be able to take part in Sakhalin-3," she said.
Experts expect the struggle for the project to unfold between Gazprom and Rosneft. The point is that Sakhalin-3's Kirinsky deposit has until recently been registered as unallocated, and Rosneft tried to claim it for itself, its reasoning being that it was already developing the neighboring Veninsky deposit. Still, the Kirinsky field was put at Gazprom's disposal without any competitive bidding. Moreover, the gas monopoly is also claiming the remaining two deposits - East-Odoptu and Ayashsky.
Political analysts say that further developments will depend on the alignment of forces in the Kremlin and whose clan (Rosneft's or Gazprom's) proves stronger.
Italy's Eni to trade in gas in Russia
Italy's Eni will be the first European company to trade in gas on the domestic Russian market.
On July 8, the company reported that on June 1 it had signed a contract to supply gas to the power plants of TGK-9, the territorial generating company in the Perm Territory (Urals). It will supply a modest 350 million cu m of gas to the TGK-9 power plants for two and a half years. Eni has not disclosed the details of the transaction, including the gas supplier and the time when supplies will begin.
The Integrated Energy Systems (IES) holding, the owner of TGK-9, refused to comment on the contract. A Vremya Novostei source in Eni says that gas supplies necessary to meet Eni's obligations to TGK-9 are fixed in contracts. However, this is not Gazprom's gas. Judging by all the signs, the transactions have not been coordinated with the Russian gas monopoly.
According to a Gazprom spokesman, Eni Energy (which will sell gas in Russia on Eni's behalf) has not applied for a permit for gas transportation. This means that the Italian company's subsidiary has bought gas from a company which has access to the pipeline, not from a gas producer's well or at an entry to the Gazprom system.
Thus, Eni Energy will act as another mediator between the present gas supplier to TGK-9 plants and the end consumer. This will have nothing to do with real gas supply experience. It will be rather difficult to understand the economic purpose of this transaction if it is not part of a more serious agreement between Eni and TGK-9 owners.
The main gas supplier to TGK-9 (apart from gas quotas supplied by Gazprom) is the Gasex trader incorporated into the IES Holding controlled by Viktor Vekselberg's companies. An informed source on the market assumes that Eni Energy has bought gas from Gasex.
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