What the Russian papers say


MOSCOW, September 17 (RIA Novosti)
Ukraine's European future shelved - expert / Russia-Georgia conflict put EU's energy strategy at risk / EU says ready to cooperate with Gazprom / Azerbaijan negotiating gas swap with Gazprom / Russian stock market takes a plunge / Government sends threatening message to hired executives


Ukraine's European future shelved - expert

Ukrainian politicians, who gave up the Orange coalition as a bad job, are unlikely to have thought about the country's smooth and progressive development.
With its inflation rate already the highest in Europe, the country hardly needs a parliamentary crisis, says Arkady Moshes, head of the Russian program at the Finnish Institute of International Affairs. As well as this, the country cannot afford to go through a paralysis of security policy, taking into account the current dramatized situation in Crimea. Ukraine's "European future," let alone the plan for joining NATO, can be considered shelved, as nobody in the West would deal with a state which has no responsible government - even though Ukraine's possibilities for joining the European Union did exist, with Europe considering sending out signals after the Georgian conflict.
The election idea sounds unconvincing as well, with Ukrainians tired of endless voting procedures, and it is not certain they will rush to polling stations to cast their votes for major parties. According to Moshes, the pro-Yushchenko Our Ukraine bloc might disappear from the political scene under such circumstances, while both the Yulia Tymoshenko bloc and Party of the Regions led by Viktor Yanukovych cannot be sure of a resounding victory.
In the next few years, Ukraine is likely to go through an interregnum stage, when old mottos and concepts die and major politicians admit their helplessness, while fresh concepts and new political figures are yet to appear, Moshes says. The elections, with no change in the current Constitution, when the sides struggle for power and not for the country's development program, are not going to change anything - while elections held just for the sake of changing the Constitution, abolishing the presidential post, and creating a two-party system seem to be risky.
However, abolishing the changes in the system which occurred in Ukraine after the Orange Revolution is impossible, Moshes says. No "pro-Kremlin coalition", as detractors call the potential alliance of the Yulia Tymoshenko bloc and Party of the Regions, will ever agree to put Ukraine in a position subordinate to Russia.
The evolving transition to the world market prices for energy resources is irreversible, which renders political loyalty meaningless as it is the voters' judgement, not appeals to foreign countries, that has become the only common way, though not always efficient, to solve political arguments. Ordinary Ukrainians show an interest in the country's European future just as the political elite does, and this interest will shape new leaders.

Nezavisimaya Gazeta

Russia-Georgia conflict put EU's energy strategy at risk

The conflict in Georgia may force the European Union to think again about its strategy for reducing its growing dependence on Russia's gas, because Georgia is a key element of this plan.
Russia de facto established control over gas and oil pipelines going through Georgia and has the right to block the transit. Moscow showed that it can cut off supplies. Even without targeting the South Caucasian pipeline, the Baku-Supsa pipeline or the Baku-Tbilisi-Ceyhan pipeline, which ships about 1 million barrels per day, during a short but intensive war, Russia highlighted the risks of the EU's strategy based on future supplies of gas through Georgia from Azerbaijan, and potentially from Kazakhstan and Turkmenistan.
The conflict aggravated the feeling of risk, and even increased concerns over considering Georgia a key transit state. In the long term, the psychological consequences of the war could more than the war itself prevent the creation of the East-West energy corridor via the Caucasus.
Although the Georgian conflict does not affect directly the route of the Nabucco pipeline - from Turkey to Austria - the growing security risk in the country is a new obstacle that the EU will have to hurdle. The fact that Russia can at any moment stop the work of the Baku-Tbilisi-Ceyhan pipeline that would transport Nabucco's gas, may force the EU to reconsider if the political support of Nabucco really does make Europe less dependant on Russia.
This feeling of risk could ruin the Nabucco project, especially if it increases the cost of the 3,000 kilometer-long pipeline. Nabucco could face huge financial troubles, because its shareholders will have to deal with expensive loans and insurance because of security risks, including the situation in Georgia, and growing commercial risks on the filling the pipeline.
The concerns over the Georgian transit and the dim prospects for the realization of Nabucco increase the advantage of the South Stream project backed by Russia's Gazprom. The pipeline would go under the Black Sea to Bulgaria and then divide into two branches that would supply Southern and Central Europe. Europe's demand for gas justifies the construction of either Nabucco or South Stream, but not both of them. It seems that if the European governments and the European Commission do not support Nabucco, its fate is predetermined.

RBC Daily

EU says ready to cooperate with Gazprom

A unit of Russia's energy giant Gazprom and Italian utility Enia S.p.A. have received approval from the European Commission to buy Italian energy supplier Enia Energia. The European Commission acknowledged that Gazprom and Eni's agreement on the South Stream pipeline project did not conflict with the competition act. According to experts, notwithstanding the South Ossetia crisis, the EC's approval shows the EU is ready to cooperate with Russia's energy giant and there are no signs of isolation.
Three companies - Italian Enia S.p.A., Austrian Centrex Europe Energy & Gas AG (founded by Gazprombank) and ZMB GmbH (Russian-controlled power firm) acquired Italian Enia Energia. The European Commission said its investigation showed that the deal would not create a competitive edge as neither Centrex nor Gazprom nor any companies controlled by them had a large enough gas and electricity market share in Italy. Gazprom supplies a limited proportion of total Italian gas imports, while Enia also delivers a small amount of the gas Italy requires.
According to Svetlana Savchenko, head of investment planning at 2K Audit-Business Consultations, Gazprom's acquisition is not significant for the company, but any energy assets are very important for Russia's energy giant as one of Gazprom's priorities is to increase its presence on the European energy market.
Savchenko says the EC's approval of Gazprom's acquisition in Italy and agreement on the South Stream project prove that the EU, notwithstanding the South Ossetia crisis, is ready to cooperate with Russia's energy giant, and not only by buying the required amount of gas. There are no signs of isolation.
According to Dmitry Abzalov, an analyst at the Center for Current Politics, the South Stream agreement was approved because of strong lobbying by German and Italian companies which have connections in the EC. Austrian companies supported the German and Italian companies in their lobbying because a gas-distribution center might be established in Austria as part of the South Stream project.
Besides, the European Commission realizes that there is no alternative to the Russian project. The Nabucco pipeline project is getting slow and it implies the use of Iranian gas. And the European Union is not favorable to Iran's leader, so it prefers Russia to Iran, says Abzalov.

Vremya Novostei

Azerbaijan negotiating gas swap with Gazprom

Baku is offering to supply gas to its neighbor Daghestan in exchange for Russian gas supplies for the Petkim chemical plant in western Turkey, co-owned by Azerbaijan's State Oil and Gas Company (SOCAR). Both sides would benefit from this deal, saving on gas transfers. The initial stage could involve supplies of between 1 and 1.5 billion cubic meters of natural gas a year.
Elshad Nasirov, SOCAR vice president for Investment and Marketing, said Daghestan needs 3 billion cubic meters a year, while its domestic output is at around 1.5 billion cubic meters a year.
He didn't elaborate on how much gas Petkim needs. It has been known, however, that, in late August, the concern applied to the Turkish authorities to obtain a permit to import 1 billion cubic meters of gas, supposedly from Azerbaijan. Earlier, on June 30, the SOCAR-Turcas-Injaz consortium had signed a deal with the Turkish government to purchase Petkim's controlling stake. The deal envisages an advance payment of $1.66 billion, with the rest of the total $2.04 billion to be paid off within the next three years.
"It is obvious that the Turkmen gas bypasses the Caspian en route to Daghestan, while both Azeri and Russian gas would need to go several thousands of kilometers to reach Turkey. That's why we suggested this interchange," says Nasirov. "We haven't received a positive response yet, but Gazprom has made us a counteroffer to supply gas to Daghestan. We are currently considering this offer, and will inform the Gazprom management later."
Gazprom refused to comment on the negotiations, now in their early stage, but a source in the monopoly signified satisfaction that a businesslike talk had finally begun.
"It's a meaningful dialogue, and not a discussion of virtual projects any more," he said, meaning the Nabucco pipeline, for which the Europeans have been looking for resources to fill up with no significant results.
Meanwhile, the swap deal doesn't look very realistic from an economic point of view. Although Gazprom can afford to buy Azeri gas at European prices, supplying it to Daghestan would be unprofitable and therefore senseless. One thousand cubic meters of gas for industrial needs costs around $71 in this region, while the current European price exceeds $500. The same goes for Petkim, with a transit distance much longer than that of Daghestan, and the need for expensive pumping through the Blue Stream pipeline across the Black Sea bed.

Gazeta.ru, Vedomosti

Russian stock market takes a plunge

September 16 turned out to be one of the worst days on the Russian stock market since the 1998 financial crisis. The exchanges stopped trading because stocks were tumbling, and banks cut mutual lending to almost zero.
Alfa Bank strategist Erik DePoy said everyone was shocked. Something really bad has happened but nobody can say exactly what it is. I don't want to believe what I see on my computer, he said.
Panic was provoked by the news about the collapse of the Lehman Brothers bank and the AIG insurer. Investors around the world are moving their funds from risky assets to more reliable instruments.
Market players are no longer satisfied with talk about external reasons for the crash.
"The market doesn't think the global crisis is the reason, because the world markets have been falling by 2%-3%, while we [the Russian stock market] by 5%-10%, and even by 15% today," said a market player. "So, we should look for domestic reasons for the plunge."
Financial hysteria is only half the problem. The crisis on the stock markets has strengthened expectations of global economic stagnation and also provoked a decline in commodity prices, including oil. This has come as a heavy blow for the Russian stock market, where oil stocks make up half of the shares traded. The RTS Oil & Gas index fell by 13.15% yesterday.
Promsvyazbank analyst Oleg Shagov said: "Gazprom, Sberbank, LUKoil and Rosneft have had the strongest negative influence on the RTS index. Gazprom shares actually plunged to a three-year low on Tuesday. The gas monopoly's capitalization has been falling by $11 billion per week in the past four months."
Businessmen compare the current situation to the 1998 financial crisis.
Pyotr Bakayev, managing director of Gazprom Finance, said: "The current crisis on the financial market is developing by the same scenario [as in 1998]. Both were provoked by the flight of foreign money from the market, although the current crisis has also been precipitated by the Caucasus conflict."
In the leading countries, money is moved from risky assets (shares) into more reliable state bonds, Bakayev said, adding that in the emerging economies, including Russia, investors usually flee all markets simultaneously.
"This situation has confirmed that foreign investors still view Russia as a developing speculative economy," he said.


Government sends threatening message to hired executives

The former corporate lawyer of the bankrupt Yukos oil company, Svetlana Bakhmina, will have to spend at least several more months in prison.
The judge did not just refuse to release the former employee of disgraced oil tycoon Mikhail Khodorkovsky's empire, but was firm enough to make her unborn third child serve the sentence as well.
Bakhmina is not guilty of murder or a violent break-in. She is a legal professional who was employed by Yukos as deputy head of its legal department. She was convicted for embezzlement of Tomskneft shares and tax evasion.
By now, she has been cleared of all disciplinary action; she has been granted incentives and is working in the prison law-and-order section. She has pleaded guilty and repented what she did.
Yet the Zubovo-Polyansky District Court in the Republic of Mordovia in central Russia refused to release her on parole, no doubt to honor the Year of Family.
The problem is greater than the plight of former Yukos lawyer and her baby. By refusing to release her, the government sends a dangerous message to all hired business executives - accountants, lawyers, financial officers and directors, indicating that they will bear full responsibility for whatever tax evasion schemes they applied upon the shareholders' orders. They will share the responsibility of those who masterminded the clever schemes.
And what's more, it is clear from Bakhmina's experience that having children does not help mothers convicted for economic crimes, who suffer twice as much watching their babies go to prison.
The Yukos case abounds in multiple cases of inhumane treatment of defendants.
Last January, the Supreme Court refused to release former Yukos vice president Vasily Aleksanyan, who had not been even convicted yet. Aleksanyan has spent nearly two years in detention, where he lost his eyesight and contracted a host of lethal diseases.
Still, Bakhmina's case clearly stands out as an important signal that the government is sending to businesses and the general public.

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