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What the Russian papers say


MOSCOW, September 30 (RIA Novosti)
Former Communist Party leader, billionaire to defend democracy/ Russia, South Korea sign $100 billion gas package/ Moscow to New Delhi: let us jointly develop new weapons/ Possible Russia-EU trade war beckons/ Azerbaijan to pump more oil across Russia/ Time of cheap loans over for oil and gas majors/

Vedomosti, Nezavisimaya Gazeta

 Former Communist Party leader, billionaire to defend democracy

Former Soviet leader Mikhail Gorbachev and banker Alexander Lebedev intend to set up a new democratic party. Lebedev has said establishing the party will only cost $1 million, "if we prevent embezzlement."
According to the Russian Union of Industrialists and Entrepreneurs, Russia should have such a party to protect financial markets, but political analysts are not enthusiastic about the idea.
Gorbachev heads the Union of Social Democrats, a movement set up in place of the Socialist Democratic Party, which ceased to exist in 2007.
Mikhail Kuznetsov, deputy chairman of the movement, said its executive committee had discussed cooperation with Alexander Lebedev, the owner of the National Reserve Corporation, last week. Social Democrats are to make the final decision at their November congress.
Lebedev, Russia's 39th richest man with $3.1 billion in personal wealth according to Forbes, has told the popular daily Vedomosti that it would cost "only $1 million" to set up the party if embezzlement were prevented.
The priorities of the would-be organization, tentatively called the Independent Democratic Party, are the election of governors, development of independent political institutions, and public television. Lebedev said the party, if officially registered, would take part in parliamentary elections in 2011.
Boris Nemtsov, who is setting up a coalition with Nikita Belykh, who recently resigned as chairman of the Union of Right Forces (SPS), said the establishment of a new party would only damage the democratic movement.
Alexei Malashenko, a member of the scientific council at the Carnegie Moscow Center, said: "There are no vacant lots on Russia's political scene where Lebedev and Gorbachev could set up a new party."
According to him, none of Gorbachev's party projects have succeeded.
Sergei Borisov, chairman of the Opora Rossii organization of small and medium-sized businesses, said business should not meddle in politics. He does not believe "in the success of these midget parties without ideology."
Anton Danilov-Danilyan, chief expert at the Business Russia association, said: "We are skeptical about the efforts of these two men, given their participation in past elections."
Garegin Tosunyan, board member of the Russian Union of Industrialists and Entrepreneurs and president of the Association of Russian Banks, said he respected Gorbachev and thought Lebedev was a good businessman.
He said in the future parties might move their attention from ideological dogmas to practical tasks of economic sectors, such as the protection of the interests of players in the financial market.

RBC Daily

Russia, South Korea sign $100 billion gas package

Russian officials' plans to revise energy relations with Europe by turning eastward took real shape on Monday as Gazprom signed a memorandum of understanding with South Korea's Korea Gas (Kogas) on annual supplies of 10 billion cu m of 'blue-sky fuel' over 30 years.
It was part of a package deal worth $102 billion which also included building a gas pipeline to South Korea from Vladivostok via North Korea, a gas chemical plant and a liquefaction facility. South Korean companies could also take part in the development of Kovykta, a huge gas condensate field in East Siberia.
Russia's gas cooperation with Korea has been spurred by Gazprom's policy of diversifying exports, said Dmitry Lyutyagin, an analyst with the Veles Capital brokerage.
The European Union became even more wary of dealing with Gazprom after the recent conflict in the Caucasus, so the Russian gas giant decided to hedge the risk and redirect part of its gas export flow eastward, he added.
South Korea is quite happy to have a reliable supplier such as Gazprom. The Asian country currently has a shortage of LNG supplies, which is bound to grow.
South Korea shows one of the world's highest growth rates of natural gas consumption, said Alexei Belogoryev, a gas sector expert at the Institute for Natural Monopoly Studies, a Moscow think tank.
He said it consumed 37 billion cu m of gas in 2007, with annual consumption likely to reach 80-100 billion by 2030. Koreas' own gas reserves are insignificant, so it will grossly depend on imports. Russia is its most convenient potential supplier, because it's geographically close and can ship gas by pipeline.
Exports to Korea, Japan and China are the cornerstone of the Russian gas export monopoly's Eastern Gas Program. "LNG is the safest way to export gas," Belogoryev believes. However for all its expensive experience and skill in pipeline construction, Gazprom still has technological problems where liquefaction is concerned.
Mikhail Korchemkin, director of East European Gas Analysis, said South Korea will receive gas produced by the Sakhalin-1 project, which means that the Sakhalin-Khabarovsk-Vladivostok pipe link will carry more gas for foreign consumers than for Russian ones.
Yet, he expressed doubts that North Korea would allow to carry Russian gas across its territory. It would certainly prefer a scheme similar to the one Russia uses in Central Asia, that is, to buy up all the gas and resell it on its own conditions.


Moscow to New Delhi: let us jointly develop new weapons

Russia's Defense Minister Anatoly Serdyukov has proposed that India should not buy Russian weapons, but instead finance their development. Yesterday, in India, he presented to his opposite number A.K.Antony a Russian draft of a program for military-technical cooperation between the two countries for 2011-2020. A source in the Russian delegation said the program could be approved as early as 2009, although that is not essential as the program looks far ahead, and the Indian partners gave it general approval.
Speaking in New Delhi, Serdyukov said the program would go over from seller-buyer relations to joint development of the newest military hardware.
A manager of one of the Russian defense plants said the following projects were offered to India: a fifth-generation fighter based on Sukhoi's T-50 aircraft, a new- generation tank, a new supersonic missile, BrahMos-2, a new-generation frigate and help in developing India's nuclear-powered submarine of its own design. It has been suggested that the experience gained in the Russian-Indian BrahMos joint venture be used in work on these projects. The venture has successfully developed a supersonic cruise missile around the Yakhont missile, the source said.
The previous program for bilateral military-technical cooperation, adopted for 2001-2010, was estimated at $10 billion. This volume of deliveries to India will be reached by the end of 2008, predicted a source in the Russian Technologies corporation. The value of the new program has not yet been defined, but will be no less, the source said.
Konstantin Makiyenko, an analyst with the Center for the Analysis of Strategies and Technologies, said the decision to give India a share in the development of state-of-the-art weapons is the only correct one, since it will allow Moscow to keep the Indian market - critically important for Russia. Nearly all the newest systems which Russia can export have been developed over the past 10 years on Indian orders, he said, but India's ambitions have grown, and there is no alternative to joint development.

Novye Izvestia

Possible Russia-EU trade war beckons

Russia, which avoided a trade war with the European Union after its conflict with Georgia over the break-away province of South Ossetia last month, may still face EU sanctions together with other countries accused of "resource nationalism."
Brussels is now drafting a package of measures against countries charging export duties and introducing other export restrictions against the backdrop of high raw-materials prices.
Although Russia may also be blacklisted, analysts said the EU had no right to demand duty-free trade from Moscow, and that it lacked the leverage for facilitating such trade.
"Naturally, the West does not like our export-regulation duties hindering operations on the Russian oil market," Mikhail Delyagin, head of research at the Moscow-based Institute of Globalization Problems, told the paper.
He said the EU should not expect free access to the Russian oil and gas pipeline network. "Unlike air or water, a common asset, this is Russian property," Delyagin said.
"Every state charges its own export duties. Nobody has the right to influence the export-duty policies of any country because this would be an attempt to interfere in its internal affairs," Alexei Skopin, deputy head of the regional economy and economic geography chair at the Higher School of Economics, told the paper.
The EU wants to include customs-duty restrictions in the agenda of talks on Russia's accession to the World Trade Organization and on signing free-trade agreements.
Moreover, Brussels wants to more actively use protectionist mechanisms, including anti-dumping duties.
Skopin said the proposed EU measures would not seriously influence Russia because Europe had already barred Moscow from virtually all sectors.
He said Brussels was charging anti-dumping duties on Russian iron-and-steel imports, and that low export duties in this field were Moscow's only motive for joining the WTO.
"Russian companies have already circumvented such restrictions, have become part of the European economy and now co-own European companies," Skopin told the paper.
"Anti-dumping duties could hurt separate companies, rather than the entire Russian economy, because Moscow does not export many products to the EU. Brussels, which is making empty threats, realizes that it cannot exert economic pressure on Russia," Delyagin said.

Nezavisimaya Gazeta

Azerbaijan to pump more oil across Russia

Azerbaijan's state oil company is negotiating with Russia an increase in the annual capacity of the Baku-Novorossiisk pipeline to 5 million metric tons.
Rovnag Abdullayev, president of the State Oil Company of Azerbaijan (Socar), said: "We are transporting minor amounts of oil through the Baku-Novorossiisk pipeline. But since we intend to diversify our supplies to the world market, we want to maintain all routes in working order. This is why we are negotiating with Russia an increase of the northern pipeline's capacity to 5 million metric tons annually."
Since Azerbaijan started transporting crude by the northern route in 1997, it has exported around 30 million metric tons of crude at $15.67 per ton. At present, the Baku-Novorossiisk pipeline transits 90,000 barrels of Azerbaijani oil a day.
Russia has more than once proposed increasing the delivery of Azerbaijani oil to Novorossiisk, but Socar and foreign companies' priorities were the Baku-Supsa and the Baku-Tbilisi-Ceyhan pipelines, with a total capacity of 60 million metric tons a year.
Several years ago, they considered cancelling the northern route or using it in the reverse regime, to pump Russian oil to the Baku-Tbilisi-Ceyhan pipeline. But the explosion at the Turkish part of the pipeline and the war in Georgia in early August, which cost Azerbaijan $50-$70 million a day in losses, forced Baku to reconsider its plans for the Baku-Novorossiisk pipeline.
According to the Caspian Energy Alliance consultancy, Azerbaijan and foreign participants in offshore exploration and production projects in Azerbaijan have lost as much as $500 million because of suspended oil transportation through the Baku-Supsa and the Baku-Tbilisi-Ceyhan pipelines.
Their losses would have been much larger if not for the stable operation of the northern route. In January-August this year, Socar transported approximately 865,000 tons of oil through the Baku-Novorossiisk pipeline to customers in Turkey, Romania, Ukraine, Croatia, Spain and Italy.


Time of cheap loans over for oil and gas majors

Russia's largest banks have raised their interest rate on ruble loans for oil and gas companies to 11%-13% from 7%-8%. Second-tier banks upped the interest to 18% and the rates keep growing.
As a result, nearly all oil and gas companies have cut their short-term loan programs and many of them plan to review their investment programs for 2009.
Sergei Vorobyov, deputy board chairman of natural gas and oil producer Itera, said: "We have already cut our loan portfolio by 10%-15% and cuts may reach 25%-30% before the end of the year compared with 2007."
This year, Itera intends to have record-large revenues of $1.9 billion compared with $1.3 billion last year, and a record-high net profit of as much as $200 million ($120 million last year). At the same time, it will divest non-core assets.
"The task this year is to divest all of our oil assets," Vorobyov said. "Of course, the crisis has affected our plans and we may postpone certain deals until 2009."
In his opinion, all players in the oil and natural gas market will have "to cut spending and to control their investment programs in 2009 and the first half of 2010."
Bankers say the correction of interest rates on corporate loans has been precipitated by the growing costs of foreign loans for Russian banks.
Roman Zhurkov, director for institutional and banking services at TransCreditBank, said the market of international loans had been closed even to the largest borrowers.
"Some investors are prepared to buy Russian companies' risks, but the cost of such acquisitions is exceedingly high, therefore making them unprofitable for even Gazprom or Itera," he said.
The price situation in the sector is another negative factor. Prices of Urals crude have plummeted by 39%, from $142.5 per barrel in mid-July to $86.87 in mid-September. At present, Urals crude is trading 30% lower than its maximum price.
Vitaly Kryukov, from the Kapital investment group, said the government decision on the emergency reduction of export duties helped improve the situation, but many companies still plan to cut their investment programs in 2008 and 2009 and reduce the debt burden.
The board of directors of energy giant Gazprom will meet today to consider reducing the company's debts.
A source in Rosneft said Russia's largest state-owned oil producer might review its investment program.
Sergei Papenko, director for investment and production efficiency at Gazprom Neft, the oil arm of Gazprom, said it might cut its investment program by 10%-20% from the approved 2008-2009 targets.

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