What the Russian papers say


MOSCOW, November 6 (RIA Novosti)
Medvedev to extend presidential, parliamentary terms / President gives Russia's answer to U.S. missile shield in Europe / Europe cuts Russian natural gas imports / European Commission gives new incentive for Nabucco project / Russia to charge restrictive auto import duties / Russians go to pawnshops instead of banks


Medvedev to extend presidential, parliamentary terms

Russian President Dmitry Medvedev announced in his first state of the nation address that the presidential and parliamentary terms will be extended from the current four to six and five years respectively.
The reform was planned during the presidency of Vladimir Putin and will eventually benefit him, say Kremlin sources.
"This is not a constitutional reform but an amendment to the Constitution," Medvedev said. "These will be very important amendments but they will not affect the political and legal essence of existing institutions."
Tamara Morshchakova, a former judge of the Constitutional Court, says it will be a constitutional reform because it will change relations between the government and parliament, and extend the terms of the main institutions of state power.
The constitutional amendments will likely be made next year, said a Kremlin source.
Larisa Brycheva, a presidential aide, said the changes would not affect the incumbent president or the current parliament.
The Kremlin source said it was not Medvedev's impromptu decision but a reform planned under Putin, mostly by Vladislav Surkov, first deputy chief of the Kremlin staff.
The reform was outlined in 2007 for Putin, said a source with close ties in the Kremlin administration. It included the election of a successor who would make the necessary changes to the Constitution and carry out unpopular social reforms, allowing Putin to return to the Kremlin for a longer term.
The source also thinks the scenario may imply Medvedev's early resignation. The next presidential election may be held as soon as 2009, thereby dividing the presidential and the parliamentary elections just as Putin proposed. They will be held in the same year only in 2021, after the completion of the development strategy designed until 2020.
Another source with close ties in the Kremlin said Putin has already begun his election campaign. He now has a Website, and on November 20 he will deliver a policy speech at the congress of United Russia, which he chairs. After that he will hold a televised question-and-answer session with the people, not unlike what he did when he was Russia's president.
Medvedev does not and will not use this form of contact with people, his team says.
Putin is now mentioned in the media as often as Medvedev, according to Medialogia, Russia's first company analyzing the media in real time.


President gives Russia's answer to U.S. missile shield in Europe

President Dmitry Medvedev, who is also commander-in-chief of Russia's Armed Forces, yesterday produced a very strong counter-argument to the deployment of an American missile-defense shield in Europe. He said that Iskander-M theater missile systems would be deployed in the Kaliningrad Region.
The president also cancelled the order to disband three regiments of the 28th Guards Missile Division of Russia's missile forces in Kozelsk, Kaluga Region.
The Iskander-M (NATO's reporting name SS-26 Stone) mobile system is designed to engage ground targets in the enemy's operational depth. One launcher carries two missiles. Its range is 50-280 km and further. The payload is 480 kg, and can be carried in cluster, armor-piercing, fragmentary-explosive and nuclear warheads.
Iskanders could reach practically any spot in Poland, the country where America plans to deploy 10 counter-missiles. The 152nd Independent Missile Brigade deployed outside Chernyakhovsk, Kaliningrad Region, was planned to be re-armed with Iskanders as early as the beginning of 2008.
In 2007, it was announced that five missile brigades would be equipped with Iskander-M missiles by 2015. So far, however, there is known to be only one battalion of Iskanders (two batteries with two systems each) in the Armed Forces.
"Iskanders in the Kaliningrad Region will become target No.1 for a potential opponent, so their transfer there will inevitably lead to a strengthening of the entire grouping in the area," said Alexander Khramchikhin, head of analysis at the Institute for Political and Military Analysis.
As regards the 28th Missile Division in Kozelsk, steps to disband it began last year. It includes five missile regiments, or 46 silo launchers of RS-18 intercontinental ballistic missiles.
The RS-18 missile (NATO's reporting name SS-19 Stiletto) has a range of more than 10,000 km; its launch weight is 105.6 tons; length, 24 m; diameter, 2.5 m. It has two stages, and a separable warhead which carries up to six nuclear warheads.
"RS-18s are badly outdated, they have outlived their predicted lifespan," said Col. Gen. Leonid Ivashov, president of the Academy of Geopolitical Sciences. "They were produced and deployed in the late 1970s and early 1980s. Soon they will pose a danger to ourselves, not to the enemy."
But the president's decision to keep the 28th Missile Division must have been swayed by the following circumstance. In 2003, some 30 RS-18 missiles were bought by Russia from Ukraine, where they were stored in a dismantled state. Now they can be considered as "new" and put on permanent duty until 2030.
In the view of Mikhail Barabanov, editor-in-chief of Moscow Defense Brief magazine, "work to assemble and fine-tune these missiles started long ago, and the president merely showed where to deploy them."


Europe cuts Russian natural gas imports

Russian natural gas exports fell 8.3% in October year-on-year. The main importers of Russian gas - Germany, Italy and Turkey - reduced gas-buying from Gazprom after it hiked prices to $460-$520 per 1,000 cubic meters on October 1. The decline is likely to continue in November and December, but Gazprom will still net record high revenue of $75-$77 billion this year.
"Russian natural gas exports under long-term contracts are the most expensive in Europe now," said a manager of the Russian gas monopoly. "The main gas consumers are importing less gas, buying the required amounts on the spot market."
The spot market is a commodities or securities market in which goods are sold for cash and delivered immediately. Gas prices on this market in Europe are 30% cheaper than under long-term contracts, said Maxim Shein of Broker Credit Service.
Italy has increased acquisitions of Algerian and Libyan gas.
"Like last spring, LNG is now cheaper than Russia's natural gas," said a source at Gazprom. "Consumption will dwindle unless the temperature falls sharply in December."
Sergei Chelpanov, deputy head of Gazprom Export, the export arm of Gazprom, said the falling import level will decrease the company's target revenue, but that revenue will nevertheless be at a record high of $75-$77 billion this year.
The company will sustain the biggest losses in 2009 when natural gas prices in Western Europe fall to $360-$400. But Gazprom intends to compensate for these losses by selling 22 billion cubic meters of gas to Belarus at $200 per 1,000 cubic meters and 55 billion cu m to Ukraine at $250-$400.
The monopoly will sustain irrecoverable losses only if the authorities order it to start making settlements in rubles from January 1, 2009. President Dmitry Medvedev announced the possibility in his first state of the nation address yesterday.
Prime Minister Vladimir Putin earlier said Belarus might be the first to start paying for Russian oil and gas in rubles from January 1, 2009.
A Gazprom manager told Kommersant that this would be difficult to do because contracts with all countries (with the exception of Ukraine) are linked to the petrochemicals basket valued in U.S. dollars.
Gas oil and fuel oil should be sold on exchanges for Russian rubles adjusted to changes in the global market situation. Otherwise a simple transition to ruble settlements will decrease revenues if the ruble exchange rate continues to fall, Shein said.
Gazprom does not fear conversion to settlements in rubles. It announced yesterday that ruble-denominated contracts would have a beneficial effect on its revenue.

Vremya Novostei

European Commission gives new incentive for Nabucco project

Europe has given an asymmetrical response to the decision of Gazprom, Qatar and Iran to set up a gas producers' union a fortnight ago.
EU Energy Commissioner Andris Piebalgs has said he will make "the Nabucco trip to the main supply and transit countries of the Southern gas corridor, to which Nabucco is integrated."
The planned trip to Turkey, Azerbaijan and Turkmenistan can be also described as "pilgrimage for Nabucco."
The European Commission is a fierce advocate of the Nabucco project, which should deliver natural gas from the Caspian Sea to Europe via Turkey. However, the economic isolation of Iran has made it unfeasible, and now politicians and diplomats are encouraging Azerbaijan and Turkmenistan to provide the required volumes of gas. But the two countries are not eager to sign the documents.
Azerbaijan expects Piebalgs to make attractive proposals. Novruz Mamedov, chief of the Azerbaijani president's foreign relations department, said Baku had so far not accepted Russia's proposal.
However, Azerbaijan has not yet announced officially that it rejected Gazprom's proposal that Azerbaijan sell to Russia all of its natural gas exports at competitive prices. The Russian gas monopoly and Azerbaijan's state oil company SOCAR say the commercial talks are not over.
"We tell Europeans that we will be good partners in the oil and gas sale and transit, but Europe needs this more than we," Mamedov said, adding that Azerbaijan can easily wait until the time is right, until Europeans agree to buy natural gas from the second phase of the Shah Deniz deposit at a good price.
The gas produced during the first phase is distributed between domestic consumers as well as Georgia and Turkey. When production at the deposit reaches its peak in 2012, SOCAR will export 6.3 billion cubic meters to Turkey and 800 million to Georgia, and supply 1.5 billion to the domestic market.
Last year Azerbaijan exported 4.5 billion cubic meters of natural gas from the deposit. The development of its second phase, with tentative production of 8-12 billion cu m of natural gas annually, should start in three years, but the decision depends on potential buyers.
Europe's concern is understandable. The Shah Deniz gas is not sufficient to fill half of Nabucco's capacity, so it needs the agreement of Turkmenistan.
Last spring, Turkmenistan signed a memorandum of intent with the European Commission to supply up to 10 billion cu m to Europe, but a memorandum is not enough for such major infrastructure projects as Nabucco.


Russia to charge restrictive auto import duties

On Friday, the Russian government will discuss plans for charging 10% higher import duties on new foreign cars. This move is expected to force international automotive giants to build car-assembly plants in Russia and to support domestic producers.
"The restrictive import duties will cover all car models that are manufactured outside Russia, except Bentley and Jaguar luxury cars," said Igor Korovkin, executive director of the Association of Russian Automakers.
Russia and the European Union now charge 25% and 15% import duties on all new cars, respectively. Analysts say the government will not raise duties by more than 10%.
"It would be enough to raise the duties by 5-10% in order to support local producers," Konstantin Romanov, an analyst with the Finam brokerage, told the paper.
Russia focused on higher auto import duties after it stopped trying to join the World Trade Organization. In order to become a WTO member, Moscow would have to reduce import duties. However, Russian officials have now decided to more actively support domestic producers.
Korovkin said India, Brazil and China had previously charged 60-80% import duties, eventually reducing them as the local industry developed. He said Chinese duties now totaled 35%, and that this did not prevent China from joining the WTO.
High import duties could force foreign companies to build car-assembly plants in Russia.
"Foreign carmakers could decide to build full-fledged plants with an annual capacity of 200,000-300,000 cars, rather than those currently turning out 25,000-30,000 vehicles," Korovkin told the paper.
Automotive companies said domestic production was expanding even without restrictive measures.
"Domestic production is an important competitive advantage for any car manufacturer, and makes it possible to reduce prices and expenses," Andrei Gordasevich, the press manager at Volkswagen Group Rus, Volkswagen's general importer to Russia, told the paper.
He said higher import duties would not boost car production.


Russians go to pawnshops instead of banks

Russians have had to remember that money can be borrowed not only in a bank. Even though in pawnshops the rate charged is 10 times higher, clients are increasing in numbers.
In October, the rate of pawned goods grew by 15% compared with August-September, said Mikhail Unksov, president of the League of Pawnshops.
In large cities, where 7% to 15% of the population uses pawnshop services, the growth has been more than 20%, added Nikolai Bobrov, president of the Inter-Regional Association of Pawnshops.
Moscow and St. Petersburg have not yet been affected by this trend, said Bobrov, who owns United Pawnshop and Pawnshop Stolichny with 16 offices in both cities.
If the crisis deepens, people will go to the capital's pawnshops after the New Year, said Andrei Petelin, general director of St. Petersburg City Pawnshop.
People are increasingly failing to buy back their pawned goods, said Yevgenia Belousova, deputy director of K-Pawnshop in Novosibirsk.
According to Unksov, 6% to 8% of borrowers fail to recover their pawned items. Soon this percentage will rise to 20%, Bobrov said. The share of pawnings, interest on which is paid on time, but which are not bought out, is already up from 20% to 25%; by the end of the year, the figure may reach 30% to 40%, Unksov added.
High-risk consumer lending in the regions is as good as stalled, with people finding no other sources of money, said Andrei Verkholantsev, a senior analyst at Entente Capital.
Russians have often met their "personal cash shortages" with short-term loans, which the banks practically did not issue in the fall, said Anton Tabakh, a senior analyst at Troika Dialog.
When money is urgently needed, the speed and efficiency of pawnshops are an advantage, said Andrei Bekarev, Ursa Bank's deputy board chairman. According to Vyacheslav Shvetsov, director of the network of social insurance funds in Perm, "today pawnshops are fulfilling a social function."
According to Unksov, the rates charged by pawnshops are on average 14% to 16% per month. This is equivalent to 168% to 192% per year, Tabakh calculated. Banks issuing consumer loans have a net margin of 15% to 20% per year, compared to 150% in the case of pawnshops, said Ivan Manaenko, head of debt market analysis at Veles Capital Investment Bank.
The pawnshops have not yet changed their rates, Unksov said. But Bobrov believes the rates are about to start mounting, first to 20% and then to 30% per month.
Out of 3,500 registered pawnshops, only 2,000 actually function, and over the past 10 months they have issued $1.4 billion (35 billion rubles) in loans, Bobrov said. Banks in the meantime issued 1.05 trillion rubles in consumer loans, Manaenko added.
Pawnshops are no rivals for banks. People who use their services are mostly non-paying and cannot expect to take out a bank loan, said Vozrozhdenie Bank's deputy board chairman Alexander Dolgopolov. Getting a loan at such rates is "beyond all reason," he believes.

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