MOSCOW, November 12 (RIA Novosti)
U.S., Russian public show no interest in improving relations / Uzbekistan pulls out of Eurasec / Gas trio may become gas quartet soon / World crisis stops foreign expansion of Russian companies / Atomstroyexport may fail to fulfill foreign reactor contracts / Russia to allow more guest workers in 2009
U.S., Russian public show no interest in improving relations
The high hopes pinned on the arrival of a new U.S. president will inevitably be disappointed, wrote Nikolai Zlobin, director of the Russia and Eurasia Project at the Washington-based World Security Institute.
Global misgivings and skepticism about America are so pervasive these days that they will certainly take a lot of time and effort to dispel. Moreover, America's own trust to the world has faded lately, he explained.
Whatever political innovations are introduced by the new U.S. government, they are unlikely to succeed until trust is restored between the United States and other leading powers, Russia included. Mutual distrust is bound to hinder many of Barack Obama's international initiatives.
This especially concerns Russia. The American elite as well as the general public and media obviously share a strong bias against Moscow. Moreover, there is no public demand for an improvement of bilateral relations. There is no large or influential lobby group to pressure the new president for some action - to make him want to spend his political capital on overcoming that bias. In addition, Americans are well aware that there is no public demand for better relations with them in Russia either, Zlobin wrote.
Admittedly, the U.S. policy toward Russia will certainly change along with the country's foreign-political strategy as a whole. The fact that all national leaders will have to seek effective ways out of the global financial crisis will also play a role. It will inevitably affect many counties' foreign-political practices, including both Russia and the United States.
But that will take time as well, and will happen long after our hopes for the new American leader reach their highpoint and fall to a lowpoint.
Uzbekistan pulls out of Eurasec
Uzbekistan has decided to withdraw from Eurasec, a regional economic group also comprising Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan, barely three years after it joined.
According to the paper's diplomatic sources in the foreign ministries of Central Asia and Russia, the Uzbek Foreign Ministry filed an official withdrawal request with the Eurasec Secretariat on October 15, and expects an answer by November 25.
The move came two days after the European Union decided to lift some of the sanctions it had imposed on Uzbekistan after a violent suppression of a revolt in Andijan in May 2005.
Pushed into international isolation, Uzbekistan decided to join the Russia-led economic and military-political organizations of the CIS countries, Eurasec and the Collective Security Treaty Organization (CSTO). This was its payment for Russia's support, a top-ranking Uzbek official told the newspaper on condition of anonymity in January 2006.
Diplomatic sources said Uzbek President Islam Karimov was disappointed by the refusal to allow Uzbekistan to join the Eurasec Customs Union, formed by Belarus, Kazakhstan and Russia.
Karimov was also offended by his colleagues' insufficient attention for his initiatives, in particular the idea of merging Eurasec and CSTO.
A Russian diplomat with inside knowledge of procedures in these organizations once said the structure proposed by the Uzbek leader reminded him of "a customs union riding in tanks."
CIS leaders also rejected Karimov's idea of reviving the 6+2 group, which dealt with the Afghan settlement until September 11, 2001. The group consisted of six neighboring states, the U.S. and Russia. The Uzbek president proposed adding one more member to the group, NATO, but Moscow cold-shouldered the idea.
Post-Soviet countries have long become accustomed to Uzbekistan's impulsive decisions.
In 1999, it withdrew from the CSTO because it became disillusioned with Boris Yeltsin's government, and joined the GUAM group of Georgia, Ukraine, Azerbaijan and Moldova, set up in Washington.
Tashkent pulled out of GUAM several years later, disappointed with its political overtones and restored its CSTO membership several years later.
Will it withdraw from it again in light of the latest developments? And will it then consider pulling out of the Shanghai Cooperation Organization, which comprises Russia, China, Kazakhstan, Tajikistan, Kyrgyzstan, and Uzbekistan?
Gas trio may become gas quartet soon
Details of Russian natural gas giant Gazprom's project with Qatar Liquefied Gas Company Limited and National Iranian Oil Company have been made public at last.
On November 12, at the first meeting of the Gas G3 supreme technical committee in Qatar's Doha (the Gas G3 alliance uniting Russia, Iran and Qatar was announced in late October 2008), they will establish a joint venture to produce gas in Iran and liquefy it in Qatar.
For this purpose, the joint venture will build a gas pipeline from Iran's South Pars gas field to Qatar's Ras Laffan province. Each founder will have a 30% stake in the project, with the remaining 10% to go to the trader, probably China's CNPC or South Korea's Kogas.
Analysts say Qatar's participation will level off political risks from the sales of Iranian gas.
"Under the project, the partners will set up a gas production infrastructure in South Pars (which is the world's largest gas field with reserves of 14 trillion cubic meters), lay a pipeline across the Persian Gulf to Qatar, and build an LNG plant in the Ras Laffan province," a source close to the Russian government said.
The remaining 10% in the venture will go to the fourth partner, which has not been chosen yet. A source with Gazprom confirmed this information adding that the decision on the fourth party will depend on the gas sales market.
Valery Nesterov of Troika Dialog says Qatar recently signed a contract with China for annual supplies of 7 million metric tons of LNG, so the joint venture's gas will probably go to that country.
According to the analyst, LNG consumption is also growing in South Korea, which means that a Chinese or South Korean state company may become the fourth partner in the venture.
No information has been given on the planned dates for establishing the venture, the size of its authorized capital, and its planned production and processing volume.
Nesterov tentatively assesses the cost of the project at $4 billion at least, considering Iran's recent proposal to China to develop the 14th phase of the South Pars field for $3.6 billion (with half of that sum to be invested in gas production and the other half in the production of 4.5 million metric tons of LNG).
In March 2007, the U.S. Congress approved a bill banning state pension funds' investment in shares of foreign companies, which invested over $20 million in the Iranian energy sector.
Gazprom does not explain how the ban could be circumvented, but says that Iran exports up to 8 billion cubic meters of gas to Turkey.
Analysts believe that Qatar's participation creates additional opportunities for the partners. South Pars lies right opposite Qatar, across a narrow bay, no further than 100-150 km (62-93 miles) away from it. Moreover, a part of the field is located in Qatar where it is called Nord Dome.
Mikhail Korchemkin, director of East European Gas Analysis, says that "this is the nearest foreign country and a convenient place to change Iranian gas's 'citizenship,' and thus avoid U.S. sanctions."
World crisis stops foreign expansion of Russian companies
Last year, foreign assets of 25 Russian companies increased by 50%, to $90 billion. But the global credit crisis stopped Russian expansion in its tracks.
In the last three years, foreign assets of 25 large expanding Russian companies have grown four-fold to reach $89.6 billion by the end of 2007. Their foreign turnover rose by 150% to $220 billion, and their staff tripled to 140,000 people. Among the 25 top companies with largest assets abroad, only four are controlled by the state (Gazprom, Sovkomflot, Inter RAO and Alrosa), but they account for 30% of combined foreign assets.
The ratings of transnational non-financial companies in Russia have for the second time been calculated by the Moscow Skolkovo School of Management, according to methods worked out by Columbia University on the basis of UNCTAD standards. Leaders are oil and metals companies (44% and 36%, respectively). Record-holders in expansion are Norilsk Nickel and Evraz. In 2007, they boosted their foreign assets five-fold.
Expansion continued in 2008, although the rate slowed. In the first six months, Russian companies purchased $12 billion worth of assets abroad ($11 billion in the same period in 2007, and $3.3 billion in 2006). These are figures calculated by Yury Ignatishin, managing director of Mergers.ru.
Among the largest deals was the purchase by Evraz and TMK of American IPSCO for $4 billion. Then Evraz closed a $2.6 billion deal with Ukraine's Privat, Ignatishin said. But starting in August, the crisis made its adjustments to expansion plans.
In October, steel producer NLMK bought Beta Steel for $350 million, but refused to purchase John Maneely Company for $3.5 billion. The price was agreed before the crisis and involved the use of a syndicated loan of $1.6 billion. The purchase by Siberian Cement of Turkey's SET Group from Italcementi did not go through - the buyer asked for a two-year grace period to pay 100 million out of 400 million euros.
Difficulties connected with refinancing may force some companies to sell their assets, Alexander Mansilya, the co-author of the Skolkovo study, said. Most will concentrate on businesses bought and their efficiency. Only individual companies will be able to ride on the coattails of the crisis and make purchases.
In October, Severstal clinched a deal with PBS Coals, trimming off one-third from the purchasing price of $1 billion. LUKoil negotiated a year's spread of the payment for a stake in Sicily's oil refinery ($1.7 billion) and Turkey's Akpet. Evrokhim bought the Sary Tas plant in Kazakhstan, the company's spokesman said. "The price is not high, but not because of the crisis: the plant was in the mothballs for 15 years."
Companies from abroad are current purchasers in trans-boundary deals, said Vitaly Farafonov of Deloitte: "Although half a year ago, as many Russian companies as foreign ones applied to us."
Atomstroyexport may fail to fulfill foreign reactor contracts
On Tuesday, Russian Prime Minister Vladimir Putin and his Egyptian counterpart Ahmed Nazif discussed joint transport, oil and gas, hi-tech and nuclear power projects.
However, independent analysts said both sides were unlikely to accomplish all objectives, primarily in the sphere of nuclear power plant construction.
Egypt wants to borrow $1.5-2 billion in foreign loans for building its first nuclear power plant by 2016.
Moscow has always been interested in nuclear power plant construction projects worldwide. Although Atomstroyexport, Russia's nuclear power equipment and service export monopoly, controls 20% of this market, its global expansion is hindered by structural restrictions.
Consequently, the Russian general contractor may fail to implement some foreign projects, including in Egypt.
A source close to the Russian nuclear industry said the inadequate resource base now had to be expanded, that the industry could annually manufacture two to three reactors, and that this was not enough to meet all construction requests.
There are plans to commission 26 reactors in Russia by 2020. Moreover, Atomstroyexport has won tenders to build 12 reactors in Bulgaria, Ukraine, India, China and Belarus.
It also intends to build six reactors in the Czech Republic, Slovakia and Turkey.
The Russian engineering sector, which must provide 44 reactors in the next 12 years, can manufacture just 36.
Gennady Sukhanov, a manufacturing analyst at Troika Dialog, said Russian engineering companies could annually make just two reactors for new Russian nuclear power plants and one more reactor for projects abroad. He said the engineering sector remained silent on production development programs.
However, there will be no scandals over Russia's failure to fulfill its foreign plant construction commitments. "Due to the global crisis and funding problems, some projects will either be scrapped or postponed," Sukhanov stressed.
This also concerns Egypt because the national budget will receive fewer tourist industry and oil sale proceeds. This and the country's reduced credit ratings will probably prevent Cairo from obtaining a nuclear power plant construction loan in the next few years.
Russia to allow more guest workers in 2009
The Russian government yesterday increased the 2009 quota for foreign workers by 600,000, to nearly 4 million. Analysts say the quota would be cut if the economic situation worsens, with the dismissed guest workers becoming illegal migrants.
Prime Minister Vladimir Putin signed a decree on November 11 to issue 3.986 million labor permits to foreign nationals in 2009. This year's quota was 3.384 million.
Construction workers are in greatest demand, despite a decline in the construction sector due to the global financial crisis. They will be issued 1.3 million permits. Russia also needs about 200,000 guest workers in the metalworking and mechanical engineering sectors, as well as over 57,000 foreign employees in the financial, administrative and social sectors.
The Institute of Economic Forecasting at the Russian Academy of Sciences has predicted that the number of unemployed in Russia will grow by 270,000-340,000 by the summer of 2009.
But the Russian authorities do not anticipate problems.
Presidential aide Arkady Dvorkovich said the other day: "there will be no significant tension on the labor market" because the government has taken decisions to prevent this, in particular by attracting foreign investment.
No practical measures to deal with the potential problem have so far been announced.
Analysts say it is difficult to predict how many guest workers Russia will need next year.
Alexei Makarkin, deputy head of the Center for Political Technologies, said: "The requirements for guest workers are unlikely to fall at the beginning of next year. It will take more than a month for Russians to become accustomed to a lower pay or to choose jobs in other professions."
He discerns signs of inertia in the government's actions and statements regarding the labor market.
"The concept of economic development until 2020 has been adopted only recently, but now the government will have to work in completely different conditions," Makarkin said.
Andrei Isayev, chairman of the parliamentary committee on the labor and social policies, said it was unwise to invite foreign workers when Russians are looking for jobs.
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