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What the Russian papers say


MOSCOW, January 15 (RIA Novosti) Russia, Ukraine still locked in gas hostilities/Gas war harming Russia's reputation/Central Bank may stop propping up the ruble/Russian car market slump slows

Vedomosti, Kommersant

Russia, Ukraine still locked in gas hostilities

The flow of Russian natural gas to Europe via Ukraine did not resume yesterday. Moscow and Kiev continue to swap accusations, while their European customers are preparing to take legal action against them.
Yesterday morning Russia sent a small amount of gas through one of the pipelines linking it with Ukraine, but then the pressure dropped and nothing more happened, EU commission spokesman for energy issues Ferran Tarradellas Espuny said.
Naftogaz representative Valentin Zemlyansky said the Ukrainian national energy company had not taken technical measures to resume the gas transits, adding, "We maintain active correspondence with Gazprom, which is throwing mud at us in the media."
Ukraine claims that Gazprom's plan to transit gas to the Balkans through the Sudzha station is unacceptable. Yushchenko's energy security envoy Bohdan Sokolovsky said it entailed stopping gas supplies to Ukraine's eastern regions.
In addition, the sides cannot agree on who should supply "technical gas" for the pipeline. In a letter to Gazprom yesterday, Naftogaz requested that the Russian energy giant supply 321 million cubic meters of technical gas in January and 600 million cu m in February and March before they agree to sign a gas supply contract that will stipulate the possibility of returning the gas.
"We can do it easily, if they pay up front," Gazprom spokesman Sergei Kupriyanov said.
Gazprom CEO Alexei Miller said, "Ukrainians demand a gift of $700 million."
Meanwhile, the parties in the conflict are preparing to take the dispute to the courts. The European Commission said it would encourage European companies and EU member countries to sue Gazprom and Naftogaz. The Greek Public Gas Corporation (DEPA) has said it will sue Gazprom.
But the Russian monopoly may redirect the suits to Ukraine.
Deputy Prime Minister Igor Sechin said yesterday Gazprom's direct losses from the conflict now totaled $1.2 billion, adding that the concern would file a lawsuit against Naftogaz with the Stockholm international arbitration court.
"Gazprom has the right to do so, but in this case it should be prepared for a countersuit," a Naftogaz spokesman said.

Nezavisimaya Gazeta

Gas war harming Russia's reputation

Opinion polls in Ukraine, Belarus and Moldova have shown that Russia is losing the trust of people in its neighboring countries. Ukrainians, for example, see Russia now as two distinct parts - one is "unreliable" (associated with Gazprom) and the other is "the people."
Belarusians fear that Russian might begin pressuring them with gas, too.
Moldovans plan to shelter under the EU umbrella.
The popularity rating of Prime Minister Vladimir Putin, previously the most popular Russian politician with Ukrainians, is falling dramatically.
"Ukrainians 'on the street' do not know Alexei Miller or take him seriously. He sounds like a postman to them, while Putin is seen as the Gazprom 'chief'," said Viktor Nebozhenko, head of a Ukrainian public opinion service. "His association with a company that is causing Ukraine so much trouble is losing Putin his popularity. His rating in Ukraine was as high as 70% recently, while local politicians' ratings never rose above 15%," he added.
On the other hand, Ukrainians' trust of President Dmitry Medvedev is rising even though his name did not even enter Ukrainian popularity ratings before. Nebozhenko explained that by the restraint shown by Medvedev during the conflict which stood out against Putin's "emotional and often aggressive statements."
Yaroslav Romanchuk, president of the Minsk-based Mizes Center said Belarusians were wary of anything connected with Russia. People are resisting being "pressured over gas," and sympathize with Ukrainians, a sentiment previously considered utterly impossible.
At the beginning, local media sources offered equal coverage of the conflict, giving the floor to both Russian and Ukrainian politicians. Later, however, Minsk TV channels became distinctly more critical of Russia.
In Moldova, supporters of Russia and Ukraine are unanimous in their questioning of the two countries' announced roles as guarantors and mediators in the Transdnestr conflict, after they have inflicted a humanitarian catastrophe on the region?
The breakaway republic which has long announced its plans to accede to the European Union, is now trying to cash in on the Russian-Ukrainian conflict by obtaining some support from Brussels if not specific guarantees.

Central Bank may stop propping up the ruble

Since the new year started, the gradual devaluation of the ruble has drastically stepped up pace. Yesterday, at the regular MICEX trading session - involving $20.5 billion - the Bank of Russia let the ruble weaken further with respect to the bi-currency basket. Soon the Bank may stop supporting the ruble altogether, because it will lack the resources, experts warn.
Yesterday, market players discussed fantastic exchange rate estimates supposed to come from unnamed government sources, which forecast that should the Central Bank pull out of the currency market and the ruble was allowed to float freely, it could drop to 50 or 55 rubles/$ (currently 31.56 rubles) in February-March.
The Bank simply has no funds to back the ruble, analysts at the Moscow Financial and Industrial Academy's Economic Research Center believe. The Bank is drawing on the country's international reserves, which today exceed $440 billion. But $225 billion of them belongs to the Finance Ministry and the Bank cannot spend it for monetary intervention: this is money which belongs to the Reserve and National Welfare Funds, designed to maintain the budget surplus when oil and gas revenues drop. This year's budget is going to have a deficit, because it was calculated with the oil price set at $95 per barrel. Sources close to the Finance Ministry are saying revenues will be recalculated based on the oil price of $32.
The Bank cannot spend the remaining $215 billion to prop up the ruble either, analysts from the academy believe. According to regulation, they say, the optimum amount of reserves must be sufficient to support the monetary base (for Russia it was $167 billion at the beginning of the year), quarterly imports ($84 billion) and short-term external debt ($114 billion).
"The reserves available to the Bank of Russia are well below this optimum value," the center said in a research note. "This means that should the crisis go systemic, the Central Bank would be unable to fulfill its constitutional function - to protect and ensure the stability of the ruble."


Russian car market slump slows

Despite the global financial crisis, the slump in the Russian car market slowed down in late 2008. Car sales plunged by 15% and 10% in November and December 2008, respectively. Moreover, the market grew by 26% throughout 2008.
The European Business Association said 2.1 million new foreign cars were sold in Russia last year, and that the national car market had posted 26% growth. U.S. automotive giant Chevrolet was first with 235,500 sales, a 24% increase on 2007. No other single foreign automaker managed to sell over 200,000 cars in Russia to date.
Hyundai and Toyota were second and third for car sales (192,700 units, 30% and 190,000, 31%), respectively. The Ford Focus was the best selling model with 93,500 vehicles and a 4% decline in sales.
It appears, however, that Russia will not become the largest European car market in 2008, as first place will go to Germany where over 3 million vehicles were sold last year.
The Metropol Investment Financial Company said about 700,000 Russian-made cars were sold here in 2008 which would mean second place overall for Russian vehicle sales.
On Wednesday, U.S. automotive giant General Motors which controls Chevrolet said it was satisfied with its 2008 balance sheet, and that the Chevrolet share nearly matched market levels.
Ford, the fastest-selling car model before Chevrolet, plunged two points and was placed fourth for 2008 sales. Car dealers said this was due to the strike at Ford- Vsevolozhsk automotive plant as well as increases in prices. However, Ford officials said they were happy with the annual results.
Market players were mostly disappointed with the 2008 results because they were expecting at least 30% growth, Igor Ponomaryov, a co-owner of Genser, one of Russia's oldest foreign car dealers, told the paper.
Although the car market has plunged due to the crisis, December was not the worst month, dealers and importers said.
Chevrolet, Ford, Nissan and Mitsubishi managed to compensate for the November slump. The companies said customers were keen to buy cars in December prior to the introduction of new car import duties on January 12.

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