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What the Russian papers say


MOSCOW, January 26 (RIA Novosti)
PACE to discuss consequences of Russian-Georgian conflict/ No change in Russia-EU gas relations/ Industry paying for ruble's 'gradual depreciation'/ Aeroflot to take over Hungary's Malev


PACE to discuss consequences of Russian-Georgian conflict

The PACE (Parliamentary Assembly Council of Europe) winter session, due to begin January 26, will discuss the consequences of the August 2008 Russian-Georgian conflict over the self-proclaimed South Ossetia Republic. A group of PACE deputies is demanding that the Russian delegation lose the right to vote.
This issue could be up for vote on the first day of the PACE session.
A decision to join PACE in 1996 should have strengthened Russian democracy and the country's legal system. But subsequent PACE membership escalated into endless Russia-Council of Europe confrontation on Chechnya and Moscow's refusal to ratify Protocol 4 concerning civilian imprisonment, free movement, expulsion and Protocol 13 stipulating the complete abolition of the death penalty as part of the European Convention on Human Rights.
The Council of Europe and PACE have changed greatly since the Cold War. Although Council members had preached common values in the bipolar world, such consensus has eroded since the admission of Central and Eastern Europe, Russia, Ukraine, Moldova, Azerbaijan, Georgia and Armenia. This seriously damages mutual understanding.
Until now, the idea of confronting the outside world was in the interests of the Russian elite and its domestic policy. Shortly after the war with Georgia, Russia threatened to leave the Council of Europe if its status or the right to vote were revised. This did not happen because most PACE delegates decided not to risk a conflict with Moscow.
The PACE budget would also suffer if Russia stopped paying its membership fees for the upkeep of the Council and its bodies. However, Moscow's possible decision to leave PACE or to freeze bilateral relations seems more likely than five years ago.
If this happened, many European analysts are beginning to think that Russia's continued PACE membership is pointless. Some Russian politicians believe there is no need for Moscow to remain in PACE. However, continued lengthy discussions followed by vague resolutions seem more likely than a complete severing in relations.

Gazeta, Kommersant, Vedomosti

No change in Russia-EU gas relations

Now that Russia has resumed its gas supplies to Europe, the EU is analyzing the consequences of the gas war. European consumers are demanding compensation for their losses, but also plan to strengthen their partnership with Gazprom and revive plans for alternative gas supply routes, because transits to Europe are mostly controlled by Ukraine.
Dusan Bajatovic, head of gas transmission, distribution, storage and trade company Srbijagas, said Serbia would allocate 5-7 billion cubic meters of storage space annually for Gazprom's gas.
After the Russian gas export monopoly signed a direct contract with the Ukrainian national company, Naftogaz, Bulgarian Economy and Energy Minister Petar Dimitrov proposed that Gazprom sign new long-term contracts with Bulgargaz to exclude intermediaries, which, according to customs information, pay three times more for Russian gas than Bulgargaz.
The Slovak government has proposed setting up a joint venture with Gazprom to distribute gas in Slovakia. Prime Minister Robert Fico said the main goal of the new company would be to become a rival for the current monopoly, Slovensky Plynarensky Priemysel, in which the state holds a controlling stake (51%) and the rest belongs to Slovak Gas Holding B.V., a consortium of E.ON Ruhrgas and Gaz de France.
Slovakia, which imports 100% of its gas from Russia, suffered more than any other European country during the Russian-Ukrainian gas conflict. Slovakia also transports some 80% of all Russian gas transits to Western Europe.
Vitaly Kryukov, an analyst with the Kapital Investment Group, said Slovakia could turn over to Gazprom part of its stake in the domestic gas pipelines in return for a discount in gas prices. The Russian energy giant currently employs this pricing method in Belarus and Poland.
"This would ensure a reduction factor for gas prices for Slovakia," Kryukov said.
However, "Gazprom is unlikely to make gas supplies to the country more reliable even if it owns part of its pipelines, because transit will depend on Ukraine anyway," the analyst said.

Nezavisimaya Gazeta

Industry paying for ruble's 'gradual depreciation'

The slump in production in December was the deepest Russia has seen for the past decade.
According to statistics, published by Russia's state statistics committee (Rosstat) on Friday, national industrial companies cut their output by an average of 10.3% from the December 2007 level. The reduction was prodded by the "gradual depreciation" of the ruble announced by the government, a practice that forced companies to slash production and channel their current liquidity into the foreign currency market.
A survey of executives of over 700 companies published by Delovaya Rossiya (Business Russia), a non-profit organization of medium-sized businesses, has revealed extremely alarming trends in Russian industry.
"The current level of business activity can be described in one word, 'storm,' resulting from a slump in Russian manufacturing industries," the organizers of the survey said.
The number of critical assessments was higher than the positive ones by almost 28% in October-December 2008, an all-time record low since the surveys were introduced (in 1996).
Entrepreneurs say demand has fallen lower than output, which is leading to overstocking and further declines in production.
Analysts estimate that the new margins of the ruble's depreciation the Bank of Russia announced last Thursday are unlikely to make companies leave their foreign currency "shelters" and return cash to production.
"Company executives know only too well that no real changes have occurred in the economy following the statement, and all the negative trends are continuing," said Igor Nikolayev, chief strategic analyst at the FBK private auditing firm.
He estimates that the destructive influence of the regime of "gradual depreciation" will account for 30% to 50% of the December slump across different sectors. This practice has forced banks and industrial producers to invest their cash in foreign currency with investments fetching 40% of their five-month ruble profits.
Companies in non-financial sectors could never earn this much from production.


Aeroflot to take over Hungary's Malev

In the very near future, Vnesheconombank (VEB) will take over Hungary's national air carrier Malev. It will handle the company's day-to-day affairs together with its strategic partner Aeroflot Russian Airlines. Experts describe the acquisition as a white elephant.
According to First Deputy Prime Minister Viktor Zubkov, the ownership-changing process will be complete within two or three days. The 49% stake in Airbridge Zrt (which owns 99% of Malev) belonging to Boris Abramovich will pass into VEB hands. A 5% stake in Airbridge belongs to an independent Hungarian investor, and the rest, to Hungarian interests affiliated with Abramovich.
Zubkov said that "effectively new routes have been determined for the company not only to Moscow, but also to other Russian cities and to the east, including China."
But Infomost general director Boris Rybak said the existing network is unlikely to be changed.
"This change would make sense if Aeroflot would be allowed to base itself in Budapest and according to Fifth Freedom (the right to carry passengers and freight to third countries) to run flights from there, but in this case Malev should not be a European airline," the analyst said. He added that Malev apparently does not want to lose its status as a European carrier. "But being a small European airline, no one will allow it to obtain any additional rights for carriage within Europe," Rybak said.
However, if VEB owns a 49% stake, it cannot be said to exercise any control over Malev.
"Aeroflot should now attend to its own business," Rybak said. "To nursemaid an external company with a history of debts, liabilities and problems lacks any logic," he went on.
"VEB has no use for such an asset like Malev. That is why it persuaded Aeroflot to become a strategic partner, but neither our airline, nor the bank, nor this country as a whole will enjoy the ownership," the analyst said.

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