Russian Press - Behind the Headlines, July 11

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Government may regulate petrochemicals market / European Parliament demands free and fair elections in Russia / Moscow: No price rises

Moskovsky Komsomolets

Government may regulate petrochemicals market

Domestic supply shortages are absurd in a country that is the world’s largest oil producer, Prime Minister Vladimir Putin said on July 8 at a meeting in Kirishi on Russia’s refining industry and petrochemicals market.

He actually accused Russian oil companies of squandering funds allocated to refinery modernization and said the government may have to resume regulation of the industry, forcing companies to sell everything they produce domestically.

“The oil industry is the goose that lays golden egg,” Putin said. “Russia became the world’s largest oil producer last year. This year, output may be even higher than last year, around 508-509 million tons (3.7 billion bbl).”

But there are also major shortcomings, the prime minister said.

“In terms of the output structure, our refining industry has fallen back to the 1950s level,” Putin said. Russia is now the largest crude oil producer, but there is a shortage of petrochemicals on the domestic market. “Russia refines less than half of the 500 million tons it produces. And even this amount undergoes only primary processing to make fuel oil,” he said.

Furthermore, this is only designed to meet corporate needs. “Domestic fuel oil production rose 28.7%, but domestic consumption fell 20%,” he said. “Where are you sending it? You are sending it abroad for further processing.”

Russia’s refining industry is fast becoming outdated because investment in modernization is unprofitable. Companies export raw materials “earning good, occasionally even windfall profits.”

“I am sorry to say that most companies neglect their commitments to increase the depth of oil processing, while making full use of the privileges given to them by the government,” Putin said.

They promised to repair and modernize their refineries but did not keep this promise, which may result in major budget shortfalls.

“This has led to a very low market stability margin. Any accident at a refinery or an unscheduled stoppage destabilizes the situation and causes shortages and surges in price, as was the case when the TNK-BP refinery began unscheduled repairs,” the prime minister said. “I hope that it wasn’t done specifically to aggravate the situation.”

He then made an emotional appeal to the oil companies: “I would like to remind all of you […] that you work in the Russian Federation. You obtain licenses to use the mineral resources, but these resources are owned by the Russian people.”

Putin said that oil companies must be held accountable for supplying quality fuels to the domestic market.

“I believe that companies’ obligations to provide domestic supplies should be proportional to crude production volumes,” he said, suggesting that the requirement be incorporated “in the mineral licenses for fields that produce 5 million metric tons of crude and more.”

He warned that if companies fail to modernize their refineries, their windfall profits may be confiscated.

Government regulation of the crude oil and petrochemicals market only spurred corruption in the Soviet era, and now companies may also consider buying the privilege to export their products.


Nezavisimaya Gazeta

European Parliament demands free and fair elections in Russia

Yesterday, Strasbourg passed a resolution denouncing Moscow for refusing to register political parties and curbing voters’ rights. The Russian opposition warns that further resolutions and even sanctions against senior officials may follow.

The European Parliament resolution, passed by all deputies irrespective of party affiliation, is official confirmation of Strasbourg’s concern about pre-election registration problems faced by Russian political parties. Members of parliament expressed their regret over Moscow’s recent refusal to register the People’s Freedom Party. They said current obstacles “seriously impair political competition in Russia, reduce voter choice, and highlight real obstacles hindering the development of political pluralism in the country.” They supported an appeal to the Russian government to reinstate legal electoral proceedings by holding free and fair elections in strict conformity with European standards. They said such elections should be monitored by observers from the Organization for Security and Cooperation in Europe and the Council of Europe. They are also worried by Russian legislators’ attempts to pass a law blocking the decision of the European Court of Human Rights.

People’s Freedom Party (PFP) co-chairman Boris Nemtsov said this was the toughest European Parliament resolution to date, and that it will likely not be the last.

Top Russian officials may face sanctions if this resolution is ignored. “This primarily concerns those who have abolished elections in Russia, Vladimir Churov, Chairman of the Central Electoral Commission; Minister of Justice Alexander Konovalov and Vladislav Surkov, First Deputy Head of the Presidential Executive Office,” Nemtsov said. The European Parliament may call the legitimacy of the new Russian parliament into question if the People’s Freedom Party is barred from participating in these elections, PFP co-chairman, Mikhail Kasyanov, noted.

The resolution also contains an amendment condemning the decision to ban Nemtsov from leaving the country, which proved somewhat pre-emptive. On July 7, court bailiffs said Nemtsov and Vladimir Milov, another PFP co-chairman, could leave Russia anytime. At first, the Federal Court Bailiffs Service (FCBS) denied that members of the opposition were banned from traveling abroad. Previously, a Moscow court had ordered them to withdraw some allegations made in their report "Putin. Results. Ten Years." The FCBS press service also listed Nemtsov as a debtor. Nemtsov claimed this was an act of vengeance, an attempt to pressure him and to prevent him from launching a comeback. "This doesn’t scare me; I will be in Moscow tonight," he said.

The threat of sanctions does not scare Russian officials. The Russian Foreign Ministry has expressed its indignation with the European Parliament resolution, saying it amounts to interference in the country’s domestic affairs. Russia’s State Duma called the resolution biased and said it will not respond. Nemtsov said that elections are not a personal matter for Prime Minister Vladimir Putin and his entourage, that Russia is a Council of Europe member, and that it should fulfill its commitments. “If Russia fails in this, then it should quit the Council of Europe, the OSCE and the G8,” Nemtsov railed.


Vedomosti

Moscow: No price rises

On Monday, the Moscow city government will unveil the draft version of the Housing federal targeted program for public consultations. Under the program every region will be able to adopt a local housing program. Moscow currently has no such program: this document is expected to fill the gap and offer a mechanism for addressing the issue.

The program has eight sections dealing with investment contracts, the renovation of old housing, repairs, the housing tenancy market, hotels, peripheral construction, state housing obligations, and housing management.

Under this program, Moscow will carry out comprehensive renovation work on 30 million square meters of housing. About 35% of all apartment buildings in the city are in need of renovation.

It plans to have pulled down all the remaining 414 five-story blocks, which have a total floor space of 1.6 million square meters, by 2014. The city will continue to honor its social commitments and build about 700,000 square meters of welfare housing annually.

It will also pave the way for the emergence of a housing tenancy market: by 2016 the city authorities are hoping to rent out 7% of all housing built each year.

The plan is that by the time the program is completed more than 170 hotels accommodating more than 50,000 guests will have been built.

Program developers say that construction volumes in Moscow will grow in the next few years. But these will not reach pre-crisis levels (4.8 million square meters annually) for another four years (by 2016). Moscow will build 2.8 million square meters a year, with the rest coming from the Moscow Region.

Senior vice-president at Knight Frank, Andrei Zakrevsky, believes these are realistic plans. He forecasts rising real estate prices in Moscow: for nearly three years Moscow has built practically nothing, and now there is a huge backlog of demand.

Grigory Kulikov, chairman of the board of directors at Miel Holding, takes issue with this. He forecasts growth equivalent to inflation, or three to five percent a year.

Prices are unlikely to grow indefinitely because everything has its limits, agrees Grigory Poltorak, president of Best-Nedvizhimost. He argues that new housing does not make up the core of the real estate market, accounting only for 15% to 20% of all deals.

“Moscow cannot keep on growing forever, there are problems with engineering services and infrastructure,” Kulikov argues.

The bulk of new building sites are already located outside the Moscow Ring Road, Zakrevsky says.

“While previously the municipal authorities were anxious to see more floor space built, now they are focusing on housing quality. Moscow is expanding because other cities are not developing normally,” Poltorak says.

“The high price of housing in Moscow is fueled by ever growing demand. Residents in other regions and former Soviet republics view real estate in Moscow as an investment destination. Many in other regions also regard Moscow as a place where they hope to work, study, and in the future raise their families,” the draft program says.


RIA Novosti is not responsible for the content of outside sources.

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