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    MOSCOW, July 4 (RIA Novosti)

    Moskovskiye Novosti

    Putin's Economic Advisor Warns Against Creeping Communism

    The creation of "state sanctuaries" in the energy and mineral sectors and the state's stranglehold on the "commanding heights of the economy" signify a creeping comeback of communism, presidential economic advisor Andrei Illarionov told Moskovskiye Novosti (Moscow News), a Russian weekly.

    Russia is becoming intoxicated with what Illarionov called the "Venezuelan Disease" in reference to that country's unprecedented economic growth until the late 1950s when it entered a decline that continues today after the authorities nationalized the oil industry and other key sectors of economy.

    Illarionov criticized the chief executive of Russia's electricity giant, Unified Energy Systems Russia, for his role in the spreading the Venezuelan germ. He said Anatoly Chubais had banned private investment in the electricity infrastructure and that these practices were now widely used in mineral resources management and other strategic areas.

    The presidential advisor also compared state intervention with brain cancer. As the brain became increasingly paralyzed, he said the government was also deadening the receptors that enabled it to see where the country was heading, cracking down upon free media, opposition parties, independent lawmakers, non-government organizations and analysts - all the civil society sensors that are supposed to set alarm bells ringing when things go wrong.

    The dismemberment of the Yukos oil major, the nationalization of its core production unit Yuganskneftegaz, the so-called electricity monopoly reform, and the fence against foreign ownership of Russian natural resources are all signs of a progressing case of Venezuelan Disease, Illarionov warned.

    "Communism is dead. Long live Communism!" the advisor said.

    Novye Izvestia

    Ukraine, Moldova to Seal off Transdnestr

    By the end of the week, Moldova and Ukraine are to open border control and customs control checkpoints between the self-proclaimed republic of Transdnestr in Moldova and Ukraine.

    This will spell a complete economic blockade for the breakaway region, today's Novye Izvestia, a leading daily, reported.

    Russian-led peacekeeping forces have controlled most of Transdnestr since 1992. Russia is in no hurry to withdraw its troops, claiming that equipment and materiel cannot be taken out because the regional authorities are blocking nay such move. Moscow also wants to defend the interests of its compatriots since 100,000 Russian citizens live there. Modest Kolerov, the head of the Kremlin Administration's department of inter-regional and cultural ties with foreign countries, confirmed this position a week ago.

    Grigory Marakutsa, the speaker of the Transdnestr Supreme Council (parliament), said Russia had promised to set aside $22 million in financial aid when he visited Russia recently.

    Speaking in Moscow July 3, Kolerov said: "The problem of recognizing the sovereignty of self-proclaimed republics is the most important and principled issue today, and it must be solved."

    Moscow has repeatedly given assurances to pro-Russian regions, only to leave them to their own devices later. The breakaway autonomy of Adzharia in Georgia was a case in point.

    In 2000, Russia supported Moldovan President Vladimir Voronin after he declared an economic war on Transdnestr. However, Ukraine opposed that economic blockade because 200,000 Ukrainians live in the region. If it had not been for Kiev, local Ukrainians would have become beggars long ago, the paper wrote.

    However, the situation has changed. Viktor Yushchenko, who was elected president of Ukraine last year, now prefers to side with Moldova. Moreover, Kiev views Russia as an enemy. Ukraine is now trying to pressure Transdnestr into making peace with Moldova on Chisinau's terms. Russia, though, is continuing to defend Tiraspol's interests.

    Transdnestr does not care whether it will be controlled by Ukraine or Russia, so long as Moldova does not take it over. Consequently, Tiraspol has no choice but to believe Russia that is acting as its protector once again.


    Russian Private Companies Borrow Increasingly Overseas

    According to the Central Bank of Russia, the foreign debt of the Russian Federation reached $221.4 billion on April 1.

    Today's Izvestia, a leading daily, wrote that even the repayment of a considerable part of the country's debts had not changed the general picture, because private companies were borrowing increasing amounts overseas.

    Since 2002, when macroeconomic indicators allowed Russia to regain the trust of foreign capital, the overseas debts of Russian enterprises have been rising rapidly. In 2003, when the borrowings amounted to more than a quarter of Russia's state debt, the Finance Ministry sounded the alarm. The then finance minister, Sergei Kolotukhin, even spoke about potentially prohibiting state-run enterprises from borrowing overseas. But by the start of this year non-state foreign loans exceeded the state debt and increased by $13.2 billion in the first quarter alone.

    International institutions that closely monitor developing economies no longer see any danger in terms of Russia's solvency. Standard & Poor's, a major international ratings agency, said two years ago that the growth of foreign corporate borrowings in Russia presented no threat to the government's solvency. It also said the non-financial sector was more of a creditor, because capital that left Russia in the 1990s was returning.

    Oleg Vyugin, the chief of the Federal Financial Markets Service, said that in 2004 alone about 25% of all the investment resources attracted by Russian companies had come from the Russian financial market.

    Given that the country's gold and foreign currency reserves have now reached $150 billion, Russian banks primarily need to be worried about the level of foreign borrowings, because their weakness has left the country's business community looking for the loans they need overseas.


    Russia, China Find Common Ground on UN Reform, Separatism

    China has become the first permanent UN Security Council member to state its support for Russia in its attempts to reform the organization, Gazeta, a daily, reported Monday.

    After Kremlin talks last Friday, Vladimir Putin and Chinese leader Hu Jintao signed a joint declaration on the international order in the 21st century and proclaimed support for each other on such vital issues as Taiwan and Chechnya.

    The United States disagrees with the Russian-Chinese approach, believing the UN should become a kind of interest club without the power to make decisions of principle. Congress has floated such ideas, and a few congressmen have suggested that U.S. should slash its dues to the UN.

    Putin preferred to steer away from the Taiwan-Chechnya issue in public, and focused on economic matters instead. Anatoly Chubais, the chief executive of Russian energy giant United Energy Systems of Russia (UES), and his Chinese counterpart from the State Grid Corporation of China signed a long-term cooperation agreement in the presence of the two presidents.

    China has been proactive lately in gaining access to energy and raw material resources, for which it is ready to pay more than many Western investors. Several years ago, the Chinese tried to bid for 75% of the stock in a Russian oil major, Slavneft, at a privatization auction, but Russia decided the deal might jeopardize its energy security, the paper wrote.

    Last Friday, Rosneft and Sinopec, a subsidiary of China National Petroleum Corporation, signed a memorandum of understanding on the joint surveying of the Veninsky hydrocarbon block as part of the Sakhalin 3 oil and gas project. Its reserves are comparable to another major offshore project in the Russian Far East, Sakhalin 1.

    According to Sergei Bogdanchikov, the president of state-run oil giant Rosneft, about $5 billion is needed to pursue such programs.

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