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    MOSCOW, August 18 (RIA Novosti)

    Vremya Novostei

    West unwittingly pushes Russia and China to rapprochement - expert

    A wave of criticism from the West has intensified Russia's and China's sense of strategic isolation, which is pushing them toward rapprochement, a Canadian military expert on East Asia told a popular Russian daily Thursday.

    Speaking to Vremya Novostei about Peace Mission-2005, Russian-Chinese war games in the Far East, Yihong Zhang said the exercises showed that Russia and China trusted each other more now than they did in the past.

    The expert said China was deliberately exaggerating the degree of its rapprochement with Russia because Beijing took the view that the exercises could be used to threaten Taiwan, and send a warning to Japan and the United States. Zhang said the move had been successful, as some newspapers in Hong Kong and Taiwan had already written that Russia would help China annex Taiwan.

    However, Zhang said he was convinced this would not happen because Russia had no such commitments to China, and if a conflict broke out around Taiwan, Russia would not take on Japan and the U.S.

    However, he said the exercises were politically advantageous for Russia. According to the expert, Russia and China have had more clashes with the West, and the exercises have given them an opportunity to remind the West of their military might.

    The expert said stronger military ties between Washington, Japan and South Korea would ensue as a reaction to Moscow-Beijing military rapprochement.

    Zhang said Americans might also invite Russia to take part in a similar war game in the Far East to ease their allies' concerns about a Chinese-Russian alliance. A similar proposal may also come from Japan - with due account for the country's legislation, which prohibits its soldiers from traveling overseas, the newspaper said.

    The expert said the exercises had both political and military significance, as it was important for both armies to organize military cooperation, including in management, control, liaison and reconnaissance.


    Airbus, Boeing set to dominate Russian market in 10-20 years - paper

    Although the MAKS 2005 air show in Zhukovsky, near Moscow, may not bring any new contracts to aircraft giants Airbus and Boeing, the companies are certain that foreign aircraft will dominate the Russian market in 10-20 years' time, a respected business daily reports Thursday.

    Vedomosti writes that the European and American concerns' forecasts could well be justified.

    In recent years, Airbus and Boeing have been fighting tooth and nail for global aircraft markets. In 2003, 57% of overall orders were placed with Airbus, and the company has retained the upper hand since.

    But things are different in Russia. About 200 foreign aircraft, among them 144 Boeings and 43 Airbuses, are currently in use in the country.

    The Europeans see Russia as a lucrative market. Airbus Senior Vice President Axel Krein said yesterday the company would have at least a 50% share of the Russian market by 2024, and Boeing and Russian aircraft makers would share the other 50%.

    Airbus estimates Russian carriers will buy 620 new aircraft in the next 20 years, in addition to regional planes. The European manufacturer estimates that sales will then hit $49.6 billion and so the company is prepared to sell more than 300 liners worth about $20 billion to Russian airlines.

    Boeing, however, will remain a formidable competitor. It intends to oust Airbus from Russia completely and monopolize the market, Craig Jones, a Boeing vice president who is responsible for sales in Russia, said yesterday. The company estimates Russia may need 822 long haul airliners by 2024, Vedomosti said.

    Experts said both companies were probably right. Sergei Koltovich, the head of aircraft fleet planning at Aeroflot, Russia's leading carrier, said the giants would have more or less equal market shares in Russia.

    Yelena Sakhnova, a United Financial Group expert, said local producers would retain a small market share. Sakhnova suggested Airbus and Boeing could each take 45% of the market, leaving the Russian aircraft industry with only 10%.


    Economy minister: Oil quality bank to help raise budget revenues

    German Gref, Russia's economic development and trade minister, has proposed that Russia set up an oil quality bank to increase budget revenues, a respected daily reports Thursday.

    According to Izvestia, the crux of the matter is that heavy and light crude produced in Russia is currently mixed in pipelines and exported as Urals oil, which costs less than Brent. This led President Putin to instruct the government to find a way of dealing with what he viewed as an injustice.

    Oil majors like Sibneft, LUKoil and TNK-BP mostly produce light crude, containing a low level of sulfur. Two regional producers, Tatneft and Bashneft, conversely, develop fields with crude oil that is more expensive to refine.

    But experts told Izvestia that companies producing heavy crude stood in the way of separate oil shipments.

    Gref said an oil quality bank could "reduce the spread between Brent and Urals oil prices." However, his ministry has not found the way of doing this yet. "It is still unclear what needs to be done with high-sulfur oil and its producers," he said at a meeting this week.

    Russia has already developed technologies for separate oil shipment but crude oil producers are blocking their use in practice. Tatneft and Bashneft extract less than 8% of Russia's oil but they are the main sources of budget revenues for the Russian republics of Tatarstan and Bashkortostan respectively. Therefore, it will not be easy to cut them out of the pipeline, the paper said.

    Sergei Suverov, an analyst of Gazprombank, a subsidiary of Russian natural gas monopoly Gazprom, said the oil quality bank would not immediately increase Urals oil prices. "It is a very time-consuming and expensive project," he said before adding that the oil quality bank would accelerate the redistribution of cash flows in the sector.

    Rosneft, Russia's state-owned oil producer, and its unit Yuganskneftegaz, which it bought from embattled oil major Yukos last year, LUKoil, Sibneft and TNK-BP will immediately feel the effect of the move: their revenues will increase by at least 8-10%, the expert said.


    Russian diamond giant to sell gold ore assets in Siberia

    Polyus, a subsidiary of the world's largest non-ferrous metal producer, Norilsk Nickel, has begun a deal to purchase gold ore assets in Eastern Siberia from Russian diamond giant Alrosa, a leading business daily reports Thursday.

    Kommersant writes that the deal was worth around $285 million.

    Norilsk Nickel Deputy Director Denis Morozov said $115 million had already been pre-paid, and in September Polyus would become the owner of companies with licenses for developing gold ore deposits with total reserves estimated at more than 700 metric tons of gold.

    A source close to the deal said that Polyus was buying three gold ore deposits managed by an Alrosa subsidiary in the Siberian republic of Sakha-Yakutia. The Norilsk subsidiary would buy 99% of producer Aldanzoloto and 96% of the Yakutia Mining Company, both of which hold licenses for the Nizhdaninsk, Kuranakh and Kyuchyus deposits.

    Up to this point, industry watchers had considered Canada's Barrick Gold Corporation to be the main contender for these oil ore deposits.

    The situation is made more complicated since the Kuranakh assets are currently disputed. A Moscow investment group, Russkie Fondy, which owns a 15% stake in Aldanzoloto, is already in the second year of a court battle to acquire all 10 gold licenses owned by the company.

    According to the paper, Russkie Fondy is preparing several new law suits for the Yakutia courts, and intends to force a change in the Aldanzoloto management at an emergency shareholders' meeting on August 26.

    Argumenty i Fakty

    More than half Russia's population are poor - survey

    A survey conducted by a leading Russian pollster indicates that as many as 60% of the country's population live in poverty, Argumenty i Fakty, a weekly digest, reports Thursday.

    By interviewing a sample of 15,000 adults from 408 urban and rural communities across the nation, ROMIR Monitoring found out that most of Russia's working poor, with monthly incomes below $110, are rural inhabitants employed in the public sector. Pensioners are the least advantaged group, regardless of the status achieved during their careers, said Tatyana Gurova, a research fellow at Romir Monitoring. The poor constantly struggle to make ends meet and expect the authorities to provide order and social justice, but do not care much about civil liberties and private enterprise, she said.

    On the other hand, a middle class seems to be emerging in Russia. According to sociologists, 25% of the country's working population can now be classified in this group. ROMIR's Mikhail Tarusin said it was this population group that the government should rely on for support. "These people feel comfortable in the new Russia. They are constantly improving their standard of living and their professional skills are in demand," he said.

    Low-income citizens, by contrast, cannot contribute to market reforms because of their social status and often fall victim to the government's economic experiments, such as the recent attempt to replace benefits in-kind with cash payments, Tarusin said. "Society, which is ready for development in new conditions, is facing an immature elite and the lack of competent strategic governance," he said.

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