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    MOSCOW, April 3 (RIA Novosti) Ukrainian crisis caused by confrontation of oligarchs/Aeroflot hopes to buy into Alitalia /Russia must be a global player on world aviation market - expert /Publisher of Russian Newsweek, Forbes put up for sale/Russia has two armies, one to protect the country and the other to serve generals


    Ukrainian crisis caused by confrontation of oligarchs

    Calling the opposition "gas speculators," Ukraine's socialists yesterday for the first time openly accused advocates of the parliament's dissolution of working for the country's business elites, which want to redistribute the nation's property.
    When Viktor Yanukovich, the former presidential candidate, won last year's parliamentary election with his Party of Regions and became prime minister, it was not only his personal triumph.
    It was also the victory of the business circles that backed him, namely System Capital Management (SCM), which is owned by Ukraine's richest man, Rinat Akhmetov, Interpipe Corporation, which belongs to Viktor Pinchuk, the son-in-law of former President Leonid Kuchma, and Ukrsib Group, which is owned by Alexander Yaroslavsky and Ernest Goliyev.
    Coincidentally or not, the latest decisions made by the Ukrainian State Property Fund have been disadvantageous for businessmen backing President Viktor Yushchenko's Our Ukraine party and the Yulia Timoshenko bloc.
    The biggest scandal broke out after the recent privatization of Luganskteplovoz.
    Privat Group, which is owned by Igor Kolomoisky, known for his long-standing friendship with Timoshenko, wanted to buy the company, but the Fund admitted only two Russian companies - the Demikhovsky machine-building plant (Moscow Region) and the Bryansk machine-building plant - to the auction.
    Both companies are controlled by Transmashholding, and as a result, the Bryansk plant bought Luganskteplovoz for $58.5 million. Timoshenko's bloc denounced the deal as illegal and initiated a parliamentary investigation.
    But the main privatization disputes are yet to come.
    This year, the Property Fund plans to auction Ukrtelecom. The government has already agreed to launch large-scale privatizations in the power generation sector.
    Regional generation assets will be put up for sale, and experts predict a tough struggle between SCM, Interpipe and Privat.
    These developments cannot be to the liking of other major players on the Ukrainian market, who are interested in changing the political situation.
    "Yanukovich is lobbying the interests not only of Akhmetov, but also of Russian businesses, as the Luganskteplovoz case showed," said Vladimir Karasev, head of the Kiev-based Institute of Global Strategies.
    "If Timoshenko's bloc and Our Ukraine insist on [early] elections and set up a coalition that will come to power, oligarchs who back them, namely Privat, will benefit. So the price of the parliament's dissolution is Ukraine as a business asset," he said.


    Aeroflot hopes to buy into Alitalia

    Russia's largest national air carrier, Aeroflot, is among 11 bidders hoping to buy a blocking 30.1% state-owned stake in Italian carrier Alitalia.
    Experts said that the synergy generated by the deal could surpass Aeroflot's most optimistic expectations.
    Because Alitalia posted 380 million euros in losses in late 2006, any prospective buyer must submit a detailed plan for overhauling the Italian airline.
    Deputy Aeroflot General Director Lev Koshlyakov declined to comment on the project, saying he was too busy.
    Aeroflot and the largest Italian bank, UniCredit, plan to control 95% and 5% in a consortium, respectively, due to be established by them.
    Experts said the Alitalia stake will cost 480 million euros, whereas its current market value is only about 410 million euros.
    Analysts said the seriously under-priced asset should cost about 420-460 million euros (plus bonuses). That compares with the book value of Aeroflot assets ($567.5 million, or 424.4 million euros).
    However, Aeroflot earned just $2.5 billion (1.9 billion euros) in 2005, while Alitalia profits totaled an impressive 4.7 billion euros that same year. Aeroflot would have favorable long-term prospects if it managed to acquire Alitalia.
    Boris Rybak, head of the aviation consultancy Infomost, said Russia would eventually join an open-skies agreement aimed at liberalizing the rules for aviation markets and to minimize government intervention.
    "A company that manages to gain a foothold in Europe before this happens would be in a stronger position," Rybak told the paper.
    Yelena Sakhnova, an aviation analyst with the investment bank Deutsche UFG, said Aeroflot would gain access to Alitalia's broad infrastructure and would pay no Russian duties, while leasing airliners.
    But Aeroflot would also inherit some serious problems, because Alitalia's total debts amount to one billion euros.
    Sakhova said Aeroflot, which sustained $200 million in losses during the 1998 economic and financial meltdown, now posts $200 million in profits. Although Aeroflot has experience in coping with crises, things will not be easy in Europe due to tough competition.
    Moreover, European airlines, which are run by powerful labor unions, have to assume tremendous commitments, including pension payments, Sakhnova told the paper.


    Russia must be a global player on world aviation market - expert

    The attitude of Europe's new political and industrial leaders toward Russia leaves it no other choice but to adopt a strategy to restore its aviation industry as a self-sufficient, if secondary, player on the world market, said Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies.
    The objective conditions are all there. These are: the rapidly growing demand for new aircraft from Russian airlines (in the next five years the domestic market will have a capacity for 300 such aircraft), an improved economic situation, and the resumption of full-cycle production at Aviastar and VASO (Voronezh Aircraft Manufacturing Enterprise).
    The infrastructure for leasing aircraft, which has been set up and has already proved its effectiveness, has become a key tool for the rebirth of the domestic aviation industry.
    A policy of national choice can in effect be summed up in three simple points. The first is to combine customs measures and leasing mechanisms to meet the requirements of an overwhelming majority of Russian airlines with upgraded Il-96 and Tu-204 planes, and new SSJ-100 and An-148 regional jets.
    The second is to launch the MS-21 program unilaterally if the Europeans refuse to pass to Russia a line for the assembly of one of the A-320 versions of the next generation.
    The third is to step up talks with China on the development of a medium-haul plane with a large seating capacity to replace the Il-86.
    The concept of national choice is not the same as complete independence, and new airliners will be built as a broad international project anyway, as in the Sukhoi regional jet program.
    Although all the conditions exist for the success of a national strategy, the choice will not be an easy one.
    The main risks stem from the serious damage suffered by the innovation potential of the Russian design bureaus with a tradition of designing civilian planes.
    The main thing is to prove to ourselves and to others that Russia is able in principle to regain its status as a global player, like Embraer or Bombardier.
    Then the perception of Russia as a potential full-fledged partner will be more realistic.


    Publisher of Russian Newsweek, Forbes put up for sale

    The sale of Axel Springer Russia, the publishing house that puts out Newsweek Russia and Forbes Russia, could be completed this month, said Newsweek Russia's editor-in-chief Leonid Parfyonov.
    The transaction has been delayed because the owners of the licenses for the famous magazines are against their sale to Russian businessmen.
    Axel Springer Russia was put up for sale long ago. The company spent several months in talks with potential buyers, market players said.
    A source in the publishing house said the frontrunner could be Sanoma Magazines, one of Europe's largest publishing holdings, with a turnover of 2.5 billion euros.
    That is quite possible, because Axel's current owners have serious requirements for the buyer.
    "The publishing house is not free to choose a buyer, because it has to reach an agreement with the holders of licenses on its publications," said Demyan Kudryavtsev, CEO of the Kommersant publishing house.
    "I do not believe that American license holders can be impartial. Their opinions are distorted by other views on the market and by PR around the media situation in Russia," he said.
    However, the opinion of international license holders will dominate the transaction.
    They clearly want the publishing house to be sold to a large Western company with extensive experience operating in Russia, but without the direct participation of Russian capital.
    Sanoma is not the only candidate. "There are quite a few candidates," a source said. "Talks, however, are unlikely to be completed this month. That information is wrong."
    An employee of Axel said that candidates included Kommersant's owner Alisher Usmanov and businessman Boris Fyodorov, who was acting in the interests of the Russian gas giant Gazprom.
    A few weeks ago, rumors emerged that Axel Springer was hard to sell due to its poor financial performance.
    A PR manager with a large Moscow publisher said that Newsweek Russia was on the brink of shutting down, because it had sold its advertising space too cheaply in order to increase the amount of advertising, and that this has made it unprofitable.

    Novye Izvestia

    Russia has two armies, one to protect the country and the other to serve generals

    On April 1, Russia reduced the length of military service for conscripts and increased the number of contract servicemen.
    That will definitively divide the Russian Army into two parts. One of them will be a professional force, armed with modern weapons, the other will consist of conscripts who actually exist only for Russian military bureaucrats to justify their existence and benefit from soldiers' free labor.
    The one-million-man Russian Army will have 400,000 officers, 200,000 contract servicemen and 400,000 conscripts by next year.
    That creates "a clumsy matryoshka doll," said Alexei Arbatov, head of the International Security Center of the Institute of World Economy and International Relations at the Russian Academy of Sciences.
    On the one hand, there will be a large army of conscripts where "they will serve less than they do now, but will be used as a workforce only."
    On the other hand, there will be units on constant alert, numbering 200,000, which will be too small to defend such a large country.
    It would be much more rational to maintain only a professional army of 500,000-600,000 men, the expert said.
    That would be the world's fifth-largest army after China, India, the United States and North Korea.
    Given "the powerful nuclear umbrella," such an army would be enough to solve local problems. Moreover, it would not require more money than maintaining "an unorganized armed group of one million people."
    Going over to a professional army would reduce the number of generals to 500-600, Arbatov said.
    "But which organization would like to be reduced?"
    He said that arguments about the need to train a reserve were farfetched, because Russia did not have enough modern military equipment for several million reserve soldiers.
    "And no one fights with Kalashnikovs anymore." If maintaining an army is an inevitable evil the state has to bear, Russia "has chosen both of the two evils."

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