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    MOSCOW, November 16 (RIA Novosti) Georgia could host NATO, analysts say/ Russia too dependent on leader's personality/ Money from offshore zones comes back to Russia/ Enel offers small stakes in Italian power plants to Gazprom/ Gedeon Richter buys its way into Russia

    Rossiiskaya Gazeta, Vremya Novostei

    Georgia could host NATO, analysts say

    A military page was turned yesterday in the history of relations between Russia and Georgia. Russian troops were withdrawn from Georgia ahead of schedule. The only units remaining are peacekeepers in Abkhazia and South Ossetia.
    Is that a big loss for Moscow? In view of the anti-Russian hysteria cultivated in Georgia in recent years, the answer is no rather than yes.
    It has long been clear that sooner or later the Russian military would have to go. Even Russia's geopolitical interests, however great, could not make them hostages to Tbilisi's unpredictable policy.
    But with bases closed, Russian military presence in the region does not end. Moscow has fine relations with Armenia, and a solid military grouping in a friendly republic is a guarantee for Russia's southern borders.
    The presence of Russian troops in Georgia was a pretext used by NATO countries to explain their reluctance to ratify the adapted Conventional Forces in Europe (CFE) treaty.
    Chief of Russia's General Staff Yury Baluyevsky told his NATO counterparts: it's finished now, Russian troops are out of Georgia and there is not even a formal reason to refuse to ratify the CFE.
    However, no meaningful answer followed. There is some chance that it might arrive before December 13, the deadline for an official Russian moratorium on the treaty coming into effect.
    Anatoly Tsyganok, head of the Military Planning Center, said: "Georgia has barracks vacated for NATO troops. The pullout of Russian bases from Georgia is unlikely to persuade the West to ratify the CFE - the West will think up other reasons not to do so."
    General of the Army Makhmut Gareyev, president of the Academy of Military Sciences, said: "The West is finding fault with Russia not only over Georgia, but also over Transdnestr and other regions. Therefore the present withdrawal of bases will not make the West ratify and fulfill the CFE. There is no guarantee that it will."
    Alexander Sharavin, director of the Institute for Political and Military Analysis, said: "What remains is the problem of Abkhazia and South Ossetia. There are grounds for a compromise solution. For example, a division of Abkhazia: the eastern part of Abkhazia could go to Georgia for Georgian refugees to settle in because they must have somewhere to live. That option is acceptable to everybody, even to Georgian radicals who today can not carry out any peace negotiations. The Abkhazians, too, are prepared and ready. As for NATO, the alliance is unlikely to make any effort to deploy its soldiers in Russian barracks. It simply does not need that."

    Moskovskiye Novosti

    Russia too dependent on leader's personality

    The more President Vladimir Putin publicly declines the option of serving a third presidential term, the more actively the Kremlin's administrative office is working to sanctify him as father of the nation and its spiritual leader.
    What is important though is that with the end of Putin's term much will change in the country's government system, which is an alarming trend. In Russia, too much depends on the leader's personally. It is therefore only natural for politicians to make efforts to preserve the current power arrangement with Putin at the top, although in a different position.
    We have not yet had time to reflect what really happened in Russia in 1991, when Boris Yeltsin replaced Mikhail Gorbachev. The country disintegrated, and what's more, the army and the special services nearly collapsed, let alone the Communist party's nationwide network, the ideological and cultural elites. Moreover, the gap between high- and low-income families was not as wide then as it is now. Today, the holders of multimillion bank accounts and millions of low-income families all over the country are equally concerned over what will become of them when Putin steps down. It is not a rhetorical question any more.
    One leader filled the country's belly with fair words for years, another brought it to its knees, and still another built a "power vertical." This vertical is now afraid it might collapse if it is stripped of its head.
    Putin has no chance of handing over power to a family member. His daughters are too young, and his wife, Lyudmila Putin, is not a politician. He plans to support one of the successors at the next elections. But political elites probably want to ensure the process by securing Putin as a supreme arbiter.
    This scenario has one major flaw, however. A vertical is not a stable structure by definition. But Putin's supporters are not thinking of strengthening all the three important props - the executive, legislative and judicial powers, let alone the horizontal scaffolding, such as civil society and an independent press.
    Power cannot stand on one leg, said Vladislav Surkov, deputy head of the Presidential Executive Office, used a very precise metaphor, in fact, because a vertical, even made of concrete and stone, is still only one-legged, and Putin's resource is not unlimited. It is all well while his political course is supported by the favorable situation on the global oil market, but if inflation soars impoverishing half of Russia's population, a one-legged government will not be able to save the country from shock.

    Business & Financial Markets

    Money from offshore zones comes back to Russia

    According to Finance Ministry forecasts for the 2007 yearend, the volume of foreign direct investment (FDI) to the Russian economy will reach $35 billion and net capital influx $80 billion. However, a larger portion of these funds is from Russian companies who transferred money abroad some time ago.
    In May 2007, Russia's Finance Minister Alexei Kudrin projected lower figures: FDI into the country would stand at $30 billion and net capital influx at about $65-$70 billion.
    Probably, the Finance Ministry has made the forecast more optimistic following the liquidity crisis, says Polina Lazich, an analyst with the AK BARS Finance investment company. Foreign loans have become too expensive for enterprises, which means companies are forced to transfer funds from abroad back into the country.
    "Looking at the structure of direct investments over the first half of the year, we see that nearly $11 billion out of $15.8 billion of direct investments came from the Netherlands and were channeled into minerals production. I think these are Russian organizations' funds, not Dutch businessmen's money," Lazich says.
    "This shows that Russian companies are becoming more confident in our economic stability," says Dmitry Fedotkin, an economist with the analytical department of VTB Bank Europe.
    Yury Chaikin, an analyst with Citigroup, is of the same opinion. "It does not matter that Russian money is coming back in the form of foreign direct investment, especially because they account for only a portion of the incoming funds. The main thing is their stable growth: from $12.9 billion in 2005 to $30.8 billion in 2006, and to $35 billion in 2007 (forecast). Direct investments are more useful for the economy than any other investments. They lead to production growth and curb inflation over the long term," he says.
    According to Lazich, the share of direct investments in the structure of capital influx is increasing: from 23% in 2006 to 26% in the first half of 2007.
    "The larger this share, the better for the economy: direct investments are more important than money. As a rule, they involve the investor's direct participation in managing the company, as well as the application of new technologies, management methods and marketing strategies in production. Besides, the companies do not have to return them as fast as loans and pay interest on them because direct investments are used over a long-term period," Lazich said.

    Vremya Novostei

    Enel offers small stakes in Italian power plants to Gazprom

    Italian electricity concern Enel has offered small stakes in national power plants to energy giant Gazprom. Enel CEO Fulvio Conti said the company was ready to provide access to consumers, and that Gazprom would not just co-own local generating assets.
    Gazprom has long been waiting for Italian proposals for joint operations on the Apennine Peninsula. This spring, Eni, the largest national oil and gas company, and Enel received the right to buy gas production assets of bankrupt oil company Yukos, namely the companies Arktikgaz, Urengoil and the Neftegaztekhnologiya R&D unit worth $2.1 billion and containing an estimated 5 billion barrels in oil equivalent.
    Prior to the Italian victory, Gazprom received a two-year option for acquiring a controlling stake in EniNefteGaz, a joint venture between Eni and Enel. The company was subsequently renamed as the Severnaya Energia (North Energy) consortium. Moreover, the Italian side pledged to allow Gazprom to buy into their Western European assets.
    Bilateral talks made headway this fall. This June, Enel managed to buy a 25% stake in Russian thermal power producer OGK-5 from utility giant Unified Energy Systems (UES).
    Enel subsequently purchased another 12% stake and offered to buy those of other shareholders except the state, which will retain its blocking stake.
    In early 2007, Conti told investors that he planned to spend 2 billion euros on operations in Russia by 2011. By early November, Enel has paid 600 million and 1.6 billion euros for its stakes in Yukos and OGK-5 assets.
    If the Italian offer was accepted, then total investment would reach 5 billion euros. Enel, which also bought a 49% stake in Russian power supplier RusEnergoSbyt last year, can now establish a vertically integrated gas-production, power-generation and electricity-retail chain in Russia.
    The Italian company would have achieved less impressive successes without Gazprom.


    Gedeon Richter buys its way into Russia

    The Hungarian pharmaceutical firm Gedeon Richter announced yesterday it was buying Poland's Polpharma and an 80.62% stake in Russia's Akrikhin for $1.4 billion and $128 million, respectively.
    With the deals clinched, Gedeon expects to become the largest drug producer in Central and Eastern Europe with a market capitalization of $5.4 billion.
    On the Russian market, experts said, it will become one of the troika largest manufacturers, after France's Sanofi-Aventis Group and Switzerland's Novartis.
    "If the deal goes through, then Akrikhin and Gedeon will have 4.1% of the Russian pharmaceutical market, and will be the second largest drug company working in Russia after Sanofi-Aventis," said Gedeon's PR director Zsuzsa Beke.
    "In the mid-1990s, Gedeon Richter held leading market positions, but when other global drug corporations made their appearance, its position was weakened," said Alexander Kuzin, DSM Group general director.
    The deal has yet to be approved by anti-monopoly watchdogs, and it "depends fully" on a merger between Gedeon Richter and Polpharma, the final decision on which is due to be taken on December 18, said Beke.
    Analysts described Gedeon's acquisitions as "forced", motivated by a trend towards its shrinking share in the global and Russian markets.
    According to the RMBC Agency, Gedeon slipped from fourth place in 2002 to eighth in 2006 in the top 10 pharmaceutical producers group.
    The company's share of the Russian drug market dropped from 3.16% in 2002 to 2.6% in 2006 (last year's sales totaled $211 million).
    In the opinion of Yekaterina Korduban, a PR director of the RMBC, purchasing Polpharma will enable Gedeon Richter "to acquire production capacities in Russia, which are now in great demand."
    "The product portfolio of the Russian producer today numbers something like 152 items, while sales in 2006 surpassed $60 million," she explained the interest shown by the Hungarian investor.
    Regis Lomm, head of Pfizer's Russian division, quoted analysts as saying that interest in the Russian market is due to pharmaceuticals market in Europe, including Hungary, and the U.S. being overstocked, while in Russia its volume could double by 2020.

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