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    MOSCOW, November 28 (RIA Novosti) Washington gets another reason to deploy its missile shield in Europe / Russians forced to request absentee ballots / Gazprom tries to preserve status of major Turkmen gas buyer / China to import Russian electricity / Gazprom and SUEK can create $16 billion generating company / Transmashholding's blocking stake estimated at $370 million

    Vremya Novostei

    Washington gets another reason to deploy its missile shield in Europe

    Iran announced yesterday the creation of a new ballistic missile, Ashura, with a range of 2,000 km (1,243 miles), thus giving the United States another reason to deploy its missile shield in Europe.
    Lieutenant General Gennady Yevstafyev (Rtd.), who earlier worked in the Foreign Intelligence Service and is now a senior advisor to the Russian Center for Political Studies (PIR Center), said: "Ashura is a deterrence weapon, but its creation will complicate negotiations on the missile shield and the Iranian problem as a whole. It is another reason to worry about the Iranian threat."
    Foreign Minister Sergei Lavrov said that Washington's written reply last week to the Russian proposal on solving the problem was disappointing.
    "It means that the United States is not ready to come to terms with Russia on the issue," Yevstafyev said. "Washington wants to continue talks without making practical decisions. It needs money to deploy the system in Europe, but Congress will not approve allocations without talks with Russia. This is why Washington is feigning activity."
    Nikolai Zlobin, director of the Russia and Eurasia Project at the Washington-based World Security Institute, said that when Pentagon chief Robert Gates made the verbal offer in October, "he proceeded from the assumption that it could not be implemented. He just wanted to show that Russia's stance is inflexible and unconstructive, and that therefore the United States has to proceed with its missile defense plans."
    According to Zlobin, "Washington wants to shift responsibility for subsequent developments to Moscow. It needs to show Europe that it is Moscow who is preventing the desired compromise."
    Iran's new achievements in the sphere of missile development may also affect its relations with Moscow. It was announced yesterday that a routine meeting of the Russian-Iranian intergovernmental commission on trade and economic cooperation had been postponed until mid-December. The meeting was to discuss the construction of the nuclear power plant in Bushehr.

    Nezavisimaya Gazeta

    Russians forced to request absentee ballots

    In some regions of Russia, tens times more people have applied for absentee ballots than during the last election campaign. Experts point to a likely doctoring of voting returns.
    An informed source said that according to the Central Election Commission (CEC), compared with 2003, the number of voters requesting absentee ballots had increased in the Republic of Komi by 54 times, in Khakassia by 58.2 times, in Chuvashia 28 times, in the Tyumen Region 32 times, in St. Petersburg 25 times, and in Moscow 10.2 times.
    Lyudmila Demyanchenko, a CEC member, said this was due to the growth of social activity among the people, although, in the opinion of Arkady Lyubarev, head of the monitoring department at the Independent Institute of Elections, "the number of absentee ballots issued in territorial election commissions is traditionally small."
    In the view of experts, in many instances it is a case of administrative pressure.
    Andrei Buzin, the head of the Inter-Regional Association of Voters, said: "We have here a striving by the local authorities to increase voter turnout. The distribution of seats in parliament largely depends on this figure: the more people come to the polling stations, the more chance there is to obtain seats to the federal parliament on regional party lists."
    This pressure campaign, however, can boomerang: many of those forced to make this step - to take an absentee ballot in advance - could later vote in principle in a way different from the one expected from them.
    On Tuesday, an anonymous Muscovite wrote to Nezavisimaya Gazeta to say that in the clinic where his wife works the head physician, at a closed meeting for management, urged his subordinates to take out absentee ballots and then turn them in to him personally.


    Gazprom tries to preserve status of major Turkmen gas buyer

    Russian natural gas monopoly Gazprom has agreed to raise the purchasing prices of Turkmen gas in 2008 to $130 and $150 (in the second half of the year) per 1,000 cubic meters. Another price rise is possible in the future because the sides have decided to switch over to the market principles in their relations in 2009.
    Due to the worsening financial states of these contracts, Gazprom hopes to preserve its status as a major Turkmen gas buyer despite insistent EU and U.S. demands to give foreign companies access to the country's resources.
    According to a Gazprom source, the price formula will be based on the average six-month price in the EU, Russian and CIS markets. The source declined to give any concrete figures. In 2009, the average price in Russia is expected to reach $80-$90, and in the EU $360-$380 per 1,000 cubic meters.
    Considering that Gazprom resells all Turkmen gas to Ukraine, the main thing for Russia in this situation is not the Turkmen contract financial state but the need to keep control over the country's gas flow.
    On November 27, Gazprom CEO Alexei Miller underlined that "the price formula to be applied from 2009 will determine the price of long-term contract supplies until 2028 and the Turkmen side is ready to increase gas supplies to Gazprom.
    While consenting to the 30%-50% price rise, Russia demands the confirmation of the 25-year contract signed in 2003 and providing for the annual purchases of up to 80 billion cubic meters of gas in Turkmenistan starting 2009. Planning to produce only 70 billion cubic meters of gas this year, Turkmenistan intends to boost production to 250 billion cubic meters by 2030.
    Gazprom hopes to strengthen its positions with the earliest possible launch of the Caspian gas pipeline construction project. The project agreement with Turkmenistan has not been signed yet, but the Gazprom source said that the project would be launched in early 2008, irrespective of what happens to that document.
    Meanwhile, Turkmenistan has begun discussing the trans-Caspian gas pipeline with Kazakhstan; and Gazprom hopes that if the Caspian gas pipeline is built earlier than the trans-Caspian one, it will have an additional argument for maximum Turkmen gas purchases.


    China to import Russian electricity

    China may complete the construction of the world's largest hydropower plant with a capacity of 22.4 GW next year, thus creating an integrated power system and ensuring part of its electricity requirements. But it will need more electricity, and so could look to buy it from Russia.
    The construction of the giant Three Gorges plant in the Hubei Province on the Yangtze River, China's longest, began in 1993 and is due to be completed in 2009. The 26 main units and six additional underground units of the $22 billion power plant will provide 22.4 GW of electricity. The total design capacity of all the hydropower plants of Russian hydropower operator HydroOGK is 23.7 GW.
    The point at issue is not to build the world's largest hydropower plant (the world's leader now is Brazil's Itaipu, with 12.6 GW), but to create a comprehensive power generating system. Unlike Russia, China does not yet have one.
    One giant power plant may not be enough to attain this goal, because electricity consumption has been growing by 7%-9% in China annually. Therefore, it may even have to increase electricity imports.
    Russian electricity monopoly RAO UES has recently said that it expects to export up to 60 billion KW/h to China annually, including from the Bureya power plant in Russia's Far East, with a capacity of 2010 MW.
    Coal producers also intend to join the Chinese project. Siberian Coal and Energy Company (SUEK) has announced that it is developing a project to build the Urgalsky hydropower plant in Russia's Far East on coal produced at the Urgalsky field.
    However, the project is being hindered by tariffs, which China considers excessive.


    Gazprom and SUEK can create $16 billion generating company

    Gazprom and the Siberian Coal Energy Company (SUEK) can set up the largest generating company ever in Russia, worth $16 billion. SUEK's contribution - its coal and energy assets - were estimated at almost $8 billion by the Deloitte company, hired by Gazprom for the purpose, according to two sources close to the monopoly.
    Another source close to the monopoly added that the total value of the new company could reach $16-$18 billion upon merger.
    Gazprom and SUEK agreed to pool their coal and energy assets in February of this year. The protocol of intent they signed provided for a joint venture, in which Gazprom would receive 50% plus one share, and SUEK 50% minus one share.
    The partners wanted to clinch the deal by July, but missed the deadline. The current timeline is the end of the year.
    A Gazprom manager said that negotiations on the sum and make-up of the deal were going on, although the monopoly wants the deal to be presented to the board of directors in December.
    Gazprom's contribution is expected to be its 10.5% stake in national power grid RAO UES (it traded at $5.5 billion during Tuesday's RTS session), the source said.
    From SUEK, Gazprom is expecting the company's main coal assets and 48% of TGK-12 and 45% of TGK-13, the largest generating companies in the industry, the manager added.
    With such an inventory of assets, Gazprom could not have enough UES shares to control the venture, because SUEK is worth $8-$9 billion, said Semyon Birg, a Finam analyst. But Gazprom is anxious to finalize the deal without additional payment.
    Gazprom and SUEK have not yet applied to the Federal Anti-Monopoly Service (FAS), said Alexander Pirozhenko, head of the department concerned.
    On November 15, Igor Artemyev, FAS head, described the deal as unprecedented and promised to clamp down anti-monopoly restrictions on its parties. He added he was not expecting the request earlier than 2008.
    In the past FAS has sharply criticized the idea.

    Business & Financial Markets

    Transmashholding's blocking stake estimated at $370 million

    Russian Railways (RZD) plans to pay 9 billion rubles (over $370,000 million) for a 25% plus one share of Transmashholding (TMH), the Russian locomotive manufacturer.
    Analysts said the railroad monopoly had decided to economize as the announced price for the stock of the holding was $130 million higher.
    The deal will be structured as an acquisition of a blocking stake in The Breakers Investments BV, registered in Amsterdam, which will soon consolidate 100% of TMH shares.
    The main TMH beneficiaries, Iskander Makhmudov and Andrei Bokarev, co-owners of Kuzbassrazrezugol, will keep control over the holding by entering the joint stock capital of the Dutch company.
    A source close to TMH explained that the Dutch registration of assets would help to attract investments on favorable terms, Eurobond funds, for example.
    Finam analyst Denis Gorev said that such a pattern is used by Russian companies to draw foreign investors into the stock capital. "That offsets some of the risks typical of Russia, either claims from tax authorities or political risks," he said.
    Gennady Sukhanov, Troika Dialog analyst, also said that Dutch legislation offered some advantages to shareholders from a tax standpoint.
    The ultimate estimate of the TMH blocking stake at $370 million is below the former assessments. Earlier, RZD President Vladimir Yakunin estimated the entire holding at $2 billion, which set the blocking stake at $500 million.
    Perhaps the company's non-public image played a role in the re-assessment, said Sevastian Kozitsyn, an analyst with BrokerCreditService. "Another contributing factor was TMH's full dependence on RZD, its main customer. The engineering holding needed the deal badly," he said.
    TMH's authorized capital is open to foreign machine builders. It has been reported that Canada's Bombardier Transportation will become an RZD partner after 2010.
    Bombardier is already taking part in two projects with TMH - a joint venture to manufacture traction converters and an engineering center in Moscow.

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