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    MOSCOW, December 3 (RIA Novosti) Parliamentary elections give authorities a free hand/ Consumers of Russian gas will have to pay in rubles/ Gazprom to team up with Total to develop gas condensate field/ Irkut to convert passenger A320s for cargo duty/ Fiat would be a better partner for AvtoVAZ than Renault - expert/ Companies will invite tax inspectors to corporate parties


    Parliamentary elections give authorities a free hand

    The idea of "a national referendum in support of Vladimir Putin as the national leader," introduced by the pro-Kremlin party United Russia and President Putin, has proved successful. Many Russians who voted "for Putin" will be surprised when he is not sitting in the State Duma, the lower house of Russian parliament.

    Had it been a proper referendum, it would not have been held for several reasons. In particular, the law prohibits holding referendums in the last year of the presidential or State Duma terms, as well as during national election campaigns.

    There would have been problems also with the main referendum question, since the Constitution does not include the idea of a "national leader." Lawyers would have worked on an acceptable formula, but they would still have to say that the idea of a "national leader" does not stipulate prolonging presidential powers and is not a state post, or an attempt to protect peoples' health and safety against an apparent threat coming from hostile forces.

    The referendum question should be formulated so as to rule out the possibility that there will be several interpretations and vague legal consequences of any referendum decision.

    Putin admitted there was a possibility of such ambiguity when he said he had not decided on what form he will control the implementation of the planned decisions. And there will certainly be different interpretations of the December 2 results.

    On the other hand, vagueness is something the authorities can live with. In fact, the task of the pseudo-referendum was to get people's approval for any actions by the "national leader" provided he is Vladimir Putin. The authorities will use the people's trust in him as an argument in favor of their actions.

    Nezavisimaya Gazeta

    Consumers of Russian gas will have to pay in rubles

    Russian state monopoly Gazprom may soon join the club of opponents of using the U.S. currency in settlements for gas supplies. Experts say, however, that it would be technically difficult for Gazprom to adopt a different currency policy, and not entirely economically efficient.

    Gazprom is currently accepting payments for its products in U.S. dollars and euros to lower currency risks. However, the situation on the global currency exchanges, with the dollar's position highly unstable, is prodding the gas giant to change its currency policy.

    "We are seriously considering selling our resources for rubles," the company's deputy CEO Alexander Medvedev said on Friday. Gazprom's Corporate Finance Department head Andrei Kruglov added that the change would happen anyway, sooner or later.

    Deliberately or not, Gazprom is therefore joining Iran, Venezuela and Ecuador in abandoning oil settlements in the U.S. currency.

    The director of the Moscow-based National Energy Institute, Sergei Pravosudov, does not think it possible to begin accepting all payments for oil and gas in rubles. "Long-term gas contracts have already been signed. This new settlement scheme might be used for future contracts, which are to come much later," he said adding that one cannot be very serious about things so far away.

    Timur Khairullin, a senior analyst with the Antanta Capital brokerage, said he understood why the Gazprom management was so worried, as the dollar has sunk 40% against the euro since 2002. "As Gazprom's key partners and customers are in Europe, the dollar-based settlements are certainly reducing the gas giant's revenues," the expert said, "but in this case it would be more logical to use the European currency instead."

    In addition, adopting the ruble for all settlements could increase demand for the Russian currency and promote its appreciation against other currencies, which, in turn, would spur inflation, he added.

    "It is difficult to forecast such long-term prospects, but at the moment, it could certainly make the Russian economy less competitive," Khairullin said.

    Gazeta, Vremya Novostei

    Gazprom to team up with Total to develop gas condensate field

    In addition to its stake in the huge Shtokman gas project in the Barents Sea, which took Total almost a year to obtain, the French company will probably have to help Gazprom develop another difficult gas condensate field, the Astrakhanskoye deposit in southern Russia.

    Gazprom CEO Alexei Miller and Total's President and CEO Christophe de Margerie discussed on Friday the prospects of the two companies' cooperation in projects in third countries as well as in Astrakhan, as part of the earlier agreement on the first stage of Shtokman.

    The Astrakhanskoye field's ABC1+C2 reserves are estimated at 4.2 trillion cubic meters of gas. It can produce 50-60 billion cubic meters a year, which is higher than France's annual gas consumption. However, the field's production is not higher than 12 billion because of environmental limitations, which can only be lifted by using costly extraction technologies.

    The extraction problem is the high content of hydrogen sulfide in the formation fluid (up to 25%) and the producing depth of over 4,000 meters.

    Gazprom will hardly be able to implement this project alone - in any case, the company has been seeking a partner to help it boost production efficiency in the Astrakhan Region for a while.

    In 1998, it tried to team up with Italy's Eni, which agreed to cooperate with Gazprom in extracting highly-sulfurous gas as part of the Blue Stream project. Eni then set up a joint venture with Stroytransgaz (controlled by former Gazprom management).

    The joint venture never came on stream because gas prices in Russia and Europe made such extraction projects economically unviable, and also because Gazprom's management team changed in 2001, and the project got sidelined.

    At present, experts suggest that even the most expensive production and refining projects would pay off, judging by medium-term gas price forecasts.


    Irkut to convert passenger A320s for cargo duty

    The Russian Aircraft Corporation MiG has agreed to hand over to the Irkut Research and Production Corporation its production premises at Lukhovitsy, Moscow Region, which Irkut plans to use to convert European Airbus 320 airplanes into cargo aircraft.

    "The Lukhovitsy plant could be either leased to Irkut following a decision by the United Aircraft Corporation (UAC) or physically transferred from their statement to [our] assets," said Oleg Demchenko, Irkut president. "But this will only be possible after MiG has been incorporated and joins the UAC [which must take place early in 2008]."

    Demchenko said this would "improve the coordination of the conversion project and reduce non-productive costs."

    "The top-level decision to hand over the premises is likely to be taken in March or May next year," said a MiG representative.

    UAC spokesman Maxim Sysoev explained that although such an option had been discussed in theory, no official decision had yet been made.

    Lukhovitsy had initially planned to carry out a final assembly of deck-based MiG-29K fighter jets, regional Tu-334s, and also MiG-110s and Il-103s for local lines.

    But the Tu-334 project was passed to the Kazan Aircraft Production Association, the MiG-110 and Il-103 projects were practically frozen, and the MiG-29 is planned to be assembled at Nizhny Novgorod's Sokol plant.

    The founders of the joint venture to convert A320 passenger aircraft that have reached the end of their guaranteed service lives to cargo freighters are Airbus, Elbe Flugzeugwerke GmbH (EADS subsidiary), Irkut and MiG.

    Planes are to be reconfigured at a Dresden plant owned by Elbe Flugzeugwerke, and at Lukhovitsy.

    The first converted A320 must be handed over to the client in 2010. The joint venture companies name among their customers cargo companies and express delivery service companies, such as DHL and FedEx.

    Irkut will also supply components for new cargo planes manufactured by Airbus.

    "There is, for example, a request from DHL for 30 new cargo A320s," the Irkut president said. "They will be assembled in Toulouse and then ferried to Lukhovitsy to mount components made by Irkut."


    Fiat would be a better partner for AvtoVAZ than Renault - expert

    Fiat chief executive Sergio Marchionne said at the weekend that an improvement program for VAZ would "need more than just investment," but such a deal would open for Fiat "a huge market, including the development of joint platforms."

    This week AvtoVAZ is expected to choose a strategic partner to which it will sell a blocking stake of shares. In return AvtoVAZ is asking for technology.

    Several companies have come forward: Renault, General Motors and Fiat, and all of them have an equal chance, said AvtoVAZ sources. The auto giant's board of directors is to decide on December 7 with whom it will continue negotiations.

    An AvtoVAZ spokesman has declined to comment. But a regional official familiar with the AvtoVAZ top management said that the Italians had the most appeal.

    Fiat is more flexible, and is ready to develop vehicles under the Lada brand, while Renault will not do that.

    AvtoVAZ chairman Sergei Chemezov earlier said that AvtoVAZ wanted to launch with Fiat a new engine division (diesel and gas engines of 1.4 to 2.2 liters) and design new A and B class cars.

    The Fiat bid has remained practically unchanged, said plant sources. No comments were available yesterday from Renault or GM.

    Fiat would be a better partner for AvtoVAZ than the French, said Igor Korovkin, executive director of the Association of Russian Automakers.

    The VAZ-made Kalina is a direct rival to the Renault Logan, while Fiat could help AvtoVAZ to design a replacement for the Samara family and classic models, he said.

    The capitalization of AvtoVAZ on the RTS on Friday was $4.56 billion. Its blocking stake is estimated at $1.14 billion. But the regional official working with AvtoVAZ, quoting the plant's management, said that such a stake if sold would cost no less than $2 billion.

    Business & Financial Markets

    Companies will invite tax inspectors to corporate parties

    The Moscow tax service believes that companies should pay an income tax from their corporate parties, and that they should invite tax inspectors to the gatherings to calculate the sum.

    The Moscow department of the Federal Tax Service has recently published a letter in the legal database explaining the system of paying income tax on corporate parties. It says that all kinds of income, both in kind and money, must be taken into account when calculating income tax.

    In-kind income includes "revenues" from free meals, and therefore corporate parties can be interpreted as employees' taxable monetary incomes. The company must therefore calculate the relevant sum to be paid to the tax authorities.

    Dmitry Kostalgin, a partner with the Taxadvisor consultancy, said: "The income can be calculated only if a tax inspector registers the amount of beverages and meals consumed [at corporate parties] by each attendee."

    Total spending may not be divided by the number of employees attending the party to determine the tax for each individual.

    Eduard Kucherov, director for taxes and law at the Baker Tilly Russaudit accountancy, said the Supreme Arbitration Court sent out an information letter several years ago saying that the individual income tax cannot be paid in such cases, because it is impossible to calculate. If the tax agencies sue companies for failure to pay the tax, the companies stand a fair chance of winning such cases.

    "The courts should act in compliance with the information letter of the Supreme Arbitration Court," Kucherov said.

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