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    MOSCOW, December 12 (RIA Novosti) Medvedev proposes Putin as prime minister / Putin to remain de facto leader /Georgia's territorial problem suits the West - expert / Cost of Nord Stream gas pipeline project rising rapidly / General Motors eyes Russian automotive giant / Russians don't want to do private business


    Medvedev proposes Putin as prime minister

    President Vladimir Putin, who has developed Russia's political system, will now busy himself with the economy. Presidential candidate Dmitry Medvedev yesterday proposed that Putin become his prime minister after the March 2008 presidential election.
    Olga Kryshtanovskaya, director of the Institute of Applied Politics, said: "Medvedev, first deputy to Prime Minister Viktor Zubkov, has not yet been elected president but has already offered the post of prime minister to another man, Putin. This is a strange situation, but the players in this game apparently value the common cause, i.e., the transition of power, above all else."
    The Kremlin administration has been complaining about the government's poor-quality work and red tape for years, saying that documents gather dust for months and issues are debated for weeks, according to a source close to the Kremlin.
    He said the government would be adjusted to the new prime minister, who should be a stronger and more influential politician than Mikhail Fradkov or Viktor Zubkov.
    Putin has not commented on Medvedev's offer, but told business leaders in the Russian Chamber of Commerce and Industry: "We are not going to have state capitalism" and will see to it that state corporations do not suppress other businesses.
    Alexander Morozov, chief economist with HSBC in Russia, pointed out that the short history of state corporations shows that some of them were set up by suppressing private and often very successful businesses.
    State corporations in their current form cannot be controlled according to legislation, and it can take them very long to become globally competitive, he said.
    Putin was most likely referring to a moratorium on the establishment of new state corporations and to the transformation of some of them into joint-stock companies, which should float their shares following consolidation, Morozov said.
    Yulia Tseplyayeva, chief economist with Merrill Lynch, said that with Medvedev as president and Putin as prime minister all economic risks would be swept away within six months. However, the outlook for the next several years is gloomy, since Medvedev will not have a say in the economy, and Putin's team will hold the real power, which will spur red tape and corruption.
    However, this will not have a dramatic effect on Russia's economic growth. The example of Ukraine shows that the economy can grow even in conditions of instability, Tseplyayeva said.

    Vremya Novostei

    Putin to remain de facto leader

    A strong and popular prime minister and a less influential president would make a poor balance of forces in government. Wouldn't this lineup also lead to a doubling of power?
    Russian political analysts have commented on presidential hopeful Dmitry Medvedev's proposal to appoint current President Vladimir Putin next prime minister.
    Dmitry Badovsky, deputy director of the Institute of Social Systems, said: "Medvedev has just made an opening statement for his election campaign, and one to secure him Putin's supporters who make up the majority of the electorate today. The voters have been openly told that in a political tandem with Medvedev, Putin could in fact retain his power. It is a clear signal to the people: vote for Medvedev, and it's going to be all right."
    Gleb Pavlovsky, president of the Effective Politics Foundation: "If Putin had just named his successor and agreed to serve him as the premier, he would end up in Medvedev's power. But he knew better than that - he began with gaining a sweeping victory at the December parliamentary elections as the leader of the country's largest political party. It is now his personal instrument enabling him to control parliament and most of the regional legislatures. In this situation, the prime minister will enjoy all constitutional powers. A prime minister is head of the executive branch, while Putin will also lean on the parliament's lower house. It would be virtually impossible to fire Putin the premier, because prime ministers are approved by parliament. A dissolution of parliament would only lead to calling a new election, and yet another victory of the pro-Kremlin United Russia party. The scheme is fool-proof."
    Valery Khomyakov, director general of the Council for National Strategy: "We are witnessing another nation-wide brainwash. The president is so scared of becoming a 'lame duck' that he even instructed Medvedev to signal to the elites that the current president would remain in power. I have doubt that Putin will become the next premier. But the prime minister is the second man in power, and the top man can never be second. People change with time and power, which is best evidenced by the fall of certain members of Boris Yeltsin's team (including Boris Berezovsky) who had actively lobbied for Putin. In addition, reorganizing the regime as a parliamentary republic would require serious changes, and doing this, Russia might end up in the same situation as Ukraine."

    Rossiiskaya Gazeta

    Georgia's territorial problem suits the West - expert

    Georgian authorities are actively creating the illusion among the population that the country's integrity can be restored without any negotiations, merely by Tbilisi pressing its demands as an ultimatum, backed by outside help, writes Konstantin Kosachev, chairman of the State Duma international affairs committee.
    They craftily say the only obstacle to this is Russia and the only "agency" capable of dealing with it is the United States and the West in general.
    The West is not debunking these illusions, because they are the most secure "hook" for Georgia, which can last indefinitely. It appears the unresolved issue suits the West fine, because it guarantees the "proper" geopolitical mood among the Georgian political class (called "adherence to democratic values" in new-speak).
    But Western powers, unlike the ordinary man in the street, are perfectly aware that there are no military or strong-arm solutions to the Georgian-Abkhazian or Georgian-South Ossetian conflicts, and any attempts to realize such a solution would explode the situation in the Caucasus, through which, incidentally, the BTC (Baku-Tbilisi-Ceyhan) oil pipeline passes.
    Or at least it would provoke a permanent civil war in Georgia on the Iraqi pattern if the West were foolish enough to introduce "peacekeepers" there who would actually uphold the positions of one of the sides, as in Kosovo, rather than maintain peace.
    But that is unlikely. And therefore the conflicts will smoulder, feeding pro-Western and anti-Russian sentiment in Georgian society. Hot-headed Georgian leaders will not be allowed to forcibly resolve them, with the illusion kept up about Moscow's fault and its hand.
    Today Saakashvili is claiming that Georgia can easily do without Russian gas and energy. But one should not underestimate Russia's economic significance for Georgia, and not only as a resource supplier.
    We should clearly state that in response to Georgia's military moves against the unrecognized republics Russia will take a series of preventive steps by sealing illicit sources of income and banning work migration.
    The country could be totally struck off the list of Russia's beneficiaries in whatever form.
    That is very serious for Georgia no matter how much the Georgian politicians flaunt their supposed economic independence from their larger neighbor.


    Cost of Nord Stream gas pipeline project rising rapidly

    The cost of the ambitious Russian-German project to lay a gas pipeline along the Baltic seabed to link Russia with Europe by 2010 is rapidly rising. It was officially estimated at about 6 billion euros.
    However, Gerhard Schroeder, the former German Chancellor, now chairman of the supervisory board of Nord Stream AG, the operator of the project, is sure that investments will have to be increased by one-third.
    On December 11, Schroeder said the project would cost 8 billion euros ($11.8 billion) to implement. Thus far, there have been two estimates: Nord Stream AG estimated the cost of the project at over 5 billion euros, and Gazprom's reports gave a figure of 6 billion.
    Experts have long expected a rise in the pipeline cost, especially after BASF's recent presentation of the project, where a figure of 9 billion euros was mentioned.
    Irina Vasilieva, Nord Stream's press secretary, told Vedomosti that her company confirmed its previous estimate (over 5 billion euros, or $7.33 billion). It will be increased only when the cost of its basic elements (pipes, pipe-laying operations, logistics services and ecological studies) is specified. Vasilieva declined to say what was the share of ecological studies in the total costs.
    Artyom Konchin, an analyst with Aton, said that some increase in costs could be explained by a recent change of the Nord Stream route, though this change should not be "measured" in billions. Such revisions of project budgets are now taken for granted: the budget of the East-Siberia Pacific Ocean (ESPO) pipeline was increased from $6.5 billion to $12.5 billion, of the Kashagan project in Kazakhstan from $50 billion to $130 billion, and of the Sakhalin-2 offshore project from $10 billion to $20 billion. Now is Nord Stream's turn, Konchin said.

    Nezavisimaya Gazeta

    General Motors eyes Russian automotive giant

    On Tuesday, the top management of U.S. automotive giant General Motors announced plans for expanded operations on the Russian market and said it was negotiating cooperation prospects with Russian carmaker GAZ in Nizhny Novgorod on the Volga River, but did not elaborate.
    Experts said GM could either buy GAZ production facilities, or that both companies could jointly develop a new passenger-car and SUV platform.
    Renaissance Capital analyst Eduard Faritov said GAZ could sell its non-core passenger-car production facilities to GM, which did not attach priority to organic production growth, and which was ready to expand production by acquiring operational facilities.
    GAZ representatives declined to comment on the talks and corporate plans.
    Although GM recently negotiated the purchase of a blocking stake in AvtoVAZ, Russia's largest carmaker, it went to France's Renault.
    Broker Credit Service analyst Sevastyan Kozitsyn said the GM management had made emotional statements after the purchase of AvtoVAZ shares by Renault.
    He said it was difficult to discuss the potential of GAZ-GM cooperation because Russkiye Mashiny (Russian Machines), a subsidiary of billionaire Oleg Deripaska's Basic Element and GAZ owner, plans to cooperate with Canadian automaker Magna.
    However, GAZ could expand its product range in the future.
    GAZ, a cost-effective performer in the mid-term, is faring better than AvtoVAZ, now rapidly losing its segment on the domestic market.
    Kozitsyn said foreign companies wishing to acquire additional production facilities in Russia and lacking the funds to build new plants were interested in cooperation with GAZ, and that GM probably wanted to manufacture cars and vehicle components here.


    Russians don't want to do private business

    According to the Levada pollster, only 18% of Russians now want to start a private business, compared with 23% five years ago.
    It has become very difficult to open a business and more profitable to work for a large company. Russians' business passivity is undermining competition and provoking major economic problems.
    Only 5% out of the 1,600 Russians polled in November have a private business, and only 18% would like to open one. Of the latter group, only 10% are working toward attaining their goal. As much as 69% of respondents said they would never attempt to open a private business (67% in 2002).
    This is not surprising, given the many barriers hindering private business in Russia, as even successful businessmen admit. The VTsIOM pollster says that the Russian business community estimates the possibility of opening a business at 2.88 on a seven-point scale.
    Those who open businesses face many problems. Less than 10% of new firms in Russia are still in business after seven years, according to the World Bank.
    The Levada Center confirmed these data, saying that 60% of those who tried to open a business in Russia said their attempt failed, and only 32% said they had succeeded.
    Boris Titov of the Delovaya Rossia business association said taxes were the biggest obstacle, which is "increasingly hindering development."
    The lack of available investment is another factor dampening Russians' business activity.
    Titov said: "The government and large companies have surplus funds, while the real economy continues to take out loans at high interest rates and against back-breaking security. How can we promote competitiveness in this situation if loan interest in the West is very low?"
    The explanation can be found in Russians' psychology.
    Valery Mironov, an expert with the Development Center, said: "Some surveys show that people with a knack for business make up not more than 10% of population. It is a rare talent, the same as a good ear for music, and it is inherited. Such people have been exterminated in Russia for decades."

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