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    MOSCOW, December 28 (RIA Novosti) Russia, US to resolve all missile-defense and CFE issues in 2009 - expert/ United Russia will remain loyal to Putin/ Russian Railways to invest over $2 billion in Armenia/ Government wants to turn Russia into Europe's largest auto market/ Hino trucks for export to Russia to be assembled in Japan

    Vremya Novostei

    Russia, US to resolve all missile-defense and CFE issues in 2009 - expert

    Next year, Russia will continue searching for acceptable solutions to problems caused by the deployment of the U.S. antimissile bases in Poland and the Czech Republic, as well as to issues related to the Conventional Forces in Europe (CFE) treaty. However, political experts say that specific proposals will not be discussed before 2009, that is, after the new U.S. president takes office.

    It is not that current negotiations will be interrupted, but they will become sluggish, said Alexander Pikayev, head of the disarmament and conflict settlement department at the Institute of World Economy and International Relations.

    On December 12, Moscow suspended its CFE membership on account of the 1990 agreement between NATO and the Warsaw Treaty Organization countries being completely obsolete, especially in view of the changes in Europe following the collapse of the Soviet Union. The Warsaw Treaty no longer exists, and it is not right that a regulating document signed by an obsolete organization is still in force. So Washington had a formal reason to send 5,000 servicemen to each of its outposts in Bulgaria and Romania, as both nations were Warsaw Pact members at the time the CFE was signed, and, naturally, no limits on U.S. forces deployed there were set.

    Still, Moscow is willing to continue negotiations. "The moratorium only concerns the old CFE. The adapted version is open for Western partners to sign and ratify it. However, the document's future will only be seriously discussed after the presidential elections in Russia and the US," explained Gennady Yevstafyev, a retired Lieutenant General of Russia's Foreign Intelligence Service and senior adviser with the Center for Policy Studies in Russia (PIR Center).

    The dispute will continue regarding Washington's plan to deploy its interceptor missile base in Poland and a radar station in the Czech Republic to repel hypothetical missile attacks on the U.S. or its allies. President George Bush even mentioned the date by which Iran will have developed ballistic missiles powerful enough to strike the U.S. and Europe - 2015.

    Pikayev said that the current Republican administration was not ready to compromise on the issue, and that Moscow was counting on dialogue with the new U.S. president who will not be elected until early 2009.


    United Russia will remain loyal to Putin

    The majority of Russians believe that the pro-Kremlin United Russia party will remain loyal to Vladimir Putin and is unlikely to support the next president, according to a survey conducted by the Levada pollster.

    The poll was held on December 21-25 among a sample of 1,600 Russians (margin of error 3%).

    Nearly a third of respondents (32%) said United Russia's group in the State Duma, the lower house of parliament, would protect Putin's interests, and half of that number said the party would help the next president.

    The future structure of power, announced in early December by Putin and his nominee, First Deputy Prime Minister Dmitry Medvedev, who is generally believed will be the next president, needs the support of United Russia.

    Putin agreed to lead the Russian government if Medvedev wins the presidential election, and promised not to redistribute powers in favor of the prime minister.

    In this situation, the key role will be played by the State Duma, which is constitutionally obliged to approve the nomination of Putin. If Putin quarrels with Medvedev, United Russia is expected to prevent the next president from firing Putin or nominating someone else for the post.

    If Putin decides to redistribute powers after all, it will be the task of the parliamentary majority held by United Russia to amend the Russian legislation or the Constitution.

    Russians have become disappointed in all the other parties after United Russia won the December 2 parliamentary elections. As many as 66% of respondents said the Union of Right Forces (SPS) has no future, 69% forecast a bleak future for Yabloko, and 46% and 47% respectively said the Communist Party and the Liberal Democratic Party had no chance in the future political system.


    Russian Railways to invest over $2 billion in Armenia

    Russian Railways (RZD) has won a concession tender to run the Armenian Railway for a period of 30 years. The Russian monopoly remained the only contender in the tender after Rail India Technical and Economic Services pulled out in December.

    An RZD spokesman said the results would be officially announced on January 15, and the same day both sides would make public the final concession terms.

    Armenia's Transport and Communications Minister Andranik Manukyan said RZD offered several scenarios. The first will operate if the Armenian Railway engages only in domestic carriage (armed conflicts have closed rail traffic between Armenia and Azerbaijan and to Russia through Georgia and Abkhazia, while with Turkey Armenia has no diplomatic relations).

    This scenario envisages $570 million in investment. Of that sum, $220 million will be spent during the first five years, with nearly 90% to be directed at restoring the railway infrastructure and the rest to be used to purchase rolling stock.

    Should a link be opened with Turkey in 2009, investment will grow to $604.8 million, and with Azerbaijan in 2010, to $1.77 billion.

    If a Georgian sector of the Abkhazian railway line opens before 2011, RZD pledges to invest $2.15 billion.

    A source from RZD said such figures had been mentioned. Manukyan said that after the first 20 years RZD could extend the concession by another 20 years.

    The concession holder is obliged to contribute 2% of its earnings from cargo carriage to Armenian's state coffers.

    The Armenian line is a small asset by RZD standards: its annual cargo turnover is less than the monopoly's daily output.

    Igor Nikolayev, director of a department at the FBK auditing and consulting company, was at a loss to assess project benefits for RZD. He believes the state monopoly simply decided to "try" at global expansion.


    Government wants to turn Russia into Europe's largest auto market

    A Russian plant of PSA Peugeot Citroen will be built in Kaluga (188 km southwest of Moscow). Japan's Mitsubishi Motors, a global partner of the French auto concern, will also build its plant there. Mitsubishi is to sign a relevant agreement with Russia's Economic Development and Trade Ministry by the end of the year.

    These are the last projects to be implemented by foreign auto concerns in Russia under the terms of industrial production. The implementation of these projects should make Russia Europe's largest auto market with sales amounting to $100 billion by 2010.

    Peugeot Citroen is planning to sign the agreement with the Kaluga authorities in early 2008 and to complete construction by 2010. During the first year of the plant's operation, which is to manufacture C-Class cars, Peugeot Citroen plans to sell 100,000 cars in Russia. It hopes to increase sales to 300,000 cars in the future.

    The choice of Kaluga by the French concern means that a Mitsubishi plant will also be built there. The industrial production agreement with Mitsubishi will be the last one: the signing of such agreements was terminated on November 10, but the memorandum of intent signed in December 2006 allows the government to make an exception in this case.

    Dmitry Levchenkov, deputy head of the Economic Development and Trade Ministry's investment department, says that 22 investment agreements have been signed with foreign auto manufacturers since August 2005, as well as 46 memorandums with auto parts manufacturers.

    "By 2015, these projects will give Russia over $6 billion in direct investments alone, without the cost of setting up allied production lines," Levchenkov said.

    According to his estimates, investments in automobile assembly will total about $4.8 billion.

    The ministry hopes that all foreign plants will reach their projected capacity in 2010 and start producing over 1.3 million automobiles a year.

    The ministry forecasts that, as a result, the Russian auto market may outpace the British and German markets and become Europe's largest by 2010.

    "Russia will produce and sell up to 4 million cars worth up to $100 billion," Levchenkov said.

    Actually, this means the doubling of the market (in money terms) over two years.

    In 2007, the car market will amount to $45 billion, with 2.78 million cars to be sold (Ernst & Young's forecast).

    Ivan Bonchev, CIS automotive leader at Ernst & Young, agrees that Russia may become Europe's largest auto market because the British and German auto markets are stagnating now.


    Hino trucks for export to Russia to be assembled in Japan

    Japan's major manufacturer of heavy duty trucks - Hino Motors - is planning to build a new plant on Hokkaido to export vehicles to Russia. Hino Motors is 50% Toyota-owned.

    A Hino spokesman in Russia said he knew of the plans but declined to divulge any details.

    According to the Japanese press, the plant will focus on exports to Russia. Hino will transport trucks to Vladivostok and then Moscow along the Trans-Siberian Railway. The capacity of the new project is not known.

    "Due to a construction boom and rapid economic growth, Russia has a growing need for trucks," said Yevgeny Bogdanov, A.T. Kearny's head for engineering and transport, "and overseas producers are trying to stake out a presence in that market."

    This year Volvo Trucks and Scania stepped forward with plans to build plants in Russia. The first will invest 100 million euros in Kaluga and will assemble 10,000 Volvo and 5,000 Renault trucks a year.

    Scania will produce 10,000 vehicles a year.

    DaimlerChrysler is also researching the truck market in Russia.

    But if they do decide to go ahead and invest in a Russian plant by betting on the local market, Hino is more cautious, Bogdanov said. Given present demand levels, a plant built in Russia would not be very profitable as demand is growing but not enough to warrant investing in a factory.

    Besides, the Japanese manufacturers usually drive a hard bargain: they always insist on owing the land where they plan to build, the analyst said.

    In the first eight months of 2007, Russia imported 39,469 trucks (new and used). According to Avtorevyu, 253 used vehicles were from Hino Motors.

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