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    MOSCOW, May 6 (RIA Novosti) Japan tries to win favor of Sakhalin locals/ Gazprom prodded toward hiring Norwegian contractors/ Export-oriented equipment to be displayed in Victory Day parade/ Russneft may go same way as Yukos/ Russian top managers leave Volkswagen

    RBC Daily

    Japan tries to win favor of Sakhalin locals

    Officials in Tokyo are considering giving pensions to representatives of small groups on Sakhalin mobilized by Japan during WWII. Making them eligible for Japan's social benefits may have a good propaganda effect in the 'Northern Territories' dispute. The move could also link Japanese companies' participation in the Sakhalin-2 project, as it was the Sakhalin Nivkhi's environmental protests that provided Moscow with a pretext to revise the agreement with foreign operators in the project.
    Under Japanese law, pensions are paid to all former soldiers and officers of the Imperial Army and their families, not necessarily ethnic Japanese. Pensions are also paid to Koreans as compensation for the damage inflicted on ethnic minorities during the war, explained Professor Kimitaka Matsuzato of the Hokkaido University.
    Pensions and compensation to the Sakhalin Nivkhi and Oroks who assisted the Japanese intelligence service during the war with the Soviet Union, are now being discussed in the same context.
    Before making the decision, the Japanese government wants to collect information about the Oroks, Nivkhi and other Sakhalin native tribes who served in the Japanese army. However, it is unclear yet whether or not the current Sakhalin residents who are Russian citizens will be entitled to the pensions. According to the 2002 census, there are 2,450 Nivkhi and 298 Oroks living in Sakhalin today.
    Professor Matsuzato said Japan was demonstrating its willingness to protect minorities' rights in cooperation with Russia and China, by raising the pension issue in the run-up to the next G8 summit.
    Russia's Foreign Ministry, in turn, said the situation needs to be clarified. "Russian officials are unlikely to object to compensation being paid to Russians for the damage done during WWII," the ministry's deputy information director, Andrei Krivtsov, told RBC Daily. "But to make specific comments on the situation, we need to study it in greater detail," he added.
    Meanwhile, Japan said last week it planned to receive annually 8 million metric tons of liquefied natural gas from Sakhalin, which would account for 8% of the country's demand and 83% of the total LNG to be produced on the island. To accomplish that, Mitsui and Mitsubishi Corporation plan to invest $3 billion in the Sakhalin-2 project.
    However, the small indigenous peoples protests over the environmental risks are a threat to the project. In 2005, local Nivkhi supported by the Green party and the Liberal Democratic Party accused foreign operators in offshore projects of killing local fish and game. Their initiative was the reason the Russian government revised the Sakhalin-2 agreement in favor of Gazprom. Tokyo must be hoping that Japanese pensions will make the locals more compliant.


    Gazprom prodded toward hiring Norwegian contractors

    Managers of Norway's StatoilHydro are doubtful that the Shtokman gas condensate project, the largest in Russia, can be implemented on time and that production will start in 2013.
    Gazprom, which will develop the deposit jointly with StatoilHydro and France's Total, assured that everything is proceeding to schedule.
    Experts believe that StatoilHydro wants to persuade the Russian gas monopoly to attract Norwegian contractors.
    Benedict Henriksen, StatoilHydro's industrial relations boss in Russia, said the commissioning of Shtokman would depend on the choice of contractors, adding that the same goes for the LNG deliveries deadline set for 2014.
    Norwegian media reported last week that StatoilHydro might withdraw from Shtokman Development AG, a joint venture set up in February 2008 to design, build and use the deposit's first-phase facilities, before the final decision is made in late 2009.
    The thing is that the criteria for choosing Russian and foreign contractors have so far not been determined. There are some 100 potential subcontractors in Russia's Murmansk and Arkhangelsk regions, and 350 in northern Norway.
    Henriksen said the project might not be so good after all, and its financial structure unacceptable.
    Total has no doubts about Shtokman's commissioning deadlines and financial structure. Gazprom said the deadlines would not be changed, and its board of directors made the same conclusion at its April 25 meeting.
    Maxim Shein of the Broker Credit Service said StatoilHydro managers are making these statements to force Gazprom to hire Norwegian contractors.
    Foreign contractors have been chosen only for front-end engineering design (FEED) of the project's first phase (15 months). It has been tentatively estimated at $14-$15 billion, and all the three phases will cost $40 billion.
    There are only Russian, French and British companies among the foreign contractors so far chosen for the project. However, more contractors and equipment suppliers, including Russian and Norwegian ones, are to be attracted in the second half of 2009.
    Mikhail Korchemkin, director of the East European Gas Analysis, said the commissioning of Shtokman would affect the construction of the second leg of the Nord Stream gas pipeline, which would be left without gas if the commissioning of the project in the Barents Sea were postponed.


    Export-oriented equipment to be displayed in Victory Day parade

    On May 9, Moscow's Red Square will host the first parade involving advanced military hardware since 1990. However, the event will mostly feature export-oriented equipment, rather than that used by the Russian Armed Forces.
    The May 5 dress rehearsal on Red Square involved 8,000 officers and troops and 200 military units, including combat aircraft and helicopters.
    On May 5, President Vladimir Putin told government members that the parade would involve military hardware for the first time in many years. "This is not saber-rattling. We are not threatening anyone. This highlights our growing defense capabilities," President Putin said.
    However, only Soviet-era Topol land-mobile inter-continental ballistic missiles, rather than their upgraded Topol-M versions adopted in 2007, will take part in the parade.
    The Iskander shorter-range missiles, S-300PMU-2 Favorit, Buk-M2 and Thor-M1 surface-to-air missile systems, T-90A main battle tanks, BMD-4 airborne fighting vehicles, Sprut self-propelled guns and Tigr off-roaders will be displayed for the first time.
    The up-to-date Su-34 Fullback ground-attack jet now undergoing flight tests and some other older aircraft will fly over Red Square.
    Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies (CAST) and member of the Presidium of the Defense Ministry's Public Council, said the military hardware parade did not highlight a militaristic revival, and that many NATO and Third World countries were holding similar parades.
    The parades are a way of showing taxpayers where their money has gone, Pukhov told the paper.He said most weapons systems were export-oriented.
    A Defense Ministry source said foreign customers had received 200% more T-90 tanks and BMP-3 infantry fighting vehicles, and that Russian units lacked S-300PMU-2 Favorit and Buk-M2 SAMs.
    Colonel Sergei Suvorov of the tank force reserve, a former adviser to Rosoboronexport in the UAE, said the parade could help promote military equipment on global markets.
    He said the United Arab Emirates had decided to buy BMP-3 vehicles after they were showcased in the last Soviet-era parade in 1990, and that the UAE contract had sustained their production throughout the 1990s.


    Russneft may go same way as Yukos

    Russneft, which has been left ownerless after its sole owner, Mikhail Gutseriyev, who fled the country, is threatened with bankruptcy. If it is declared bankrupt, it will be sold out in portions, like Yukos.
    However, experts think the government is not interested in liquidating Russneft, because it would have to annul its licenses. The best approach would be to allow a company loyal to the Kremlin to buy Russneft.
    According to the results of inspections of Russneft's activities in 2006, tax agencies' additional claims to the company may reach 18-20 billion rubles (over $840 million).
    "Russneft will not be able to repay extra tax claims, which will actually result in its bankruptcy," a source familiar with the data of the Federal Tax Service said.
    If this is true and the company is to make additional tax payments, it will be unable to do so. Russneft has already lodged a complaint with the Supreme Arbitration Court against the extra tax of about 20 billion rubles for 2003-2005. The company also has big debts to Sberbank ($1 billion) and Switzerland's Glencore ($874.95 million), as well as a ruble debt amounting to 32.58 billion. Russneft is to repay its debts by the end of 2011.
    If the company is bankrupted, it will repeat Yukos' destiny.
    "Russneft's main creditor is the state and it will be in charge of the bankruptcy procedure," said Alexander Razuvayev, head of Sobinbank's market analysis department. "It is quite possible that Russneft will be given to a state-controlled company."
    At the same time, the liquidation of Russneft as a legal entity may have serious negative consequences. A market expert explains that "the company's assets and property will be given a new owner, but this is nothing without Russneft's licenses. With the company's liquidation, its license agreements will be annulled, and the new owners will have to pay a lot in order to restore them."
    The expert believes that the government's most probable decision will be to avoid Russneft's bankruptcy and allow a company loyal to the Kremlin to buy it. "This may be Deripaska's company, or Rosneft," he said.
    In his opinion, "the government is unlikely to recover more than 3-4 billion rubles in tax claims, but "this scenario will help to avoid many problems, including license problems."


    Russian top managers leave Volkswagen

    Denis Petrunin, head of Volkswagen in Russia, may leave his post in July because the German auto concern's headquarters are unhappy with his promotion strategy.
    Petrunin is the second Russian manager to leave VW because of differences with the management. A year ago, Oskar Akhmedov resigned as director general of Volkswagen Group Rus, which imports Volkswagen, Skoda and Audi cars to Russia.
    Volkswagen is the only foreign automaker to hire Russian directors. The experiment has failed, and the company is currently 17th on the Russian auto market in terms of sales.
    Petrunin said it was down to insufficient imports, adding that small dealerships cannot deal with growing sales.
    "Volkswagen has always preferred working with small dealerships, which are considered more loyal, in Russia and elsewhere in the world," said a source in the concern.
    The recruiting of Russian management for Volkswagen in 2006 created a sensation, as no other foreign carmaker had considered Russians for top positions before, trusting only foreign specialists. And none of them have followed Volkswagen's example since.
    Alexander Agibalov, managing director of AG Capital brokerage, said Petrunin's promotion strategy was logical because in future car sales will grow faster in the regions than in Moscow or St. Petersburg.
    Large dealerships have extensive networks and are therefore preferable partners in the regions compared with small companies, he said.
    Mikhail Pak, an analyst at the Kapital financial group, said it is more difficult to dictate conditions to large players, but their brands are better known and they have a streamlined sales technology. Sales can be increased only if one works with large holdings, Pak said, adding that this should be a major argument for Volkswagen, whose plant in Kaluga is expected to reach design capacity by 2010.

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