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    MOSCOW, July 22 (RIA Novosti)
    Russian rail monopoly may be fined for antimonopoly violations / Gazprom to supply LNG to Spain / Chavez may sign $1 billion arms contracts in Moscow / Another GM plant for Russia / Belarus publishes privatization plan for 2008-2010 /


    Russian rail monopoly may be fined for antimonopoly violations

    Russian courts are considering five cases of violations of antimonopoly legislation by Russian Railways and its subsidiaries, worth as much as 466 million rubles ($20.08 million).
    If the Federal Antimonopoly Service (FAS) wins them, the rail monopoly will pay the largest fines in the history of Russian antimonopoly law.
    According to the regulator, Russian Railways used its monopoly position on the rail market to deny other market players access to rail cars for transporting perishables (beer) and automobiles, and to car repair services.
    Cases over the rail company's refusal to provide cars for perishables, in particular to Refservis, were opened at the request of the Heineken and Baltika breweries. The case involving car repair services was initiated by Soyuzgruzpromtrans.
    The service said on its web site that the problem regarding Refservis had been solved.
    A Russian Railways spokesperson told the popular daily Vedomosti the rail monopoly had contested three cases of the transportation of perishables and automobiles in a first instance court, and two cases of beer transportation and rail car repairs were being considered.
    Since May 2007, FAS can fine companies abusing their dominant market position 1%-15% of their profit. Its usual fine is 3%-4% of turnover, the newspaper quoted FAS head Igor Artemyev as saying.
    Renaissance Capital analyst Eduard Faritov said the intended fine of 466 million rubles ($20.08 million) amounted to 0.5% of the rail monopoly's net profit and 0.047% of its turnover in 2007.
    This is not much, but losing in court would be a more severe punishment for Russian Railways, because a monopoly should behave correctly regarding its clients and competitors.


    Gazprom to supply LNG to Spain

    Gazprom Marketing & Trading, a British trader of Russian energy giant Gazprom, and Spanish Gas Natural SDG have signed an agreement on LNG deliveries.
    This will facilitate the development of a flexible supply system for gas bought in Libya and Azerbaijan, though until recently Spain protected its market from the Russian gas monopoly for fear of price fixing by Gazprom and Sonatrach.
    GM&T yesterday announced in a press release that it signed a framework agreement with Gas Natural for potential short-term LNG supply on July 2, which defines the structure and terms of such supplies.
    "For us, it is a good opportunity to expand our LNG trading activities ahead of the startup of the Shtokman project in 2013-2014," said Frederic Barnaud, GM&T's LNG director.
    The two companies also agreed to explore potential business opportunities in pipeline gas transactions, as well as in power and carbon trading, as part of their portfolio diversification strategies.
    GM&T did not say how much LNG would be supplied to Spain.
    Until recently, legislation prevented Gazprom from entering the Spanish market. But in early 2007 amendments were drawn up for the law on gas, which prevents non-EU countries from working on the Spanish gas market.
    The amendments said Spain may deny state companies the right to work on its domestic market if said companies represent a country lacking comparable legal conditions, and if Spain believes such cooperation will run contrary to the principle of reciprocity.
    These amendments were directed above all against Russia and Algeria. The law was approved in the first reading in 2007.
    According to the European Union of the Natural Gas Industry (EuroGas), last year Spain consumed 37.7 billion cubic meters of gas, two-thirds of it in the form of LNG and the rest as pipeline gas. Its largest gas supplier was Algeria (37%), which is why the Spanish government was so alarmed by the memorandum on joint actions Gazprom and Sonatrach signed in spring 2007.
    The memorandum was later denounced, giving Gazprom a chance to gain access to the Spanish gas market.
    "This transaction will allow Gas Natural SDG to diversify the companies with whom it operates to balance its portfolio and meet supply and demand constraints in final markets," explained Alberto Gonzalez, Gas Natural's Gas Portfolio management director.
    Gas Natural SDG is the main gas supplies division of the Gas Natural group, the leader in the gas sector in Spain and Latin America and the world's third biggest gas transporter by volume. In 2007, GN's revenue totaled 10 billion euros and net profit was 1 billion euros. Its largest shareholders are Bank La Caixa (35.5%) and Repsol YPF (30.5%)
    Gazprom CEO Alexei Miller reportedly said at the annual shareholder meeting that the monopoly was becoming a major player on the pipeline gas and LNG markets.
    Gazprom press secretary Sergei Kupriyanov said: "We may sell gas to Spain if acquisitions from Azerbaijan, Libya and other countries allow the creation of a flexible and maximally efficient system of supplies."
    Mikhail Korchemkin, the founder and managing director of the consulting company East European Gas Analysis, said: "In response, the EU might introduce antimonopoly duties. For example, it might introduce an entry duty for Gazprom's gas."
    Maxim Shein from BrokerCreditService said the deal with Gas Natural would allow Gazprom to start by delivering small batches of LNG to avoid possible sanctions.

    Rossiiskaya Gazeta

    Chavez may sign $1 billion arms contracts in Moscow

    Russian and Venezuelan trade experts have been finalizing bilateral arms sale contracts for the last few months. Moscow could supply the bulk of weapons to Caracas, now implementing an ambitious rearmament program and ordering tanks, airplanes, submarines, multi-purpose motor-boats, surface-to-air missile (SAM) systems and light firearms.
    A source in the Russian defense industry said President Hugo Chavez was planning to spend over $30 billion on state-of-the-art weapons systems in the next four years, and that competition was tough among prospective suppliers.
    Considering Venezuela's special interest in Russian weaponry, Moscow has a good head start and is ready to face any rival on the Latin American market, he told the paper.
    Current and upcoming Venezuelan contracts will net Moscow over $4 billion in the next few years.
    Both countries have signed a contract for the sale of 24 Sukhoi Su-30MK2 Flanker multi-role fighters, 34 Mil Mi-17V Hip medium-lift helicopters, ten Mi-35I Hind helicopter gunships and three Mi-26T Halo heavy transport helicopters.
    Russia has supplied 100,000 Kalashnikov AK-103 assault rifles to Venezuela, where the first batch was presented to soldiers by President Chavez. Moreover, two plants, now under construction in Venezuela, will turn out AK-103 rifles and ammunition under a Russian license.
    Experts said Moscow and Caracas would sign another contract for the delivery of 20 revamped Tor-M-1 SAMs for shielding vital Venezuelan military and economic facilities.
    China, Greece, Cyprus and Iran have already bought Tor SAMs that can simultaneously track 48 targets up to 25 kilometers away.
    Experts said the Tor contract and another one for the purchase of three Kilo-class (Varshavyanka) diesel-electric submarines cost over $1 billion.
    The Venezuelan military who are interested in Russian naval technology want to buy six more conventional submarines because Moscow does not sell nuclear-powered submarines.
    Moreover, Caracas wants to acquire several dozen surface warships, including Project 14310 Mirage patrol boats, i.e. floating missile platforms that can destroy any ship 7 to 130 kilometers away.
    Venezuela is negotiating the purchase of several dozen Ilyushin Il-114 patrol planes and has also requested the first ten Mi-28N Havoc attack helicopters, due to be delivered after July 2009.


    Another GM plant for Russia

    General Motors has started looking for a site to build its second plant in Russia. Last week, a GM delegation inspected a plot of land in the Dinsky district of the Krasnodar Territory for a factory able to produce 50,000 cars a year.
    Southern Russia interests GM by virtue of being close to sea ports.
    Vyacheslav Ivanov, the district's deputy head for industry and construction, told Kommersant that GM is casting about for a place in which to assemble Opel- and Chevrolet-branded vehicles. He did not give the figure beyond saying that initially the automaker plans an operation with 500 jobs, which is to be expanded in two further stages. The plant, he said, will take five years to build.
    He said the district administration had offered GM a choice of three plots for the project, and that it was ready to provide infrastructure. No one knows when GM will give its answer. Its Russian office yesterday confirmed that the company was having talks with many Russian partners on an operation in Russia, but stressed no final decision had been made yet.
    The Economic Development Ministry (which coordinates car assembly projects in Russia) declined to comment.
    GM is already building a plant in St. Petersburg to assemble Chevrolet and Opel models. The plant will have a capacity of 70,000 cars and go on stream in November 2008. When it is keyed up to full capacity, it will have a staff of 900 workers.
    Ivan Bonchev of Ernst & Young is not ruling out that the capacity of GM's second plant in Russia could initially be between 25,000 and 50,000 units. If the holding gives the project the thumbs up, volumes are certain to grow, the analyst said.
    Industrial assembly, which is used by all foreign carmakers in Russia, was abolished in the fall of 2007 as being in contradiction of WTO rules. But GM had anticipated the move by signing a memorandum with the Economic Development Ministry on its second plant in Russia, so the auto-maker will be under no constraints. The memorandum runs out in September 2008, and this is the deadline before which the holding must choose a site.
    Sources in ministries say GM viewed sites not only in Krasnodar, but also in the Kaluga Region (no comments could be received from its spokesmen on Monday).
    The GM delegation led by its president, Rick Wagoner, also visited the Nizhny Novgorod Region, as Kommersant reported on July 9.
    GM is not the only automaker planning a second plant in Russia. At the end of May, Jim Tetreault, vice president of Ford of Europe, also discussed such a possibility. Currently Ford has the Ford-Vsevolozhsk plant in the Leningrad Region, but Mr. Tetreault said a second one would not necessarily be built in St. Petersburg. He did not give any details.
    Mr. Bonchev is not surprised that carmakers are no longer considering St. Petersburg as a region for building new capacities - workforce shortages there will only grow. He puts down the auto manufacturers' desire to build up assembly capacities in Russia to its growing car market (in 2009 it could become Europe's largest). This is very important for Germany, which is experiencing financial problems over lower sales on traditional markets.
    Mikhail Pak from Metropol said southern Russia could attract GM by its closeness to sea ports and the developed rail network of the central region. Ahead of the Olympic Games in Sochi, southern infrastructure will be developed.


    Belarus publishes privatization plan for 2008-2010

    The Belarusian government has published a plan for the privatization of state-held assets in 2008-2010. It includes the Gomeltransneft-Druzhba pipeline and the Druzhba oil transportation company based in Novopolotsk, which are to be privatized in 2009.
    Valery Nesterov, an analyst at the Troika Dialog investment company, said the decision to privatize the Belarusian section of the Druzhba oil pipeline, running from Russia to Europe, could be prompted by Russia's plans to build the second leg of the Baltic Pipeline System, which would detract oil from the Druzhba pipeline.
    The privatization list does not include the Mozyr and Novopolotsk oil refineries. Sergei Musiyenko, head of the Minsk-based analytical center Ecoom, said Belarus intended to privatize them eventually but did not want to bind itself by announcing deadlines.
    The Belarusian authorities said they would consider each enterprise slated for privatization separately.
    Irina Barkovskaya, department head at the Belarusian state property fund, told the BelTA agency: "Directors of some plants fear Russians will buy everything, but we will not allow this."
    Initially, 25% stakes will be put up for sale, she said, adding that later the share of private capital in state companies would grow.
    The majority of companies to be privatized (143) belong to the Transportation Ministry. These are bus and automobile pools, repair companies of Belarusian Railways, the Belavtostrada road-building and maintenance company, Belarusian river and sea shipping lines, the Pinsk and Gomel shipyards, and the aircraft repair plant in Orsha.
    The Industry Ministry will privatize 109 companies, including the MAZ truck producer, the Minsk Motor Plant, the Baranovichi plant of machining equipment, BelAZ (open-cast mining equipment), Belgaztekhnika (gas transportation and equipment), Gomselmash (agricultural machinery), and the Minsk producer of metalworking machine tools.
    The Defense Ministry will privatize 12 companies, including Minsk prime mover plant, the Volatavto truck seller, the Lyos, Agat System and Radar producers of electronics and communication systems, and the Minsk electromechanical plant.
    Konstantin Makiyenko, deputy director of the Russian Center for Strategic and Technological Analysis, said Russian arms exporters could be interested in Belarusian defense companies, which could be used to modernize arms systems for foreign clients.

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