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    MOSCOW, October 14 (RIA Novosti)
    EU cannot understand Russia's policy/ SPS acting chairman to be appointed advisor to Rosnanotech head/Atomstroyexport to help finance Ukrainian NPP projects/Euroset drops Indian project/ Old Gazprom shareholder halves its stake in Russia gas giant/ No benefit for TNK-BPs minor shareholders from shares buyout


    EU cannot understand Russia's policy

    Relations between Russia and the European Union have been going up and down for nearly three years. At first sight, they look fine, yet no progress has been made in drafting and signing practical agreements, a Russian political analyst writes in the business daily Kommersant.
    Andrei Fyodorov, director for political programs at the Russian Council on Foreign and Defense Policy, writes that the Caucasus war has stalled Russia-EU dialogue revived during a summit held in Khanty-Mansiisk, West Siberia, last June.
    The Baltic countries and Poland have serious doubts that dialogue can be resumed before the end of this year, especially since the EU has approved a coordinated stance on Abkhazia and South Ossetia and is insisting that Russia officially recognize Georgia's territorial integrity, the analyst writes.
    The EU cannot understand Russia's current or future policy. This is why it is not keen to accept President Dmitry Medvedev's proposal to start discussing a new European security system. Many in Europe fear that Russia's goal is to destroy existing security institutes, notably the OSCE.
    Brussels does not need an open conflict with Russia, Fyodorov writes, especially in conditions of a global economic crisis, which has upped energy security stakes. However, it may change its stance if a new gas war breaks out between Russia and Ukraine.
    Until recently, dialogue with France, Germany and Italy has been more important to Russia than its relations with the whole of the EU, for understandable reasons. But in future this scheme will not be as effective as it is now, given the continued consolidation and upcoming change in the EU power system.
    According to Fyodorov, Russia is not ready for this change.
    A new partnership and cooperation agreement between Russia and the EU, which should provide the basis for their relations in the coming decade, should settle disputes and create a stable mechanism of political and economic cooperation, possibly including the creation of a free trade zone.
    The longer they delay drafting of the agreement, the less chance of the EU working normally, the analyst writes.
    So, the only thing Russia and the EU can do now is to start working openly and informally on key aspects of the future agreement, so as to create at least the foundation for their future cooperation, Fyodorov concludes.


    SPS acting chairman to be appointed advisor to Rosnanotech head

    This week, Leonid Gozman, acting head of the SPS party, will be appointed advisor to the head of Rosnanotech, Anatoly Chubais.
    In an interview with the Kommersant business daily, Gozman refused to comment on whether Chubais will join the top echelon of the new right-wing pro-Kremlin party, which the SPS is due to merge with.
    It was Anatoly Chubais who selected his old-established associate to be co-chairman of the pro-Kremlin party, Kommersant reports. The SPS has only said that Chubais will join the new party.
    The right-wingers joining the pro-Kremlin party aggravated disagreements with opposition members. Mikhail Kasyanov, leader of the People's Democratic Union (PDU), said he "certainly" will not participate in the democratic forces convention on December 13, where the decision to establish an opposition movement will be made, in case SPS members, who plan to join the pro-Kremlin party, are present.
    SPS acting chairman Leonid Gozman said he sees the way clear for his party's members to participate in the opposition forum as well as to join the movement, adding that he could also attend the event. The steering committee on establishing the opposition movement, however, has already suggested SPS members outline their political stance, stressing that it would be impossible for them to hold simultaneous membership in the opposition movement and the pro-Kremlin party.
    Mikhail Kasyanov said yesterday that the People's Democratic Union, the United Civil Front and the new movement could establish a new opposition coalition after the convention.

    RBC Daily

    Atomstroyexport to help finance Ukrainian NPP projects

    Atomstroyexport, Russia's nuclear power equipment and service export monopoly, won a tender to complete two reactors at the Khmelnitskaya nuclear power plant in western Ukraine.
    The tender also involved South Korea's Electric Power Corporation and U.S. energy giant Westinghouse, who pulled out of the bidding. The 4 billion euro V-392-B construction project will be based at a site already earmarked for NPP infrastructure.
    The Ukrainian Fuel and Energy Ministry said the Russian company was ready to finance 85% of the construction costs, or 3.4 billion euros.
    "Ukraine is currently unable to finance the project. The remaining 15% will be financed out of the republic's budget and through higher energy tariffs," ministerial spokesman Fent Di said.
    Atomstroyexport could issue its loan under the London Interbank Offered Rate (or LIBOR) plus 3%. Kiev will start repaying the loan six months after the commissioning of both reactors and would completely reimburse its partner within a five-year period.
    Atomstroyexport said it would not channel corporate assets into the project, but that it could provide Russian government support in case of Ukrainian state guarantees.
    The Russian company said the sides had not yet finalized a number of aspects of the project. Ukraine insists that national companies account for at least 66% of the project's contractors. This issue still needs to be settled.
    Fent Di said construction would not begin until 2010 because the feasibility study had to be completed, and because additional legislation was required to build every new reactor in Ukraine. The project is to be completed in 2016.
    Dmitry Baranov, industry analyst at Finam Management, said Ukraine could profit from the easy-term loan.
    Khalil Shekhmametyev, chief analyst at the Otkrytiye brokerage, said Atomstroyexport was also planning to build NPPs in Turkey and Bulgaria, as well as in Russia.
    However, Izhora Plants in St. Petersburg, northwestern Russia, is the only national reactor manufacturer.
    "Russia has signed so many contracts that it may have trouble fulfilling them," Shekhmametyev said.


    Euroset drops Indian project

    Euroset, Russia's largest retailer of mobile handsets, digital cameras and MP3 players, has announced it is dropping its long discussed Indian expansion project. Analysts are putting the decision down to the global financial crisis.
    Euroset spokesperson Natalia Aristova said the retailer had decided to concentrate on business development in Russia and the CIS.
    "We dismissed the project as inadvisable," said Yevgeny Chichvarkin, chairman of the Euroset board of directors and former co-owner of the chain.
    The Indian market for mobile communications services and its mobile retail market looks extremely attractive. According to the U.S. analytical agency Digital Communities, the number of mobile telecom subscribers in India stood at 270 million people as of August 2008, with a mobile penetration rate of 17%. In 2006, India's mobile retail market was estimated at $16.6 billion.
    Euroset has repeatedly shown interest in the Indian market, and not only Euroset. Altimo, the telecom arm of Alfa Group, tried to negotiate buying a stake in Hutchisson Essar, India's second largest operator, in January 2007 during Vladimir Putin's visit to India. However, the company was outbidded by Vodafone which offered $13.5 billion.
    Analysts describe the Indian mobile market as "highly segmented:" there are seven major operators in the country covering 70% of its territory, as well as a number of smaller operators working within certain states. Eldar Murtazin, a leading analyst at Mobile Research Group, said India's mobile retail market is relatively closed, which means a company needs a strong local partner to do business there.
    Analysts believe that Euroset halted the project because of the global financial crunch. "Retailers all over the world are trying to cut costs now rather than expand chains," said Vasily Koval, analyst with J`Son&Partners.
    Margarita Zobnina, director of the Russian office of the Dynargie international consultancy, said a foray into India's market would require major investment which Euroset cannot afford now. "In addition, the market potential for Russia's regions is not yet exhausted," she added.
    Analysts agree that Euroset could still expand to India when the crisis subsides, if it still wants to. "That market will take a long time to grow. Even local retailers won't be expanding now, so the situation is unlikely to change drastically during the crisis," Koval said.


    Old Gazprom shareholder halves its stake in Russia gas giant

    The possibility of a margin call has encouraged Swedish investment company Vostok Gas, one of the oldest shareholders in Gazprom, to cut its share in the gas monopoly by nearly a half.
    Last week, Vostok Gas sold a 0.46% stake (27.13 million ADRs) in Gazprom for an undisclosed sum. The tentative value of the stake on the LSE was $530 million, compared with $1.6 billion six months ago.
    Vostok Gas also sold 0.14% of Gazprom shares in September 15-19, when the stake was valued at $235 million.
    Vostok Gas Ltd (formerly Vostok Nafta Investment Ltd.) is a leading investment company for the Russian gas industry. The Lundin family directly and indirectly controls approximately 30% of the company, with the remainder of the shares spread among private investors, mainly in Sweden.
    Its stake in Gazprom has decreased from 1.46% as of June 30, 2008, to the current 0.86%. Vostok Gas started buying Gazprom shares in 1997, when the gas monopoly's share market was not liberalized and it had few foreign investors among its shareholders.
    "It pained us to divest Gazprom securities, but then everyone is pained by the current situation," a manager of one of the Lundin Group's companies said.
    Vostok Gas decided to sell Gazprom shares because of the danger of a margin call on a $1 billion loan from Deutsche Bank, he said. Vostok Gas took out the loan in the second quarter of 2007 and used part of it to buy Gazprom securities.
    The manager refused to discuss the terms of the loan. Deutsche Bank and Robert Eriksson, from the investor relations and media contacts department at Vostok Gas, also declined to comment.
    Pavel Naumenko, head of the securities department at Renaissance Capital, said margin calls were the plague of the Russian market. They have not provoked the fall on the market, but have seriously complicated it.
    Ruben Vardanyan, the largest beneficiary of Troika Dialog, said margin calls had triggered a domino effect. "Large beneficiaries and even some minority shareholders" bought securities and used them as a pledge to buy other assets, he said. When the value of the pledges plummeted, they started selling them, thereby accelerating the fall.
    Gazprom lost 39% of its value last week, breaking all negative records on the trading floors.
    Timur Nasardinov, the chief trader of Troika Dialog, said between 3% and 4% of Gazprom shares changed hands on the LSE, adding that Vostok Gas added to the gas monopoly's troubles, because it certainly sold its stake on the market.


    No benefit for TNK-BP's minor shareholders from shares buyout

    Yesterday Kommersant found out that on October 8 TNK-ÂÐ shareholders voted against admitting four subsidiaries to the holding, therefore denying minor shareholders the opportunity to sell their stocks at a high price. Had they been able to sell their stocks, TNK-ÂÐ would have needed over 40 billion rubles to buy them out. Given the present financial crisis, the company would have been unprepared for such expenditure.
    The need to reorganize TNK-BP Holding, which owns Russia's TNK-BP assets, was justified by the necessity to avoid double taxation, which occurs if sudsidiary companies (SIDANKO-Neftepererabotka, SIDANKO-Investments, SIDANKO-Securities and Sborsare Management, which account for the holding's 5.36% of ordinary stocks) receive dividends from a holding and then return funds to it.
    A month ago the holding informed its minor shareholders about their new right to sell their shares if the company started a reorganization process. The buyout terms were more than lucrative: 48.94 rubles per share and 11% bonus against the price of ordinary stocks, and 40% against privileged ones. But the right to sell stocks at this price would have appeared only if a decision to reorganize the company had been made, a source with the company explained.
    TNK-BP made no comment on the shareholders' decision. A company source said the decision was connected to the financial crisis. According to the source, under present market circumstances the company was likely to have difficulty paying for the shares it would have had to acquire (a lot of shareholders would have tried to sell their stocks under the beneficial offer terms). Buying out all minor shareholder stocks (3.3% of ordinary stocks and 5.1% of the holding's authorized capital) would have cost the company over 40 billion rubles. Yesterday the offer's price exceeded the market cost of the holding's ordinary stocks by 87%, and the privileged ones by 108%.
    "This news is certainly disappointing to minor shareholders," UnicreditAton analyst Artem Konchin said. "Yesterday shares dropped on this news: shareholders kept their stocks hoping that the holding would buy them out: ordinary - at 26%, and privileged - at 18% more than the market bid." However, the analyst added, under the present circumstances the basic shareholders' decision is understandable.
    The analyst did not rule out that if the market situation improves, TNK-BP will resume the reorganization issue. Vitaly Kryukov from the Kapital investment group also believes that the company has merely postponed the matter. In his view, it would have been difficult to predict such a drastic change in the market a month ago.

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