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    Russian Press - Behind the Headlines, December 30

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    Russia toughens anti-drug legislation\ Wave of gubernatorial sackings hits Russia\ Novatek: New market leader

    Moskovsky Komsomolets
    Russia toughens anti-drug legislation

    Federal authorities have set a threshold for how many narcotic plants grown in the garden can send Russians to prison.

    Officials approved a list of plants containing narcotic or psychotropic substances, and defined the large and exceptionally large amounts for the application of criminal charges.

    As reported by Moskovsky Komsomolets from the administrative offices of the Russian government, psychotropic plants include the blue lotus, psilocybin-containing mushrooms, mescaline cacti, coca plants, cannabis, white poppy, Hawaiian rose, salvia, khat and ephedra.

    Growing two cacti, four coca plants, 10 bulbs of poppy, salvia, ephedra, blue lotus or Hawaiian Rose, 20 marijuana plants or psilocybin mushrooms at home or on a plot of land is enough to earn a jail sentence. Such numbers of plants containing narcotic substances are now defined as a large amount. An exceptionally large amount starts from 10 and 20 units respectively for mescaline cacti and coca plants.

    Growing “large amounts” means at least 100 mushrooms, poppy bulbs or blue lotus, Hawaiian rose or salvia plants, at least 200 ephedra plants and 330 cannabis plants.

    Also, the Russian government has determined the amount of dried and ready-to-use plants considered to be an exceptionally large amount: more than three grams of the blue lotus, salvia or Hawaiian Rose, and six grams of cannabis, 10 grams of psilocybin mushrooms and 20 grams of coca or poppy. This also means more than 50 and 100 grams of mescaline-containing cacti and khat, respectively, as well as more than 30 grams of salvia, Hawaiian Rose and blue lotus seeds, more than 100 grams of mushrooms and marijuana, 250 grams of coca plants and cacti.

    Wave of gubernatorial sackings hits Russia

    In 2010, the Kremlin made a major shake-up among governors, replacing 18 regional heads across the country. Such political heavyweights as Moscow Mayor Yury Luzhkov, President of Tatarstan Mintimer Shaimiyev and President of Kalmykia Kirsan Ilyumzhinov lost their jobs. It seems this year the federal government has finished the job it started in 2000: it finally and utterly put down all the uncooperative regional leaders.

    Pollsters have voted Yury Luzhkov’s dismissal the main political event of the year. It is hard to disagree but it was the last in a series of governor sackings in 2010. All in all, 35 personnel decisions were made, with 18 regional heads removed from their posts, and 17 keeping their positions.
    A whole generation of regional governors, who openly or secretly opposed the Kremlin in the 1990s and the 2000s, has been removed from office and politics. Mintimer Shaimiyev, Murtaza Rakhimov, Yury Luzhkov and Nikolai Fyodorov were not just masters in their fiefdoms: they were politicians of nationwide importance. In the 1990s and 2000s, they were confident of their right if not to dictate their will to the federal government, then at least to voice their displeasure with Kremlin decisions. Their political independence particularly exasperated the federal center.

    Luzhkov, Rakhimov, Shaimiyev and others in no way can be described as opposition: they were all United Russia members and regularly contributed to its electoral successes at federal and regional ballots.

    However, the Kremlin had made up its mind to renew the gubernatorial corps. In a number of cases the process was quiet: in Tatarstan, Chuvashia and Kalmykia the presidents surrendered their powers at the end of their terms. Murtaza Rakhimov, president of Bashkortostan, had to step down before the end of term, but since he did not dare oppose the federal center openly, his resignation was relatively quiet.

    Finally, Yury Luzhkov openly locked horns with the Kremlin and was sacked. By that time, he had remained practically the last representative of his generation and had no one left to support him. This showed that the Kremlin had triumphed over a whole political trend, rather than an individual regional boss. The generation of old regional barons is gone forever.

    Currently, the Kremlin is facing a far bigger challenge: to ensure that its appointees work more efficiently than the former generation of regional leaders.

    One of the 18 gubernatorial dismissals stands out: Georgy Boos, head of the Kaliningrad Region, had to step down after one term in office. It was recognized he did not enjoy respect in the area. Boos’ interrupted career is not only his headache, but also the Kremlin’s. It emerged that not every presidential appointee is able to control a region. Perhaps, in 2011, it will become clear that in addition to being a good manager, a governor must be a political heavyweight.

    Novatek: New market leader
    This year saw a new frontrunner emerge in Russia’s gas sector. Novatek, an independent producer and the government’s new favorite, has beaten state-controlled giant Gazprom to tax privileges. Gazprom, with its market cap down about 60% from its pre-crisis level, is selling its core assets and downgrading production and export estimates.

    Novatek seems to have revived after influential oil trader Gennady Timchenko bought into its share capital. Timchenko acquired his stake in October 2008, when Novatek was valued at $11 billion; now its value has shot up to $36 billion. Since last spring, the company bought four major oil assets for $1.9bln excluding the new units’ debt, and boosted its reserves nearly 150%.

    Last summer, Novatek signed an agreement with Gazprom on future independent export of its liquefied gas from Yamal. Later this year, Novatek was granted significant tax privileges, something Gazprom had been asking for but never managed to obtain. As a result, Novatek’s market cap peaked at $29 billion in late October.

    Gazprom’s results are far less impressive this year. With market capitalization of $151 billion, down 58.3% from its pre-crisis level, it was forced to sell some of its oil and gas assets. Novatek bought a 25.5% stake in SeverEnergia from Gazprom and 51% of Sibneftegaz from Gazprombank. Gazprom halved its stake in Novatek by selling 9.4% to Gazprombank in December.

    Gazprom failed to negotiate tax privileges and lost its Mineral Tax battle with the Finance Ministry: in 2011, the tax will surge 61%, the first rise in five years. One of the major shareholders, German E.ON, divested Gazprom stake this year.

    What’s worse, the Russian natural gas monopoly now has to admit that U.S. shale gas is not a myth, and show more consideration toward its European customers, because its European exports will not regain their pre-crisis level in 2010 or 2011, said Denis Borisov, a Bank of Moscow analyst.
    Germany’s E.ON, WIEH and Wingas, France’s GdF and Italy’s Eni negotiated adjustments to its long-term contracts, which may inflict losses on the supplier.

    Gazprom is valued far below Novatek or Western majors by EV/EBITDA and P/E multiples, Borisov said. Some analysts predict modest growth in 2011, while others believe Gazprom is in for yet another difficult year. As for Novatek, most analysts agree that it still has enough growth potential.
    Gazprom could be more efficient than all Western majors and have greater market value, a company source said. However, this will only happen if the gas transport system is operated and financed by a separate entity, and if the gas giant is no longer forced to “voluntarily” sponsor social programs, and Olympic and APEC projects.

    Gazprom CEO Alexei Miller remains optimistic. He believes that Gazprom’s value is growing steadily and expects its market cap to exceed its pre-crisis level and reach a “fair” value. “My recommendation is to buy,” he said without elaborating.

    RIA Novosti is not responsible for the content of outside sources.

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