Noviye Izvestia
Ukraine Crisis Will Have Repercussions for Russian Economy
Experts are largely pessimistic in their forecasts about the consequences of Ukraine's "orange revolution" for the Russian economy.
Viktor Vereshchagin, deputy director of the Expert Institute, believes the Russian economy has already been hit by the fall-out of the political crisis in Ukraine, as Ukrainian business has suspended contacts until the situation there becomes clear. "If forces that are unfriendly towards Russia come to power, the property of big Russian business in Ukraine will be put under a question mark," Mr. Vereshchagin believes. According to the expert, major fuel and energy, metallurgic, automotive and other companies may lose from $10 to $100 billion.
Andrei Shastitko, deputy director of the Bureau of Economic Analysis, said Ukraine's banking sector was a weak point. "If it is affected, the real economic sector will encounter difficulties, including in transferring money to Russian partners," Mr. Shastitko told Noviye Izvestia. However, the expert believes certain sectors of the Russian economy that are rivals for their Ukrainian counterparts may even benefit from the crisis. This is particularly true of the metallurgic sector. Relatively cheap Ukrainian metal has been a headache for Russian producers.
Mikhail Delyagin, the head of research at the Institute of Globalization Problems, does not agree with the opinion. Some Russian metal works might benefit temporarily from an economic collapse in Donbass, an industrial region in eastern Ukraine. However, Ukrainians who will lose their jobs will then come to Russia. According to Mr. Delyagin, metal plants will have to spend all they earned from the collapse of their Ukrainian rivals on social support for the unemployed.
The disorganization of Ukraine's financial system is a more urgent threat, the expert believes. The situation may deteriorate in the future. "Gas pipeline tapping may begin [nearly 80% of Russian gas is exported via Ukraine] not for financial purposes, but to survive the winter during the crisis," said Mr. Delyagin.
Vedomosti
India To Pay $2 Billion for Russian Weaponry
President Vladimir Putin will visit India on December 3-5, when contracts for the delivery of Russian submarines and aircraft, which are worth at least $2 billion, may be signed. A Russian delegation led by Defense Minister Sergei Ivanov has already arrived in New Delhi to discuss the upcoming deals in detail.
Vedomosti learned at a military complex enterprise working on Indian contracts that India was "highly likely" to sign documents on the ten-year lease of two decommissioned Project 971 Shchuka nuclear submarines, which are currently at the Amur Shipbuilding Yard. Besides this, the countries may sign a contract for the delivery of two Project 877 Varshavyanka diesel submarines and three or four Tu-22M3 medium-range bombers.
The re-fitting of one Shchuka submarine is 70% complete (the other is 30%-40% complete) and will cost India at least $400 million, while the leasing fees will be around $25 million a year, according to a source with knowledge of the situation at the shipyard.
Marat Kenzhetayev, an expert at the Center for Disarmament Studies, said the refits, the construction of coastal infrastructure, and crew training may bring Russia $2 billion. The Shchuka submarines will probably be equipped with Bramos anti-ship missiles developed by Russia and India. These missiles can also be installed on Tu-22M3 bombers. According to Mikhail Barabanov, a naval expert, India's Navy will thereby secure superiority over its neighbors, including Pakistan and China, in the Indian Ocean in the long term.
Moscow Defense Brief Editor Ruslan Pukhov said talks on the sale of another three Project 1135.6 frigates (a contract for the sale/purchase of three frigates worth $900 million was implemented this year) and Amur type submarines will begin after Mr. Putin's visit.
Gazeta
Gazprom May Become the Largest Oil Company in the World
On Tuesday, Gazprom made public its plans to establish the largest oil and natural gas company in Russia and in the world through Sergei Bogdanchikov, chief of its subsidiary Gazpromneft. According to these plans, Gazpromneft may take over Yuganskneftegaz, Sibneft and Surgutneftegaz, Gazeta writes. Gazprom's board of directors, Mr. Bogdanchikov said, has accepted a proposal made by Deutsche Bank, Gazpromneft's strategy adviser, which promotes the company's development by acquiring majors like Sibneft, Surgutneftegaz and Yuganskneftegaz. "As Rosneft's integration into Gazprom's structure has coincided with the Yuganskneftegaz sale (77% of the shares), it would be logical to use this opportunity," he said.
Experts doubt that establishing such a giant in Russia is economically advisable. "Major state-run companies are managed less efficiently than private ones, and enlargement does not mean improvement," said Maxim Shein, an analyst with BrokerCreditService. These plans can only be seen in terms of geopolitical interests. The raw-material factor is one that allows the country to influence the international community. Russia has a lever to influence Europe, as the latter greatly depends on Russian gas supplies. If the world's biggest oil company is established and then controlled by the state, Russia will be able to exert considerable influence on global oil prices.
Moreover, a major oil company will enable the government to regulate the supply of oil products to the domestic market, including for the Defense Ministry.
Considering that Gazprom controls over 80% of Russia's natural gas market, it may be conjectured that it will seek a similar position on the oil market. However, managers at the companies on Gazprom's list prefer not to believe the plans of the gas monopoly. LUKoil and TNK-BP see Gazprom's statementsas unrealistic, and have made no comment on them.
Nezavisimaya Gazeta
Audit Chamber drafts mechanism to return major companies to the state
When addressing the latest congress of the Russian Union of Industrialists and Businessmen, President Putin assured business representatives that privatization results would not be revised. However, Nezavisimaya Gazeta writes, there is an impression that officials are moving to annul the privatization results de facto. The Audit Chamber has published the text of an analytical report called "An Analysis of State Property Privatization Processes in the Russian Federation in the 1993-2003 Period." Interestingly, Audit Chamber Chairman Sergei Stepashin long ago pointed to the advantages of nationalizing major Russian companies.
Privatization results may be revised. According to the Audit Chamber, privatization has produced few social benefits, while principles pertaining to the equality of citizens and consideration for the interests and rights of all social strata have not been observed.
The Audit Chamber report focuses on loans-for-shares auctions. The document's authors list a number of companies whose privatization rules they believe could be questioned: TNK, Yukos, Sibneft, Slavneft, Sidanko and some others.
This document stipulates a number of methods for restoring the status quo. One of these is currently being implemented with regard to Yukos. The report reads that the Audit Chamber's checks and the facts provide legal grounds to recognize individual deals as invalid within the statute of limitations. Therefore, subsequent proceedings on annulling privatization results could be instituted under a simplified concept based on precedent.
Vladimir Putin's speech at the national congress of judges yesterday supported Sergei Stepashin's intention, albeit indirectly. According to the Russian leader, oligarch groups are to some extent still trying to exert pressure on the authorities. "We are fighting this and will continue to do so in the future," the president stressed.
Kommersant
Russian Painters Break Records at London Auctions
An auction of important Russian pictures at Christie's was a great success. Four paintings were sold for over $1 million each. One of them, Aivazovsky's "St. Isaac Cathedral on a Frosty Day" was bought for a record $2 million, Kommersant reports.
Buyers from Moscow and St. Petersburg, as well as some dealers and collectors from Paris, attended the event at Christie's in King Street. The auction began with less expensive items, as the catalogue is always drawn up to allow buyers to "warm up" before the main attractions go under the hammer. This precaution, however, proved to be unnecessary: there was competition even for relatively inexpensive pictures. A work by Nikolai Sverchkov easily entered the record books, when his painting "Emperor Nicholas II and Kaiser Wilhelm I in a Horse-Drawn Carriage near the Petropavlovsk Fortress" was sold for Ј300,000 (the auction house's commission of about 12% will be added to the final sum). The buyer was an anonymous collector, and the director of Christie's Russian division, Alexis de Tiesenhausen, received his bids over the phone.
A preliminary valuation of Aivazovsky's "St. Isaac Cathedral," which was painted in 1891 and already publicly auctioned 15 years ago, was Ј1-1.5 million. The auctioneer opened the bidding at Ј550,000, but it went very slowly and cautiously, with long pauses, both in the room and on the phone. Finally, the record was broken and the painting sold to an anonymous buyer for Ј1 million ($1,889,000).
Immediately afterwards Ivan Shishkin's "Forest Landscape" was sold for Ј680,000, a record for the painter.
Konstantin Somov's small painting "The Stroll" (1918) was likewise sold for a record Ј220,000.
There was also unprecedented bidding for an Ilya Repin picture. His sketch for the painting "Portrait of the Painter's Family in an Apartment at the Arts Academy in St. Petersburg" (1905) was sold for Ј900,000. The final sum will be $2 million.
Bidding for the "Street Seller in Ancient Greece" by Genrik Semiradsky, an academic and elegant painter, stopped at Ј650,000.
