Vedomosti
Russia Hurries To Pay Off Paris Club Debt
Russia is in talks with the Paris Club over the early repayment of 30 billion euros (84% of the country's sovereign debt) in 2005-2007. The agreement may be signed before the end of the year, Vedomosti reports.
There could not be a better time for negotiations. Germany (who Russia owes 42.5% of its debt) and France (7%) have been violating the provisions of the European Stability and Growth Pact for three years. Italy (12% of the debt) has been warned against a possible violation of the pact this year.
Under the pact's terms, euro-zone countries should not run a budget deficit of over 3% of GDP. If this happens, they are expected to remedy the situation within a year. If they fail to do so, they will have to pay a fine of 0.5% of their GDP. However, slowing growth and stagnation in the euro-zone's biggest economies, i.e. Germany and France, have led to the pact being criticized. The main reason for the discontent is that it does not allow an economy to be stimulated using budget and tax policy methods. However, the pact cannot simply be annulled. The EU authorities turned a blind eye to Germany's and France's violations, and the two countries did not pay the due fines of about 12 billion euros.
Worse still, another four euro-zone countries are on the verge of violating the pact, and the pressure on France and Germany is mounting. They need money to reduce their budget deficits from 3.9% to 2.9%, and from 3.7% to 3% respectively.
In these circumstances, Russia's early debt settlement will be timely and will secure additional benefits for the country. First, Finance Minister Alexei Kudrin said $700-900 million a year would be saved on paying back interest, which would also facilitate debt servicing in the future. Second, creditors may well make concessions on the sum of the debt, considering their financial needs.
But most importantly, the Stabilization Fund will not be completely spent on dubious mega-projects, as money would be channeled toward debt servicing.
Commersant
Moscow Mayor Criticizes Key Federal Reforms
Yesterday at the President Hotel, the regional heads of the Central Federal District summarized the results of 2004. Moscow Mayor Yuri Luzhkov suddenly shifted the focus of his speech to the interests of the governors and accused the federal government of "anti-constitutional" intentions, Commersant reported.
Mr. Luzhkov's major concerns were about the new plans for dividing responsibility between central and regional authorities. "Governors will be deprived of control over their regions," he said, "and will become nominal representative figures." As evidence, he cited a new law on the complete substitution of benefits with monetary compensations. This law, according to Mr. Luzhkov, "crassly infringes on the rights of the subjects of the Russian Federation," and in particular deprives them of the right to provide financial support to law enforcement agencies, cultural institutions and Russians abroad. Mr. Luzhkov said that such laws, devised by the "chief accountant," Finance Minister Alexei Kudrin, are anti-constitutional, and "neither the country, nor the President needs them."
Meanwhile, during the discussion of this law, which was adopted in the summer of 2004 and supported by the majority of Moscow deputies in the United Russia party, neither the mayor nor his supporters in the State Duma said that the law would infringe on constitutional rights. Therefore, yesterday's revelation is probably not about monetary compensation, but rather a different law that Mr. Luzhkov only dared to mention indirectly. Rejecting the artificial limitation of governors' authority, Mr. Luzhkov suddenly said that Russia would never become a unitary state because "none of the prominent figures in the government are capable of ruling such a vast and diverse country as Russia."
The December 15 law that abolishes the popular election of governors references a unitary state. However, when the president proposed the law at a cabinet meeting on September 13, Mayor Luzhkov was one of the first to support him.
Vremya Novostei
Government Liberals In Defense Of Russian Business
Russia's mid-term socio-economic development program for 2005-2008 may become the liberal economic manifesto of the authorities, or rather, of the liberal part of the cabinet. Several near-sensational statements punctuated a discussion of its text in the State Duma, writes Vremya Novostei.
Finance Minister Alexei Kudrin said that the term "presumption of guilt" could not be added to tax legislation. The tax system stipulates that law-abiding taxpayers pay taxes and inspections only target suspect areas.
Economic Development Minister German Gref went even further, proposing a way to protect business from the tax agencies. According to him, in some countries businesses may request an audit of their tax reports. This is done before a company emerges on the market so that it can show investors that it is "clean." If the tax agencies have claims on the said company after that, so much the worse for them, the minister said, as they would not be able to present them.
In addition to methods of calling the tax agencies to order, the minister expects to complete privatization by selling the remaining property that the state does not need within three years. "The only question is: Do we have the political will not to discuss the strategic importance of each enterprise?" Mr. Gref said.
Rossiiskaya Gazeta
Will Yugansk Auction Be Held?
Yesterday, a Houston court started hearing Yukos's petition for bankruptcy. The company filed the petition to contest the December 19 auction of a 77% stake in its main production unit, Yuganskneftegaz, reported Rossiiskaya Gazeta.
Deutsche Bank officially objected to Yukos filing for bankruptcy in a Houston court. Yukos's action could seriously damage the bank's interests, because the bank was preparing to grant a large loan to Gazpromneft, a bidder in the Yugansk auction.
"We are disregarding the commotion in America over the auction because we are acting within Russian legislation," said Alexander Komarov, a representative of the Russian Federal Property Fund, the organizer of the auction.
Alexander Shokhin, chairman of the Coordinating Council of Russian Business Unions, agreed, "the bailiffs' decision to hold the auction is absolutely legal." He suggested that Yukos's suit in Houston was an attempt by the company's management to save itself.
Russia and the US do not have an agreement on the mutual recognition of court decisions. Under American law, a company with assets in the US may use the US judicial system. The Moscow Arbitration Court called Yukos's actions illegal because Yukos is registered in Russia and therefore arbitration hearings concerning the company are only legal if they are held in Russia.
If the Houston court rules in favor of Yukos by placing an injunction on the auction, hypothetically, the company will have the opportunity to file claims against the buyer of Yuganskneftegaz outside Russia. The scandalous Swiss company, Noga, attempted this trick several years ago and had Russian ships arrested for alleged Russian debts and tried to seize Russian fighters at a Paris air show.
Mikhail Khodorkovsky, the former Yukos CEO, stated yesterday that the petition filed in a US court would not help the company's management protect shareholders from creditors.
Izvestia
Minimum Wage To Be Raised In Russia
By May 2006, the minimum wage for public sector workers will be raised from 600 to 1,100 rubles ($1 equals 27.8 rubles). State Duma deputies adopted an amendment to this effect in the second reading yesterday. By 2008 (when the next parliamentary elections are due), the United Russia party, which has a majority in the Duma, promised to bring minimal wages into line with the minimal subsistence level (now 2,396 rubles), Izvestia reports.
Mikhail Zurabov, the health and social development minister, believes that if the minimum wage exceeds a certain level (e.g. 800 rubles), regional budgets may suffer a deficit that could entail forced redundancies in public sector organizations, transforming the minimum wage from an economic into a political indicator.
However, the United Russia faction held consultations before the Duma plenary session and decided to raise the minimum wage to 720 rubles from January 1, 2005, to 800 rubles on September 1, and then to 1,100 rubles on May 1, 2006. Therefore, within a year and half (from late 2004 to May 2006), public sector workers will have had their wages increased by 84%, which, though not reaching the minimal subsistence level, will at least cover inflation, said Andrei Isayev, the head of the Duma committee for labor and social policy.
