MOSCOW, September 20 (RIA Novosti)

Nezavisimaya Gazeta


The unheard-of social spending slated by the 2006 draft budget has led some experts to predict a possibility of future revolutionary changes in the government's domestic policy.

Mikhail Delyagin, director of the Institute for Globalization Problems, says that the draft budget illustrates one single problem: the government has no idea how to spend the money and it is going to "think of it later."

Moreover, the Russian president's latest statements about increased social spending look very much like a revolution in the official state policy, the expert says. "His speech was of purely pre-election character, which means that an election campaign has been launched," he maintains.

He makes another point to prove his case. "The same can be seen in the Finance Ministry, which has always defied any PR and openly ignored people's opinions," he says. "Suddenly they put out a document titled 'The Budget Policy in 2006-2008', which is purely advertising." He believes that early elections will be held in the parliament and it will soon change its status.

Delyagin suggests that the State Duma will soon receive new powers, those of appointing president. "The president's third term would be too scandalous, while giving the State Duma new powers, raising its status will help the authorities to solve the problem of 2008," he argues.

Ekspert No. 35


Russia can use the North European Gas Pipeline to improve its economic and political positions in Europe. Still experts are warning of a possible future setback, unless Moscow diversifies gas exports.

Any positive shift in energy and political relations between Russia and Europe does not guarantee a prosperous future to Moscow. An even more pessimistic scenario highlights the EU's striving to diversify energy consumption. "European authorities are simply obsessed with the idea of getting rid of their energy dependence on Russia," Dmitry Yevstafyev, an analyst with PIR Center, said. "Instead of pumping more natural gas to the EU, Russia may eventually face a reduction or stagnation in gas exports because of gas supply diversification, a switch-over to alternative energy sources and advanced liquefied gas technologies. Moscow would deliver 80-90 billion cubic meters of gas, rather than 136 billion cubic meters. The EU would buy the rest in the form of liquefied gas from Persian Gulf countries. Add to this Turkmen gas transits under the Black Sea and via Ukraine," he stressed.

"The North European Gas Pipeline will help Gazprom to preserve, not strengthen, its positions on the European market. We must build additional gas pipelines, while gas consumption is on the rise. But stagnation or even reduced European energy demand are likely to set in a few years' time," Mikhail Korchemkin, the managing director of the East European Gas Analysis consulting company, noted.

Most experts believe that Europe would face a local economic crisis, if it rejects Russian gas. The EU would survive such a crisis that would spell far-reaching economic problems for Russia.

"Russia should diversify its exports if the EU diversifies its imports. Two giant nations, India and China, are now moving away from energy sources, i.e. coal and hydroelectric power stations meant for poor economies, and opting for more advanced energy carriers, such as natural gas," Yevstafyev said.



Polyus, Russia's leading gold miner and a Norilsk Nickel subsidiary, bought more than 50% of the largest Yakut gold deposits containing nearly 900 tons from the Russian diamond monopoly IG ALROSA yesterday. As a result, Ireland's Celtic Resources, a long-time ALROSA partner, has lost any hope of controlling these deposits.

Celtic Resources, which has already invested millions of dollars into Yakut deposits, has accused Russian authorities of aggravating the local investment climate and promised to fight a courtroom battle for Yakutia's gold.

"We have acquired assets with a unique potential, moving to establish a world-class Russian gold-mining company, as this is a key factor of our strategy," Polyus president Yevgeny Ivanov said.

"Polyus has bought 99.2% of the Aldanzoloto GRK gold-mining company's shares, a 50% stake in the Yuzhno-Verkhoyanskaya mining company and 100% of the Yakut mining company's shares," Denis Davydov, head of Polyus' PR department, noted. The entire deal is worth $285 million, with $115 million already paid by Polyus.

The Russian Natural Resources Ministry believes that foreign companies should not bid in an auction for the sale of Russia's largest Sukhoi Log gold-ore deposit (Irkutsk region, Eastern Siberia). This deposit has more than 1,000 tons of gold; and average gold content is 2.7 grams per ton of ore. Local ores also contain platinum and other platinum group metals. Polyus, which now produces more gold than any other Russian company, will soon become a major player on the international gold market.

It seems that international courts alone can hinder this process. From now on, Polyus lawyers will have to defend the company's rights to newly purchased assets in court because the Yakut deal pits Polyus against several leading foreign companies operating on the gold market.



Russian oil companies unanimously agreed yesterday to freeze the prices on oil products on the domestic market until the end of 2005. Experts believe that their unexpected compliance is explained by a wish to demonstrate social responsibility and avoid a change in the taxation of the oil industry proposed by the Economic Development and Trade Ministry.

The decision was made at the meeting of representatives of LUKoil, TNK-BP, Rosneft, Sibneft, Surgutneftegaz and Tatneft with Industry and Energy Minister Viktor Khristenko. The oil producers agreed to do this, but stipulated that their move had not been forced by a government resolution, an official spokesman of the ministry said.

To extend a short-term effect, LUKoil, Russia's biggest oil company, has suggested implementing a traditional set of measures: giving up tying the mineral production tax to an export price of oil, stimulating diesel fuel consumption (in particular, by reducing the customs duties on the import of foreign cars) and encouraging big investment in modernizing oil refining. It is easy to see that in this case LUKoil would derive the biggest profit.

The oil producers made this decision in response to the Economic Development and Trade Ministry's proposal to introduce a 100% tax on profits from the export of oil, if its price exceeds $27 per barrel, said Andrei Gromadin, an analyst with the MDM bank. At the same time it was suggested that the mineral extraction tax not be tied to the oil price, something the oil producers have been insisting on for a long time. But, according to Gromadin's estimates, compensation would be unequal, as more profit would go to the government if the new plan were adopted.

This explains why the oil companies decided to forestall this damaging move and demonstrate their willingness to cooperate, having agreed not to raise prices for some time.

Market operators believe that, in fact, the companies lose nothing. "The prices have already stopped climbing, and by the end of the year they will start going down," said Yevgeny Arkush, president of the Moscow Fuel Association. Experts explain this tendency by a seasonal decline in the demand for motor fuel and also by the fact that in winter some of the sea routes of fuel export cannot be used.



There is a plan on the drawing board in the Ministry of Education to conduct drug testing on all high school students and those planning to enter a university. The results of these tests might become a prerequisite for entrance into a university or school of higher learning, Andrei Fursenko, Education and Science Minister, stated. Human rights advocates say that the ministry's planned drug testing program is completely at odds with the basic principles of the Constitution.

"No country in the world uses the method of mandatory testing, however, there is an urgent need to do something now," Sergei Apatenko, head of the youth policy department of the Education Ministry, believes.

The Federal Service for Narcotic Drugs and Psychotropic Substances Control (Gosnarkokontrol) has been lobbying for a state campaign to identify student drug users for several years now. Official statistics say that nearly 150,000 Russian teenagers are using psychotropic substances regularly. Police officers assigned to narco-squads say that figure is way too low. Claiming that the number of "junkies" is five times greater than official statistics.

In the spring of last year, the Service signed an agreement with the Primorsky (Maritime) territorial council of university rectors: students that are drug users will be automatically dismissed from their institutions of higher learning. It is proposed that information concerning drug addicts should be received from the police and clinics because the territorial authorities did not dare to test all students.

The youth law, adopted by Moscow authorities, requires annual clinical examinations of all students, which may or may not include the possibility of testing them for drug use. However, the administrations of university level institutions wouldn't dare adopt such a policy because it is contradictory to federal legislation.

Leo Levinson, head of the New Drug Policy public organization, believes that mandatory testing will violate the basic principles of the Constitution - the presumption of innocence and the right to private life. "In our country statistics about stealing is no less impressive than one about drug addiction," he says. "However, no one suggests that all metro passengers be searched in order to find out if they are thieves."

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