Vedomosti
Investment Bank Looking for Putin Successor
Can rival factions in the Kremlin agree on a successor to President Vladimir Putin? This question worries the analysts of the Renaissance Capital investment bank. The best variant for investors would be a successor who would continue reforms. Bankers say the worst possibility would be, in the absence of an heir, a third term for Putin. But in this scenario, reform would slow down anyway because officials will be busy struggling to keep their positions.
Ronald Nash, chief strategist of Renaissance Capital, says in his report on politics and the presidency released this week that from the Kremlin's viewpoint, the primary task for the next president should be to assume power without disrupting political stability. To attain this goal, the current administration should maintain control over basic power structures for the next four years. This is why reforms will slow down irrespective of who becomes Russia's next president.
There are no political institutions independent of the Kremlin, Nash writes. So the only threat to stability comes from an internal struggle in the presidential administration. The best variant for investors would be if power was assumed by a progressive official, whose candidacy was supported by two Kremlin groups, the security-related officials and the reformists.
Whoever takes over will find it difficult to push beyond the political boundaries. Thus the difference between Renaissance's two variants is smaller than it seems, Alexander Morozov, the leading HSBC economist on Russia, said. He recalled that former Prime Minister Yevgeny Primakov failed to implement his ideas.
Rory MacFarquhar, an economist with Goldman and Sachs, said the outcome of the battle was predictable. "Liberal economists are close to Putin's mind and security-related officials, to his heart," he said. "The heart will win." However, he hopes the successor will see that Russia's security depends primarily on the health of business.
An official at the Russian Ministry of Economic Development and Trade called on investors to wait: "Stability has a price, which is a slowdown of reforms."
Biznes
LUKoil Takes Offense
LUKoil, Russia's oil major, has taken offense at the decision by Lithuanian authorities to hold talks on the sale of Mazeikiu Nafta only with TNK-BP. Russia has a very weighty argument - its oil pipeline. No one is going to turn off the tap, of course. But Moscow may suggest that the negotiators might have difficulties if the talks go wrong.
"Ill-considered" was the word used by Ivan Paleichik, chairman of the LUKoil Baltia company, to describe the Lithuanian decision to negotiate the sale of Mazeikiu with TNK-BP. Moscow, however, could get Lithuania to reconsider its decision: the oil Mazeikiu receives is transported mainly through the Druzhba (Friendship) pipeline controlled by state-owned Transneft.
"If they deal with only one customer and do not explain what is wrong with the others, it may look like a case of corruption," Paleichik said. He expressed hope that all candidates would be allowed to participate. Apart from TNK-BP and LUKoil, international oil trader Vitol SA, Kazakhstan's Kazmunaigaz, and Polish PKN Orlen SA have shown interest.
Officials in Vilnius, however, believe TNK-BP best meets the requirements for a future owner. This, for example, is the opinion of Prime Minister Algirdas Brazauskas.
Analysts think the factor that weighed in favor for TNK-BP was its foreign majority shareholder. This gives the company certain guarantees of independence from Russian authorities. On the other hand, Lithuania's perceptions of LUKoil are a company overly loyal to the Kremlin.
Both Mazeikiu and TNK-BP are aware of the "pipeline argument." The Lithuanian holding's oil refinery has been brought to a near halt on several occasions because of failures in Russian oil supplies. TNK-BP had to say goodbye to the promising project of developing the Kovykta gas deposit in Eastern Siberia because the state was unwilling to relinquish pipeline control. Gas was to have been shipped to Korea and China via a private pipeline. However, it was later announced it would be transported by Gazprom, which said Kovykta export deliveries were not economical.
Kommersant
Vietnam to Buy Russian Warships
Rosoboronexport is preparing to sell two Type 11661 Gepard (Cheetah) small escort ships to Vietnam and plans to build two more similar warships at a buyer's shipyard. This contract, due to be signed by late 2005, will cost an estimated $300 million, experts and industrialists say. Captain 1st Class Pham Ngoc Minh, chief of staff of the Vietnamese Navy, visited Kazan in early October. And it seems that the contract's main provisions were coordinated during his visit.
Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies, believes that the entire Gepard contract package will cost about $300 million. In addition to these escort ships, Vietnam will receive naval weapons, helicopters, and accessories for assembling the Gepards.
St. Petersburg's Severnaya Verf (Northern Shipyard) offered the export-oriented Type 20382 Tiger corvette to Vietnam. The more heavily armed Tiger is almost as large as the Gepard. But Vietnam chose the less costly Gepard, while the Russian Navy had to spend $110 million on a Tiger-class corvette.
The Type 16661 Gepard-3, 9 small escort ship was developed in the early 1980s for ASW (Anti-Submarine Warfare) missions. The vessel is capable of firing on other ships and aerial targets. Each Gepard warship has two Uran-E cruise missile complexes with four launchers each, three Palma anti-aircraft missile/gun systems, one AK-176-M artillery system, and one Kamov Ka-31 Helix helicopter.
The keel of a prototype Gepard was laid for the Soviet Navy in Zelenodolsk in 1988. However, they cut that hull apart in 1989 because of military spending reductions. In 1992, the Russian government ordered four simplified Type 11661 escort ships, hoping to export them, but there were no orders. The Russian Navy also criticized these small-tonnage and lightly-armed warships.
Nezavisimaya Gazeta
Stabilization Fund: Convert to Dollars and Invest Abroad - Expert
Alexander Nekipelov, Vice President of the Russian Academy of Sciences, member of the Russian government's Competition and Business Council.
The Stabilization Fund can never be spent in rubles because they do not work effectively in Russia. In fact, they do not work at all. We should convert the Stabilization Fund money into dollars, take them out of the country, and put them in foreign securities.
Norway's Petroleum Fund, which was created to save surplus oil wealth for future generations, invests its assets in stocks and bonds. Russian authorities exchange the Stabilization Fund, as well as gold and forex reserves, for low-profit and extremely liquid securities. In other words, the Stabilization Fund, which mostly sterilizes excessive money supply, does not fulfill its direct functions.
Russia may face a number of problems, such as plunging oil prices, inadequate budgetary proceeds, subsiding economic growth, and even a recession. In this case, it would be very dangerous to invest considerable sums into the economy, as it would lead to runaway inflation.
The Stabilization Fund can also be used to import food or consumer goods. However, Russia's executive branch is unable to effectively organize such centralized imports because of inadequate control, all-out corruption, and lack of transparency.
Not using the Stabilization Fund will lead to serious losses. The Central Bank needs $50 billion in order to balance the forex market. Surplus reserves total about $100 billion, with lost annual profits amounting to at least $3-5 billion. It would therefore be wrong to invest this money into low-yield assets.
It is better to repay external debts ahead of schedule than to hoard money. However, simple arithmetic shows that when debt-servicing payments are 6%, there is no sense being in a hurry when we can invest in good securities and receive 10% interest on our money.
Izvestia
Must Russia Abolish the Death Penalty?
Most Russians are against abolishing the death penalty. But for the country, ending capital punishment once for all is an international obligation. Should the state, which has a moratorium on the death penalty, take the next step?
Dmitry Rogozin, co-chairman of the Rodina faction in the State Duma:
The decision to abolish the death penalty was not kosher - no referendum was held and no resolution passed by parliament. The decision was made single-handedly by then president Boris Yeltsin, who sought Russian membership in the Council of Europe, the so-called club of civilized states.
Actually the capital punishment issue does not concern democracy but rather the fight against crime pursued by the administration whether ruthlessly or not at all. The death penalty is more humane than life imprisonment for the despicable creatures that deserve it.
Regarding the Council of Europe, which is insisting on the abolition of capital punishment, we should just walk out. Russia does not need this organization.
Mikhail Margelov, chairman of the Federation Council's committee on international affairs:
Russia joined the Council of Europe of its own free will by assuming a series of commitments, including the risky one of abolishing capital punishment. Formally, the death penalty has not been abolished. This may well develop into another offensive against Russia by European ill-wishers, not only in anti-Russian rhetoric, but also in specific actions, complicating business relations with an unfriendly expanded European Union and retarding the implementation of agreements reached at the last Russia-EU summit. Moreover, this issue is sure to be used to subvert Russia's chairmanship of the G8.
Abolition of the death penalty coincides with Russia's European choice, as repeatedly stressed by President Vladimir Putin. Incidentally, the choice required considerable political will at the time.
