MOSCOW, August 3 (RIA Novosti)
Government plans to spend more on Kuril Islands/ TNK-BP seeks new assets in Russia/ Alrosa diamond giant eyeing Baltic amber asset/ Chinese-designed cars to be made in Moscow Region
(RIA Novosti does not accept responsibility for the articles in the press)
Kommersant
Government plans to spend more on Kuril Islands
Russia's government will approve Thursday a new federal program for the social and economic development of the Kuril Islands. Over the next nine years, Russia will spend $1,000 per resident per month in a bid to show its cares about the isles, four of which Japan has claimed as its "northern territories." The $1,000 is 40% more than what the Japanese government spends on an average on each of its citizens.
The Kuril Islands will receive 2 billion rubles a year, with every islander qualifying for more than 300,000 rubles a year, which may make the Kurils the best budgeted region in Russia (nationwide spending per person in 2007 is set at 36,900 rubles). Kuril budget spending will be higher than in the Czech Republic and only 30-35% less than per capita figures in the United States.
One of the main declared objectives of the new program is "to make the Kurils an increasingly attractive place to live." Between 1990 and 2005, their population declined from 11,000 to just over 6,500, the worst figure for all Russia, with the exception of Chechnya.
The government explanation for the unprecedented investment is that seismic exploration on the island shelf has confirmed oil and gas. The islands also have gold and silver. In addition, they produce one-fifth of fish and other sea food in Russia.
A government source said: "Admittedly no one can administer the Kurils from Moscow, and as we discuss the program we will speak of creating normal conditions for economic development on the islands. This means establishing developed infrastructure: energy and transport."
The official, however, added that Russian investors were unlikely to stump up the cash. But he said if the government provided certain financial incentives, businessmen from China, Korea and Japan would be ready to approach the region.
Vedomosti
TNK-BP seeks new assets in Russia
TNK-BP would like to increase its oil refining capacities in Russia, possibly through buying refineries of the embattled oil company Yukos. Experts told the paper that the Russian-British oil venture would find it hard to buy the operating assets.
Anthony Considine, executive vice president, downstream, TNK-BP, said oil refining is a very profitable business in Russia because of the high export customs tariffs on oil. He said all market players would like to have more oil refining assets but they were too expensive.
The TNK-BP official said the Orsknefteorgsintez oil refinery his company sold to RussNeft, Russia's youngest oil company, late last year had been built some 50 years ago and was not designed to produce the high-quality petrochemicals in great demand. The company, he said, believes that the refinery's reconstruction will be too expensive. However, he did not specify what other oil refineries, except for Yukos assets, TNK-BP was interested in.
Denis Borisov, an analyst with the Solid brokerage, said only Yukos refineries could be sold now. Yet, Yukos's best assets - the Kuibyshevsky and Novokuibyshevsky oil refineries - are likely to go to Russia's state-owned oil company Rosneft, which does not have enough refineries but has plenty of friends in high places.
Energy giant Gazprom and its oil arm Gazprom Neft have already shown interest in the Angarsky petrochemical company. "TNK-BP is unlikely to cross their path but it still hopes the gas monopoly will develop the Kovykta oil field as soon as possible," Borisov said. As a result, TNK-BP could claim the rights for oil refineries in Syzran and Achinsk unless Rosneft wishes to buy them, the expert said. He valued the former at $700-$800 million and the latter at $450-$500 million.
Building a new oil refinery may be an alternative. According to Borisov, "it will be practical to build a new oil refinery with the refining margin of up to $6 per barrel. The index is $10 now, but two years ago it was much lower than $6." The expert said it would take about five years to develop and build a refinery, so similar projects are fraught with serious financial risks.
Gazeta.ru
Alrosa diamond giant eyeing Baltic amber asset
Russian diamond monopoly Alrosa is considering buying a bankrupt amber company in Kaliningrad, the westernmost region of Russia.
Experts told the paper that this "strange" interest was because the government was ready to support the deal as part of the nationalization of mining enterprises.
Anastasia Varechkina, managing director of AksionBKG, a management and investment consulting company, said Alrosa's interest in the amber company was strange. "Diamond companies are closed cartel organizations that seldom diversify production," she said.
"It is an interesting asset, because it accounts for about 70% of the world's amber output," said Igor Nuzhdin, an analyst with Solid brokerage. "But it is a very small company, with only $3 million in 2005 revenues, which is peanuts for Alrosa. Even if it revitalizes it, annual revenues will be about $11.6 million, which is not much for the diamond monopoly either."
But other experts said a promise of state assistance could encourage Alrosa's interest in the amber company. "Its interest in the company can be connected to the government's policy of nationalizing mining sectors," said Dmitry Ugolkov, chief analyst with the CentreInvest Group. "The amber business has a good future, which is why the so-called amber mafia is so proactive."
Despite the bankruptcy procedure, the company intends to keep up production. All of its output is sold directly at market prices, and about 30% (85 tons) is exported.
"This business has a good future and deserves attention," Ugolkov said. "Alrosa will most likely consolidate its business of producing precious stones and jewelry."
Biznes/Vremya Novostei
Chinese-designed poor man's minicars to be made in Moscow Region
Irito, a Russian group of companies and the leading importer of Chinese vehicles into Russia, has decided to start making them. It plans to build a plant in the Moscow Region. Experts told the paper that if its price is cut 25%, the Chinese small-car BYD Flyer could replace the Russian Oka economy car and compete with the Korean Daewoo Matiz.
Once the Economic Development and Trade Ministry gives its approval and an agreement on import breaks for assembly components is signed, construction will start on a plant capable of turning out 25,000 cars a year. The company did not disclose the completion date.
Irito said it had valuated ground-up investment at more than 1 billion rubles ($37 million). The company also said future plans provide for up to 40% of local production. But Yevgeny Shago, an analyst with the Region group of companies, said the Chinese were most likely to waive this arrangement and pay import duties on components: their manufacture in Russia is unprofitable, especially in small volumes. "In China the worker's wages are $50 to $100 a month, a sum no one in Russia will work for," he said.
Russian assembly, Irito said, will bring the Flyer's price down to $4,600 in barebone configuration (25% less than now). The company said "in present market conditions the Flyer will make the best economy car that is desperately needed by low-income groups."
Igor Rogozin, the director general of Alliance Motors, said even today the Flyer is the lowest-priced foreign car in its segment. "Its reduced price will increase its sales," he said.
Nor was Shago ruling out that with the price down the company will be able to market 25,000 units a year, although this looks doubtful. Since December 2005, when the BYD Flyer was first introduced to Russia, its sales have reached only 1,500.
