MOSCOW, October 25 (RIA Novosti) Ilim Pulp to sell 25% of its assets to International Paper/Shell agrees to act as Gazprom's contractor on Shtokman/Mineral resource tax benefits to be applied to continental shelf/Khodorkovsky inspires human rights foundation/Russia ranks 147th for press freedom
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Vedomosti
Ilim Pulp to sell 25% of its assets to International Paper
International Paper, the world's number one timber concern, will acquire a 25% stake in Russia's largest paper and pulp holding, Ilim Pulp. The sector's biggest transaction will be announced Wednesday. Ilim Pulp's owners will get up to $500 million from the deal, experts estimate.
A source familiar with the transaction said the parties will announce the sale of a blocking stake in the Russian company to the U.S. concern. Another source said that International Paper will buy a "non-controlling" stake in Swiss Ilim Holding S.A., which controls Ilim Pulp's key assets - about 90% of the Kotlas paper and pulp plant, the Pulp and Cardboard Plant, the Ust-Ilim timber-processing plant, Bratskkompleksholding, Ilim-Gofropak, and 51% in the St. Petersburg cardboard plant.
The parties will set up a new joint venture based on Ilim's assets, one of the sources said. The JV will acquire new assets in Russia, although it is not clear yet which.
Rivals were impressed by the transaction. Andrei Prokopov, CEO of the National Timber Industry Company, said it was epoch-making for the sector.
"Russia controls one-fourth of the world's timber reserves, and that is why the U.S. company wants to enter the Russian market," said Vladimir Krupchak, a member of the Russian parliament and former owner of the Arkhangelsk paper and pulp plant.
Russian pulp assets are undervalued, including because of country-related risks, and it is more profitable to buy them than to build new plants, said a businessman working in the industry.
Ilim Pulp's shareholders will generate a healthy profit from the deal. Prokopov estimates its 25% stake at $250-500 million, while German Lipkin, CEO of Lesprom Industry Consulting, said it could cost $300-400 million. Yet that is just the beginning, timber executives said, adding that International Paper could try to acquire a controlling stake in Ilim Pulp.
Gazeta.ru
Shell agrees to act as Gazprom's contractor on Shtokman
Oil major Royal Dutch Shell has offered Russian energy giant Gazprom its services as a contractor, to develop the Shtokman field, off Russia's Arctic shelf. Shell may be seeking to improve relations with the Russian government, which is carrying out extensive checks into the Sakhalin II in the country's Far East. Experts believe the least Gazprom will agree to will be a blocking stake in the project.
Developing Shtokman, even as a contractor, will bring companies large profits, so there will be enough candidates for participation in the project apart from Shell.
Observers believe Shell could settle the conflict in three ways. First, it can significantly increase Gazprom's stake in Sakhalin II. Earlier the gas monopoly's officials said they would like to obtain a blocking stake of 25% plus one share at least. Then the system of production-sharing agreements will not be reviewed, and the government will agree to raise the project costs to $20 bln.
Under the second scenario, Gazprom may gain a minority stake in the project. The costs will then be approved at $16-$18 bln and negotiations on the revision of PSA provisions will be continued.
The third scenario envisages a further confrontation, which may cause the government to refuse to increase the costs and to ask European courts to fine Shell on the grounds that the company is not honoring its commitments as the project operator.
Gaining profits from the sale of Sakhalin-II liquefied natural gas remains a priority for Russia. "A revision of PSA terms is aimed at giving Russia a larger profit. The government may wish to modify the project's profitability parameters," said expert Dmitry Abzalov from the Center for Current Politics. "Then Russia's stake will grow to 70%." However, he said, an alliance with Gazprom would benefit Shell most. "Transferring a large stake to the monopoly will enable Shell to avoid political, strategic and economic risks, if the company insists further that the terms of the agreement remain unchanged," the expert said.
Biznes
Mineral resource tax benefits to be applied to continental shelf
Following East Siberia, tax benefits on mineral resource extraction will be applied to oil and gas fields on the continental shelf. The Russian Economic Development and Trade Ministry plans to submit a corresponding bill to parliament next spring. Experts, however, believe that it could be passed much more quickly, as Gazprom, which now has the largest continental shelf reserves, will press for tax holidays.
Field developers waited for the bill for almost two years, but the final version, which was adopted last summer and will come into force in 2007, does not cover continental shelf or the Timano-Pechora oil and gas region, providing benefits only to East Siberian fields.
"As Gazprom has refused to involve foreign companies in developing the largest shelf field, Shtokman, thereby bringing the project out of the product sharing agreement category and under general taxation, it can speed up the adoption of the initiative," said Alexander Blokhin, deputy director of the Antanta Capital brokerage.
Other companies developing the continental shelf are Rosneft and LUKoil.
Although the mineral resource extraction tax accounts for about 9-10% of the total amount of taxes and duties paid by oil producers, its abolition will favorably influence both companies and the entire industry, experts told the paper.
"Applying benefits to shelf will definitely boost Russian oil production in general," said Natalia Yanakayeva of Center Invest Group. It will be beneficial for companies to invest free cash in further shelf development, because production will speed up and may be extended.
"If companies now plan to work on shelf for about 30 years, after the introduction of tax benefits, this term may be extended to 40-50 years," she said.
Infrastructure development will lead to a bigger number of oil wells, which will also contribute to producers' revenues. However, the first results from the change will not appear until production starts, i.e. in five to seven years, the analyst said.
Kommersant
Khodorkovsky inspires human rights foundation
On October 24, ahead of the third anniversary of the arrest of Mikhail Khodorkovsky, the former owner of Yukos, the foundation For Prisoners' Rights was established. It includes the most prominent rights advocates and the businessman's mother, Marina Khodorkovskaya.
Founders deny that the foundation has been set up to support the beleaguered oligarch, but admit that his name will help to attract additional attention to the human rights situation in Russia.
"Yes, we use his name quite cynically," said Lev Ponomarev, chairman of the Human Rights movement. "But the foundation is not set up for him. It is just that the world's attention is focused on him, and his case highlights the most typical problems that earlier remained unnoticed."
That is why the foundation's establishment was timed to coincide with the anniversary of his arrest, he said. "Now Mikhail is taking part in public life, even if indirectly," he said.
Rights campaigners speak of "mass beatings, torture, moral and physical humiliation, including forcing prisoners to strip naked, and even direct threats of rape."
"As far as we know, Russia has 20 torture prisons. The situation in the penal system deteriorates every day, and we have to act before this plague spreads to all Russian prisons, to break down this terrible mechanism of humiliation and destruction," Ponomarev said.
Foundation members intend to hire lawyers to represent prisoners, to contact local and federal authorities and even international institutions. Rights advocates admit that lawyers cost a lot of money, so they hope that the organization will receive financing from international foundations, and that Russian businessmen who have themselves experienced imprisonment will also help.
"Protection of prisoners' rights is very popular in the West and it is easy to get money for it," said Stanislav Belkovsky, president of the National Strategy Institute. "But this money should be given not by foreign foundations, but by Russian businessmen who have not been to jail yet, in order to prepare a retreat."
Vyacheslav Nikonov, president of the Politika Foundation, said "the establishment of the foundation could be a way for the Khodorkovsky family to invest its money."
Novye Izvestia
Russia ranks 147th for press freedom
Reporters Without Borders, an international journalists' organization, has published its global rating of press freedom. Russia ranks 147th out of 168 countries, down nine places from the previous year. One should not have expected anything else, experts told the paper.
Russia's position in the rating was affected by the recent murder of journalist Anna Politkovskaya, the organization's representatives said.
"Politkovskaya's death played a significant role in pushing us down," said Alexei Simonov, president of the Glasnost Defense Foundation. "But there were two other major reasons. The first one is that in the last five or six years, journalism has reconciled itself to absence of freedom. The other is state influence, exercised both directly and by making many publications municipal or city enterprises."
Igor Yakovenko, secretary general of the Russian Journalists' Union, said that although "there are many complaints about the methods used to rank countries, Russia's rating definitely corresponds to the reality in the country."
The union has recently completed its own monitoring of political events coverage in the mass media. "Over 90% of political information broadcast by national television stations and published in the newspapers with the greatest circulation is propaganda in favor of the United Russia party and the president," Yakovenko said. "So we can speak of a monopoly of information."
Rankings are unlikely to change the situation, although they do have some effect, experts said. "This is a game that is interesting even for those who do not care about freedom of speech," Simonov said.
However, television anchor Nikolai Svanidze, member of the Public Chamber, said that these ratings do not change anything. "The only thing they influence is the attitude of West European intellectuals toward Russia," he said.
"But will it bring a positive outcome? I am not sure. Western mass media begin pressing their authorities toward active antipathy toward Russia, which only leads to the opposite result."
