MOSCOW, March 14 (RIA Novosti) Russia's chief election official dismissed/Not enough oil for Eastern pipeline - Fradkov /Total to be checked for compliance with environmental legislation/Unpleasant surprise for Korean investors on Russian coal deposits/Banks have few secrets left
Vedomosti
Gazeta
Russia's chief election official dismissed
It seems that President Vladimir Putin did not trust the chairman of the Central Election Commission to hold parliamentary and presidential elections in 2007-2008. Alexander Veshnyakov was not on the list of commission members signed by the president yesterday.
Now, someone more loyal to the Kremlin administration will be counting the votes for Putin's successor. Veshnyakov, however, may get elected to the Russian parliament with a left-wing party and take a leading post there.
Veshnyakov quarreled with United Russia, the pro-Putin party that has a majority in the parliament, last summer, said a source in the Kremlin administration.
He criticized the adoption of amendments that allowed the banning of parties or candidates from elections for making extremist statements, and objected to abolishing the minimum voter turnout requirement.
At the same time, he began siding with Sergei Mironov, chairman of the upper house of the Russian parliament.
Veshnyakov supported his Russian Party of Life, the predecessor of the recently formed left-wing party Just Russia, in the Supreme Court in the autumn 2006, while his deputy Oleg Velyashev and commission secretary Olga Zastrozhnaya supported the party's return in the election race in the Kirov Region.
"He began viewing himself not as just the arbitrator of how election legislation is abided by, but as an actor in the political process," said Vitaly Ivanov, vice president of the Center for Current Politics in Russia, commenting on Veshnyakov's absence from the list.
A source in Mironov's party said that after the meeting with the president March 13, Veshnyakov met Alexander Babakov, secretary of Just Russia's central council. Babakov yesterday said that he suggested Veshnyakov join the party.
A source in the Kremlin administration said he could have been promised a seat in the new parliament.
The new chairman of the Election Commission is certain to be someone out of the five members endorsed by the president.
Observers have named Vasily Volkov, who has been on the president's list three times, as the frontrunner for the position. A source in the Kremlin administration and a Commission member with a consultative vote, Vadim Solovyev, are of the same opinion.
Dmitry Badovsky, deputy director general of the Institute of Social Systems, said: "The main factor in the upcoming elections will be administrative resource, so Volkov's sphere of responsibility is thoroughly calculated. He will be able to control anti-extremism efforts during the campaign."
Kommersant
Not enough oil for Eastern pipeline - Fradkov
On Tuesday, Russian Prime Minister Mikhail Fradkov visited Yakutia, a republic in northeast Russia, and inspected a 730-kilometer stretch of the incomplete 2,700-kilometer oil pipeline network, due to link Taishet in Russia's Irkutsk Region with Skovorodino in the Amur Region on the Pacific coast.
But he said the pipeline is unable to reach design capacity as planned because the region lacks oil.
The ambitious $11 billion project, due to be completed in December 2008, will not pay back before 2025, unless Eastern Siberia boosts annual oil output by 50 million metric tons.
Russia's Deputy Natural Resources Minister Alexei Varlamov said the pipeline's first stage will only pump about 30 million metric tons of oil per year if Eastern Siberia and Yakutia expand production.
The entire network is to pump 80 million metric tons of oil per year after its second stage is commissioned in 2012.
Deputy Industry and Energy Minister Andrei Dementyev, who accompanied Fradkov to Yakutia, said the pipeline will be filled to capacity by 2020-2025.
He said the region must receive $102 billion worth of federal and private investment by 2020 in order to ensure a steady hydrocarbon production increment.
Consequently, Eastern Siberia and Yakutia would produce 40 million metric tons of oil by 2015 and boost output to 80 million metric tons by 2025.
However, the projected pipeline is barely cost-effective because oil companies invested just 30% of the required sum into the region last year.
Last fall, Natural Resources Ministry officials said the increment in extractable Eastern Siberian oil deposits totaled only 7% of projected targets.
Embattled oil giant Yukos, which has the right to develop the huge Yurubchensky deposit containing an estimated 282 million metric tons of oil in the Evenk Autonomous Area (Eastern Siberia), was to have provided the main regional production increment.
Eduard Rebgun, Yukos' court-appointed receiver, asked the Natural Resources Ministry not to revoke the licenses of the company's subsidiaries prior to the sale of corporate assets. After that, the deposit will receive a new owner.
In December 2006, the Ministry said state-owned oil major Rosneft, energy giant Gazprom and the Russian-British consortium TNK-BP do not fulfill licensing agreements on time.
Gazeta
Total to be checked for compliance with environmental legislation
Russia's Federal Environmental, Engineering, and Nuclear Supervision Agency (Rostekhnadzor) began an inspection March 13 of the French oil company Total, the operator of the Kharyaga oilfield in northern Russia, for compliance with industrial and environmental safety regulations.
The Russian Ministry of Natural Resources has accused Total of lagging behind schedule in the volume of production. The French company has been told it must raise oil production to the required level by the end of March.
The attack was not unexpected for Total, as the Sakhalin controversy has shown what partners in projects developed under production-sharing agreements (PSAs) should expect.
Shell, which Russia's technological standards watchdog accused of exceeding the cost of the Sakhalin II project, was pressured into selling a controlling stake in the project to energy giant Gazprom. It appears that it is now the turn of Total and its Kharyaga project.
The PSA regime entails an individual taxation system. By signing a PSA, the state actually confirms that its tax system does not satisfy the interests of long-term investment.
That is exactly what the Kremlin did in the past, but the situation has changed. Production-sharing agreements are now viewed as "tax partisans" to be fought in punitive operations.
The political aspect of the conflict is also transparent. In 2005, President Vladimir Putin set a goal of ensuring national control of strategic spheres of the national economy.
A relevant bill imposing limitations on foreign investors who try to get a foothold in strategic Russian sectors will be soon submitted to parliament and will formalize the role of foreign investors as junior partners.
The list of the 40 strategic sectors includes deposits of federal significance, which essentially means all deposits.
Politics has always had priority over law in Russia. Besides, relevant clauses or entire laws can be found to pursue a required policy, as demonstrated by the Sakhalin II controversy, where Shell was forced to give up a controlling stake although it did not directly violate law.
The Sakhalin controversy also showed that creating an atmosphere conducive to forcing out a foreign partner under a PSA is quite profitable.
Nobody intends to expropriate an investor's property, but he is put in a situation where he cannot refuse the buyer's offer.
Gazeta.ru
Unpleasant surprise for Korean investors on Russian coal deposits
South Korean investors are willing to acquire Russia's largest coal deposit. However, they risk facing a similar situation the Russian-British joint venture TNK-BP is dealing with now at another field.
A consortium that includes LG International Corp. and the state-owned company Korea Resources Corp. wants to take part in the Elgaugol project, which holds the license for the Elginskoye deposit in Yakutia, with proven reserves of 2.2 billion metric tons of coal. The Korean party is in talks with Yakutia on the upcoming auction.
Experts, however, said that the Koreans are not certain to win. Large Russian companies, including Renova, an asset management holding, Alrosa, the diamond monopoly, and Mechel, a steel and coal producer, are also interested.
"Foreigners will not get this nice bit," said Alexei Pavlov, head of analysis with the VIKA brokerage. "The most the Koreans can hope to get is contracts for future coal supplies."
"The Koreans are being used for a purpose," said Igor Nuzhdin of Bank Zenit. On the one hand it will help sell the assets faster, and on the other ensure competition, he said, adding that the government could buy some of Mechel's assets when implementing its plans to establish a special steel holding, and that this would give the company the money and motivation to win the coal battle.
If foreigners do manage to join the project after all, they may find themselves in a situation similar to the one TNK-BP is now facing on the huge Kovykta gas field in Siberia.
"The field requires a 320-kilometer (200-mile) railway, and only 60 kilometers (37 miles) have been laid," said Avi Roitman, mining analyst with 2K Audit - Business Consulting. "In that case, foreigners may become hostages of Russian Railways, [the state-owned monopoly] that controls all Russian railways."
Another risk lies in Alrosa's "habit of creating scandals," he said.
Losing at the auction, the diamond producer may well claim its rights to Elgaugol, as was the case with another Yakutian coal company, Yakutugol.
All the more so, as Alrosa can hope to get the 39.4% stake in Elgaugol, now held by the government of Yakutia, as it will be brought under state control.
"If the issue is raised, Alrosa will become one of the frontrunners for the assets," Roitman warned.
Biznes
Banks have few secrets left
Russia's financial regulator has initiated a bill that will oblige lending institutions to report about all transactions of their clients that exceed 600,000 rubles (about $23,000). Bankers are surprised, but most of them prefer not to push their luck and are already notifying the authorities of all large transactions.
Coming up with the initiative, the Federal Service for Financial Monitoring is pushing for the elimination of the words "economic activities of a client organization" from the law on money laundering.
At present, a bank may not disclose information on large transactions to the service if it believes that it is in line with the client's profile.
"To put it simply, if a bank sees that a shoe factory is buying pipes, then it has to report it to the service," said Alexei Sedov, head of financial control with the Bank of Moscow.
Yet most banks prefer to report all transactions exceeding 600,000 rubles in order to avoid trouble.
"As the notion 'economic activity' is extremely vague, banks are reporting as much as they can," said Alexei Kogorev, head of inter-bank market risks at Promsvyazbank.
A banker who asked to remain anonymous said that the initiative was just another act of intimidation.
"The Service decided to remind banks that it is keeping vigil," he said.
Alexei Gonus, deputy chairman of the board of Sobinbank, said: "The drive to improve control over operations is commendable, because we are also interested in clean client bases."
Kogorev, however, said that it would be another blow to banking secrets, although the bill would give banks clear instructions.
Anatoly Aksakov, deputy chairman of the parliamentary committee for lending institutions and financial markets, said that the bill's adoption could "increase information reported to the Service by 10%."
The increase, however, will create new problems for the financial service, bankers warned.
"It may not be able to deal with the future information flow," Gonus said.
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