What the Russian papers say


MOSCOW, March 28 (RIA Novosti) Russia finds gas key to Europe/TNK-BP leaves Rosneft auction despite discount/Ex-premier admits mistakes/New gas pipeline to link Eastern Siberia with Pacific Coast/Rosoboronexport to conquer composites market

Gazeta, Kommersant

Russia finds gas key to Europe

Latvia will get "not the Pytalovo District, but the ears of a dead donkey," was the way President Vladimir Putin described a border dispute between Russia and Latvia a year ago, a bon mot that shocked the diplomatic community.
The tone set at a March 27 meeting between Prime Ministers Mikhail Fradkov and Aigars Kalvitis in the Kremlin was quite different.
They signed a border treaty that had been initialed 10 years ago, and also agreed that a major depot would be built for Russian gas in Latvia, from which it would be delivered to Europe.
A recent opponent of Nord Stream for environmental reasons, Latvia is now prepared to join the project to build a gas pipeline on the floor of the Baltic Sea, and has even proposed that the Russian gas monopoly Gazprom should use Latvian gas transportation infrastructure.
Some Russian experts worry that Russia has acted rashly.
Mikhail Demurin, former deputy head of the Second European Department responsible for Latvia at the Russian Foreign Ministry, said Moscow should not have signed the agreement without a declaration of intent with regard to bilateral relations.
Demurin, who is now a member of parliament, said Russia should have bargained harder, as the absence of an agreement did not complicate the protection of the border with Latvia.
The Kremlin should have pressed Riga for military-strategic guarantees, such as the non-deployment of NATO bases in Latvia, he said.
"By agreeing to sign [the agreement], the Kremlin has created economic opportunities for some and deprived itself of political levers of influence," Demurin said, adding that the agreement was probably lobbied by the oil and gas sector, namely Gazprom.
According to him, the issue concerns the construction of Nord Stream and a desire by Russian companies to use Latvian storage facilities.
One more reason that probably prodded Moscow to sign the border treaty could be the rapidly deteriorating relations with Belarus.
It is said increasingly frequently in Russia that the quarrel with Minsk is shifting the focus to the Latvian route for the transit of Russian oil and gas to Europe.

Nezavisimaya Gazeta

TNK-BP leaves Rosneft auction despite discount

A subsidiary of the state-owned oil major Rosneft has won the first auction of the bankrupt oil company Yukos' assets, living up to all expectations. The appearance of competition was created with the help of British Petroleum's daughter company.
The auction of 1 billion ordinary shares, or 9.44%, of Rosneft, and promissory bills of its production unit Yuganskneftegaz, with a nominal price of 3.56 billion rubles (about $137 million) took four minutes.
The players made nine moves. As a result, the lot price grew by just above 1%, from 195 billion rubles to 197.8 billion rubles.
Samotlorneftegaz, a subsidiary of BP's Russian joint venture TNK-BP, withdrew from the auction, although the market price of the stake in Rosneft alone fluctuated around 218 billion rubles ($8 billion).
Representatives of GroupMenatep Ltd, which controls 61% of the beleaguered Yukos oil company, were not admitted to the auction as observers.
Analysts believe that the role of Samotlorneftegaz was purely technical.
The company played along with Rosneft, because it is impossible to hold an auction without a second bidder.
However, the losing party pretended to fight to the bitter end. "We bargained as long as we considered possible, but, unfortunately, our bid was not high enough," said TNK-BP's representative, Alexander Sahdrin, after the auction.
Natalia Milchakova of the Otkrytie brokerage said: "No one needs this stake except Rosneft. The sum is large, but the size is small."
Experts are now trying to forecast further developments.
"Rosneft may place [the stake] through a secondary public offering," said Alexei Kormshchikov of Uralsib. "It can also be bought by a strategic investor, for example, China's SNPC or Sinopec, which has long wanted to gain greater access to Russian production units."
If the Chinese buy the stake at a high price, it would tell the market that Rosneft's assets cost much more than their current price, which would push up the price of the company's shares on the market and increase its capitalization.
"It is hard to say which of the scenarios is more feasible," Kormshchikov said. "But I know that Rosneft is currently considering both."


Ex-premier admits mistakes

Former Prime Minister Mikhail Kasyanov, a likely opposition candidate for president, continues barnstorming the country and drumming up support for a change of political course.
While in Perm, the People's Democratic Union leader, who used to find no fault with his work, suddenly pinpointed two main mistakes of his premiership.
At a meeting with Kasyanov, Perm's small businessmen, contrary to expectations, were interested in politics rather than economics. One of them wondered why the former prime minister was second-guessing the authorities while only recently he was one of them.
"Several omissions were made," the former prime minister said. "I did not protest the establishment of control over television. The NTV company is a glaring example," Kasyanov said. "Although, had I started making waves, I would have quit the prime minister's job earlier," he added, as if to justify himself.
His second mistake, Kasyanov said, was his failure to resist Vladimir Putin's power vertical.
"Initially, I was not aware of the upshot," the former head of government again said as though in justification of himself.
"What are your forecasts for March 2008?" asked one of the businessmen.
"As before there are three scenarios: President Putin remains, a technical successor, and free elections," Kasyanov said.
According to him, increasing signs point to Putin's staying on. One of these signs is a large-scale campaign held last weekend by the Nashi movement, and called "Send an SMS message to Putin."
"When Nashi is campaigning for a third term, the authorities give the go-ahead for such things. These things are not done without the leadership's knowledge," Kasyanov said.
The former prime minister complained that the opposition is practically barred from contesting December's parliamentary elections.
"The Union of Right Forces is, unfortunately, under the Kremlin's thumb, and only Yabloko, which, in my view, still remains independent, holds out some hope," Kasyanov said.
He told journalists that a common presidential candidate from the opposition would be named in mid-July at the latest. In his view, two men can claim the nomination - Kasyanov himself and Yabloko leader Yavlinsky.


New gas pipeline to link Eastern Siberia with Pacific Coast

Energy giant Gazprom might build a new gas pipeline parallel to the incomplete oil pipeline due to link Eastern Siberia with the Pacific Coast.
However, the future of the project will depend on the government's plans for developing the Eastern Siberian deposits.
Valery Nesterov, an analyst with the Troika Dialog brokerage, said the new project would reduce expenses, due to lower land allocation and infrastructure costs.
He said the new Gazprom pipeline's future would become clear only after the government approves the Eastern gas program, which stipulates 15 regional deposit-development options.
Gazprom and the Economic Development and Trade Ministry support three scenarios, according to which the new pipe may run parallel to the Eastern Siberian Oil Pipeline, namely, via Taishet and Skovorodino, and with an offshoot into Yakutia, a republic in northeastern Russia.
A Gazprom official said part of the joint gas supply network would run parallel to the Eastern Siberian Oil Pipeline.
In 2006, the government of Yakutia offered to build a gas pipeline along the Eastern Siberian pipeline. Officials said deposits in Yakutia could yield at least 35 billion cubic meters of natural gas annually for the next 50 years.
The new pipeline could pump 80 billion cubic meters of gas per year, together with Eastern Siberian casing-head gas and feedstock from the Kovykta deposit in the Irkutsk Region.
Yakut officials said the pipeline could also reach into China, and a gas-liquefaction plant could be built on the Pacific Coast for subsequent export operations.
Nesterov said Gazprom is lobbying for a route that would include Western Siberian and Sakhalin deposits under the Altai project.
Alpha Bank analyst Dmitry Lukashov said the new pipeline would pump gas from the Kovykta and Chayandinskoye deposits in Eastern Siberia and Yakutia.
Under the three scenarios, the deposits are to be developed by 2016-2017.
"We must first choose the deposits and design the pipeline afterward," Nesterov told the paper.


Rosoboronexport to conquer composites market

Rosoboronexport, Russia's official weapons exporter, which also produces cars, titanium and special steels, has proposed setting up a new holding to conquer the composite materials market.
Experts believe that the Russian military aircraft industry could receive multi-million dollar orders every year for composites.
In a letter to the head of the Federal Industry Agency, Boris Aleshin, Rosoboronexport's CEO Sergei Chemezov cited the Western experience of cooperation between producers of composites and aircraft makers.
"The Russian aircraft industry lags behind foreigners in this respect," he said.
Experts agreed with his assessment. "We have almost lost the ability to produce [composites]. This is one of the sectors where the state's strong arm would be necessary," said Boris Rybak, CEO of the consulting company Infomost.
However, Sergei Lukyanychev, former CEO of the Russian Research Institute of Natural and Synthetic Diamonds and Tools, said that Russian companies did have potential.
"We have many more achievements than, say, the Koreans, who were very weak with respect to aluminum alloys until the mid-1990s," he said.
Most of the experts the newspaper contacted said composites could realistically be used mainly in combat aircraft.
"The composite need of Russian civilian aircraft manufacture is zero," Rybak said. "However, it is very big for military aircraft, especially for fighters, where it can be up to 30%. The market size can be hundreds of millions of dollars."
Top executives in the Russian aircraft industry agreed with this opinion. "The use of such materials in our new regional passenger plane, the Sukhoi SuperJet100, will not pay off," said Sukhoi's CEO Mikhail Pogosyan.
A representative of MiG Corporation said it actively used composites when designing new combat planes.
"In the body of the MiG-AT flight trainer, about 30% of the parts are made of composite materials," said the company's deputy CEO Vladimir Barkovsky. "That is the highest figure among Russian jets."

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