What the Russian papers say


MOSCOW, March 29 (RIA Novosti) U.S. bases encircle Russia - expert/U.S.-Iranian war would bring Russia billions of dollars /Russia, Algeria to sign $7 billion arms contracts/Kazakhstan gives up Trans-Caspian pipeline project/Officials mount pressure on foreign investors of Sakhalin energy project

Vremya Novostei

U.S. bases encircle Russia - expert

The United States is sorry that the European segment of its anti-ballistic missile (ABM) shield has offended Moscow, so much so that it intends to withdraw from the treaty on intermediate- and shorter-range missiles.
Despite Washington's attempts to assuage Russia's apprehensions, Russian experts write that U.S. military facilities are encircling Russia.
Brian Green, deputy assistant secretary of defense for forces policy, said in Congress that the anti-missiles in Poland and the early warning radar in the Czech Republic were no danger [to Russia] because they would be unable to intercept a Russian intercontinental missile in case of a conflict with the United States.
Henry Obering, the Director of the Missile Defense Agency (MDA) at the Office of the Secretary of Defense, told congressmen that the American shield could cover not only U.S. NATO allies, but also the European part of Russia.
Sergei Kazennov, an expert with the Institute of National Security and Strategic Studies, said: "It does not matter if American radar can or cannot register the launch of a Russian missile."
What is important is that "the U.S. is gradually encircling Russia with its bases and other military facilities."
Therefore, "the deployment of the ABM system in Central Europe has challenged the presumption that the system is designed to protect the U.S. from missiles of the 'axis of evil' countries."
The U.S. ABM shield, notably its Central European segment, is dangerous to Russia "not so much because of the superior radar and interceptor missile technologies, but because of the ability of military facilities to propagate, grow an infrastructure, and gradually move towards Russia," Kazennov said.
In fact, the Pentagon does not rule out that its ABM system could be expanded to include sea- and space-launched elements.

Nezavisimaya Gazeta

U.S.-Iranian war would bring Russia billions of dollars

Yesterday's (Wednesday's) events have shown how economically beneficial the start of hostilities in the Persian Gulf might be for Russia.
A reaction by commodity exchanges to mere rumors that Iran shelled a U.S. warship in the Gulf was typical.
The rumors provoked a sharp rise in oil prices favorable to the Russian oil industry. If similar prices remained that high for a year, they would yield Russia a minimum of $10 billion in oil exports alone.
Russia's fuel sector would profit even more if a real war were to begin in the Gulf.
Currently, Iran supplies about 2.3 million barrels of oil to the world market daily, or 5.7% of world exports.
In the event of a U.S. attack, Tehran has threatened to close the Strait of Hormuz, through which more than 20% of the world's oil exports pass.
It is not unlikely that Iran would bomb neighbors' oil fields. One can only speculate what sort of a leap in oil prices could be prompted by such a development.
"If Iranian oil quits the market, prices could shoot up to $80 and higher," said Dmitry Lukashov, an oil analyst with Zenit Bank.
Alfa Bank oil analyst Konstantin Batunin saidthat "the prices could well spiral above $100". Gazprombank analyst Mikhail Zak agrees.
With such a surge in prices, it is easy to calculate Russia's bounty from a war in Iran.
Russian exports of oil and refined products in crude terms are about 7 million barrels a day. A one-off price increase of $10 would give Russia at least $25 billion a year, with the bulk of the money making it to the state budget.
That would enable the government to overcome its tax shortfall, which was about 400 billion rubles ($15 billion) in the first two months of the year because of lower oil prices.
Growing oil prices are also likely to benefit Russia indirectly.
"Higher revenues for the treasury and companies would push up labor demand and inject life into the country's machine-building and construction sectors," Lukashov said.
However, such a scenario, according to Batunin, would also "make the Russian economy more raw materials-dependent in the longer term."


Russia, Algeria to sign $7 billion arms contracts

In March, Algeria officially invited Russia to bid in a frigate tender and in joint warship construction tenders.
If the projected $7 billion deal is closed, then Algeria would become Moscow's main partner in the sphere of military-technical cooperation, because both countries had signed $8 billion arms-sales contracts last year.
Russia and Algeria are also negotiating the sale of Sukhoi Su-32/34 Fullback fighter-bombers, Mil Mi-28N Havoc attack helicopters, as well as additional supplies of Su-30 Flanker and Mikoyan-Gurevich MiG-29 Fulcrum fighters, Pantsir-S1 air-defense systems and T-90S main battle tanks.
All contracts are to be signed in 2007-2008.
Until now, India and China were Moscow's main clients, with $10 billion and $6 billion until 2010, respectively.
However, contractors said they are skeptical, and industrialists are in no hurry to rejoice, either.
Oleg Demchenko, president of the aerospace company Irkut Corporation, said new deliveries are possible after the sale of 28 Su-30MKI (A) warplanes, but no talks are being conducted.
The Nizhny Tagil-based Ural Railroad Car Works [Uralvagonzavod], a leading Russian tank manufacturer, decided to supply the first 40 T-90S tanks in 2007, rather than last year.
Starting in April 2006, a feasibility study of the $800 million project for the construction of two frigates was conducted.
A source in the industry said the talks are not making any headway because three companies want to build the frigates, and Rosoboronexport, Russia's main state-owned arms-export monopoly, has not yet mended relations with St. Petersburg-based Severnaya Verf (Northern Shipyard).
The contract for the sale of Pantsir-S1 anti-aircraft weapons may become the main problem, because it is linked with the completion of their tests in the United Arab Emirates, which had ordered them much earlier than Algeria.
The Tula-based Instrument Design Bureau (KBP), an independent arms producer and exporter, said tests of the first Pantsir-S1 are to be completed this summer.
The UAE was to have received 50 Pantsir-S1s in 2003-2006. However, the systems will only be delivered by 2010, starting in late 2007.
"KBP, which has signed four Pantsir-1S sale contracts with Algeria, Syria, the UAE and an unspecified country, may face problems because of delayed supplies to Abu Dhabi," said Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies in Moscow.


Kazakhstan gives up Trans-Caspian pipeline project

Kazakhstan has decided not to build a Trans-Caspian gas pipeline, which is good news for the Russian state-controlled gas giant Gazprom, experts believe.
The benefits of the project have not been proved yet, said Kazakh Foreign Minister Marat Tazhin following a meeting with EU High Representative for Foreign Policy Javier Solana, EU External Relations Commissioner Benita Ferrero-Waldner and the foreign ministers of Germany, Uzbekistan, Tajikistan, Kyrgyzstan and Turkmenistan.
The idea of a Trans-Caspian gas pipeline was proposed by the United States in 1996.
The pipeline, laid across the Caspian Sea, was to pump 30 billion cubic meters of gas a year to the pipeline running from Baku (Azerbaijan) to Tbilisi (Georgia) to Erzurum (Turkey), which was put into operation last year.
From there, gas would be delivered to Europe by the Nabucco pipeline, which is to be completed by 2010. That would bring Central Asian gas to European consumers while bypassing Russia, thereby undermining Gazprom's standing on the EU market.
Gazprom declined to comment on Kazakhstan's decision. But it is good news for the concern, said Valery Nesterov, analyst with Troika Dialog.
The amount that could be pumped through the rival route would not exceed 20% of Gazprom's supply, but it is more profitable for the gas giant to use Central Asian gas to meet domestic demand in Russia, he said.
Kazakhstan does not want to quarrel with Moscow, said Dmitry Aleksandrov of the Russian Institute of Strategic Research. All the more so as Russia could block the construction because the demarcation of the Caspian is not complete.
However, Kazakhstan may soon want to revise the decision, he said.
Nesterov also said that the project has not been buried for good. The pipeline could originate in Turkmenistan, which produces more gas.
Kazakhstan is less interested in the project than is Turkmenistan, Nesterov said. Gas production in Kazakhstan will grow by 20 billion cubic meters in 10 years, and the country will have to increase deliveries to Russia and China.
Besides, the project is an expensive one and is unlikely to pay off soon.


Officials mount pressure on foreign investors of Sakhalin energy project

A previously delayed inspection of the Sakhalin I energy project has begun.
Experts said that problems there are similar to ones found at Sakhalin II. The inspection seeks to put pressure of the project's foreign investors in order to redistribute gas produced on the Russian Far East island, experts said.
Inspectors of the Federal Service for Supervision of Natural Resources Use were expected at Sakhalin I last November. Now the Service said it had different plans.
"We will first check the documents, and then start an environmental inspection in May," deputy head Oleg Mitvol said Wednesday.
Experts are inclined to view environmental inspections as a way to put pressure on the project's foreign shareholders.
Russia is not satisfied with the terms of the production-sharing agreements (PSA). When such agreements were signed in the 1990s, the country's economy was weak and it was impossible to carry out large projects without foreign participation.
Now, however, the government and state-owned companies have plenty of money and they no longer want to share what they could get on their own.
There is also the problem of distributing gas flows. Russia is working hard to ensure that gas from Sakhalin I will be delivered to the domestic market and not exported, said an analyst with a Russian brokerage.
"Under the gas export law, Gazprom's export monopoly does not apply to PSA agreements. The operator of a project has the distribution right in this case," he said.
"Exxon has signed a contract to supply gas to China. So it is quite possible that another inspection has been launched in order to make the operator change its decision or to even cede its right to distribute gas to Gazprom," he said.
Natalia Milchakova, of the Otkrytie brokerage, said that Gazprom's participation in the project was predetermined.
"Gazprom has plans to supply gas to China, and it could use gas from Sakhalin for this purpose. Secondly, the political vector is shifting toward the priorities of state-owned companies. Besides, the scenario of Gazprom's joining Sakhalin I is similar to its joining Sakhalin II. New inspections of the Sakhalin projects were quite predictable," she said.

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