What the Russian papers say


MOSCOW, April 27 (RIA Novosti) Putin's program to take several presidential tenures - experts/ Moscow plans no immediate moratorium on CFE Treaty/ U.S. to take Russia to court for gas cartel/ Sakhalin II foreign investors make further concessions to the state/ LUKoil to receive controlling stake in three African projects


Vremya Novostei

Putin's program to take several presidential tenures - experts

The political scientists listening carefully as President Putin delivered his annual state of the nation address to the Federal Assembly were given the impression that he was not going to step down at all.

The program he presented must have been compiled for several successive presidents to diligently implement it step by step, says Alexei Makarkin, deputy director of the Center for Political Technologies, a Moscow-based think tank. To implement it will take several presidential terms.

It happened because Putin's ambition is to continue playing two roles in the system he created: to be an arbiter, mediating between the feuding clans and a strategist, determining the county's key development goals. He has probably selected a post to enable him to carry out the plans, but is wary of giving too much away for fear of becoming a "lame duck."

The implementation of his ambitious programs will largely depend on two factors: the situation with the global energy market and corruption levels in Russia's government. If oil prices fall, the president could find himself in a situation like Mikhail Gorbachev, whose ambitious projects were ruined by the collapsed Soviet economy. Corruption, in turn, flourishes best when public institutions and the legislative branch are weak.

The president focused on continuity in his address [to the Federal Assembly], says Valery Khomyakov, director of the Council of National Strategy, a Moscow-based think tank. He did not name specific individuals, but instead focused on Russia's policies for the next few years. Unless a revolution happens, the plans he outlined are quite realistic. To spare this country of a revolution would require more than silencing the March of Dissent in Pushkin Square with the help of police batons. Presidential and parliamentary elections should be made as honest and transparent as possible, so that no one can accuse the president or parliament of not being completely legitimate.

Dmitry Oreshkin, head of the Mercator analytical group, also got the impression the president was not going too far once his term was over. It would hardly be polite to give such detailed and specific instructions when one is leaving office, the expert said. He must have chosen one of the top government posts. He would hardly walk away after having proclaimed the country's priorities and goals for the future. He must stay close to help achieve them, he concluded.



Moscow plans no immediate moratorium on CFE Treaty

In his annual state of the nation address to the Russian Federal Assembly, President Vladimir Putin said Moscow would stop fulfilling the Conventional Forces in Europe (CFE) Treaty if NATO does not ratify it.

Putin said the West is in no hurry to ratify the CFE Treaty; the United States is deploying troops in Eastern Europe and new NATO members in the Baltics have not even signed the document. In this case, Russia could impose a moratorium on the treaty.

Moscow, which has no plans for an immediate moratorium, would make this decision only after consultations with NATO, Kremlin officials said.

The West instantly reacted to Putin's statement, and NATO Secretary General Jaap de Hoop Scheffer said the Alliance demanded an explanation from Moscow regarding the proposed moratorium on the CFE Treaty.

There are no plans for an immediate moratorium on the CFE Treaty. Russia may raise this issue if no progress is reached at talks with NATO in a year, a Kremlin source said.

Russia does not want to make enemies, Mikhail Margelov, member of the Federation Council, the upper house of parliament, told the paper.

Since the break up of the Warsaw Pact, the CFE Treaty became an instrument of Russia's unilateral disarmament and Western control over the process, Mikhail Barabanov, an expert with the Center for Analysis of Strategies and Technologies, said. Although the West from the outset had more warships, no naval reductions were discussed. Starting with 1999, talks on the CFE Treaty have produced no results because the West forced Russia to reduce its conventional forces and to withdraw them from Europe.

"The CFE Treaty made sense when the treaty existed between the Warsaw Pact and NATO," military expert Alexander Golts told the paper.

Vladimir Yevseyev, senior research associate with the Institute for World Economy and International Relations of the Russian Academy of Sciences, said Moscow's possible decision to renounce the adapted CFE Treaty or the Intermediate Range Nuclear Forces Treaty would not create any unilateral advantages.

"In that case, we would have to spend more to deploy additional forces to offset the potential threats," he said.


U.S. to take Russia to court for gas cartel

The Senate Judiciary Committee on Thursday unanimously passed the No Oil Producing and Exporting Cartels Act (NOPEC), which would allow the U.S. Justice Department to file anti-trust lawsuits against foreign states for establishing economic cartels and price fixing.

Even though the word "gas" was not mentioned in the new U.S. bill at all, Russia's Foreign Ministry, gas giant Gazprom and Konstantin Kosachev, who heads the parliament committee on international affairs, still said they were "worried" by the U.S. Senate's move.

The bill expanding U.S. law enforcement bodies' authority far beyond national borders has been sent to Congress for a vote. None of the previous versions of the NOPEC Act have been approved since 2000.

The legal action which U.S. courts will apply, if the bill is approved, will be up to the judges; but most likely a prosecution would result in arrest or confiscation of the foreign government's property in the United States. At least that was the scheme applied by Switzerland's Noga, which attempted to seize Russian property as part of debt repayment having interpreted its agreement with the Russian government as a go ahead to do so.

The NOPEC bill formerly applies to oil only, but its wording could still be interpreted as applying to all fuels including natural gas. Russia was one of the initiators of forming an intergovernmental group at the recent gas forum in Doha, Qatar, to work out natural gas and LNG pricing guidelines. Even though no "gas OPEC" agreements have been signed, a cartel-style consultative body has been de facto created, involving 14 major world gas exporters. No wonder Moscow is annoyed by Washington's anti-trust initiative. Even if this unfriendly move is aimed against Iran and Venezuela, and not Russia, "we cannot keep silent," a Russian government official said.

"It is not the first time the United States has attempted to pass bills applicable outside its national borders," the Russian Foreign Ministry said. Kosachev's response was even blunter. "The U.S. Senate has no legal grounds to slap restrictions on Russia and other nations having strong gas industries." Gazprom shares this position.


Sakhalin II foreign investors make further concessions to the state

Foreign companies investing into the Sakhalin II oil and gas project, under a production sharing agreement, have agreed to a 25% discount during the sale of the project's controlling stake, and to finance nearly $4 billion in non-redeemable expenses.

On Thursday, a Western consortium agreed to pay $1 billion bonus payments annually to the Russian government.

All payments will be made starting from 2010 and pegged to future oil prices, a source on The Wall Street Journal familiar with the details said.

He said foreign investors have agreed to issue one R Class non-voting share to the Russian government, which will then entitle them to part of Sakhalin II profits.

A source in the oil and gas sector confirmed the existence of "special" agreements between foreign companies and Russian authorities. He said this measure is aimed at removing certain irritants for Russia, namely, delayed project implementation deadlines and the government's concerns about future oil prices.

According to the source, this mechanism and the PSA concept imply that government profits are directly dependent on oil prices.

The dividend introduction mechanism is compensation for the longer project deadlines, and allows the concerned parties to receive the same amounts, albeit more slowly, the source said. He said priority dividends would shield the economy from lower oil prices.

Mikhail Subbotin, director of SRP-Ekspertiza, a consulting firm, who co-authored the federal PSA law, said it is strange that the state, which is not involved in the project, receives shares. Such agreements imply additional taxes and change the essence of the PSA agreement.

"The state, which is not abiding by its commitments, is imposing its own rules on the game and is destroying any final illusions," Subbotin told the paper.


LUKoil to receive controlling stake in three African projects

LUKoil, the largest Russian oil company, has decided to prospect for oil and gas on the West African continental shelf and is preparing to buy 56.66% stakes in three prospecting projects in the Ivory Coast and Ghana from the U.S. company Vanco Energy.

Experts said LUKoil would spend no more than $200 million on these projects.

All three projects are implemented under a production sharing agreement (PSA) and envision prospecting operations over an area of 15,000 square kilometers.

Vanco Energy currently owns 85% stakes in each project, whereas local authorities are entitled to 15%, said Grigory Volchek, spokesman for LUKoil Overseas Service Ltd.

He said LUKoil and Vanco Energy would close the deal this summer but declined to name its price and subsequent investment volumes.

A Vanco Energy spokesperson also declined to comment.

This is not the first African project for LUKoil. Previously, the company said it had bought a 63% stake in a prospecting project on the Ivory Coast shelf, but did not go into details.

Experts said they couldn't estimate possible LUKoil expenditure because they knew little about African PSAs.

LUKoil Overseas said the three sectors are located at a depth between 200 and 3,000 meters.

Alpha Bank analyst Dmitry Lukashov said it could take the partners $30-$50 million to drill one well.

MDM Bank analyst Andrei Gromadin estimated such expenditure at $40-$60 million.

Under the agreement, all investment is to come from LUKoil, which may spend as much as $200 million.

Gromadin said this is a high-risk project for LUKoil. However, African projects would be far more expensive if prospectors found substantial oil and gas deposits.

Consequently, LUKoil could profit by merely reselling them, he told the paper.

The U.S. publication Oil & Gas Journal placed Ghana and the Ivory Coast among the poorest African countries in terms of proven oil and gas deposits, namely 100 million and 15 million barrels (13.6 million and 2 million metric tones), respectively.

It appears that both countries account for just 0.7% of proven LUKoil deposits (16.12 billion barrels).

All foreign projects implemented by LUKoil account for 6% of its proven deposits, receiving $91 million worth of investment in 2006.

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