What the Russian papers say


MOSCOW, April 28 (RIA Novosti) Estonia deliberately provokes conflict with Russia/Federal Atomic Energy Agency set to become state-owned presidential corporation/Moscow needs company to honor CFE treaty/Fees for foreign airlines to be raised again /Russia to attract industrial holdings

Rossiiskaya Gazeta, Vedomosti, Vremya Novostei

Estonia deliberately provokes conflict with Russia

In response to the removal of a World War II statue from central Tallinn, the Russian parliament threatened to sever diplomatic relations with Estonia, and officials said economic sanctions were a distinct possibility.
The situation has affected Russians, who are no longer issued Estonian visas, and Estonian producers, whose output is being boycotted.
"I would understand it if the monument were removed 15 years ago," said Alexander Rahr, an expert with the German Council for Foreign Policies. "But the impression today is that Tallinn is playing a completely different game.
"Estonia's ruling elite probably wants to play on feelings and provoke new conflicts, in particular with Russia. Some East European countries are playing on the alleged fear of Russia to become closer with the Untied States and get additional privileges from the European Union."
The Baltic countries have been trying increasingly often to equate Nazism with Communism, which Rahr described as "a very strange and dangerous trend" that "may provoke new conflicts and push Russia out of Europe and into Asia."
"Europe is prepared to do everything possible to prevent Russia's moral, economic and political strengthening," Rahr said. "It is believed here that young states can be forgiven their mistakes, but Russia cannot."
Despite political differences, Russian-Estonian trade and economic cooperation can be described as intensive this year.
According to Estonia's statistics service, Russia was Estonia's largest trading partner in February 2007, for the first time ever (17% of total imports).
Dmitry Abzalov, an expert with the Russian Center for Current Politics, said Estonia re-exports a substantial part of Russian goods to the EU. Meanwhile, Russia is not on the list of the five largest buyers of Estonian goods.
Sergei Oznobishchev, director of the Russian Institute of Strategic Assessment, said: "Estonia is closely tied to Russia and depends on it economically. No matter how much the Estonian economy grows according to the World Bank, it will always need Russian oil, gas and metals."


Federal Atomic Energy Agency set to become state-owned presidential corporation

On Friday, Russian President Vladimir Putin signed a decree to overhaul the nation's nuclear power industry.
Under the document, a state-owned nuclear giant, AtomEnergoProm (AEP), will be established by early 2008 and will consolidate assets worth $40-50 billion. Its capitalization is to reach an impressive $100 billion in the future.
The Federal Atomic Energy Agency (Rosatom) said the figure is a rough estimate, because no AEP IPO is in sight.
A high-ranking source in the nuclear power industry said President Putin himself suggested establishing AEP.
A special state corporation, also called Rosatom, will retain some functions of the Federal Atomic Energy Agency and will manage all of AEP shares and defense-oriented nuclear companies. Rosatom will also oversee nuclear and radiation safety and fundamental research programs.
Sources in the nuclear industry said Rosoboronexport, the largest national arms exporter, and the Nanotechnology Corporation could also be overhauled.
The Federal Atomic Energy Agency said AEP, due to be established by July 1, would receive the shares of 55 joint-stock federal state unitary enterprises in the civilian nuclear sector by December 1.
The corporation Rosatom will not be allowed to own assets, but will manage them starting in 2008.
"That resembles a non-profit organization or the Russian Central Bank," the source told the paper. He said a similar plan would be used to convert Rosoboronexport into a state-owned corporation.
According to the paper's sources, the Nanotechnology Corporation mentioned in Putin's latest state of the nation address will also be established along the same lines.
It appears that the government will relinquish direct control over the corporation Rosatom, and the president will appoint its chief executive officer, who will report directly to him.
Private investors cooperating with AEP will only be allowed to work uranium deposits and to obtain blocking stakes in joint mining ventures.

Moskovsky Komsomolets

Moscow needs company to honor CFE treaty

Western countries refuse to ratify the Treaty on Conventional Forces in Europe (CFE) until Russia withdraws its troops from Georgia and Moldova. That is an artificial link, because the treaty is a legal document, and troop withdrawal was negotiated only in word, a Russian military expert told the popular daily Moskovsky Komsomolets.
Alexander Pikayev, deputy head of the disarmament sector at the Institute of the World Economy and International Relations (Russian Academy of Sciences), said the agreement on troop withdrawal had been signed with Georgia, and that Russian servicemen would pull out of that South Caucasian state next year.
According to him, talks with Moldova are being held back by problems with the removal of munitions.
However, four new NATO members - Croatia and the three Baltic states - have not signed the CFE Treaty, and therefore NATO can deploy as many conventional weapons there as it pleases, Pikayev said.
The CFE Treaty limits the deployment of Russian troops in Russia, but does not impose similar limitations on other countries. Therefore, Russia will not comply with the 1999 treaty if the other signatories do not follow suit.
He said there was only a psychological connection between Putin's announcement of a moratorium on the CFE Treaty and the deployment of ballistic missile defense systems close to Russia's border.
Differences over the European ABM system created the conditions for withdrawal from the CFE Treaty.
At the same time, there are quite a few problems associated directly with the CFE Treaty and connected not with ABM, but with the harsh Western stance.
The possibility of a moratorium or even withdrawal from the CFE Treaty has been discussed for a long time, but made public only now, Pikayev said.
As for the invitation to cooperate in the creation of a European ABM system, the United States has made it to smooth over criticism of its plans to deploy the nuclear missile shield in Europe.
Besides, the U.S. lagged behind the former Soviet Union in the ABM sphere, and therefore would like to acquire some Russian technologies.
According to Pikayev, the U.S. has never offered a joint ABM system to anyone, trying only to use the territories of other countries in its own interests.
Anyway, the United States is creating its ballistic defense system in the belief that it might eventually use it against Russia.


Fees for foreign airlines to be raised again

The Russian Air Navigation Service (ANS) will again raise fees for foreign airlines. This will bring in more revenue for upgrading equipment, but it will also increase the gap between the fees paid by Russian and foreign companies.
Fees for foreign airlines were increased 9% February 1. But Alexander Neradko, the head of the ANS, does not consider the planned measure a fee increase.
"This will not be an increase, but an index-linked fee adjustment motivated by the strengthening of the Russian ruble against the dollar," he said.
The ANS needs additional funds to upgrade its electronic support equipment. More than 3 billion rubles will be spent for this purpose, twice as much as last year.
"The budget does not provide for such spending, so the ANS has to collect money by constantly raising its fees," said Valentina Chernyavskaya, an analyst with the Vika investment company.
She said that as a condition of its entry into the World Trade Organization, Russia would have to gradually cancel the fees it charges foreign aircraft for flying over its territory, and that would also reduce the agency's income.
In 2008 the International Air Transport Association (IATA) will inspect Russia's civil aviation, and according to experts the association will find it in violation of international conventions that require equal fees for both foreign and domestic companies.
Today foreign companies pay 2.5 to 3.5 times more depending on the type of aircraft.
"When the inspection reveals such a big difference in fees, the IATA will strictly insist that they be harmonized" said Oleg Sudakov, an analyst with Rye, Man & Gor Securities.
He said that the IATA might call for a single large payment increase for Russian companies, but according to the analyst another solution is likely.
"An agreement will be concluded on gradually increasing fees for Russian companies," he said. Until the inspection is carried out, it will be possible for the ANS to save money. "It is better to pay late than early," Sudakov said.


Russia to attract industrial holdings

According to a bill passed in Russia yesterday, dividends from participation in companies' capital payable in Russia to individuals and companies will be tax-free if the package amounts to 50% of the capital and costs at least 500 million rubles ($19.43 million, or 14.29 million euros).
Experts believe that is not enough to attract holdings to Russia, but officials say the state may also offer other concessions.
The tax rate will be cut from 30% to 15% for foreigners, and will remain 9% for Russians.
Under the bill, the Russian parent company will not pay taxes on dividends received from its subsidiaries in which it owned at least 50% of the stake (more than 500 million rubles, or $19.43 million) for at least a year.
The privilege is not granted if the subsidiary is registered in an offshore zone (the list of such zones is compiled in the Finance Ministry).
All other Russian companies will pay 9%, and foreign companies 15%.
To prove its right to a zero tax rate, the company in question must supply tax agencies with information about the date of the stake's acquisition and its value (or depositary receipts). The privilege will become effective in 2008.
The state wants to stimulate the establishment of holdings in Russia, including as a site for investing in the Commonwealth of Independent States, said a source in the Kremlin administration.
Dmitry Gusev, a partner with Deloitte & Touche, said Russian corporations, including state-owned ones, were establishing holdings abroad for that purpose.
"This is a very attractive project for those who live beautifully and do not hide their money in offshore zones," said a tax consultant of a major Russian holding.
However, he believes that the entrance fee is too high and was more acceptable at the beginning of the bill's drafting: 50% of the stake or 1 billion rubles ($38.85 million, or 28.57 million euros, or at least 1% of the statutory capital).
It will be difficult to overcome that obstacle if investment is diversified, he said.
Natalia Burykina, head of the parliamentary tax subcommittee, argues that industrial and financial holdings will not have to pay taxes.
According to Pavel Vasilyev, vice president of Renaissance Capital, these amendments are not enough to draw up legislation on holdings. That is the first step, taken mainly to create a positive image, he said, and expressed the hope that the state would subsequently take other, more practical steps.
That is possible, and it may even lower the entrance fee, said the Kremlin source.

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