MOSCOW, August 27 (RIA Novosti) Russia's smart diplomatic move unappreciated/LUKoil cuts exports to German /Multi-billion contract with India teeters on edge/Italy's Enel may become sole owner of Russian generating company
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Russia's smart diplomatic move unappreciated
Russian Finance Minister Alexei Kudrin has done the impossible - he forced Vaclav Havel to thank Russia for nominating Josef Tosovsky to head the International Monetary Fund (IMF).
Vaclav Havel, who was Czech president when Tosovsky was prime minister and central bank head, said that the nomination "is a great honor for the Czech Republic."
However, Moscow's smart diplomatic move went almost unnoticed in the maze of Russian policy.
"We believe that Tosovsky is the right man in the right place at the right time," the Russian Finance Ministry said.
He may be the right man, but the time is not right, because another candidate for the post has already been chosen.
Following Rodrigo de Rato's unexpected resignation as Managing Director of the IMF which he filed in June, the European Union nominated France's Dominique Strauss-Kahn to head the IMF, an organization that works for international economic development, the stabilization of currencies and the exchange, and provision of temporary financial assistance to debt-plagued countries.
It was clear after the Second World War which countries were sufficiently developed to be held responsible for world finance. A group of 29 countries signed the agreement establishing the IMF.
But their number has expanded to 185 since then, and global economic growth now increasingly depends on the achievements of China and India, as well as - to a smaller degree - Russia and Brazil.
China, Japan and Russia have the world's largest gold and foreign currency reserves.
So, why can't a developing country head the IMF?
The point at issue is not abstract justice. The IMF can no longer fulfill its main task of preventing financial crises, which swept the emerging markets from Argentina to Turkey in the late-1990s.
In presenting the candidacy of Tosovsky, Kudrin said: "The IMF could not help Russia prevent the 1998 financial crisis, and neither had it helped many other countries [in similar situations]."
Russia has confirmed its status as the main rebel, and yet nominated a respectable candidate, who would seem acceptable to Europe or the United States. But Russia is losing the PR campaign so far.
The traditional East European argument against Tosovsky is that he cooperated with the security services during the totalitarian era.
The allegation that Moscow is forcing a "KGB agent" on the IMF is ridiculous, but Russia is partly responsible for the propagation of such allegations.
Its smart diplomatic move has not won general approval because Russia is using a policy from positions of strength in all areas, from gas exports to the flights of strategic aircraft.
The world sees its attempt to change the rules of the game in the IMF as one more attack against the United States and Europe.
Kommersant
LUKoil cuts exports to Germany
Russia has cut oil exports to Germany through the Druzhba pipeline in the past few months.
On Friday, LUKoil admitted the cut, explaining it as a consequence of bad economics. Sources in the company said negotiations with buyers were continuing, and that the old volumes could be restored.
Experts do not rule out that the export cuts may become LUKoil's argument in talks to purchase an oil refinery in Europe, although the Russian oil sector generally seeks to redirect pipeline deliveries to sea ports.
The source explained the situation by the worsening economics of delivery to Germany, not least due to a Belarus decision to increase the oil transit fee through its territory (the Druzhba pipeline from Russia to Europe runs across Belarus) by 30%.
According to the pricing agency Argus, Russian oil exports to Germany as early as June dropped 21%, month-on-month, and in July, by another 2%, down to 1.44 million metric tons.
"The reduction was partly due to differences between sellers and buyers, but now that the main dispute has been resolved, exports will resume in the same volume," said Mikhail Perfilov, Argus director for development.
Experts do not rule out that LUKoil's policy was dictated by its desire to buy processing capacities in Europe, as the company's management has repeatedly said.
"Perhaps oil supplies in this direction are now really less profitable than in others, but they may grow more effective if LUKoil becomes an enterprise owner," said Maxim Shein from BrokerCreditService.
Perfilov also points to a general trend of Russian export supplies to move away from pipelines to sea ports.
"Traditional purchasers of Russian Druzhba crude are increasing the sea import of alternative oil brands, while Russian companies are increasing shipments via Ukrainian ports. In the first seven months of 2007, shipments leaped by 70%, to reach 11.8 million metric tons," he said.
Vedomosti
Multi-billion contract with India teeters on edge
One of the major international projects so much looked forward to by the Russian aviation industry risks falling apart because of bureaucratic delays.
Agreed to during Vladimir Putin's visit to India, the schedule for preparing documents to begin developing the military transport plane MTA (Multirole Transport Aircraft) has been knocked off course, and the Indians are thinking about an alternative to the Russian plane.
Oleg Demchenko, president of the Irkut Corporation, called the situation critical: "The bureaucrats have messed things up, so that for two years we have been unable to conclude an intergovernmental agreement," and Russia may lose this project, with India deciding to develop the plane with the Brazilian corporation Embraer, Italy's Alenia, or Spanish CASA.
A source in the Defense Ministry said the Russian Air Force has taken a passive view of the program, and the lack of clear signals from command that it is planning to buy large numbers of the aircraft contributed most to the Indian partners' skepticism.
All of which may lead to a situation in which Russia loses what little it has of transport aircraft building, because the MTA is the only project of this type which can secure financing from a foreign partner, and the plane itself still claims a unique niche on world markets and, should it be developed, could be sold to third countries, said Konstantin Makiyenko, an expert with the Center for Analysis of Strategies and Technologies.
If India turns its back on Russia, Embraer would gladly take Irkut's place.
A few months ago it presented a project for a similar plane, the C-390. As a result, bureaucrats and the military will not only kill the multi-billion project but could leave Russia's Air Force without an aircraft it so badly needs, because the An-12 will soon be written off, Makiyenko said.
He cannot recall anything like this stupendous bureaucratic saga. There is nothing to compare it with, the expert said, because the scale of the undertaking is unprecedented.
A manager at one of the aircraft building plants estimated it at $5 billion to start with.
Nezavisimaya Gazeta
Italy's Enel may become sole owner of Russian generating company
Italy's Enel is the first foreign energy company that has decided to test the effect of Russian energy reform.
Last Friday, on August 24, the Federal Anti-Monopoly Service allowed Enel to become the sole owner of a wholesale generating company (OGK-5) controlled now by Russian energy giant RAO Unified Energy System (UES) on behalf of the state.
The sale of several power plants to foreigners should become a landmark deal and prove the investment's attractiveness of the sector and a positive effect of the reforms conducted by RAO UES.
The rated capacity of the OGK-5 four power plants slightly exceeds 8,600 megawatt and accounts for 4% of the Russian electricity market.
This June, the Italian company paid over $1.5 billion for a blocking stake in OGK-5 and announced its plans to increase it to a controlling stake.
Experts have said that Enel is not a portfolio but a strategic investor in the Russian energy sector which intends to benefit not from the sale of shares but from the daily operation of the generating companies.
"Today, financial indicators of all generating companies are rather low because sale electricity prices are formed within regulated contracts according to the 'costs plus' formula, that is, with a relatively small excess of current expenses," said Igor Vasilyev, an analyst with the Troika Dialog investment company.
Meanwhile, electricity prices on the free market are considerably higher than regulated ones, which allows the generating companies to get sizeable profits even today, he explained.
"Italy's Enel is a strategic investor which hopes to profit from electricity sales on the fast-growing free market," Vasilyev noted.
At the same time, experts warn that the companies' hopes for profits will be fully justified only after the liberalization of the wholesale electricity market.
According to Matvei Taits, an energy analyst with the UralSib financial corporation, Enel will not be the only foreign company in the Russian energy sector.
"Alongside Italians, Germany's E.ON and Finland's Fortum have also displayed an interest in the purchase of Russian power generating facilities," he said.
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