MOSCOW, October 5 (RIA Novosti) Russia, Belarus, Kazakhstan rush Customs Union agreement/ Gazprom, Rosneft vying for Chinese market/ Russia to manufacture consumer electronics in China/ Traders break grain export records before tariffs introduced/ Strategic gold deposit to go up for tender
Vedomosti
Russia, Belarus, Kazakhstan rush Customs Union agreement
On Friday Tajikistan's capital Dushanbe is playing host to the summit of the regional Eurasian Economic Community (EurAsEC), where Russia, Belarus, and Kazakhstan are expected to agree on an accelerated procedure to form the EurAsEC Customs Union.
A decision to start with a tri-party customs union was made at the EurAsEC Council meeting in August 2006. A Kremlin source said the other three Council members - Kyrgyzstan, Uzbekistan and Tajikistan - would be unable to participate in the accelerated procedure because their economic development is at insufficient levels.
The three nations plan to sign an agreement on the Customs Union commission, a protocol on the regulation of international agreements which will outline the legal basis for the union, and a uniform tariff policy.
The source said the documents had been drafted by Russia's Ministry for Economic Development and Trade and agreed with other government departments, and the Cabinet has already issued a proposal to the president to sign the first two. The source said it was hard to predict a timeframe for the Customs Union's formation because of certain disagreements with Belarus over customs tariffs. Other EurAsEC members are expected to join the Union later.
It is possible to create an "abridged version" of the EurAsECñ Customs Union, said Vladimir Zharikhin, political scientist and deputy director of the CIS Institute, a Moscow-based think tank. Still, one needs to understand that the fewer countries involved, the less useful the group is. In addition, a real customs union is impossible without political integration, primarily because some international body is needed to monitor the observance of the customs agreements at the very least, the expert said.
On Thursday, the presidents of Russia and Kazakhstan met at a Novosibirsk economic forum.
Today the summit participants will discuss the nomination of a new CIS president (Kazakhstan President Nursultan Nazarbayev chairs the organization at present), and of a new executive secretary of the CIS.
Gazeta.ru
Gazprom, Rosneft vying for Chinese market
Gazprom is reluctant to cede the Chinese market to Rosneft, and so Russia's state-controlled gas monopoly is trying to redirect gas produced by the Sakhalin-1 oil and gas project off Russia's Pacific coast back to Russia. The two giants' standoff might provoke the adoption of a bill to adjust existing PSA projects, which would make Russia far less attractive for investors.
Sakhalin-1 gas will be channeled to Russia, not China, as was originally projected by the consortium participants - U.S. Exxon Neftegas Limited and Japanese Sodeco hold a 30% stake each, and India's ONGC and Russia's state-run Rosneft hold 20% each.
Gazprom said it would not allow the gas to be exported to China because Russia's Far East would be experiencing a shortage of gas, with demand reaching 10 billion cubic meters as early as 2010.
Neither Rosneft, nor the foreign project investors are likely to agree with Gazprom, because selling gas to China would be a much more lucrative solution in the case of Sakhalin-1. Still, Gazprom has a fault-proof pressure tool, arguing that Sakhalin is Russian territory, and that Gazprom has Russian gas export monopoly under the effective legislation. On the other hand, PSA projects like Sakhalin-1 are currently exempt from Gazprom's monopoly, which therefore cannot dictate decisions to its foreign investors.
The PSA agreements signed in the 1990s are expected to be adjusted in the near future to remove that exemption, and the gas giant will gain control of all gas exports without exception.
"Considering the gas monopoly's ambitious plans, the adjustment may be due quite soon," said Andrei Karelsky, an expert with the Vegas-Lex law firm. "But the bill will take away part of Russia's investment attractiveness.... In fact, Gazprom shares will then be the only assets foreign investors will be allowed to buy," the lawyer said.
Dmitry Abzalov, an expert with the Center for Current Politics, a Russian think tank, said March and April would probably see the two giants' vying peak, as major personnel reshuffles and redirection of oil and gas projects could be expected after the presidential elections.
Kommersant
Russia to manufacture consumer electronics in China
Russian IT company Sitronics, which designs, produces and markets audio-visual household and portable electronics under its umbrella trademark, is buying a 66% stake in a Chinese company from the ZTE corporation. The goal is to manufacture household electronics in China.
Experts have assessed the transaction at $10 million. Sistema, one of Russia's largest diversified corporations, which incorporates Sitronics, said low production costs in China should make its output more competitive in Russia.
IT market players believe that only large state contracts will make the project profitable.
AFK Sistema president Alexander Goncharuk said that Sitronics would produce satellite navigators, digital TV adapters, and CDMA equipment for mobile communication access under its own brand in China. He added that the production of such equipment in Russia is unprofitable.
"Tens of millions of dollars will be invested in the new company to be called Sitronics ZTE," said a source associated with the corporation. "Investment should pay back in three to five years, and the company's output is expected to occupy 30% of the Russian and Chinese markets of navigators and TV adapters."
Chinese company ZTE produces telecoms equipment, notably for fixed-line and mobile communications. The Chinese government owns a 32.41% stake in it, and its European shareholders include Credit Suisse and Deutsche Bank. The company's income for the first half of the year amounted to $1.99 billion, and its capitalization as of October 4 was $37.92 billion.
Sergei Golovin, deputy director for marketing at NVision Group, the leader in HD, SD, and digital audio routing systems on the Russian market, said: "Practice shows that European producers locating production in China cut the prime cost of products marketed on their markets by approximately 10%. Larger cuts are impossible due to the cost of deliveries of components to the production site and finished products from it."
Alexander Chachava, president of LETA, a Russian multiprofile services company, said that by moving production to China, Sitronics would put itself on equal pegging with their Asian rivals.
"Initially, Sitronics satellite navigators will enjoy less demand in Russia than the equipment made by the Taiwan-based E-Ten or Mitac," Chachava said. "Only large state contracts can make the project profitable. For example, the state could order digital TV adapters as part of the federal program of conversion to digital television broadcasting, and satellite navigators for military and other state service vehicles."
Nezavisimaya Gazeta
Traders break grain export records before tariffs introduced
In September, Russia broke grain export records, dispatching 2.4 million metric tons, 300,000 of which was barley. The previous record was set in 2002, when 2.1 million metric tons of grain was exported in one month. Grain traders' high level of activity is partly down to statements regarding the introduction of restrictive export measures.
According to Dmitry Rylko, director general of the Agricultural Market Institute, it is also the result of high demand for Russian grain on the world market and the inability to use Ukrainian infrastructure to deliver grain.
"Moreover, the authorities' plan to restrict grain exports had a certain influence and caused exporters' fussiness," said Rylko. However, according to his remarks, thanks to the good harvest, which will be 79 million metric tons, increasing grain exports will not threaten domestic supplies.
Sergei Shakhovets, head of the information and analyses department at the Grain Union, says that it is senseless to introduce restrictions on grain exports. First, one should wait until the end of the harvest. Second, even if traders wish to export a critical volume of grain, they will not be able to do it as it will be technically impossible due to the lack of grain containers, the absence of a port infrastructure, etc.
It is difficult to speak about the influence of introducing restrictive tariffs on domestic prices. "If the tariffs are 10%, it will not influence prices; if it is 40%, which is a curtain measure, prices could fall," said Shakhovets.
However, rumors about the authorities' possible future decision to introduce restrictive tariffs on barley exports of 30% from contract volume and not less than 70 euro per ton stopped prices rising to 5,100-5,600 rubles per ton, although, prices rose at 40%, from 4,100 rubles to 6,000 rubles per ton from January to July of this year. The government notwithstanding its willingness to introduce barley tariffs has not yet approved the prices, due to bureaucracy.
Vremya Novostei
Strategic gold deposit to go up for tender
The right to develop the Sukhoi Log gold deposit, the largest in Eurasia, will be fought over at a tender, not an auction, Russia's Natural Resources Minister Yuri Trutnev, said on Thursday.
The minister's remark lent substance to two rumors that had been circulating at the same time. First, the most likely candidate for the development was Russia's largest Polyus Gold mining company, a member of the Interros group. Second, Polyus Gold was likely to be sold to Alrosa, that is to say, to the state as part of a property-sharing deal between Interros co-owners Vladimir Potanin and Mikhail Prokhorov.
The discussion as to whether to grant the license to Sukhoi Log at an auction - to whoever pays the most - or an investment tender, considering other circumstances and above all the so called strategic interests of the state, has been churning since 2003.
The most active advocate of the tender is the administration of the Irkutsk Region where Sukhoi Log is located. In this way they appear to be protecting the interests of Polyus Gold, which operates other gold fields in the region.
Quite recently, however, semi-official dates were mentioned for an auction at the end of 2007 or in the first half of 2008. In parallel, when Potanin and Prokhorov announced their asset division, it was rumored that Polyus Gold was too large to be owned by one of them. The story went on to say that the state, through its Alrosa diamond monopoly, had showed an interest in Polyus Gold.
Trutnev's remark Thursday seems to confirm that events are going that way. The minister announced the switch from an auction in favor of a tender when reporting deposit reassessment results. Incidentally, the reappraisal had been carried out by the Central Geological Prospecting Institute of Non-Ferrous and Noble Metals in tandem with Polyus Gold.
That could be indirect evidence that the findings were tailored to suit a concrete winner of the future tender. With no foreign claimants, the Irkutsk administration is ruling them out, Polyus Gold looks like a sure winner. The likelihood of the state (Alrosa) taking the company under its wing could make its candidacy a win-win proposition.
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