MOSCOW, October 8 (RIA Novosti) Russia set to bring post-Soviet republics together / Observers stunned by Putin's controversial personnel decisions / Arcelor Mittal denied access to major coal tender / Russia's oil services market to mushroom - expert / New Russian government unable to contain inflation
Kommersant
Russia set to bring post-Soviet republics together
On Saturday, the summit of the Collective Security Treaty Organization (CSTO), convened in Tajikistan's capital of Dushanbe, approved decisions aimed at turning the organization from an amorphous structure into a powerful military-political bloc.
The CSTO has been granted the right to form a peacekeeping force, and its members now can buy Russian-made weapons at domestic prices.
The CSTO comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan. This year the organization will mark its 15th anniversary.
The decision, as well as the appointment of Sergei Lebedev, former chief of Russia's Foreign Intelligence Service, to the post of executive secretary of the Commonwealth of Independent States (CIS), shows that Russia is set to stop the decline of its influence in the CIS and to prevent a recurrence of "color" revolutions there.
It was Russia who initiated the crucial decisions, including on its long-time dream of establishing a collective peacekeeping force in the CSTO. The organization's peacekeeping brigades will have an international status and could be sent to any conflict zone in the world.
Russian Foreign Minister Sergei Lavrov refuted the rumor that Moscow planned to use them to settle conflicts in the breakaway Georgian republics of Abkhazia and South Ossetia.
The crucial element is that the CSTO peacekeeping force will be able to conduct operations in its zone of responsibility without a UN mandate.
Moscow's actions fit the logic of its policy in the former Soviet republics, the main goal of which is to strengthen Russian influence. It started acting by strengthening its influence in regional organizations, in order to make them instruments of Russia's foreign policy.
However, its moves could have the opposite effect. Many former Soviet republics tolerated the CIS mainly because it was ineffective and did not threaten their independence. Now they could turn away from Moscow and seek protection from the West or China.
Georgian President Mikheil Saakashvili and Turkmen leader Gurbanguly Berdymukhammedov, who refused to sign many final documents at the Dushanbe summit, could be the forerunners of such events.
Moskovsky Komsomolets
Observers stunned by Putin's controversial personnel decisions
Last weekend, President Putin once again proved his knack for leaving politicians and observers puzzled and stunned, sending former Prime Minister Mikhail Fradkov to head Russia's foreign intelligence service in a series of personnel reshuffles.
Putin's personnel decisions are often startling. But this one really sets one thinking as to whether or not he really plans to become Russia's next prime minister when he ends his term as president.
The past week left the public convinced that the Russian government's prospects were no longer vague: the president gave them a clue by hinting that he would become prime minister and things would remain pretty much as they are now. But can we be really confident of that? Well-informed sources say each of Putin's major personnel decisions, like appointing a prime minister or a foreign intelligence chief, has rendered them virtually speechless. So why should he be more open and clear about his own political future?
If one recalls the exact wording of Putin's statement, he never really promised to come back as prime minister. What he really said was he did not rule that out. Which could in fact mean anything.
He has been leaking political red herrings since 2005. In early 2006, we felt quite certain that Dmitry Medvedev was the projected successor. Then came the time when we were quite as certain about Sergei Ivanov's chances. Today, Putin's decision to become the next premier is seen as an axiom. But will it remain as incontestable tomorrow?
The post of prime minister is primarily an economic position. Even with the new authorities, it will still be an economic position. Does Putin really need this? And, if he really is considering becoming the next prime minister, why is he consistently trying to weaken the Cabinet as a government institution? The Cabinet and ministries are in fact giving away much of their real economic authority in favor of the newly created government corporations.
If Putin decides to step down, it will give Russia the chance of building a modern political system. But will he leave power? The country's future is as vague as ever.
Vedomosti
Arcelor Mittal denied access to major coal tender
On October 5, Russian mining and metals giant Mechel paid $2.3 billion for the Elga coal deposit in Yakutia, north-east Russia, 22% above the starting price, outbidding Russia's largest diamond producer Alrosa. Arcelor Mittal, the world's largest steel producer, was barred from the auction.
It took the government several years to find an investor for the Elga deposit with an estimated 2.7 billion metric tons of coal, which could annually yield up to 30 million metric tons.
The Russian Transport Ministry, which was expected to develop the deposit in the early 2000s, eventually listed it among non-core projects; and its successor, the company Russian Railways, started looking for a prospective buyer.
In 2005, Alrosa and Mechel decided to bid; Alrosa wanted to diversify its business operations, and Mechel planned to buy a controlling stake in coal producer Yakutugol, which produced 10.3 million metric tons last year.
Mechel bought a blocking stake in Yakutugol for a record $411 million.
It was decided to auction off a 75% stake minus one share in Yakutugol and a 70% stake in coal producer Elgaugol (in which 29.5% is owned by Russian Railways and 39.4% by the government of Yakutia).
Although Arcelor Mittal also wanted to bid at the auction, Mechel CEO Alexander Ivanushkin said the interests of Russian metals companies would be threatened if foreigners established control over Yakut coal, and that Arcelor Mittal wanted to obtain Alrosa's stake in case of victory.
However, the Russian Federal Property Fund said prior to the auction that Arcelor Mittal would not bid.
A spokesperson for Arcelor Mittal said the company was surprised by the Property Fund's decision and knew nothing about its motivations. The Property Fund declined to comment on the situation, and Elgaugol CEO Mukhamed Tsikanov said Arcelor Mittal had not submitted the required documents.
A source close to a bidder said officials from the Economic Development and Trade Ministry, Finance Ministry and Kremlin Administration had discussed Arcelor Mittal's possible involvement and ways of preventing a collusion between auction participants.
A source in the Kremlin Administration said that although its officials had monitored the situation, the Property Fund had independently reached a decision to ban Arcelor Mittal from the auction.
Sergei Donskoi of Troika Dialog brokerage said Mechel could join the top 10 international coal producers after buying Yakut assets.
$mart Money
Russia's oil services market to mushroom - expert
The stagnation of the Russian oil and gas market is no longer a secret to anybody: the sector's companies are no longer showing runaway growth rates. The time is right for a rapid development of services. Forecasts predict their market's growth will total $20 billion by 2011, writes Mikhail Pak, an energy and metals analyst with Capital brokerage.
Today, half of all oil services in Russia (geophysics, seismic exploration, drilling, well repairs, and maintenance of equipment) are done by units owned by vertically integrated petroleum companies. For example, independent service suppliers working for Surgutneftegaz, Tatneft and Bashneft do not account for more than 20-30%. The remaining part of the job is done by subsidiaries of the oil companies. The reasons are many: one is that the oil majors do not want to depend on outsiders. Another is that the market itself is underdeveloped.
Nevertheless, Russia's young oil services market will grow by leaps and bounds in the next few years. The seasonal nature of servicing and exploration means that equipment quickly becomes obsolete. In addition, companies have to pay storage costs. There is only one solution: sell the units concerned and outsource the oil services. This way, companies could not only do without running their own equipment and having their own staff, but also choose better terms.
Examples are not hard to find. In 2004, LUKoil clinched a deal to sell LUKoil-Burenye, which later formed the core of the country's largest drilling company, Evrazia. The Integra Group sprouted on the basis of service assets that were spinned off from TNK.
Outsourcing oil services is an additional outlet for independent suppliers. Last year, they accounted for $6.2 billion. By 2011, the figure will more than double, to $14 billion.
For the time being the Russian oil services market is very fragmented. On the one hand, this provides the possibility of asset consolidation around major players. On the other, it means that companies providing oil services are largely unable to offer "turn-key" solutions. However, growing competition is bound to improve the quality of services and make them higher-priced. Small-time players will, therefore, have to leave or pool together, which is a good stimulus for making the industry more transparent.
Market prospects are promising: while last year its volume was $11.8 billion, the 2011 figure could reach $20 billion.
Nezavisimaya Gazeta
New Russian government unable to contain inflation
The recent reshuffle in the Russian government and the appointment of Viktor Zubkov, former head of financial intelligence, to the post of prime minister coincided with the highest September inflation in the past seven years.
The record-high increase in food prices put in question pre-election reports on the growth of public incomes and a general economic improvement. Economists say prices will continue to grow at least until the end of the year.
According to the Federal Statistics Service, consumer prices went up by 0.8% in September, or double the limit promised by the government. As a result, inflation will not be kept within the promised 8% level, or even below last year's ceiling of 9%.
Yevgeny Gavrilenkov, chief economist with the Troika Dialog investment company, said: "There is no way inflation can be kept below 8% or even 9%." He believes it will rise to 9.3%-9.4%.
Prices grew faster in the past six months, including September, than in the same period last year. Officials cite different reasons, including a revision of utilities rates, rising oil prices on global markets, the inflow of foreign capital, and even the growth of wheat prices in Europe and the United States. They explain the latest increase in dairy prices in Russia by a growth of prices of powdered milk in Europe after agricultural subsidies were cancelled there.
However, some economists believe that the inflation is a logical result of the current economic policy, which reduces domestic production and increases the dependence on import prices.
"Russia's dependence on growing global grain prices is a result of the unwise ruble appreciation policy," Gavrilenkov said.
One more inflation driver is budgetary injections in the economy, which will continue until the end of the year. According to Gavrilenkov, the government could approve administrative measures to fight inflation soon, and also proclaim the inadmissibility of allowing the growth of domestic prices.
Sources in the government said several ministers would be fired after the December elections to the State Duma, the lower house of Russia's parliament.
RIA Novosti is not responsible for the content of outside sources.
