MOSCOW, November 14 (RIA Novosti) Putin repeats he will stay at helm, but does not say how/ Construction of 2nd stage of ESPO pipeline delayed for years/ Russia short of gasoline/ Gazprom ditches non-core assets/ Russian top bank managers paid better than in America
Gazeta.ru, Vedomosti
Putin repeats he will stay at helm, but does not say how
For the first time in the election campaign Vladimir Putin has openly supported United Russia. The president acknowledged there were crooks in the party, but also said that at the moment there was nothing better in Russia. In the view of experts, Putin took this step because he saw that the party's popularity ratings has ceased to grow.
Putin did not give a direct answer to a question posed by Krasnoyarsk road workers about the role he would play in Russian politics at the end of his term. "There are various options," he said.
The president did not give any indication he would head a cabinet or any other structure, said a high-placed source in the presidential administration: Putin merely suggested that instead of talking about a third term all the time it would be better to support the party of power at the polls and, then he would be in a position to influence the situation in the country.
Meanwhile experts are noting that Putin had to use his name to support United Russia once again because its popularity has not changed in the past two weeks.
"Not all presidential followers are prepared to vote for United Russia at the polls, and Putin's rating is therefore 15-20% higher than the party's," said political expert Dmitry Badovsky. "It is clear that one step by Putin when he headed the [party's] election ticket was not enough to break the established public opinion - 'we are for Putin, but not for United Russia'."
In the expert's view, the situation could follow two scenarios: either the president will resort to extreme measures in an attempt to maximize the party's rating and could join its ranks at a forum of Putin supporters scheduled for November 21. Or the election drive by United Russia and the president's campaign trail could run in parallel, with the president at the forefront and the party in the background.
"The choice will depend on which parliamentary model the incumbent authorities find preferable," Badovsky said. "If they consider a model of a two party parliament [United Russia and KPRF], then Putin will most likely continue to canvas for the party and join it before the election race ends. If they examine a model of a three- or four- party Duma, then it cannot be ruled out that in the last few days before the ballot Putin could approach some other party."
Kommersant
Construction of 2nd stage of ESPO pipeline delayed for years
The government has returned for finalization the draft resolution to begin project planning for the second stage of the Eastern Siberia-Pacific Ocean (ESPO) oil pipeline with a projected capacity of 50 million metric tons a year. Work on the ESPO-2 project planning will not begin until the 2008 presidential election. This sharply increases the risks of Russian oil pipeline monopoly Transneft, which has already spent billions of dollars on ESPO-1: without ESPO-2 the pipeline, which is under construction now, will not have a guaranteed consumer.
Viktor Khristenko, Russia's minister of industry and energy, told Kommersant: "We will start project planning for ESPO-2 anyway, and we'll be able to start implementing the project immediately after the completion of the first stage." The first stage of the ESPO pipeline is to be commissioned by the end of 2008.
In order to get matters off the ground and start coordinating the ESPO-1 project, Transneft's ex-CEO Semyon Vainshtok had to press for an interview with Vladimir Putin in June 2007. Only the president could decide whether it was worthwhile to build a pipeline worth $11-$12 billion without a definite prospect of its being filled with oil. Putin took the political decision to finish building the first stage of the oil pipeline and instructed Prime Minister Mikhail Fradkov to provide the project with raw materials. The prime minister resolved the problem administratively - he put pressure on Rosneft, which agreed to redirect 24 million metric tons of oil from West Siberian fields into ESPO.
By refusing to consider the project, the government has made the ESPO-2 project (worth about $4-$5 billion) jump through a series of bureaucratic hoops, which will require three months at least. To get things going, Khristenko will either have to produce fresh exploration data or repeat Vainshtok's "feat" and obtain a new political decision from the president on the construction of the ESPO second stage.
In the absence of a decision on ESPO-2, the issue of spending the previous $11-$12 billion has become totally confused. It was projected that an ESPO branch to China will make the ESPO-1 project profitable. However, the issue was not settled during the recent visit of Wen Jiabao, head of the State Council of the People's Republic of China, to Russia: the sides failed to agree on tariffs and on financing the branch pipeline construction.
It is now obvious that the construction of the ESPO-2 project could be postponed for several years. Without it, the first stage of the pipeline, made possible by the lobbyists' pressure, could be at risk.
Vedomosti
Russia short of gasoline
Russia, a major oil-exporting country, is now facing a gasoline shortage. Wholesale gasoline prices have been growing steadily over the last 45 days; and local gas stations will soon have to raise prices by 15%-20%.
The Russian Statistics Agency (Rosstat) said gas companies had curtailed sales by 6.7%, and that fuel reserves had dwindled by 4.2%. The Kortes Information and Research Center said wholesale fuel prices had soared by 1.7% last week. Kortes analyst Lyudmila Lurye said there was almost no gasoline in free supply, and that retail prices were bound to increase soon.
An independent gas station owner called the market situation threatening and said the company was posting zero high-octane gasoline and negative diesel profits. He mentioned acute shortages, and said fuel reserves were currently being sold.
He said vertically integrated companies controlling 85% of the retail market reportedly had enough fuel for their own chains only, that they were deliberately trying to oust independent traders, and that nobody wanted to lose money.
The owner said he would either have to raise prices by 1.5-2 rubles ($0.06-0.08) per liter or shut down his gas stations.
Gennady Krasovsky, the head of Investor Relations Department at Russia's largest private oil company LUKoil, said there were no plans to oust other companies from the market, but that top-quality fuel was in short supply.
Krasovsky said, although Russians had bought 1.1 million foreign cars in the last 10 months, no refineries had been built in the last few years. He said one LUKoil gas station had boosted daily sales from five metric tons in 2002 to eight metric tons today.
Yevgeny Arkusha, president of the Moscow Fuel Association, said the government would manage to curb wholesale price hikes, that retail prices would also stop growing, and that an alleged market redivision would no longer be discussed.
Business & Financial Markets
Gazprom ditches non-core assets
Gazprom is continuing to unload its non-core assets. On Tuesday it was announced that Surgutstroigaz would be put up for auction, with a total of 14 businesses to be sold. The holding considers the activities falling outside three main sectors - gas, oil and electric power - to be non-core. But industry analysts doubt that Gazprombank or Gazprom-Media would repeat the fate of Surgutstroigaz in the near future.
"Services provided by house structures like Surgutstroigaz [its principal activity is building long-distance oil and gas pipelines] often cost more than hiring companies," said Alexander Shtok, director of the due diligence department at the independent consulting group 2K Audit - Business Consulting.
Experts are sure that Gazprom's ditching of non-core and ineffective assets will enable it to trim management costs and prevent risk of unforeseen expenses that could follow the bankruptcy of subsidiary or dependent companies unconnected with basic production.
Now the concern has put up for auction its stakes in 14 enterprises (agricultural companies, pipe manufacturers, and construction and assembly companies). Their sale will fetch around 3 billion rubles.
Within the strategy it would also be logical to sell banking assets. But experts doubt that the main company will part with Gazprombank in the next few years. "Gazprom sells non-core assets at a time when they reach maximum value," said Natalia Milchakova, head of fundamental analysis at the Otkrytie financial corporation.
Besides, Gazprombank is rated seventh among the rapidly developing banks in Russia, said Shtok. Gazprom does not consider it profitable to dump such forward-looking companies, he added.
As far as the longer-term perspective is concerned, the first "lame duck" will be Gazprom-Media. "Its revenues widely swing from demand and supply shocks, making the company management often worry about its profitability," Shtok said.
"But one should not forget that the sale of such a huge company is dictated exclusively by a changing political mood. Therefore the upcoming elections will certainly play a decisive role in that matter," he added.
Gazeta
Russian top bank managers paid better than in America
The generally accepted assumption that salaries in America are higher than in Russia does not follow when it comes to bankers. Surveys have shown that foreign colleagues may be really jealous of how much Russian financiers make - top bank managers, that is.
A study by the Moscow Financial and Industrial Academy (an education and research institution) has found that top managers at several Russian banks, such as MDM Bank and Russian Standard, make more than $4 million a year. For example, the average annual income of a member of the Russian Standard board is $5.78 million (141.8 million rubles), MDM Bank, $4.3 million (105.6 million rubles), and Sberbank, $1.91 million (46.9 million rubles).
Western banks operating in Russia pay their local employees a half or even one-third of what large Russian banks offer. "Foreign banks have their own internal compensations policies, and they view their Russian offices as small links of their global branches. There are banks in Russia, such as Alfa Bank, MDM Bank, or Rosbank, which can afford to pay their employees more than the market average, and they do. Major government-controlled banks pay a little less," said Artur Shamilov, a partner with TopContact Executive Search, a Moscow-based recruiting agency.
Vasily Solodkov, the director of the Banking Institute at the Higher School of Economics, said banking is a high-income job by definition, but Russian top managers are still overestimated.
Shamilov is convinced that this situation will persist for the next few years. "Although the formal salary of a top manager from one of Russia's top ten banks is incomparable with salaries at Goldman Sachs or the Bank of New York, effectively Russian top managers make more than their foreign colleagues from similar-sized companies," he said.
Salaries at Russian investment banks arouse envy in their foreign colleagues. "Those foreign specialists, who are not scared of Russia, willingly come here to work because they can make so much more," Solodkov said.
Some expatriates working for Russian subsidiaries are also lured to large Russian-owned banks by higher salaries. CEO of the Moscow office of U.S. Merrill Lynch, Mike Egglton, quit to take over at Russian investment bank Trust, while his predecessor Allen Vine went off to head the board of Nafta Moskva investment group. According to various estimates, investment bankers in major Moscow banks make between $7 and $10 million a year, twice as much as their U.S. colleagues.
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