MOSCOW, December 10 (RIA Novosti) Voters will find out Putin's successor just before elections/ Russia, U.S. ready for confrontation, although neither wants it - expert/ Russia to choose between ballistic missiles and social programs/ Renault to buy into Russian automotive giant/ Finance Ministry encourages major holdings to register domestically/ Russia's international reserves grow fast, but are used unwisely
Novye Izvestia
Voters will find out Putin's successor just before elections
The nomination of several presidential candidates will allow the incumbent Russian president, Vladimir Putin, to keep the elite in the dark and save his successor from attacks by political opponents.
The deadline is December 23. Political analysts say that the people will most likely learn the name of Putin's successor immediately before the March 2, 2008 election. But this will not prevent the man from winning in the first round, because there will be several Kremlin-nominated candidates.
Dmitry Badovsky, deputy director of the Institute of Social Systems, said three candidates would be the best option.
The pro-Kremlin United Russia party will nominate one of the candidates at its December 17 congress.
A Just Russia, another party supporting the president, will nominate its candidate several days later.
Party leader Sergei Mironov, the speaker of the Federation Council, the upper house of Russia's parliament, previously said his party would not nominate a presidential candidate. But the December 2 parliamentary election showed that A Just Russia revised its election list several times, cutting the number of leaders from three to two, and it can also review its decision regarding the nomination of a presidential candidate.
The For Putin movement of Putin's supporters might be used to nominate the third candidate. It has the capability of collecting the 2 million signatures necessary for his registration.
Valery Khomyakov, co-chairman of the National Strategy Council, said the nomination of several candidates would prevent the disruption of the election if all opposition candidates withdraw from the race. In this case, the second and third Kremlin-nominated candidates will act as sparring partners.
Experts believe that Putin will keep silent until the very last moment, when he will announce the name of his successor and therefore ensure his victory.
Leonty Byzov, chief analyst with the VTsIOM pollster, said more than 60% of Russians were prepared to vote for anyone Putin pointed to.
Nezavisimaya Gazeta
Russia, U.S. ready for confrontation, although neither wants it - expert
In the early 1990s, the United States believed that Russia would get absorbed in domestic reform and abandon its geopolitical ambitions, wrote expert Ivan Safranchuk, director of the Moscow office of the Washington-based World Security Institute. Even pro-Western politicians in Russia supported the idea, but they believed that, if properly reformed, this country would become a full-fledged member of the Western community. At the very least, Russia expected to snatch a blocking stake in the "joint venture" U.S. & Partners, but the stake it had been eyeing was diluted. The Russian elite wanted the "dry residue," but failed to get it, the expert explained.
It was important for Washington that Moscow did not wind up with the bad boys but remained neutral. Moscow, which was busy restoring its influence in the CIS and beyond, wanted Washington to leave it alone, but the two positions could not do anything but clash, the expert added.
[President Vladimir] Putin's memorable Munich speech was an attempt at honesty and openness. He tried to find the golden mean between the two extremes - neither hushing down the controversy, nor starting open confrontation, and he largely succeeded in doing it this year. However, both nations are feeling a growing need for more decisive action, the expert suggested. Some U.S. officials have certainly become annoyed by Russia's growing clout; they are proposing projects "to constrain Russia."
On the one hand, Russia is smaller and weaker than the Soviet Union used to be, the expert reasons. From a purely military standpoint, the present "U.S. against Russia" position is stronger than the "U.S. against the Soviet Union" was. It follows that if Moscow really wants another cold war, it might as well get on with it, and lose it again. On the other hand, the United States has its hands full without a conflict with Russia - two wars going on, a terrorist threat, instability in the Middle East, and insurgents in Latin America. Moreover, there is no trust in old European allies. The rapidly developing China is making things even more complicated for the U.S., because weakening Russia would now mean giving it new opportunities. The situation is quite uncertain for the U.S., the expert concluded.
Many U.S. officials still underestimate Russia, while some Russian politicians are clearly overestimating its potential, which is a very dangerous margin. At present, all the mutual claims and grudges are siphoned into the respective anti-Russian and anti-U.S. rhetoric in both countries. This rhetoric shapes specific sentiments, which in turn generate demand for action. However, even if we all restrain our emotions and avoid the pre-election risks in 2008, the U.S.-Russia prospects remain vague. Both are ready for confrontation, the expert believes.
Vedomosti
Russia to choose between ballistic missiles and social programs
On Friday, First Deputy Prime Minister Sergei Ivanov met with veteran members of the government's defense industry commission and said there were no plans to expand production of inter-continental ballistic missiles.
Former chairman of the U.S.S.R. state planning committee (Gosplan) Yury Maslyukov, who headed the defense industry commission in 1985-1991, told Ivanov that the Russian armed forces were not buying enough military equipment, that only 15% of warplanes could fly, and that the Strategic Missile Force was annually receiving just six to seven Topol-M ICBMs, whereas 30 missiles were needed.
Topol-M ICBMs are to form the mainstay of the national strategic nuclear forces by 2015.
Ivanov said current Topol-M purchases matched Russia's economic potential, and that the military had calculated the required number of missiles in line with the military-strategic situation.
He said otherwise the government would have to spend less on social programs and housing construction, and that the production of Topol-M silos and other related infrastructure had got underway.
Ivan Safranchuk, head of the Moscow office of the Center for Defense Information, said the Topol-M program, including silo construction, could account for 25%, or 30 billion rubles ($1.22 billion), of the entire state defense order.
A source in the Russian Defense Ministry said the mobile version of the Topol-M ICBM did not require expensive infrastructure.
In early 2007, Ivanov said there were plans to buy 34 silo-based Topol-Ms and 66 mobile versions until 2015.
Yevgeny Myasnikov from the Moscow-based Center for Arms Control, Energy and Environmental Studies, said the Russian Strategic Missile Force would then be reduced from 500 to 200 ICBMs, and that the United States still planned to maintain 450 operational strategic missiles.
$martMoney
Renault to buy into Russian automotive giant
French automaker Renault will buy a 25% blocking stake worth $1.3 billion in Russia's largest car manufacturer AvtoVAZ, which annually turns out 700,000 vehicles. Until now foreign carmakers have only built their own plants in this country.
Volkswagen, a leading investor in Russia's automotive industry, has so far channeled only half that sum into its Kaluga plant.
Although AvtoVAZ has for a long time failed to independently solve its problems, foreign companies are still interested in its production facilities. General Motors, Magna, FIAT and Renault have all negotiated with the crisis-ridden Russian automaker.
Last week, GM offered to buy a major stake in AvtoVAZ, but the corporate board of directors subsequently chose Renault.
It remains unclear whether Renault made a lucrative offer on finding out about the American offer, but the choice seems quite logical as AvtoVAZ and GM have repeatedly quarreled, and their Chevrolet Niva sports utility vehicle is not very popular on Russia's market.
Although neither AvtoVAZ nor Renault have announced any production plans to date. They reportedly want to jointly manufacture Renault Logan and Lada Kalina vehicles.
AvtoVAZ did not want to help its direct rival even though the French company was quite happy about the prospect of mastering Renault Logan production in Russia.
Previous corporate top managers believed it would be pointless to sacrifice the Kalina project in favor of such an attractive investor. But it appears that newly appointed CEO Boris Alyoshin is more pragmatic; or perhaps the French giant has promised to allow AvtoVAZ to use the Renault Megane platform for its own vehicles.
The Renault-AvtoVAZ deal is more ambitious than industrial assembly programs implemented by other foreign carmakers in Russia. It appears that both companies will eventually expand production to several hundred thousand cars per year in order to recoup their expenses and to saturate the seemingly bottomless Russian market.
Cooperation prospects seem good because AvtoVAZ received foreign-car production incentives long ago.
Kommersant
Finance Ministry encourages major holdings to register domestically
Russia's Finance Ministry has published a list of offshore zones which will no longer grant Russian companies the opportunity of being registered there and then transferring their dividends tax-free back to Russia.
Experts, however, do not believe the new "black list" will be that important, because the major companies, which are close to the Kremlin and are mainly enjoying the income privileges, do not as a rule use shady offshore schemes.
The newly released document listing 41 offshore zones is rather linked to the amendments to the Tax Code, which will come into force as of January 1, 2008. They will set zero tax on the profits from income companies receive on their shares in other companies (meaning their subsidiaries).
Until recently, the rate was 9% for Russian companies and 15% for foreign ones. Exemption from these payments was granted at the request of President Vladimir Putin, who instructed the ministry to create stimuli for large companies to register at home.
A partner at the law firm John Tiner and Partners, Valery Tutykhin, discovered that the ministry had made at least two blunders while drafting the list: it forgot to include the very obvious offshore zones, the Seychelles and Barbados. However, it is of no practical importance in any case.
"Because of the proviso requiring at least a 500 million ruble stake in share capital, only major companies affiliated with the state would be able to use the privilege, but they are unlikely to use some obscure offshore territory to register," the lawyer said.
His forecast is that major investments in the foreseeable future will be channeled mainly through Luxembourg, the Netherlands, Austria and Britain, which are not on the ministry's list.
As for Cyprus, the expert added, although on the list, it will remain attractive for Russian businesses, because the ministry's instruction will in no way affect the present tax-optimizing schemes involving local companies. It will not cancel the very convenient Russia-Cyprus agreement on avoiding double taxation either.
In addition, according to Ernst & Young partner Pyotr Medvedev, the limitation on using Cyprus for channeling dividends is easily avoidable in fact. For example, a Cyprus company pays dividends to a Dutch one (exempt from taxes according to an existing agreement between the countries), while the latter will transfer the money to Russia where it comes under the zero tax application.
Business & Financial Markets
Russia's international reserves grow fast, but are used unwisely
The rapid inflow of capital into Russia has increased its gold and foreign currency reserves by more than 50%, to $463 billion, in January through November 2007. But the country does not have an efficient strategy for using these funds, according to experts.
Earlier this year, the Finance Ministry expected its international reserves to grow by $115 billion. Two weeks ago, Finance Minister Alexei Kudrin said they would grow by $150 billion before the end of the year.
Yevgeny Nadorshin, an economist with the Trust bank, said that when making its forecast for the year, the ministry did not pay close attention to several factors, such as the $5 billion the state-controlled bank VTB raised during its IPO abroad, and "the sale of Yukos assets, for which Rosneft borrowed some $22 billion."
He said the international reserves would have been more modest otherwise.
Valery Piven, chief market analyst with the Otkrytie financial corporation, said the gold and foreign currency reserves had been growing quickly due to a major inflow of capital. "Export revenues are boosted by growing oil prices," he said.
Alexei Moiseyev, chief analyst with Renaissance Capital, said foreign investments, which went up considerably, to $60.3 billion, in the first half of the year.
The current volume of Russia's international reserves provides a substantial financial stability margin. It is impossible to imagine ruble depreciation now, Moiseyev said.
However, he is not satisfied with the government's management of these reserves.
"The funds are being invested in U.S. securities, although there are serious economic problems in that country," he said.
According to Nadorshin, there is no need to accumulate such huge reserves. On the other hand, their investment in the Russian economy would strengthen the ruble and therefore have a negative effect on industrial growth.
Experts say Russia's gold and foreign currency reserves will have grown to $470-$475 billion by the end of the year.
Moiseyev said the situation next year would depend on the global markets, and it is not clear if Russian companies will be able to borrow abroad. He said they would most likely have a limited opportunity to do this.
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