MOSCOW, December 25 (RIA Novosti) Bushehr: speculation galore/Arms sales fetch Russia over $7 billion/ AvtoVAZ-Renault deal to take until 2010/Experts say commissioning of ESPO pipeline may be delayed/Sukhoi Superjet 100 flight tests postponed/ Russia protects stainless steel market with high import duties
Nezavisimaya Gazeta
Bushehr: speculation galore
Once again a new tentative date for commissioning the Bushehr nuclear power plant has been announced. But no official announcements have followed. Third-country suppliers still continue to extend deadline after deadline. Some analysts think Russia is using Bushehr as diplomatic leverage against Iran and a bargaining chip in dealing with Western partners.
Last Sunday, Iran's Minister of Energy Parviz Fatah reported that the plant would "go on stream" on March 21, 2008, first at half-capacity - 500 MW, and a year later at full capacity - 1,000 MW.
"One must be very careful in giving launch dates for any nuclear facility, because the main objective is safe operation at all stages of its construction," said Irina Yesipova, spokeswoman for Atomstroyexport (the main contractor at Bushehr). "The actual start up is still a long way off, with a great deal still to be done, especially regarding the fuel."
The exact date for completing the delivery of nuclear fuel rods is not being released for security reasons. The only thing known is that it should take place some months after deliveries start. The first quantity arrived on December 16.
The loading of fuel into the reactor proper will not begin until after all the 163 basic and 17 spare rods arrive at the site. But the rods alone are not enough for full-scale physical tests and especially the power start up. The facility must also take delivery of a certain amount of equipment from third countries. And they, as practice suggests, are not always reliable suppliers.
There is speculation that Moscow is deliberately manipulating the deadlines until Iran settles its relations with the IAEA and fulfils the UN Security Council requirements. And the problems with third countries are being used as a convenient tool for these maneuvers.
Kommersant
Arms sales fetch Russia over $7 billion
On Monday, Defense Minister Sergei Ivanov announced that Russian arms exports in 2007 would reach a new record of more than $7 billion. There will be a shortfall of $1 billion over problems with ships being built and a cooling in relations with Algeria. Sales have doubled over the past seven years.
In the shorter perspective, further growth is expected in arms supplies from Russia, evident from the full order books of arms exporters.
On Monday, Mikhail Dmitriyev, head of the Federal Service for Military Technical Cooperation, said: "The current export order books - over $32 billion - gives an optimistic view of military-technical cooperation. The largest slice has been secured by Rosoboronexport, which has orders on hand worth $24 billion."
As before, aircraft are expected to be the top exports of 2008 with Sukhoi and MiG fighters to India, Venezuela, Indonesia, and Syria. There are also plans for exports of air defense systems to China and Syria, warships to Vietnam and submarines to India and Algeria.
Analysts, however, are not ruling out a fall in Russian arms deliveries in three to four years' time.
"With $7 billion under our belt we are entering a sort of plateau. Our exports will keep up at this level for at least the next three to four years if the existing international business climate prevails," said Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies. "Later, however, a dramatic fall can be expected."
In his view, the Russian defense industry is experiencing a shortage of workers, especially highly-skilled personnel.
On the other hand, inflation in the defense sector is way above the average across the country: in 2007 the inflation rate in Russia will be 12%, whereas in the military-industrial sector it will exceed 20%.
In addition, according to Pukhov, the defense industry is facing growing overheads due to a lack of energy-saving technology.
As a result, Russia could find itself unable to produce some weapons, and lose the competitive edge to other countries.
Vedomosti
AvtoVAZ-Renault deal to take until 2010
Under the agreement to sell a 25% stake in Russia's largest automaker AvtoVAZ, French Renault will pay 70% of the amount in 2008, while the remaining amount will be contributed in 2010, and will depend on AvtoVAZ's performance up to the date.
The agreement signed on December 8 by Renault and Troika Capital Partners, the brokerage representing the pool of investors including state-run arms exporter Rosoboronexport, is not binding. Currently Renault is carrying out a due diligence review on AvtoVAZ; once that is completed, the sides will be able to sign a final deal by February 26, 2008. Renault will initially become the owner of 12.8% in the automaker. Its stake will be later increased to 25% plus one share after the cancellation of the shares held by AvtoVAZ subsidiaries in July and a planned 17.5% additional issue.
The amount of the deal has not been disclosed. Several sources close to Troika or AvtoVAZ suggested that the amount would be calculated from the whole company's estimated market value of $5.3 billion, which means a blocking stake should cost around $1.325 billion.
Troika will receive half that amount, $660 million, after the contract is signed in February, according to sources close to Rosoboronexport, Troika and AvtoVAZ management.
In July, when Renault obtains the blocking package as planned, it will pay another 20% of the amount, over $260 million, the Rosoboronexport source said. The Troika source confirmed the information.
As a result, investors will receive around $920 million.
However, the sellers will have to wait until 2010 to receive the remaining 30%, and the final amount will depend on the company's performance over that time. The source close to Troika said it would be calculated on the basis of the plant's average EBITDA for 2008 and 2009, without specifying the formula.
The Rosoboronexport source said Renault would pay the amount if AvtoVAZ's EBITDA reached $700 million, but the other source did not confirm the sum.
This deal is very wisely structured, said Kirill Chuiko, an analyst with Uralsib Financial Company. Without a solid development strategy or a new model lineup, and with a decreasing market share, AvtoVAZ is a high-risk investment, and Renault was right to have pegged its payments on dynamic financial results. It will also be a good stimulus for the current owners of the plant.
Gudok
Experts say commissioning of ESPO pipeline may be delayed
The board of directors of Russia's pipeline monopoly Transneft has not approved changes in its investment program discussed on December 24 envisaging a delay in commissioning the first stage of the Eastern Siberia-Pacific Ocean oil pipeline.
The company believed it was unable to change the construction timeframe written in a government's decision. At the same time, Transneft has already sent to the Industry and Energy Ministry its proposals for postponing the construction deadline set for finishing the first stage of the oil pipeline from late 2008 to September 2009.
Experts think that Transneft is more interested in transporting oil to Europe.
Under the ESPO project, the company plans oil transit from Siberia to the Pacific coast for further oil export to the countries of the Asia-Pacific region, primarily China and Japan.
According to Konstantin Batunin, an analyst at Alfa Bank, the construction delay will allow the oil companies participating in the project, primarily Russia's state-controlled oil major Rosneft, to better prepare the fields for exploitation.
However, experts are not ruling out the delay will not be the last.
"The delay is down to the fact that Transneft is more interested in building the second stage of the Baltic Pipeline System (BPS-2), which will transport oil towards Europe. Surgutneftegaz and LUKoil are also interested in it," says Dmitry Abzalov, an expert from the Center for Political Studies.
It is less costly to transport oil to the west than to the east. "With pipelines running both eastward and westward, Russia would get additional trump cards in its foreign policy. However, the simultaneous construction of ESPO and BPS is unlikely because of an oil shortage," Abzalov said.
"The problem can be resolved only through the development of new fields, but for this the state should reduce the tax burden on oil producers which, naturally, will lower budget income. I think after the postponement of the ESPO commissioning, its construction will slow down further," he added.
Kommersant
Russia protects stainless steel market with high import duties
Russia may raise import duties on stainless steel products by 35%-40%, from 840 euros to 1,200-1,300 euros, in early 2008, and expand the duties to Chinese imports, according to Deputy Industry and Energy Minister Andrei Dementyev.
Analysts say this measure, aimed at closing a market with a capacity of 150,000 metric tons a year, will benefit metals giant Mechel and deliver a heavy blow against Russian traders of Chinese metal.
Russia introduced the duty on metal products imported from the European Union on March 20, 2007.
"Russian producers may initiate an anti-dumping investigation, and if it proves that imported metal products were sold at dumping prices, import duties will be raised in 2008," said a spokesman of the Economic Development and Trade Ministry, which controls the protective duties commission.
Analysts said Mechel, Russia's largest producer of special steels, would benefit the most from the projected measure.
Maxim Khudalov, an analyst with the Metropol investment company, said: "In 2006, imports accounted for 70% of the Russian stainless steel market. Since their quality is higher, Mechel has been trying to rally government support in order to keep its share of the market."
Oleg Petropavlovsky, an analyst with Broker Credit Service, said the duties would effectively close the Russian stainless steel market.
"China is advancing apace in all metal sectors, so [the introduction of prohibitive import duties] is a political rather than an economic decision," he said.
Metal producers from Turkey and Ukraine could narrow the gap created by the increased duties and subsequent decline in supplies from the EU and China.
According to Dementyev, the rise in duties and introducing them to more countries will be a lasting measure imposed for three or four years.
Vedomosti
Sukhoi Superjet 100 flight tests postponed
Flight tests for Russia's new regional plane the Sukhoi Superjet 100 have been postponed because some components, notably the SaM146 engine, have not passed their trials on time.
First Deputy Prime Minister Sergei Ivanov said in September, when the Superjet 100 was delivered to Zhukovsky near Moscow for ground trials, that the plane would fly by the end of the year.
Olga Kayukova of Sukhoi Civil Aircraft said yesterday that the maiden flight of the Superjet 100 had been postponed until next year.
She did not say when the flight tests would be held, but a source at Sukhoi said the aircraft would fly in February. An engineer from a research company involved in the project said the plane would take off no sooner than spring 2008.
Kayukova said the postponement would not exceed the norm of up to five months. Problems are to be expected in a project involving many leading international companies, she said, adding that the deadline set for the maiden flight is a way of keeping partners and suppliers on their toes.
An engineer who attended the ground tests said the reason for the delay was the uncompleted trials of the SaM146 engine designed by French company Snecma and Russia's Saturn.
Yuri Lastochkin, head of Saturn, said the trials began in December instead of October because of infrastructure problems at the trial contractor, the Gromov Flight Research Institute.
Yevgeny Gorbunov, head of the Gromov institute, said the trials are proceeding according to schedule agreed with the client (Snecma).
Another reason for the delayed flight tests is the uncompleted trials of the plane's frame, because not all parts of the frame have been properly adjusted. In particular, one of the doors is not closing tightly, said a participant in the trials.
Aeroflot signed a contract for 30 Superjet 100 planes with Sukhoi, with the first delivery set for November 2008.
"We expect the delivery to be made on time," said Lev Koshlyakov, deputy director general of the national air carrier.
The fine for any delays in delivery is $1.5 million per plane.
Kayukova said the delivery deadlines have not been changed.
Boris Rybak, head of aviation consultancy Infomost, said there is nothing dramatic in postponing the project by four or five months. For example, Airbus postponed the production of its A380 liner by two years, and Boeing's B787 Dreamline rolled off the conveyor line 12 months later than planned, he said.
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