What the Russian papers say


MOSCOW, January 14 (RIA Novosti) British Council sabotaging Russian Foreign Ministry's decision / Second Khodorkovsky trial could be timed to coincide with presidential election / Toyota plans to launch assembly of low-cost cars in Russia / Nippon Steel will not export metal to Russia / Russian companies show interest in German stock exchange / Russian vodka going through hard times


British Council sabotaging Russian Foreign Ministry's decision

Great Britain has ignored the ban on the British Council's operations in Russian regions by announcing the resumption of its offices' work. Russia views this decision as an unparalleled act of sabotage and considers retaliating.
Opened in Moscow in 1992, the first information center of the Council was accorded the status of the British Embassy's cultural center in 1994. Sixteen more offices have been established since then in Russia. Over 400,000 Russians took part in the Council's projects every year.
In late 2007, Russia's Foreign Ministry accused the British Council's offices in Russia of financial fraud and unlawful establishment of additional diplomatic missions, thus providing their employees with diplomatic immunity.
When suspending the British Council's activity in Russia, the ministry was rather straightforward about the decision having also political reasons. Foreign Minister Sergei Lavrov as good as linked it directly with tensions aggravated between Russia and Britain over the case of Alexander Litvinenko, the former Russian security services agent poisoned with a radioactive substance in London in November 2006.
Russia's Foreign Ministry sees the British Council's intention to resume work despite the Russian government's suspension as sabotage. "We will wait until they really resume operation," said Andrei Krivtsov, deputy head of the ministry's press office. "Then we'll see how it goes and decide on response measures."
It is easy to forecast the range of sanctions Moscow could bring upon the British Council. The Council had been facing tax evasion charges ever since it began operating in this country, which culminated in 2005 with the St. Petersburg office management sued for illegal entrepreneurship. The case resolved then after the British Council was registered with the Russian tax regulator.
Kommersant has information that economic charges have been reinstituted against the British Council. Despite the fact that the British Council has voluntarily closed down its cultural center in Nizhny Novgorod, the local government is still considering a suit to collect its overdue lease payments.
The Foreign Ministry representative in the Sverdlovsk Region, Sergey Ivanov, suggested that, unless the ministry's demands are met, Russian companies and agencies will be recommended to refrain from cooperating with the British Council.

Moskovsky Komsomolets

Second Khodorkovsky trial could be timed to coincide with presidential election

A sudden freak change has occurred in the so-called second "case" of the embattled ex-oligarch Mikhail Khodorkovsky. The Investigation Committee under the Prosecutor-General's Office is in no hurry to take the matter to law although it finished the investigation a long time ago.
An unnamed source at the Prosecutor-General's Office said: "the case is ready to be taken to court, but is lingering in the Investigation Committee. For some unknown reason it is not being handed over to the prosecutor's office for approval."
"The case is all sewn up, and the co-accused have even read it, but for some reason the investigation period has been extended again, to March 2," Yury Shmidt, the oligarch's lawyer, said, puzzled. "I just cannot understand what else they are doing with it."
The Prosecutor-General's Office announced it was launching a new case against former Yukos head Khodorkovsky and Menatep head Platon Lebedev in January 2005, during the first trial. The period of investigation had been extended twice, but it was not until December 2006 that the new charges were made public against Khodorkovsky and Lebedev. On February 5, 2007 they were formally accused of embezzling over 850 billion rubles.
Prosecutors decided to conduct a preliminary investigation in Chita, where Khodorkovsky and Lebedev had been transported under guard from the prisons where they were serving time.
But both appealed against the decision, saying the investigation must be conducted in Moscow, where they are alleged to have committed their crimes.
The Basmanny Court, followed by the Moscow City Court, agreed with their reasoning and rescinded the prosecutors' order. But the prosecutors filed a protest with the Supreme Court of Russia, which repealed all previous decisions and sent the matter back for further inquiry.
Perhaps that is the reason why the Investigation Committee is not rushing to bring the matter into court: what if Themis' servants admit again the investigation in Chita was unlawful? For, as Shmidt explained, "non-competence of investigating agencies, if established, could render nul all evidence gathered on a case."
However, the lawyer said it was pure speculation: "We are not even contemplating it."
There may be another version: the investigators themselves are not happy with their results and are now bringing the case up to scratch.
There is also a third suggestion: they plan to bring one of the most high-profile cases to the court just ahead of the presidential ballot.


Toyota plans to launch assembly of low-cost cars in Russia

Japan's Toyota plans to produce low-cost cars, in the $7000-10,000 price range, in Russia. On Friday Tadashi Arashima, head of Toyota Motor Europe, revealed the plans to produce the cars at the company's St. Petersburg's plant.
If Toyota can keep the cost of the car as they have announced, it will be the cheapest foreign mass-market car in Russia, says Ivan Bonchev, automotive analyst at Ernst&Young. Other budget foreign cars cost more than $10,000. The price of Chevrolet Lanos starts at $ 10,000, Renault Logan at $10,700, Hyundai Accent at $12,000.
Within the range of $10,000 one can buy only Chinese Chery Amulet ($9,860.) In the same niche, up to $10,000, AvtoVaz offers cars such as Lada Kalina (starting at $9,700) Samara (starting at $8,500 for three-door hatchback) and "classic" (starting at $5,650.) An AvtoVaz representative has made no comment on Toyota plans.
A budget car will strengthen Toyota's position on the Russian market, said Bonchev.
In 2007 Toyota sold 157,000 cars in Russia which made Russia the largest Toyota's sales market in Europe. Toyota's management has already announced that the company could increase production of its cars in St. Petersburg up to 200,000-300,000 cars.
Toyota launched its first plant in St. Petersburg at the end of 2007 and invested in this project $200 mln. It produces Toyota Camry; the plant's capacity is 20,000 cars a year. In a year and a half it can increase the production of cars up to 50,000.
Toyota considers the possibility to construct the second plant in Russia for $180 mln. The company has already signed the Memorandum on the implementation of the project with the Ministry of Economic Development and Trade. In 2011 the company plans this plant to produce 50,000 cars and in 2012 - 100,000 cars, as stated in the Ministry's documents.

Business & Financial Markets

Nippon Steel will not export metal to Russia

Arcelor Mittal, the world's largest steel company, will supply metal to Japanese automotive plants in Russia, where there is a shortage of top-quality metal sheet.
Akio Mimura, CEO of Nippon Steel, the largest partner of Japanese automotive giants, said the company found it unprofitable to export metal to Russia, and that it had no intention of building its plant here or setting up a joint venture with a Russian partner.
He said the company virtually knew nothing about the Russian market.
Toyota cars and Isuzu trucks are currently assembled in Russia; Nissan, Suzuki and Mitsubishi have also signed investment contracts with the Russian government and want to build their plants in the country. The contracts stipulate welding operations 18 months after initial production.
Russia's Magnitogorsk Iron and Steel Works (MMK) and Severstal have stated their intention to supply metal to foreign automakers in Russia. Corus, an international company providing steel and aluminium products and services to customers worldwide, is also studying the possibility of building a metal-rolling plant near St. Petersburg.
Kirill Chuiko, an analyst with Uralsib Financial Company, said auto manufacturers had to cooperate with global suppliers because Russian metal producers could not guarantee product quality.
Under the investment contracts, automakers must relocate production to Russia and order more sheet metal here. Chuiko said Russian metallurgical companies were interested in expanding the highly profitable metal-sheet segment.
They have already signed preliminary contracts with foreign automakers. Denis Gorev, an analyst with Finam brokerage, said MMK and Novolipetsk Steel (NLMK) had launched construction of world-class metal-sheet plants, that production would commence in 2009, and that the companies would have many customers.


Russian companies show interest in German stock exchange

German exchange operator Deutsche Boerse AG, which opened a Russian office last May, has only now reported its early results. In December, the investment holding Finam joined its trading floor. Other Russian brokerages are showing interest. However, experts think the exchange will be of interest only to small-time brokers eyeing second-tier companies.
According to the World Federation of Exchanges, the capitalization of the companies trading on the exchange had totaled $1.42 trillion by the end of November 2007, with sales reaching over $4.06 trillion in the first 11 months of the year.
Securities of 56 Russian companies, including Aeroflot, AvtoVAZ, Bashneft and Gazprom, are currently trading on DB.
Finam has been the second Russian broker to be cleared for Deutsche Boerse operations. Aton investment company has been working on the exchange since 2004.
At the end of last year, CenterInvest Group signed a cooperation memorandum with DB. However, the group is not a full member of DB and has no right to conclude deals on its exchange.
"We propose to use Deutsche Boerse as one of the trading floors for placing securities of Russian second-tier companies," said Oleg Preksin, chairman of the board of directors of CenterInvest Group.
A source at the exchange said three more Russian companies could gain membership before the end of the first quarter of 2008. Financial corporations Otkrytie and Uralsib are also planning to become Deutsche Boerse members.
"A month ago we opened an office in Frankfurt and in the summer of 2008 are planning to become a member," said Roman Lokhov, Otkrytie's managing director.
A source at Uralsib bank said that "all the necessary documents for membership have been sent and we are expecting the go-ahead from Deutsche Boerse in the next few months."
Analysts believe DB could compete above all with a branch of the London Stock Exchange - Alternative Investment Market, or AIM. According to the findings of Munich University and the European Business School, exchange placement costs in Frankfurt total 6% to 9% of IPO volume, while in London they are 7% to 12%.
Analysts do not believe large Russian players will be interested in DB. "Trading in Russian securities on the German exchange is not large as yet, with all turnover concentrated on the LSE, and for this reason we are not considering possible DB membership," said Anton Atrashkin, director for public relations at Renaissance Capital.


Russian vodka going through hard times

The volumes of whisky, gin and tequila imported into Russia are growing with every year, compensating for the relative stagnation of the domestic vodka market. Russians more and more often prefer what they see as exotic alcohol, suggests a report by the Federal and Regional Alcohol Market Research Center.
Last year, strong drinks imports amounted to 10 million dekaliters, up 20% on the 2006 level. According to experts, this kind of growth is usually witnessed when a certain product is entering a market.
Last year, Britain, Ireland and the U.S. literally flooded the Russian market with whisky by boosting deliveries 160%, to 1.17 million dekaliters. Russia could consume more, experts say, had it not been for importers' greed. "They do not import cheap brands marketed in the West at $1-$2 per liter," the report said. "The situation resembles the one earlier witnessed in the wine segment: first cheap table wines from countries outside the CIS appeared in Russia only after 2000, when rich customers have formed themselves an idea of each of the producing countries."
Gin is gaining a strong position in Russia. Although 72,000 dekaliters in 2007 might not seem like a large amount, it is still a 100% growth on the 2006 level. Experts say its popularity is not growing as fast as it could because Russians prefer consuming it in the HoReCa segment (bars and restaurants), where markups on alcohol are usually high.
The brandy market is one of the fastest growing ones in Russia today. Brandy imports totaled 1.8 million dekaliters last year. Armenian brandy producers have consolidated their positions on the Russian market lately, experts said, as they account for 52% of all brandy imports.
As for Russian vodka, it is facing hard times. The vodka market is in stagnation; it has slowed down because of high competition. It is also shaken from inside by the rivalry between legitimate players. According to experts, in 2007 vodka producers had to compete with brandy, rum and whisky as desperately as with vodka imported from Ukraine, Finland and Sweden.
Current vodka production and imports stand at their levels of three years ago, the Center's director Vadim Drobiz said. The only segment showing some growth is vodka premium (200 rubles per half a liter), but it is a very small segment, he added.

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