MOSCOW, April 11 (RIA Novosti) The West wrong about Russia/ United Russia Has 'Strategic Post' Ready for Putin/ RusAl faces nationalization in Guinea/ China obstructs ESPO pipeline construction/ LUKoil to sell off its gas station chain in the United States/ Low-budget cars swamp Russian auto market
Gazeta.ru
The West wrong about Russia
The West often asks what it has done wrong regarding Russia. It wonders why Russia has strayed from the path it entered in the early 1990s, which should have turned it into a democracy gradually integrating in the Euro-Atlantic community under the benevolent eye of the leading Western powers, prominent Russian analyst writes in the online newspaper Gazeta.ru.
Fyodor Lukyanov, editor-in-chief of the Moscow-based magazine Russia in Global Affairs, writes that the West is acting on the false assumption that a special policy can be applied to Russia. But a policy regarding Russia cannot be considered without its connection to the general situation in this globalizing world.
The West should ask itself not what it has done wrong regarding Russia, but what it has done wrong since the end of the Cold War, the analyst writes. It should ask itself why the collapse of Communism has not led to the establishment of a new, fair world order.
The two presidential terms of Vladimir Putin were a period when it turned out that the formulas for solving global problems, which the West considered logical, either misfired or produced unexpected results, Lukyanov writes. It took the international community a long time to see that problems accumulate because there are no adequate methods to analyze them and insufficient solutions.
Russia's current confidence rests not only on high oil prices, but also on the miscalculations made by the West, primarily the United States, which undermined the huge leadership potential it had at the beginning of the 1990s.
According to Lukyanov, Putin's Russia, although it has been advancing at a fast pace, has not created serious problems for the West. However, it is using problems others created to improve its standing, which is logical for a major power that is recuperating after a painful fall.
Russia was not the sole source of problems related to the conventional forces in Europe treaty, Iran, Kosovo, ballistic missile defense, and Europe's dependence on gas imports. All of these problems resulted from objective processes, and frequently because of mistaken political decisions made by all international players, including Russia.
Nearly all of the international institutes that formed the basis of the old world order are currently in crisis, Lukyanov writes. International relations have lost their ideological footing, and the West cannot deal with this situation because it is still fighting off Cold War inertia.
Its attempts to explain problems by the presence or absence of democracy in this or that country are not producing the desired results, and processes currently underway in the world cannot be slotted into any one specific development model.
Lukyanov writes that the policy of upholding one's interests is a logical choice in a world that is not developing as everyone would like it to, without a definite destination or clear outlines of a future world order. Every country is doing what is thinks is best, proceeding from its own interpretation of interests and ways of upholding them.
Vedomosti
United Russia Has 'Strategic Post' Ready for Putin
The pro-Kremlin United Russia party is working on amendments to its charter that would allow the outgoing president, Vladimir Putin, to take one of the top posts in the party leadership without being a member.
Putin agreed to top the party's election list at the October congress, and 64.3% voted as a result. Observers were then unanimous that Putin was heading for the premier post and was assuring himself parliamentary support.
President-elect Dmitry Medvedev has no plans to join the party, a source in his team said, although he supports the ideology. Putin has not applied for membership either, but the party is expecting him to take one of the top posts.
Sources in the Kremlin and in United Russia told Vedomosti that the party in power was working on amendments to its charter which would change its governance structure and create the post of an off-party leader. "The national leader idea will therefore be formalized," the United Russia source said.
Garry Minkh, head of the Russian government's legal department, is helping United Russia amend the charter, the source said while Minkh was unavailable for comment.
Sources at United Russia said they did not believe any management functions would be redistributed between the effective party leaders. Putin does not need any specific executive powers in the party, but they are preparing a strategic post for him.
United Russia has a managing body co-chaired by representatives who are not required to become members, the Supreme Council. It includes Moscow Mayor Yury Luzhkov, President of Tatarstan Mintimer Shaimiyev, and Emergencies Minister Sergei Shoigu. "The council will probably be enlarged, given additional powers, and Putin will head it," a source in the Kremlin executive office suggested.
"Putin is trying to turn United Russia into his own political resource and preserve the party as a key political force. This will be especially important after the new president takes his post," said political analyst Rostislav Turovsky. But, since Putin has so far delayed joining the party, he must have some back up ready, the expert believes.
Kommersant
RusAl faces nationalization in Guinea
Authorities in Guinea are threatening to nationalize a bauxite and alumina plant in Fria that RusAl bought two years ago unless they receive more funding.
The facilities include a bauxite mine, alumina plant, a rail branch, a seaport in Conakry, and other infrastructure objects. In 2006, RusAl purchased from the Guinean government a 100% stake in state-owned Friguia SA and a 15% stake in Alumina Company of Guinea Limited. At the time of privatization, the enterprise was mining 2.2 million tons of bauxite and producing 700,000 tons of alumina a year.
The facility at Fria - the sole alumina refinery in the West African country - is run by the Alumina Company of Guinea (ACG), which is controlled by RusAl.
"Our purchase met all the terms and conditions of the agreement, which was legally formalized with the government of Guinea in full accordance with accepted procedures," said Vera Kurochkina, a RusAl spokeswoman. "We have received no official notices concerning our observance of the agreement," she added.
The sum of the deal was not disclosed. According to unofficial figures, it amounted to $22 million. At that moment the Russian company was managing a mining holding, Bauxites of Kindia, under a 25-year concession and examining the possibility of building a new bauxite and alumina factory around bauxite deposits at Dian Dian.
But a year later, Guinea's Information Minister Justin Morel said on local television that the authorities were considering a review of agreements with overseas companies. He promised that should the companies refuse to "act amicably," the authorities would "enforce the hand of law." In the summer of 2007, Guinea set up an interdepartmental committee to review mining conventions and contracts and is currently looking into 13 deals.
Denis Gorev, a Finam analyst, said the risks of losing assets are high. "On the one hand, by succumbing to blackmail, the company might face the same claims in other African countries. On the other, it is better to pay the difference now than lose control of the plant later," the analyst believes. "Even if Guinea refunds RusAl's money back, it will not be enough to purchase the same-size capacities."
Nikolai Sosnovsky, a Sobinbank analyst, said since Bauxites of Kindia and the Fria facilities form an unbroken production chain, problems at one end are apt to cause snags at the other. Sosnovsky stressed that the bauxite business in Guinea is "very important" for RusAl, because one-quarter of its bauxite comes from Guinea.
Vedomosti
China obstructs ESPO pipeline construction
Nikolai Tokarev, president of the oil pipeline monopoly Transneft, has asked the Russian government to decide if the East Siberia-Pacific Ocean (ESPO) oil pipeline will have an offshoot to China.
The pipeline is being built, yet no agreement has been reached with the China National Petroleum Corporation (CNPC).
Tokarev wrote to Deputy Prime Minister Sergei Naryshkin on March 14 encouraging the government to decide the issue without delay.
According to an order from the Industry and Energy Ministry issued in 2005, Russia is building the pipeline with a capacity of 30 million metric tons from Taishet in the Irkutsk Region (Siberia) to Skovorodino in the Amur Region (Russia's Far East), and also intends to build an oil port at Kozmino with a capacity of 15 million metric tons.
As much as 15 million tons of oil is to be supplied to China, but the Russian government is still considering the construction of an offshoot there.
"This is a vital issue that can seriously affect the ESPO concept," Tokarev wrote.
The decision depends on agreements on the price of Russian oil supplies to China, Industry and Energy Minister Viktor Khristenko told the popular daily Vedomosti. In particular, the Chinese company should be convinced to buy oil at a higher price than that stipulated in its contract with state-controlled oil producer Rosneft.
Under the agreement, Rosneft is to deliver 48.4 million tons of oil by rail in 2005-2010 in repayment for the CNPC loan granted in 2005 for the acquisition of Yuganskneftegaz, the main oil-producing asset of the bankrupt oil company Yukos.
Rosneft was unhappy with the prices stipulated in the contract and in November 2007 it raised the price by $0.675 per barrel, by reducing the Urals/Brent discount from $3 to $2.325. Rosneft hoped to sign an agreement for the higher price in February 2008, but CNPC is so far unyielding.
The talks with CNPC are still under way, said a Rosneft spokesperson. These are difficult talks, because the Chinese are trying to cut the price, said a source with connections in the Russian company.
CNPC has refused to comment on the issue.
Valery Nesterov, an analyst with the Troika Dialog investment company, said Transneft's concern is understandable, since plans for ESPO's second stage and the capacity of the Kozmino port depend on the offshoot to China.
If the Kozmino port is redesigned, the cost of the pipeline's first stage will grow by 8%, to 367.5 billion rubles ($15.66 billion), and of the second stage by 30%, to 430 billion rubles ($18.33 billion), Nesterov said.
Kommersant
LUKoil to sell off its gas station chain in the United States
Russia's largest oil company LUKoil has decided to sell 162 low-profit gas stations in Pennsylvania and southern New Jersey purchased in 2004 from its strategic partner ConocoPhillips, the third-largest integrated energy company in the U.S.
The gas stations, due to be sold by early May for $138 million, will be supplied with LUKoil petroleum for the next 15 years.
LUKoil entered the U.S. market in 2000 after purchasing over 1,300 Getty Petroleum gas stations. In 2004, the company bought 795 gas stations from ConocoPhillips, which, in turn, acquired a 7.6% stake in LUKoil the same year and now owns 20% of the Russian oil major.
The company declined to name the new gas station owner and said it was selling them because they do not comply with corporate profitability levels. U.S. gas stations account for one third of the 6,100 LUKoil gas stations.
Vadim Gluzman, chief executive of LUKoil's U.S. unit, said a foreign company had bought the low-profit gas stations, and that the U.S. retail market featured a low and volatile retail sale margin. This is why major companies prefer to operate inside the wholesale segment; and petroleum delivery contracts are stipulated during local gas station sales, Gluzman told the paper.
Analysts called the deal profitable. Denis Borisov, an analyst with Solid brokerage, said any oil company needed its own refineries in order to obtain the maximum possible economic effect from operating gas stations chains.
Konstantin Cherepanov of KIT Finance also said the deal was profitable because the Russian company had spent $350,000 per gas station in 2004, and that it had now earned $800,000 per station.
Nezavisimaya Gazeta
Low-budget cars swamp Russian auto market
In the first quarter of 2008, Ford skipped from second to third place in car sales by overseas makers, letting Korea's Hyundai to overtake it. Experts say low-budget models are increasingly cornering the Russian market, making it difficult for American cars to compete.
As in a previous year, Chevrolet leads the field (its sales rose by 59%, up to 58,500 cars), according to the Automobile Producers' Committee of the Association of European Business (AEB). Hyundai, which replaced Ford in second place (+6%, up to 41,500 cars), has nearly doubled its sales compared with the first quarter of last year (raising them by 97%, or to 44,000 cars). Nissan is breathing down Ford's neck, with a doubling of sales, and a jump to 37,200 cars.
Overall sales of foreign cars, including those assembled at Russian plants, increased in the first quarter of 2008 by 54%, from 295,000 to 454,000.
Compared with 2006, foreign car sales in Russia in 2007 rose by 61%, from 1.02 million to 1.64 million. There is no downward trend yet, despite growing fuel prices, and a lack of quality-built roads and a developed service network. Experts say with surprise that statistics are defying all forecasts, where sales should stop growing in 2009-2010.
Analysts believe the main reason why Ford is continuing to lose ground in Russia is the massive demand for low-budget cars. "Ford simply cannot keep up with market growth," said Sevastian Kozitsyn, an analyst with BrokerCreditService. "Previously it rode on the coat-tails of an attractive credit policy, and today perhaps it no longer has reserves for price cuts, while its rivals keep turning out new models in the medium price segment. A Chevrolet Lacetti is priced at $16,000, while a Focus sells for $20,000. This price gap is too important for most of the buying public and is the motive for choosing the cheaper model."
AEB statistics support his conclusions. According to its findings, sales of the budget Renault Logan increased in the first quarter of this year by 45%, to 18,000 units. The Hyundai Accent went one better, with overwhelming growth of 91% and sales reaching 16,500 cars.
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