MOSCOW, April 29 (RIA Novosti) Latvia calculates compensation claims for Soviet occupation / Prodi declines South Stream leadership, jeopardizing project / Russia to use natural gas in its bargaining with EU / Moscow holds back establishment of gas OPEC / Transneft changes ESPO-2 pipeline route / Russian government to allow companies to advertise beer in stadiums
Kommersant
Latvia calculates compensation claims for Soviet occupation
The Latvian government yesterday received a report from the commission calculating the size of monetary compensation for the alleged Soviet occupation of the republic.
Commission members and ministers so far refuse to say how much they want from Russia, but sources of the business daily Kommersant said the claim could be between $3.5 billion and $4.5 billion, or one-tenth of Lithuania's claims.
According to the Latvian Foreign Ministry, this is a preliminary report, which will be ready for publication by the end of 2008 or in early 2009. But Latvia needs facts and figures now for talks with Russian partners during the forthcoming meeting between the two countries' presidents in June.
Latvian political analyst Andris Kudors, director of the Riga-based Center for East European Political Studies, said the report was not compiled to demand compensation from Russia.
"Theoretically, we could present the bill to Russia, but few people want Russia to pay. What they want is a gesture of goodwill. The Vatican no longer practices the inquisition, yet the Pope has decided to say he was sorry," Kudors said.
"Since Russia is the legal successor of the Soviet Union, it should not just sit in the Soviet place in the UN Security Council, but also assume responsibility for its actions. Unfortunately, Russia does not want to take a critical look at its past, and therefore is pursuing a tendentious policy regarding its neighbors," the analyst said.
"We know that Russia also suffered from the Soviet regime. Why then is it defending it? It has not opened Soviet archives, and the FSB hides documents and denies access to our historians. Russia's foreign policy strongly reminds me of the Soviet policy," Kudors concluded.
A high-ranking official at the Latvian Foreign Ministry said the decision to demand money or apologies, or to smooth over the issue, would depend entirely on the political will of national leaders, as well as on bilateral relations in the next few months.
Latvian authorities apparently have reasons to drop their claims to Russia. Unlike Estonia and Lithuania, they are not protesting against the construction of the Nord Stream gas pipeline.
Moreover, they have proposed building an offshoot to the Latvian coast and a large gas storage facility. But Russian gas giant Gazprom and its subsidiary Latvijas Gaze, the local gas monopoly, said the project is not economically prudent.
Gazeta.ru
Prodi declines South Stream leadership, jeopardizing project
Russia has so far failed to lure an important European politician to head a natural gas pipeline project affiliated with state-owned Gazprom.
Italy's outgoing premier, Romano Prodi, has formally turned down an offer to head South Stream, a natural gas project by Gazprom and Italy's Eni which is expected to seize Europe in a tight energy grip together with its northern twin, Nord Stream.
In late 2005, former German Chancellor Gerhard Schroeder accepted the presidency of the North-European Pipeline Company's supervisory board (now Nord Stream). A few months later, he became the head of its shareholders' committee. His decision then sparked a high-profile political scandal in Germany and internationally, as his critics claimed he in fact agreed to be paid by the "Putin regime," which was clearly behind the state-run Gazprom. Schroeder was offered around 1.5 million euros a year.
Industry watchers believe Prodi must have been scared off by the negative repercussions of Schroeder's appointment to head the Gazprom-led project.
Anatoly Dmitriyevsky, director of the Oil and Gas Research Institute, said that Schroeder's experience could have made Prodi think twice over whether or not he was prepared to go through a similar attack.
Dmitry Oreshkin, a leading research associate at the Russian Academy of Sciences' Institute of Geography, said: "Prodi could have accepted the job offer five years ago, as Schroeder did, but not now that Moscow's strategy has been exposed. Everyone understands that the Kremlin is buying up outgoing politicians."
"If he accepted Russia's offer, he would be harassed in Europe as someone 'bought' by the Kremlin," the analyst said. "Russia's image has changed greatly in the past few years, it has lost its good reputation. It has become risky to deal with us," he added.
Oreshkin also said that Prodi's refusal could jeopardize the project. "Russia would not be seeking a political heavyweight like Prodi if it hadn't expected problems to arise; now it will have to find someone else for the job," he speculates. With Prodi lost, Gazprom has a greater chance of running into problems with South Stream, he concluded.
Vedomosti
Russia to use natural gas in its bargaining with EU
President-elect Dmitry Medvedev said upon his election that foreign policy was the domain of the president. But don't expect changes, because foreign policy depends too much on objective factors, above all lack of resources, said a Russian analyst.
Konstantin Simonov, head of Russia's National Energy Security Fund, said mankind could invest a fundamentally new fuel in the future, but there will not be an energy revolution in the next few decades.
Therefore, Russia has an ace it would be foolish not to use - its natural gas resources, the largest in the world. Russia, Iran and Qatar control as much as 55% of global proven gas reserves, according to Western estimates. The division line between energy producers and energy consumers is becoming clearer.
European politicians are naively talking about diversifying energy supplies, because Norway is the only European country with perspective gas resources, Simonov writes. It can increase gas production to 1.06 trillion cubic feet by 2015, while the EU will need 4.94 trillion cubic feet of gas more by that time.
The EU is pushing Russia back in North Africa, the analyst writes. But Libya is not as strong gas player in terms of reserves as Algeria, with which the EU has failed to come to terms on a gas alliance. Anyway, North Africa can provide only between 1.41 trillion and 1.76 trillion cu f of gas.
According to Simonov, Europe thinks liquefied natural gas (LNG) will solve its problems, but this is a highly competitive segment and new projects need huge investments. This is why Qatar cannot increase gas production endlessly. The United States, China and Japan are fighting each other on the LNG market, which means that the EU cannot hope for unlimited LNG supplies there. In short, Qatar will not play in the European game of gas patience.
Flirting with Central Asia is a dead-end game, and not because pipelines cannot be built to bypass Russia, but because the EU will not contract new gas there. The volume of the region's real gas reserves is kept secret, but BP's annual report puts them at not more than 1.7% of the world's total per regional country. And China also wants a share of Central Asian gas.
Russia has only one rival for the European market in the medium term - Iran. Therefore, the Kremlin's foreign policy will be focused on Iran, because Russia could benefit from routing Iranian gas to India and China, which would allow it to preserve its stance in the European gas market and therefore normal political dialogue with the EU.
Russia will be unable to implement new gas production projects without foreign assistance because it needs technologies, personnel and risk sharing. Europe would give us political bonuses for this. Norway would more gladly vote for participation in the Shtokman gas condensate project than for Ukraine's accession to NATO.
Nezavisimaya Gazeta
Moscow holds back establishment of gas OPEC
The process of establishing an organization of leading global natural gas producers and exporters, a so-called gas OPEC, has met with difficulties. Analysts believe that Moscow, despite its obvious interest in a gas cartel, is purposely biding its time, not wishing to assume exorbitant obligations in the new organization.
On April 28, the fifth meeting of the Gas Exporting Countries' Forum opened in Tehran. Despite initial assurances that the sector's ministers will attend the meeting, only lower-rank officials and experts have arrived. The forum is to meet next time in Moscow on June 24, but the meeting may be delayed till October-November at Russia's request, Chakib Khelil, Algeria's minister of energy and mining, said.
Analysts say that problems hindering the establishment of the new organization are explained by Moscow's unwillingness to commit itself by excessive obligations within its framework.
Iran, which insists on the soonest possible formation of the new cartel, wants to resolve its political problems. Possessing the world's second largest gas reserves, Iran actually does not export gas and even imports it, including from Turkmenistan. Russia, which is the largest gas supplier to Europe, builds its relations with EU countries on the basis of long-term agreements and prices tied to world oil prices. It has no intention of changing its export scheme or coordinating its gas prices with other participants in the cartel.
According to Sergei Pravosudov, director of the National Energy Institute, "the very idea of establishing a gas OPEC cannot but appeal to Russia, which has the world's largest gas reserves. However, there is no reason to rush fences as the time is playing into Moscow's hands. Hence its attempts to drag out the formalization of the gas cartel."
Gazeta
Transneft changes ESPO-2 pipeline route
Russia's pipeline monopoly Transneft decided to change the route of the second ESPO leg. It will run north of Khabarovsk instead of south as was planned earlier. As a result, the Eastern Siberia-Pacific Ocean main will be 75 miles longer and its cost will be 20 billion rubles ($850 million) higher.
However, Transneft said the change would not affect the project timeframe.
In fact, the company changed the pipeline route to move it outside Khabarovsk's water conservation area after Russia's environmental watchdog, Rosprirodnadzor, pointed out that the earlier planned route risked polluting the city's drinking water sources.
The ESPO-2 project was roughly estimated at 320-330 million rubles ($14 million), in 2006 prices. With the route change, the costs may grow to 350 million rubles. With inflation and growth in building materials prices taken into account, the overall costs of both pipeline legs may exceed 700 million rubles ($30 million).
Analysts are convinced that this rise in the project costs is not the last.
"With a major project like ESPO, one cannot avoid adjustments of dates and costs along the way. In this case, however, Transneft has good reasons to hike costs. On the other hand, the price rises certainly affect the company's shareholder value," said Timur Khairullin, a senior analyst with the AntantaPioglobal investment group.
According to expert estimates, even with the current investment level, ESPO can be considered the world's most expensive pipeline project in terms of its cost/capacity/length ratio. The generally accepted average cost of laying one kilometer of pipeline is around $1 million, while it exceeds $6 million in ESPO even as it is now.
Still, despite the growing costs, analysts are convinced that the project will pay back.
"The geopolitical aspect should also be taken into account," said Khairullin. "The project will stimulate the development of Eastern Siberia. Companies will have no impetus to develop new fields there unless there are transportation routes available."
On the negative side of the geopolitical gain, Transneft will now have to hike oil transportation tariffs to return its investment. The project was expected to pay back in 18 to 20 years, with the tariff of $38.8 per metric ton. In the current situation, experts estimate that the project can only pay back in 20 years if the tariff is raised to $55-57.
Oil companies cannot afford to pay this much. "Even with the zero mineral tax in Eastern Siberia, producers cannot afford to pay more than $50," said former Economic Development and Trade Minister German Gref.
Vedomosti
Russian government to allow companies to advertise beer in stadiums
The government has approved a bill allowing companies to advertise beer during sporting events. However, there will be no such advertisements at the May 21 Champions League final in Moscow.
Under the amended advertising and sports laws, breweries that spend 15% of their advertising budgets on sports programs for teenagers are allowed to advertise beer in stadiums.
The same provision applies to the sponsors of Russian and official international competitions, except youth league events. However, the government proposed abolishing the 15% deduction clause because it hindered financial flows and because it was impossible to monitor such deductions.
Vitally Mutko, president of the Russian Football Union and member of the Federation Council, the upper house of parliament, said the bill would not be passed prior to the May 21 Champions League finals at Moscow's Luzhniki Stadium.
Consequently, Heineken, the event's co-sponsor, will not be able to advertise there.
Heineken Russia PR director Anna Meleshina said the company would abide by national laws, and that as the final is only one match in the tournament it will not cause substantial losses to the company.
Brand Action Group sports director Maxim Belitsky said the annual profits of sports clubs and federations would soar by $10-15 million if the amendments were passed.
Andrei Malafeyev, PR manager at Moscow Efes brewery, said most beer-lovers were primarily football fans.
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