MOSCOW, June 6 (RIA Novosti) The CIS gets a new function / Security Council could wield real power / Nord Stream construction postponed again / Moscow to discuss fixed gas prices for Ukraine after debts are paid / BP tries to smooth over conflict in TNK-BP / Hyundai to build third multi-brand car plant in Russia
Kommersant
The CIS gets a new function
The CIS, which has been declared dead many times, has developed a new function, a Russian analyst writes in the popular business daily Kommersant.
According to Fyodor Lukyanov, chief editor of the Moscow-based magazine Russia in Global Affairs, the Commonwealth of Independent States is the only forum where the leaders of the former Soviet republics can talk without having the very fact of the meetings viewed as concessions.
For example, a meeting between the presidents of Russia and Georgia would most likely provoke debates about who initiated it and who made the concession, but not if it is held during the informal CIS summit in St. Petersburg, which begins in Moscow on Friday.
Or take Ukrainian Prime Minister Yulia Tymoshenko, who would have had little hope of holding talks with her Russian counterpart, Vladimir Putin, if not for the meeting of the CIS Council of the Heads of Government in Minsk last May.
The importance of the organization will continue to grow, because politics in the post-Soviet territory is growing increasingly complicated, Lukyanov writes.
In the past, the post-Soviet republics could hope that their bright - or bleak - future depended on the making the right choice. But the two-dimensional system of coordinates - "for Russia" vs. "for democracy" - has proved inadequate for the increasingly diversified processes underway in the former Soviet Union.
The analyst writes that the situation is far from stable in the CIS countries that have opted for authoritarian rule and in those that "have chosen freedom." The merciless struggle for power in them is complicated by the logic of external geopolitical rivalry, often producing unpredictable results, Lukyanov writes.
This spotlights the need for dialogue, because the partners have to coordinate their positions or at least inform each other about them. This is why the CIS summits, which many leaders not so long ago disregarded, are becoming increasingly popular. The CIS leaders, no matter what they think about Russia, now do not recommend abstaining from CIS summits.
Integration in the CIS, with Russia or any other country as its core, is unlikely. Attempts to form alternative groups, such as GUAM (comprising Georgia, Ukraine, Azerbaijan and Moldova) or the Community of Democratic Choice (established last year by Ukraine, Georgia and Moldova), have not been successful.
The same goes for the recent idea of forming an "Eastern European union" to incorporate the post-Soviet countries to which the European Union cannot offer anything better. But its future is bleak, just like that of any other project designed to avoid making clear decisions, Lukyanov writes.
In his opinion, the CIS need not fear rivals. It will not be the foundation from which a new union will grow, but neither will it be jettisoned, because this would be irrational.
Gazeta
Security Council could wield real power
Russia's power vertical faces another shake-up. In the fall, the Federation Council will submit to the State Duma a draft federal law "On the Security Council of Russia" prepared by the Presidential Executive Office.
If the law is passed, from January 1, 2009 the Security Council will be changed from an advisory body under the president into a national center of authority with broad powers.
The current Council, held in legal limbo, owes its weight and influence entirely to its chairman (the Russian president) and the persona of its secretary. The new law is called upon to put an end to the uncertainty and provides for thorough rethinking of its role.
The revolutionary new feature of the bill drafted by Federation Council member Anatoly Korobeinikov is that all Security Council resolutions and directives will now be self-fulfilling acts, needing no support from other bodies of state authority (such as presidential decrees) and will be binding on all executive bodies, including the government. The Security Council will also have a say in personnel policy on security matters and will get a separate spending line in the budget.
The Security Council as an advisory body was set up by President Boris Yeltsin in 1991. Its secretaries at various times were such heavyweights as the then Kremlin gray eminence Yury Skokov, the charismatic General Alexander Lebed, and top KGB officers Nikolai Bordyuzha and Vladimir Putin.
The Security Council remained a center of influence right up to 2001, when Sergei Ivanov oversaw it. Then it began to be seen as a kind of trimmings to Putin's power vertical. The Security Council's comeback was initially mooted in May of this year, when Nikolai Patrushev, who quit as FSB director, took over.
Unofficial sources say the idea to review its role was first born in the presidential establishment last year.
The bill drafter, Korobeinikov, told Gazeta that the draft has overwhelming backing: in the Presidential Executive Office, State Duma, Defense Ministry, and Security Council.
"Hopefully, in the fall when the Federation Council submits it to the State Duma, our counterparts will adopt it both on first and second readings," he said.
Vedomosti
Nord Stream construction postponed again
President Dmitry Medvedev had expected the Nord Stream pipeline along the bottom of the Baltic Sea to link Russia and Germany to be ready exactly on schedule. But the onset of construction has been put off again, now until early 2010.
The Nord Stream project will be launched in early 2010, the project operator said in a news release. Last fall, it was slated for the summer of 2009, and still earlier, at the end of 2008. The new delay is due to the need to resolve all environmental concerns of the countries involved and general environmental activists, said Irina Vasilyeva, a spokesperson for Nord Stream.
However, gas shipments will begin in 2011 as planned, she assured, without mentioning a specific month. They probably mean the second half of 2011, a source close to one of the Nord Stream shareholders said.
When the deadline was moved for the first time, Nord Stream's technical director Sergei Serdyukov said they would simply have to be working more intensively, that's all, completing the work in 18 months (instead of the planned 23-24) between the onset of construction and commissioning of the pipeline, startup tests and pilot deliveries included.
According to the official, the pipeline will come on stream in summer 2011 at the earliest, although Gazprom has already signed contracts to deliver around 723.65 billion cu f of natural gas via the pipeline, mainly with Germany's E.On. Under the contracts, first deliveries will have to be made in 2010. Other pipelines crossing Belarus and Ukraine have no additional capacity available, a Gazprom Export manager said.
Moreover, not all analysts believe Nord Stream will go on stream even in 2011. The project operator has been in negotiation with all the parties concerned for over six months, but no permit has been obtained yet.
No tangible progress has been made, said Mikhail Korchemkin, director of East European Gas Analysis, a consulting company. There are no grounds to believe that the construction will begin in 2010, and even if it does, they are unlikely to complete the pipeline on time, he added.
The delays are unlikely to affect the cost of the project, since all the basic works and services have already been paid for. But Gazprom will have to find a way of fulfilling its contract obligations to customers.
"The best and cheapest option is to lay a new gas link in Ukraine, Bogorodchany-Uzhgorod, 145 miles long with a throughput capacity of 670 billion cu f of gas a year," the expert suggested.
Admittedly, the company will have to put up with Ukraine's unpredictable demarches, like arguing with Gazprom and threatening it with transit restriction. Last spring Valery Golubev, deputy chairman of Gazprom's management committee, said the Bogorodchany-Uzhgorod project was redundant since the European gas deliveries had already been distributed between the existing pipelines and the projected Nord Stream.
Kommersant
Moscow to discuss fixed gas prices for Ukraine after debts are paid
On June 6, Russia and Ukraine negotiated a long-term agreement on natural gas supplies and transit.
The talks ended in failure. Replying to a proposal made by Naftogaz head Oleg Dubina to switch over to direct agreements with companies on fixed gas prices in 2009-2014, Gazprom CEO Alexei Miller said this cannot be done until the Ukrainian national company settles its debts to Gazprom's subsidiaries.
This debt currently exceeds $700 million. Besides, there is 12-15 billion cu m of undocumented Russian gas in Ukrainian underground gas depots.
A source close to the talks told Kommersant that as of May 30, Naftogaz owed $780 million in gas payments for April and May to RosUkrEnergo, 50% owned by Gazprom.
The issue of Russian gas in Ukrainian underground gas depots remains unsettled. The March 12 agreement between Gazprom and Naftogaz provides for using this gas to pay for the 1.4 billion cu m of Russian gas, supplied to Ukraine at the beginning of the year, at $321 per 1,000 cu m.
However, to make settlements with Gazprom, the owner of the gas held in those depots must be specified in documents. According to a source at Ukrgazenergo, a RosUkrEnergo subsidiary, there is 15.5 billion cu m of gas in the depots belonging to an "uncertain owner."
Yury Korovin, director general of Ukrainian trader Olgaz-Invest, said Naftogaz would need $870 million to pay for gas from the underground gas depots at Ukraine's domestic price, $290 per 1,000 cu m.
"If this gas is properly documented, the pre-bankruptcy situation in Naftogaz will be further aggravated," said a source familiar with the situation in the company. "In recent months, the company has not paid for gas transportation to regional companies, and it has repaid only $100 million out of its $700 million debt."
According to a source at the oil, gas and oil refining department of the Ukrainian Fuel and Energy Ministry, a loan of $400-$500 million is being negotiated with ABN Amro and Deutsche Bank "in order to pay debts to Gazprom and reach a long-term cooperation agreement."
If the debt settlement takes too long, RosUkrEnergo can demand its money through the court. One claim has already been filed. A source close to Gazprom said that RosUkrEnergo appealed to the Arbitration Institute of the Stockholm Chamber of Commerce claiming $55 million in penalties from Naftogaz for gas payment delays in 2006.
RosUkrEnergo has officially confirmed that such a claim was filed on April 8. The date of hearing has not been fixed yet.
Gazeta.ru
BP tries to smooth over conflict in TNK-BP
BP CEO Tony Hayward has come to Russia to settle the ongoing shareholders' conflict in Russian-British oil venture TNK-BP and to hold talks with Gazprom.
This clearly means BP wants to cooperate with the energy giant, and therefore that the sale of the Russian shareholding in TNK-BP to Gazprom is only a matter of time.
A series of legal probes against TNK-BP in recent months has prompted speculation that Gazprom is moving to acquire part of BP's stake.
Dmitry Abzalov, an analyst at the Center for Current Politics think tank, said: "BP has decided to formulate as clearly as possible its stance regarding Gazprom so as to encourage talks with the gas monopoly and strengthen the positions of British shareholders in TNK-BP in the information war between the British and Russian owners."
Market players say the Russian stake in the joint venture will be sold by the end of the year.
"The Russian owners will try to sell their stake at as high a price as possible, but Gazprom does not like squandering funds when it can avoid doing this," Abzalov said. "Considering the growing investment spending of Gazprom and [its oil unit] Gazprom Neft, the monopoly will do its best to undercut the price."
On the other hand, the analyst said this is not a repetition of the Yukos affair, and that the deal will be most likely made in a civilized manner.
"A second Yukos affair would be too complicated and energy-intensive a process, undermining trust in Gazprom and casting a shadow on President Dmitry Medvedev," Abzalov said. "Since Gazprom is unlikely to pay for the Russian stake in TNK-BP as much as the owners want, certain privileges could be offered to the Russian shareholders."
Pressure is being put also on the British partners. The recent summons of TNK-BP chief Robert Dudley to prosecutors has been viewed as an attempt to weaken the British partners' stance.
Dudley was summoned on Wednesday as a witness in the tax avoidance case opened against Slavneft, 50% owned by TNK-BP.
"Gazprom wants to undermine BP because it plans to buy not only the 50% Russian-owned stake in TNK-BP, but also 1% of shares held by British partners," Abzalov said. "BP does not want to cede control of the company, but the news of Dudley's summons to the prosecutor office could affect the TNK-BP share price and therefore substantially decrease the company's share value."
Vedomosti
Hyundai to build third multi-brand car plant in Russia
A Hyundai plant whose construction started in St. Petersburg yesterday will also produce Kia cars, making it a third foreign multi-brand auto plant in Russia.
Korea's Hyundai-Kia Motors auto concern has pledged to invest 330 million euros in the project, and its plant's output will be 100,000 cars per year. The plant will be sited on an area of 200 hectares. It will go on stream in December 2010 and by the end of 2011 will be keyed up to design capacity.
Earlier, Hyundai Motor Europe President Kun Hee Ahn said the St. Petersburg plant would be manufacturing a budget car to compete with the Renault Logan. But a year later, a new brand will join its product line.
Hyundai Motor vice-president Ahn Joo-soo told Vedomosti that in a year's time the plant will also begin making Kia cars based on the same platform. Hyundai and Kia have been working together since 1999, and operate several jointly-owned plants across the world.
Hyundai's multi-brand plant is not the first such foreign plant in Russia. In Kaluga, Volkswagen has been turning out Volkswagens and Skodas, while PSA Peugeot Citroen and Mitsubishi will build there a plant to produce all three brands, including the Outlander SUV on one and the same platform. AvtoVAZ, whose blocking stake is owned by Renault, is likely to add two more brands - Renault and Nissan - to its own Lada.
Auto globalization is making itself felt in Russia as well, said Ivan Bonchev, an auto analyst at Ernst & Young, and this is logical - the construction of jointly-owned plants and production of cars based on the same platform gives considerable savings. Assume that Hyundai and Kia build not one plant capable of producing 100,000 cars a year, but two with 50,000 units capacity each, then their combined investments would be 400 million euros, the analyst said.
In other words, in construction alone the partners could save at least 70 million euros. As for cars assembled on the same platform, they can be ranged in price and options, Bonchev said. The Kia, for example, could be a higher-priced brand than the Hyundai.
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