MOSCOW, June 26 (RIA Novosti)
EU-Russia PCA treaty may take years to coordinate/ Russian president to build anti-corruption pyramid/Severstal's Mordashov would cut stake for foreign expansion/ Analysts say Caspian oil and gas reserves strongly overestimated/ LUKoil to increase supplies to Gazprom/National sponsors will not profit from Russian football team's success
Vedomosti
EU-Russia PCA treaty may take years to coordinate
The talks on a new partnership and cooperation agreement (PCA), to be launched at the Russia-EU summit in Siberia's Khanty-Mansiisk starting Thursday evening, may take years.
Russia is the third largest exporter to the EU and the fourth largest importer of EU goods, President Dmitry Medvedev told Reuters ahead of the summit.
The previous PCA expired in 2007 but was extended by a year. Time is running short, yet the partners have not even started discussing a new agreement, initially because of Poland's protests over Russia's ban on the import of Polish meat.
Then Lithuania raised its own objections for holding the talks, but later agreed, under pressure from Germany and France, to withdraw some of its claims. However, it insists that the new agreement should be rich on detail, especially in the energy sector.
Moscow thinks it should be "a serious legally binding document but at the same time not burdened with absolutely concrete things." Separate agreements could be signed on practical economic and other issues, presidential aide Sergei Prikhodko said.
According to a Kremlin source, Russia also points to Ireland's rejection of the Lisbon Treaty as an example of how the EU's need for complete internal unity on decisions could draw out the PCA talks.
Alexander Babakov, vice speaker of the State Duma, the lower house of Russia's parliament, said Britain, Latvia, Lithuania and possibly Poland might create problems during the talks.
Alexander Rahr, Program Director for Russia/Eurasia at the German Council on Foreign Relations, said: "The situation is potentially dangerous, because the framework part of the agreement will be overhauled completely, after which it will be sent for ratification to all EU countries, including the Baltic ones."
In his opinion, the new PCA treaty may follow in the wake of the European constitution, i.e., take many years to approve.
However, there is a glimmer of hope that the new PCA treaty will be signed within a year for at least five years, said a Kremlin source. The previous PCA treaty was signed for 10 years.
Gazeta.ru
Russian president to build anti-corruption pyramid
Presidential Chief of Staff Sergei Naryshkin placed on the president's desk Wednesday one of the most long-awaited documents of recent months - a national anti-corruption plan. Some of its ideas are familiar: draft a law, think up measures, monitor officials' expenses, seize property for bribe-taking.
Drawing up and implementing a national anti-corruption program was one of the mainstays of Medvedev's electoral program. And a May 19 decree "On Measures to Counter Corruption," which established a special council under the President, was one of the first acts signed by Medvedev on taking office.
Medvedev himself, at least in words, acknowledges that corruption in Russia is a way of life, the mode of existence of the Russian bureaucracy, rather than a departure from the rule. In an interview with the Reuters news agency ahead of a Russia-EU summit in Khanty-Mansiisk, the Russian president described corruption as a "systemic challenge." According to him, corruption is a combination of crimes that paralyze state mechanisms in many cases, and such a threat can only be handled by a systemic response.
But the systemic response implies a transformation of the system, while Medvedev stepped in under the very opposite slogan of the continuity of the previous course. Strict laws can be passed against corruption, but everything will depend on law enforcement practice (which the legally-trained Medvedev is perfectly aware of), and on how state machinery will function.
In fact, the struggle against corruption in Russia is a struggle of the current bureaucratic system against itself. And it is expected to be waged by bureaucratic methods. "It's all rubbish," said Georgy Satarov, president of the Indem Foundation. "How can a government office write a plan to fight corruption inside its own walls? There must be an independent outside analysis. And only after that can such a document be written, with some contribution from the department concerned," the former aide to President Boris Yeltsin said.
It can of course be assumed that the current widely publicized anti-corruption plan is being adopted as a whitewash not to scare off some influential persons who find the established system quite suitable. Perhaps the new president is only gauging the situation, mustering up his strength, forming a following, and building up public support only later to launch into a decisive battle against corruption. But so far it all looks like pure fantasy, comforting though it may be.
Nezavisimaya Gazeta
Severstal's Mordashov would cut stake for foreign expansion
Severstal Chief Executive Officer Alexei Mordashov said that he would consider allowing his stake in Russia's largest steelmaker to be diluted to as little as 40%, from the current 82%, to fund foreign acquisitions.
Experts are convinced that Mordashov has not abandoned expansion plans vocally supported by the Russian government even after the deal to acquire European metals giant Arcelor failed to take place.
"I could definitely use it as an acquisition currency," Mordashov said in an interview with Bloomberg. "In my mind, something around 40 or 45 percent probably would be fairly sufficient to have significant control of the company."
Mikhail Feldman, head of the department of major transactions at Russia's 2K Audit - Business Consulting, said Mordashov's statement had indicated that Severstal was still looking for good M&A targets. "In the failed merger with Arcelor, Mordashov's package would not have exceeded 32%," the expert said. "That means a cut-off to 40% in Severstal coupled with a good M&A proposal would be quite justified."
Alexander Razuvayev, head of Sobinbank's market analysis department, shared his doubts: "The problem is such large-scale acquisition plans are often risky. One cannot just go thrashing about the world buying everything that comes up forever. Acquisitions require funding which is not unlimited."
According to Razuvayev, the government is actively prodding Russian businessmen into foreign expansion and setting up international companies. Mordashov, who is known for his loyalty, is acting according to the prescribed plan. "After the Arcelor deal failure, he began buying everything on sale in a bid to build a transnational empire," Razuvayev went on to say. "It is very good politically, because it helps meet the goals set by the government. But it is not yet clear how that patchwork empire will operate."
Khalil Shekhmametyev, chief analyst at Otkrytiye brokerage, also spotted a foreign expansion trend with Russian businesses, pointing out that LUKoil and Evraz are also buying foreign assets. "I am still of the opinion that the best protection of a business is through asset swaps, not selling to foreigners, the TNK-BP predicament being an eloquent example of that," he said.
Vedomosti
Analysts say Caspian oil and gas reserves strongly overestimated
The Caspian shelf has again disappointed Russian oil companies, primarily LUKoil. Analysts think that oil companies should review their forecasts which have been too optimistic from the start.
In early 2004, Russia's largest private oil producer LUKoil and Kazakhstan's state-controlled Kazmunaigaz signed an agreement on joint exploration in the Atashsky area, which is located near the frontier but is under Kazakhstan's jurisdiction. Soon, the above companies' subsidiaries - LUKoil Overseas and Kazmunaiteniz - set up a joint venture, Atash, which obtained a contract for exploration work.
Drilling, which was started in April 2008, has now been completed, but neither oil nor gas have been found there. A source close to Atash says that a well has been drilled to a projected depth of 2,500 meters without any result. Grigory Volchek, press secretary at LUKoil Overseas, refused to comment. The paper failed to contact Kazmunaiteniz.
Drilling operations were conducted by the Astra rig of the Eurasia Drilling Company. Medzhid Zulpukarov, director general of BKE-shelf, Astra's operator, refused to discuss the Atash drilling results. He said that the drilling of a well 2,500 meters deep on the Caspian shelf costs about $40 million and Astra's work costs the client $130,000 per day.
It is not the first time that the Caspian shelf has led to disappointment for Russian oil companies. In 2005, LUKoil drilled a dry well in the Yalama field in the Azerbaijani sector of the Caspian shelf. It cost LUKoil $50 million. LUKoil and Kazmunaigaz's drilling in the Tyub-Karagan block in the Kazakh sector (not far from the Atashsky area) was also unproductive (the costs exceeded $20 million). In 1999, the Karabakh project in the Azeri sector was closed because of insufficient reserves. LUKoil was the largest shareholder in the Karabakh project. In 2006, Russia's state-controlled Rosneft drilled a dry well in the Kurmangazy area (Kazakh sector).
According to Valery Nesterov, an analyst at the Troika Dialog investment company, "Caspian shelf reserves have been largely overestimated initially, so now the companies will have to revise their forecasts. It is quite possible that all major deposits have already been discovered there."
The Atashsky area lies in the northern part of the Caspian shelf at a depth of 7-35 meters. Its potential reserves are estimated at 248.8 million metric tons of conventional fuel, including 141.7 million metric tons of oil.
Kommersant
LUKoil to increase supplies to Gazprom
By 2014, LUKoil is planning to triple production on its four fields in Bolshekhetsky depression in the Yamal-Nenets Autonomous Area. The company said it had agreed to supply 30 billion cubic meters of gas to a combined network. Gazprom is not confirming that it has approved the new quota for LUKoil, but by that time the gas monopoly will have had a capacity surplus in the region.
LUKoil head Vagit Alekperov said: "Gazprom has given us the green light for up to 28 bln cu m from Bolshekhetsky, where we are currently producing 10 billion."
In 2008, LUKoil plans to produce 20 bln cu m (against 14 bln cu m in 2007). The gas sold in 2007 fetched the company 9 billion rubles, of which 7 billion came from Gazprom.
A Gazprom source said no documents have yet been signed on increasing LUKoil supplies, and he had not heard anything about such an agreement. LUKoil said the understanding "was preliminary and oral."
Gazprom has always been reluctant to pump gas from outside producers. The Federal Anti-Monopoly Service has repeatedly filed cases against Gazprom for pipeline discrimination for such companies as NOVATEK, Nortgaz and Rospan (part of TNK-BP).
Vitaly Kryukov from Capital Investment Group believes in 2014 Gazprom will have enough capacity to handle the increasing amounts of gas from independent producers. "By 2014, the Bovanenkovo-Ukhta pipeline is expected to be completed to deliver gas from the promising Yamal fields. As a result, the gas production will shift from West Siberia to Yamal, and output from Gazprom's traditional fields will fall," the analyst explained. "This will free capacities for independent producers engaged in West Siberia." In his view, the gas selling price for Gazprom could reach 3,000 rubles ($127), compared with the present 1,100 rubles ($46.59).
Mikhail Korchemkin, head of East European Gas Analysis, said that by 2014 production on Gazprom's old fields in the Nadym-Pur-Tazovsky region will decline by 100 bln cu m to 120 bln cu m a year, mainly because of natural depletion. However, in the analyst's opinion, it would be more logical for independent producers to build a gas pipeline of their own than for Gazprom to invest in transporting "independent" gas. Cutting the investment program while maintaining high sales is the best vitamin for Gazprom's capitalization, Korchemkin believes.
Vedomosti
National sponsors will not profit from Russian football team's success
Although the 2008 UEFA European Football Championship, commonly referred to as Euro-2008, is breaking viewing records in Russia, the national side's sponsors will not profit from the results.
On June 21, 68% of Russians aged over 18 watched the home team beat the Netherlands 3-1, said influential pollster TNS Gallup Media. This is an all-time high because only 53% of adult audiences watched the Russian President's address on New Year's Eve; and another 47% watched the finals of the Eurovision song contest.
Sponsors could have expected huge profits, if they believed in the national team.
Energy giant Gazprom, the general partner of the national team, and its technical sponsor Nike, did not buy advertising time in Euro-2008 broadcasts, Anton Leontyev, general director of Telesport Marketing agency that sells advertising time on Russian channels, told the paper.
Although commercials cost 150-200% more per minute during prime-time Euro-2008 broadcasts, over 50 companies wanted to advertise their products. But the Russian team's official sponsors were not very active. "Doubtless, they lost," Leontyev said.
Sergei Kapkov, head of Russia's National Football Academy Foundation, said companies had sustained heavy losses because they did not believe in the national team.
He complained that Russian mobile operator MegaFon had not issued T-shirts with its logo to fans they way it did in 2004. This is a setback because Russian fans are often seen on TV these days.
Alexei Popov, strategic planning director at Estestvenno agency, said sponsors' profits could have increased several-fold, now that the Russians have made it to the semifinals.
Gazprom and Nike declined to comment on the issue. A MegaFon press service official said the company had sponsored the team out of patriotic, rather than commercial, considerations.
Samsung Electronics spokesman Marat Rakayev said the company had guessed right by choosing the team's head coach Guus Hiddink and forward Roman Pavlyuchenko for its commercials, first broadcast in May.
According to Rakayev, the team's successes boosted corporate TV sales by early June. GfK, Germany's largest market research institute, said Samsung now controlled 37% of the Russian LCD-television market, instead of 28% last fall.
Leontyev said the sponsorship of the Russian squad was worth $2 million a year, and that sponsorship packages would have soared if the team had entered the tournament with a real obvious chance to reach semi-finals. Although the Euro-2008 sponsor status costs more, at least $10 million, Russian companies are not eager to pay through the nose because they are not that interested in the European market, Leontyev told the paper.
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