What the Russian papers say


MOSCOW, October 9 (RIA Novosti)
Medvedev, Sarkozy find common language / NATO plans to protect Russia's neighbors worrisome for Moscow / Kyrgyzstan determined to prove that Russian investments won't be lost / Russian economist discovers reason for global financial crunch / Gazprom, Lundin Petroleum discover oil in Caspian's Lagansky block / Magna to scrap car-component production plans in Russia

Gazeta.ru, RBC Daily

Medvedev, Sarkozy find common language

French President Nicolas Sarkozy has supported Russian President Dmitry Medvedev's idea of reforming the European security system. The two leaders made policy speeches at the first World Policy Conference in Evian, France.
Analysts say the interests of Russia and the European Union coincide, but point out that the conference has not proposed practical solutions to global problems.
Medvedev's five principles of a new treaty on the European security system, which should replace the 1975 Helsinki Final Act, reflect the Kremlin's idea of a multipolar world.
According to them, no country has exclusive rights in maintaining European security, but instead all countries should refrain from using military force to solve problems and from participating in military alliances that threaten others.
Sarkozy supported some of Medvedv's ideas in an emotional speech, beginning his every other sentence with "Dear Dmitry."
Analysts are not surprised at the French president's friendly attitude to his Russian colleague.
Fyodor Lukyanov, editor-in-chief of the Moscow-based magazine Russia in Global Affairs, explains it by an attempt to "snatch intellectual leadership from the United States" and says Medvedev is Sarkozy's main ally in this undertaking.
The Russian president has chosen his tone wisely, proposing joint consideration of ways to overcome the ongoing financial crisis and making practical proposals on European security, Lukyanov said.
"The world is tired of criticism, while Medvedev's proposals offer a solution," the analyst said.
Konstantin Simonov, president of Russia's Center for Current Politics, said: "We need a new Yalta [conference on principles of the post-WWII world order] and a new Bretton Woods [system of monetary management that set the rules for commercial and financial relations among major industrial states]. Of course, Medvedev's five principles will not save the system, but his speech amounted to Russia's invitation to Europe to discuss a new agenda."
Timofei Bordachev, director of the Center for Comprehensive European and Global Studies at the Moscow-based Higher School of Economics, said: "Given its complicated relations with the U.S., Russia is steering a policy of rapprochement with Europe. The EU also wants to become a more independent player on the international scene and to break out of its dependence on the U.S. The positions of Russia and the EU on these issues coincide."
Vladimir Gutnik, head of the European Studies Center at IMEMO (Institute of World Economy and International Relations at the Russian Academy of Sciences), doubts that the Evian conference will have positive results.
"Apart from rhetoric and common phrases, the Evian meeting has not done anything to approve practical solutions to global problems, in particular financial ones," Gutnik said.


NATO plans to protect Russia's neighbors worrisome for Moscow

The summit of NATO defense ministers due to open in Budapest on Thursday may seriously affect the military alliance's relations with Russia. The bloc's defense ministers, set together for the first time since the Georgian war, will discuss Georgia and Ukraine's NATO entry bids as well as plans to protect members and partners that share borders with Russia.
On Wednesday, certain measures of the plan were offered by U.S. Secretary of Defense Robert Gates, who announced the possibility of giving U.S. Navy ships to the Ukrainian Navy to replace Russia's Black Sea Fleet. Gates mentioned however that this would have to receive Congress approval, which would take several months.
However, military experts say that the U.S. administration could implement the plan faster.
Konstantin Makiyenko, an analyst from the Center for Analysis of Strategies and Technologies, said: "The U.S. has enough fleet vessels, including the mothballed fleet. No technical or legislative obstacles should occur, with Ukraine and the U.S. being able to establish a joint alliance in the Black Sea which would surpass the Black Sea Fleet in terms of technical capabilities."
In this case, Kiev will have another argument in its dispute with Russia over the placement of the Russian fleet in the Crimea. The Kremlin insists that the fleet is required to defend the southern borders of both Russia and Ukraine. However, the issue will become less urgent when Ukraine obtains its own fleet.
"Why does Ukraine need these vessels? Are they going to use them for delivering arms to Sudan?" Russia's ambassador to NATO Dmitry Rogozin indignantly commented.
Russia's Defense Ministry bluntly refused to comment on Gates' initiative, while officials from Russia's Foreign Ministry said it was premature to discuss the issue of Ukraine's obtaining its own fleet, noting that they were bothered by the NATO summit's agenda. "The summit aims to consider Georgia's demands for new military equipment, while Russia speaks against Tbilisi's remilitarization," ministry representatives said.
Meanwhile, the Kremlin is planning activities to respond to NATO's possible plans. Russia will hold military exercises called Zapad-2009 (West-2009) together with Belarus next year, Defense Minister Anatoly Serdyukov announced Wednesday at the meeting of Russia and Belarus' Defense Ministry officials in Moscow. On November 2, Russian and Belarusian military officials will sign an agreement on setting up a joint air defense system, State Secretary of the Union State of Russia and Belarus Pavel Borodin said, noting that the system will serve as a "defense from NATO."

Nezavisimaya Gazeeta

Kyrgyzstan determined to prove that Russian investments won't be lost

Kyrgyzstan can't wait to see the Russian president arriving in Bishkek at the head of a top-level delegation on an official visit today. Their enthusiasm is easy to understand, as Russia has promised to invest $2 billion in the Central Asian country. However, the negotiations are bound to be difficult.
Presidents Dmitry Medvedev and Kurmanbek Bakiyev plan to sign a series of interstate energy agreements and discuss settlement plans for the $193 million debt Kyrgyzstan owes to Russia. The Russian delegation includes the foreign minister, the ministers of transportation, economic development, defense and energy, which indicates that the parties are in for a serious discussion.
Kyrgyzstan's economy has been declining lately, along with mounting social tensions. Local officials warn that the country is poorly prepared for the imminent arrival of winter. Moscow's investments are Bishkek's only hope, although Prime Minister Vladimir Putin said the $2 billion would be provided for two specific projects, the Kambaratinsk hydropower plants 1 and 2 on the River Naryn.
Analysts half expect Russia and Kyrgyzstan to fail to reach an agreement.
Dr Alexander Knyazev, head of a regional branch of Moscow's CIS Institute think tank, said: "The risks are too many. Although Kyrgyzstan has the most favorable investment climate de jure, many of the legal acts aren't observed. Local officials and businesses aren't ready to embark on large projects. Corruption levels are outrageous even at the preliminary consideration stages of the projects."
So for, Russian capital is not directly present in Kyrgyzstan, where there are only a few companies with Russian participation. Toktaiym Umetaliyeva, head of the local association of non-profit and non-government organizations, says Kyrgyzstan is openly getting rid of Russian investors.
"About 40% of Russian businesses divested from local assets over the past two years. Channeling capital into "shadow operations" is a usual local business practice. Russian businesses can even be taken over through different schemes, their investors replaced by businessmen from Kazakhstan, Iran or Pakistan," she said.
Dr Knyazev said the country's government should show the political will to preserve Kyrgyzstan's statehood. They need to select a key economic partner and create a preferential regime for that partner, he added. "The so-called multi-vectoral policy is history. And the choice isn't big - either Russia or China, while other partners can only play secondary roles," he emphasized.


Russian economist discovers reason for global financial crunch

The U.S. subprime mortgage problems only triggered off the global financial crisis now in full swing, while its key underlying reason was really the overcapitalization of the markets. The crisis was inevitable, argues Igor Nikolayev, chief strategic analyst at the FBK private auditing firm, author of the research paper Stock Market: Growth High and Plunge Low.
"I have always felt uneasy about the widely declared principle that the higher the capitalization, the better. Our research was based on the idea that each specific level of economic development should have a corresponding stock market capitalization level. An important part was to compare the global economic recession periods and the total stock market capitalization curves at the time of each crisis.
"For the purposes of our research, we used the Market Capitalization to GDP Ratio as a single measure of where valuations stand at any given moment. It is calculated by dividing the total stock market value of all publicly traded companies in a country by its gross domestic product. The measurement is also applicable to global GDP and global market capitalization.
"The calculation fully confirmed our hypotheses. The global market cap to GDP ratio stood at the level of 40%-60% during the 20th century. Its sharp growth in the 1990s that culminated in 118% in 1999 was followed by an enormous global recession at the turn of the century.
"Later, in 2002, the variable dropped again, to 73%, then surged to 122% in 2007. It went well over the 100% like it did before the previous recession. What we are witnessing now is the natural consequences of the rise, and another drop is expected this year, by almost 40 pp to 83%.
"This leads us to believe that there must be some limit, some threshold value always followed by a meltdown.
"The global financial crisis was predetermined by the global market cap to GDP ratio going over a value which could ensure further stable development. The mortgage crisis in the United States catalyzed the process. If it hadn't happened, something else would have come up. A sharp fall in the different countries' stock market capitalization was inevitable, just like it will inevitably be followed by GDP slowdown," the economist concluded.

RBC Daily

Gazprom, Lundin Petroleum discover oil in Caspian's Lagansky block

Independent Swedish oil and gas exploration and production company Lundin Petroleum yesterday announced that large oil resources had been discovered in the Lagansky block of the Russian sector of the Caspian Sea.
Lundin Petroleum has currently a 70% net interest in the block. Its subsidiary, PetroResource, owns the exploration license for the block jointly with energy giant Gazprom.
Gazprom has a call option to acquire a 50% plus one share in Lagansky, and Lundin has a call option to acquire an additional 30% from minority shareholders. If both options are exercised, Lundin Petroleum will retain 50% minus one share, while Gazprom will hold a 50% plus one share in the Lagansky block.
The Lagansky block with an area of 2,000 square km is located in the Central Caspian Basin. Russia's largest private oil company, LUKoil, holds development licenses for the deposits located near it.
Lundin's PetroResource received the exploration license for Lagansky in 2004. The current license agreement provides for drilling one well in 2008 and three wells in 2009 as well as conducting 3D seismic exploration on an area of 300 square km.
According to tentative estimates, the gross recoverable resources of the block amount to 110-450 million tons of oil.
Lundin did not drill the first well in 2006 as stipulated in the license, and therefore the Russian mineral regulator, Rosnedra, revoked it in June 2007.
Gazprom promised to remedy the situation and signed the agreement on a call option with Lundin in July 2007. In February 2008, Lundin was issued a permit to start drilling at the block.
Vitaly Kryukov, an analyst at the Kapital investment group, said Gazprom might exercise the option after the block's resources are proved. In his opinion, the deal will be carried out at a discount for the Russian company. He assessed the buyout stake at approximately $40 million ($0.1 per barrel).
Valery Nesterov, an analyst at the Troika Dialog investment company, is not convinced the project will interest Gazprom or its subsidiary, Gazprom Neft, which has so far been developing only onshore deposits.
Besides, the Caspian shelf has been a priority sphere of interest for LUKoil and Rosneft, the largest state-owned crude producer, Nesterov said.


Magna to scrap car-component production plans in Russia

On October 3, GAZ Group, the second-biggest Russian carmaker, sold its 20% stake in Magna International Inc., Canada's largest automobile parts manufacturer, in line with a margin call.
And now Magna is ready to scrap plans for building a car-component plant in St. Petersburg, north-western Russia.
A city hall official and two consultants familiar with Magna project details said the company was ready to back out.
One of the consultants said Magna would have to spend more on the inconveniently located project, and that it had failed to sign enough component-delivery contracts with automakers.
Another consultant said the project's future remained undecided.
Magna, which announced plans to build a car-component plant in St. Petersburg two years ago, wanted to invest $50 million in the project but did not specify construction deadlines.
In December 2006, the municipal government allotted a 30 hectare land plot to Magna in the Shushary industrial zone near the incomplete Toyota, General Motors and Suzuki automotive plants and extended the lease contract by another 11 months in April 2008.
A manager of an automotive plant, now under construction in St. Petersburg, said Magna had promised two years ago to supply components from its local plant, but that it had kept silent for the last few months.
Another automotive-plant official said component-delivery contracts signed with Magna had not been fulfilled.
Spokespersons for Avtoframos, the Moscow-based car-assembly plant of France's Renault, and Avtotor carmaker in Kaliningrad, Russia's Baltic exclave, said their companies did not negotiate car-component deliveries with Magna.
GM and Toyota spokespersons declined to comment on the issue, while those of Volkswagen, Ford and Izhevsk Auto Plant in Udmurtia, a republic in the Volga Federal District, could not be reached for comment.
Magna plans could have been influenced by the global financial crisis and the decision of Russian billionaire Oleg Deripaska, CEO of Russian Machines, part of his enormous Basic Element holding, and GAZ Group co-owner, to sell his 20% stake in the company, Yevgeny Bogdanov, an auto analyst at A.T. Kearney, a global strategic management consulting firm, told the paper.
Bogdanov said the company had trouble implementing its projects on the local market because it lacked a powerful Russian partner.
The company which has just started building the plant in St. Petersburg would lose almost nothing, Bogdanov told the paper.
The Magna - Russian Machines joint venture, due to manufacture plastic parts and car-body components, could remain the largest corporate project in Russia.
A GAZ Group spokesman said production plans remained unchanged.

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