MOSCOW, October 16 (RIA Novosti)
Russia to benefit from non-binding format of Geneva consultations/ Energy companies ask for easy government loans/ East Siberian fields development launched/ Weak Russian banks found out by financial crisis/ Another of the top 50 banks changes hands/ Russians cutting everyday expenses/
Kommersant
Russia to benefit from non-binding format of Geneva consultations
The status and mandate of the international consultations on stability and security in the Caucasus, which began in Geneva today, have not been determined. This may be good for Russia, because their participants are unlikely to rapidly agree on breakthrough solutions, a Russian analyst writes in the business daily Kommersant.
Georgy Kunadze, a leading researcher at the Moscow-based Institute of World Economy and International Relations at the Russian Academy of Sciences, who was Russia's deputy foreign minister in 1991-1994, writes that some of the consultations' goals are unclear and others are unrealistic.
Some say the talks will try to convince Georgia to sign non-aggression pacts with Abkhazia and South Ossetia.
As far as I know, nobody has so far convinced China to sign such a pact with Taiwan, Kunadze writes. So who says we can do this in the case of Georgia? It reminds me of Winston Churchill's note in the margin of a speech, "Argument weak. Shout."
Others say the consultations will discuss measures to prevent a repetition of Georgia's "unrestrained militarization." This amounts to sanctions, but this proposal should be addressed to the UN Security Council, which has ruled out the possibility.
Russia believes that the international legal status of Abkhazia and South Ossetia is clear, and so will not discuss it again, the analyst writes. However, it probably wants to fortify that status by ensuring that the two countries' representatives attend the consultations.
I don't know how this can be done, Kunadze writes, because these representatives will certainly come to Geneva with Russian passports. Therefore, Abkhazia and South Ossetia will be seen as analogues of Ukraine and Belarus, which posed in the UN as independent states while being part of the Soviet Union.
Russian diplomats say the Russian delegation will attend only those meetings in Geneva where the two countries' representatives will also be present. So, the Russian delegation will not attend plenary meetings, the analyst writes, adding that this will only give Russia's foes a chance to approve any decisions they want.
Russian delegates will attend the meetings of working commissions to which Abkhaz and Ossetian representatives have been invited and where they will have to answer unpleasant questions about Georgian refugees. There are about 250,000 of them.
Russia will probably be encouraged to present documentary proof of "Georgian crimes," such as lists of the dead in South Ossetia, in these commissions.
One more problem for Russia will be the Medvedev-Sarkozy plan, which has not been published in Russia and whose texts in different languages differ, Kunadze writes.
In short, the non-binding format of the Geneva consultations will suit Russia the most, because it will not lose if they fail to agree on practical measures.
Gazeta.ru, RBC Daily
Energy companies ask for easy government loans
Energy companies have followed oil producers in appealing to the government for help. Private shareholders of generating companies suffer the most from shortage of liquidity and unacceptable lending conditions, as they have made commitments to invest in business expansion when buying generating assets. The 'heirs' of former energy giant RAO UES believe that construction projects may be suspended unless they are given privileged borrowing terms.
The Energy Producers' Council, a non-profit partnership, said it was drawing up a request they planned to send to the government, asking for the issue of easy loans for the further implementation of their investment programs.
The council members include EuroSibEnergo, a utility controlled by billionaire Oleg Deripaska, IES (Viktor Vekselberg), OGK-3 OGK-3 (NorNickel), OGK-5 wholesale generating company (controlled by Italian Enel, German E.On, Russia Power and Suek), TGK-10 territorial generating company (Finnish Fortum) and TGK-4 (businessman Mikhail Prokhorov).
The companies need to borrow a total of several dozen billion dollars, at an interest not exceeding the Central Bank's refinance rate (currently 11%), according to estimates by the wholesale and territorial utilities.
Russia's Energy Ministry said it was looking at various possibilities of supporting energy companies, but did not elaborate on the format or timeframe of potential assistance. A source close to the non-profit energy partnership said the required amount is close to $50 billion.
Konstantin Gulyayev, an analyst with the Kapital Investment Group, said the total worth of generating companies' investment programs is close to 1.2 trillion rubles and that they involve building generators with total capacity nearing 30.4 GW.
"They have raised slightly over 500 billion rubles through additional share issues, which is only half of the required investment," Gulyayev said.
Oil majors LUKoil, Rosneft, and TNK-BP, and gas giant Gazprom, earlier asked the government for easy loans. The government pledged to provide $9 billion to refinance their debt. Russia's Bank for Development and Foreign Economic Affairs (Vnesheconombank) is likely to lend the amount; it has been the recipient of the bulk of requests for loans to companies and banks.
The repercussions of the financial crisis are still likely to spread to the industry, which is the largest energy consumer, and on to other economic sectors as well. "We are almost certain that energy consumption growth will slow down," said Irina Filatova from BrokerCreditSErvice.
"Energy consumption in Russia will probably grow by a mere 1% or 2% a year, not 4% as planned. Even stagnation is possible if the worst comes to the worst," Gulyayev added. "And that would mean companies would need to cut their investment programs and reduce their projects to increase production."
The analyst expects energy companies to slash their investment programs by a quarter, and to move the deadlines for current construction projects to much later dates.
Vedomosti
East Siberian fields development launched
Yesterday, TNK-BP and Rosneft launched the Verkhnechonskoye field with great pomp. Its oil will be pumped via the East Siberia-Pacific Ocean (ESPO) pipeline, Vedomosti reports. Experts compare this event with the start of the development of the West Siberian fields.
"ESPO allowed us to begin developing the field that was previously considered unprofitable for thirty years," TNK-BP Chief Operating Officer Tim Summers said. Investments in the project have already exceeded $1 billion, TNK-BP and Rosneft stated yesterday. Future investments are assessed at $4-$5 billion.
The Verkhnechonskoye oil and gas field was opened in 1978. In the Russian classification, its proven reserves amount to 201.6 million metric tons of oil (Ñ1 + Ñ2), and 95.5 billion cubic meters of gas. The license owner is Verkhnechonskneftegaz, where TNK-BP has a 68.5% stake, and Rosneft - 25.9%.
In 2008, Verkhnechonskneftegaz will produce 180,000 metric tons of oil, and in 2009 - up to 1.3 million. By 2013, production volume is to reach six million metric tons at least, which is some 9% of TNK-BP's current production, TNK-BP Executive Vice-President Sergei Brezitsky promised.
ESPO will work in the reverse mode for a year, pumping oil from the east to the west. During this period Verkhnechonskoye oil is to be supplied to Rosneft by the Angarskaya Petrochemical Company. In its turn, Rosneft is to supply the same volumes of oil to the TNK-BP plant in Ryazan from its Vankorskoye field in the Krasnoyarsk Territory, which is the largest project in the region (its estimated capacity is 23 million metric tons of oil per year). The partners signed an agreement in summer. The Verkhnechonskoye field was opened yesterday, but the launch of the Vankorskoye field was postponed till mid-2009.
The managers who attended the launch didn't reveal how the companies could coordinate the discrepancy in the schedules. "We have agreements, and they will be realized as soon as the Vankorskoye field is launched," Brezitsky said. TNK-BP and Rosneft representatives refused to comment on the matter.
The Eastern pipeline has recently received the first oil from Surgutneftegaz's Talakanskoye field in the Republic of Sakha (Yakutia).
"The start of oil production in East Siberia is a new hallmark in the development of the Russian oil industry; it can be compared with the start of the development of West Siberian fields 40 years ago," Valery Nesterov from Troika Dialog said.
However, the two regions won't manage to equalize oil production: by 2020 some 56 million metric tons of oil will be pumped in East Siberia, whereas oil production in the Khanty-Mansi Autonomous Area, West Siberia, already totals 280 million metric tons, Nesterov said.
Gazeta.ru
Weak Russian banks found out by financial crisis
The financial crisis has reached the Russian banking sector. Several regional banks are experiencing problems because of rumors about their imminent bankruptcy. Analysts say this is being done deliberately, because a financial crisis is a good time to get rid of rivals.
On the other hand, they think the crisis has only accelerated the inevitable collapse of the banking system.
The schemers use e-mail, ICQ, SMS, forums and blogs to encourage the public to withdraw money while they still can. The people panic, forming long lines at the banks.
Banks in the Urals and Volga regions, the Krasnodar Territory and Sakhalin have been attacked this way.
The financial crisis has created the conditions for such rumors and attacks.
"Many banks are short of liquidity, and every one of them is working to solve the problem. But regional banks are especially vulnerable, because nobody has promised them support money," an employee in the main department of the Central Bank in a Russian region said.
Denis Barabanov, chief analyst at the financial markets division of the Grandis Capital investment company, said: "The first rumor was provoked by the general panicky mood, with people fearing a large bank or company would be the next to fall."
A second wave of rumor is different, though. "It aims at provoking a re-division of property," Barabanov said.
Vladimir Sergiyevsky, an analyst at the Finam investment company, said: "The rumors usually hit retail banks."
In his opinion, such attacks are usually initiated by other banks, which in this way hope to win over clients or at least to weaken their rivals.
Denis Mukhin, an analyst at the Broker Credit Service investment company, said: "Other business groups could also be involved, hoping to buy a good bank cheaply in this situation."
A banker said on condition of anonymity that even Sberbank employees are spreading the rumors. "When our corporate clients ask Sberbank to transfer money to another bank, they are told the transfer cannot be made because the bank in question is bankrupt," the banker said.
Analysts think the financial crisis has only accelerated the inevitable collapse of the banking sector.
"It was bound to happen, sooner or later, because the banking system has been recently growing too fast. This is a logical process of weeding out the weak," said an employee of a large Russian bank.
Vedomosti, Kommersant, Gazeta
Another of the top 50 banks changes hands
With a plan to rescue the financial market through VEB as yet inoperative, the state itself is saving private banks through its own lending institutions. After KIT Finance and Svyaz-Bank, the crisis has hit Sobinbank. Its new owner, for a token sum, became Gazenergoprombank, controlled by Gazprom.
"The agreement to seal the deal was reached on October 15, with the direct participation and support of the Bank of Russia," Gazenergoprombank said in a press release. Gazenergoprombank has already announced plans for regional expansion and to buy Samara's Solidarnost Bank.
The deal has been struck between two practically equally-sized lenders. In the first half of 2008, Gazenergoprombank ranked 40th in terms of assets and 37th in terms of equity capital in Interfax-100 Rankings. Sobinbank was a close runner-up, 39th in assets and 46th in equity capital.
Sobinbank survived the 1998 meltdown. The bank also figured in a laundering scandal that involved America's Bank of New York in 1999. According to The Wall Street Journal, up to 80% of Russian importers took advantage of the laundering scheme used by several Russian banks in the BoNY (including Sobinbank).
Pre-crisis, Sobinbank was worth $560 million, with a capital-to-equity leverage ratio of two, said analyst Maxim Osadchiy. Experts find it hard to name the current price. "Cheap bank assets in crisis conditions acquire great appeal and perhaps the bank was sold below its fair pre-crisis estimate," said Albert Khisametdinov, chief executive of RESO Credit Bank.
Sobinbank co-owner and chairman Sergei Kirilenko explains the sale as down to a lack of prospects rather than financial difficulties: "The bank has no liquidity or liability problems. But in the current conditions, a bank cannot develop without a serious partner and state support." He explains the token sum of the deal by the fact that no one will now offer a normal price, while "maintaining a bank without recourse to resources is economic nonsense."
Gazenergoprombank will have such recourse: sources in Gazenergoprombank and Sobinbank and a source close to one of its shareholders say that the Central Bank will deposit 10 billion rubles with the bank.
Recently, the state has helped Vnesheconombank to acquire Svyaz-Bank (for 5,000 rubles), while RZD and Alrosa have purchased KIT Finance (for 100 rubles).
RBC Daily
Russians cutting everyday expenses
The current global financial crisis has resulted in Russians cutting down their shopping expenses, including those for food, estimations by experts at the Romir Panel monitoring company have revealed. People in small towns have already reduced their everyday shopping expenses by 9.5%, while the buying power of those residing in big cities has stagnated.
The estimations of September's household consumption index have shown that Russians have reacted to the current crisis by reducing their expenses. The consumer preferences of the country's lower middle class have been hit the hardest, experts say.
"Even in Russia's biggest cities, the opportunities for income growth in most families have been exhausted, with people starting to cut down everyday expenses," researchers at Romir Panel say. "People are limiting purchases to a minimum," echoed them Vadim Solod, CEO of Nerkom Group of Companies.
"Even in worst case scenario - which is unlikely to occur - we would only lose up to 20% of sale volumes due to consumers turning to cheaper goods," Vladimir Sadovin, General Director of the Moscow-based Azbuka Vkusa chain store, said, expressing a certain optimism.
However, according to Dmitry Potapenko, managing partner of the Marka and Gastronomchik chain stores, in November the current situation might lead to a "mass hysteria, when people will cease making purchases." In this situation, the management will be forced to begin a second wave of dismissals and request a delay in payments to suppliers.
At the moment, retail chains are trying to increase their profit margins in various ways, selling to customers as much as possible and paying a minimum amount to suppliers. Currently, their debts are growing and they use any opportunity to delay payment, a general director of a distributor company noted, saying this results in a "limited range of variety."
Meanwhile, suppliers will not easily yield to the retail chains' requests to delay payment and reduce mark-up. "Certain suppliers have even started to panic, trying to increase mark-up by 40%," Sadovin said.
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