MOSCOW, October 22 (RIA Novosti)
Qatar, Russia, Iran initiate gas cartel / Al-Gaddafi's visit accelerates disgraced deputy finance minister's release / Finnish geologists hinder Nord Stream / Gazprom needs $2 billion to mend budget hole / Oligarchs lose billions, sell property to stay afloat / Crisis does not scare Russians
Kommersant, Gazeta.ru
Qatar, Russia, Iran initiate gas cartel
Qatar, Russia and Iran have agreed to cooperate when signing gas export contracts. "The gas Group of Three is as good as formed," Gazprom CEO Alexei Miler said in the wake of the talks with delegations from Qatar and Iran.
However, it was Iranian Oil Minister Gholam Hossein Nozari who used the term "gas OPEC."
The idea is not a new one. Global politics has been haunted by it regularly since 2001. However, high-profile statements have boiled down to nothing so far.
"Collusion" between gas producing countries is prevented by a simple scheme: natural gas usually crosses borders through pipelines, which carry it to specific markets dominated by long-term contracts based on well-thought-out pricing formulas. Liquefied natural gas (LNG), which is transported in tankers and could be viewed as oil equivalent, so far plays only an insignificant role in pricing.
Gas producers will only be able to manipulate LNG prices when it begins to account for 25%-30% of the global gas market. That would be enough to influence prices in importer countries and compete with long-term pipeline contracts. Moreover, in that case gas suppliers could also try to peg natural gas prices to LNG instead of fuel oil, coal and other energy resources, as is the case now.
LNG currently accounts for less than 8% of the global gas trade, and spot LNG deals made in addition to long-term contracts, for 8% of the total LNG supplies. It is too small a niche to serve as basis for collusion against consumers.
Importantly, the "gas OPEC" idea is most actively lobbied by countries who are either new on the LNG market, or aren't present there at all, such as Russia and Iran. If the situation does not change, any such agreements will remain empty declarations.
Such declarations are voiced by politicians, not natural gas professionals. Anyone with a basic knowledge of the gas market tries to dissociate themselves from such games.
Gazprom deputy CEO Alexander Medvedev once expressed doubt that gas market players would be able to sit down together and agree on gas prices. Former Industry and Energy Minister Viktor Khristenko in February 2007 described the gas OPEC idea as a "product of overexcited fancy."
That was only a week before then-President Vladimir Putin said it was an "interesting proposal."
Vedomosti, RBC Daily
Al-Gaddafi's visit accelerates disgraced deputy finance minister's release
Deputy Finance Minister Sergei Storchak, who has spent 11 months in custody under investigation on embezzlement charges, has been released with restrictions, and so was Viktor Zakharov, CEO of the Sodexim company.
The progress in the high-profile case might be linked to Lybian leader Muammar Al-Gaddafi's first visit to Russia. Storchak used to be in charge of Libya's debt.
Storchak, Zakharov and two top managers at Mezhregionbank were arrested in November 2007 and accused of embezzling federal funds through a scheme involving alleged settlement of the Finance Ministry's debt to Sodexim.
Two weeks ago Moscow's Basmanny court extended Storchak's detention until November 15 although he had asked the court to release him into his own custody. Chief investigator Anatoly Iskantsev said he requested the extension of Storchak's detention because his guilt was supported by flagrant evidence.
The investigation is over now, and the defendants have no means of influencing its progress, explained Vladimir Markin, spokesman for the investigation committee at the prosecuting attorney's office. Storchak said Tuesday that the decision was "very unexpected."
Finance Minister Alexei Kudrin had asked repeatedly last November to release his deputy under his personal guarantee, but was declined.
The minister told the media Tuesday that Storchak had not been dismissed as deputy finance minister, but that he had not yet had time to discuss with his deputy when he would be able to return to work.
An employee of the state-run Russian Technology Corporation suggested that Storchak's release was linked to a visit of Muammar Al-Gaddafi planned later this month. Storchak was responsible for the settlement process of Libya's $4.4 billion debt to the former Soviet Union. That debt was written off in exchange for military and other contracts. But the talks stalled for a long time after Storchak's arrest, which displeased the Libyan leader.
A Libyan diplomatic source doubted the connection. Although admitting that Storchak initially conducted the talks successfully, he said other people took over after he went to prison, and in any case, officials in Libya never discussed any connection between the talks and Storchak's arrest.
However, a source close to the deputy minister confirmed that Al-Gaddafi's upcoming visit must have played an important role.
Lawyer Yevgeny Baru said a release at this point is a highly unusual move because when investigators obtain an arrest warrant, it is usually valid for the whole investigation period, until the case is sent to court.
"There is practically no evidence against Storchak," a source in the Prosecutor General's Office told RBC Daily. "The court will probably try to save face now by convicting him of some minor crime and sentencing him to one year which he has already served."
Novye Izvestia
Finnish geologists hinder Nord Stream
Finnish opponents of Nord Stream, a project to pump gas from Siberia to Europe under the Baltic Sea, have made a surprise move. A group of businessmen filed a request with the Finnish Employment and Economy Ministry for a permit to conduct geological exploration in the Gulf of Finland.
Nord Stream is being built jointly by Russian energy giant Gazprom, Germany's E.ON and BASF and Dutch gas transportation firm, Gasunie, at an estimated cost of $12 billion.
The site, where the Finnish businesses will search for ores containing copper, silver, nickel and platinum, lies between the Estonian economic zone and Finnish territorial waters. If the permit is granted, the gas pipeline will not be built there.
Estonia has refused to grant a permit to build the pipeline on its shelf.
The businessmen, who refuse to identify themselves, claim they do not seek political benefits, but Finnish analysts doubt this statement.
Veli-Pekka Salonen, a professor of environmental geology at the University of Helsinki, said it was highly unlikely that the above raw materials would be found in the area, because they would have been found long ago on the Estonian shelf.
Lawyer Kari Silvennoinen, who represents the businessmen, claims his clients' stance is legally faultless.
"The most important thing in claims for using seabed is who files a request with the ministry first," he said. "Nord Stream is only working on an environmental feasibility study, and therefore has no permit to build the pipe."
The Finnish businessmen filed their request in late August.
The Finnish Employment and Economy Ministry said it would consider the request before the end of November. It needs to establish that the businessmen really intend to create a mining company there and have no other aims in mind.
Three years ago, Finland's Supreme Court rejected a similar seabed exploration claim filed by a group of businessmen after establishing that their true goal was to prevent a rival seabed project.
Vedomosti
Gazprom needs $2 billion to mend budget hole
The global financial crisis has made a huge hole in the budget of Russian energy giant Gazprom, which had planned to raise $2 billion from the IPO of its banking unit, Gazprombank, this year.
Gazprom's budget stipulates additional revenues from the sale of a 14.5% stake in Gazprombank. Of that figure, 4.5% of the shares were to be sold to the bank's shareholder, pension fund Gazfond, and 10% during the bank's initial public offering.
The plans were outlined in the documents prepared for the August meeting of Gazprom's board of directors, who approved the sale of a 4.5% stake to Gazfond for 22.388 billion rubles (nearly $847 million) following an assessment by Ernst & Young.
This means the whole of the bank is worth 497.5 billion rubles ($18.8 billion).
The public flotation of a 10% stake would have earned Gazprom another 50 billion rubles (nearly $2 billion).
Alexander Sobol, deputy chairman of the bank, said the IPO would not be held in 2008 or 2009 due to the dramatic market situation.
Gazprom spokesmen refuse to say how the company can make up for the lacking 1.5% of its planned revenues, or if Gazfond has already paid for the 4.5% stake. A spokesman for Lider, which manages the assets of Gazfond, also refused to comment.
Pavel Mamai, an analyst with Lehman Brothers, said even Gazprom would find it burdensome to borrow $2 billion now, because foreign banks charge interest at Libor plus 7%-11% while Russian state banks offer a Libor plus 5%, thanks to government's support.
Gazprom hopes it will not have to borrow funds before the end of the year, because gas prices are high in Europe. However, it has filed a request with VEB for a soft loan just in case, a Gazprom manager said.
Another employee of the gas monopoly said it had requested more than $1 billion.
Gazprom controlled Gazprombank until 2006, but then decided that a 25% stake would be enough for it, so Gazprombank issued additional shares, cutting Gazprom's stake to 41.7%.
Andrei Kruglov, deputy chairman of Gazprom's Management Committee, said last summer the gas company might further reduce its stake to 25.1% before the end of the year, if Gazprombank conducted an IPO.
However, the documents prepared for the director's August meeting say that Gazprom must retain at least 35% in the bank because of Gazprombank's commitment to repay a $500 million syndicated loan.
If Gazprom cuts its stake in the bank without coordinating the move with its creditors (who are not named in the documents), the creditors could demand early repayment.
Gazprombank has several loans issued on the condition that Gazprom will maintain at least a 35% stake in it. The last of them expires in three years, Sobol said.
He refused to say how much the bank owes under these loans.
RBC Daily
Oligarchs lose billions, sell property to stay afloat
You will not yet see Maybach luxury cars on Moscow streets with a "for sale" sticker, but after Russian shares have dropped more than 70%, the combined fortunes of 25 richest Russians are now down by $230 billion, according to Bloomberg.
Experts say the country's industrial elite is feverishly casting about for some cash to serve their loans. They are even selling their property, says an insider. "People wishing to buy a Ferrari, a yacht or a villa, can do so now at a bargain."
Olga Kryshtanovskaya, an expert in the Russian elite, says who will benefit from the crisis: "Billionaires' problems boost the role of the state, because nearly all natural resources are in its hands." In her view, a similar picture is seen in the West, "only in Russia the state pursues its economic interests with greater zeal."
Kryshtanovskaya is echoed by Christopher Weafer, chief strategist at Uralsib Bank: by making financial injections, he says, the Kremlin increases its influence in the country's largest companies and industries. The state will dictate to them how they should invest and develop, the analyst said. The bailout needed to save foundering companies from going to the wall is $50 billion.
Kryshtanovskaya predicts that the crisis will serve as a cover for another property "redistribution" in Russia. In her view, the political leadership already has a finger in the economic pie, and now has more reason to do so. And although early in his presidency Vladimir Putin made a sort of pact with the oligarchs, the Kremlin still occasionally complains that some or other billionaire "rides a high horse." Now, thanks to the crisis, the establishment has gained leverage to "rein in" unsympathetic businessmen.
Nikolai Petrov, of the Moscow Carnegie Center, believes the group of "Kremlin oligarchs" is sure to be among the winners. People like Sergei Chemezov, a friend of Vladimir Putin, runs an empire consisting of 500 companies as head of the state-owned Russian Technology Corporation. "They are so close to the country's leadership that to get money is no problem for them." Petrov says.
Kommersant
Crisis does not scare Russians
A recent survey by the Levada Center revealed that Russians care little about the financial crisis, with most of the country's citizens considering it to be a "temporary" consequence of the global crisis, which Russia will overcome soon.
Experts say, however, that anxiety could eventually sweep the Russian society if mass layoffs or a surge in consumer prices take place.
A full 14% of respondents were still unaware of the crisis. Another 14% said they had heard of it but couldn't give any comments. And a further 42% said the crisis bothers them little, as they think that the slump "is temporary and doesn't affect the fundamentals of the country's economy" and "the situation in Russia will improve soon."
Thirty-one percent of those polled turned out to be sceptical about the prospects for Russian economy, "facing grave financial turmoil." The biggest number of pessimistic responses (35%) was received from those between 40-55 years old. "They have lived through several crises," says Natalia Bondarenko of the Levada Center.
Young people between 18 and 25 are least concerned about the crisis, with just 26% of them expecting Russia's economy to run into serious trouble. Around 20% of the young people, however, "haven't heard about the crisis at all."
Most of the Russians, however, (54%, and 72% in Moscow) view the current slump in their country's economy as an effect produced by the global financial crisis. This point of view will persist "until mass dismissals begin," says Iosif Diskin, co-chairman of the National Strategy Council.
According to his estimates, the financial crisis could hurt the real economy, including "the construction sector and linked industries like construction materials production." A decrease in production in the above listed sectors would lead to dismissals, followed by growing discontent with the government's economic policy. Aside from unemployment growth, "downbeat expectations in society could be caused by a sharp upsurge in consumer goods prices," says Dmitry Orlov, general director of the Political and Economic Communications Agency.
RIA Novosti is not responsible for the content of outside sources.
