MOSCOW, October 29 (RIA Novosti)
Russia to strengthen relations with China / Ukrainian opposition accuses Yushchenko of illegally arming Georgia / Britain hampers RusAl's deal with foreign creditors / Gazprom launches cost-cutting program / Russia needs clear rules for bailout aid to prevent corruption / Most Russians go out unarmed
Vedomosti
Russia to strengthen relations with China
Russia once said it would redirect its oil exports to China, which the West regarded an empty threat. But the financial crisis, which threatens to deteriorate into an economic recession, has changed the situation. Russia's political differences with the West have been accompanied by a fall in Europe's solvent demand and the debt risks of commodity suppliers.
Russia now needs to focus on the East, which means that China's positions in relations with Russia will continue to grow stronger.
China's state petroleum company CNPC and Russia's oil pipeline monopoly Transneft have agreed to build and operate a branch from the East Siberia-Pacific Ocean oil pipeline to the Chinese border. Transneft and state-owned crude producer Rosneft have also resumed oil supply talks with CNPC and Sinopec.
The sides could not agree on oil prices for a long time, because China insisted that oil should be supplied to it at below market prices. Russia has apparently decided to meet this request now that oil prices are falling.
Russian oil companies and budget need additional revenues because of the financial crisis. In addition, the agreements with China include a provision on $20-$25 billion Chinese loans for Rosneft and Transneft.
Prime Minister Vladimir Putin has called on his Chinese counterpart, Wen Jiabao, to consider broader use of national currencies in mutual trade, and again criticized the U.S. dollar.
Although Russia and China have blamed the crisis on the United States, the dollar is now growing and therefore remains the most reliable global currency. No wonder that Wen Jiabao refused to speak about the dollar.
Russian-Chinese trade is growing fast, but still remains small in absolute figures, at $43 billion in January through September, with China posting a positive balance of $3.91 billion.
Russia is only the seventh largest trade partner of China, which is Russia's third largest partner after Germany and the Netherlands. A switch to settlements in rubles and yuan will benefit exporters and importers, but will not ease the two countries' dependence on the dollar.
The structure of bilateral trade is unlikely to change either. Commodities account for approximately 90% of Russian exports to China. Agreements on cooperation in nuclear power generation and aircraft manufacturing may increase the share of Russian engineering companies in exports to China, but growing oil supplies will also augment the share of commodities.
Cooperation benefits both countries, whose economic growth will slow down in 2009. China has problems with exports, but its foreign currency reserves are growing, and it still needs energy resources.
Kommersant
Ukrainian opposition accuses Yushchenko of illegally arming Georgia
The scandal over Ukrainian arms sales to Georgia continues unabated in Kiev. On Tuesday, Russian President Dmitry Medvedev promised "not to forget" those who had armed the Mikheil Saakashvili regime. Although Medvedev did not mention Ukraine, his statement implies that Moscow views Kiev as the main culprit.
Many countries sold offensive and defensive weaponry to Georgia. Tbilisi bought six 122-mm RM-70 multiple-launch rocket systems, an upgraded version of the hard-hitting BM-21 Grad MLRS, 24 Dana self-propelled howitzers and 70 T-72 main battle tanks in the Czech Republic.
Bosnia sold five 262-mm long-range M-87 Orkan MLRSs to Georgia, which also received mortars from Bulgaria and Greece, and Bulgarian-made anti-tank missiles.
Israel played it safe and only supplied defensive weapons to Georgia, flatly refusing to sell the 300 Merkava main battle tanks requested by Tbilisi. Subsequent Russian-Israeli tensions over arms deliveries to Georgia were quickly defused.
Ukraine topped the list, delivering 90 T-72 tanks, seven Mil Mi-24 Hind helicopter gunships, self-propelled guns, radars and surface-to-air missile (SAM) systems.
Technically speaking, Ukraine has not violated any agreements, whereas Georgia exceeded CFE (Conventional Force in Europe) Treaty ceilings after buying various weapons from Kiev.
Let's face the facts: Kiev removed the Buk-M1 and OSA-AK/AKM SAMs earmarked for Georgia from combat duty, an event unprecedented in modern military history. Although the contracts were signed as quickly as possible, their real price is not known. Everyone also knew that Ukrainian weapons would be used against the self-proclaimed republics of South Ossetia and Abkhazia, and Russia.
Although the investigation panel has not brought up any charges yet, it will continue its work, because frequent arms scandals allow the opposition to attack the Yushchenko administration.
Vedomosti
Britain hampers RusAl's deal with foreign creditors
It appears that British politicians are trying to interfere in negotiations between United Company Russian Aluminum (UC RusAl) and a syndicate of banks on the possibility of rescheduling the increase of collateral for a two-year syndicated loan backing RusAl's acquisition of a 25% stake plus one share in Russian nickel and palladium miner Norilsk Nickel.
There is mounting political pressure on the Royal Bank of Scotland (RBS), which is part of the 11-bank consortium, which RusAl needs to pay $4.5 billion before Friday October 31.
Liberal Democrat MP Vince Cable wrote to RBS chairman Tom McKillop asking him to insist on keeping to the schedule, arguing that the money was needed to lend to British small and medium-sized companies.
In addition, the British government is currently busy rescuing the struggling RBS by buying a controlling stake in it.
UC RusAl secured the $4.5 billion loan to acquire a blocking stake in Norilsk Nickel last April from an 11-bank syndicate. Under the loan agreement, the collateral value had to exceed the loan amount by 50%, which is $6.75 billion. However, Norilsk Nickel has lost nearly four-fifths of its market value since last spring, closing at $11.9 billion on the LSE at 7:20 p.m. Moscow time on Tuesday.
It follows that the 25% stake acquired by RusAl now costs as little as $2.97 billion and that RusAl had to add nearly $4 billion to the collateral by Friday.
The company is trying to negotiate a deferral until the end of November. Although RBS's share in the loan issued to RusAl may be insignificant, to get a deferral, RusAl needs to have all the 11 banks' consent.
Representatives of RusAl and ABN Amro (part of the RBS group) declined to comment. Other participants in the syndicate - BNP Paribas, Credit Suisse, Merrill Lynch, Natixis, UniCredit, and Morgan Stanley - refused to discuss negotiations with RusAl as well, while four more banks were unavailable for comment.
A source in one of the banks told The Independent that it would give RusAl no more than one week after the deadline to increase collateral.
RusAl's beneficiaries are Oleg Deripaska (56.7%), Sual shareholders (18.9%), Mikhail Prokhorov (14%), and Glencore (10.3%). The company's revenue was $14.3 billion in 2007.
Kommersant
Gazprom launches cost-cutting program
Russia's Gazprom plans to revise its contracts with equipment suppliers and service providers in a bid to downgrade prices.
The monopoly's cost-cutting program is aimed at eventually bringing capital investment in pipeline construction down at least 20%. The company could save around 40% in this segment in prices set out in this year's investment program.
Last year's cost-cutting scheme saved the gas monopoly 14.2 billion rubles, and this year's 10.1 billion. However, Gazprom plans to enhance cost-cutting efforts in view of the global financial crisis.
An expert examination of the projects on this year's investment program suggested that construction costs could be cut by 18%, and capital expenses on new gas pipelines by at least 20%, the monopoly said in a statement.
This year's investment program allocates 380-420 billion rubles of the total of 820 billion for gas transportation projects. Next year's draft investment program is estimated at over 1 trillion rubles, but Gazprom has neither announced cost cuts nor evaluated 2009 pipeline projects separately.
A source at the latest Gazprom board meeting said the monopoly planned to slash costs of service and equipment. "In view of the global financial crisis, they decided to revise all contracts, including those already signed. It is out of the question to pay the full price nowadays, all costs will be cut," he said.
Mikhail Korchemkin, director of the East European Gas Analysis consultancy, said Gazprom's current spending on new pipelines are twice what other countries pay in similar geographic environment and climate. The analyst believes that Gazprom could cut costs by expanding its underground gas storage capacity because the monopoly often keeps gas on hold in the pipes.
"Underground gas storages are ten times cheaper than pipelines, and can be used for the same purpose," he said.
Konstantin Cherepanov from KIT Finance believes that Gazprom's main expenditure item, oil and gas purchases, will only grow as a result of conflicts with Ukraine and Central Asian suppliers. The second largest expenditure, personnel, could be cut by slashing bonuses, layoffs, and forcing older employees to retire.
"Personnel used to be Gazprom's biggest expenditure, this was the reason why Gazprom's costs spiked in the fourth quarter of 2007," Cherepanov explained.
The monopoly indeed plans to cut managerial personnel costs. It intends to dismiss about 10% of its 5,000 head office staff after January 1, 2009.
Nezavisimaya Gazeta
Russia needs clear rules for bailout aid to prevent corruption
A crisis is not only a time of losses, but also a time for enrichment, especially for corrupt officials.
The Russian government has approved the allocation of 5-6 trillion rubles (nearly $220 billion) to support the national economy, including hundreds of billions of rubles for the banking system. But the mechanism for distributing this aid is not transparent, which creates additional possibilities for corruption.
It is not clear on what conditions Vnesheconombank (VEB) will distribute the $50 billion allocated for the repayment of the largest Russian companies' foreign loans. Besides, Russian companies say they need more than $100 billion.
Even if the distributions are considered by the bank's supervisory board publicly, companies have a chance to "encourage" officials to lobby for them in the absence of clear-cut money distribution schemes. Only one thing is clear now: foreign creditors may take over the pledged stakes in large Russian companies unless these companies get financial assistance from the state. But this can be said of the majority, if not all, of the aid requests.
The decision to invest over 40% of the National Welfare Fund (nearly $20 billion) in Russian securities is even more vague. One third of that sum was transferred to VEB for investment in the stock market a week ago, but the future of these funds is unclear.
To profit from inside information, you only need to be the first to buy the indicated securities. Those who "share" such information will get kickbacks, and those who invest in the securities VEB plans to buy will get rich too.
The non-transparent mechanism of investing the National Welfare Fund money has engendered unpleasant rumors on the stock market.
Last week, bids for lots comprising 1 million shares in large Russian companies were made, and the lots were bought immediately. This seemed to indicate that officials with inside information were buying the lots so as to profit by reselling them to VEB, or that the bank allowed the said companies' largest beneficiaries to sell their stakes before prices plummeted.
The Central Bank will soon officially receive the right to decide which banks should be bankrupted, merged with larger banks, or sold to rivals cheaply. This could break the back of the banking community, which has not yet calmed down after recent scandals and accusations of corruption over the admission of some banks to the deposit insurance system, which allows them to work with individuals' deposits.
Novye Izvestia
Most Russians go out unarmed
Four out of five Russians carry no self-defense devices, relying on their fighting skills or Guardian Angels. A recent survey by SuperJob.ru revealed that as few as 2% of the population carry firearms. Experts say the reason for this is that most people have never experienced a dangerous situation in which self-protection equipment could come in handy.
Gas sprays are the most popular self-defense device, carried by 5% of Russia's adults and by one out of every 14 women. Rubber-bullet and blank firearms are preferred by 4% men each. "Although I carry a knife, assuming that someday I will need it, I haven't put it to use so far", said a respondent, and another mentioned that having a blank firearm with him makes him feel more confident.
"In Russia, purchasing firearms for self-defense should have been allowed long ago for law-abiding citizens. My pistol saved my life three times," a respondent said.
One out of every 100 citizens carries a pneumatic weapon, and one out of 30 an electric stunning device.
82% of the respondents said they carry no self-protection means. Many regard weapons as senseless, assuming that they will not put them to good use when attacked. "The sight of a weapon often makes assailants go to extremes", some respondents said.
Some people think "it's better to run than to carry something heavy." Others say "if the attacker wants to, he will kill you whatever you have with you." Those who practice martial arts, tend to rely on the latter.
Some respondents suggested their own techniques of self-defense. A woman said she carries "a thick book on psychotherapeutics, which she could use to even kill someone." Another respondent said, at the end of the working day the expression of his face prevents anyone from messing with him.
Experts say purchasing self-defense devices is justified. "Over the last year, more than 600 cases were registered when gas sprays, batons and traumatic weapons helped people protect themselves,", says State Duma Deputy Police Lt-Gen Alexander Gurov. The law allows for inflicting any damage to the criminal. "If you are attacked by a person attempting to strangle you, you should kill him, and you will be right," says the official.
"The best way to defend oneself is to retreat. I think running is the best way out of any dangerous situation. You could also offer money to the assailants", says Roman Kim, Deputy President of the Boxing Federation.
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