MOSCOW, November 10 (RIA Novosti)
Russia may experience problems in Latin America/Russia, U.S. have unique chance to leave Cold War in past/Russia may propose ban for offshore companies at G20 summit/Kremlin exploits financial crisis to boost global status/Russian government to support domestic car makers/Russian sub accident threatens weapon export deals
Kommersant
Russia may experience problems in Latin America
Deputy Prime Minister Igor Sechin finished his tour of Venezuela, Nicaragua and Cuba last weekend. A number of documents were signed, but they are threatened by the complicated political situation in some of the countries he visited, competition from China, and the election of Barack Obama as 44th U.S. president.
Although attractive for investment, the three Latin American countries are also fierce enemies of the United States. Employees at the Russian energy companies whose executives accompanied Sechin to Nicaragua say their interest in that country grew for political reasons after the war in the Caucasus.
Political risks are considerable in all three countries, but above all in Venezuela where regional elections are scheduled for November 23.
Regional authorities in Venezuela, especially state governments, enjoy a huge measure of autonomy from the center and therefore no serious project can get off the ground without their political support.
The opposition could grow stronger after the upcoming elections, because the population is becoming increasingly critical of the president's political direction, and falling oil prices have robbed the leasdership of funds to finance multibillion social projects.
The situation in Nicaragua is explosive, because the election campaign for municipal elections, held yesterday, was one of the tightest for years, Felix Navarrete, spokesman of the Supreme Electoral Council (CSE), said.
Russia's stance in Latin America is undermined by China, which has been expanding there for the past ten years. In 2006, Venezuela signed a deal to buy 18 Chinese tankers worth $1.3 billion. The sides are negotiating the building of new tankers in China, and Huge Chavez's words on the possibility of building tankers in Russia could be aimed at making the Chinese more pliable.
And lastly, Moscow's advance in South American markets could be slowed by the election of Barack Obama, which all Latin American presidents, including Hugo Chavez (Venezuela), Daniel Ortega (Nicaragua) and brothers Fidel and Raul Castro (Cuba), have welcomed.
Relations between the U.S. and these three countries have been strained in the past eight years largely because of President George Bush's policy. Business ties may now be the first to flourish, if Obama fulfills the promise to start talks with Raul Castro and other leftwing leaders in the region without preliminary conditions.
In other words, Russian companies will have to compete in Latin America with U.S. opponents, which have the finance and technology, and know the market inside out.
Izvestia
Russia, U.S. have unique chance to leave Cold War in past
Russia has every reason to pin its hopes on the new administration in Washington, if of course it is really new. There are a lot of people in Barack Obama's team who are keen for a breakthrough in relations with Russia, Konstantin Kosachyov, the head of the State Duma international affairs committee, stated in an article published in Izvestia.
Bush's legacy does not appear inspiring at all - the U.S. ABM in Europe, the unqualified support for Saakashvili regime. It is yet unclear how the new administration will address the Ukrainian issue, which is critical for Russia.
The Bush team's harsh and ill-considered steps (for example, failure in Iraq) biased European opinions against the U.S. president and have, to some extent, fostered Europe's rapprochement with Russia. Now Europe can have a new "idol," with transatlantic ties likely to be given fresh impetus. It cannot be ruled out that it will be achieved at the expense of relations with Russia. Russian President Dmitry Medvedev has offered a three-way interaction between Russia, the European Union and the U.S., which appears Moscow's most reasonable stance in the new atmosphere. If we work out a positive agenda for our partners, demonstrate strength, rather than force, steadfastness, rather than obstinacy, defend our interests, rather than encroach on other's rights, we will be able to prevent new U.S.-European dialogue from becoming anti-Russian.
Barack Obama has two options: either "to stop Russia," transforming it into another Evil Empire in the eyes of Americans and demonstratively rejecting it, or to achieve a breakthrough in relations between the two great states and make history by burying the Cold War. The final choice depends on Russia as well as what advice prevails in Barack Obama's administration. We have a unique chance, and missing out would be a mistake.
Vedomosti
Russia may propose ban for offshore companies at G20 summit
A country producing a little over 3% of global GDP certainly cannot expect its proposals to be listened to at the upcoming meeting of heads of the world's top 20 leading economies, to be held in New York on November 15. The only chance of being heard is if Russia formulates its proposals concisely, clearly, inventively, and at the very least realistically, suggesting some guarantees of long-term interest in what is being proposed, said Konstantin Sonin, a professor at the New Economic School/CEFIR in Moscow.
However, the ideas put forth by the Russian government so far reflect its unhappiness with the current geopolitical order rather than coming across as inventive and realistic.
British Prime Minister Gordon Brown has set a really good example in this respect. Although Britain's share in global GDP, and consequently its influence, is as small as Russia's, its government proposed the idea of involving the Gulf countries in supporting IMF projects. Many countries are expecting support from that international financial institution, and Russia has even more reasons than Britain to raise this issue, the economist argues.
Russia's international reserves could set an example for Gulf sheikhs to follow. It would be more meaningful than Iceland's individual proposal of assistance, and in a sense even more reliable.
It is not that Iceland could backtrack on its pledge. Its debts are enormous, and Iceland, however responsible and reliable, might end up defaulting, even if everything goes its way and with the best will in the world.
Russia could also promote another initiative. A huge slice of financial living goes on outside the leading economies' jurisdiction - in offshore zones or simply beyond regulated markets. The current financial crisis has shown a need for tight regulation of the derivative markets, and some steps are already being made to bring in such regulations.
To make global markets more transparent and controllable, it would be wise to abandon the practice of registering offshore companies, Sonin suggests. Or, more specifically, to ban companies which do not operate in countries they are registered in. This is a very sensitive issue for Russia, as many of the country's large industrial enterprises are owned by offshore companies.
The financial crisis is a good moment to eliminate the problem: for example, the government could provide assistance to struggling companies on the condition that their ownership structure is entirely transparent.
There are advocates and opponents of the offshore practice in other countries, including the United States. But in any case, this initiative is very much likely to be heard, because it is a very sensitive issue for Russia.
No dramatic changes in the global financial order are expected from the upcoming meeting in New York. However, the fact that China, India and Brazil are invited is a truly landmark event, because these countries are no less important for the global economy than some of the G7 members.
It is time they proposed some fresh ideas, Sonin wrote.
Nezavisimaya Gazeta
Kremlin exploits financial crisis to boost global status
It looks like Moscow is not only capable of coming out of the current financial crisis with only a few scratches, but also of cashing in on it, including boosting its global status.
A number of Russian companies are already taking out incredibly large loans through the state Bank for Development and Foreign Economic Affairs, known in Russian as Vnesheconombank or VEB, as part of the government assistance package. But the government is not acting as a passive sponsor here. It is rather an active participant in the processes which could help Russian companies consolidate their foothold on international markets, and build up the country's geopolitical influence.
The Kremlin in fact has long been looking at the possibility of boosting Russia's influence on international markets through setting up "national champions" in strategically important sectors. Such champions actually already exist in the oil and gas sector and in engineering. Russia's metals industry is still the most unconsolidated in the world.
The current financial crisis is a good time to consolidate by tapping domestic resources as well as buying foreign assets at knock-down prices, which Russia can easily afford.
Therefore, a proposal from the United Company Russian Aluminum (UC RusAl), the world's largest producer of aluminum, to establish a powerful global player in the mining and metallurgical industry was bound to be welcomed by the government.
Deliberating on the possible consequences of the financial crisis for Russia, analysts primarily predict "forced" business mergers. But who says it's a bad thing? The issue has been there for some time, especially in metallurgy.
A country keen to hold a strong position on the global mining and steelmaking market has two options - either to set up its own national champions, such as Brazilian CMVD or Australian BHP Billiton, or allow its assets to be taken over by foreign champions, as was the case with Canada's Alcan.
No wonder the Russian government decided to interfere with the long drawn out conflict between Norilsk Nickel shareholders, which accelerated the emergence of a mining giant once the company's business had been streamlined.
This way, it won't have to fear a repetition of last year's predicament, when Norilsk Nickel's cobalt reserves came under control of the U.S. OM Group, or another major outflow of the company's and its subsidiaries' cash through trust management schemes.
It is the government's duty to help Russian companies profit from the crisis and consolidate their temporarily cheap stocks, as a large portion of Norilsk Nickel shares are scattered between panic-frenzied foreign investment funds, making the company very vulnerable.
Government assistance in setting up large corporations capable of competing with global giants is more important and needed than ever.
Vremya Novostei, Vedomosti
Russian government to support domestic car makers
The Russian government announced on Friday a recovery plan for the financial sector and other areas of the economy, including the car industry. Import duties for foreign cars less than five years old will be raised to 30% from the current 25%, tariff rates for cars over five years old will be banned.
Although Russian car makers have long been seeking to introduce prohibitive duties for car imports, the authorities have been slow in introducing them as the country's car market kept growing. The previous increase in tariff rates sparked protests, like in Russia's Far East, where most people drive used foreign-made cars.
Experts say the decision shouldn't be shelved amid the crisis. "Definitely, many will like it, because the government will allow more foreign car plants to be built in Russia, and foreign models manufactured in Russia will be cheaper than imported ones", says UBS analyst Ilya Makarov.
So far, however, Russia's car industry has been experiencing problems, as car sales fell, forcing major car makers to suspend production or ask for state support. GAZ Group has requested 30 billion rubles ($1.1 billion) to stabilize operations as well as an additional 12 billion ($445 million) to build a diesel engine production center in the Yaroslavl Region. AvtoVAZ and KamAZ are seeking $1 billion each.
Any measures aimed at protecting the domestic market are positive, with state support incredibly vital for manufacturers, while car sales are down by 20% due to the financial crisis, said Igor Korovkin, Executive Director of the Association of Russian Automakers. The market will not collapse completely and the recession will last no more than two years, said VTB analyst Yelena Sakhnova. The recent government decision will enable Russia's car industry to become stronger while foreign companies that are still building car plants in Russia to launch production faster.
For international auto makers the increase in tariff rates will be favorable, said Sergei Lepnukhov, GM representative in Russia. Renault's Russian representative, Oksana Nazarova, said 70% of the company's cars sold in Russia are assembled here, and the concern is holding on to its plans to boost production at the Avtoframos plant. By the end of 2009, it expects to manufacture 160,000 cars, which is twice more than the current figure. According to GM's estimates, in two or three years, Russia will become Europe's biggest car market, Lepnukhov added.
Gazeta
Russian sub accident threatens weapon export deals
Twenty people died and 21 were injured in an accident over the weekend on the Akula II class Nerpa nuclear attack submarine during trials in the Sea of Japan.
Once the trials had been completed, the sub was due to be leased to India for 10 years at $650 million, but this, and other Russian weapon export deals, could be under threat following the accident.
The construction of the Akula II class Nerpa nuclear attack submarine started in 1991 but was suspended for over a decade due to lack of funds. It is the last submarine that was laid down in the Soviet Union and completed in Russia.
"They will blame the accident on the shipyard," said a source of the Gazeta daily at the Amursky shipyard in Russia's Far East. People at the shipyard are skeptical about the outcome of the investigation.
According to unofficial information, once the trials had been completed and the Nerpa had joined the Russian Navy, it was due to be leased to the Indian Navy. Funds enabling the completion of the construction were paid only after the lease contract had been signed. Now the future of this and other arms export contracts is under threat.
Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies, said the accident would not threaten the lease contract.
"Nobody has so far officially mentioned the possibility," he said. "India is unlikely to refuse the submarine lease because of the accident in the Sea of Japan. It may influence the price, but India won't be able to buy a nuclear submarine anywhere else."
Pukhov added that the Nerpa accident would not affect the export of Russian submarines, because Russia has not yet become firmly established in this market, but it would certainly leave a bitter aftertaste in potential customers.
"They will view this as a system, given the past delays in commissioning frigates and problems with equipment for anti-submarine aircraft," Pukhov said. "And so they may decide to break off relations with Russia at least when it comes to naval deliveries."
Pukhov added that the rapid growth of prices in Russian defense exports was not benefiting the country.
"In the past, buyers closed their eyes to many drawbacks in the quality of Russian weapons because of the acceptable pricing, but these drawbacks may prevent the development of the Russian defense industry now that outlays and prices for arms exports are rapidly approaching global market levels," Pukhov said.
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