MOSCOW, November 17 (RIA Novosti) G20 leaders signal beginning of anti-crisis campaign / Russia-EU partnership goes up dead end / Central Asian gas: EC sets up a proxy to leapfrog Gazprom / Gazprom increases staff at head office / Russia's largest hydropower company to cut 17% of workforce / Financial crisis makes Russians doubt domestic model of state capitalism
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G20 leaders signal beginning of anti-crisis campaign
Before the Washington summit of the G20 leaders, the U.S. press compared it to the Bretton Woods conference, which established the current international financial system in 1944, with the IMF and the World Bank at its core.
The system did well until the early 1970s, but the current financial crisis has exposed all of its incurable drawbacks. The Bretton Woods system was set up by the powers that won World War II, who could therefore force their will on the rest of the world.
There are no winners now; the enemy - crisis - has not been defeated and it is not clear what wonder weapon it may use next.
The leaders of the G20 nations, which account for 90% of the world's economy, proposed different variants of saving the global financial system, but said the summit was unlikely to approve concrete remedies.
They can propose closer coordination, but this does not mean the governors of the Russian or Chinese central banks will be invited to the Federal Reserve's meetings, which determine the value of money worldwide.
They can dream about more transparent financial regulation and a system of early warning of future crises, which the IMF and the Financial Stability Forum (comprising treasuries, central banks, and supervisors in important financial centers) have promised to set up.
Seismologists have not learned to predict earthquakes, and economists likewise cannot forecast where another bubble will grow and subsequently burst, sending everyone down.
There is also the problem of ideological differences. China says the crisis is rooted in excessively liberal rules of the game, which gave free rein to U.S. market speculators.
British Prime Minister Gordon Brown has proposed a liberal plan of fighting the crisis through tax stimulation, which provides for a coordinated reduction of taxes and interest rates in the leading countries.
The EU and Russia are worried that tougher financial regulations will curtail the use of derivatives.
Anyway, it is good that they have started discussing global financial reform, and it is symbolic that the G20 leaders met at the National Building Museum in Washington to do that.
Concrete agreements will have to wait until a follow-up summit, scheduled for April 2009, likely to be held in London.
Nezavisimaya Gazeta
Russia-EU partnership goes up dead end
The EU-Russia summits have brought no results in the past few years, and the latest meeting in Nice reconfirmed the trend, said Yekaterina Kuznetsova, European programs director at the Center for Post-Industrial Society Studies, a Moscow think tank.
Europe even stopped pretending to treat its relations with Russia as a top priority. Brussels, as well as other European capitals, at best regard strategic partnership with Russia as some remote vision of future relations, likely only upon a host of conditions and provisos.
Even the new PCA talks to be resumed on December 2 are hopeless to reverse the trend. The reason is Europe's changing priorities with regard to Russia along with Russia's plans concerning a united Europe, the analyst said.
The most important outcome of the Nice summit was emphasis on security issues as part of bilateral relations. President Dmitry Medvedev's threats to deploy Iskander missiles in Russia's westernmost exclave of Kaliningrad, and to take other actions to neutralize the planned U.S. missile defense system in Central Europe, have pushed other aspects of Russian-European relations to the margin of the meeting.
Rather than focusing on expanding the partnership, the participants got carried away with the security problem they are unable to resolve alone. However, the outcome of the summit was controversial even in this aspect: French President Nicolas Sarkozy who holds the EU presidency, persuaded Medvedev to postpone the deployment of Iskanders until new continental security conditions are developed, which is only next summer, while the U.S. radar and interceptor missiles won't be installed until 2012.
Meanwhile, Medvedev made some progress on his initiative to sign a new continental security treaty, as European leaders finally agreed to hold an OSCE meeting also inviting the United States.
No one will claim these issues aren't serious or important, but was the Nice summit the best site to discuss them? It obviously wasn't, Kuznetsova argued.
It has shown that interstate dialogue is no longer effective, and that the EU-Russia partnership has gone into a dead end. It is an especially bad sign for Moscow that, to revive stagnating bilateral cooperation, Russia and Europe apparently "needed" the threat of a conflict that, to be honest, has neither ideological nor territorial reasons.
The Kremlin has in fact launched, and the EU eagerly supported, a drive to move the EU-Russia bilateral partnership to a multilateral relations area. The summit, established to regularly inspect bilateral cooperation's progress status, has now turned into a talky international forum where people discuss intentions and plans, Kuznetsova added.
Kommersant
Central Asian gas: EC sets up a proxy to leapfrog Gazprom
The European Commission has proposed setting up a Caspian Development Corporation to buy gas directly from Central Asia, to coordinate investments in oil and gas production in the region, and to deliver energy supplies. The project, which is part of a package of measures to ensure Europe's energy security through 2050, is designed to break Gazprom's monopoly on Central Asian gas supplies to Europe. Even Germany, Gazprom's closest ally in Europe, supported the idea by promising to make "very interesting" proposals to the Turkmen authorities.
The objective of the project is to build a southern gas corridor to pump 60 billion to 120 billion cu m of gas per year to the EU, including through the Nabucco and Trans-Saharan gas pipelines. The overall cost of the project aimed to reduce gas dependence is 2 trillion euros.
Very soon the EU's anti-monopoly bodies will examine the direct purchases of Caspian gas for compliance with laws on competition, and the European Commission will invite "representatives of appropriate countries at a ministerial level [Turkmenistan, Kazakhstan, and Azerbaijan] to agree a timeline for agreements." By the middle of 2009, further obstacles toward completing the project will be identified and reported to the European Council and Parliament.
Maxim Shein, of BrokerCreditService, said that laying a Trans-Caspian gas pipeline would also require, in addition to investment, the agreement of Russia and Iran, which are opposed to the scheme. Also, there is nothing with which to fill the pipeline yet, because Turkmenistan has agreed to export only an additional 10 billion cu m of gas per year.
Currently, the EU is importing 61% of the 500 billion cu m of gas it consumes annually. By 2030, according to European Commission estimates, Europe will be importing 84% of its gas. The Russian share in European imports now accounts for 42%.
Valery Nesterov of Troika Dialog says the formal trigger for activating anti-Russian aspects of the EU's energy policy was provided by events in the Caucasus. "They gave legitimacy to EU initiatives to diversify energy sources for Europe," the analyst said.
The effort is several-pronged: development of liquefied natural gas imports, reversal of the Odessa-Brody oil pipeline to Europe, talks on Nabucco, and a European gas ring.
"The costs involved are high and hardly justified, because national EU power grids are partly connected and need not be merged through plain inter-linking. This can be done more simply and at less cost," Nesterov said. He believes this is a "bold push," but "no real results can be expected in the medium term."
Vedomosti
Gazprom increases staff at head office
Despite the financial crisis, energy giant Gazprom increased its staff by 10.5% in the third quarter of 2008. Average incomes of corporate managers also rose by 5% over the same period.
In July-September 2008, Gazprom headquarters hired 590 new workers and increased its staff to 6,222, said the company's third-quarter Russian Accounting Standards report.
This is the highest increase for eight years, since the third quarter of 2000 when Gazprom increased its staff by 12.8%. From July 2006 till July 2008, the corporate headquarters' staff increased by just 0.85% from 5,584 to 5,632.
In July 2008, Gazprom CEO Alexei Miller signed an order on restructuring the corporate administration and streamlining its staff. At that time, two Gazprom officials said the document aimed to reduce corporate spending and to lay off over 10% of Gazprom headquarters' personnel.
Gazprom is reorganizing its security services nationwide and turning them into the main company's subsidiaries. A corporate spokesperson said security service personnel were now listed as headquarters managers.
In the third quarter of 2008, per capita incomes increased from 89,436 rubles ($3,276) to 93,985 rubles ($3,442). Third-quarter wage and social-security funds soared from 1.51 billion rubles ($55.3 million) to 1.75 billion rubles ($64.1 million).
When the crisis began, virtually all companies announced plans to lay off personnel or to hire less new workers. Until now, only Rosneft, the largest state-owned national oil company, has been able to afford to hire new personnel. In January-March 2008, its main office increased from 1,326 to 1,459 staffers (10%), as mentioned in its first-quarter Russian Accounting Standards report.
Gazprom's oil-production unit, Gazprom Neft, reduced its staff by 17.7% during the second quarter.
Troika Dialog analyst Valery Nesterov said the crisis would force Gazprom to modify its personnel policies, and that the company would face initial problems after its European proceeds are reduced in the second quarter of 2009.
He said Western companies listed security services as part of outsourcing programs facilitating greater labor productivity and profits. All this increases corporate value, Nesterov told the paper.
Kommersant
Russia's largest hydropower company to cut 17% of workforce
RusHydro, Russia's largest power generating company, has announced sweeping layoffs, 17% including vacancies, in a bid to cut outlays.
Analysts say other companies in the sector may follow suit.
RusHydro will lay off 17% of its personnel in January-March 2009, acting board chairman Vasily Zubakin said on Friday. "We will start with cutting vacancies," he said but refused to specify how many of the 16,000 employees would actually be laid off.
The company will also shed personnel by divesting some of its service subsidiaries.
Many power generating companies have been pondering cuts in spending and also energy-saving procedures, but RusHydro has become the first to announce staff cuts. Other companies in the sector are not planning to immediately follow its example.
Vitaly Koskovetsky, PR head at Mosenergo, said it did not plan personnel cuts.
Yekaterina Dobrogorskaya from wholesale generating company OGK-1 said they did not plan cuts, including in the number of vacancies.
IES Holding, which controls four territorial generating companies in the Volga and Urals regions, recently streamlined its structure and managerial personnel as part of transition to a new business model, said Nadezhda Rukina, head of the company's PR department.
Alexander Seleznyov from the Uralsib investment company said reductions could begin at many power generating companies, adding that such cuts would be part of streamlining company structure.
The financial crisis is not the main reason behind the cuts, he said, because power plants have always been self-sufficient and had their own repair and other service units. Conversion to outsourcing would give the parent companies more room for maneuver, Seleznyov said.
He said the number of personnel at Russian power generating companies per 1 kW of installed capacity was much larger than at Western companies.
Vedomosti
Financial crisis makes Russians doubt domestic model of state capitalism
The current financial crisis has forced many Russians to revise their beliefs on the government's role in the economy. Compared to the much calmer 2007, sociologists have registered a growth in the number of people who think that the government's task is to guarantee private business development.
On the other hand, most Russians' priorities remained virtually unchanged, as they think that the government should control prices and try to bring them down.
According to Levada Center, a national pollster, the share of respondents supporting government control over prices has grown from 39% in 2007 to 45% in 2008, and those approving the government's efforts to bring prices down from 40% to 44%. Russia in fact is not the only country showing this trend. According to TNS-Sofres, a similar growth was registered in France (32% and 36%, respectively.)
However, people's sentiments about methods the government should use to influence the economy have changed significantly. In 2007, Russians believed that the government had to focus on financial support of agriculture and nationalization of key economic sectors (35% and 22% respectively).
One could expect the financial crisis to enhance their paternalistic feelings. However, the actual figures suggest the opposite: the former intervention is now supported by 24%, the latter by a mere 9%.
On the other hand, the number of those who believe that the government's job is to guarantee the development of private businesses, grew from 8% to 14%, and the number of respondents who think it important to support the banking system, almost trebled from 4% to 11%.
The latest surveys suggest that the crisis has made many Russians question the effectiveness of the domestic model of state capitalism, doubt the increasing role of state corporations and reflect on the role of private businesses, explained Alexei Levinson, head of socio-cultural research at the Levada Center.
He said the economically active part of society is not satisfied with the official interpretations of the reasons for the global crunch. People are trying to think deeply and search for the underlying causes; they are no longer convinced the old paternalistic approach will help.
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