MOSCOW, November 21 (RIA Novosti) Russian government admits financial turmoil has become economic crisis / Tax amendments to keep economy from abyss / LUKoil may buy 30% stake in Spain's Repsol / Ukraine faces gas war again / Daimler reviews bid for Kamaz / Tbilisi, Saltsburg fuel passions over Sochi Olympics
Vedomosti, Kommersant, Gazeta.ru
Russian government admits financial turmoil has become economic crisis
Prime Minister Vladimir Putin became the main star at the 10th congress of the pro-Kremlin United Russia party. His speech on the struggle against the crisis should inspire a simple idea - the government would help simple people overcome financial problems without serious damage to their living standards.
The government has admitted that the financial turmoil has become an economic crisis. It has proposed cuts in profit tax to help companies weather the financial turmoil and increased social assistance to people.
Political analyst Alexei Makarkin said: "The government has taken a therapeutic decision. They need to show at the beginning of a crisis, which will last for an unspecified time, that the situation is not dramatic, that people need not withdraw their savings from bank accounts or stock up on food."
The promise to help everyone can be interpreted as Putin's intention to show that he controls the situation, Makarkin said.
Boris Titov, co-chairman of the new Pravoye Delo (Right Cause) party, described the prime minister's ideas as correct and liberal, but said he was not sure they were suited for the present period.
"These measures will be good for a post-crisis economy. They should have been taken long ago," he said. "I'm afraid it is too late for them now."
Titov does not think the defense enterprises should be given the 50 billion rubles ($1.8 billion) the government has promised them.
"Why support them at all, let alone issue such a huge sum?" he said. "Let them go bankrupt. The sector must prove its efficiency, whereas [additional] state allocations will be squandered or embezzled."
Political analyst Dmitry Badovsky said it was good the government had decided to move from fighting the crisis in word to doing it in deed. The elite and society discussed the possibility of a crisis in September. Then they debated the whether the crisis would affect the real sector. Now they are considering how soon it can be overcome. The political and administrative decisions mean they have found answers to most questions.
In fact, a second part of the presidential address, which everyone wanted to hear from Dmitry Medvedev, was made public at the United Russia congress, Badovsky said. It means that Putin has taken the political initiative and assumed responsibility. Badovsky said the move fit the logic of tandemocracy, with the president responsible for institutional decisions and the prime minister having more economic power.
Natalya Timakova, Medvedev's press secretary, said Putin's proposals had been coordinated with the president.
The audience did not seem to notice when the prime minister said they might consider "investing in the assets of foreign high-tech companies to promote mutually beneficial cooperation and economically justified transfer of production to Russia."
The government apparently thinks the crisis will cut the cost of foreign companies' assets in 2009, above all in the European Union, and is protecting the Russian economy for a future breakthrough.
However, Putin and other speakers did not elaborate on this issue.
Vedomosti
Tax amendments to keep economy from abyss
The global financial crisis has granted Russian businesses what they could only dream of before. In addition to a 175 billion ruble tax cut, the government has proposed another stimulus package which would enable businesses to save up to 550 billion rubles ($20 billion).
The content of the new tax package is dramatically different in concept. While until recently government support was mostly geared to large corporations or specific important industries, the tax amendments announced Thursday will benefit almost everyone, small businesses included.
In other words, these proposals envisage a systemic change and will probably keep the economy from sliding into an abyss - at least upon a few conditions.
The reform basically affects profit tax which will be cut by four percentage points, to 20%, on January 1. This alone will save companies about 400 billion rubles ($14.5 billion). It is important that the main cut affects the federal part of the tax, while regional governments are authorized to discount their corporate taxpayers another four percentage points. Therefore, companies operating in such regions will be able to pay profit tax at 16%.
Further on, companies will be allowed to pay profit tax on a cash basis rather than an accrual basis, which means they will no longer be forced to lend to the government at zero interest.
Faster amortization initially planned a year from now, will now be introduced on January 1 as well. The tax small businesses pay on the difference between their revenues and expenditures will be slashed to one-third of its former rate, to 5%.
Business leaders could hardly hide their excitement on Thursday, only wishing the schemes had been adopted earlier. The unproductive discussion of a VAT cut which has kept the government busy this whole year, has in fact delayed the cut in profit tax - a measure proposed by the Finance Ministry and recommended by the International Monetary Fund in the spring emphasizing that cutting direct taxes is more effective than indirect ones.
Will this new package be effective enough to help the country hold through the raging financial crisis? The answer to this question will depend on how long the global crisis persists.
If the global economy shows signs of revival by next summer, Russia will have a chance to go through this unscathed. Oil prices will grow to $60-$70 per barrel by that time, Russian borrowers will regain access to refinancing and the government will no longer have to use its reserves so fast, supporting ailing companies and banks.
RBC Daily
LUKoil may buy 30% stake in Spain's Repsol
Off-the-record reports suggest that LUKoil, Russia's largest independent crude producer, is negotiating the purchase of a stake in Repsol, Spain's largest private oil and gas company.
LUKoil wants to buy a 20% stake owned by Sacyr Vallehermoso, a leading Spanish construction company based in Madrid, and 9.9% from minority shareholders.
Another Repsol co-owner, Criteria CaixaCorp, an investment holding company controlled by Spanish savings bank La Caixa, said it was ready to sell its 14.3% stake in Repsol.
Analysts said the deal would cost LUKoil over $6 billion; but the Spanish government hopes to retain control over Repsol.
Sacyr has wanted to sell its Repsol stake for a long time, naming France's Total, Royal Dutch Shell and Russian energy giant Gazprom as possible buyers.
Last week, Gazprom spokesman Sergei Kupriyanov said the purchase would not take place as the company was not interested in such an investment because it could not receive a blocking stake in Repsol.
The Spanish Finance Ministry reacted negatively to a possible deal with Gazprom and called it inappropriate.
Repsol and the Spanish government hope to retain control over the company and to preserve its private, independent and national status.
Spanish Prime Minister Jose Luis Rodriguez-Zapatero said LUKoil could buy into Repsol, but that the company should retain its national status.
Troika Dialog analyst Valery Nesterov said the financial crisis facilitated large-scale property redistribution in Russia and elsewhere.
"Just like any other developing company, LUKoil is interested in cheap assets. But it is unclear whether the deal will be closed," Nesterov said.
Unlike Russian companies, foreign corporate capitalization has fallen by a relatively small margin; and such companies remain sufficiently expensive, said Nesterov.
He said LUKoil still had to buy an Italian refinery, and that it was unlikely to purchase a stake in Repsol.
Natalya Milchakova, chief analyst at the Otkrytiye financial corporation, said the deal could be closed, that the 30% stake would cost $6-6.2 billion, and that LUKoil's 2009 investment program could total $9 billion, including acquisitions and adjustment statements.
"Technically speaking, LUKoil could buy into Repsol if the price is right and if it has enough spare cash. In that case, the company would have to sacrifice its positive cash flows," Milchakova said.
Kommersant
Ukraine faces gas war again
Russian energy giant Gazprom is threatening to charge Ukraine more than $400 per 1,000 cu m of gas unless Naftogaz of Ukraine repays its $2.4 billion debt. President Dmitry Medvedev confirmed the seriousness of the monopoly's plans in no uncertain terms.
This time, Gazprom's steps are backed not only by political but also by economic reasons. The monopoly is expecting non-payments on the domestic market and a 1.5% reduction in its annual output, or the loss of $2 billion in net earnings.
Ukraine is refusing to accept Russia's demands.
Vladimir Trikolich, deputy head of Naftogaz of Ukraine, said his company's debt to the RosUkrEnergo trader (50% owned by Gazprom and the only supplier of gas to Ukraine) is "$1.26 billion to $1.27 billion give or take" for the gas supplied this year, and "owes nothing to Gazprom."
But Andrei Knurov, a spokesman for RosUkrEnergo, said there were a $300 million penalty for delayed gas payments and a $900 million outstanding debt for November deliveries.
According to sources familiar with the negotiations, early in the week Gazprom proposed that Naftogaz pay its $2.4 billion debt by crediting Gazprom's transit payments for 2009-2010, at the existing transit fee of $1.7 for pumping 1,000 cu m per 100 kilometers. But in this case Naftogaz's balance of payments, already in the red, would be deprived of a guaranteed source of revenue. Sources say the Ukrainians turned down the offer on Wednesday.
Analysts say that in the context of the financial crisis a gas war between Ukraine and Russia will have not only political background - Gazprom is trying to compensate for missing revenue.
Valery Nesterov from Troika Dialog said a drop in production due to reduced demand for gas in Russia and Europe will cut the planned $34.7 billion net profits by 6% to 7%. That is to say, Gazprom's net earnings will be $2 billion short of the target.
Nesterov added that demand for gas in Europe is now lower. "Europeans have filled their underground gasometers to capacity at lower prices (currently, $500 per 1,000 cu m) and their gas requirements are for a time below planned ones," the analyst said. Gazprom has already trimmed down its sales forecasts for countries outside the former Soviet Union from 166.8 billion cu m to 161 billion cu m.
In addition, the monopoly is facing non-payments. "Mezhregiongaz will have to work hard the next six months to collect the money," Valery Golubev, Gazprom deputy head, said early in the week. A source in Gazprom said money for gas was still coming in, but a number of large power, metals and cement plants said they would not be able to pay for gas at the end of November.
RBC Daily
Daimler reviews bid for Kamaz
The ongoing crisis has forced German automaker Daimler to cut its acquisition bid for Russian truck producer Kamaz to 10% from 42%.
Unable to pay $2 billion for the 42% stake, Daimler has decided to cut it to 10%.
The German concern, which has cut production and laid off workers, said it would buy the 10% stake in Kamaz only if the contract stipulated joint projects.
According to the Russian Technology Corporation, which holds a 34.4% stake in the truck producer, the crisis has affected both Daimler and the value of Kamaz shares, so the revision of the contract will suit both parties.
A 10% stake in the truck producer will allow Daimler to get a foothold on the Russian market. When the situation improves, the German concern may buy more Kamaz shares.
The form and value of the deal, and the size of the stake, are to be agreed by the end of November.
A source at Kamaz said Daimler had initially intended to increase its shareholding to a controlling stake, but the crisis made it change the offer so dramatically that Kamaz refused to discuss it. Now Daimler intends to buy a minor stake and later increase it to a blocking stake, and to discuss joint projects, notably the production of truck tractor units and light commercial vehicles.
Andreas Renschler, head of Daimler Trucks, said on Wednesday that the decision to buy into Kamaz would be made very soon.
Hit by the crisis, Daimler has announced plans to cancel additional shifts, laid off workers and prolonged Christmas holidays to four weeks. In the United States, where Daimler holds 30% of the market, it closed two Sterling Trucks plants and dismissed 3,500 workers.
Ivan Bonchev, head of the CIS automotive section at Ernst & Young, said the acquisition of the 10% stake in Kamaz would be profitable only if complemented with joint projects or other cooperation conditions.
"Kamaz needs modern technologies, but the terms of access to them are very important," Bonchev said.
Daimler AG engages in the development, manufacture, distribution and sale of passenger cars, trucks, vans and buses worldwide.
Gazeta.ru
Tbilisi, Saltsburg fuel passions over Sochi Olympics
Scandals involving the planned Sochi Olympics will probably flare up until its very opening. However, Russia's right to host the Olympics can only be revoked in case of nothing less than a revolution.
The occasional talk about whether or not Sochi should be taken off the 2014 project seems to be convenient to everyone. In the latest "soap opera," Gabi Burgstaller, the mayor of Saltsburg, a rival bidder to host the 2014 Winter Games, said her city was still happy to oblige if Sochi fails to complete the preparations on time.
The Georgian government seconded with enthusiasm, as it was a good pretext to remind the international community of their grudge.
Interestingly, Russia came up with a landslide of responses to these intones (which didn't even claim to be sensational). First, an array of officials and athletes, from the Russian Foreign Ministry's spokesman to renowned figure-skaters, thought it their duty to speak out in chorus. Second, their statements all boiled down to nothing.
It gave Russia a reason to show to public at home how inadequate Georgian officials are and how confident the Russian government is, and to encourage some national pride. Nothing is more encouraging to it than a threat that others might claim what the nation sees as its major victory. Better still if the claims are groundless and hopeless.
That Sochi's election to host the 2014 Olympics was taken as a national triumph achieved due to the recognized national leader is a historic fact. State Duma speaker Boris Gryzlov, who rarely produces precise definitions of anything, hit the mark by describing the emotion shared by most Russians as a sense of national triumph.
Local complaints of those whose houses faced demolition worked as a good backdrop, making the national triumph stand out even more clearly.
However, the emotion has somewhat faded with time, as is often the case with most strong emotions. Meanwhile, it is once more in demand today, during the hard time Russia is going through. Pride for Sochi is part of a reserve fund of patriotism, which we should use unsparingly now. Any possibility to do so, even the smallest, should be jumped on with the maximum result.
And then, who said there is a scandal? The Games have not been moved to another locality even when the Soviet Union and the United States boycotted the 1980 Moscow Games and the 1984 Summer Olympics in Los Angeles at the height of the Cold War. The 2014 Sochi Olympics can be moved to another location only if an asteroid destroys the Earth or in the unlikely case of a revolution.
In any event, given that critics of Sochi have no power to change anything, it's simply a must to cash in on it.
RIA Novosti is not responsible for the content of outside sources.
