MOSCOW, December 1 (RIA Novosti) Russia, Belarus in new dispute / Magna to expand operations in Russia / Government driving Russia into resources impasse / Weak trade unions suit business, but might hit back in a crisis
Russia, Belarus in new dispute
A meeting of the supreme state council of the Russia-Belarus Union State scheduled for today has been cancelled, although Belarusian President Alexander Lukashenko was expected to arrive in Moscow to attend.
The planned signing of a Russia-Belarus agreement on a unified antimissile defense system was also suspended.
The state council meeting has been derailed for a second time. Initially, it was scheduled for November 3, but was postponed after a Russian President Dmitry Medvedev met with his Belarusian counterpart a week before that, on October 25. The Kremlin press office then said the council meeting was being delayed, without giving reasons.
This time around, officials in both Russia and Belarus hinted in the runup to the meeting that it was going to be a "breakthrough in the history of the Union State."
However, Ivan Makushok, spokesman for Union State Secretary Pavel Borodin, said yesterday: "One of the sides brought up a series of important issues for discussion, requiring additional coordination. Therefore, the state council meeting will have to be moved to a later date."
Russian Ambassador to Belarus Alexander Surikov reminded the Belarusian authorities last week about their earlier commitment to recognize Abkhazia and South Ossetia as independent states. The statement was made after Russia transferred $1 billion to Belarus, half of the $ 2billion loan Moscow had agreed to extend.
According to Kommersant's information, Russia agreed to provide the financing upon Lukashenko's verbal commitment to support Russia and recognize the two republics' independence.
However, the Belarusian leader has indicated that he was not planning to heed Moscow's opinion. "If we make some decision on Abkhazia and South Ossetia, it will be our own decision, not made under Moscow's pressure," he said late last week in an interview with the news agency AFP.
This is probably the reason why the Kremlin is reluctant to welcome the Belarusian president. "All plans have been cancelled. No state council, no visit," Kommersant's Kremlin sources said briefly.
Magna to expand operations in Russia
Magna International Inc., Canada's largest automobile parts manufacturer, plans to open two production facilities in St. Petersburg and in Kaluga, a city to the southwest of Moscow.
The company has leased 12,000 square-meters of floorspace at the premises of the St. Petersburg nuclear power plant components manufacturer Izhorskiye Zavody and plans to launch production there, pending construction of its own plant in Shushary outside the city.
The plant's first stage will cost an estimated $60 million to build. In early 2009, Magna is set to supply the first components to automotive giant Ford Motor and other foreign carmakers operating in St. Petersburg.
Analysts said the lease contract would annually cost Magna 1.2-1.6 million euros, but that the expenses were justified because the company needed a bridgehead before commissioning the main production facility.
Sergei Bodrunov, president at the St. Petersburg Association of Auto-Component Manufacturers, said Magna had hurried to carve out its own market niche ahead of other rivals.
Magna plans to sign a contract for building a plastic components plant in the Kaluga Region in the near future, a regional administration official said.
He said the project was worth several dozen million euros, and that the plant would start making components for German automotive giant Volkswagen next year. Andrei Gordasevich, the press manager at Volkswagen Group Rus, said the company had signed a cooperation contract with Magna.
The Russian automobile market, still one of the world's largest, will post 15-20% growth in 2008, while car sales in Europe and the United States will plunge by 15%, Yevgeny Bogdanov, head of Moscow office of A.T. Kearney, a global strategic management consulting firm, said.
Magna recently said it expected North American and European car output to dwindle from 15.1 million and 15.8 million cars, respectively, in 2007 to 12.8 million and 14.9 million this year.
Bogdanov said auto-component manufacturers, including Magna, needed to stake a claim in Russia where car sales are expected to increase starting with 2010.
Government driving Russia into resources impasse
By sharply raising tariffs for the services rendered by natural monopolies in 2009, the government is cynically ignoring the interests of industry, ordinary people and the country as a whole. The authorities are still focusing on the development of Russia as a natural resources supplier to the rest of the world.
Arkady Dvorkovich, a presidential economic aide, has promised that the authorities will find ways to compensate individual branches for the growth of tariffs. But such an approach does not make anybody happy.
Firstly, branches slated for compensation will be picked out by administrative methods, and it is not certain that the choice will fall on the most promising ones in terms of stability in crisis conditions and producing goods with high added value. Most likely the opposite will be the case.
Secondly, if tariffs were not raised so drastically and, ideally, frozen for a time, there would be no need to save the branches from collapse due to their inability to pay the increased tariffs.
And this at a time when most companies described as natural monopolies reported many-billion profits for the first nine months of the year. In January-September, for example, Gazprom's profits went up by 120% year-on-year.
The monopolies have large quantities of non-core assets on their books - from fashionable hotels and sanitariums to sports clubs that need tens of millions of dollars in annual infusions. But they are in no hurry to shed them, because the tariffs they raise every year make other enterprises and the population pay these expenses indirectly (through tariffs).
Higher rates can always be justified by the need to invest in development (as Prime Minister Vladimir Putin said recently) in order for the country to be able as before to produce resources required by the world and live on the returns from their sales. In such an economy, other sectors that need to fight for markets against rivals can be sacrificed, it appears.
Weak trade unions suit business, but might hit back in a crisis
The credit crisis is the right time for the trade unions to stage a comeback. But luckily for many businessmen, workers' associations in Russia are survivals of the Soviet era and are not unions in the real sense of the word.
Lame unions save enterprises unnecessary trouble, while over-aggressive ones (such as United Auto Workers in the United States) can bankrupt a whole industry. But bad as unions are, it is even worse without them: in emergency situations when there are no union rules to observe, people simply begin destroying the "exploiters."
In Russia, according to findings of the VTsIOM public opinion agency, 64% of those who said they had a trade union at their office or enterprise do not believe it helps the living standards of their staff; and only 11% hold the opposite view. Since 2005, these figures have changed little (70% and 16%, respectively). In France, 66% point to the strength and influence of their trade unions, and only 12% believe them to be weak.
The membership of the Russian Federation of Independent Trade Unions (FNPR), the successor to the Soviet-era AUCCTU (All-Union Central Council of Trade Unions), is still high (28 million), but is shrinking. Active independent union groups (1.5 million members) are on the rise, but will not alter the general picture for a long time. Besides, heads of both private enterprises and state corporations have often pursued and fired trade union activists who upheld workers' rights.
When wages kept rising, the weakness of Russia's trade union movement was not noticeable. The economic crisis is threatening layoffs, wage cuts and a shorter working week. But at a recent general council meeting, the FNPR leadership only paid lip service to urgent help for the real economy, observance of workers' rights, and cuts in migrant quotas.
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