What the Russian papers say


MOSCOW, December 3 (RIA Novosti)
NATO dismisses Tbilisi, Kiev resumes dialogue with Moscow/Rescuer of Russian companies turns to government for help/Luxury retailers cut purchases to weather crisis/Government, monopolies dictate prices in Russia

Vremya Novostei

NATO dismisses Tbilisi, Kiev resumes dialogue with Moscow

In Brussels, Ukrainian and Georgian representatives did not receive entry to the much-desired Membership Action Plan from NATO foreign ministers, but only a promise to admit them in the future once they meet NATO standards. At the same time, NATO ministers agreed to resume contacts with Russia, which were suspended on August 19 over a conflict with Georgia over South Ossetia.
The August conflict soured relations between Russia and NATO, but its side effects were the realization by the West of the possible negative consequences of a quick acceptance of Georgia and Ukraine into the alliance.
"Europe needs Russian gas, not battles on the side of Ukraine and Georgia," Alexander Khramchikhin, head of analysis at the Institute of Political and Military Analysis, told Vremya Novostei. In his opinion, "the alliance has been steadily disarming itself ever since the Cold War ended, and has drastically cut its armed forces in all countries with the exception of Greece and Turkey." The main factor now is "all-European pacifism, which excludes all wars, especially against Russia."
In the analyst's view, "Former Soviet territories still perceive NATO as a powerful, united military force, although it ceased to be one a long time ago." While some countries fear NATO, others, on the contrary, based on Soviet stereotypes, seek protection by the "all-powerful" bloc.
Khramchikhin said that Ukraine and Georgia "appear to believe that the alliance is commanded by the United States." "But moves by the outgoing U.S. administration no longer matter," the analyst said. "In addition, all NATO decisions are made by agreement, as required by its charter."


Rescuer of Russian companies turns to government for help

Russia's National Bank for Development, known in Russian as Vnesheconombank, or VEB, the instrument of state support to ailing companies during the financial crisis, has requested further funding of 950 billion rubles ($33.9 billion) from Prime Minister Vladimir Putin. A report on the request will be submitted to the prime minister by December 6.
VEB's share capital is 262.5 billion rubles ($9.4 billion), while until recently investment projects totaled a mere 180 billion rubles, however, in the past few months, the state corporation has been turned into a life buoy for the country's struggling stock market and companies amid the crisis.
The bank's share capital was increased in November with 75 billion rubles ($2.7 billion) from the government for economic measures to support the financial sector. This is not all: VEB has direct access to the 450 billion rubles and $50 billion in Russia's international reserves allocated to support companies and their owners hit by the crisis, and another 175 billion rubles to support Russia's stock market.
However, it looks like dealing with the crisis has drained VEB's own strength. Cash injections into other banks have shrunk its own capital, as have stock market transactions involving the revaluation of securities portfolio, said Kirill Parfenov, president of the Banking Accountants Club, who described VEB's request as "relevant."
Neither Chairman Vladimir Dmitriyev nor the bank's spokesmen could explain the figure of 950 billion. However, VEB said it was not insisting on receipt of the entire amount in cash, but could accept part of it as state guarantees," Dmitriyev said.
Russia's international reserves total $449.9 billion, which means VEB had asked for over 7.5% of the country's gold and foreign currency. Theoretically, cash could be drawn from the National Welfare Fund which currently contains over 3.6 trillion rubles ($128.5 billion), according to a Finance Ministry source.
Another Ministry official said VEB's request was too high and it was unclear which source should be used. He added that the reserve fund would be used unsparingly to cover the federal budget deficit which would arise from tax reforms announced by Putin and an impending budget recalculation.


Luxury retailers cut purchases to weather crisis

Retailers working in the luxury goods market are adjusting their plans amid the financial crisis. Retailers plan to cut purchases of new designer underwear and clothing by 30% next year as they expect Bentley and Ferrari sales to drop.
Analysts predict that in the best case scenario Russia's luxury market will grow by a mere 2%-3% next year.
Fashion Consulting Group, Russia's premier provide of market research, consulting and professional client services to the fashion, retail and manufacturing industries, said luxury goods sales worth $38-$45 billion, made up as much as 15% of the clothing and accessories market. Luxury goods sales had up until 2007 grown by 10%-15% annually.
In a attempt to reduce the negative consequences of falling demand, the Wild Orchid women's underwear retailer, which has an average cost of $400-$500 per item, has sold its foreign subsidiary, which owned two shops in London and one in Italy's Forte dei Marmi, one of the most popular Tyrrhenian resorts.
Alexander Fyodorov, the retailer's main owner, said it had also put on hold the opening of some 100 new shops. "Our plan is to survive," the businessman said.
Eduard Kitsenko, a co-owner of Podium, a Russian fashion chain, said: "In the past, buyers bought as many items as they wanted, but now they are mostly buying just one."
Even the richest Russians are cutting spending. Ilya Berezin, head of the auto division of the Mercury Group, the official dealer for Ferrari, Lamborghini, Bentley and Bugatti, said orders for next year were down approximately 20%.
Orders for Bentley and standard Ferrari models have plunged significantly, Berezin said. They sold 230 Bentleys in 2007, only 180 in 2008 (the fall began in August), and expect to sell as many, or even fewer in 2009.


Government, monopolies dictate prices in Russia

Foreigners arriving in Moscow are surprised because local prices are continuing to skyrocket despite the global financial crisis. This is rather unusual because consumer prices in the West are dropping together with plunging oil prices.
Prices have been falling in the United States since August 2008. Inflation in the European Union has subsided from 3.7% to 2.3% since November 2008.
However, prices in Russia continue to skyrocket despite all the economic factors.
In January-September 2008, nationwide inflation reached 10.6%, an all-time high in the last six years. Central Bank chairman Sergei Ignatyev said annual inflation would reach 13-14% by late November.
The adjusted 2009 economic development forecast prepared by the Economic Development and Finance ministries has predicted prices to continue to skyrocket next year.
The basic scenario states oil prices of $50 per barrel and price hikes of 12.5%, with pessimistic scenario stating price hike could be 15%.
Pricing policies in many economic sectors, including the fuel market, are distorted by monopolies or the government.
Global oil prices have plunged nearly threefold since July. In early December, a liter of gasoline cost 14 rubles (50 cents) in the United States and over 20 rubles (70 cents) in Moscow.
Due to an extremely monopolized market and high taxes, nationwide wholesale and retail petroleum prices are falling by 7-10% and 1-1.5% per week, respectively.
The state is doing a lot to whip up inflation. Natural monopolies are due to raise their tariffs next year. Despite the need to support domestic industries, state-regulated prices will continue to grow and will cause greater outlays.
In 2009, wholesale gas and electricity prices are due to rise by 19.6% and 26%, respectively, while retail prices soar by 30-40%.
The government did not cut back on state spending, the main inflation factor, despite the ongoing crisis. Inflation is also fueled by the decision by Russian monetary authorities to weaken the ruble and by traditional popular distrust toward banks.
Economists say the crisis will eventually curb nationwide inflation, which would soar next year otherwise. Still this is not very encouraging news, all the more so as local wages have now been frozen.

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