What the Russian papers say

MOSCOW, September 6 (RIA Novosti)

Novye Izvestia/Nezavisimaya Gazeta

Potential U.S. base in Turkmenistan alarming for Russia - expert

The United States may soon transfer a military base from Uzbekistan to Turkmenistan. Experts interviewed by two popular Russian dailies said that Russia could both benefit and suffer from this move.

According to Novye Izvestia and Nezavisimaya Gazeta, observers said that the United States' military presence in Turkmenistan was part of preparations to attack Iran. Once in Turkmenistan, the U.S. will close the ring around Iran, as it already has bases in all the other countries bordering on Iran.

However, the U.S. military base in Turkmenistan will also affect Russia's interests, the chairman of Russia's Islamic Committee, Geidar Dzhemal, said. Firstly, nearly all the Central Asian republics will find themselves under U.S. control. Secondly, Russia will lose Iran, its ally in the region.

"A U.S. strike at Iran is inevitable, and it is being planned for the near future," Dzhemal told Novye Izvestia. This will badly affect Russia in economic terms too, as a U.S. attack on Iran will damage the entire region's infrastructure, and Russia will have to deal with an influx of refugees.

Moreover, all the major oil reserves that Iran exports to Europe will be seized by the United States.

Nezavisimaya Gazeta quoted Colonel Anatoly Tsyganok, the head of Russia's Center for Military Forecasting, as saying that Uzbek President Islam Karimov could even be ready to pay the United States $100-300 million to withdraw its troops from the Khanabad air base in the country immediately.

The expert said: "The Shanghai Cooperation Organization [Russia, China, Uzbekistan, Kazakhstan, Kyrgyzstan, and Tajikistan] might take on the Khanabad air base after the U.S. leaves, and deploy its own joint air group under the pretext of anti-terrorist efforts in Central Asia."

Tsyganok also said that Uzbekistan did not have the money for the purpose. Therefore, only SCO members, most likely Russia and China, would be able to sponsor the project. Tsyganok said Moscow would hardly miss the chance to seize the Uzbek air base ahead of other countries.

Izvestia

Putin's social initiatives will cost hundreds of billions - paper

President Vladimir Putin instructed the government to solve many social issues in the next three years, a respected daily reports Tuesday.

Izvestia writes that the government would have to find money to raise the wages of doctors, teachers, scientists, teachers and soldiers, to triple housing construction and connect schools to the Internet.

According to the paper, the Finance Ministry immediately reported that the budget had about 100 billion rubles ($3.5 billion) to implement the president's social initiatives. However, the majority of experts said this money would not be enough even to cover wage raises and education spending.

Igor Nikolayev, senior strategic analyst with FBK, an audit and financial consultancy, said higher public sector wages would require 400 billion rubles (about $14 billion) from the federal budget.

Yaroslav Kuzminov, the head of the Moscow-based Higher School of Economics, said budget allocations for education would have to be increased from 3.2% of GDP to 4.5% to achieve at least the Soviet education levels. According to the Higher School of Economics, at least 140 billion rubles (almost $5 billion) need to be spent on education.

One of the most expensive social initiatives of the president is budget support for the mortgage program.

Alexander Borodai, the deputy chairman of the public council of the minister of regional development, said apart from in a mere four or five cities, no mortgage support program was in operation in Russia. "Nobody can say today how much mortgage support will cost the federal budget," he said.

The State Committee for Construction and Housing (Gosstroi) said new housing worth $15 billion had been commissioned in Russia in 2004. Therefore, tripling housing construction would cost at least another $5 billion, the newspaper wrote.

Yevgeny Gavrilenkov, the senior economist with Troika Dialog, a brokerage and investment company, said in turn that the president's initiatives were well within the 2006 draft budget and therefore would have no extraordinary macroeconomic effect. However, he added that budget expenditures would be 22% higher in 2006 anyway. "But the economy will be unable to keep up with this pace," Gavrilenkov said. Consequently, inflation will exceed the government forecasts [of 7-8.5%] and hit 10-11% next year, he told Izvestia.

Vedomosti

Gazprom's capitalization tops $100 billion

A company with a market value of over $100 billion has emerged in Russia for the first time. But in a few years' time, Gazprom, Russia's natural gas monopoly, will be worth more than double that figure, Vedomosti, a respected business daily, says Tuesday.

"This is a huge capitalization, and not only by Russian standards," said Alex Kantarovich, an analyst with Aton Capital, a Russian brokerage. "Anything worth more than $10 billion is considered big business all over the world, and Gazprom is worth ten times that," Kantarovich said.

Sergei Suverov, head of market analysis at Gazprombank, a subsidiary of the monopoly, said this symbolic figure made Gazprom a heavyweight.

Investors are happy the concern plans to list its shares on the New York Stock Exchange within two to three years after liberalizing its shares, said Maxim Shein, head of analysis at Brokerkreditservis, a Moscow-based financial company. They are also pleased with the news that Russia has started supplying liquefied natural gas to the United States.

Vedomosti produced the capitalization of other natural gas and oil giants for the sake of comparison: China National Petroleum Corporation came in at $143.8 billion, France's Total at $161.3 billion; and Britain's BP at $246.3 billion. The Russian monopoly wants to compete with these companies in the next five years. Last week, chief executive Alexei Miller said that in five years the concern's capitalization could rise to 200 billion euros at the current exchange rates, and even more if given favorable conditions.

These plans do not seem extraordinary to experts. "With such prices for the resources, the coming liberalization [of the equity market] and a normal listing, Gazprom's share potential is enormous," Kantarovich said. "And if, moreover, the company becomes shareholder-friendly, its capitalization may soar several-fold."

Nearly every Russian company has been rapidly appreciating recently. Their capitalization, as estimated by the UralSib financial group, has reached $370 billion against $240 billion earlier in the year. With Gazprom factored out, public companies in Russia have grown by over $90 billion in value in the first eight months of this year.

Kommersant

Moscow and Berlin lay new gas route

E.ON AG, the world's biggest private energy and gas concern, will get a 24.5% stake in the authorized capital of a joint venture set up to build the North European Gas Pipeline but will not be involved in the development of the Yuzhno-Russkoye natural gas field, a leading Russian business daily reports Tuesday.

Kommersant writes that Gazprom chief executive Alexei Miller, the Chairman and CEO of E.ON, Dr. Wulf Bernotat, and the chairman of oil producer BASF Wintershall, Jurgen Hambrecht, would sign an agreement on the terms of financing the pipeline on September 8, during Russian President Vladimir Putin's visit to Germany. A source close to the talks said a joint venture would be set up within months through the establishment of authorized capital. Gazprom will provide 51% and E.ON and BASF, 24.5% each.

According to the paper, the pipeline, which will cover 1,187 kilometers (about 750 miles) and cost $5.7 billion, will be laid to Europe along the bottom of the Baltic Sea. First discussed in 1997, the idea was as an alternative natural gas route to Germany, Scandinavia and Britain. Its design capacity will be up to 55 billion cubic meters a year.

Until yesterday, Gazprom had only one strategic partner in the project. In April, it signed a package agreement on the transfer of a 49% stake in the venture to BASF Wintershall. It also stipulated the exchange of 15% of Wingas (a subsidiary of BASF) shares for a 50% stake Severneftegazprom, a regional oil company in Russia that holds the development license for the Yuzhno-Russkoye deposit in Western Siberia. Located on Yamal Peninsula in the north of western Siberia, it has reserves of 700 billion cubic meters of gas and will be the main provider for the European pipeline. In return, Gazprom is to get access to the end users in Germany and a share in BASF energy projects, the paper said.

That agreement spurred E.ON to action. The above source said that no other foreign company could hope to participate in the project now.

E.ON's participation in the development of Yuzhno-Russkoye is not stipulated in the agreement, which means that Gazprom has not received everything it wanted and talks will continue. A source close to Gazprom's management said E.ON would not be allowed to dip into the pipeline's raw materials base, the paper said.

Vremya Novostei

Russian Railways to review project with Siemens

Russian Railways (RZD), Russia's railroad monopoly, is currently reviewing a joint project with Siemens to build a fast rail link between Moscow and St. Petersburg, a popular daily reports Tuesday.

According to Vremya Novostei, a contract signed by Gennady Fadeyev, the former RZD president, on April 11, 2005 in Hanover with Siemens said high-speed trains would be built in Russia under German engineering supervision using Russian components. The new RZD president, Vladimir Yakunin, said he had had to suspend the project in its original form. "We expect to implement the program without billions [of rubles] in loans," he said.

The cost of bullet trains alone (RZD planned to purchase up to 60 of them) was estimated at 1.5 billion euros. At first, the trains were to carry passengers at speeds up to 300 km/hr (186 mph) on the Moscow-St. Petersburg-Helsinki line. The first train was scheduled to be ready in December 2007.

The share of Russian components in a completed train was to increase proportionately from 30% in 2007-2008 to 40-45% in 2010 and 70% in 2015.

To implement the project, Siemens set up a joint venture with Transmashholding, the owner of the Demikhovo rolling stock producer. RZD held loan talks with the European Bank for Reconstruction and Development (EBRD) to develop infrastructure. The company also looked for state support in the form of preferential customs duties on imported equipment and components.

Siemens was to have drafted a preliminary design by the end of September, but the deadline has been extended, the paper said.

Significantly though, Yakunin said in June: "It cannot legally be possible for one chief to sign the contract and another to cancel it."