MOSCOW, May 17 (RIA Novosti) Russian, Iranian leaders set for talks/ Russia-EU energy dialogue in trouble/ European versions of the Yukos affair/ The state, Gazprom and Rosneft/ Russia to invest in road building/ TNK-BP under the tax microscope/
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Nezavisimaya Gazeta
Putin, Ahmadinejad to negotiate in Shanghai amid Iranian nuclear crisis
Russian President Vladimir Putin is to meet his Iranian counterpart Mahmoud Ahmadinejad on June 15 at a regular summit of the Shanghai Cooperation Organization (SCO) in Shanghai one month before the G8 summit in St. Petersburg. Experts said Tehran is trying to use the traditional East-West divide to increase differences in opinion between permanent UN Security Council members over Iran's controversial nuclear program.
The SCO, initially known as the Shanghai Five, now comprises Russia, China, Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan. India, Pakistan, Iran and Mongolia have observer status.
This second meeting between Putin and Ahmadinejad since his election as President of the Islamic Republic of Iran may pose a challenge to the United States, which is demanding sanctions against Tehran for its refusal to halt its nuclear program.
Russian Foreign Minister Sergei Lavrov said on Tuesday that an invitation had already been sent to Ahmadinejad, the only leader of an SCO observer nation wishing to attend the Shanghai summit, although the six SCO members do not plan to admit new countries.
It appears that Moscow is employing Soviet diplomatic methods, ostensibly maintaining relations with radical leaders who are disliked in the West.
Sergei Karaganov, chairman of Russia's council on foreign and defense policy, said the international community could use Iran's observer status in the SCO and its subsequent membership to strike a bargain with Tehran.
Kommersant
Russia-EU energy dialogue damaged - ex-prime minister
In its energy relations with Russia, the European Union often employs a unilateral approach, ignoring Russian concerns, including those that are sensible and grounded, Russian former Prime Minister Mikhail Kasyanov wrote.
Because of this, Russia is forced to give priority to bilateral relations with individual European countries and national companies. This seriously devaluates the Russia-EU energy dialogue, making it subordinate to political bilateral relations, with their potential disadvantages, as is the case with the North European Gas Pipeline.
However, Russia has also failed to achieve success in its domestic and foreign energy policies, Kasyanov believes. Moreover, these policies have become dramatically worse in recent times, generating new problems. Gas sector reform has been tabooed, while the transformation of the power generation industry has stalled. As a result, these sectors will remain vertically integrated and state-controlled for a long time. However, he argues, liberalization and de-regulation are slowly but steadily progressing on European gas and electricity markets. This means that the Russian and European markets are moving further and further apart, rather than together.
One cause of concern is Russia's recent decision to limit foreigners' access to strategic industries, which has created an obstacle for energy companies' investment plans, Kasyanov said. Such restrictions are nothing new in global practice, provided they are transparent and clearly spelled out. But the situation in Russia is different.
This runs against national interests, because the energy sector badly needs investment to develop new fields, boost energy output, and supply it to markets, the former prime minister points out. Experts are sure that only urgent action can prevent a drop in Russia's gas production in the near future.
Vedomosti
Every European country has its "Yukos affair"
Anton Ivanov, chairman of Russia's Supreme Arbitration Court, said he was surprised not to be asked about Yukos during a recent visit to the United States. He said that a careful study of the history of tax planning in Europe showed that every country had its own "Yukos affair."
Some country had to be the first. When a similar case was initiated in the United Kingdom 15 years ago, the press complained that it spelled an end to offshore business. Since then, a new approach has been widely used by courts, and has led to changes in the practice of tax planning. A certain number of undesirable actions were set out, which no experienced consultants would recommend to their clients.
Before the Yukos saga, Russia was in a situation where any formally legal scheme was protected, even when it contradicted the economic essence of transactions.
The tax element of the Yukos case fits into the framework of European law. Those who think that the judges had no legal grounds for making the decision over Yukos are wrong. The case was bound to provoke a social outcry one way or another, because it reflects changes in the "social contract" between the state and business.
It is an established fact that the authorities in Yeltsin-led Russia closed their eyes to business using various gray schemes to avoid taxes which amounted to 95 kopecks per ruble. The social contract later changed; the authorities decided to lower taxes, while introducing harsher rules for their administration and collection.
All countries have had such a period in their tax history. It was always complex, because societies saw it as the end to free enterprise. This always happens at sharp turning points in history, when a state abandons some fundamental principles governing its relations with society.
Gazeta.ru
State balances between Gazprom and Rosneft
The Kremlin is thinking about keeping Rosneftegaz, which controls oil company Rosneft and 10% of natural gas monopoly Gazprom. Officials have been ordered to find a new goal for the company. Experts suggest that Rosneftegaz might become a third major player in Russia's state oil and gas sector.
Rosneftegaz is a subsidiary of the federal state unitary enterprise Tekhnopromexport. It was set up in November 2004 to carry out Rosneft's privatization, by first buying part of its authorized capital, and also to buy a stake in Gazprom, a necessary step for the government to obtain a controlling stake. However, Rosneft President Sergei Bogdanchikov, with the support of Igor Sechin, deputy head of the Kremlin administration, managed to defend the company's independence.
It seems that the Kremlin is still undecided whether to continue with Rosneft's initial public offering, or to stop at restructuring Rosneftegaz's debt. This provokes concern among analysts. "At present an important question is how Rosneftegaz will pay off its debt: by refinancing, or by using Rosneft's IPO. I believe that the latter is more probable," said Alexander Razuvayev, chief analyst at the MegaTrustOil financial company.
Observers say that it does not matter which state structure controls Rosneft and Gazprom: in any event, the main shareholder will be the government.
Perhaps the Kremlin hopes to use Rosneftegaz as a third power in the state oil and gas sector, which would enable a balancing between Gazprom and Rosneft. Apart from holding Rosneft's stock, Rosneftegaz's management formally has a huge influence on Gazprom, owning a stake without which state control over the gas monopoly would be impossible.
Experts say officials are interested in maintaining a stable political situation. "It is unlikely that competition between the two main power centers in the state-owned segment of the energy sector will escalate before the next election," said Dmitry Tsaregorodtsev, analyst with FIM Securities. "On the contrary, interested parties will try to maintain neutrality and to work together to ensure a Kremlin candidate's victory so that the new president will remain the existing bureaucratic stratum unchanged."
Novye Izvestia
Europe to invest in Russian roads
The European Bank for Reconstruction and Development has said it will double its investments in Russia over the next five years. The money will be spent on social infrastructure development. EBRD President Jean Lemierre said that since the Russian government cannot decide what to spend its petrodollars on, Europe will have to take care of Russia's roads.
Europe is set to double its monetary assistance to Russia from the current 1.1 bln euros to 2 bln euros by 2010. Experts say the sum includes credit support that will also grow by almost 3.3 bln euros.
Vladimir Salnikov, a leading expert with the Center for Macroeconomic Analysis and Short-Term Forecasting, a think-tank, said: "They have always had money. The West simply wants to show its approval of Russia on the eve of the G8 summit to be held in St. Petersburg, the more so as Russia-Europe relations have been tense since Gazprom's recent attacks on Europe. And bad relations cannot be allowed when we control the gas taps," he said.
According to Salnikov, Europeans will get no economic benefit from their "generosity" as such infrastructure investments are long-term and bring small returns.
Vladimir Kozlov, director of the Center for Studies of Sectoral Markets, clearly did not approve of the EBRD president's statement on the idleness of the Russian government, which allegedly redirects huge sums to the Stabilization Fund, without using it to develop infrastructure. "Of total government investment (350 billion rubles [$12.95 bln] in 2006), 140 billion rubles ($5.18 bln) was allocated for upgrading roads and transport," the expert said. "This is a large federal target program, comparable to the Defense Ministry's investments," he said. At the same time, Kozlov said only the closest cooperation between the government and businesses would help Russia to build good roads.
However, given the recent statement by Valery Dorgan, head of the Department of Roads in Central Russia, businesses have not so far considered investing in road construction, and instead tend to "build facilities near existing roads without paying a single kopeck for road maintenance." So, according to experts, EBRD's hopes for assistance from private companies to develop Russian infrastructure may not reach fruition.
Gazeta
Russian tax agencies scrutinize TNK-BP
Russian-British joint oil venture TNK-BP has set aside 35.1 billion rubles ($1.3 billion) to meet back-tax claims that may be presented after authorities finish inspecting its subsidiaries' operations during 2002 and 2003. Experts have recommended that the company also start preparing to meet tax claims for 2004 and 2005.
The conclusions of tax inspections into the operations of the Tyumen Oil Company (TNK) and Sidanko in 2002 and 2003 have been sent to TNK-BP as the companies' legal successor.
Ivan Gogolev, the PR spokesman of TNK-BP, said the initiative to create a reserve fund proceeded from the company's international practice. "This is a standard procedure for dealing with local tax agencies," he said.
Gogolev said the reserved sum was the top ceiling expected for back-tax claims. "We even hope to have some money left over. The size of the fund was calculated to meet maximum claims, and will remain unchanged until payment time," he said.
The reserve fund is only intended for back-tax payments, but analysts say TNK-BP should also create a fund for future claims, as the tax authorities are closely scrutinizing its operations.
"TNK-BP stands out among Russia's natural resource companies, possibly because it has a large share of foreign capital," said Alexander Blokhin, an analyst with investment company Antanta Capital. "All other companies are loyal to the authorities, and are therefore left alone. For this reason, they do not need to create such reserve funds."
TNK-BP was created in 2003. Half of it belongs to British Petroleum, and the other half to Alfa Group (one of Russia's largest privately owned financial-industrial conglomerates) and a consortium of Access Industries and Renova.
In 2005, it produced 75.35 million tons (553.82 million bbl) of crude; net profit according to Russian Accounting Standards was 59.3 billion rubles (more than $2 billion) during the year, and revenues totaled 702.65 billion rubles ($26 billion).
