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MOSCOW, September 1 (RIA Novosti) Putin's "democratic views" harm Russian democrats / Airplane crash revives project to merge Russian air carriers / Fighter production contract amended / Russian shipbuilding to focus on hydrocarbon shipping / Vneshtorgbank gets rid of non-core asset

(RIA Novosti does not accept responsibility for the articles in the press)

Nezavisimaya Gazeta

Putin's "democratic views" harm Russian democrats

Russia's democratic forces are the only side protesting against the Kremlin's authoritarian tilt, and hoping that plans to install a successor will fail. However, the hopes of the opposition may lie in President Vladimir Putin's decision to run for a third term, as this will help voters to see the link between the country's problems and their true cause, said Vladislav Inozemtsev, director of the Center of Post-Industrial Society Studies.
Analyses of trends in the Russian economy and social sphere show that the country will face a hard time after 2008. The balance of exports and imports is changing fast, and even with moderately favorable conditions, the trade balance could be reversed by 2009-2010, he said.
Budget spending, however, continues to grow at the same pace, so even the current oil price of $75 per barrel will not be enough for government officials in 2009. In three or four years, it will be clear that the so-called national projects and other extremely expensive initiatives are nothing but PR and do not help to improve people's prosperity. Finally, the current foreign policy, if continued, will escalate the confrontation with the United States and Europe, while the prospects of an alliance with China are far less attractive than they are presented as being, Inozemtsev said.
All these results will be brought about by Putin's policies, but it is very likely that the blame will be dumped on the political suicide whom he will handpick as his successor. In 2012, the failed successor will again be replaced by Putin the "savior of the nation". There could be nothing more disorienting for the public than this scenario, the expert said. So it would be more useful for Russian democrats and Russian democracy if Putin decided to keep his power, instead of choosing a Kremlin official to succeed him.
Only if the man who is fully responsible for the current political and economic course remains in office in 2008-2012 will the inadequacy and destructiveness of this course become evident, Inozemtsev said. Otherwise, there will be fewer chances that policies will be adjusted and more reasons to develop a personality cult, and the new Russia will not be a democracy for many years to come.

Gazeta.ru

Airplane crash revives project to merge Russian air carriers

Russia has too many airlines, and that affects flight safety, according to Prime Minister Mikhail Fradkov. AirUnion, which includes several Russian airlines, got the message and proposed a merger of all air carriers into a state alliance, offering, in exchange, to buy 50 of the new RRJ planes being developed by Sukhoi.
Under the proposal, AirUnion will include the state-owned shares in Krasnoryark Airlines (51%), Domodedovo Airlines (50.04%) and Samara (46.5%), as well as Omskavia, Sibaviatrans and AirUnion-RRJ, which is being set up.
Experts estimate the project to develop the new airplanes, the Sukhoi Superjet 100 (RRJ), will cost $920 million. The cost of one RRJ will be about $25 million.
The idea to merge all airlines into one company has its advantages, industry experts said. The issue has been discussed for over 10 years, however, and the recent surge in interest is mainly the result of the Tu-154 crash near Donetsk, Ukraine. So it is too early to say whether or not any real steps will be taken in that direction.
"A merger of air carriers will allow the setting up of a single holding that will have greater access to loans, and consequently, will allow it to modernize its fleet," analyst Vladimir Karnozov said.
"It will also help to optimize routes," he said. "However, these plans have been discussed since the mid-1990s, and there has been almost no progress. Ten years ago we had 330 companies, now we have 270. At the same time, only about 50 are engaged in regular flights."
AirUnion's proposal to merge the industry in exchange for the purchase of new aircraft is its attempt to find a place in the sun and using the RRJ project to do so, analysts said.
"AirUnion's statement is shocking," Karnozov said. "How can you link the choice of a model with how the market will be influenced? Choice should be based on other factors, such as quality."
Talks between the AirUnion and the government can take place, he said, but such public statements can only provoke an extremely negative response from the international community.

Kommersant

Fighter production contract amended

Russia's state arms exporter Rosoboronexport and the Indian Defense Ministry have revised the deadline for fulfilling a major military-technical contract for the assembly of 140 Sukhoi Su-30-MKI Flanker heavy-duty fighters on a Russian license.
This contract will be completed three years ahead of schedule, and India will not relocate fighter production to Hindustan Aeronautics Ltd. enterprises.
Indian officials said relocation would double production costs, and the new plan will enable Russian companies to earn an extra $350 million.
The $3.5-billion Su-30-MKI contract was signed in December 2000. Irkut, a leading Russian aircraft manufacturer and the main contractor, was to have supplied Su-30-MKI kits and organized their assembly at HAL enterprises by 2017. India has received 26 kits to date.
Irkut's partners said the contract may be fulfilled by 2012. Irkut officials confirmed that contract deadlines had been changed on Thursday, but declined to comment on the reasons for this.
A source inside the Russian aircraft industry said the Indian Defense Ministry wants to fulfil this contract as soon as possible, so that it does not interfere with the purchase of another 126 medium-range fighters. "New Delhi has already announced a tender," the source told the paper. A report by an Indian government control and auditing department said production of Su-30-MKIs in India would cost double their imports. The report said the Indian Air Force would then have to spend $8.71 billion on these warplanes.
Independent experts said the decision to expedite the contract's fulfillment is motivated by New Delhi's plans to enhance the combat potential of its Air Force.
Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies, said it is high time that India upgrade the Su-30-MKI, developed in 1996. "Moreover, Pakistan and China, which are India's adversaries, are implementing active rearmament programs," Makiyenko told the paper.
Under the initial contract, Russia was to have supplied 10-15% of Su-30-MKI components. A source inside the Russian aircraft industry said India would cut expenses because it would not have to buy expensive equipment and production rigging for building Su-30-MKIs at HAL plants.
Russian contractors said this would help them earn about 10% of the initial contract price, or $350 million.

Vedomosti

Russian shipbuilding to focus on hydrocarbon shipping

To elevate its shipbuilding industry to world levels, the Russian government will not consider $10 billion to be excessive. Drafted by the Industry and Energy Ministry, a plan for the development of civilian shipbuilding provides for refitting old shipyards and building new ones, and the construction of gas carriers, offshore drilling platforms, and river craft. A niche set aside for vessels to carry liquefied natural gas (LNG) for export is seen as promising.
In total deadweight ordered, the Russian industry in 2005 accounted for 0.6% of orders placed by world leaders - Japan, South Korea, and China. Vietnam moved ahead of Russian shipbuilders, Iran has moved further ahead, and Turkey has overtaken Russia. "In its present condition Russian shipbuilding is incapable not only of occupying a worthy place on the world market, but even of keeping domestic markets," officials say.
It is proposed, therefore, to divide shipyards into three groups. The first will cater for the defense sector and fulfill defense orders and foreign contracts. The second will operate on markets of military and civilian orders, but within each enterprise there will be two yards, differing in terms of business organization, technology, and market behavior. The third will enter the world market of commercial shipbuilding and function in a highly competitive environment.
A promising niche exists for ships carrying liquefied natural gas (LNG) for export. There are currently no shipyards building gas-carriers in Russia, and for the project to be a success energy giant Gazprom (an LNG cargo owner), Sovkomflot (a ship-ordering customer) and a yard for making gas carriers should form an alliance.
While Japan and South Korea are focusing on large-volume gas-carriers, Russia could manufacture shuttle-type tankers which "no one has yet seriously undertaken to build," said Sergei Frank, Sovkomflot general director.
"This is Russia's niche," said Valery Levchenko, Baltiisky shipyard general director. If the state puts emphasis on LNG transport, it can invest in the expansion of our capacities, he said.
Konstantin Makiyenko, analyst of the Center for Analysis of Strategies and Technologies, does not consider it necessary to create an alliance with foreigners to build gas carriers - it is enough to buy manufacturing licenses. "If they sold one to Iran, then we too can reach an agreement at government level."

Biznes

Vneshtorgbank gets rid of non-core asset

AFK Sistema has bought stakes in Perm Motors Holding companies from Vneshtorgbank 24, and is planning an overhaul of its assets to ensure that they correspond to its development strategy. Market players wonder why Sistema needs these assets, while banking specialists say Vneshtorgbank is putting its books in order before making an IPO early next year.
Sistema considers the deal to be financially attractive, but has not disclosed the sum involved, citing the need to finalize it technically. A source close to the deal said it was clinched at a price way below the estimated value of the assets. But he, too, declined to name the exact figure. The assets had been previously evaluated at about $330-340 million, with market debt at $201 million.
Market players are surprised above all because the Perm engineering plant is a problematic asset. Aviation business makes up only 40% of all its orders. Orders for aero engines keep falling. Gazprom is also trimming down its purchases from the enterprise. While in 2004 it bought about 50 gas turbine units from Perm, in 2005 the figure was down to 25.
Perhaps if Gazprom steps up its production, the plant will not be left without orders, but this will not improve things drastically. Gennady Sukhanov, an analyst with Troika Dialog brokerage, said its technical backwardness might prevent Perm from participating in such projects as supplying turbines for Silovye Mashiny's combined-cycle plants. And this is a promising market, considering the amount of construction and modernization planned at thermal power stations by electricity monopoly Unified Energy System.
"It is hard to guess why Sistema requires Perm Motors," said Sukhanov. "Development of a new modern engine calls for about $1 billion in investment, plus the high cost of licensed technologies."
"Vneshtorgbank is cleaning up its books before an IPO scheduled for the first quarter of 2007," said a source in the banking community familiar with the bank's plans. "In fact, AFK Sistema becomes a nominal holder until a core buyer is found."

 

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