MOSCOW, September 8 (RIA Novosti) Russia, Morocco to exchange missiles for oranges/ Abramovich set to establish largest Russian metallurgical holding/ LUKoil eyes Asian market/ Statoil, Total join Shtokman project/ Power market goes liberal, fails to interest foreign investors
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Vedomosti
Russian President Vladimir Putin discussed economic issues with Moroccan King Mohammed VI. Russia, which receives Moroccan oranges in exchange for metals and crude oil, will now supply weapons. Experts said they would not affect arms deals with Algeria, Morocco's long-time adversary.
Soviet-African cooperation hinged on ideological and geopolitical principles, but Putin said it was now time to transform the huge potential of bilateral relations into economic ties. Inter-governmental cooperation agreements on fishing, tourism, culture and communications were inked during his visit. The president said joint energy projects, such as shelf oil and gas production and construction of power plants in Morocco, had been examined.
Arms sales are a new aspect of bilateral cooperation. Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies, said Morocco had received few Soviet weapons because it relied heavily on U.S. and French weaponry. However, contracts for the sale of Fagot and Kornet anti-tank guided missiles worth several tens of millions of dollars were signed earlier this decade. In 2005, Russia and Morocco concluded a $100-million contract on the sale of six Tunguska air-defense systems.
Presidential aide Sergei Prikhodko told journalists that Russia was likely to supply more weapons to Morocco.
Andrei Maslov, director of the Af-Ro consultancy, said Russia should not worry that the sale of these defensive weapons would have a negative impact on military-technical cooperation with Algeria, which signed contracts worth $7.5 billion during Putin's visit in March.
The expert said although Algeria had supported anti-Moroccan movement Polisario in the Western Sahara in the 1970s, the now purely "ritual" bilateral confrontation did not hinder Algerian-Moroccan cooperation. Algeria pumps gas to Europe along a vitally important pipeline in Morocco.
Makiyenko said arms trade with Morocco faced serious problems because Morocco with its limited resources was not an oil-exporting country.
Kommersant
Abramovich set to establish largest Russian metallurgical holding
Yevgeny Shvidler, chairman of Millhouse Capital's board and business partner of Roman Abramovich, has said the Russian tycoon wants to establish Russia's largest metallurgical holding with Evraz Group as the core by taking over other iron and steel works.
According to the paper, the intractable stand of plant owners has forced Millhouse to warn openly of an imminent consolidation of assets, while the officials in the Kremlin administration have indicated that President Vladimir Putin has lent his support to the idea.
Shvidler said Millhouse preferred share exchanges. "We need more expensive assets rather than control," he said. A source close to Millhouse explained talks with shareholders of metallurgical companies were difficult because none of them wanted to lose control and key-owner status.
A Kremlin source said Shvidler had no choice but to launch an open attack. "The Millhouse Capital chief had to show that he is supported at the top," the source told the paper. "Vladimir Putin supports the consolidation idea as he believes only then can Russian metallurgists become competitive on the global market. Presidential aide Igor Shuvalov set out this position recently [on September 5]."
Takeover candidates reacted calmly to Millhouse Capital plans. Metalloinvest and Gazmetall owner Alisher Usmanov said he was ready to negotiate "on certain conditions."
"A fair evaluation of our and Evraz assets is essential," he told the paper.
Usmanov said Metalloinvest and Gazmetall would be worth at least $10-12 billion after consolidation. "At first, we hope to receive a 50% stake in a consolidated company because Evraz also has the same price. The merger had not been settled yet," he said.
Analysts said consolidation was a reasonable idea and the merger of Evraz, Severstal and Metalloinvest would create a company with $30-billion capitalization.
Millhouse said nothing about the profit rates of future ferrous-metallurgy deals.
Denis Borisov, an analyst with Solid brokerage, said the group could not expect to reap a profitability of more than 40-50% a year. "This is much less than it earned after the resale of oil company Sibneft," he told the paper.
Gazeta.ru
LUKoil eyes Asian market
Russia's biggest oil company may open a network of filling stations in the Asia-Pacific region. LUKoil's 100 stations in northeastern China are the beginning. LUKoil will benefit from staking its presence on the Asian retail market before oil begins to flow along the Eastern Siberia-Pacific Ocean pipeline (ESPO).
The LUKoil press service never comments on talks. A source in China National Petroleum Corporation (CNPC) said current negotiations also covered possible refining operations in Daqing.
The news appears somewhat illogical, because last summer LUKoil stopped shipping oil to China and said it was unclear when deliveries may resume. In 2005, LUKoil planned to transport up to 3 million metric tons (22 million bbl) to China, but the plans hit the buffers over rail supply costs. "It was one of our export outlets, but high railroad tariffs closed it," the company said.
Experts took issue with the argument. "Transporting oil by rail is extra-profitable even given the existing tariffs," said Nikolai Podlevskikh, head of analysis at Zurich Capital Management, "even though rail deliveries are less competitive compared with pipe tariffs." By giving up rail, LUKoil should have been able to compensate these exports by piping supplies to the West, said the analyst.
If the negotiations with CNPC end successfully, LUKoil need not wait for the opening of the ESPO, especially since its tariffs may be high enough due to the line's cost and length.
LUKoil should not lose time, specialists told the paper. In March of this year Rosneft, for example, signed a contract with CNPC on a joint venture to sell oil products in China. It takes about a year to establish a network of gasoline stations, while the commissioning of the pipeline, given its length, may be postponed.
The company's appearance on the retail Asian market before the ESPO begins supplies gives it a competitive edge over firms that will follow the pipeline.
Gazeta
Statoil, Total join Shtokman project
Statoil, a Norwegian oil and gas company, and the Murmansk municipal administration signed a memorandum on mutual understanding Thursday. Under the agreement, an environmental program for the Murmansk Region will be drafted. Experts told the paper that the memorandum represented a form of confirmation of preliminary agreements on Statoil's entry into a project to develop the massive Shtokman deposit in the Barents Sea.
Shortly prior to this, the Norwegian company said it had received a letter inviting it to continue discussions on the project. Statoil said the letter was received after France's Total reported it had been invited to resume talks on its participation in the Shtokman project.
Valery Nesterov, an analyst with the Troika Dialog investment company, told the paper, "The choice of Statoil is no coincidence: Norsk Hydro is a private company, whereas Statoil is 80% state-owned." Statoil's invitations to join its projects in the North Sea could be another plus point.
Kristoffer Maro, president of Statoil Russia, said his company had proposed giving Gazprom a role in developing Norway's Snoehvit (Snow White) shelf deposit in return for a 20% stake in the Shtokman gas condensate project. The Russian energy giant has made no secret of its interest in the project but has indicated the exchange proposal needs to be revised.
Snoehvit has fewer reserves than Shtokman (193 bln cu m against 500 bln cu m), but analysts told the paper the Norwegian project is Shtokman's closest analogue. Besides, Gazprom's striving to appear on the liquefied natural gas market as soon as possible is well known. The Shtokman project will start working at the end of the decade at the earliest, whereas Snoehvit has reserved capacities at an LNG terminal in Cove Point (U.S.). Gas exports from the Norwegian field are expected in early 2007.
Experts told the paper that access to markets was major plus point for Total. Alexander Blokhin, analyst with the Atlanta Capital investment company, said the French company's LNG projects helped it to enter the Shtokman project. "Total has not been a great success in its oil activities in Russia but it possesses vast experience of LNG production. It was one of the first companies to enter that market," the analyst said.
Gudok
Power market goes liberal, fails to interest foreign investors
A week during which a deregulated electric power market operated in Russia has shown that in energy-deficient regions tariffs may more than double. Foreign investors, for whom the reform was undertaken, remain uninterested in the Russian market.
A government decision of August 31 practically abolished state regulation of electricity tariffs, making the only exception for the population during the transition period. Larisa Shiryaeva, head of marketing with Russia's Unified Energy System, said the aim of the reform was to lower generating companies' tariffs through competition and so to reduce the end consumer price. But in a week of trading in the new conditions the market demonstrated an entirely different reaction. Some of the country's western regions more than doubled supply rates, notable in peak-load periods.
The uneven territorial distribution of generating plants across Russia has played havoc with supply and demand: when European Russia has a capacity shortage, the east has a surplus. So electricity tariffs in the North Caucasus, for example, are three to five times higher than in Siberia. And even if investors do come here, there will be no price cuts because new projects will have to be paid for with high tariffs.
Experts told the paper it was too soon to speak of a really competitive electric power market capable of attracting investors. "The introduction of new rules is only the first step to a free market which is now dominated by one player - Russia's Unified Energy System," said Aton analyst Dmitry Skryabin. "In a situation when one and the same organization fixes prices and controls demand (by limiting consumption and otherwise) it is impossible to speak of any competition."
The analyst also said foreign investors did not so much fear the existing rules on the power market as the high commercial risks. No one has given them any guarantees that once they build their stations in Russia, the price of gas inside the country will not rise to average European levels.
