MOSCOW, October 23 (RIA Novosti) Russia, EU clash over the Energy Charter / Tensions heighten around Sakhalin II oil and gas project / Nissan plant in St. Petersburg to assemble Suzuki cars / Government expectations from Russian oil trading in New York too high / China to get Russian fighters worth $2.5 billion
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Novye Izvestia
Russia, EU clash over Energy Charter
The results of last week's informal Russia-EU summit in Lahti, Finland, did not surprise experts - it would have been futile to expect Moscow to ratify the Energy Charter discarding its own interests.
Iosif Diskin, deputy general director of the National Strategy Center, said Russia's refusal was motivated by economic rather than geopolitical factors, as well as by the Kremlin's fear of losing control over its natural resources.
Diskin said the Energy Charter called for annulling existing long-term contracts and liberalizing the entire European gas supply market. However, this goes against Russia's interests, as short-term gas prices will fall.
Europe does not need such a setup either, because many market players will initially bring down prices. Long-term gas projects did not envision any market-style solution for a period of more than seven to eight years. "In the long run, such projects will be deprived of investment; and initial gas prices will soar considerably," Diskin told the paper.
The current EU position was dominated by time-servicing moods of Brussels officials and by the de facto pro-U.S. actions of small countries and the United Kingdom, which depend on Washington even more than their European partners.
According to Diskin, European companies also advocate long-term contracts. He said Brussels was openly confronting Russia and denying it access to the European gas distribution network.
Western experts, who knew the Energy Charter ran counter to Russian interests, still wanted Moscow to ratify it. "They believe Moscow will back down in order to avoid confrontation," he told the paper.
Biznes
Tensions heighten around Sakhalin II oil and gas project
The Industry and Energy Ministry has suggested changing the internal terms and conditions of the Sakhalin II production sharing agreement, while Natural Resources Minister Yuri Trutnev does not rule out freezing it. A review of the PSA terms may complicate the conclusion of international contracts for Russian companies.
The Sakhalin II agreement is the "worst of all the three existing PSAs," said Deputy Natural Resources Minister Andrei Dementyev. The document did not come into effect until two years after it was signed, and the start of development was postponed, since the project's feasibility studies were based on preliminary geological data, and the design levels of production were altered.
As in the case of Shtokman, follow-up exploration revealed the deposit was more extensive than originally thought. The overall level of production was initially planned at 90.64 million tons of oil and 335 billion cubic meters of natural gas. The current expected figures are 150 million tons of oil and 479 billion cubic meters of gas.
The existing terms of profit sharing are unfavorable for Russia. According to the PSA, until the rate of profitability reaches 17.5%, the Russian side will be receiving 10% of profits, and investors 90%. At the next stage profits will be shared fifty-fifty, and when profitability reaches at least 24%, Russia will start receiving 70%, and investors 30%.
In September of last year, the Sakhalin II operator, Sakhalin Energy, submitted new estimates increasing project outlays from $9.9 billion to $21.9 billion. Analysts doubt whether the estimates will be approved as suggested by the operator. "The authorities are showing a clear desire to cancel the agreement," believes Denis Matafonov, a senior analyst with Antanta Capital. "Since the agreements were signed, Russia's possibilities have changed, and the country now finds it more profitable to develop deposits with less foreign participation."
Should the project be stopped, Russia will have to revise the agreement, provoking claims from foreign companies, Matafonov said. But the main negative result will be the loss of political face. "What passes with domestic operators will not be tolerated by international corporations," the analyst said. "Breaching existing agreements will complicate the conclusion of future international contracts."
Vedomosti
Nissan plant in St. Petersburg to assemble Suzuki cars
Japanese carmakers Nissan and Suzuki may join forces to win over the Russian market: the two companies are in talks on assembling Suzuki cars at a Nissan plant that is under construction in St. Petersburg.
Several Russian government officials confirmed the reports to the paper, but did not give details. No specific agreement has been reached yet, a source said. Suzuki declined to comment, while a Nissan spokesman said that for the moment they intended to manufacture only Nissan cars at the St. Petersburg plant. He neither confirmed nor denied that talks were in progress.
Last summer, Nissan and Suzuki decided to expand their cooperation and discussed the possibility of supplying their cars to each other, to sell them under original brands on different markets.
Nissan already sells Suzuki Otti small cars on these terms. The companies also agreed to use production facilities on emerging markets together. They intend to test this initiative in India, where Suzuki owns a 54% stake in Maruti Udyog, which is building a new assembly plant in Manesar with a capacity of 200,000 cars annually. It will also assemble Nissan cars for export to Europe.
A similar idea could be implemented in Russia, experts told the paper. Suzuki sales in Russia have been growing rapidly this year. It sold 11,400 cars in the first nine months of the year, against 9,803 for the whole of 2005. "This is great news," said Sergei Alekseichuk, an independent car market expert. "Suzuki cars are in high demand with Russian buyers." All Suzuki cars delivered to Russia are sold very quickly, said Igor Korolivets, manager with Avtomir, which is a Suzuki dealer.
Kirill Chuiko, an analyst with Uralsib, said cooperation with Suzuki would help Nissan to reach the plant's planned capacity faster and speed up its pay off. The Japanese carmakers will not be competing with each other, because the Russian market is growing very fast and will expand 60% this year alone, he said.
Nezavisimaya Gazeta
Government expectations from Russian oil trading in New York too high
The government's hope of receiving an additional $3 billion from launching trade in Russian oil futures under the new Russian Export Blend Crude Oil (REBCO) brand in New York may not become a reality.
Until now, Russia has mainly exported Urals crude, the price of which was set by international energy agencies by multiplying the market price of Brent crude, which is of higher quality, by a reduction quotient.
Experts maintain that REBCO will be of higher quality than Urals, due to lower sulfur content, which will allow it to be priced above Urals. "The transparent mechanism of setting prices for Russian crude will bring the industry at least $3 billion annually," said Russian Deputy Economic Development and Trade Minister Kirill Androsov at the trade opening ceremony in New York.
Analysts, however, believe that these expectations are exaggerated, they told the paper. "The quality of Russian crude is still inferior to Brent, so the latter's price will be the benchmark, and REBCO will cost less," said Anna Sukhanova, analyst with the Finam brokerage. "Using the transparency of the system to make profits, as Androsov proposes, is not possible," said Alexander Razuvayev, head of research at Megatrastoil. "Of course, liquidity may bring a premium, but only a small one."
The final goal of the project is to "set up an international mercantile exchange in Russia," Androsov said. "There is every reason for this to become the world's fourth largest center of commodities trading," he said.
Experts, however, said an oil exchange in Russia is more a promotional move than a real necessity. Full-scale oil trading on Russian sites can now be organized only by autocratic means, forcing state-controlled giants Rosneft and Gazprom there, they said.
Private companies do not have any need to put their products on commodities exchanges, as all of their energy is already contracted. "Russia has an established system of selling crude and petrochemicals," Razuvayev said. "We do not need an oil exchange now."
Kommersant
China to get Russian fighters worth $2.5 billion
Rosoboronexport, Russia's state arms export monopoly, is completing talks on the sale of about 50 Sukhoi Su-33 Naval Flanker fighters worth $2.5 billion to China. If successful, this will be the second most expensive national arms-sale contract after a $3 billion agreement for the assembly of 140 Su-30MKI fighters in India under a Russian license.
Sources close to the talks said China would buy two Su-33 deck fighters worth about $100 million for its incomplete aircraft carrier by late 2006 and assess their specifications and performance. The contract will be signed in Beijing this December; and the warplanes will be assembled at the Komsomolsk-on-Amur aircraft production company.
The first Chinese aircraft carrier, due to be launched by 2010, will operate foreign-made planes, as national carrier-borne aircraft are not yet available.
Beijing, which plans to design its own Su-33 version with the help of Russian technology, recently bought a T-10K fighter, i.e. a prototype Su-33 version, from Ukraine in order to study its design.
The T-10K, which was grounded after the Soviet Union's disintegration, has the required systems for deck landings.
China plans to build three aircraft carriers by 2016; and Moscow may count on an expanded contract if Beijing has trouble developing its own deck planes.
Another 12 Su-33s are to be supplied under the Russian-Chinese contract. In all, China may receive up to 48 fighters worth $2.5 billion.
Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies, said China, which has mastered production of the J-11 warplane, a replica of the Su-27SK Flanker fighter, could develop its own carrier-borne planes.
"Their price and efficiency are another matter because deck fighters are quite unique," said Makiyenko. It was impossible to transform the Su-27SK into a navalized warplane by fitting it with a more powerful engine.
Beijing is not signing the entire deck fighter contract because it perceives Russian problems during the sale of 38 Ilyushin-76MD Candid and Il-78MK Midas transport aircraft to China. Both sides are also coordinating the contract's price, he told the paper.
