MOSCOW, March 7 (RIA Novosti) Russia changes policy on breakaway republics / Moscow unlikely to thwart NATO-Ukraine rapprochement / Russian Air Force to use Uzbek airfields / Caspian Pipeline Consortium to receive no more oil from Tengiz / Russia has the world's second largest number of billionaires / Volvo to make construction equipment for Europe in Russia
Vremya Novostei, RBC Daily, Kommersant
Russia changes policy on breakaway republics
Moscow has responded to Kosovo's self-proclaimed independence by changing its policy regarding post-Soviet breakaway republics. It has announced its decision to lift limitations in relations with Abkhazia, which is a form of political recognition.
Political analyst Dmitry Yevstafyev described it as "a breakthrough in Russia's foreign policy."
"We are doing right for the first time in 20 years, speaking softly and acting harshly. In the past we did it the reverse," he said.
Alla Yazkova, head of the Center for Mediterranean and Black Sea Studies at the Institute of Europe, Russian Academy of Sciences, said: "Russia will not recognize Abkhazia politically, but [the lifting of limitations] was a trial balloon that has opened new possibilities for Russian companies, including those involved in building the 2014 Olympic facilities in Sochi."
Georgia says the blockade of Abkhazia has recently been ineffective. The majority of Abkhazians have Russian passports, so can cross the border without problems. There are no flights to Abkhazia, but its ports receive ships (mainly fishing vessels and bulk carriers) from many countries, including Turkey and Ukraine, which are friendly with Georgia.
Russia, Armenia and Georgia now want to resume rail transport across Abkhazia. Russia needs it to supply construction materials for the 2014 Olympics, and as a site where some tourists can be placed.
Sergei Grigoryev, vice president of the Olympic construction corporation, said: "Abkhazia could supply construction materials for the Olympic projects, primarily cement, which is already in short supply."
Market players say at least 5 million metric tons of cement will be needed for these projects, which the traditional producers (Novoroscement and Kavkazcement) cannot supply. It will be economically inexpedient to deliver cement from a distance of more than 1,000 km (622 miles). Abkhazia's cement producers are located closest and therefore their output could be the cheapest.
Russia has called on the other CIS countries to lift sanctions from Abkhazia, but not from South Ossetia, another Georgian breakaway republic.
If Ossetia is granted the right to export its agricultural products, the rest of western Georgia will use the advantage. Before the introduction of the embargo, a major part of Georgian farming produce was exported through South Ossetia.
Abkhazia prohibited the delivery of Georgian cargo to Russia through its territory.
Kommersant
Moscow unlikely to thwart NATO-Ukraine rapprochement
Major obstacles holding back Ukraine's accession to NATO are good news for Russia, which is trying to prevent the North-Atlantic Alliance from coming too close to its borders. However, there is also bad news - the rapprochement between Ukraine and NATO is highly unlikely to be prevented, said Alexei Malashenko, an analyst at the Carnegie Moscow Center.
Trivial as it may sound, a partnership with the United States would benefit Ukraine's national interests as much as friendship with Russia. However, the situation is only superficially similar to that during President Leonid Kuchma's term in office, when Ukraine had to maneuver between two camps.
Kuchma maneuvered between Moscow and Brussels, using his flirtation with NATO as a tool to pressure Russia. But today, Ukraine is serious about a rapprochement with the alliance, even if the process is not as rapid as in Georgia's case, the analyst said.
As for Brussels, it has an important psychological advantage over Moscow in its relations with Kiev. NATO never asked Ukraine to make an either-or choice. This is a strong position, and appears much more attractive than Russia's, Malashenko said.
Moscow still has enough resources to play to gain in the Ukraine-NATO-Russia triangle, but to achieve success it would have to change its methods of pressuring Kiev. Primarily, it should abandon attempts to threaten and intimidate Ukraine. There is no better way to push Kiev into NATO's arms than to hint at the possibility of targeting Russian missiles at Ukraine, which President Vladimir Putin recently did.
It is worth bearing in mind that East European and Baltic nations' desire to join NATO was initially prompted by their fear of Moscow. The less Ukraine is scared of Russia, Russian missiles or Russian gas cuts, the less the need to hide behind the alliance's skirts. Moreover, the analyst said, if Russia itself builds friendly relations with NATO, the issue of Ukraine's accession will become much less pressing. Which is to say, Moscow could hinder Ukraine's rapprochement with NATO by changing its own policy first.
Nezavisimaya Gazeta
Russian Air Force to use Uzbek airfields
A source in the Russian Defense Ministry speaking on condition of anonymity said that Moscow and Tashkent were negotiating the possible use of the Khanabad air base and other Uzbek airfields by the Russian Air Force through diplomatic channels.
Colonel General Leonid Ivashov, former longtime head of the Defense Ministry's main international military cooperation department, said Russia and Uzbekistan had signed the corresponding agreement in 1999, but that both sides had not yet discussed technical aspects of deploying Russian war planes in the Central Asian republic.
Ivashov said Russia would not profit from a permanent air base in Uzbekistan.
However, Moscow is interested in Khanabad, and the Defense Ministry source said the United States had recently modernized the sprawling Khanabad airfield.
Before the break-up of the Soviet Union in December 1991, a regiment of intermediate-range Tupolev Tu-22M Backfire bombers was deployed in Khanabad. In 2001, the United States launched a counterterrorist operation in Afghanistan and requested permission to lease the Uzbek base.
At that time, President Islam Karimov, who maintained good relations with the United States, allowed the Pentagon to use Khanabad as a staging area. However, Washington denounced the "inhuman" Karimov government after Uzbek troops suppressed an anti-government rebellion in Andijan in May 2005. Tashkent then demanded that all U.S. troops and military equipment be withdrawn from Khanabad. The United States complied in the fall of 2005.
Moscow, which has signed a treaty on allied relations with Tashkent, will not benefit from Karimov's current efforts to mend relations with the West. The Kremlin no longer trusts Uzbekistan and closely follows all actions of the country's authorities.
For example, the Tashkent aircraft plant used to manufacture Ilyushin Il-76 strategic military-transport aircraft in Soviet times. Russia, which has agreed to include the company in the United Aircraft-Building Corporation consolidating all private and state assets engaged in the manufacture, design and sale of military, civilian, transport, and unmanned aircraft, plans to relocate their production to Ulyanovsk in the Volga area.
Kommersant
Caspian Pipeline Consortium to receive no more oil from Tengiz
After long debates, shareholders of the Caspian Pipeline Consortium (CPC) building a 935-mile oil pipeline from the Tengiz oil field in Kazakhstan to the Russian port of Novorossiisk on the Black Sea coast have rejected Chevron's latest initiative to start financing the CPC expansion project.
Transneft and LUKoil blocked the would-be transaction. Meanwhile, Chevron and Kazmunaigaz are beginning to build a competing oil pipeline. As a result, Russia will lose an opportunity to transport additional volumes of oil from the Tengiz field, which will go via Azerbaijan, Georgia and Turkey.
March 6 was the deadline for discussing Chevron's initiative to finance a revision of the CPC expansion project. The need to start work on the feasibility study is explained by the fact that the CPC has the endorsed and coordinated pre-project documentation which is valid only till October 2008.
If western shareholders can get approval for the budget of the feasibility study, work on it could be launched and the contractors' consortium (Kellogg, Brown & Root, Gulf and Giprovostokneft) could do the whole job within the term of validity of the pre-project documentation.
Meanwhile, oil production on the Tengiz field has exceeded the current CPC capacity. This year, Tengizchevronoil, the operator of the field, hopes to produce 25-26 million metric tons of oil (against 13.93 million metric tons in 2007, according to InfoTEK data).
An alternative route for transporting Tengiz oil is already being prepared. In January 2007, Tengizchevronoil, Kazmunaigaz and Agip KCO (the operator of the Kashagan field) reached accords to create a Kazakhstan Caspian oil transportation system worth $3 billion with the initial capacity of 25 million metric tons.
It is projected to build the Eskene-Kuryk pipeline and create a system of tanker oil deliveries from the port of Kuryk to Baku and further, via the Baku-Tbilisi-Ceyhan pipeline.
Kazmunaigaz confirmed to a Kommersant correspondent that with the CPC expansion being stuck, work on the pipeline to Kuryk is being stepped up.
Nezavisimaya Gazeta
Russia has the world's second largest number of billionaires
The number of Russian billionaires has grown by nearly 12 times since 2002. Analysts explain this by high commodities prices, asset consolidation, and an unfair social policy.
Forbes has published a new list of 1,125 people whose private fortunes exceed $1 billion, placing Russia, with 87 billionaires, second after the United States and ahead of Germany (59), which had held second place for six years.
Igor Nikolayev, chief strategic analyst at the FBK private auditing firm, said: "The record increase in the number of billionaires in Russia can be explained by high economic growth rates, active consolidation of assets, and continued income stratification in the country."
He said the number of Russian billionaires was abnormally large considering the size of the economies of the United States, Germany and Russia.
"The German economy is approximately 50% larger than the Russian economy, yet Russia has nearly 25% more billionaires. There is a similar imbalance compared with the United States," Nikolayev writes.
He said the Russian policy of encouraging asset consolidation was an additional booster of the number of billionaires.
Andrei Shastitko, director of the Moscow-based Bureau of Economic Analysis (BEA) Foundation, said: "Russians' rapid rise on the Forbes list was ensured by the growth of global commodities prices and glaring social stratification."
He said large Russian companies were taking over core and non-core assets, so that the gains from the favorable situation on global markets were accumulating in the hands of a small group of owners.
"Russia is rapidly approaching the Latin American inequality model in terms of incomes," Shastitko said.
Analysts say Russia is unlikely to cede its second place in terms of the number of billionaires even to such rapidly developing economies as India and China.
"Prices of Russian energy, metal and other export commodities will most likely remain high, helping Russians on the Forbes list to increase their wealth," Shastitko writes.
"The Chinese authorities are trying to curb aggressive growth of millionaires and billionaires, and so China is unlikely to vie with Russia for top rankings on the Forbes list," Nikolayev adds.
Business & Financial Markets
Volvo to make construction equipment for Europe in Russia
Sweden's ÀÂ Volvo is planning to launch the production of construction equipment in Russia. Starting from 2011, the company will produce 1,000 tracked vehicles a year, and production will be boosted substantially in later years. The Swedish company hopes that the Russian facility will soon be able to meet the entire European demand.
The company has already purchased a 15-hectare plot of land in the Kaluga Region, to the southwest of Moscow, near another Volvo plant which will manufacture trucks.
Tomas Kuta, director general of Volvo Construction Equipment Russia, said it would be an independent company.
He said Volvo will manufacture excavators and other track vehicles at its Russian plant.
After 2010, annual demand for Volvo excavators will reach 5,000 in Russia alone, said Sevastyan Kozitsyn, an analyst with Broker Credit Service. He also estimated the initial investment in the plant at 20-30 million euros.
Last year, Volvo marketed 965 construction vehicles in Russia. The company is experiencing a shortage of production facilities around the world, which is limiting sales, Kuta said.
He added that Volvo excavators and similar track vehicles are only manufactured at a South Korean plant, which the Swedish concern bought from Samsung Heavy Equipment in 1998. The costs of shipping the machines to Europe are too high, and Volvo needs local facilities to build the required equipment.
However, the final decision will be made with account for export duties, Kuta said, adding it wouldn't be cost-efficient to import components from Korea either, so all the components except engines and gear boxes would be made in Russia.
As of now, Russian construction companies mostly purchase cheap equipment made in Russia or China, said analyst Mikhail Lyamin of the Bank of Moscow.
According to him, a local production will also reduce costs, and Volvo's offer will become quite competitive.
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