MOSCOW, February 17 (RIA Novosti)
Middle East conference in Moscow proof of Russia-U.S. rapprochement / Moscow in no rush to supply S-300s to Iran / Crisis hits Gazprom / Currency speculations send Russian industries tumbling /
Vedomosti, Vremya Novostei
Middle East conference in Moscow proof of Russia-U.S. rapprochement
Moscow will host a conference on the Middle East at a date to be agreed on after the winners of the parliamentary election in Israel form a new government.
Russian Foreign Minister Sergei Lavrov said in Jerusalem that Hamas and Hezbollah would not attend the conference.
Analysts view the meeting as one more piece of proof of a thaw in Russian-U.S. relations.
The EU, the U.S. and the UN agreed that the conference should be convened in Moscow, but the Israelis are unsure over the usefulness of the event. The decision to attend or not to attend it will be made after they form a new government, which will take at least a month.
However, an informed Russian diplomat told the Vremya Novostei daily yesterday: "In fact, all Israeli politicians, including [Benyamin] Netanyahu, have already agreed to come to Moscow, but will announce their decision later. We have succeeded in this respect."
Russia has been proposing a Middle East conference in Moscow for several years, but the proposal was cold-shouldered first by the Americans, then by the Israelis and lastly by the Palestinians.
In the meantime, Moscow established diplomatic relations with Hamas and said that Hezbollah was not a terrorist organization.
In November 2007, the U.S. held a Middle East conference in Annapolis, which Russia attended on the condition that the next conference would be held in Moscow.
President George W. Bush promised after the meeting in Annapolis that Israel and Palestinians would sign a new peace agreement before the end of his term. He failed, and the Moscow conference is unlikely to greatly facilitate the settlement of Arab-Israeli differences either. But it will definitely boost Russia's international prestige.
The absence of Hamas and Hezbollah will be a technical issue, because their attendance was not planned in the first place. Besides, Moscow has said it continues to interact with the two organizations and views these relations as an important instrument.
The largest problem in Russian-U.S. relations by the end of Bush's term was a lack of mutual trust and infrastructure for building it up. The current situation promises a change in the trend, according to the Vedomosti daily.
Kommersant
Moscow in no rush to supply S-300s to Iran
Iranian Defense Minister Mostafa Mohammad Najjar arrived in Moscow yesterday to open talks on Russian arms supplies. Tehran is particularly interested in S-300PMU-1 surface-to-air missile systems, and a contract for their delivery was signed long ago. But Russia is not planning as yet to hand these systems to Iran in order not to upset a dialogue that has begun with the new U.S. administration.
So far, the largest deal between Russia and Iran in the defense sphere has been a contract to sell 29 Tor-M1 systems (December 2005, $700 million). Since then, Tehran has shown particular interest in the S-300PMU-1. The contract to supply five battalions of S-300s for $800 million was initialed and signed a long time ago, but shelved for political reasons. The global media and Iranian officials have time and again reported the start of deliveries. The last time the Federal Service for Military and Technical Cooperation denied these rumors was on December 22.
Tehran is not optimistic now either. "The S-300 contract can be fulfilled at the word go," said a source in the defense establishment. "New agreements are in the works, and contracts to supply Buk-M1 surface-to-air medium-range missile systems are under discussion. But to start moving requires a political decision, which is still lacking."
The main factor working against military and technical cooperation with Iran is Moscow's wish to improve relations with the United States. Foreign Minister Sergei Lavrov and U.S. Secretary of State Hillary Clinton are scheduled to meet in March for the first time, while in April, President Dmitry Medvedev will be able to make personal contact with President Barack Obama.
Moscow is pinning great hopes on these talks, because it believes the sides could find a compromise on nuclear disarmament and deployment of U.S. missile defense facilities in Eastern Europe. News of S-300 supplies for Iran starting is likely to mar the atmosphere for talks.
"The S-300 supplies to Iran are showing no progress and are unlikely to show any even after the defense minister's visit," Rosoboronexport press secretary Vyacheslav Davidenko told Kommersant yesterday.
Vedomosti
Crisis hits Gazprom
The recent slump in natural gas consumption has forced Gazprom to slash production by 13% for a second month running, a record output cut over the past decade.
Analysts estimate that a 10% cut in Gazprom's production reduces the country's GDP by 0.3%-0.5%.
CDU TEK, the Energy Ministry's central dispatch unit in Moscow, has calculated that Gazprom's average daily gas production in mid-February was down 13.3% year-on-year.
Natural gas production has decreased by 9.9% on average across Russia. In January, Gazprom lost 13.7% in output because of its conflict with Ukraine. Now production is solely falling due to lack of demand, which is an effect of the global economic crisis, according to Pavel Sorokin, an analyst at the UniCredit Aton, part of the international Unicredit Group.
Gazprom warned that its 2009 production might fall to 510 billion cubic meters, UniCredit Aton said in the wake of a series of meetings with the monopoly's management in February, down 7% from the 2008 output.
Citi analysts cited 520 billion cubic meters, down 5%. Gazprom has not officially denied the validity of either figure.
Sorokin estimated that, with the power plants' shrinking demand (down 5%-7%) as well as the official gas exports forecast (down 8%, or 22 billion cubic meters), Gazprom's production is likely to go down 5.5% from the 2008 level, to 520 billion cubic meters.
The industry has not seen anything like this since the Soviet Union's disintegration. The greatest fall in Russia's total annual gas production was registered in 1997 - 5.4%.
It is hard to predict how bad the consequences will be. Gas producers do not necessarily have to abandon wells to cut production, a Gazprom manager told Vedomosti in January. But he did not disclose the technological bottom of the fall, something analysts dare not estimate.
What they do know is how hard the Russian economy will be hit. Valery Mironov, chief economist at the Development Center economic research foundation, said every 1% drop in natural gas production brings GDP down 0.06%, which means a 10% cut will lead to a 0.6% economic slowdown.
Reduced gas production will in turn reduce its consumption in power generation and steel-making, said Yaroslav Lisovolik from Deutsche Bank in Moscow.
"Considering the multiplication effect, a 10% drop in Gazprom's production will slash GDP by 0.3%-0.5%," he added.
RBC Daily
Currency speculations send Russian industries tumbling
Industrial production in Russia dropped 16% last month from January 2008, a slump unheard-of since 1994. The downward trend was aggravated by a drive on behalf of Russian banks, companies and individuals to invest their cash in foreign currency.
The unexpectedly deep slump has jeopardized this year's production forecasts. However, analysts claim the industries have reached bottom.
Whereas before the economic crisis Russia was ahead of many industrially developed nations in economic growth, it is now apparently trying to race them downward with grim determination. Overall industrial production decline in the Eurozone was 12% year-on-year in January.
Manufacturing was hit hardest, dropping by 24.1%, while mining lost 3.6% of output, and production and distribution of energy, gas and water, 7%.
"Automotive production dropped 80%, despite the government's policy on raising import duties," said Yaroslav Lisovolik from Deutsche Bank in Moscow.
Only a few industrial segments are still showing some growth, mainly food production. Valery Mironov, chief economist at the Development Center economic research foundation, cited a 3.3% rise in flour production, and 15.8% in cereals output, which, according to him, showed consumer preference for cheaper foodstuffs.
Mironov estimates that large-scale currency speculations have brought consumer demand down, adding another 4 ppt to industrial decline.
"The industries reached bottom in January," said Vladimir Salnikov of the Center of Macroeconomic Analysis and Short-Term Forecasts. He also said companies had no reason to buy currency anymore, since production would be more profitable now.
Analysts also predict an increasing replacement of imports with domestic products in the next few months.
January's drop, obviously much deeper than expected, is forcing analysts to revise their forecasts for industry.
Deutsche Bank's revised estimate says industrial production will drop 5% this year, while the other two think tanks are even less optimistic.
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