What the Russian papers say

MOSCOW, August 6 (RIA Novosti) Money flows out of state corporations/ Deripaska plans mammoth private power company in Russia/ Russians assess war in South Ossetia/ Timber demand plummeting in Russia and the world

MOSCOW, August 6 (RIA Novosti) Money flows out of state corporations/ Deripaska plans mammoth private power company in Russia/ Russians assess war in South Ossetia/ Timber demand plummeting in Russia and the world

RBC-Daily

Money flows out of state corporations

The government is cutting its allocation to the Housing and Utilities Reform Fund from 240 billion to 175 billion rubles, freeing up the funds to cover the 2009 federal budget deficit.

Officials at the state corporation explained that the move was part of the government's bailout policy. The 65 billion will be taken in 2009 and returned to the fund over the next two years.

The Finance Ministry estimates that it will be able to repay 50 billion rubles next year, and the remaining 15 billion, in 2011.

However, the Fund was forced to adjust its cash flow plans due to the shortfall, changing the limits for financial support in the regions. Regional support programs have been cut by an average of 16%.

"This backtracking is a purely tactical move," the Fund's deputy PR director, Grigory Volkov, told RBC Daily, adding that strategically, the housing and utilities reform was still on as both the president and the prime minister view it as a priority of the country's state policy.

The prime minister's spokesman, Dmitry Peskov, said the idea was to temporarily withdraw the funds that the state corporation was not planning to use this year anyway. He also had information that similar withdrawals would be made at two other state corporations, Rusnano and Olympstroy. He did not specify the total amount of funds to be taken from the corporations, but a government source cited a figure of 160.4 billion rubles to RBC Daily - 71.4 billion from Olympstroy and 24 billion from Rusnano.

Analysts believe the government is doing this to give it a safety net, as prospects for an economic recovery are still unclear at this point, while the 2009 budget deficit consists of a very solid 3.419 trillion rubles, or 8.9% of GDP.

"This sounds like an extra safety measure, in case budgetary pressure proves higher than expected," said Yaroslav Lissovolik from Deutsche Bank in Moscow. "Funds planned for investment are being rechanneled into social programs, which is in line with the government's bailout policy with its emphasis on social programs."

Alexei Pavlov, a deputy department head at Arbat Capital, said the leading countries' anti-crisis plans have made investment in social infrastructure a top priority. This helps fight unemployment and prepares the ground for later economic recovery, he added.

The problem with Russian state funds is that they have failed to use the huge sums allocated to them during a period of stability, said Ilya Ilyin, a Nomos Bank analyst.

By taking the money from the state corporations the government is violating the private property right, said Igor Nikolayev, chief strategic analyst at the FBK private auditing firm. "Of course, it is impossible to prove it legally, as state corporations are officially returning the money voluntarily. But everybody knows they have really been forced to do so. Now what long-term strategies are we talking about when the government is allowed to change the rules of the game as it goes along?" Nikolayev said.

Vedomosti

Deripaska plans mammoth private power company in Russia

Russian oligarch Oleg Deripaska has decided to build Russia's largest private power company. Evrosibenergo will have 40% more capacity than Viktor Vekselberg's KES-Holding.

Deripaska is one of the first to invest in Russian power generation, but until recently his generating assets have been scattered. Now the businessman has decided to establish a power holding. Evrosibenergo, which he controls, has already consolidated most of its assets, reports En+Group.

As a result, Evrosibenergo's installed capacities will reach 19.5 GW (electric) and 17.57 Gcal/hr (thermal). This will make Deripaska's company the country's third largest by capacity following state-owned Energoatom and Rusgidro. The largest private generating company in Russia is currently KES-Holding: its stations generate 13.77 GW. But in thermal capacity, Deripaska's company will be way behind KES, whose stations can produce a massive 67.8 Gcal/hr.

Evrosibenergo was set up in 2008, and for the time being belongs to several structures of En+Group, the group's spokesman said. But soon En+Power, which was registered on the island of Jersey in May 2008 (its sole shareholder is En+Group) will become Evrosibenergo's parent company, as follows from documents issued by Jersey's registration chamber. En+Power was given the go ahead by the Federal Anti-Monopoly Service (FAS) to consolidate its energy and coal assets a year ago, says a FAS spokesman.

By consolidating assets, "we are creating a transparent and understandable company structure and are raising the standards of corporate governance," said an En+Group spokesman.

Mikhail Rasstrigin, a VTB Capital analyst believes that Deripaska is consolidating his assets to find an investor. It is unlikely to go to an IPO, but rather it will be a private placement by En+Power, up to a blocking stake, the analyst believes.

Such an option is possible, says a source close to En+Group. The company requires funds to finance its large-scale investment program Irkutsenergo through 2020, which has been estimated at 100 billion rubles ($32 billion) by the company management recently, Rasstrigin said.

"No decisions (on a placement) have been made yet, although an IPO is one of the more potentially interesting instruments for attracting funds required to develop Evrosibenergo and implement its investment program," En+Group CEO Vladislav Solovyov was quoted by his spokesman as saying.

Vremya Novostei

Russians assess war in South Ossetia

More than half of Russians (54%) believe Russian troops should stay in South Ossetia, the Levada Center reported in a survey carried out on Tuesday. As many as 24% of respondents, however, suggested Russian troops should be pulled out, with 22% declining to give a definite answer. Analysts at the Levada Center say that in 2008 support for withdrawal from South Ossetia was 3% higher.

Some 47% of Russians still believe the situation in South Ossetia and Abkhazia is tense, last year the figure was 57%. Some 31% of respondents believe that tension has reduced and peace is returning to the republics with just 5% stating that the situation in the region is worsening.

A total of 67% described Russia's moves in August 2008 as "the only possible way out of the existing situation." And 13% said sending troops into South Ossetia marked "a failure for Russian diplomacy, highlighting the Russian leadership's inability to deal with problems between countries through peaceful negotiations." While 20% of respondents had no answer.

Almost a year after South Ossetia's and Abkhazia's independence was recognized, 40% of Russians believe the decision neither benefitted nor harmed Russia, with 29% viewing the move as positive and 15% as negative - 16% were undecided.

During the survey the Levada think tank sampled some 1,600 Russians in 128 villages, towns and cities across 46 regions in the country on July 17-20, 2009.

The All-Russia Public Opinion Research Center (VTsIOM) also carried out a survey on the anniversary of Russia's war against Georgia. According to its findings, more than half of Russians (56%) accuse the Georgian authorities of provoking the armed conflict in South Ossetia in August 2008. Another 15% believe the U.S. administration and Western intelligence services were to blame, while 5% believe that ambitions by the parties involved in the conflict were to blame. Just 3% said the countries involved in the conflict were equally to blame and only 2% accuse the Russian authorities. The "authorities" in "South Ossetia," "Ukraine," "NATO and the UN," each earned 1%.

The overwhelming majority (86%) of those questioned by VTsIOM are confident that Russia did the right thing backing South Ossetia in the conflict, with only 6% of respondents disagreeing, and 7% failing to give an answer.

Half of Russians (52%) believe that today Russia should treat South Ossetia as an independent state, and only 3% of respondents believe that South Ossetia should be returned to Georgia. A quarter (25%) would like to see the republic become part of Russia.

Forty-one percent of those surveyed consider that humanitarian aid should be given to South Ossetia, with 32% supporting financial aid, and 28% military aid. Twenty-seven percent of Russians think help in restoring war-damaged facilities is a top priority.

Twenty percent support Russia's help in restoring South Ossetia's statehood and government - two and a half times as many as those who believe it should be viewed as an independent state. Only 6% believe it should not receive help, with another 6% unable to answer.

The survey was carried out on July 25-26, 2009 among 1,600 respondents in 140 villages, towns and cities in 42 regions across the country.

Novye Izvestia

Timber demand plummeting in Russia and the world

The European Economic Commission reported yesterday a significant fall in demand for timber in its member countries down 8.5% in 2008, which is a record drop for the past 36 years.

Russia, however, saw a much swifter fall in timber, chipboard and paper production this year, down 20%-40%. Analysts do not expect the domestic market or exports to stabilize until December, and a full market recovery will have to wait until next year.

The European Economic Commission (EEC) comprises over 50 member states also including, along with the EU, several Asian nations, the United States and Canada. They account for 57% of global timber material demand. Therefore, an 8.5% drop in consumption in EEC countries means global production is in for huge losses. Hardest hit has been the United States and Western Europe. This situation is a natural consequence of a crisis in the housing market - fewer buildings are being constructed and so timber demand has fallen.

Russia's forestry and timber sector is even worse off. According to the national Association of Pulp and Paper Producers, the first half of 2009 saw an 18.5% drop in rough timber output. Pulp production fell 21%, paper 8.5%, plywood 31.6%, hardboard 39.2%, veneer 30.5% and chipboard 30.8%.

Analysts attribute the plunge to exceptionally low domestic consumption. "Timber consumption in furniture making and construction has dropped by around 30% since the beginning of this year. Construction volumes have indeed decreased, and furniture sales are also going through a seasonal slowdown. Also, a significant group of furniture shoppers bought using credit that is rarely available now," Olga Deulina, senior analyst with the Lesprom Network information and trade system, told NI.

Russian exports have dropped, too. According to the Federal Forestry Agency, round timber exports have dropped the lowest. In the first quarter of this year, the drop was 54.1% year on year. Pulp exports declined by 29.3%, plywood 22.3%, hardboard 15%, sawn timber 9.7%, paper and cardboard 9.2%, and chipboard by 7.2%. The trend still persists.

Moreover, analysts expect further declines in timber exports as demand in the West is still low.

Meanwhile, June brought some hope to producers. Their output grew month on month, plywood by 6.3%, hardboard 3.5%, rough timber 15.6%, chipboard and veneer, by 30.9% and 35.9%, respectively.

"Apparently, construction is resuming, a usual seasonal rise. But it does not yet embrace all of the country's regions. I don't think there are any reasons for a recovery in production. The market could stabilize by the end of the third quarter, but growth is unlikely to begin until 2010," Deulina said.

Even the recent cut in producer prices has not had a tangible effect on demand, market experts say. On the other hand, there is almost no margin to cut prices further. Companies are barely making any profit at all. Worse, some previously quite sustainable plants are already having financial problems as a result of overstocking.

RIA Novosti is not responsible for the content of outside sources.