What the Russian papers say

Russian-Iranian missile deal suspended / Russian president rallies support of business leaders / Ukraine looking for alternatives to Russian gas supplies / China to make carbon copy of Russian aircraft carrier /

MOSCOW, October 22 (RIA Novosti)

Russian-Iranian missile deal suspended / Russian president rallies support of business leaders / Ukraine looking for alternatives to Russian gas supplies / China to make carbon copy of Russian aircraft carrier /

Vedomosti

Russian-Iranian missile deal suspended

Russia has halted the supply of S-300 air defense missile systems to Iran until the political situation clarifies, even though Iran has paid for the weapons, said two unidentified sources in the defense sector.

Analysts believe the decision may close the Iranian market for Russia.

The $1 billion contract for five battalions of the S-300PMU-1 air defense missile systems to Iran was signed in 2007. The United States and Israel, concerned with the possible consequences of the deal, have more than once asked Russia not to deliver the systems, capable of intercepting their bombers if they decide to strike at Iran.

According to a source with inside information on the deal, the contract has not come into force because Russia has not duly notified Iran, which has therefore not made the required payments. The source said the contract was suspended for an indefinite time immediately after signing.

However, sources in the defense sector claim that Iran has made an advance payment under the contract and subsequently started making regular payments, and that the contract has therefore entered into force.

Another source in the defense sector said missile systems worth over $300 million were to be delivered this year, but the shipment has been suspended and the Russian Defense Ministry is considering ways to buy out the systems.

Konstantin Makiyenko, an analyst at the Russian Center for Analysis of Strategies and Technologies, said the decision to halt the contract was likely taken for political reasons based on the intention to reset relations with the United States and the subsequent harshening of Russia's stand on Iran.

The decision may cost Moscow dearly. Under the 1995 Gore-Chernomyrdin memorandum, Russia agreed to stop the sales of conventional weapons to Iran in 1999 while the U.S. agreed to respect the confidentiality of the agreement, to prevent the unsanctioned delivery of American arms from states of the Near and Middle East to Russia's neighbors, and to ramp up cooperation with Russia in the sphere of defense technologies in order to open new markets for the products of both countries.

However, the United States did not deliver on its promise, Makiyenko said, adding that the secret memorandum closed Iran's arms market to Russia for a decade. The same can happen now that Russia has halted its S-300 contract, and China may take Russia's niche on the Iranian market, he said.

The latest version of the S-300 family is the S-300PMU2 Favorit, which has a range of up to 195 kilometers (about 120 miles) and can intercept aircraft and ballistic missiles at altitudes from 10 meters to 27 kilometers.

Gazeta.ru, Vedomosti

Russian president rallies support of business leaders

Russian President Dmitry Medvedev has proposed closing, reincorporating as joint-stock companies, or privatizing state corporations. He made the proposal at a traditional meeting with business leaders.

Analysts say the president has indicated that private businesses may buy into state corporations.

All state corporations were set up in Russia when Vladimir Putin was president. Medvedev only signed the decree on the establishment of the Federal Road Agency, which the media regard as a state corporation.

In August 2009, the president instructed the Prosecutor General's Office and the presidential control department to inspect state corporations and submit conclusions on the expediency of their subsequent operation by November 10.

However, Medvedev said on October 21 that the first to be reincorporated as joint-stock companies should be those corporations that are "operating in a competitive environment."

Analysts say there must a good reason for his decision.

"The Russian Union of Industrialists and Entrepreneurs represents Russia's business leaders, who have a complicated attitude to state domination in the key economic spheres. The president has been trying to recruit their support," said Alexei Makarkin, deputy head of the Center of Political Technologies, a Moscow think tank.

In Russia, it is not even the state but officials who are playing a key role in the economy. They have been allowed to engage in business, including in non-profit companies. This system does not fit with the ideas of modernization, economic competitiveness, and development of private business, which Medvedev has been advocating, Makarkin said.

A joint-stock company, even if 100% state owned, is much better for budget risk minimization and transparency, analysts say. However, Igor Nikolayev, head of strategic analysts at FBK, one of the first private audit firms in Russia, said the government would still have to preserve some state corporations.

"Russia must hold the 2014 Winter Games, and restructuring Olympstroy in this situation would mean risking failure to prepare for the games," he said.

Olympstroy is responsible for building the sports facilities for the games in Sochi, a Russian resort city on the Black Sea.

A representative of state development bank Vnesheconombank (VEB) said the bank was prepared to work in any form. "It is the essence, not the form that matters to us," he said.

Kommersant

Ukraine looking for alternatives to Russian gas supplies

Ukraine has taken new steps to reduce its consumption of Russian natural gas and review its long-term agreements with Russian energy giant Gazprom.

On Wednesday, the Ukrainian government approved a development plan for its gas transportation system for 2009-2015. The plan stipulates the replacement of 7 billion cubic meters of natural gas imported annually with electricity.

A source close to Ukraine's state energy company Naftogaz said the plan provides for retooling the gas pumping systems of compressor stations, which use gas turbines and piston engines, to electricity. This should lower Ukraine's dependence on Russia because this will reduce the acquisition of buffer gas.

A Gazprom manager said unofficially that in this way Ukraine would be able to cut gas purchases by 7 billion cu m annually, although Naftogaz has pledged to buy at least 41 billion cu m of Russian natural gas annually until 2019.

In August, Ukrainian Prime Minister Yulia Tymoshenko said Kiev planned to cut the consumption of Russian gas to 25 billion cu m from the 52 billion contracted for 2010. Russian Prime Minister Vladimir Putin told her they would not fine Ukraine for its failure to buy the contracted gas.

However, the gas transit price includes the provision that Ukraine's gas transportation system uses buffer gas.

"If they change the type of fuel, they should also change the pricing formulas for gas transit and acquisition," the source said.

Valery Nesterov from Troika Dialog said the bulk of European countries mostly use gas for their gas transportation systems and switch to electricity only when there is a nuclear power plant located within 100 km (62 miles) of the system.

"The compressor stations of all new gas pipeline systems, including Nord Stream and Nabucco, are designed to use gas," Nesterov said.

Maxim Shein from Broker Credit Service said the conversion of compressor stations to electricity would increase the gas transit price.

"Ukraine currently spends $1.3 billion annually on the purchase of Russian natural gas for technical purposes," he said. "Given the current electricity rates, its technological expenditures will rise to $2 billion."

"It is for Ukraine to decide which fuel to use at its compressor stations. However, we are not going to review the terms of contract with Naftogaz and will insist that Ukraine honor them," said Sergei Kupriyanov, the spokesman of Gazprom.

Izvestia

China to make carbon copy of Russian aircraft carrier

China plans to start building two aircraft carriers soon, said Andrei Chang, chief editor of Kanwa Defense Review, a monthly of the Kanwa Information Center (KWIC), a non-government news agency officially registered in Toronto, Canada.

Chang saw photographs of a concrete mock-up of an aircraft carrier deck with a deckhouse in the Chinese press. Located near the city of Wuhan, the mock-up is a carbon copy of the upper deck of the Russian aircraft carrier Admiral Kuznetsov.

When building an aircraft carrier, the Chinese will have to take into account a number of technical details, make complicated calculations and do the research necessary for installing and adjusting radars and other equipment, not to mention a ramified network of cables and communication systems.

Chang said Research Institute No. 701 in Wuhan usually deals with such problems, and that the aircraft carrier would be built at the Shanghai shipyard.

China first showed interest in air-capable cruisers in the mid-1990s, when the Russian Navy started selling them. China bought the scrapped Minsk and Kiev air-capable warships through South Korea.

The Soviet Union laid down the Varyag cruiser, a better version of the Admiral Kuznetsov class warship, in December 1985. The Varyag was to have 36 Su-27K Flanker fighter jets and 16 Ka-27 Helix helicopters. However, perestroika stopped the money flow; and the cruiser, 75% ready, was sold to a tourist company from Macao. It later turned up in China, which is known to have made carbon copies of many foreign weapon systems.

"China will have many problems," said Ruslan Pukhov, head of the Russian Center for Analysis of Strategies and Technologies. "Russia is unlikely to help it build the warship, and the Chinese will never accomplish this task single-handedly."

An aircraft carrier is not just a sea-based airfield, but a huge naval complex. For example, Brazil has built an aircraft carrier but cannot use it, and so the warship is gathering rust in a port. A similar fate may await the Chinese aircraft carrier.

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