What the Russian papers say

MOSCOW, November 5 (RIA Novosti) Russia loses the Opel deal, may benefit from the loss/Gazprom may increase its stake in Germany's biggest gas trader/ Russian-French arms deal depends on political impulse - analysts/ Tax agencies want jobless to pay income tax from state subsidies

Vedomosti

Russia loses the Opel deal, may benefit from the loss

General Motors has decided not to sell a 55% stake in its German unit, Opel, to the consortium of Canada's auto components manufacturer Magna and Russia's state lender Sberbank.

The GM board said that improving business conditions and the strategic importance of Opel to its operations had prompted the move. The U.S.-based company has reported that overall GM sales grew 4% in October, the first year-over-year sales improvement in 21 months.

The reason for the decision is not the ambitions of GM, which was seen as the world's largest automaker, but the fact that each of its four divisions - GM North America, GM Australia, GM South Korea, and GM Europe - is responsible for a different group of cars.

GM cannot lose Opel, which makes small cars that enjoy the highest demand during the economic downturn, because it has nothing to replace it with. And without it, GM would soon lose the battle to the other behemoths of the global automobile industry.

Magna does not appear upset at GM's decision because the acquisition of Opel would have placed it at the center of a conflict of interests. Ford and PSA Peugeot Citroen said they trusted Magna's decision, but another large buyer of its components, Volkswagen, expressed serious concern at the proposed deal.

It looks like Russia will be the biggest loser, as it wanted to buy Opel to get cutting-edge automobile technology for its GAZ plant. However, it may still benefit from GM's decision not to sell Opel.

In the current troubled economic situation, Russia should not strive for nano and other high technologies, but think about restructuring its system of state management of the economy to give business some breathing space. If it does so, Russian business will eventually develop and implement modern technology.

GM Europe, which sells Opel and Vauxhall cars as well as Cadillac and Chevrolet, has the fourth highest auto sales in Europe, after VW Group, PSA Group and Ford Motor Co., according to the European Automobile Manufacturers' Association.

Kommersant

Gazprom may increase its stake in Germany's biggest gas trader

GdF Suez has not taken a decision to join the Nord Stream gas pipeline project because Gazprom wants a share of its gas transportation assets, notably a 5.26% stake in Verbundnetz Gas (VNG), the largest gas distribution company in eastern Germany. In response, the French gas giant said it was considering joining the rival project, Nabucco.

Two sources have confirmed the information on talks between Gazprom and GdF Suez published by the German newspaper Handelsblatt.

"It could be a good deal for Gazprom because the monopoly would gain access to the East German network [VNG controls 95% of the market in former East Germany and 16% of united Germany's market] and an opportunity to increase its share in the German market," said one of the sources close to the talks.

A few years ago, E.ON Ruhrgas sold VNG shares to GdF, which merged with Suez in July 2008, rather than to Gazprom so as not to create a rival.

In response, Gazprom teamed up with the Dutch, who sold it a 9% stake in the Balgzand Bacton Line (BBL), the first natural gas pipeline between The Netherlands and Britain, and also allowed it to use Dutch gas transportation facilities.

According to Gazprom, it was still continuing talks on Nord Stream. GdF Suez wants to get additional rights in the operation of Nord Stream, in particular, a seat on the project operator's board of directors and the right of veto on large deals and strategic issues.

Gazprom is also negotiating the size of compensation the French company will have to pay if it decides to leave the project, and the sides' responsibilities to creditors, a source said.

Mikhail Korchemkin, director of the U.S.-based East European Gas Analysis consultancy, said: "The problem is that GdF Suez, which will get a part of E.ON Ruhrgas's stake in Nord Stream, demands compensation from Gazprom."

If Gazprom closes the VNG deal, it will be able to use but not manage Germany's gas transportation system, the analyst said.

Maxim Shein of Broker Credit Service said the sides changed their requests several times last year. For example, Gazprom wanted the right to operate on France's domestic market and a stake in LNG terminals. Time will show what the final agreement will stipulate.

Vedomosti

Russian-French arms deal depends on political impulse - analysts

The issue of buying the French-made Mistral helicopter carrier (L9013) for the Russian Navy could be settled during Russian Prime Minister Vladimir Putin's upcoming visit to France in late November.

The Mistral is scheduled to call at St Petersburg, Russia, on November 15. There are plans to accommodate Russian weapons aboard the ship and to land a Kamov Ka-52 Hokum-B attack helicopter on her deck during the visit.

Oleg Burtsev, Deputy Chief of the Russian Navy's Headquarters, said the Russian military wanted to buy one warship from France and build four more in Russia under a French license and would inspect the Mistral during its port call.

The Mistral will become the largest ship due to be bought by Russia in cash over its entire history. The Russian side will thoroughly inspect the ship two weeks in the run-up to political negotiations in France that will either approve the project at top level or will call the purchase premature, the paper's source said.

Arnaud Kalika, editor-in-chief of the French military-strategic bulletin TTU, said Putin's visit would show whether the deal would be approved by Russian and French leaders.

French agencies and state-owned French naval shipbuilder DCN (Direction des Constructions Navales) constructing the Mistral-class ships are waiting for political impulse. A similar situation is seen in Russia, a source at the national Defense Ministry told the paper.

Analysts still doubt the need for buying such an expensive ship. Konstantin Makiyenko, deputy director at the Russian Center for Analysis of Strategies and Technologies, said the entire project would cost over one billion euros, and that the funding could instead be used to buy French thermal imaging systems for all of Russia's tanks, which are to be retained under current military reforms.

Last week, Anatoly Isaikin, CEO of Russia's state arms trader Rosoboronexport, said his company had not yet been instructed to launch ship-purchase talks. A source close to the Russian Defense Ministry said the deal could be closed without Rosoboronexport's involvement.

Rosoboronpexport was not in the negotiations of a similar contract for the purchase of unmanned combat air vehicles (UCAVs) from Israel Aerospace Industries Ltd. for the Russian Army.

Vedomosti

Tax agencies want jobless to pay income tax from state subsidies

The unemployed who receive state assistance for starting up a business must pay an income tax from that amount, Russia's Federal Tax Service (FTS) said.

A dramatic increase in unemployment late last year forced the Russian government to adopt an employment support program worth 43.7 billion rubles ($1.5 billion at the current exchange rate). One of its measures stipulated business startup assistance, which was initially set between 10,000 rubles ($342) and 58,800 rubles ($2,012). Since the summer, all jobless wishing to start up a business had received the maximum assistance.

The Ministry of Healthcare and Social Development said 55,300 people had received business startup assistance worth 3.8 billion rubles ($130 million) from the federal budget.

Up to 100,000 people will receive such assistance by the end of the year, increasing budget spending to 6 billion rubles ($205.3 million), Deputy Minister Maxim Topilin said.

However, the FTS said in a letter in September that a 13% income tax must be paid from the assistance money because the list of incomes from which the tax is not paid does not include business startup assistance (Article 217 of the Tax Code).

This decision has been coordinated with the Finance Ministry, reads the letter signed by deputy FTS head Sergei Shulgin.

The Healthcare and Social Development Ministry has decided to help the unemployed. "We will conduct consultations with the Finance Ministry to amend the Tax Code to lift taxes from the business startup assistance granted to the jobless," Topilin said.

The Healthcare and Social Development Ministry has not yet submitted an official request, and the Finance Ministry will consider it as soon as it is received, a spokesman for the Finance Ministry said.

The Russians who receive business startup assistance count every kopeck, and so it is extremely important for them to lift taxes from it, said Dina Krylova, a presidium member of the OPORA Rossii association of small and medium-sized businesses.

Dmitry Kostalgin, a partner at Taxadvisor, said the Tax Code provides reasons for lifting taxes from such assistance. For example, Article 217 reads that taxes shall not be levied on state allowances and other forms of compensation paid in accordance with legislation.

"The catch is that the business startup funds allocated to the unemployed are registered as subsidies, not allowances," Kostalgin said.

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