What the Russian papers say

MOSCOW, November 30 (RIA Novosti) Russia proposes new Helsinki Act / Tehran talks big to scare the international community - expert / Russia, Belarus, Kazakhstan seal Customs Union / Still too soon to celebrate AvtoVAZ solution - analyst

Gazeta, Kommersant, Vedomosti

Russia proposes new Helsinki Act

The Kremlin published a draft treaty on European security on Sunday that should formalize President Dmitry Medvedev's main foreign policy initiative put forth in June 2008, several months after he assumed office.

The president proposed creating new security mechanisms involving all Euro-Atlantic and Eurasian countries.

Vladimir Zharikhin, deputy director of the Institute of the CIS, said the treaty was nearly as good as the Helsinki Act. "If the European countries sign it, the OSCE will become redundant," he said.

However, Zharikhin said the security agreement would not be signed until Europe settles the problems of Kosovo, Abkhazia and South Ossetia.

"Half of Europe thinks the status quo includes Kosovo and the other half does not think so. Russia thinks the status quo should also include Abkhazia and South Ossetia, while the EU rejects the idea," Zharikhin said. "There will be no common security space unless both sides settle these problems."

One legally binding document cannot resolve these issues, said Dmitry Trenin, director of the Carnegie Moscow Center and chair of its Expert Council and its Foreign and Security Policy program.

The problem is Russia's lack of trust in the United States and Eastern Europe's lack of trust in Russia, he said.

Alexander Konovalov, president of the Institute for Strategic Assessment and Analysis, a nongovernmental think tank, said: "The main problem with the [proposed] treaty is that it is based on the principles of the OSCE, which has lost its significance."

Mikhail Vinogradov, president of the Petersburg Policy Fund, said the treaty was most likely drafted to ensure that Russia leads the process for creating a new common security system.

"The key issue on which Russia and the EU differ is the interpretation of threat. To Europe, Russia is a threat. However, in the future this initiative would give Russia an additional trump card in its relations with Europe. It would be able to say, 'We proposed a solution, but you rejected it'," Vinogradov said.

Nezavisimaya Gazeta, Vremya Novostei

Tehran talks big to scare the international community - expert

The Iranian parliament on Sunday asked the government to submit a plan to downscale cooperation with the International Atomic Energy Agency (IAEA). This was the deputies' reply to the "anti-Iranian" resolution the agency adopted on Friday. Tehran is even threatening to pull out of the Nuclear Non-Proliferation Treaty, but analysts think this is a bluff.

"Influenced by domestic politics, the Iranian leadership could decide to withdraw from the NPT to avoid looking weak or giving ground to internal opposition. They could present this approach as a heroic decision they were forced to adopt in the face of international pressure," said Georgy Mirsky, chief researcher from the Russian Academy of Sciences' Institute of World Economy and International Relations.

But perhaps Tehran's loud statements to break off relations with the IAEA, expel inspectors, and continue uncontrolled uranium enrichment are aimed at scaring the international community. The Iranians seem to expect that the West, after calculating the risks, might decide not to push Iran into a corner, but meet it half-way, the analyst believes.

Russian specialists stress that withdrawal from the NPT would not benefit Iran. In the opinion of Andrei Cherkasenko, director of the Atompromresursy Group, a rupture in Iran's relations with the IAEA would jeopardize further Russian-Iranian cooperation in the nuclear power sector. Russia has yet to complete Iran's first nuclear plant in Bushehr, ensure plant safety, or solve a number of engineering problems that the Iranians are unlikely to be able to cope with. Plant operation, for example, will be run by a joint venture to train and improve the qualifications of the Iranian staff servicing the plant. The Iranians could also face the problem of producing reactor fuel rods. Enriched uranium cannot be loaded into the reactor in and of itself. The fuel already delivered by Russia will be enough for one charge only.

Nevertheless, if the UN Security Council demands sanctions, Russia is likely to back them. "The only question is how to make sanctions more effective against the Iranian leadership and less painful for the Iranian people," said Nina Mamedova, head of the Iranian department at the Russian Academy of Sciences' Institute of Oriental Studies.

Vedomosti, Novye Izvestia

Russia, Belarus, Kazakhstan seal Customs Union

Russia, Belarus and Kazakhstan signed the Customs Union agreement on Friday November 27 in Minsk. The new arrangement will take effect on January 1.

The Customs Union is the first step toward a common economic space. However, this does not resolve the problem of WTO accession. Moreover, Russia still has some disagreements with its allies.

"They have finally realized that a building should begin with a foundation rather than the roof," said Vladimir Zharikhin, deputy director of the Institute of the CIS think tank. "A common customs system should come first; then a common economic space, and then a common currency," he added.

"One shouldn't forget potential pitfalls either," he warns. "This union will mean nothing unless a functional supranational body is set up."

A source in the Russian delegation to the summit said Kazakhstan had to make far more changes in its customs policy than the other two members. A total of about 5,000 customs duties had to be raised, First Deputy Prime Minister Igor Shuvalov confirmed. After January 1, a special commission with international authority will be established to adjust the remaining discrepancies. Another delicate problem to be considered next year will be oil export duty, which Kazakhstan does not currently charge at all.

The multi-phase coordination of specific customs rates will take at least two or three years, according to Yaroslav Romanchuk, head of the Mizes Research Center in Minsk. He warned that single customs rates will remain on paper only if there are too many exceptions.

The Minsk summit participants also focused on the next step in integration - a Common Economic Space to be established by 2012. This timeframe was one of the most controversial issues at the talks, with Moscow being even more pessimistic than the other partners, the source said.

President Dmitry Medvedev admitted that no decision had been made on WTO accession. However, he added that there are still two options - either to join as a group or separately, but with a common policy. In Shuvalov's words, a decision has been made to intensify the WTO entry effort, to be completed next year.

Europe is concerned about this integration, said Yulia Tseplyayeva from Merrill Lynch: joining the WTO will make Russia unable, if need be, to restrict auto imports or grant oil and gas price preferences to its CIS partners.

Nezavisimaya Gazeta, Kommersant

Still too soon to celebrate AvtoVAZ solution - analyst

Analysts are divided over a letter of intent signed by Russia's largest carmaker AvtoVAZ and French-Japanese auto giant Renault-Nissan during Prime Minister Vladimir Putin's recent Paris trip.

It is unclear whether Russia will receive state-of-the-art technology or just a cheap platform for poor Third World countries from its partner.

Renault, AvtoVAZ and its shareholders reached a preliminary agreement on supporting the troubled Russian automaker during Putin's visit to France.

Russia and Renault are to invest 50 billion rubles ($1.7 billion) and 300 million euros (14.8 billion rubles) in AvtoVAZ, respectively. Renault's cash investment will total just 60 million euros, with the rest being technology and equipment.

Renault will retain a blocking stake in the Russian company, located in Tolyatti in the Volga Federal District, and may eventually buy additional stock.

It appears that the French-Japanese carmaker is the only company that can help AvtoVAZ overcome the protracted crisis now plaguing it. In terms of expectations, this compares with the initial history of the Volga automotive company, bought by the Soviet Union from Italy in the late 1960s.

However, Renault will prioritize production of its own cars in Tolyatti and will sell them on the Russian market. AvtoVAZ is to improve assembly quality, without the technical benefits of the latest platforms.

Igor Korovkin, executive director of the Association of Russian Carmakers, said the success or failure of Renault's anti-crisis program for AvtoVAZ will eventually depend on production volume.

If the company starts assembling 200,000 to 300,000 Renault Logans annually, it would highlight the serious intentions of French shareholders. But this will be possible only if Renault relocates parts and component production to Russia. Otherwise the project would be hampered by logistics, Korovkin said.

Dmitry Baranov, a chief analyst at Finam Management, said there was no particular reason to celebrate a solution to AvtoVAZ's problems. "It is unclear what we will receive. It has been announced that Renault will transfer some unspecified technology to AvtoVAZ," Baranov said.

The deal's terms may change more than once, said Mikhail Pak, an auto industry analyst with the Aton Investment Co.

The partners will spend three months finalizing the anti-crisis plan. This implies that no final agreements have been reached. The deal could be closed more quickly if technical details were the main issue, Pak said.

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