What the Russian papers say

Putin to celebrate Nord Stream victory over environmentalists / Moscow and Washington, no joint missile defense shield - analyst / BPS-2 pipeline launch won't reduce Russian oil shipments to Europe / Court says Sakhalin-2 operators must pay 32% profit tax

RBC Daily

Putin to celebrate Nord Stream victory over environmentalists

On Wednesday, Russian Prime Minister Vladimir Putin will address the Baltic Sea Action Summit (BSAS) in Helsinki, Finland.

Moscow considers the summit a platform for launching a media campaign to promote construction of the Nord Stream gas pipeline, planned to link Russia and Germany via the Baltic Sea, and as another opportunity for bilateral talks.

According to sources in the Russian government, Putin would like to get acquainted with Lithuanian President Dalia Grybauskaite, the former EU commissioner for financial programming and budget who actively opposed the Nord Stream pipeline.

Putin's involvement in the summit was prompted by insistent requests from Finnish leaders, with whom he maintains good personal contacts, sources in the Russian government say. Putin plans to discuss ways of combining efforts to preserve a unique environmental system and construction of the Nord Stream pipeline, necessary to facilitate European energy security.

The opponents of Nord Stream from the three Baltic States and Poland have been using environmental issues as their main argument. Consequently, Moscow views the Helsinki summit as a platform for launching a media campaign promoting the start of construction on pipeline this spring.

"Despite the agreements, many variables can still complicate the project's implementation," said Dmitry Abzalov, an analyst at the Center for Current Politics, a Moscow think tank.

"Swedish demands to limit construction during fish spawning are hard to meet. We must launch a positive media campaign right away," Abzalov said.

Mikhail Krutikhin, a partner and analyst with the independent Moscow-based RusEnergy consultancy, said Putin's speech would facilitate the trans-Baltic pipeline's successful construction by Russian energy giant Gazprom. "The opinions of opposing parties can be overlooked, now that consent has been received from Scandinavia," Krutikhin said.

Grybauskaite, a longtime opponent of the Russian gas pipeline, has stated bluntly that she would be happy if the project were removed from the agenda. Of all the bilateral meetings scheduled for Helsinki, Putin prioritizes talks with Grybauskaite.

Both leaders have voiced a mutual desire to get acquainted, Russian government sources said. According to Krutikhin, the meeting is also motivated by energy concerns. Lithuania has virtually shut down its Ignalina nuclear power plant, while Russia plans to launch construction of a nuclear power plant in neighboring Kaliningrad Region. Vilnius is seriously concerned about these plans.

Rossiiskaya Gazeta

Moscow and Washington, no joint missile defense shield - analyst

Russia's response to the United States' decision to reconfigure its missile defense system in Europe has been mild because, first, possible threats to Russia's security from U.S. missiles in Romania are less pointed, and second, Moscow wants to complete talks on the new strategic arms reductions treaty, according to Nikolai Zlobin, director of the Russia and Eurasia Project at the World Security Institute.

An equally important aspect of Russia's reaction to the Romania deployment plan is possible cooperation in establishing a joint system.

For Washington, cooperation with Moscow is a fairly safe way to guarantee security in the region. However this appears difficult due to the continuing differences in assessing the Iranian threat, let alone prevention.

As long as Moscow and Washington view regional security issues so differently, a joint anti-missile defense system in the area is unlikely. These differences are based in each country's respective security policies, something that cannot be ignored, and not in technical specifications or deployment locations.

U.S. President Barack Obama took some steps to "reset" relations with Russia. Ukraine and Georgia will not for the time being join NATO. A commission chaired by the two presidents marks the long-awaited start of a process of institutionalizing bilateral relations. Russia, for its part, also made some moves to meet the U.S. halfway, especially on Afghanistan. One of the sore points remains the post-Soviet space, where the interests of the two countries often clash. But their laissez-faire attitude toward the Ukrainian presidential election shows the possibility of compromise.

Both sides wish to reset their policies. It would be a setback if the process of cultivating mutual confidence were to end before it started simply because of an overreaction from Moscow on U.S. plans to deploy anti-missiles in Romania. In any case, Washington would likely ignore Moscow's doubts.

Kommersant

BPS-2 pipeline launch won't reduce Russian oil shipments to Europe

Despite the recent conflict with Belarus, Transneft is not planning to cut oil shipments to Europe across that country, even after the second leg of the Baltic Pipeline System (BPS-2) is completed. The company plans to secure the 30 million metric tons of crude a year required to fill the pipeline by redistributing supplies currently shipped through Ukrainian and Polish seaports.

Analysts warn that an excessive Russian oil supply in the Northwestern region could send prices lower.

BPS-2 will probably be completed a year from now, eight or nine months ahead of schedule - completion was planned for the third quarter of 2012, Transneft head Nikolai Tokarev said in an interview with a corporate magazine.

The government approved the BPS-2 project in early 2007, shortly after an oil transit conflict with Belarus in December and January. The dispute cropped up again in early 2010, as the two countries failed to reach an agreement on the amount of crude oil to be supplied at duty-free rates. Belarus threatened to raise oil transit fees in response to any Russian imposed limitations.

Yet, Tokarev assured, tensions with Belarus will not force Russia to cut the amount of oil shipped to Europe through that country. "Concerns have been voiced that BPS-2 would influence Russian exports to Europe. But Russia will not walk away from the historical East-European markets - there are refining facilities built during Soviet times and they are technologically designed for Russian crude oil specifications," he explained.

In his words, 85-88 million metric tons of Russian oil are being transported annually to Europe across Belarus. "There is no plan to cut these volumes. Some oil will be diverted from the Ukrainian port of Yuzhny route, and from BPS-1 [a pipeline to the port of Primorsk in the Leningrad Region], which is currently overloaded," he said.

BPS-1, which was designed to transport 70 million tons of crude a year, is effectively pumping 74 million now, Tokarev said. Another Transneft source added that part of the oil currently being shipped from Ukrainian and Polish ports will be diverted to BPS-2.

However, if the oil currently shipped across the Black Sea and on through the Mediterranean, is diverted to the Baltic coast, Russian oil prices in the northwestern region could drop because of the increased supply, warned Vitaly Kryukov from the Capital investment company.

Vedomosti

Court says Sakhalin-2 operators must pay 32% profit tax

The profit tax for contract holders of the Sakhalin-2 oil and gas offshore project in Russia's Far East has been set at 32%, but they will be able to use privileges denied to other companies.

The board of Russia's Supreme Arbitration Court heard on Tuesday a dispute between Schlumberger, a Sakhalin-2 contract holder, and the Federal Tax Service department for the Sakhalin Region.

Schlumberger, a global oilfield and information services company with a focus on energy, filed a lawsuit contesting the additional taxes and penalties that together are worth 63.7 million rubles ($2.1 million).

Three different courts have ruled that Schlumberger is to pay the 32% profit tax, as opposed to the 24% profit tax in 2004-2006 and a 20% profit tax in 2009. The 32% tax is stipulated in the production sharing agreement (PSA) signed in 1994 between Russia and project operator Sakhalin Energy.

At the same time, the courts said the company could use profit tax privileges when investing in fixed assets, as stipulated in the PSA, even though they have been removed from the Tax Code.

Schlumberger, which filed a lawsuit protesting the 32% profit tax, said the PSA reads that the tax must not exceed 32%, which means that it can be lower.

In the 1990s, the profit tax was as high as 35%, and so the PSA protected operators, but the use of consistent tax rules by everyone appears to be a more equitable solution now, said Rustem Akhmetshin, a senior partner at Pepeliaev, Goltsblat & Partners, which represented the interests of Schlumberger.

However, the three-member Board of the Supreme Arbitration Court in July refused to hear an appeal, saying that the PSA stipulated a special tax schedule for operators, contract holders and subcontractors.

The Russian tax agencies, also dissatisfied with the courts' rulings, have also appealed, though belatedly. However, the federal commercial court of the Far Eastern Federal District heard the appeal and later ruled that Schlumberger should be stripped of its right to privileges stipulated in the PSA.

On February 9, the Board of the Supreme Arbitration Court reversed the ruling of the Far Eastern court, saying that it violated the rules of procedure, and confirmed the previous ruling of the courts.

This means that Schlumberger will enjoy PSA privileges but must pay a 32% profit tax, Akhmetshin said.

The rationale behind the decision, which has not yet been made public, will set a precedent for any future lawsuits filed by other contract holders, the lawyer said.

For example, Sakhalin Shelf Service, which services and supplies Sakhalin oil and gas projects, is in litigation to invalidate the tax agencies' claims for 148 million rubles ($4.87 million).

Saipem UK Ltd. (drilling oil and gas wells), which has been ordered to pay the 32% profit tax, could still appeal the decision of the Far Eastern court.

MOSCOW, February 10 (RIA Novosti)

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