MOSCOW, February 6 (RIA Novosti)
Antitrust Watchdog Predicts Sharp Rise in Gasoline Shortages
Shortages of motor fuel in Russia will surge by 7000 percent by 2015, the Federal Anti-monopoly Service (FAS) has said, based on its gasoline consumption and production estimates.
Production will decline due to the adjustments that 12 Russian oil companies have made to their four-party agreements with the FAS, the industrial safety watchdog and the technical regulations agency last year. Two years ago, the government required Russian refineries to modernize their facilities. On January 1, 2013, Russia introduced a ban on selling low quality Euro-2 gasoline. Euro-3 will be banned from 2015 and Euro-4 from 2016.
However, companies have revised their modernization capabilities and downgraded their production plans for the environmentally friendly Euro-5 fuel from 38.6 million to 17.3 million metric tons in 2015, a FAS source said. At the same time, they have increased their Euro-3 and Euro-4 production plans. The law allows them to continue producing the low quality fuel for export. As a result, the shortfall of “legitimate” fuel will reach 8.2 million tons in Russia two years from now.
Rosneft will have a 6.3 million ton shortfall of production in 2015, the largest on the Russian market. This is equal to one-sixth of annual consumption.
The company is also unlikely to launch a catalytic reforming unit at its Novokuibyshevsk plant this year, the watchdog warned. Rosneft does not share this concern, arguing that its modernization program is going according to plan.
At the same time, neither Rosneft nor Gazprom Neft agreed to comment on the FAS fuel production estimates.
Although some of the fuel companies might be falling behind on meeting the upgraded standards, a shortage of millions of tons sounds unlikely, a LUKoil representative said. The company estimates the potential fuel shortage caused by the upgrade in fuel quality to be no more than 600,000-700,000 tons this year. LUKoil has not yet prepared estimates for 2015, but it is no longer manufacturing Euro-3 and Euro-4 fuels.
The LUKoil representative suggested covering the deficit with imports from Belarus, which has modernized refineries and is a major fuel exporter.
The FAS backed this proposal, adding that the government needs to consider fuel imports from Belarus, Kazakhstan and Europe as well as tapping state fuel reserves in case of severe need.
Some companies may fail to meet the government’s plan to modernize their facilities, said analyst Vitaly Kryukov from Capital investment group. The situation will become clearer closer to 2015. However, the government is unlikely to change the deadlines for banning sales of Euro-3 fuel because it would put those companies that have invested more in modernization at a disadvantage.
Belarus could easily cover the deficit of high quality fuel in Russia, but it would have to rechannel its exports from Europe to Russia, said Dmitry Aleksandrov, head of the research department at Univer Capital. Although this could be more efficient financially due to lower shipment costs, Belarus is likely to try to negotiate additional preferences in exchange.
London Court Lifts Seizure of Malofeyev’s Assets
The UK High Court has made its final ruling in the complaint from VTB Capital plc (a VTB subsidiary), which is currently in dispute over a $225 million loan repayment with two companies of the Marshall Group, its founder Konstantin Malofeyev and Nutritek International Corp. The court refused to proceed with the case in the UK and reclassify the lawsuit in order to make Malofeyev bear personal responsibility for the loan agreement with VTB Capital, which would have increased the damages to $330 million.
The court lifted the seizure of Malofeyev’s assets from today since the case, it ruled, is outside UK jurisdiction.
VTB intends to continue to defending its interests in every possible jurisdiction, says a source in the company.
In 2007, VTB Capital offered Russagroprom a loan to purchase six dairy enterprises from Nutritek. Soon after the deal was closed, Russagroprom stopped repaying the loan. VTB discovered that it had been misled by Nutritek about the actual assets of Russagroprom. It was also revealed that the seller and the buyer were affiliated and both controlled by the Marshall Group. The bank filed a fraud suit against Marshall, Malofeyev and Nutritek. In November 2011, the court ruled that the case is out of its jurisdiction but Malofeyev’s assets in Cyprus, the Cayman Islands and the British Virgin Islands, which total of $200 million, must remain frozen until the case is tried in another court.
The frozen assets included Marshall’s shares in the Universal Telecom Investments Strategies fund registered in the Cayman Islands and a 10.5 percent holding in Rostelecom common stocks. The fund was free to manage its stocks but the money recovered from their sale would have to remain in the fund.
Malofeyev is said to be considering selling his Rostelecom shares. The process will be easier now that the seizure of the assets has been lifted. One of the potential buyers is Leonard Blavatnik. A source familiar with the negotiations says he has been offered a 167 ruble ($5.5) per share deal but this is not a fair price. Only yesterday, Rostelecom shares were trading at 121.5 rubles ($4) and Marshall’s entire portfolio was worth 36 billion rubles ($1.2 billion). Also, Blavatnik would rather wait until the portfolio is free from any restrictions.
A source close to Malofeyev claims reports of the businessman’s plans to sell the shares are only rumors. Malofeyev himself refused to comment, as did the representatives of Marshall Capital, Alfa Group, the UK High Court and the press service of VTB.
Another Corruption Scandal Hits the Defense Ministry
A new corruption scandal was reported on Tuesday. It hit Remvooruzhenie, one of the Defense Ministry’s Oboronservis agencies. Police investigations revealed that the Defense Ministry was receiving components of questionable quality for homing torpedoes and at inflated prices. The deal was concluded by Remvooruzhenie. Investigators say Admiral Gennady Suchkov, an adviser to the Defense Minister, lobbied for the suppliers’ interests. Nine years ago, Suchkov was given a suspended sentence following a nuclear submarine disaster.
Preliminary police investigations showed that the Bars Research and Production Association, based in St. Petersburg, supplied components under a contract with Remvooruzhenie. It, in turn, purchased these components from the Kirov Engineering Plant in Almaty in Kazakhstan, which used to manufacture them, via the Russian-Kazakh Arsenal-Mashzavod Company. A total of 45 component sets for torpedoes were delivered by plane in 2010. Bars paid its partners 12 million rubles, receiving 25 million rubles from Remvooruzhenie.
The next delivery took place in 2012. This time the parties concluded contracts for the supply of 60 million rubles worth of components. Bars expected to receive 120 million rubles from Remvooruzhenie.
But last December the police searched Bars offices and confiscated 40 supplied sets and covering documents.
The official reason, the police said, was that Bars and Arsenal-Mashzavod did not have the necessary licenses.
Military representative Grigory Kolodyazhny, who took delivery of the components, had doubts about their quality and price. “I suspect the components are from old Soviet-era stocks,” he told Kommersant.
The police also took note of the fact that Defense Minister’s adviser Gennady Suchkov could have lobbied Bars and Arsenal-Mashzavod interests. In 2011, he suggested setting up an inter-departmental task group “to re-certify oxygen torpedoes and service them at Oboronservis plants.” The admiral made himself chairman of the group, also bringing in Vladimir Fitsner, Bars General Director, who once served under Suchkov in the Northern Fleet.
A Kommersant source says such task groups were practically never checked, and founding documents were signed by Anatoly Serdyukov, the then Defense Minister, “without so much as a glance.”
However, Fitsner is protesting. “I do not see any reason why law enforcement officials seized all the papers and the parts,” he complained. He said the free customs space between Russia and Kazakhstan means that no licenses are required. The incident is pure provocation, and one could even call it theft which violates our contract,” says Fitsner.
Kommersant failed to draw any comments from Admiral Suchkov. His former attorney Vladimir Cherkasov (who secured the admiral’s suspended sentence in 2004 following the deaths of the crew of the K-159) said he did not believe the admiral was involved in any shady affairs. “He is a completely honest person,” he said.
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