MOSCOW, October 15 (RIA Novosti)
Radical military reforms announced in Russia/International consultants approve pipelines bypassing Russia/Baltic pipeline construction postponed for a year/Russia bails out British depositors with Icelandic banks/Crisis stops Murdoch from offloading Russian stake/Russian labor market faces financial problems
Gazeta.ru, Vedomosti, Kommersant
Radical military reforms announced in Russia
The Russian authorities have announced the most radical military reforms since the collapse of the Soviet Union in 1991. The Defense Ministry plans to pension off a lot of generals, more than halve its staffs, and reform the Soviet-style armies, divisions and regiments.
Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies, said radical military reform was overdue.
Dramatic reductions may displease generals, said an officer in the Defense Ministry.
There are many rational proposals in the planned reform, such as disbanding undermanned, and therefore inefficient, units. The number and skills of officers at central headquarters are also inadequate. However, if the plan is not implemented correctly, the reforms will not produce the desired results.
General of the Army Igor Rodionov, former defense minister, said accelerated move to a brigade structure could be an indirect result of the conflict in South Ossetia.
"Victory in a limited theater of military operations has convinced the Russian authorities that small mobile units are the best way of achieving success in any modern conflict," he said. "But only a large-scale war could confirm or disprove whether this decision is correct."
Alexander Pikayev, head of the disarmament and conflict settlement section at the Institute of World Economy and International Relations, thinks the Caucasus conflict "has encouraged the Defense Ministry to urgently start the reform." However, "the new system should be implemented very carefully," he said, because "converting from the old to a new system could undermine the army's combat readiness."
Mikhail Babich, a member of the pro-Kremlin United Russia party and deputy chairman of the defense parliamentary committee, said he believed the reforms had been drawn up by a small group of people, and their implementation could undermine the army's combat readiness.
Igor Korotchenko, a member of the Public Council at the Defense Ministry, said such crucial decisions should be made only by the Russian Security Council, with those in charge of the reform made personally responsible for the outcome. And it should be approved by experts and the two parliament houses.
Pavel Felgengauer, a military expert, said: "It is difficult to say when the new army will become effective, but it is a fact that an army based on divisions is no longer combat ready and therefore useless."
Nezavisimaya Gazeta, Kommersant
International consultants approve pipelines bypassing Russia
A Turkmen gas field was recently evaluated by an international oil and gas advisory firm, Britain's Gaffney, Cline & Associates. According to the first-ever external audit of a Turkmen field, the reserves of the south Yolotan-Osman deposit near the Afghan border are comparable with the largest Russian fields.
The international consultants' assessment generally confirms the information provided by the country's government but treated with skepticism until recently. The confirmation of Turkmenistan's reserves means that the Central Asian country has sufficient resources to fill the planned Nabucco pipeline designed to carry Central Asian gas to Europe and bypass Russia.
According to company official Jim Gillett, Yolotan may hold 4 trillion cu meters of natural gas according to the lowest estimate, 6 trillion by the best estimate, and 14 trillion by the highest.
"It is now clear that whatever the results of further verifications, there is more than enough gas to fulfill Turkmenistan's current contract commitments," Gillett said in comments televised on Tuesday.
Six months ago, analysts were skeptical about the Turkmen government's statements about its soil holding around 21 billion metric tons (155 billion barrels) of oil and 24.6 trillion cubic meters (870 trillion cubic feet) of natural gas. They still had fresh memories of former president Saparmurat Niyazov's ambitious and exorbitant claims that Turkmenistan could annually export 150 billion cu meters of gas for the next 250 years.
Underestimated reserves of Turkmen gas fields allowed various experts and Russia's Gazprom to dismiss the pipeline plans cherished by the EU, the U.S., China and Iran as unfeasible.
They questioned the efficiency of laying a pipeline along the Caspian seabed (the Transcaspian pipeline project), as well as the probability that the planned Nabucco pipeline would be filled with gas at all.
Both routes are aimed at breaking Gazprom's monopoly on transport of Turkmen oil and gas to Europe across Russia.
With the new data now available, the Transcaspian project may receive fresh impetus.
Natalia Milchakova, head of fundamental analysis at the Otkrytie financial corporation, said it was hard to tell how soon that might happen. "The same holds true for the Nabucco project. However, while before there were doubts about the Turkmenistan's chances of delivering the required amount of gas, now the stakeholders' greatest concern will be the price of gas. It is clear that they won't be selling it cheap," she added.
Vedomosti
Baltic pipeline construction postponed for a year
Construction of the second leg of the Baltic Pipeline System (BPS-2) won't begin for another 12 months, which moves its completion date to 2012 at the earliest, according to Vedomosti, a popular business daily.
The 630-mile BTS-2 will annually pump 370 million bbl of crude from Unecha to Ust-Luga, with a branch link to Surgutneftegaz in Kirishi. It is expected to lower Russian oil producers' dependence on the East European system Druzhba.
Pipe monopoly Transneft has been waiting for the go ahead from the government and is ready to begin construction right away. But the approval has not been signed yet. A source in the Energy Ministry said the project has already been agreed with all the agencies concerned and it will be sent to the government on October 20. He did not elaborate further.
BTS-2 won't go on stream until 2012, the ministry official told Vedomosti. Transneft had suggested moving the commissioning to a later date from the earlier planned 2011, without providing any written basis.
Transneft cited two main reasons for the delay: first, there is still no agreement on financing, and the previous timeframe was drafted 18 months ago. Second, since government approval has been delayed, it could lead to delays in agreeing the route and land allocation.
The deadline was moved after a thorough study of the project's technological parameters and risk assessment, the official added.
Financing has yet being discussed, Transneft Vice-President Mikhail Barkov said. According to the company's estimate, BTS-2 will cost around 120-130 billion rubles ($5bn). Transneft expects the government to contribute more than half of that amount, Barkov said.
The Finance Ministry was instructed Tuesday to draft a program for Transneft, including possible solutions to the liquidity crisis, availability of lending and debt refinancing, a ministry source said.
Analysts believe that in conditions of the financial crisis Transneft has made a logical move to postpone BTS-2. It is crucial for the monopoly to keep to the deadlines of its core project, the Eastern oil pipeline, said Vladimir Vedeneyev from the Bank of Moscow. As for BTS-2, its timeframe is not so important because it is a political project. Oil producers are willing to wait.
Gazprom Neft is interested in shipping its products through BTS-2, but a small shift in the construction schedule will not play a significant role for it either, the company's spokesman said.
Kommersant
Russia bails out British depositors with Icelandic banks
A delegation of Iceland's National Bank and Finance Ministry yesterday started talks in Moscow with Russia's Finance Ministry and Central Bank to secure a stabilization loan for the island state. No details are yet available, but if Russia issues the loan, it will save hundreds of thousands of British depositors, rather than Iceland's economy.
The Central Bank announced the details of the loan on October 7: four billion euros to be issued at LIBOR + 0.3-05% and to be repaid in 2011-12. Iceland's Foreign Ministry said Russia was not the only state it was negotiating with for a loan. So far, Iceland's Foreign Ministry and National Bank are avoiding only one of the potential sources of funding - the International Monetary Fund.
If Russia's Finance Ministry and Central Bank agree to lend to the National Bank, support will be extended to one of the most interesting segments of the all-European banking system. On October 4-7, the National Bank nationalized the country's three major banks - Kaupthing, Landsbanki and Glitnir Investment Group with more than 200 billion euros in total assets. With Iceland having a population of 300,000, Kaupthing and Landsbanki catered to a client base of over 700,000 depositors.
Iceland's banking system has little if any direct link with Iceland itself. In 2007, 31% of Kaupthing group's earnings of 850 million euros came from the United Kingdom, 26% from Scandinavia, 8% from Luxembourg, and only one-third from Iceland.
Dutch depositors with Icesave (Landsbanki's Internet division), following talks between the central banks of Iceland and the Netherlands, have been guaranteed 20,800 euros per account according to Dutch law (payment will be compensated by Iceland's Central Bank). But Iceland cannot guarantee all British deposits in Icesave: British legislation provides higher deposit guarantees. This is the main stumbling block in talks between the Icelandic and British central banks. Last week, the British Treasury froze Landsbanki's assets in the U.K. totaling 7 billion euros, but Landsbanki declared the move, based on anti-terrorism legislation, unlawful.
Russia's $4 billion euro loan is unlikely to solve all the problems: individual deposits in Landsbanki alone totaled over 15.5 billion euros at the beginning of 2008.
Gazeta, RBC Daily
Crisis stops Murdoch from offloading Russian stake
French advertising firm JCDecaux and Rupert Murdoch's media group News Corp. said they have called off discussions to sell News Outdoor Group.
In a joint statement, the two companies said "economic and capital market conditions have made it increasingly difficult to conclude strategic partnerships on this scale."
Sergei Filchenkov, an analyst with the Finam investment company, said the deal was scrapped over valuation differences of News Outdoors, which analysts put at $1.5 billion.
"The seller and the buyer most likely disagreed on the price," Filchenkov said. "As far as I know, the deal involved an asset swap. Given JCDecaux's current price, it would have had to put up an extremely large stake for the deal. So the financial crisis, which has forced the French company's value down, is one of the factors behind the failure of the deal."
The proposed deal attracted global attention by its high price and Murdoch's loud statements. In mid-August, the media magnate said he wanted to sell his Russian business because of the high country risks.
"The more I read about investments in Russia, the less I like the feel of it," he said. "The more successful we'd be, the more vulnerable we'd be to have it stolen."
The market thought the magnate was putting up a good front, because News Outdoors was at the time fighting tough rivals in the market for outdoor advertising.
The decision to scrap the deal will not affect the Russian market, said Andrei Beryozkin, general director of the ESPAR-Analytic marketing research company.
"ESPAR-Analytic will not change its forecast for the outdoor advertising market," he said. "New Outdoor Russia will not be affected either, because the deal did not involve any change of management or JCDecaux's involvement in governing the company."
Anatoly Kupreyev, director general of Master Ad, an outdoor advertising leader in Russia, said: "In conditions of global economic instability, and in particular sharp fluctuations on the Russian financial market, the key players have taken a timeout. However, outdoor advertising has entered a phase of active transformation, and so decisions approved earlier will not be changed without good reason. Integration will resume on the market as soon as the economy enters a minimum correction zone."
Novye Izvestia
Russian labor market faces financial problems
The U.S. financial crisis has engulfed the world and affected Russian companies and their personnel.
Vladimir Gimpelson, director of the Center for Labor Market Studies at the Moscow-based Higher School of Economics, said crisis-ridden companies would cut back on spending and either make staff redundant or trim their wages.
He said Russians would be shocked after losing corporate bonuses that account for 40-90% of their wages.
"The problem-ridden automotive industry, car dealers and metallurgical companies have stopped hiring new workers and are beginning to lay off their employees," Yulia Vincha, managing partner at the Unity-Staff recruiting center, told the paper.
She said the companies also preferred to lay off contract staff and employees on their probation period. The crisis would affect all economic sectors, and medium-level and top managers would be the first to go, she said.
Grigory Polkan, regional development director with a major consultancy, said there were too many bankers and financial analysts on the labor market, and that employers no longer offered high wages and fringe benefits to their personnel.
"The global financial crisis will soon affect the entire real economy," Maya Toksanbayeva, senior research associate with the Russian Academy of Sciences' Institute of the Population's Socio-Economic Problems, told the paper.
She said local companies would soon downsize production, cut wages and start laying off personnel, and that offering unpaid leave, a feature of the 1990s crisis, was also possible.
Toksanbayeva said financial safety cushions could eventually fail to produce the desired effect, and that public-sector wages would be frozen in conditions of high inflation.
Analysts said employers could use the crisis to pressure their personnel. Some of them would cut wages and introduce additional requirements and restrictions, motivating them by major financial problems.
Toksanbayeva said this was possible because "employers are taking advantage of every opportunity, including labor legislation."
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