MOSCOW, August 13 (RIA Novosti) Russian coal companies may nearly double exports/ Rosneft refuses to pay Yukos's debts/ J.P. Morgan ready to work with rich Russians/ Arctic oil will be worth its weight in gold/ Who are Russians' friends and enemies?
Russian coal companies may nearly double exports
Russian coal companies have an opportunity to nearly double their exports since the German government decided to stop coal production by 2018 due to high production costs. Germany's RAG Coal International GmbH, which deals in coal, chemicals and property, has already started negotiations with some companies, including the Siberian Coal Energy Company (SUEK), Russia's largest coal producer and one of the world's top ten producers, on an increase in fuel purchases. It will be difficult for Russian companies to organize additional supplies of over 50 million metric tons of coal a year to Germany, but they will be able to increase their export earnings by $1.3 billion.
According to the estimates of Alexei Pavlov, head of research at the VIKA investment group (IG VIKA), total exports of Russian coal amount to about 50 million metric tons a year, of which 30% is delivered to Western European markets, primarily Germany and Britain. It is more profitable to sell coal in Europe than in Russia, as one metric ton of thermal coal costs about $30 in Russia and at least $60 in Europe.
Igor Nuzhdin, an analyst with Zenit bank, calculated that the replacement of German coal by Russian coal in Germany's imports will give Russian companies an additional $1.3 billion a year.
However, experts fear it will be difficult for Russian companies to fully meet Germany's requirements. Alexander Andreyev, deputy general director for strategic planning of the Raspadskaya Coal Company, said that Russian coal may prove non-competitive because of high transport tariffs. It may face competition from cheap coal from Australia and the Republic of South Africa. According to Nuzhdin's estimates, Russian coal companies will have to increase coal output by no less than 7%-10% and partially redirect export flows.
Coal companies do not share these misgivings. "If Germany needs more [coal] supplies, we are ready to increase them," said Alexei Naumenko, SUEK's press secretary. Colleagues at the Kuzbassrazrezugol Coal Company (Russia's second largest coal exporter) are of the same opinion. Stepan Dubkov, head of the company's press service, said that by 2012 the company would produce 57 million metric tons of coal, increasing annual output by nearly 20%.
Rosneft refuses to pay Yukos's debts
An obscure investment company named Vesta may help state-controlled oil producer Rosneft to get rid of an uncomfortable creditor, Yukos Capital S.a.r.l., affiliated with bankrupt oil company Yukos.
On August 9, Vesta filed four suits with the Moscow Arbitration Court, demanding that the court recognize as invalid four loan agreements between the Luxembourg-based Yukos Capital and Yuganskneftegaz, the former core production unit of Yukos, signed in the summer of 2004.
According to the financial report of Yuganskneftegaz for the fourth quarter of 2004, it signed four loan agreements with Yukos Capital S.a.r.l. in July and August that year worth a total of 11.2 billion rubles ($439 million), with maturity on December 31, 2007.
In December 2004, Yuganskneftegaz was sold as part of repayment of Yukos's debts; the ultimate buyer was Rosneft.
Vladimir Yurasov, a lawyer with the Moscow-based law firm Kniazev & Partners, said Vesta was operating on behalf of Rosneft, which is responsible for part of Yukos's debts.
If the court grants Vesta's suits and invalidates the four loan agreements by the end of this year, Rosneft's debts will shrink by $439 million.
A Rosneft spokesman declined to comment on the issue.
Vesta, which is not listed in the state register of legal entities, was set up in 2003 as a brokerage. According to the Federal Statistics Service, its 2005 revenues were 532.1 million rubles ($20.86 million at the current exchange rate) and profits were 1.6 million rubles ($62,720).
Information from the SPARK database shows that Anatoly Stanilovsky combined the posts of the head of Vesta and Rosnefteimpex, where Rosneft holds 25.3% of voting shares, until August 2006.
Business & Financial Markets
J.P. Morgan ready to work with rich Russians
J.P. Morgan (Suisse) S.A., the private wealth manager of JPMorgan Chase, plans to start working in Eastern Europe and Russia. According to experts, the Russian market for wealth management of local millionaires can easily accept one more player.
However, western banks will find it difficult to hire an appropriately skilled team, as foreign managers do not know how to work with Russian clients.
Pablo Garnica, managing director of the private bank in Geneva, said: "There are lots of entrepreneurs in those countries making a lot of money."
There were 119,000 Russians with $1 million in assets last year.
Three western financial groups are working with them - Credit Suisse, HSBC, and UBS. The most successful Russian wealth managers are Troika Dialog, Uralsib and Renaissance Capital; several other banks and investment companies also offer private banking services.
Dmitry Zhuk, head of Renaissance Investment Management, said: "There are few players and very many rich people in the [Russian] market. So I see no obstacles to the emergence of one more western bank."
At best, JPMorgan will need at least a year to propel its Russian office, even if it has a recognized brand name.
Nikita Ryauzov, head of investment banking at MDM-Bank, said: "Despite the huge development potential of the wealth management market in Russia, this is a highly competitive segment, and any newcomer wanting to succeed will have to pursue an aggressive marketing policy, and offer [its own] know-how to sophisticated clients."
Sergei Zatsepa, marketing director with the Dokhodnye Investitsii (Profitable Investment) managing company, said: "The most difficult task for a western bank is to form an [efficient] team and hire [good] marketing specialists. Practice shows that foreign managers don't know how to work with Russian millionaires."
Experts have calculated that JPMorgan's business in Russia could initially grow by $1 billion a year. For comparison's sake, Renaissance Investment Management plans to increase the volume of management funds from $3 billion to $5 billion this year, according to Zhuk.
Arctic oil will be worth its weight in gold
The benefits of gaining mineral resources in the Arctic from a depth of four kilometers below the partially ice-covered surface appear to be enormous: experts quote figures as high as $500 per barrel of oil equivalent. But these hopes are mere fantasy. No one can give an exact figure because the necessary technologies simply do not exist yet. But this does not mean that this will always be the case.
For the moment Russia has no technology of its own to produce oil or gas from under Arctic waters. But such technology is available to several large international companies taking part in Russian projects. The latest example is France's Total and its participation in the development of the Shtokman deposit. Similar technologies are used by Norsk Hydro, Conoco Phillips, ExxonMobil, Statoil, and Chervron. If Russia fails to develop its own methods, it will not be able to do anything in the Arctic without Western partners. To build its own capacity, Russian companies will have to invest several billion dollars.
Drilling at depth of four kilometers is costly and difficult. It will be even more difficult to pump out the oil and gas. But even this problem can be tackled in principle. However, there is a third roadblock - ice. The ice and snow on the North Pole are so deep that it renders all present technologies inoperative. It is not enough to have an ice-breaker to cut the ice - it has to be constantly cleared away in case a platform is damaged or swept away. In winter the effort will demand enormous costs.
Nevertheless Russia, which has until recently obediently followed in the wake of key world players, has tossed such a hefty stone into the quiet pool of Pax Americana that all parties concerned will have to respond to its widening ripples. One can go on indefinitely saying this is not the 15th century, when territories could be staked out by hoisting a flag, but Russia has set off a global discussion on an issue that will have to be solved sooner or later. And the sooner the Arctic's legal status is determined, the better, because it will reduce the danger of an armed conflict. At any rate, no one is going to fight for real now. But they will have to kick themselves for letting the Russians be the first to the North Pole again.
Who are Russians' friends and enemies?
Russians have a mixed view of the world. According to the July survey by the Levada pollster, 74% of them consider Russia a Eurasian state with its own development path (compared to 53% in 2001), while only 10% see it as a Western state and 7% as an Eastern one.
As many as 46% of respondents said they viewed major Western countries as Russia's adversaries, and 42% said Britain, the United States, Japan, and Germany are its partners.
The United States is traditionally viewed as the Russia's main adversary, although the degree of hostility depends on the authorities' international moves and their coverage by the state-controlled media.
In April, when President Vladimir Putin's speech at the security conference in Munich determined the general mood, 48% of Russians had negative feelings about the U.S. After Putin met with U.S. President George W. Bush in Kennebunkport, Maine, in early July, 52% said they had a positive attitude to the U.S., while 36% gave negative responses.
Alexei Grazhdankin, deputy head of the Levada Center, said: "Russians' attitude to the United States has improved in the last few years. It was much less positive eight years ago."
He said the public reacted promptly to Washington's moves, becoming more critical during the bombing of Yugoslavia in 1999 and the Iraqi war in 2003.
"When we speak about the United States as a geopolitical player, it is portrayed as an adversary," Grazhdankin said. "When we consider business cooperation, it is a partner. And if we ask Russians about their attitude to Americans as a nation, there will be many more positive answers. Our leaders' moves do not influence our attitude to the people, as we watch American films and sympathize with their main characters which is normal."
According to sociologists, Georgia and the Baltic countries are considered to be more bitter adversaries than the United States. "Conflicts with them erupt every year, which is why the U.S. does not rank high on the list of our adversaries," Grazhdankin said.
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