MOSCOW, October 23 (RIA Novosti) Putin's system threatens Russia's future/December parliamentary elections to heighten tensions between Russia and Europe/Tymoshenko's supporters set to provoke Russia-Ukraine gas war/Iran buys Israeli fighter jets/Experts forecast more transactions on Russian insurance market
Putin's system threatens Russia's future
Insiders in President Vladimir Putin's team, who have preferred to influence decisions behind the scenes, have come out of the shadows.
The pool of the president's "grey eminences" includes Sergei Chemezov, board chairman of carmaker AvtoVAZ and head of state arms exporter Rosoboronexport, Prime Minister Viktor Zubkov, and Viktor Cherkesov, who has been appointed to chair the national drug enforcement committee.
Many considered them technical figures, non-political leaders in charge of financial flows in their respective sectors. But it has turned out that they have their own views on Russia's future and policy. They have openly presented their claims to molding state policy and demonstrated their ideas and management styles, which to a degree contradict Putin's system of governance.
There have been periods in Russian history when conservative insiders from the chief executives' teams came to the fore offering their recipes for state policy.
In the early 1990s, conservative members on the team of President Mikhail Gorbachev gradually increased their grasp on decision-making. Few people in Russia knew of Valery Boldin, Oleg Baklanov, Oleg Shenin and Valentin Varennikov on August 18, 1991, the day before these technocrats joined the coup against Gorbachev.
In 1995 and 1996, we saw a dramatic strengthening of the group comprising Alexander Korzhakov, Oleg Soskovets and Mikhail Barsukov, who openly tried to force their political plans on President Boris Yeltsin, including the cancellation of presidential elections. But Yeltsin's political will prevented that malignant tumor from spreading through the Russian political system.
Putin's positions are much stronger than Gorbachev's were in 1991 and Yeltsin's in 1996. He still largely controls the situation, but his relations with his team have apparently changed. Like Gorbachev in the past, Putin will have to increasingly take into account the demands of conservatives on his team.
They propose spending Stabilization Fund resources to support enterprises that are friendly to them and strengthen state regulation of the economy, as well as putting a corporation headed by security forces at the country's helm.
These insiders no longer want to remain in the shadows, and Putin seems unable to keep them silent any longer. This evolution of his system of management promises a bleak future for Russia.
December parliamentary elections to heighten tensions between Russia and Europe
Concerns are being raised in Europe over Moscow's persistent silence, as no international organizations have received official invitations to send observers to State Duma elections slated for December 2.
Russia's Central Election Commission (CEC) said it would issue invitations after the registration of all candidates, while opposition sources suggested the government was deliberately asking for trouble.
Andrei Davydov, who heads the CEC international division, confirmed that the CEC had not issued a single invitation to date.
"Russian law does not stipulate any deadlines for sending invitations to international observers. Russia has relevant international commitments, and will abide by them. Each country can decide on the schedule depending on its internal procedures," he said.
The CEC plans to distribute invitations only after the registration of the running parties and independent candidates is completed, which will be no later than October 27. He said Poland had stated two weeks before elections it did not need any international observers at all.
Vladimir Ryzhkov, a non-aligned member of the Russian parliament's lower house and former leader of the liquidated Republican Party, is convinced that international observers "will certainly be invited to the December elections, possibly at the very last minute."
"The Kremlin needs them badly," he said, because "an election's outcome is only definitively recognized as legitimate by the international community if international observers monitor the process and find no violations."
Boris Nadezhdin, secretary of the federal political council of Russia's right-wing SPS party, said he was convinced of the opposite. "Not one of international observers will be invited to monitor the Russian elections. They will be disposed of, just like the opposition parties are, because they all are in Vladimir Putin's way. They prevent him from attaining his personal goal of stabilizing Russia, which he interprets as ensuring [pro-Kremlin] United Russia a parliamentary majority," he said.
Tymoshenko's supporters set to provoke Russia-Ukraine gas war
A new Ukrainian government headed by Yulia Tymoshenko, widely tipped to become prime minister, will have to promptly tackle gas issues. Statements made by Tymoshenko's entourage imply that Ukrainian-Russian relations may get worse.
Sergei Teryokhin, who served as economics minister in the previous Tymoshenko government, said Ukraine should get Russian gas in line with contractual, rather than market, prices.
He said Russia was a major gas supplier, and that Ukraine was an important transit nation. The press service of the Yulia Tymoshenko Bloc quoted Teryokhin as saying that "both sides must sit down and agree on the terms of exchanging gas as a commodity for transit services."
However, Teryokhin has made this statement at an inappropriate moment because energy giant Gazprom and Ukrainian gas monopoly Naftogaz Ukrainy are still abiding by a five-year contract due to expire in 2010. Under the contract, Moscow pays Kiev $1.6 for each 100 km traveled by 1,000 cubic meters of gas.
Proposed barter deals would violate the contract, because Gazprom undertakes to pump at least 110 billion cubic meters of gas per year.
On Monday, Gazprom CEO Alexei Miller and Ukrainian Fuel and Energy Minister Yury Boiko discussed preserving the current gas supply arrangement. Gazprom's press service said both men had negotiated the settlement of Kiev's debts, and that national companies were repaying them in line with existing agreements.
But there are no guarantees that the new Ukrainian government will honor such agreements.
Both sides declined to say whether 2008 gas prices were being discussed. But Ukrainian Economics Minister Anatoly Kinakh said the country could only tolerate a 15% price increase and pay not more than $150 for every 1,000 cubic meters of gas.
Iran buys Israeli fighter jets
Iran has signed a contract with China for the delivery of two squadrons of J-10 fighter planes. The design was developed by Israel for its Air Force and then sold to Beijing. Engines for the jets will be supplied by Russia.
Representatives of the Iran Aircraft Manufacturing Industrial Company said China would deliver the total (24 jets) in 2008-2010. Experts, estimating one fighter at $40 million, put the contract's value at $1 billion.
The maximum range of the J-10 with detachable fuel tanks is 2,940 km. In this way, Iran will be able not only to fly over the Persian Gulf, but also theoretically venture as far as Israel and come back to base.
Until now, Iran's longest-reach fighters have been Russian-made MiG-29s (Fulcrum), whose maximum range is 2,100 km.
Experts, however, do not think the two squadrons of J-10s will substantially alter the balance of force in the region.
"The American military has far more planes of more advanced types in the Persian Gulf area," said Konstantin Makiyenko, an analyst with the Center for Analysis of Strategies and Technologies.
"A more likely opponent of Shia Iran is Sunni Saudi Arabia. But even Saudi Arabia, thanks to American assistance, has a more powerful air force than Iran," he added.
In the expert's view, Iran will most likely use J-10s to protect key facilities, such as the nuclear power plant at Bushehr.
Besides, the very presence of J-10 jets could act as a deterrent, said Makiyenko: the fighters can theoretically scuttle any Israeli strike at facilities which Israel may believe are manufacturing weapons of mass destruction.
Experts say that in mid-2007 the Chinese Air Force had a complement of 89 J-10s. According to unofficial reports, China had intended to build 120 such fighters for its needs.
As a propulsion unit the J-10 uses the Russian AL-31FN engine, an upgraded version of the AL-31F turbojet widely employed on Su-27 (Flanker) fighter planes.
In July 2005, China concluded a contract with arms export monopoly Rosoboronexport for the supply within the next two years of 100 AL-31FN engines from Moscow's Salyut plant with an option on another 100 engines.
In the summer of 2007, China exercised its option by signing a new contract for another 100 AL-31FN engines to be supplied within the next two years.
Business & Financial Markets
Experts forecast more transactions on Russian insurance market
This year has seen the largest ever transactions on the Russian insurance market. Shareholders of four out of the five leading companies declared their intention to sell their business or a stake in it. Three transactions have already been made. Their aggregate value is about $2bn, five times more than the total volume of transactions in the sector over the past 15 years. Analysts are convinced that the insurance market is in for a new wave of mergers and acquisitions.
According to a study on mergers and acquisitions (M&A) in the Russian financial sector prepared by PricewaterhouseCoopers (PwC), the world's largest professional services firm, the insurance business is second to the banking sector by the number and volume of transactions signed in 2006 and in January-June 2007.
Gordon Latimir, PwC's financial services chief, said that the Russian insurance market, with its relatively low capitalization and high growth rates, remains attractive for foreign investors. According to Mr. Latimir, far from all major global and European companies are represented in Russia, so a new wave of transactions is most likely on the Russian insurance market in the near future.
Analysts of Russia's Expert RA rating agency are convinced that at present quite a few leading Russian insurers are focused to foreign investments, and are even prepared for the complete sale of their businesses.
Meanwhile, in the race for large insurance portfolios and market share, in which reliability is given second place, and volumes are expanded exclusively by dumping and high commission fees paid to agents, insurance companies are likely to witness an increasing number of scandalous bankruptcies on the Russian market within the next 18 months.
Alexander Grigoriev, director general of Ingosstrakh, one of Russia's largest federal insurance agencies, agrees that a number of leading market players have tried to increase their portfolios as much as possible prior to deals or in preparations for deals. "This will not necessarily lead them to bankruptcy but will surely result in a low quality of the portfolio and lower liquidity," he said.
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Any response would likely boomerang on Russia – the partnership between Rosneft and ExxonMobil is a case in point. The United States has hit Russia with a third round of sanctions. This time the Americans went with a higher caliber weapon, targeting Russia’s biggest energy companies (Rosneft and Novatek) and banks (VEB and Gazprombank).