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RIA Novosti

Analysis & Opinion

What the Russian papers say

20:00 19/01/2009

MOSCOW, January 19 (RIA Novosti)
Russian, Ukrainian premiers announce end of gas conflict, Europe still cold / Russia fails to solve problems through West / Facing loss of business, Oleg Deripaska takes up the helm again / Aeroflot set to buy Czech Airlines /

Vedomosti

Russian, Ukrainian premiers announce end of conflict, Europe still cold

The prime ministers of Russia and Ukraine have announced the settlement of the gas conflict, as Kiev agreed to pay $360 per 1,000 cu m of gas, according to Vedomosti sources.
Ukraine might have decided it could do without Russian gas for a while, analysts add.
Two days of top level consultations in Moscow followed by a five-hour meeting between Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko, have resulted in some progress. The two officials announced late last night that they had reached an understanding.
However, they still need to wait for President Viktor Yushchenko's reaction, as his opinion may be very different from Tymoshenko's. He could even take her success as his personal defeat in the ongoing political campaigning in the run-up to the presidential elections in Ukraine.
The European Union isn't overenthusiastic about the news, not after they have been waiting for two long weeks.
Ferran Tarradellas, the European Commission's energy spokesman, commented indignantly that the EU had heard many statements, but no gas arrived.
A Russian official said European consumers will have to wait a little more, as gas will only reach them in 75-100 hours.
Essentially, Putin and Tymoshenko reached a deal by trying "not to humiliate Russia or offend Ukraine," explained Alexander Gudyma, Tymoshenko's gas advisor. That is why the gas price is higher than Ukraine had expected, while transit fees remain unchanged until the end of this year. The important part is to remove intermediaries from the supply chain, Gudyma said.
Mikhail Korchemkin, director of the East European Gas Analysis consultancy, said Ukraine's plan is to sign a first-quarter gas price agreement but not buy any gas yet. Naftogaz had around 17 billion cubic meters (600 bcf) in its underground tanks as of the end of last year.
As for a long-term contract, Russia and Ukraine will discuss that in March, when global prices are expected to fall. Ukraine's position will become stronger in spring anyway because it will have to transport less gas to Europe while beginning its own seasonal accumulation of gas in storage tanks.
Ukraine is a unique customer, Korchemkin said, because its gas consumption in spring and summer is higher than in winter.

Moskovsky Komsomolets

Russia fails to solve problems through West

Russia and Ukraine appeared to be ready to settle their gas conflict last weekend. Nobody can guarantee the implementation of their agreement, but the intermediary results of the conflict show that Moscow has failed in its attempts to use the West to pressurize Kiev.
Russia had to resume direct talks with its Ukrainian partners based on complicated gas payment schemes that are clear only to the initiated few.
In terms of logic and justice, Russia had the upper hand in the gas conflict with Ukraine. But it has again been reminded strongly that global politics is based on individual countries' interests, not logic or justice.
No matter what turn the Russia-Ukraine gas conflict takes, the West will always act in accordance with its friend-foe system, where Russia will always be a foe. To the West, Ukraine is a country of the "victorious orange revolution," while Russia is "the cradle of Putin's authoritarianism." Like almost all EU countries, Ukraine is an energy consumer, while Russia is a member of the rival "suppliers club."
These facts predetermined the pro-Ukrainian policy of the West. During the massacre by Georgian troops in South Ossetia last August, Washington beat its chest but said it did not matter who started the war. The EU leadership acted comparably during the Russian-Ukrainian gas war, claiming it cannot understand who is right and who is wrong in the conflict.
The West only needed to hint at its desire for the current Ukrainian leadership, who badly wants to join NATO and the EU, to act to fulfill it. However, contrary to Moscow's expectations, the West refused to take the hint.

Kommersant

Facing loss of business, Oleg Deripaska takes up the helm again

The crisis is forcing shareholders to take up the day-to-day running of their companies again. Now Oleg Deripaska, the controlling shareholder of aluminum giant RusAl, whose heavy debt has already lost him part of his business, has followed in the footsteps of Alexander Abramov, the founder of Evraz Group.
Market players and analysts believe it was his difficult financial position that made Deripaska become RusAl's general director in place of Alexander Bulygin, who has led the company for more than five years. Margin calls from lending banks have already stripped Deripaska of 25% of his shares in the Canadian auto component company Magna and 10% of the German developer Hochtief. Although early in the year he agreed to buy a 25% stake plus one share of Norilsk Nickel from Mikhail Prokhorov, Deripaska never paid the deal in full. In October, the RusAl owner owed the ONEXIM Group president more than $1.4 billion, and it is still unknown if he has repaid any of this debt. In October, RusAl had to pledge its blocking stake in Norilsk Nickel with Vnesheconombank as collateral to obtain a loan of $4.5 billion. RusAl also pledged its main aluminum smelters - in Krasnoyarsk, Bratsk, Novokuznetsk and Sayanogorsk - while the state received the right to place its representatives at RusAl.
According to Dmitry Smolin, Uralsib brokerage analyst, RusAl's total debt may be as high as $16-18 billion. With aluminum prices at $1,500 per ton, the company may prove unable to pay off such a debt, the analyst believes. But RusAl is Deripaska's key holding, and if the worst comes to the worst he may agree to lose Norilsk, but will fight for RusAl tooth and nail, the analyst said. It is not surprising that in such a situation the businessman has decided to run the company himself, Smolin added.

Vedomosti

Aeroflot set to buy Czech Airlines

Despite the global financial crisis, Aeroflot, Russia's largest air carrier, will file a request for the purchase of Czech Airlines (CSA). In the past, Aeroflot has unsuccessfully tried to buy state-owned stakes in three other European airlines, namely, Alitalia, Austrian Airlines and Serbia's Jugoslavenski Aerotransport (JAT Airways).
On January 19, the Czech Finance Ministry will announce the terms of a tender for privatizing a 92% CSA stake, ministerial spokesperson Suzanna Hoholova said.
Aeroflot plans to bid in the tender, deputy corporate CEO Mikhail Pouboyarinov told the paper, but declined to say how much the company was willing to pay for CSA.
Aeroflot CEO Valery Okulov focused on CSA in October 2007 when it became obvious that his company would not buy into Alitalia.
Corporate spokesman Lev Koshlyakov said Aeroflot would apply for a loan together with an unspecified partner and use it to finance the deal.
VTB Capital's transportation analyst Yelena Sakhnova said CSA could be worth around $800 million, that its 92% stake would cost over $735 million, but that an undisclosed corporate debt had to be deducted from the sum total.
Yevgeny Shago, chief analyst at Ingosstrakh Investment, said CSA was not worth more than $400 million, and that Aeroflot hardly needed a more expensive asset for entering the European market.
Shago said Aeroflot could borrow money at state banks or on the European market, and that its debt to EBITDA ratio was just over one point.
This is the best asset eyed by Aeroflot, Oleg Panteleyev, the editor of the aviation web site Aviaport.ru, told the paper. He also mentioned CSA's low debts and sound positions in Eastern Europe.
However, the CSA purchase is now less profitable than a year ago because European air-traffic volumes continue to decline against the backdrop of tougher competition. The International Air Transport Association said European passenger-traffic volumes had increased by 2.2% last year but fell by 1.3-4.6% in October-November 2008.

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