GAZPROM AND MEDIA-MOST REACH AN AGREEMENT AGAIN

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GAZPROM AND MEDIA-MOST REACH AN AGREEMENT AGAIN

Komsomolskaya Pravda, November 18, 2000, p. 2

Alfred Koch, chief executive of Gazprom-Media, looked very tired on November 17, after tense and lengthy negotiations with Media-Most.

According to the latest agreement, instead of the $211 million debt (what Media-Most owes to Gazprom), Gazprom-Media will take 16% of the NTV television network, as well as blocking shares (25% plus one) in all other companies of the Media-Most holding, including the Ekho Moskvy radio station, the newspaper “Segodnya”, and “7 Dnei” magazine.

Since Gazprom already held a 30% stake in NTV, now it will have 46%. Moreover, as a guarantee that Media-Most will pay back another debt of $260 million, Gazprom will receive 19% more NTV network shares as security, plus 25% in other Media-Most companies.

Despite such a significant reorganization of Gusinsky’s empire, Koch assured reporters that NTV will be independent of the state and any tycoons, since no one will hold a controlling interest in the network.

Koch also tried to explain why he had pulled out of the previous agreement. According to him, this was because Gusinsky was charged with fraud in absentia, and declared a wanted man. Koch also assured reporters that he had not been forced to withdraw from the agreement “at gunpoint”.

DUMA DEMANDS A HIGHER BIRTH RATE

Kommersant-daily, November 18, 2000, p. 2

On November 17 Duma deputies questioned Labor Minister Alexander Pochinok about what the government plans to do to improve the demographic situation. It was learned that as yet, Pochinok himself is not a suitable example to convince people to have more children.

The labor minister also confirmed that the birth rate is currently falling, while the death rate is rising. In 1999, the total population of Russia decreased to 145.6 million. If this trend is not changed, by 2010 the population may fall to 121 million (not counting migration). Then Russia will be the world’s 14th most populous country (instead of seventh).

Pochinok immediatly rejected all the popular theories about birth rates falling worldwide, and Russia just following the common trend. According to him, Russia’s birth rate is falling five to seven times faster than in Western Europe. However, unlike Europe, Russia still has some reserves that could contribute to increasing the birth rate. These are people who are currently living below the poverty line, and the developing middle class. Pochinok said that the Cabinet has already worked out a special program.

As a result of the meeting, the Duma proposed that the Cabinet should present to the Duma an annual report on the demographic situation. We tried to find out if the Cabinet is planning to set a personal example to the public: rumor has it that Pochinok’s family is expecting a new addition. However, the minister just answered “No comment!” to a direct question from our reporter.

ST. PETERSBURG HAS ITS OWN STRATEGIC DEVELOPMENTS CENTER

Nezavisimaya Gazeta, November 18, 2000, p. 2

A well-known national idiosyncracy of Russia is that a new regime usually sets up new state structures. First, Russia has been divided into seven federal districts, which, in turn, need their own prosecutor’s offices, departments of the Ministry of Justice, and Ministry of Taxes and Duties. However, it seems the federal government is unlikely to stop there.

On November 16, the North-West Strategic Developments Center was opened in St. Petersburg. A similar center is now being set up in Nizhny Novgorod, the capital of the Trans-Volga federal district (it will be called the Strategic Research Center). Although the St. Petersburg opening was well-attended, it seemed rather a formality, which is common for such ceremonies. People spoke of Russia’s need for a new ideology. The center is ready to start work. However, so far there are no plans to work on any big projects, covering the whole North-Western district. According to Petr Shchedrovitsky, research consultant, the first large project will be an overall evaluation of human resources in the regions of the North-West. The center is registered as a non-commercial organization. Officially, it is not a local branch of the Moscow Strategic Developments Center (SDC); the latter is only one of the founders. Nonetheless, it is obvious that the St. Petersburg SDC will be working on the basis of methods and traditions of Herman Gref’s Moscow SDC. By the way, the list of founders is very interesting: apart from the Moscow SDC, they are: Baltika Brewery, the Rossia commercial bank, Telecominvest, and the Granit Research Institute.

ARGUMENTS OVER ADDITIONAL BUDGET REVENUES CONTINUE

Nezavisimaya Gazeta, November 18, 2000, p. 3

Although the government has agreed that not all extra budget revenues next year should be spent on repaying state debt, it seems it will not give in to the Duma so easily. Now the fight centers on the distribution of the hypothetical billions. Yesterday the Duma budget committee approved an amendment to the third draft of the bill on additional budget revenues; according to this, all additional revenues should be equally divided between state debt payments and other spending priorities (primarily social services). However, the Finance Ministry has an opinion of its own. According to Deputy Finance Minister Tatiana Golikova, the Cabinet will require the Duma to reconsider the issue of additional revenues. The Cabinet now insists on spending 70% of the additional budget revenues on repaying state debt, and 30% on other expenditures. Apparently, the closer the date of the third reading (December 1) approaches, the more proposals ther will be on how Russia should spend the additional budget revenues it will supposedly get next year as a result of high world oil prices.

POWER LINES TO CONNECT SIBERIA WITH THE WORLD

Novye Izvestia, November 18, 2000, p. 2

Anatoly Chubais, head of Russian Joint Energy Systems (RJES), has proposed that strategies for the development of Siberia should take into account the unique competitive advantages of Siberian energy resources.

At yesterday’s meeting in Novosibirsk, Chubais suggested a number of economic premises for strategic development of the region, such as establishing an energy market, and introduction of market prices and competition.

That’s why, Chubais said, a restructuring plan has been developed for RJES, which has recently been discussed in Omsk and was supported by regional leaders. According to Chubais, the Siberian electricity sector should become the starting point for the development of the whole of Siberia.

According to Chubais, 183 billion kilowatt/hours of electricity a year is produced in Siberia, which is 21% of all electricity produced in Russia. At the same time, the average tariff per kwh in Siberia is only 18 kopecks, while generally it is 32 kopecks throughout Russia. According to Chubais, in Siberia “the most important, strategic” point is not even production of electricity, but the power grid that connects Siberia with other Russian regions and Europe. Until recently, Siberia was isolated. RJES has taken a number of measures to eliminate the isolation. In particular, RJES has restored the power lines between Siberia and Kazakhstan, which linked it with the rest of the country in Soviet times.

IGOR IVANOV: POSITIONS OF RUSSIA AND JORDAN ARE VERY CLOSE

Novye Izvestia, November 18, 2000, p. 2

Russian Foreign Minister Igor Ivanov said at a joint press conference with Jordanian Foreign Minister Abdel Ilah al-Khatib yesterday that Russia and Jordan have been linked for many years by friendship and cooperation, the foundation of which was laid by King Hussein.

During the meeting with King Abdullah II and talks with Jordan’s foreign minister and prime minister, Ivanov agreed to further develop the positive relations that had been built up over many years of cooperation between Russia and Jordan. Ivanov said: “We will develop political dialogue at all levels, including the top level.” According to Ivanov, the positions of Russia and Jordan are either close or identical on many global issues, especially on peace in the Middle East, and resolving the situation with Iraq.

Foreign Minister Abdel Ilah al-Khatib said in turn that his Russian colleague was visiting Jordan at a key moment for the region. He stressed: “We have understood each other while discussing the use of excessive force against the Palestinians, and we consider that there is no reason for such a show of force.”

GENERAL SHAMANOV ON THE SITUATION IN CHECHNYA

Izvestia, November 18, 2000, p. 2

According to Lieutenant General Vladimir Shamanov, citizens of 52 different countries have supported the separatists of Chechnya in fighting Russia, and have fought together with Chechen guerrillas (during the first Chechen war there were citizens of only 15 countries). Shamanov said: “The aggression from international terrorism mostly came through Georgia and Azerbaijan. Now the leaders of these countries are feeling uncomfortable themselves, because of the presence of these mercenaries on their territory.” The general also said that by order of President Vladimir Putin, he and a number of other army commanders and politicians are preparing proposals for stabilizing the situation in Chechnya. According to Shamanov, first of all it is necessary to set up an Interior Ministry in Chechnya, which would be subordinate to the federal Interior Minister.

PROSECUTOR’S OFFICE WILL WAIT FOR KUDRIN

Izvestia, November 18, 2000, p. 2

According to Boris Salmaksov, deputy prosecutor of St. Petersburg, the St. Petersburg Prosecutor’s Office has sent a summons to Deputy Prime Minister and Finance Minister Aleksei Kudrin: he has been requested to appear as a witness.

According to Salmaksov, the finance minister will have to give evidence on the activities of the economy and finance committee of the St. Petersburg Mayor’s Office from 1992 to 1996. Anatoly Sobchak was then the mayor, and Kudrin was the head of this committee. Salmaksov stressed that Kudrin is not being accused of anything, and the request has nothing to do with the recent search of the head office of PromstroiBank in St. Petersburg.

Kudrin was also given an option to postpone his visit to the Prosecutor’s Office. According to Gennady Yezhov, Kudrin’s press secretary, the finance minister has made use of this option, since on the appointed day he was at a meeting in Novosibirsk.

RUSSIA CANNOT AFFORD TO GET RID OF ITS TOXINS

Vremya MN, November 18, 2000, p. 2

An international conference on Russia’s problems with implementing the convention banning chemical weapons has wound up in Moscow. The conference was organized by the Russian Green Cross; it coincided with the third anniversary of the convention being ratified by the Duma, and the eighth anniversary of the creation of the radiation, chemical, and biological forces of the Defense Ministry. These forces were created to manage the destruction of the toxic substances, of which Russia has the world’s largest stockpile: about 40,000 thousand tons.

According to the convention, by April 28, 2002 Russia must destroy 20% of its chemical stores; however, so far there is not a single plant where this can be done. Construction of a special plant in the Saratov region, where 3% of Russia’s chemical arsenal is stored (yperite, lewisite, and yperite-lewisite mixes) is still in its preparatory phase. In the Kurgan region, where there is the largest stockpile of shells and missile warheads with sarin, soman, and V-gases (13.6% of Russia’s stockpile), only the site for building a special plant has been selected. In Udmurtia, and in the Kirov, Bryansk, and Penza regions, there are five more storage facilites; no plans have even been prepared there for building plants to destroy chemical weapons.

According to Zinoly Pak, general manager of the Russian Ammunition Agency, which is presently acting as the official client for work on destroying chemical weapons, this situation is due to funding shortages. Of 500 million rubles allotted from the budget, only part was received; and international aid is far too small to help solve the problem. However, according to Pak, in 2001 there are plans to allocate six times as much from the budget, and he believes that Russia will finally be able to meet its obligations under the convention.

However, the opinion of analysts differs from Pak’s. According to them, the international aid has been cut only because the destruction of chemical weapons has turned out to be a low-priority issue for the Russian government.

The situation is also complicated by the people who live near chemical weapons storage depots: they demand that their needs for social services should be considered when special chemical plants are built – they want to have running water, gas, sewage, roads, and hospitals….

But the Russian government prefers to economize, and keeps rejecting the demands of the “chemical villages”.

According to Academician Anatoly Kuntsev, who is the major Russian expert on destroying chemical weapons, there is no need to rush things, nor to try to meet the convention’s ten-year deadline by any means possible. According to Kuntsev, our “poison” can wait, since it is “well packed”, and so far there is absolutely no danger. And if other countries are so concerned about the fate of these chemicals, they can always provide more aid. Russia cannot afford to pay for their fears.

INVESTORS TAKE OFF THEIR ROSE-COLORED GLASSES

Vremya MN, November 18, 2000, p. 2

On November 17, some executives from major Russian companies held a confidential meeting with representatives of major Western investors. The latter were visiting Russia to decide for themselves how attractive Russia is for investment.

Dmitry Vasiliev, executive manager of the Institute for Corporate Management and chair of the Association for Protection of Investors’ Rights (APIR), estimated the companies represented by the guests to be worth a total of $3 trillion. However, their share is no more than 0.5% of total investment in the Russian economy.

Earlier, the guests had to listen to an honest lecture on business “a la Russe”. According to a witness, the guests were astounded – and said that the real situation had turned to be even worse than they had thought. The worst aspect is the low quality of corporate management in Russian companies.

At present, the Federal Securities Commission (FKTsB) is developing a code for corporate management (based on a similar code in Malaysia). However, Vasiliev is concerned that the process of agreeing to the code will be bureaucratized, and the document itself might eventually turn out to be another “correct” but absolutely meaningless law.

Among the current plans of APIR are continuing to push for Gazprom shares to be sold off in a civilised way, and to keep an eye on the restructuring of RJES. The Irkutskenergo electrical utility is also being watched by APIR – since, according to Vasiliev, this company is likely to become the center of the next investment scandal.

The Norilsk Nickel company is a special case: it has ignored the requirements of its shareholders, and so far has not presented any data on the structure of the company’s capital. Meanwhile, according to the head of the APIR, there is every reason to believe that the company has carried out an affiliated transaction, which has hurt minor investors. It is not ruled out that in order to protect the rights of minor investors in Norilsk Nickel, APIR will use a method unusual for Russia. Vasiliev is ready to take legal action against the financial consultant of Norilsk Nickel (Deutsche Bank), if it turns out that its incompetent or negligent conclusion led to the violation of the rights of investors.

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