Russia 110224 Basic Political Developments
King Juan Carlos I of Spain to visit Russia to launch the Year of Spain in Russia
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King Juan Carlos I of Spain to visit Russia to launch the Year of Spain in Russiahttp://channel6newsonline.com/2011/02/king-juan-carlos-i-of-spain-to-visit-russia-to-launch-the-year-of-spain-in-russia/ 23 February 2011 MOSCOW, RUSSIA (BNO NEWS) -- Russia on Wednesday announced that King Juan Carlos I of Spain will visit St. Petersburg next Thursday to emphasize bilateral ties upon invitation of President Dmitry Medvedev. King Juan Carlos I and Queen Sofia will join Medvedev on Friday at a ceremony to announce the official start of the Year of Russia in Spain and the Year of Spain in Russia. The royal couple will be in Russia from February 24 to 25. The two year-long celebrations will include more than 350 events involving world-renowned artistic groups, musicians, major exhibitions, conferences, investment forums and symposiums. St. Petersburg's State Hermitage Museum will exhibit artistic masterpieces from the National Museum of the Prado consisting in 66 paintings representing all the major genres from the collections of the Museum of Madrid. The exhibition will include works from El Greco, Velazquez, Goya, Titian, Rubens, Moreau, Luis Melendez, Pantoja de la Cruz, Watteau and others. It will be open until May 29. In addition, Medvedev and King Juan Carlos I will discuss prospects of further development of bilateral cooperation in various fields, as well as key aspects on the most pressing regional and international issues. The two leaders are expected to give considerable attention to the economic component of Russian-Spanish relations such as ways to expand cooperation in energy, transportation, high technology, tourism, major infrastructure projects. (Copyright 2011 by BNO News B.V. All rights reserved. Info: sales@bnonews.com.)
http://www.itar-tass.com/eng/level2.html?NewsID=15983227&PageNum=0 24.02.2011, 00.16 BRUSSELS, February 24 (Itar-Tass) - Russian Prime Minister Vladimir Putin arrived in Brussels for talks with the European Commission over the main problems of economic cooperation between Russia and the European Union. The main program of Putin's working visit will begin on Thursday, February 24: he will take part in a meeting in the Russian government - European Commission format, and have talks with European Commission President Jos· Manuel Barroso and European Union President Herman Van Rompuy The parties are expected to give priority to the new basic Russia-EU agreement, the problem of Russia's joining the World Trade Organization, important projects in economic and energy cooperation, the implementation of the joint Partnership for Modernization initiative and industrial policy issues. The talks in the Russian government - European Commission format will take place ahead of bilateral contacts between Russian ministers and EU commissioners.
Published: 24 February, 2011, 09:53 Edited: 24 February, 2011, 09:56 Russian Premier Vladimir Putin is in Brussels to hold major talks with the European Commission.Unrest in North Africa and the Middle East forced its way onto the agenda at the meeting between Vladimir Putin and top European officials. The sides will also focus on the most acute issues, such as energy, trade, co-operation in high-tech and Russia's accession to the World Trade Organization. A new Russia-EU partnership agreement is also on the agenda. The previous Russia-EU agreement expired in late 2007, but was automatically extended. According to the deputy head of the Russian government’s staff, Yury Ushakov, the Russian premier is expected to have a meeting with the head of the European Commission, Jose Manuel Barroso, and president of the European Union Herman Van Rompuy. Ushakov underlined that Rompuy "cut short his international tour to meet Vladimir Putin". The talks in the Russian government – European Commission format will take place ahead of bilateral meetings between Russian ministers and EU commissioners. The Russian delegation consists of senior Russian government officials including Russian Foreign Minister Sergey Lavrov, Finance Minister Alexei Kudrin, Economic Development Minister Elvira Nabiullina and Energy Minister Sergey Shmatko. After the talks, a joint news conference is scheduled. Following that, the high-ranking officials will have a working lunch where it is believed that discussions on energy, cooperation in visa affairs and justice will be held. Prime Minister Putin is expected to express his opinion on the situation in the Middle East and North Africa, which earlier were not carried by the mass media.
24.02.2011 / 07:00 CET Today's meeting between the Russian government and the European Commission is a sign of maturing partnership. Another tradition is being established within the framework of Russia-EU co-operation. The meeting between the Russian government and the European Commission taking place in Brussels today is the fourth event of this format involving most of Russia's ministers and most European commissioners (previous meetings were held in 2004 and 2009 in Moscow, as well as in 2005 in Brussels). I think we can rightfully call it a joint session of our top executives. Besides a traditional plenary meeting under the chairmanship of Russian Prime Minister Vladimir Putin and Commission President Jose Manuel Barroso, a number of cluster sessions and bilaterals will take place in the course of the day. The undisputable added value of this format is that practically all subjects of mutual interest can be discussed in detail between officials who are directly responsible for preparing and taking main policy decisions, implementing strategic guidelines and at the same time exploring new avenues for interaction. It can thus be considered an essential element of the Russia-EU co-operation architecture, providing a valuable interface between the dozen existing sectoral dialogues, regular meetings at ministerial level in the format of Permanent Partnership Council in its different configurations, and of course the twice-yearly summits. This time, the agenda includes five major thematic blocks – trade and economy, industry and innovations, energy, justice and home affairs and international issues. The main focus will understandably be on two horizontal priorities: the ‘Partnership for Modernisation' (P4M) and on-going negotiations on a New Basic Agreement. The meeting provides a good opportunity to discuss further practical steps in the context of implementing the P4M's Rolling Action Plan endorsed at the Russia-EU summit last December. As the head of the Russian negotiating team at the negotiations on the New Basic Agreement, I hope that today's meeting will give the impetus necessary to the talks, which have been proceeding reasonably well, but, as every bureaucratic process, regularly need a fresh political jolt in order not to sprawl out indefinitely in time. Having said that, I can only reiterate our position (shared, incidentally, by our EU partners) that what matters is the quality of the future agreement, not the speed of the negotiations – or any artificial deadline for their completion. High on the agenda will be joint efforts aimed at speeding up the transition to a visa-free regime and issues related to energy co-operation. The liberalisation, and ultimately abolition of, the existing visa regime with the EU remains one of our main priorities. Personally, I am convinced that in today's Europe visas have become an anachronism. Moreover, I believe that, unless unnecessary and obsolete restrictions on the movement of people in Europe are lifted, progress in fostering closer ties between our societies or in creating a properly-functioning Russia-EU common economic space will be impeded. Needless to say, visa liberalisation is, in the view of the vast majority of Russian citizens, a kind of reality check for the strategic partnership between Russia and the EU. Figures speak for themselves: annually 1.5 million EU citizens and 2.5 million Russian citizens apply for Russian or Schengen visas. Energy continues to be a rather ambivalent sphere in our relations, full of opportunities and contradictions. We are struggling to find a viable balance between co-operation and competition. Our interaction in this field cannot be merely limited to security of supply and transit and stability of demand. Europe's energy security also encompasses issues such as the impact of the implementation of the EU's ‘third energy package' on other countries' companies operating in EU member states and establishing transparent and non-discriminatory rules for foreign, including Russian, investments in the EU's energy infrastructure. Finally, I should add that today's encounter is the first of its kind after the entry into force of the Lisbon treaty and the subsequent creation of new EU structures designed, among other things, to streamline EU's relations with its key partners and make them more efficient. This provides an additional strategic significance to the event. I am confident that it can serve not only as a major benchmark, but actually as a spring-board for a stronger and more sustainable strategic partnership.
http://www.bne.eu/dispatch_text14285 Chris Weafer - UralSib
Prime Minister Putin starts a two-day formal visit to Brussels today. The main items on the schedule will be energy cooperation, a long-awaited revised Russia-EU Partnership agreement and WTO entry. In the "energy for trade" barter that has dominated talks between both sides over the past ten years, it is "advantage" Russia for now. At least that is how the Russian side will likely play it. Gazprom (OGZD LI: Hold), which has been a significant under-performer on the Russian market through 2008, '09 and until late last year, is the main proxy for any new deals agreed on energy this year. Russia finally joining WTO - expected on January 1st 2012 at the latest - will be a big positive for the whole Russia story and for asset valuations. Although the spreading violence and instability in North Africa puts at risk the global economic recovery, an event that would hit everybody hard, for now at least Russia is in a very favourable position. The fiscal position is benefiting from much higher oil revenues than expected and rating agencies must upgrade the country's debt rating very soon. The country's energy based geo-political importance is also improving with every new headline from North Africa and the Gulf. This year, Russia will - hopefully - take full advantage of both circumstances. Russia's ambassador to the EU has already warned that this week's talks will be difficult. Russia sees itself to be in a much stronger position concerning energy supplies and will use that to press hard for EU support for WTO entry by the end of 2011. Membership of the international trade body is seen in Moscow as one of the key elements in the government's efforts to attract higher levels of foreign investment into the economy. After skirmishing around the issue since the mid 1990's, Moscow now urgently wants to join the WTO because without higher levels of F.D.I. - and the active involvement of foreign companies in JV and PPP roles - the economy is in danger of sustained low growth, higher oil price vulnerability and the social and political consequences implied. Note: I have written about this extensively in recent weeks, e.g. Modernization - A Practical Guide" issued in early January. The reasons that Russia views its "energy bargaining", or perhaps "energy bartering" position as being stronger than at anytime in the last ten years is because the alternative options, which seemed safe only last year, now look a lot less reliable than energy supplies from Russia. Specifically; * Transit disputes with Ukraine have been fully resolved * Transit disputes with Belarus cannot be more than irritations from time to time * The Nord Stream pipeline system is well progressed and will eventually make the EU even more reliant on Russian gas imports. Phases I and II have a capacity of 55 Bcm * South Stream is much more likely to be built than the floundering Nabucco pipeline system and will add a minimum 30 Bcm to exports * Shale Gas looks less of a significant alternative in Europe than at first thought * Price competition from LNG is also now less of the significant threat than was thought a few years ago. Major exporters, such as Qatar, are in no mood for a price war and are in contact with Moscow about price structuring. * Uncertainty over supplies from North Africa and the threat of contagion to bigger producers in the Gulf * The very real threat that Nigeria will be next * China's insatiable demand for imported energy - made real with the opening of the ESPO oil pipeline and the probability of a gas export deal during this year - means that Russia has very viable alternatives to the EU export market. Product from Novatek's LNG project will also more likely sail east rather than west when completed. Staying the world's biggest energy producer is No 1 priority While "modernization" and "investment" are words frequently used by government ministers to emphasize the urgent need to set Russia on a new course, in practice, the more significant actions continue to be in the energy sector. Establishing Russia as the world's biggest energy provider was critical in returning the country to a position of importance in geo-politics and in restoring the strong sense of national pride and confidence that, as much as improving living standards, underpins majority public support for Vladimir Putin. For that reason, maintaining average daily oil production at 10 million barrels per day and connecting additional gas pipes to Europe and Asia are by far the greater priorities in Russia. Keeping oil production at the current rate over the next ten years, i.e. the declared objective of government, while keeping tax revenue high enough to fund planned budget expenditures, is going to be a difficult juggling act. Nobody doubts that there will have to be changes to the current tax oil & gas sector structures and that capital investment in the industry will have to be increased. Otherwise average daily production will inevitably decline. The evidence points to the fact that remaining the world's most important oil producer is a greater priority than, e.g. domestic projects like Skolkovo, for both domestic and geo-political reasons. Russian PSAs have become are a bad word in the oil industry because of Sakhalin II. It is, however, important to bear in mind that Putin's government did not like the PSAs that it inherited because of what it considered to be unfair terms agreed under the previous administration. However, over the past eight years new "rules of the game" have been established and PSAs concluded under these rules will be safer. That is entirely consistent with the oil major's experiences in other oil regions over the past 100 years. The National Oil Companies of countries such as China, India, Malaysia and Gulf Arab states are already eager participants and several International Oil Companies, which are already active in Russia, e.g. Shell, BP, Total, ENI, are also expected to have active roles.
New Energy Direction - But Only Geographic As 2010 gave way to 2011 on Russia's Far East border with China, the first direct oil pipeline connecting both countries was officially inaugurated. This is Russia's first eastern oil export pipeline and China's second direct oil import pipeline (the first was from Kazakhstan). Over the next six months it is expected that Russia and China will finally bring to an end the long drawn out negotiations to build a gas pipeline between both countries. In 2011, Russia also wants to wrap up plans to build the South Stream gas pipe, to push ahead with plans to co-ordinate gas exports from North Africa to Europe, to conclude talks to build two Bosphorus by-pass oil pipelines and to push its claim for greater sovereignty in the potentially energy rich arctic. Contrast the near frenetic activity, and real progress, in the energy sector with the much more modest advances in the modernization agenda. Most of the hype about Russia's future, and the core of investor expectations, is based on the assumption that the country is accelerating efforts to make the country more attractive for strategic investors outside of extractive industries and that the country will continue to diversify both in terms of economic growth drivers and budget revenues. That is also the base case assumption that I recently set out in a note, Economic Glasnost, i.e. that there is today simply no choice but to make the changes/reforms required to advance that goal. Aggressively pushing ahead with energy projects of course does not exclude progress with the modernization agenda. But what it does mean is that progress in the latter will remain slow, and project specific, so long as the government priority is focused on the former. We have seen time and time again that even as the President and Prime Minister talk about wide-ranging reforms and investment priorities, etc, the only real progress is in those areas where the most senior members of government are personally active. Last year those efforts were mainly directed towards rebuilding the auto-sector and this year the signs are that the pharmaceutical, housing and agriculture sectors will be prioritized (see separate note to follow). Bottom line is that so long as energy projects remain the key priority, as they clearly are today, progress elsewhere will be slow and selective.
Russia's Energy Growth Since the start of the Putin administration on January 1st 2000, Russia's average daily oil production has grown from 6.2 million barrels (1999) to 10.15 million barrels (2010). More importantly, Russia's average daily exports of both crude and refined oil products grew from an average 2.6 million barrels to 7.3 million barrels in the same period. Today, Russia is the world's largest oil producer and the largest exporter. In that same period, Russia earned approximately $1.5 trillion from exporting oil and gas. When Putin became president in 2000 his most important economic/industrial policy was to push the oil companies to stop playing corporate politics and to invest in the industry, i.e. to restore production. The tax reforms put in place during Putin's first term were as much about stopping capital flight in the oil sector, e.g. via such mechanisms as transfer pricing, as they were to stimulate investment in the broader economy. Raising oil production had two important objectives; to increase oil revenues for the budget and to make Russia too important to be left out of geo-politics. Those are still the key objectives today.
Geo-Politics The argument over whether an abundance of oil and gas is a curse or a blessing is one that has been waging, and will continue to wage, for decades. If you are in Norway or Nigeria then the respective answers are clear. In most other countries the answer is less clear. $1.5 trillion of oil and gas export revenues has certainly transformed Russia while arguably slowing the pace of economic, social and political reforms that might have taken place if the relatively easy money was less abundant. Becoming the world's biggest energy power has undoubtedly helped Russia reclaim its seat at the top table of geo-politics. There are plenty of arguments to be made as to whether the pace of the country's economic growth and its economic structure justify Russia's place in the so-called B.R.I.C. category or in the G8 group of countries. But there can be no arguments as to Russia's importance to the global economy as a source of energy and minerals. That places Russia is a different category to other, faster growing, developing economies, e.g. Indonesia, and ensures its prominent position in geo-politics. Russia is the biggest energy supplier to the E.U., in terms of piped gas, crude and refined oil. It is also the most important route for Central Asian oil and, to a lesser extent, gas to western markets. Russia is also now much more important as an energy supplier to China and that role will expand with the expected gas export pipeline. The planned development of projects in Sakhalin and the expansion of the East Siberia Pacific oil pipeline will mean that the country's importance across all of northeastern Asia and to the west coast of the United States will increase further.
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