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Thursday, August 07, 2008

Grain equal to gas?

MOSCOW. (RIA Novosti economic correspondent Vlad Grinkevich) - The food crisis is compelling many governments to look for ways of curbing soaring food prices. At the same time, they are sensitive to any moves which might increase them. The intention of the Russian Ministry of Agriculture to transform its Agency for the Regulation of Food Markets (AFM) into a major Russian grain trader has caused an inordinately stormy reaction in the West. Analysts have accused Moscow of attempting to manipulate the food market. This change was announced last July. Along with tariff regulation, Russian officials believe that the state's involvement in grain exports will help protect the domestic market against skyrocketing grain prices which are a major cause of "agflation." Rosstat (the Federal State Statistics Service) reports that by the end of the third quarter of this year, food prices will grow faster in Russia than in the European Union (EU) as a whole. Last June, they went up by 1.1% in Russia (by 12.9% since the start of the year), whereas in the EU they increased by a mere 0.3%. Prices on bread and bakery products grew by 2.4% in Russia in June. The ministry wants the government to transfer its controlling interest in 28 of Russia's major grain elevators and export terminals to the AFM. The aggregate sum of the transferred shares may reach $300 million to $400 million. The West has perceived the potential appearance of a new player in Russia as a threat. The Financial Times has accused Russia of an attempt to gain an instrument to pressure the world market. Analysts believe that in four to five years, the new company will establish control over up to half of Russia's grain exports, and will become similar to Gazprom in its influence of the market. The U.S. Department of Agriculture (USDA) has also voiced its concern over the appearance of a major Russian grain trader but it is not clear whether U.S. officials are worried about the world grain market, or about Russian private companies. The USDA complains that the AFM will prejudice the operation of these companies, and described the plan as a giant step back into the Soviet era. Russian experts believe that the West's concern is exaggerated. It is not clear what the new agency will be like, and who will take part in it. Dmitry Rylko, director of the Institute for Agricultural Market Studies (IAMS), told RIA Novosti: "The importance of this agency is overrated. Even if it accumulates all the state-owned shares in the grain companies, it will not be the biggest player in the market. It will dominate the market only if it is joined by some private players. Nobody knows whether this is going to happen." In the IAMS's estimate, more than 60% of the market belongs to six private players: the International Grain Company Agrika, Rosinteragroservis, Yugtranzitservis, Yug Rusi, and Aston. The apprehensions that Moscow may turn food into a diplomatic weapon and use it as Gazprom is using gas may sound flattering, since the Russian government does not conceal its desire to turn Russia into the leading player in the food market, but they are certainly premature. It would be inappropriate to compare the AFM with Gazprom which is the world's largest gas exporter, and the owner of the world's richest gas deposits. In the grain market, Russia ranks fifth after the United States, Canada, the EU and Australia. This does not mean that its role is small. Russia has the lead in a number of regional exports, for instance, in Egypt and in India. Russian officials would like to enhance Moscow's influence on the world food market, primarily the grain market. However, their previous initiatives did not cause such a dramatic response in the West. For example, the Russian agricultural minister has more than once voiced his idea of setting up a grain "OPEC" to coordinate world trade in grain. But Russian experts are not very enthusiastic about this prospect largely because the various grain-producing countries aren't likely to coordinate their actions as OPEC does with oil. The OPEC members have state monopoly on oil production and exports, whereas grain trade remains in private hands in the majority of grain-exporting countries.

Tuesday, August 05, 2008

Russians pay last respects to Solzhenitsyn

MOSCOW, August 5 (RIA Novosti) - Russians lined up in the rain in Moscow on Tuesday to pay their last respects to Alexander Solzhenitsyn, the writer whose books did much to reveal the truth about the Soviet system of labor camps. Solzhenitsyn, a Nobel literature prize laureate, died of heart failure at his home near Moscow late on Sunday. He was 89. The lavish ceremony saw the dissident writer's body lying in state in the Academy of Sciences in the Russian capital. His open casket stood before a Russian flag as a guard of honor marched slowly past. Prime Minister and former president Vladimir Putin placed a bunch of red roses by the coffin and offered his condolences to Solzhenitsyn's widow, Natalia, and his sons. The ceremony was also attended by a host of other top officials, leading cultural figures and scientists. World leaders have also sent their condolences to Solzhenitsyn's family since the news of his death broke, calling him "a symbol of freedom." In a telegram from the Russian government to his family, Solzhenitsyn was called "the country's conscience and an embodiment of internal freedom and dignity," and "a man, whose books and life served as moral guidelines for the nation." Best known for his Gulag Archipelago, a chronicle of his and thousands of other people's experiences in Joseph Stalin's labor camps, Solzhenitsyn first came to acclaim in Russia and the world during Soviet leader Nikita Khrushchev's political "thaw." In 1962, his One Day in the Life of Ivan Denisovich - a numbing account of gulag life - was published by the Soviet literary journal Novy Mir. However, in 1974, with the "thaw" a distant memory, and four years after being awarded the Nobel Prize in Literature, Solzhenitsyn was exiled from Russia. He spent 20 years abroad, mainly in the United States, finally returning home in 1994, three years after the breakup of the Soviet Union. The writer, however, was disappointed with the new Russia, which he said had lost much of its spirituality, increasingly adopting Western materialistic values. He also criticized the West, saying after NATO's bombing of the former Yugoslavia in 1999 that, "I don't see any difference in the behavior of NATO and of Hitler." Solzhenitsyn will be buried in an Orthodox ceremony at the Donskoi Monastery in the Russian capital on Wednesday. He chose his final resting place himself some five years ago.

Friday, August 01, 2008

Russia further cuts its oil deliveries to Czech Republic

July 30, 2008 - International Herald Tribune by Judy Dempsey - BERLIN: Russia has further reduced its oil deliveries to the Czech Republic, bringing total July cutbacks to 50 percent, senior Czech officials said Wednesday, a disruption that is again calling into question Russia's reliability as an energy supplier to Central and Eastern Europe. Supplies were reduced about 40 percent early in the month. A further cut in the past few days reduced the flow to half its pre-July level, officials said. Russia's oil pipeline monopoly, Transneft, has declined to give any indication of when full operations will resume through the Druzhba, or Friendship, Pipeline, said the Czech officials, who included Vaclav Bartuska, ambassador at large for energy security. Bartuska said that if Russia was eager to promote itself as a reliable supplier of energy to European customers, the way it was treating the Czech Republic could damage its reputation. "The fact that we are not being told the real reasons for the disruption and expect reductions to be increased by more than 50 percent for the month of August shows the lack of transparency in the way the system works," he said. The Czech Republic is unique among the countries of Eastern and Central Europe in its ability to cope with cutbacks of oil from Russia because it diversified its sources during the early 1990s. But it still relies on Russia for much of its natural gas. Other countries in the region that import significant amounts of both oil and natural gas from Russia, with the oil coming through the Druzhba Pipeline, are particularly concerned that Russia may gradually shift oil exports to the Baltic Pipeline system, which feeds Northern Europe. This would mean that most East European countries would have to pay more for oil because shipment fees would be higher. Transneft cut supplies in early July, a day after Secretary of State Condoleezza Rice signed an accord with her Czech counterpart to deploy part of the Pentagon's antiballistic missile shield on Czech territory. Russia denied then that the decision to cut supplies from a contracted July volume of 500,000 tons to 300,000 tons had been in retaliation for the signing. Mikhail Barkov, Transneft vice president, said there were "technical and commercial reasons," adding that two Russian producer companies, Bashneft and Tatneft, considered it more profitable to process the crude oil in Russia before exporting it. Russia tried to improve its reputation as a reliable exporter last year after it came under strong criticism for cutting oil supplies to Belarus, affecting supplies to Germany and several East European countries. Chancellor Angela Merkel of Germany told Vladimir Putin, Russia's president at the time, that Russia must tell any directly affected countries before making cutbacks so that they could at least make alternative arrangements. Moscow agreed at the time to establish an early warning mechanism to notify the European Commission, the executive arm of the European Union, of cuts. In the case of the Czech Republic, the European Commission said Wednesday that Russia had not activated the warning mechanism. When asked why not, a commission spokesman replied that the Czech Republic was coping and that, in any case, the issue between the two countries was being resolved. When pressed to give a more detailed reason as to why Russia had not told the commission, he replied that the mechanism "was not yet in place." He explained that the Russians had not yet agreed to nominate officials who would notify the commission in case of disruptions of exports.

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