MOSCOW, June 8 (RIA Novosti)

Relations between Russia and Belarus reach boiling point / Putin the ultimate power in the system of government / Gazprom to borrow another $10.5 billion for Nord Stream pipeline / Russia set to double grain exports

Kommersant, Moskovsky Komsomolets

Relations between Russia and Belarus reach boiling point

The past week has been marked by unabating scandals and a slanging match between the Russian and Belarusian heads of state. On Saturday, Russia turned words into actions. The Russian sanitary watchdog Rospotrebnadzor banned the import of Belarusian dairy products, which could cost that country's budget $1 billion.

Before the sanctions were introduced, Belarusian President Alexander Lukashenko said military cooperation between Moscow and Minsk was at risk. Moreover, he threatened Russia "with another Chechnya" if Russia tried to annex Belarus. Russian Finance Minister Alexei Kudrin said yesterday that Belarus's sovereignty was a heavy burden for it, because "being a stand-alone region, Belarus bears heavier expenses than Russian regions."

In its relations with Russia, Belarus has always acted as a younger, but proud and unruly brother. Minsk was sure until the last moment that Moscow would never stop paying for the "Belarusian miracle," because Russia was rich and alone on the post-Soviet space.

But a true friend is tested when you are in trouble. In the middle of last year, following developments in Georgia, Russia found itself practically in international isolation. Everyone expected Minsk to support Moscow on the Abkhazian and South Ossetian issues. But as always, Lukashenko played on two fronts: he turned away from the Kremlin, while accepting money from Russia, and stepped up negotiations with Europe. The advances he made to the European Union pursued one aim - that of making Russia give more money to Belarus.

But this scheme stopped satisfying Moscow. In a global perspective, Russia no longer needs anything from Belarus. A Union State could have had relevance a year ago by allowing President Putin to remain in office. The Abkhazian and South Ossetian issues were important last fall. Beltransgaz, the Belarusian state gas company whose pipelines carry Russian gas to Europe, is in Gazprom's hands.

Lukashenko's only lobbyists left in the Kremlin are the military. But even their arguments do not sound convincing. With the warming of Moscow-Washington relations and a global crisis, deployment of new anti-missile defenses does not look urgent and Moscow has time to test a new method in relations with Minsk - a stick instead of carrot.

Vedomosti

Putin the ultimate power in the system of government

Prime Minister Vladimir Putin's visit to Pikalyovo, a small town in the Leningrad Region, highlighted the peculiarities of the current system of government in Russia. It showed that only the premier can solve problems that should be the competence of local lawmaking, judicial and executive authorities, said a Russian analyst.

Konstantin Sonin, a professor at the Russian School of Economics, said that the "Putin system" implies direct involvement of the country's political authorities in relations between private employers and their workers. It is used to force a bank to issue a loan and enterprises to sign contracts and pay wages.

The scandal in Pikalyovo also highlighted the main drawback of the Putin system -the lack of any intermediate links in the chain.

According to Sonin, when the system of state management (election of the Federation Council, governors and deputies from single-candidate districts) was dismantled and courts were gradually made subordinate to Putin's political control, he was often accused of violating abstract democratic ideals.

However, the crisis has shown that the problem is not abstract but quite real. As a result of changes in the system of state management in the past 10 years, Putin has become the ultimate, if not the only, authority in the country.

Many employers are laying off personnel, with the number of unemployed doubling over the past year and many companies unable to honor their obligations. No man alone can tackle all of these small problems, the analyst writes. Moreover, the most inefficient solution, allocations from the budget, has been chosen for Pikalyovo.

Can governors be called to account if they fully depend on central authorities? What can they do in the Federation Council, the upper house of Russia's parliament, if they sometimes do not even know which region they represent?

If there were deputies from single-candidate districts in parliament, their cries would have alerted us to problems. If we had elected governors, members of the upper house and deputies of the lower house, responsibility could have been divided among them, Sonin said. As it is, there is no one among whom to divide responsibility.

Nezavisimaya Gazeta

Gazprom to borrow another $10.5 billion for Nord Stream pipeline

The shareholders of Russian energy giant Gazprom may at their June 26 general meeting provide 24.035 billion euros worth of guarantees to Nord Stream AG, operator of the planned Nord Stream gas pipeline, due in 2010-2012 to link Russia and Germany via the Baltic Sea.

That same meeting will have to approve new loans for Gazprom.

Cash-strapped Gazprom, which provides multibillion-euro guarantees, plans to borrow $10.5 billion from Russian national development bank Vnesheconombank, Sberbank, VTB and Roselkhozbank.

The Nord Stream pipeline, due to link Vyborg, Russia, and Greifswald, Germany, will also pump gas to other European countries. However, a project that initially was to cost 2.5 billion euros has trebled to be worth 7.4 billion euros.

Most analysts have criticized Gazprom's plans.

"Gazprom, which has a very big appetite, estimates the cost of the planned Sakhalin Island-Vladivostok gas pipeline in Russia's Far East at an exorbitant $23 billion," said Mikhail Krutikhin, a partner at the RusEnergy consultancy.

Krutikhin said the company was overstating its budgetary estimates. "At least 30% of the stated sums will be spent for other purposes because Gazprom has debts of $50 billion that are unlikely to be repaid in conditions of plunging gas production, demand and global prices," Krutikhin stressed.

Dmitry Alexandrov, an analyst with the Financial Bridge investment company, said Gazprom was probably trying to guarantee payments to Gazprom Export, the world's largest natural gas exporter, for the next seven to eight years under the Nord Stream project.

Alexandrov said the long-term guarantees were being made against the backdrop of recent gas transit conflicts with Ukraine and aimed to convince prospective customers that the situation was under control.

"All these efforts are like putting on a good face under the circumstances. The project is not making headway despite all efforts. There is no investment project, so any guarantee can be given," Krutikhin said.

The financial plan has not been approved 18 months prior to commissioning the pipeline's first leg, and not one bank has pledged to issue any loans.

Vedomosti

Russia set to double grain exports

Russia, Ukraine and Kazakhstan, which together supply over 25% of the world's grain, are discussing establishing a pool of grain exporters to coordinate marketing policies.

Russia plans to raise its average grain harvest to 135 million metric tons in 10-15 years (the post-Soviet record was 108.1 million tons harvested in 2008), which will allow it to export 40-50 million tons annually, Russian Agriculture Minister Yelena Skrynnik said.

This is double the 2008 figure, when Russian grain exports totaled 22.25 million tons, according to ProZerno, which specializes in research of grain and oilseed markets in Russia and other CIS countries.

Russia is acting more aggressively than other exporters to increase its share in the global grain market. It has increased it from 1% in 2000 to 14% in 2008, making the country the world's second largest grain exporter after the United States, whose share fell to 20% from 28%.

Kazakhstan and Ukraine are currently ranked 6th and 7th respectively, ProZerno writes.

If Russia, Kazakhstan and Ukraine coordinate their grain export policies, this will lower price volatility in the global market and the dependence of prices on speculative factors, and also strengthen the three countries' competitiveness in the global market, Minister Skrynnik said.

However, it will be very difficult to greatly increase grain exports because Russia's infrastructure is already working to capacity. It can handle 25 million metric tons annually, said Nikolai Demyanov, deputy director general of the International Grain Company, the Russian subsidiary of Switzerland-based Glencore.

It costs $22-$23 per metric ton to handle grain for export via the Russian port of Novorossiisk, while handling grain for export via Ukrainian ports costs $16-$17, and $5-$6 for export from the European Union. Therefore, to increase its grain exports, Russia must first expand and modernize its export infrastructure, Demyanov said.

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