MOSCOW, March 5 (RIA Novosti)

Obama's 'secret' letter used in diplomatic games on missile defense system/ Russian military to cut purchases/ Russia may stop foreign currency transfers to offshore zones/ Russia may stop foreign currency transfers to offshore zones

RBC Daily

Obama's 'secret' letter used in diplomatic games on missile defense system

U.S. President Barack Obama said he had not offered his Russian counterpart a specific deal in which the United States would shelve its missile defense plans in exchange for Russia's pressure on Iran. Moscow also confirmed the United States and Russia were not in any "secret" talks to trade off U.S. missile bases in Eastern Europe for Iran.

Analysts believe the whole media story surrounding Obama's private letter to Dmitry Medvedev was the onset of a diplomatic game involving Russia-U.S. bilateral relations and their joint policy on Iran.

Miriam Pemberton, research fellow at the Institute for Policy Studies, said those who do not want the United States to drop their missile defense plans are behind the media campaign surrounding Obama's letter. She said that the Eastern European lobby was very strong in Washington and that they would happily accuse President Obama of a secret deal with Moscow in order to question his "Munich policies" that threw new East European democracies to the lions that is to "imperial Russia."

On the other hand, she did not rule out that the publicity given to Obama's letter had also come from Russia, where hard-line politicians are unhappy about the rapprochement between Russia and the United States and dream of returning to a Bush-style confrontation.

Alexei Malashenko from Moscow's Carnegie Centre said Russian and American diplomats acted cooperatively this time around, aiming their harmonized signals to Tehran. "The only tool Russia could pressure Iran with is cutting off or reducing arms exports," he said.

Iranian presidential elections are due in June, so Russia and the United States are making it clear in advance that Iran had better choose Mahmoud Khatami or some other moderate leader.

Vedomosti

Russian military to cut purchases

The Defense Ministry has cut its budget by 8%. Analysts say it will have to reduce arms and military equipment purchases.

In December last year, the Russian government instructed all ministries and departments to cut unprotected spending by 15% in 2009. Acting in accordance with these instructions, the Defense Ministry will cut spending by 8%, Deputy Defense Minister Lyubov Kudelina told journalists on Wednesday.

A source at the ministry said it would not reduce its payroll and other spending areas.

The Defense Ministry's spending this year had been planned at 1,439 billion rubles ($39.72 billion), 8% amounts to 115 billion rubles.

An official from a socio-economic department said the Defense Ministry was to cut spending by 125 billion rubles, with the right to choose which areas to cut.

A source at the Defense Ministry said new amendments to the budget could stipulate even larger cuts.

Kudelina said in late February that the initial wording of the ministry's draft budget stipulated the allocation of 36% of its planned expenditures (as much as 520 billion rubles) for the purchase, repair and development of weapons, 32% (460 billion rubles) for pay to personnel and severance payments to commissioned officers and NCOs to be laid off as part of military reforms, and 8% (115 billion rubles) for military pensions.

The Deputy Defense Minister said spending on rearmament and social payments would not be affected, with the overall budget to be reduced through the cuts to spending on construction, repair and other items.

However, Mikhail Barabanov, an analyst with the Moscow-based Center for Analysis of Strategies and Technologies, said the ministry, which cannot cut spending on social payments, would have to reduce weapon purchases.

It is unlikely to cut spending on armaments for the strategic nuclear forces but may curtail funding for armor and other equipment purchases for the Army, Barabanov said.

Argumenty i Fakty

Russia may stop foreign currency transfers to offshore zones

Analysts say that approximately $110 billion will leave the country this year, compared to $130 billion in 2008. This is a lot for a country with a budget deficit, and some people are proposing introducing foreign currency limitations.

Oleg Vyugin, chairman of the board of directors of the MDM Bank, who had chaired the Federal Financial Markets Service and was first deputy chairman of the Central Bank, said: "There are reasons for such measures, as the bulk of bailout funds issued to companies to save their preference loans has been converted into foreign currency and placed on foreign currency accounts, which can be opened only with foreign banks. This amounts to the export of capital, because the money is not benefitting the country."

Vladimir Kvint, head of the financial strategy department at the Moscow University's Higher School of Economics, said: "It often happens in Russia that a hard-working company transfers its profits to an offshore zone, where they land in the coffers of two or three people."

"Therefore, we need to introduce limits on the transfer of foreign currency to such zones. To achieve this goal, we should demand the disclosure of the names of Russian beneficiaries of companies registered in offshore zones, and monitor the transfer of funds to such zones," Kvint said.

"Cyprus was the largest investor in Russia in 2004, but the Central Bank of Cyprus said it had invested only $14 billion, which means that the other $6 billion was Russian money returning to the country of origin," the analyst said.

"What stopped us from introducing offshore limitations sooner? The reason is that they will affect the interests of many people, including some who should be implementing this measure," Kvint concluded.

Sergei Guriyev, rector of the New Economic School, said: "Specialists do not believe that the government will introduce currency regulations, which would be easy to get round any way and would only increase corruption."

Sergei Glazyev, director of the New Economy Institute, said: "Late last year, [Russian] banks converted the preference loans they had received from the Central Bank into dollars. But that speculative attack against the ruble was provoked by the country's fiscal authorities, who could easily prevent it by introducing elementary currency limitations. For example, they could reinstitute currency controls at commercial banks."

RBC Daily

Siberian company to build $200 million satellite for Indonesia

An Indonesian telecommunications major, Telcom, has contracted a Krasnoyarsk company, Information Satellite Systems (ISS), to build a $200 million telecommunications satellite. The choice of a Russian manufacturer is quite logical, say analysts: Russia offers prices that are around half or 30% as high as the Americans.

The satellite will be equipped with 42 transponders and is due to be completed by August 2011. This is not the company's first contract to build satellites for foreign clients. Last summer, IAI Spacecom, which is responsible for maintaining Israel's national space communications network, concluded a contract with the ISS to build a $157 million Amos-5 satellite.

Direct Info executive director Alexei Kondrashov said the ISS won an open tender for the right to manufacture a satellite for an Indonesian company. It offered a more attractive price than the American or European producers. "This is a fiercely competitive market, and the price issue can decide a great deal," the analyst said. He believes $200 million to be an average or a low figure. "American or European manufacturers would have opted for such a contract only if prices were 50% or 100% higher," Kondrashov said.

According to Vladislav Kochetkov, an analyst with Finam investment bank, political factors may have played no small role in choosing a contractor: Russia and Indonesia warmed to each other following an Indonesian tour by Vladimir Putin. "Russia gets regular orders from Asian nations. Perhaps it was Russia's loyal attitude to Islamic countries that played a role in choosing the producer," the analyst said. "A company placing an order in the West could face all sorts of problems leading to the cancellation of the contract at any stage of production."

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