The Moscow Times Friday, December 3, 2004. Page 1.
Yukos, Arms Top Agenda in India
By Lyuba Pronina Staff Writer Energy and arms deals are expected to top the agenda as President Vladimir Putin begins a four-day swing through India and Turkey on Friday.
On his first stop, New Delhi, Putin could win political and financial support for his coup de grace against Mikhail Khodorkovsky, the sale of Yukos core production unit Yuganskneftegaz, if India's state-run Oil and Natural Gas Corporation agrees to take part in the auction.
Putin will also be looking to sign arms sales and cooperation deals with India, which last year surpassed China as Russia's No. 1 arms customer.
India's ONGC said last week it is keen to bid for the assets of Russia's near-bankrupt oil major Yukos. ONGC already has a 20 percent stake in Russia's Sakhalin-1 project, where it invested $1.7 billion, and is keen to bid for a stake in Sakhalin-3.
"ONGC appears to be seeking to endear itself to the Russian authorities through a dummy bid for Yugansk to ensure there are sufficient numbers for the auction to be deemed transparent and competitive. ... Friends don't come much better than that," said Michael Heath, political analyst with Aton brokerage. "The likely quid pro quo for this support will be for ONGC to receive favorable treatment in its effort to get into Sakhalin-3."
Putin's visit comes a day after Defense Minister Sergei Ivanov -- in India on a three-day visit since Tuesday -- and his Indian counterpart, Pranab Mukherjee, said they had agreed on new investments on developing weapons systems together.
"We are moving from a buyer-seller relationship to the joint development of new military technology," Ivanov told reporters in India after meeting Mukherjee, Reuters reported Thursday.
India has in the past few years been moving away from direct acquisition of Russian-made military hardware toward producing tanks and jets under license using Russian technology.
India's defense industry is also involved in joint development of the new Brahmos supersonic cruise missile with Russian state-owned missile maker Mashinostroyeniya, and of multipurpose transport aircraft with privately controlled fighter maker Irkut.
Hindustan Aeronautics Ltd. announced earlier this week that it is ready to commit $100 million to the development of Sukhoi's Russian Regional Jet project. Putin is expected to visit Hindustan Aeronautics' headquarters in Bangalore on Friday and a Brahmos facility on Saturday.
Kommersant has reported that Russia and India would sign arms deals worth $2 billion and discuss future contracts for another $5.5 billion.
A defense industry source said Wednesday that MiG is hoping to win an upcoming tender to supply India with 126 MiG-29 fighter jets, a deal that could be worth an estimated $4 billion.
Kommersant reported Thursday that Ivanov had managed to secure a deal in New Delhi to lease two Akula-class nuclear submarines and three long-range Tu-22 M3 bombers, as well as contracts to modernize previously delivered T-72 tanks and the sale of three more frigates.
Neither the Defense Ministry nor Rosoboronexport would confirm the report on Thursday.
Energy and arms will also be high on the agenda when Putin flies to Turkey on Sunday for the first-ever official visit to the country by a Russian head of state.
The two-day visit had been originally planned for early September, but was postponed due to the Beslan terrorist attack that left more than 330 people dead.
Putin is due to meet Turkish President Ahmet Necdet Sezer and Prime Minister Recep Tayyip Erdogan and is expected to sign a series of agreements on economic and security cooperation.
"This is a historic visit, the first official state visit by a Russian head of state in 512 years of bilateral relations," said Ali Ihsan Akiskalioglu, president of the Russian-Turkish Business Association in Moscow.
Other Russian leaders have visited Turkey, but not on full state visits. President Boris Yeltsin visited Turkey in 1992 and 1999, but as part of international summits. During the Brezhnev era, Nikolai Podgorny, the chairman of the Presidium of the Supreme Council of the U.S.S.R., visited Turkey in 1973.
After centuries of more or less continuous rivalry, relations between the two countries have been on the mend since the Soviet breakup, seeing bilateral trade jump from $200 million to $10 billion per year, with oil and gas sales to Turkey rocketing.
According to the Economic Development and Trade Ministry, energy sales account for 72 percent of Russian exports to Turkey. Russian exports to the country last year totaled $5.4 billion.
Increasing exports through the Blue Stream gas pipeline under the Black Sea will be the focus of discussions, Akiskalioglu said. Supplies through the pipeline reached 1.3 billion cubic meters last year, with a target of 2 bcm this year.
Gazprom CEO Alexei Miller on Wednesday visited Turkey ahead of Putin's trip, meeting with Erdogan and Energy Minister Mehmed Guler to talk about cooperation deals, including potential investment in distribution and transportation infrastructure.
Turkey is also likely to bring up tanker traffic through the congested Bosporus straits, which has increased 30 percent in the past two years as Russian oil exports boom.
One project under discussion, the Trans-Thracian pipeline, would run from Kiyikoy on Turkey's Black Sea coast to Ibrikbaba on the Aegean. If constructed, it could let 60 million tons of oil per year circumvent the straits.
Industry and Energy Minister Viktor Khristenko said Tuesday that Turkey has proposed a number of pipeline plans for bypassing the Bosporus. "We ourselves have 12 projects. We get one more each year," he said, Interfax reported.
Russia is also interested in other Turkish energy projects, including electricity privatization, oil refineries and liquefied gas plants, Khristenko said, speaking on the sidelines of a Russian-Turkish commission on trade and economic cooperation in Moscow.
As a Turkish trade partner, Russia is second only to Germany.
A total of 400 Turkish firms are working in Russia and have invested $2 billion here over the last decade, said Turkish Embassy official Gurkan Sozen.
"Russia is like a big apple for Turkish businesses. ... We want to use [Putin's] visit as an opportunity to boost business," Sozen said, adding that Turkey aims to increase bilateral trade to $25 billion in three years.
Alexander Lebedev, head of the Chamber of Commerce and Industry's Russia-Turkish Business Council, said he hoped the trade imbalance between the two countries, now heavily in Russia's favor, would be addressed during Putin's visit.
Russian exports to Turkey last year stood at four times its imports.
Turkish companies in Russia are active in construction, retail, banking and brewing. Russian shuttle traders import Turkish-made clothes worth about $3.5 billion per year, while 1.5 million Russian tourists spend more than $1.5 billion per year on vacations to Turkey.
Both Sozen and Lebedev said that Putin and Erdogan would discuss arms sales.
Russia has been pushing its Ka-50 Akula attack helicopter in an ongoing $4 billion tender, but so far without success.
"I don't believe that the United States, on whose financial aid Turkey is dependent, will allow this deal to happen," said Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies.
Putin and Erdogan are also expected to discuss security in Iraq, Iran, Central Asia, the Caucasus, Cyprus and the Balkans, said a Kremlin source familiar with the agenda.
"Putin will be asked questions about the situation in Chechnya," Lebedev said, but added that the Turks would likely not be too critical of Moscow's policy in the North Caucasus.
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