BUSINESS REPORT in association with rossiyskaya gazeta, russia WEDNESDAY, NOVEMBER 10, 2010 ...Marching towards a common future Gas Diplomacy Gazprom may join in Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline; India signs framework pact


TAPI-ing Asian pipeline dreams


The Trans-Afghan four- nation TAPI gas pipeline has gathered momentum, with Russia signalling Gazprom’s participation in $3.3 billion project to focus on the emerging Asian market.


OLGA SENINA RIBR


The meeting between Rus- sian President Dmitry Med- vedev and his Turkmenistan counterpart Gurbanguly Berdymukhamedov on Oc- tober 22 in the Turkmen cap- ital Ashgabat led to two dra- matic headline-making decisions. First, they agreed to put off construction of the Caspian gas pipeline (Turkmenistan– Kazakhstan–Russia) with an annual capacity of 30 billion cubic metres until the de- mand for gas starts to revive in the European Union. Sec- ond, Gazprom, Russia’s state- owned natural gas behemoth, began discussing possibili- ties for participation in the 1,680-km TAPI (Turkmeni- stan–Afghanistan–Pakistan– India) pipeline, which will deliver Turkmen gas to India and Pakistan through Af- ghanistan. The $3.3 billion project, with an expected annual capacity of 33 billion cubic metres,


was stalled for long due to security fears as the pipeline would pass through areas af- fected by the Taliban insur- gency in Afghanistan and volatile terror-prone areas of Pakistan. The two decisions were announced by Russia’s Deputy Prime Minister Igor Sechin, who is in charge of the energy sector, after the presidential talks. The Rus- sian delegation, however, did not include either Gazprom CEO Alexei Miller, or any of his deputies. Sechin, howev- er, indicated that Gazprom’s participation could take dif- ferent forms: “possibly as a contractor, designer or full member of the consortium”. While postponing construc- tion of the Caspian pipeline, it is crucial, as Russian ener- gy diplomacy goes, to offer alternative forms of cooper- ation; and the possible inter- est in TAPI fi ts into this logic, according to Vitaly Kryukov of IFD Kapital. By reviving discussions about possible participation by Gazprom in TAPI with Turkmenistan, Moscow is attempting to make Asian gas exports more appealing. Reporting on the develop- ment, the Kommersant daily suggested that it meant that Gazprom is willing to help


The diversi- fication of energy ex- ports is an emerging trend in Rus- sia's energy diplomacy. The share of oil and gas exports to the Asian countries will reach 10-13% by 2015.


fund the high-risk project in order to thwart the West's ef- forts to get Turkmen gas for the proposed EU-led Nab- ucco gas project that would compete with Russian gas exports to Europe. Today, European demand is not enough to drive new exports, says Mikhail Korchemkin, Director for East European Gas Analysis. Agrees Sechin: “Given the current condi- tions on the gas market – I say it without any sarcasm – Nabucco has no future,” said Sechin. In a signifi cant development, India, along with three other participating countries, on September 20 initialed the Gas Pipeline Framework


Agreement (GPFA) and heads of agreements for the proposed Gas Sales Pur- chase Agreement for the TAPI, in Ashgabat. This will be followed by signing of Gas Sales and Purchase Agreement, which will out- line the terms on which the Central Asian nation will sell gas, and agreements pro- viding state support by the four nations in the project. Turkmenistan is hoping the GSPA may be signed during a proposed TAPI summit in Ashgabat in December. The cross-border TAPI pipe- line has its share of critics. “This project is not going to be completed in the foresee- able future because of the in-


stability in Afghanistan. The discussions are too theoreti- cal,” said Aleksey Makarkin, deputy director of the Centre for Political Technologies. This is also why there is no way Gazprom can walk out of the IPI project (Iran–Pak- istan–India) with an annual capacity of 30–35 billion cubic metres. Many experts point out that the TAPI was backed by the US as an al- ternative to the IPI due to Iran's involvement in it. However, India has a chance to start receiving Russian gas much earlier. The ONGC can exchange its share in Sakha- lin-1 for Gazprom liquefi ed gas, said Stanislav Tsygank- ov, head of the Foreign Trade


Department of the Russian company. The problem is that, officially, the ONGC may not carry on negotia- tions on behalf of the consor- tium because the project is operated by Exxon Neftegas. It’s important to remember that the Russian authorities expressed their displeasure with Exxon Neftegas in late October because the esti- mated project budget in- cluded in the programme of works upto 2055 nearly dou- bled from $42.8 billion (in the 2003 programme) to $95.3 billion. Russian Ener- gy Minister Sergei Shmatko has, however, said that no change of operator is on the agenda.


NEWS IN BRIEF


Mutual fund to invest in BRIC economies


Russia's Troika Dialog investment company has formed a 50.4 million ruble ($1.66 mil- lion) open mutual fund to invest in the BRIC countries. "The fund helps our clients invest in the most fast-growing world economies and diversify their investment geographical- ly," said Troika Dialog Managing Director Anton Rakhmanov. "It gives an opportunity to diversify away from raw materials, consid- ering that Russia and Brazil are largely the suppliers of raw materials, while India and China are their consumers." RIA Novosti


Joint S&T programme extended till 2020


The Indo-Russian Integrated Long-Term Programme (ILTP) of Cooperation in Science and Technology will be extended to 2020 and will refocus on biotechnology and informa- tion technology. The document on extending this crucial programme will be signed during President Dmitry Medvedev's visit to India late December. As part of the programme, a technology transfer centre was set up in Mos- cow with a database consolidating all com- mercially valuable technologies developed by Russian scientists. A similar centre will be launched in New Delhi soon. RIA Novosti


Rosatom looking for JV with Indian partners


ITAR-TASS


Tech Power The idea of Russia's Silicon Valley struck Vladimir Putin when he visited IT powerhouse in 2004 From Bangalore to Skolkovo


The Skolkovo project, that seeks to make Russia a tech superpower, has spurred the Russian parliament to reform 113 laws to support an innovation-based economy.


IRINA SEVOSTYANOVA RIBR


In December 2004, when then President Valdimir Putin came on a state visit to India, he stopped off in Ban- galore. He was so impressed by ‘technoparks' and special economic zones in India’s IT city that a month later, he ex- horted Russians to achieve a breakthrough in informa- tion technology in a speech at a scientifi c township near Novosibirsk. The visit also spurred the process of reforming the Russian legislation to pro- vide a viable framework for an innovation-based econo- my. Five years ago, the State Duma adopted a law on Spe- cial Economic Zones (SEZ). It took only several months to pass the bill. Under the law, residents of Russian SEZs could enjoy privileged taxation. Along with tourist, production and logistic (ports) zones, the law also provided for inno- vation or technology parks. The latter were modelled after western business incu-


ITAR-TASS Tax incentives galore


At Skolkovo Innovation Centre participants are not required to keep accounting records unless their annual sales pro- ceeds exceed 1 billion rubles ($33 mn); they do not pay profits tax until their annual proceeds exceed 1 million ru- bles ($33.000), after which they become taxpayers, but pay profits tax at a zero rate until the year in which their profits top 300 million rubles


bators; the area of an inno- vation zone cannot be more than three square kilome- ters and it can host two com- panies at most. The original focus was on technology de- velopment and commercial- isation, but about a year ago, SEZ residents were al- lowed to have production facilities too, says Aleksan- dra Vasyukhova, innovation projects team leader at VEGAS LEX law firm. Companies operating in in- novation zones are exempt- ed from property, land and transport taxes during the fi rst 5-10 years. The Law on the Skolkovo In-


novation Centre signed by President Dmitry Medvedev in late September has added new tax incentives for the centre’s residents. The Rus- sian government looks to at- tract smaller businesses, says Vladislav Korablin, a lawyer at Yukov, Khrenov and Part- ners.


Thanks to the Skolkovo proj- ect, companies resident in technology commercialisa- tion zones retain the reduced 14% rate of the unifi ed social tax (UST) instead of 26% of salary that non-privileged employers have to pay for each employee. From 2011, the UST will be replaced


Microsoft CEO Steve Ballmer signed off on a plan to join the Skolkovo Centre, which could bring "tens of millions of dollars".


with insurance contribu- tions totalling 34%. Unlike Silicon Valley in the US, which relies on a vast workforce of highly qualifi ed immigrants, Russia has more in common with Bangalore and takes advantage of local talent. However, Russian lawmak- ers are also taking important steps to attract foreign spe- cialists and hope the new re- gime will also bring back those Russians who have worked in the IT sector in the US. From January 1, 2011, the in- come tax for non-residents will equal the standard 13% rate for Russian citizens in- stead of the 30% that for- eigners have to pay during


($1 mn). They do not pay VAT (except on goods imports in- to Russia) or property tax un- til their aggregate profits ex- ceed 300 million roubles from the beginning of the year in which their sales proceeds top 1 billion rubles; they pay insurance contributions on- ly to the Pension Fund of the Russian Federation at a 14% rate until the 300 million ru- bles profits mark is reached.


the fi rst six months of their stint in Russia. Getting Russian visas will also become less painful. On July 1, 2010, the duration of working visas was extended from 1 to 3 years with multi- ple renewals, while the issu- ing process was shortened from 4 months to 14 working days. Currently, the State Duma is mulling another law that would allow families of qual- ifi ed foreigners obtain visas on similar terms. When the new regulation becomes op- erational, they will be able to get a working visa for the same period and renew it in the same way as the special- ists without having to re- register at the immigration


authority every four months. “For Russia, Skolkovo is a testing ground for transition to an innovation economy,” says Evgeny Fyodorov, chair- man of the State Duma Com- mittee for Economic Policy and Entrepreneurship. The ambitious project forced his committee to revise ex- isting economic legislation. Members of the Russian par- liament have identifi ed 113 laws that need to be updated. “Our job is to transform Rus- sian science into an R&D business, create a technology market and establish a legis- lative framework for a new kind of industry," says Fyo- dorov, describing priority items on his agenda. He esti- mates this transition will take six to eight years. In the short term, initial changes will be introduced in investment-related laws to establish simpler proce- dures for creating venture funds and start-up compa- nies that rely on their fi nanc- ing, promises Oleg Fomichev, director of Strategic Man- agement and Budgeting De- partment at the Ministry of Economic Development. The ministry is working together with state corporation Ros- nano to draft the necessary amendments to federal laws and the Civil Code that will be submitted for the Russian Cabinet review this month. Medvedev, a cheerleader of innovation, also emphasised “the work to alleviate the regulatory burden on invest- ment funds” and “liberalisa- tion of export rules for inno- vative products".


TWICE A MONTH IN TWO DAILIES Russia&India Business Report in The Economic Times www.indrus.in Russia&India Report in The Times of India


Rosatom, Russia’s state-owned atomic power corporation, is looking for partners in India to set up a joint venture, which will produce equipment for nuclear power plants, Vladimir Kashchenko, CEO of Atomenergomash, a Russian nuclear and power engineering company, said in Mum- bai recently. He stressed that his company was also ready to launch joint production of components for non-nuclear power fa- cilities. "We also plan to manufacture equip- ment for conventional power plants," said Kashchenko. Russia is negotiating with several leading industry players in India for collaboration. He added that an Indian joint venture could provide Atomenergo- mash with a good local production hub, which will target other Asian and African markets. The company will open its Indian office by December and will fi nally select partners as early as April next year, said he. Polit.ru


Readmission pact likely to be signed next month


ITAR-TASS


Russia and India have agreed to cooperate in combating illegal immigration and will sign a readmission agreement. “The delega- tion from Russia’s Federal Migration Ser- vice and their Indian colleagues have agreed a draft memorandum of understanding on combating illegal immigration. It envisag- es cooperation in this sphere between the two countries, as well as readiness to sign a readmission agreement later,” reported Val- entina Kazakova, deputy head of the Fed- eral Migration Service’s citizenship depart- ment. The pact was finalized during negotiations in India between officials of Russia’s Federal Migration Service delega- tion and consular officials from India’s For- eign Ministry. The MoU is expected to be signed in December. RIA Novosti


November24


November 10


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