“Kommersant”: “Prime minister issues directives on gas prices”
Prices may be liberalised, but only in the domestic market.
Addressing the VTB forum "Russia Calling!" yesterday, Prime Minister Vladimir Putin said domestic gas prices will be liberalised soon, but the state will retain its monopoly on the export of gas. Kommersant's special correspondent ANDREI KOLESNIKOV draws some consolation, however, from the prime minister's remark that "this is not forever."
The VTB investment forum "Russia Calling!" (not to be confused with Dmitry's Medvedev's open letter "Russia, Forward!"), gathered at the President Hotel. The organisers of the forum were obviously at pains to make it look modern, and because the President Hotel's interior is anything but modern, the plenary sessions were held in a glass outbuilding with a limited number of seats. So, many forum participants chose to watch the proceedings on TV screens in the lounge. Gracing the head table were VTB Chief Andrei Kostin, former German Chancellor Gerhard Schroeder, World Bank President Robert Zoellick and several foreign businessmen who, by their dogged determination to make reckless investments in the Russian economy had earned the right, if not to profits, at least to sit on the flanks of the head table.
I noticed that Sergey Polonsky, head of MIRAX Group, was eyeing the platform party closely. It was some time before I realised that he was looking not at the platform party but at the picture on the wall behind them. It showed the Federation Tower in which VTB occupies 28 storeys. Sergey Polonsky is no stranger to that building. Looking at the screen-saver gave him a feeling of being a fully-fledged participant in the forum.
Meanwhile Finance Minister Alexei Kudrin was delivering his speech, explaining that the government should continue stimulating the economy just as the Central Bank had done by announcing a cut of the refinancing rate by another half a percentage point as of September 29 (the rate has now reached a neat and round figure of 10%, which suggests that it may stay at that level for a long time). Kudrin was explaining that stimulus measures "are a tricky thing which should be exited at just the right time, and failing that, should be exited later rather than sooner because that way the risk of loss would be less."
Kudrin declared: "The current oil price is high even if looked at from a long-term perspective; we believe that next year it will be $57-58."
He said that what worried him even more than the oil prices was capital flight.
"In 1998 capital flight of just over 10 billion roubles overturned Russia's financial system. Now we have an outflow of 156 billion, yet it has not affected the system. And recently we have seen a growth of $7 billion.
The finance minister promised that the government would preserve the leading banks (about 70) "through support from government resources". All the other banks were apparently going to be consigned to oblivion.
All this time Gerhard Schroeder was listening to Kudrin intently with knitted brows. He did not relax even when Kudrin, probably worried by his furrowed brow, offered him a bottle of water. Schroeder shook his head: he had no time for it. He was thinking hard, apparently his thoughts were anything but pleasant and he was scrutinising Kudrin's face as if he had never seen him before.
First Deputy Chairman of the Central Bank, Alexei Ulyukayev, was in upbeat mood. He said that in the morning, VTB suddenly experienced a surge in investment.
"Perhaps this is your money?" Ulyukayev suggested running his eyes over the audience. Perhaps you have brought it in your purses and briefcases?"
The joke however, was lost on the audience. A joke has to be funny to make an impact.
Unperturbed, Ulyukayev went on quipping:
"The supersonic speed at which information spreads at the Finance Ministry is apparently higher than at the Central Bank: Alexei Kudrin has already announced another cut of the refinancing rate."
It was clear that in reality Ulyukayev was somewhat disappointed that it fell to the Finance Minister and not to him to announce the Central Bank's new initiative that meets the aspirations of the people. Ulyukayev was aware that the opportunity to break the good news was a prize to be fought for until last. After all, such opportunities seldom present themselves. He knew that he had just missed an excellent chance of breaking good news, and it was a near miss.
So he was reduced to fancy and mysterious phrases designed to show that the Central Bank was doing serious business and that its professionals had the situation under control:
"The rouble is in a quasi-free float," was the phrase he repeated twice.
A foreign businessman told Kudrin that his colleagues who had long made Russia their second homeland were worried about corruption in the country.
The finance minister conceded that corruption was indeed a problem in Russia.
"Moreover, the level of corruption is high, as everybody who has to deal with the government machine knows. It is such a big challenge that unless we do something about it within several years we won't be able to solve any other tasks. I hope we still have it in us to meet that challenge," Kudrin added in a somewhat less confident voice.
Then, answering a question from another foreign businessman, Kudrin did some economic crystal ball gazing.
"What should we expect? We can expect anything," he said and added that he was worried about extremes in businessmen's expectations.
After his forecast, what else could he expect?
At last, Putin entered the room and took his seat next to Schroeder, whose furrowed brow straightened out to give way to a wrinkled forehead.
"We all understand how dangerous blind faith in the all-powerful state is," the prime minister said. "And we still feel that businessmen would like to sponge on the state (was he referring to the 70 banks which Kudrin said the state would support? - A.K.). Some of the businessmen have become greater believers in the state than the state itself. They are beginning to forget about the free market."
When such a statist as the prime minister enthuses about the free market, the first reaction is to wonder if the state has any money to support that market.
"There will be no return to the past," the prime minister said. "Russia will remain a liberal market economy. We are committed to scaling down state interference in the economy."
"Five years ago", an emotional Andrei Kostin was recalling, "Vladimir Putin, who then worked as president, said that it was necessary to create an investment bank on the basis of VTB. He even asked us how the government could help. I was taken somewhat unawares and I said that the best thing would be to attend our first Investment Forum and make a speech." Five years on, Vladimir Putin kept his promise, as usual.
As Kostin spoke, Putin illustrated his words with gestures. First, he confirmed by spreading his arms that Andrei Kostin did not know what to ask for. Then he waved his hand as if to say, don't listen to him, it was not how it all happened. And as Kostin was nearing the end of his speech he rubbed his fingers against his thumb and looking in Kostin's direction asked, laughingly: "Better tell us how much money we gave you."
"Two hundred (billion roubles - A.K.) twice," Kostin replied promptly.
"That's something only the Russians in the audience can understand," the prime minister remarked, apparently referring to the Russian drunks' habit of drinking vodka from 200-gram glasses. "That makes four hundred, right?"
"Yes," Kostin said without enthusiasm.
At last it was Gerhard Schroeder's turn to speak. He readily delivered paeans to Russian gas, called on Europe to get rid of its dependence on Ukraine for gas supplies and warned that the Nabucco gas pipeline to Europe bypassing Russia "would be practicable only if it is filled with gas from Iran, and Iran is in chaos."
A foreign participant in the forum asked the prime minister whether he could expect that the gas monopoly would soon be restructured and privatised just like the oil business was in the 1990s. Obviously, it was not an idle question for the questioner. "In the future," Putin replied.
"Why?" the businessman asked nervously. "Can we expect it?"
"You certainly can," the prime minister replied.
"Thank you." The businessman replied and walked back to his seat, apparently to start the long wait.
"Thank you very much," Kostin echoed, preparing to announce a lunch break.
But at that point the prime minister chimed in that the government was aware of the shortcomings of state monopoly and that it would seek, for starters, to provide equal access for all to the gas infrastructure.
"Access to the pipeline means increased production," he went on. Increased production means lower prices... That is good for the consumer of course (one would have thought that this should make the government happy as its main concern is the prosperity of consumers, i.e. the ordinary citizens - A.K.). But it may carry certain threats to the country's budget... So we will proceed carefully... Besides, we will try to liberalise the domestic market in the near future... But the monopoly on sales in the foreign market will be preserved."
Putin reassured the businessmen, however, that this would not be "forever."
"But certainly for the medium term," Putin concluded.
"Well, everything is pretty positive," Sergey Polonsky summed up the results with a sigh.
Andrei Kolesnikov
