kg: Known Russian political analyst attacked in Bishkek

The Moscow Times: Communists Give Support to Medvedev

By Alexander Bratersky

President Dmitry Medvedev found an unlikely ally Wednesday in Communist leader Gennady Zyuganov, who praised the president and criticized Prime Minister Vladimir Putin at a presentation of his own plan to modernize Russia.

Even the title of Zyuganov’s program, “Go Russia, Toward Socialism!” mirrored Medvedev’s “Go Russia!” article, which was released in September and served as the backbone for the president’s recent state-of-the-nation address calling for Russia to modernize.

“President Medvedev speaks about modernization, while Prime Minister Putin endorses conservatism,” Zyuganov told reporters as he sought to highlight political differences between the two leaders who say they run the country in tandem.

Zyuganov noted that Putin’s Cabinet and United Russia, chaired by Putin, had yet to draft a modernization program providing substance to Medvedev’s broad initiative. “The program of innovations offered by the president in the state-of-the-nation address has not been supported by the United Russia party and government,” he said.

The substance offered by the Communists’ modernization program includes abolishing the flat 13 percent income tax, boosting state support for agriculture, nationalizing raw material industries and giving tax holidays to medium-sized businesses.

Zyuganov said he agreed with Medvedev’s call to disband state corporations, which were created during Putin’s presidency and do not have to follow the same rules as other companies.

“President Medvedev said state corporations work ineffectively, but the prime minister provides cover for this ineffectiveness,” Zyuganov said.

He urged the State Council, a policymaking group comprised of federal government officials, governors and lawmakers and chaired by Medvedev, to review the Communists’ program at its next session in January.

Zyuganov used a book of comic strips to present the program during a news conference at the offices of Interfax.

While Zyuganov has grown increasingly critical of Putin during the economic crisis, he has taken a softer stance toward Medvedev in what analysts said could be a sign that the Communists prefer Medvedev in the ruling tandem. “I am not saying the Communists will make Medvedev their leader, but they will take each other’s interests into account” in the next State Duma elections, said Alexei Mukhin, an analyst with the Center for Political Information.

Mukhin said the Communist Party was the only major political group left for Medvedev because the others were controlled by Putin and his retinue.

Zyuganov denied on Wednesday that his party would merge with A Just Russia, an idea proposed by A Just Russia leader and Federation Council Speaker Sergei Mironov earlier this week.

Dec. 10 (Bloomberg) -- Russia is considering an easing of mining laws designed to protect domestic producers because they’re deterring foreign investors and curbing development, Deputy Minister of Natural Resources Sergei Donskoy said.

The government may streamline the approval process for foreign investors, give them tax breaks and increase compensation should the state decide to take back assets.

“We have proposed the government amend the legislation,” Donskoy said in an interview. “We realize that the new laws are hampering exploration.”

Exxon Mobil Corp., the largest U.S. oil company, and Canada’s Barrick Gold Corp., the world’s biggest miner of the metal, have said the so-called strategic deposit legislation risks damaging Russia’s economy to protect local companies as they compete for the country’s mineral wealth.

“The thing with strategic deposit laws is that they are scaring off other investors who were considering coming to Russia,” said Sergei Lobov, manager of Barrick’s Fedorova Tundra project in the country’s northwest, which has been delayed by the legislation.

The laws, which came into force in May 2008, cover deposits deemed to be “strategic.” They include resources of more than 50 metric tons of gold, 70 million tons of oil and 500,000 tons of copper. Developers need permission from authorities including the Federal Security Service, formerly known as the KGB, and Prime Minister Vladimir Putin.

Shell, BP

Russia adopted the rules to clarify procedures after the state forcibly gained control of Royal Dutch Shell Plc’s Sakhalin venture in 2006 and threatened to revoke licenses to TNK-BP’s Kovykta gas field in 2007.

“It was timely in 2007 and early 2008 when prices for deposits peaked,” said Mikhail Leskov, a partner at NBLgold, a Moscow-based consultant advising mining companies including Petropavlovsk Plc. “Now, as the market plunged, it looks like this legislation limits exploration and drags Russia’s mining industry behind international competitors.”

The state can take back a deposit from developers and pay their costs plus a premium of 30 to 50 percent. Critics say that deters investors because it ignores the value exploration companies can add to a deposit by proving reserves.

“Companies may fail to prove large reserves at a field, or they may succeed,” said Lou Naumovski, a vice president at Toronto-based Kinross Gold Corp. “Limiting the amount of return for high-risk exploration ventures makes little sense, as companies are more likely not to bother exploring if they see a limitation on the potential returns for their efforts.”

‘Halfway Measures’

The Ministry of Natural Resources is proposing to gauge the market value of deposits where licenses have been withdrawn and pay investors half that amount, Donskoy said in a Nov. 10 interview in his office in Moscow.

“No government body is acting independently in Russia” said Konstantin Simonov, the head of Moscow-based National Energy Security Fund, an independent consultant. “The ministry obviously reacts to signals sent by Vladimir Putin, who said earlier this year the bureaucratic procedures should be streamlined for foreign investments.”

The ministry’s proposed changes are “all halfway measures,” said Valery Braiko, the former head of the Soviet Union’s largest gold-producing unit who now heads the Russian Gold Producers’ Union. The group is lobbying for the ministry to raise the threshold for strategic gold deposits to 200 tons.

Gold Mines

The current 50-ton threshold “means investors need to get this multi-stage approval at as high a level as Putin to develop a pretty small deposit,” Braiko said. “It’s ridiculous.”

Some foreign companies have succeeded in bringing projects into production. London-based Petropavlovsk mines gold in eastern Russia and said last month an expansion was ahead of schedule at its Pioneer pit. Kinross started output at the Kupol mine last year, becoming the largest gold producer in Russia after Moscow-based OAO Polyus Gold.

Barrick has made less progress and is still renegotiating the right to build its Fedorova mine, having previously been granted an exploration and development license. Robin Young, the chief executive officer of Amur Minerals Corp., a London-based miner, said his company faces the same situation with its own Russian project.

Other companies quit Russia altogether. Zoloto Resources Ltd., a Canadian gold explorer, stopped investing in the country last year after the laws were passed, company spokeswoman Yana Bobrovskaya said.

De Beers

De Beers, the world’s largest diamond company, withdrew from a mining joint venture in January after talks with the Federal Anti-Monopoly Service about the processing of gems in Russia, said Tom Beardmore-Gray, a spokesman for De Beers’ former joint Venture partner Archangel Diamond Corp. Lynette Gould, a spokeswoman for De Beers, declined to comment.

Russia has the world’s largest reserves of gold deposits, after South Africa and the U.S. Russia’s production gained 15 percent to 151 tons in the first nine months of 2009, according to the producers’ union, driven by output from Kinross and Petropavlovsk. Supply will decline in the “medium term” after smaller foreign miners fled Russia, Vitaly Nesis, the CEO of Russian precious metals producer OAO Polymetal, said in October.

“Russia obviously has a right to protect its national interests and give some preference to domestic miners,” Naumovski said. “Looking from another angle though, Russia is competing with other countries for investments in its resource sector and may lose this competition unless it considers amending the strategic law.”

Gold was little changed at $1,127.88 an ounce at 8:53 a.m. in London. Barrick shares rose 38 cents, or 1.4 percent, to 27.90 euros in Frankfurt trading.

To contact the reporter on this story: Ilya Khrennikov in Moscow ikhrennikov@bloomberg.net

Last Updated: December 10, 2009 04:03 EST