Kasyanov surfaces with master plan

Jun 28, 2004 02:00 AM

by Denis Maternovsky

What's a prime minister to do when he's fired?
Well, if you're the man who won juicy debt concessions from Western governments; the man business barons came to see when they needed help; naturally you launch a multinational, multibillion-dollar bank to finance major infrastructure projects. Not wanting to go the way of his predecessors, all of whom were either marginalized, sent abroad or reassigned to outposts, Mikhail Kasyanov unveiled an ambitious plan to finance up to $ 48 bn in oil and gas pipeline projects.
"[Russia, the European Union] and several CIS countries will jointly finance the bank," Kasyanov said in his first specific comments on his plans for the future since being fired in February after running the White House for nearly four years.

Kasyanov said the priority of the new bank will be to increase oil and gas supplies to Europe by financing the construction of 30 bn to EUR 40 bn' ($ 36 bn to $ 49 bn) worth of pipelines and other pressing infrastructure projects. That means Kasyanov would have to find at least $ 6 bn in start-up capital. Kasyanov’s spokeswoman said that President Vladimir Putin liked the idea when Kasyanov suggested it to him at a recent meeting in the Kremlin.
"Putin ordered both the Central Bank and the Foreign Ministry to investigate by mid-July the possibility of implementing the project," the spokeswoman, Tatyana Razbash, said.

Kasyanov said the new institution could be based on two existing banks, International Investment Bank and the International Bank of Economic Cooperation, both of which once handled the accounts of COMECON, the former Soviet council set up to promote economic integration with socialist countries.

Paul Collison, who studies Russia's oil and gas industry for Brunswick UBS in Moscow, said Brussels could well be interested if the terms are right. Kasyanov, however, said he did not expect an answer from the Russian government until September at the earliest because "it is overwhelmed withwork now."

September would be fortuitous for Kasyanov, since, according to Razbash, he is not allowed to work for a commercial structure within six months after leaving office. Officially, Kasyanov "resigned" his post, along with the rest of the government, ahead of the March presidential vote.
Kasyanov may be on to something. Putin has been urging the government to move faster on expanding the pipeline network, which is already running at capacity.
"This is not the first year that the government has been unable to decide on its priorities. The issue is more than ripe," Putin said of the pipeline bottleneck in his state of the nation address last month. "We're talking about diversifying shipments of our oil," Putin said.

Output hit a post-Soviet high of 9 mm bpd in April, but state-owned pipeline monopoly Transneft can only export less than half of that amount, or 4 mm bpd.
"This is one of the most critical issues today. If they don't build extra pipelines, they are missing out on enormous opportunities," Collison said.
He said that the decision to build new pipelines is "ultimately political," and Kasyanov's excellent connections as a "quintessential insider" will be of critical importance. The government has repeatedly declared that it will not allow privately owned pipelines, although Kasyanov's successor, Mikhail Fradkov, has said private capital to build pipelines would be welcomed.

Mikhail Khodorkovsky's plan to build a 600,000-bpd private pipeline to China, which was largely seen as an attempt to undermine the state's monopoly, may have been one of the reasons for his arrest last October, analysts have said. But political analysts remained divided on whether Kasyanov's initiative may mean a return to politics.
Kasyanov did not rule out the possibility of continuing his political career, as long as he is "elected to the post and not appointed," but he did not elaborate.
"That means he refuses to take any post from Putin's hands," said Andrei Piontkovsky, an independent political analyst. "That is the level of independence characteristic of him." On the other hand, an ambitious project such as the one suggested by Kasyanov is impossible without Putin's full support, Piontkovsky said. "Otherwise he would have followed Khodorkovsky's path."

Piontkovsky said that after four months of negotiations, it looked as if Kasyanov and Putin had finally struck a deal whereby Kasyanov gets "a piece of the pie" in exchange for staying out of politics until 2007. Other political observers, such as Alexei Mukhin, director of the Centre for Political Information, said Kasyanov's ties to both Khodorkovsky and ex-President Boris Yeltsin's "Family" of former Kremlin insiders means that "there is no place for him in big politics anymore."
"He is basically forced by circumstances to play by Putin's rules," Mukhin said. "With this [pipeline] project he is holding out his hand to the president."

Mukhin said Kasyanov will almost certainly take part in the 2008 presidential election, but whether he will win or not is "a technical question," since "political masterminds in the Kremlin" will use so-called administrative resources to support their chosen candidate.
Mukhin dismissed media speculation that Kasyanov may have his eye on Mayor Yury Luzhkov's job, which officially ends in 2007.
"Kasyanov may have a chance somewhere in Rybinsk, but not in Moscow," where Luzhkov's clan is fully in charge, he said, laughing.

Source: The Moscow Times
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