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Tuesday, January 29, 2008

Fears of recession hang over Davos

Fears of recession hang over DavosJanuary 23, 2008 - Russia Today - Sliding stock markets and fears of a global recession are likely to dominate talks at the annual economic forum, which opens in the Swiss city of Davos on Wednesday. Also on the agenda are the legacies of Vladimir Putin and George W. Bush, the outgoing presidents of Russia and the U.S. respectively. Although the Davos forum hasn't officially started, several meetings have already taken place on the sidelines. Later, delegates will hear opening remarks by the Afghan president Hamid Karzai and a welcoming speech by U.S. Secretary of State Condoleezza Rice. The main subjects of the forum will then be discussed at a plenary session. The corridors at the Congress Centre will be swarming with the great and the good, including about 27 heads of state or government, 113 cabinet ministers, hundreds of chief executives and bankers. Altogether, about 2,500 participants will attend. The Russian delegation includes the Russian Finance Minister, Aleksey Kudrin, the head of Sberbank German Gref and representatives of large Russian businesses. This year’s theme sounds, as usual, somewhat blurred - ‘The Power of Collaborative Innovation’. To put it simply, it’s global tensions - both political and economic. Business leaders will focus on private equity investors and the growing power of India, China and oil-rich nations, including Russia. Lee Howell, Senior Director, Head of Asia and Head of Global Agenda at the forum says Russia has an important role to play on the key issues. Among those under discussion in Switzerland include climate change, energy security, arms non-proliferation, the war on terrorism, and sovereign wealth funds. “The assumption is that if the U.S. economy slows down, then it will have an adverse impact on global growth. The hope is that there will be a decoupling and that it will come from the BRIC economies, and the R in BRIC is Russia,” Lee Howell added. But with turmoil on the world's stock markets, Russia is unlikely to top the agenda.

Total Faces Budget Problems on its LNG Project

24.01.2008 - [Neftegaz.RU] - The French oil company Total said Tuesday that it was facing budget problems on a major liquefied natural gas project in Iran and that it was reviewing plans with the Iranian government. "We are reviewing the project with the Iranian government, and it could take some time," said Philippe Boisseau, president of gas and power at Total. He declined to give an estimate on the latest cost of Pars LNG, which will be the Islamic Republic's first liquefied natural gas export terminal or say when Total might make an investment decision. Pars LNG would be fed by developing part of the giant South Pars gas field in a project, but construction costs have spiraled throughout the energy sector. The terminal was due to start in 2009 but has been pushed back to at least 2011.

Huge Gas Discovery to Make Brazil Self-Sufficient

23.01.2008 - [Neftegaz.RU]- The discovery of a huge gas field off the coast of Rio de Janeiro could make Brazil self-sufficient in natural gas, a Petrobras representative said on Tuesday. The discovery is located about 5,100 meters below the surface of the Atlantic Ocean. "If this field has the gas that Petrobras believes it has, it will make Brazil self-sufficient in natural gas," Guilherme Estrella, the company's production and exploration director said at a news conference. He said it would take Petrobras at least two years to determine if the new find is commercially viable. If so, production would probably not begin before 2014. Estrella said the reserve, nicknamed Jupiter, covered 1,290 kilometers (516 square miles) — about as big as the ultra-deep Tupi field discovered last November.

Societe Generale and Rosbank: divorce without a marriage?

MOSCOW. (Anatoly Gorev for RIA Novosti) - The scandal surrounding the largest French financial and credit group Societe Generale is mounting. The swindle by the bank's junior trader Gerome Kerviel has already been called the biggest fraud during the entire history of world financial markets. According to the investigators, Kerviel stole almost five billion Euros from the bank. It is not even possible to estimate what damage he has done to the bank's image. Probably, the banking market in Russia would not have reacted to the scandal if the French group did not operate quite successfully in Russia through its subsidiaries - Bank Societe Generale-Vostok (BSGV) and Rusfinansbank. Until recently, Societe Generale was one of the most active foreign buyers on the market of bank mergers and acquisitions. In 2006, the French group purchased a 20% stake in Rosbank in two stages, and was planning to buy another 30% of its shares before 2007 ended. Societe Generale's interest in Rosbank was quite natural. It wanted to have the controlling stake in a key retail player. Rosbank's huge network of branches is probably second only to that of Sberbank (Russia's main savings bank). Societe Generale representatives could not conceal their pride, causing their rivals to be jealous. The group was going to buy a bank, which is considered a leader in one of the most tempting segments of the market - consumer credits, auto loans and mortgages. But in the last few days, it has been rumored that the deal between Societe Generale and Rosbank may not go through. Experts are quoting the former's far from prosperous position as one of the reasons. The group had to acknowledge the loss of five billion Euros and write off another two billion Euros, presumably because of bad mortgage loans. Considering the ongoing crisis in the United States and the liquidity crunch, it may lose even more in the mid-term perspective. But even seven billion Euros is a big loss, particularly for a group that symbolized stability and success during the last few years. Needless to say, nobody doubts that Societe Generale, even in the current unfavorable situation, has enough funds to close a $1.7 billion deal with Rosbank. This is one of the largest recent transactions in the Russian market, but this sum is not critical for the French bank. However, the French group may not be interested in purchasing 30% of Rosbank stock now that it is bogged down in its own problems. First of all, it has to restore its image and make up for the losses, rather than reach out to developing markets. A possible failure of the deal will adversely affect not only Societe Generale and Rosbank, but also the Russian banking market as a whole. The deal was considered very important in many respects and entailed a record high premium. Experts from foreign banks and international consulting groups emphasized that finalizing the deal would enhance the appeal of Russian bank assets in the eyes of potential "strategists." This is especially important now that international investors are becoming less and less active in developing markets because of liquidity problems that may affect any bank or investment company. The recent scandal has shown that even a financial giant like Societe Generale is not protected against them.

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