Andy Potts

Making French connections

Russian readies, Renault know-how

The latest Avtovaz rescue bid, signed in France on Friday, involves Renault technology beefed up by Russian cash to bail out the beleaguered Tolyatti carmaker.

Renault, the French carmaker with a 25 per cent plus one share stake in the Russian firm, is set to provide up to 240 million euros in non-cash support for Avtovaz.

Meanwhile Russia is expected to pump up the roubles - up to 50 billion - to keep the troubled firm on the road, RIA Novosti reported.

Prime Minister Vladimir Putin confirmed that there would be no dilution of that 25 per cent stake held by Renault in conjunction with Russian Technologies, adding that more cars would be made in the Russian Far East, supported by Renault's Japanese partner, Nissan.

Other deals done during Vladimir Putin's two-day trip to Paris include France's EDF joining the South Stream pipeline project, creating what the prime minister described as "almost an asset swap" between the Euro energy giant and Gazprom. At the same time the two countries have "firm plans" for cooperation in nuclear power, Reuters added.

But Reuters reported that there was still no decision over buying French Mistral-class warships, one of which recently visited St. Petersburg. It had been expected that Russia would invest in new vessels to protect its interests in the Black Sea - or rattle its sabres at Georgia, according to Tbilisi.

Budget deal

Next year's budget will show a deficit of 6.8 per cent - or $100 billion - following its approval by the Federal Council last week.

But projected budgets until 2012 see the planned overspend dropping to 4 per cent in 2011 and 3 per cent the following year, RIA Novosti reported.

The sums largely depend on projected oil prices: next year's figure anticipates an average price of $58 per barrel for Urals crude, rising by one dollar a year subsequently.

If oil prices climb towards the $100 mark the deficit could be eradicated by 2012, according to Finance Minister Alexei Kudrin. Last week oil was trading at around $75 a barrel.

Russia's budget revenue has been set at $238 billion, with expenditures of $338 billion.

Meanwhile the EBRD has predicted a 3.1 per cent GDP growth next year following an 8.5 per cent drop in 2009.

Last orders

The famous drunken banya scene in the popular Soviet-era comedy "Ironiya Sudby" ("Irony of Fate") is as much a part of Russian New Year's as pumpkin pie at Thanksgiving or the Queen's speech at Christmas.

But it could be banned from TV screens if Russia's Health and Social Development Ministry gets its way.

Trud newspaper reported last week that in a bid to tackle alcoholism, officials want to ban any on-screen images containing booze or people drinking it.

While mostly aimed at further tightening advertising restrictions, it would also potentially scupper screenings of the festive family favourite - the plot of which hinges on a boozy banya party which sees the Muscovite hero inadvertently arrive "home" in an identical flat in Leningrad.

Record low rates

Lower inflation has pushed Russia's key interest rate to a record low of 9 per cent, the ninth rate cut since April.

The Central Bank is trying to stimulate bank lending to nurture the fragile economic recovery while also stemming the flow of speculative investment which is driving a dangerously strong rouble's climb against the dollar.

There are fears that the strong rouble could derail the nascent recovery, and some analysts expect another small rate cut before the end of the year.

Meanwhile Central Bank boss Alexei Ulyukayev announced a cut in emergency support for the banking as the economy recovers, with a 10-fold drop in inter-bank lending.

Raging bulls

Nice rice

Russia's rice farmers have produced a record harvest - which could cut imports by 30 per cent, Itar-Tass reported. Agriculture minister Yelena Skrynnik told Vladimir Putin that the bumper crop vindicated state support for growers.

Toxic assets

Hotel bills slashed

Average Moscow hotel prices plummeted 35 per cent in October - but still weigh in at a whacking €156 per room, reported travel industry web-site carrentals.co.uk. Occupancy was also down, with Moscow's revPAR indicator falling almost 40 per cent. Hotel industry researcher STR Global found falling prices and low occupancy throughout Eastern Europe - though Moscow's average room rate remains almost double the cost in tourist hot-spot Prague.

Shot down

Russia's manufacturers of unmanned aircraft have been told to aim higher by the air force, RIA Novosti reports. Colonel General Alexander Zelin said existing home-made surveillance drones failed to meet the military's requirements and said it would be "a crime" to commission them.

Cap in hand

The Moscow region government has been knocking on the bank manager's door to maintain public services in the face of financial problems, RIA Novosti reported. The local authority borrowed $226 million from VTB in a two-year loan.

The week ahead

Dec 1: A London court is to hold a hearing on the extradition of Yevgeny Chichvarkin

Dec. 1: Samara - Avtovaz starts full working week

Dec. 2: Russian Energy Minister Sergei Shmatko to address State Duma

Dec. 3: Washington - Federal Reserve Chairman Ben Bernanke to speak before Senate Banking Committee while US President Barack Obama speaks to leaders from business, labour and finance.

Dec. 4: Monthly US Employment report

Dec. 7: Indian Prime Minister Manmohan Singh arrives for annual Russia-India summit

Dec. 7-12: Russian Economic Congress