Moscow press review for December 21, 2015
MOSCOW. Dec 21 (Interfax) - The following is a digest of Moscow newspapers published on December 21. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The Russian government, responding to claims by Crimean leader Sergei Aksyonov that the region has not received a penny for the federal program to develop Crimea and Sevastopol, questioned the "professionalism and performance" of the peninsula's leadership and has ordered the economy and finance ministries to submit proposals to reprimand the region's authorities. However, analysts do not believe this will lead to Aksyonov's ouster (Kommersant, p. 1).
A dispute about Federal Anti-Monopoly Service control over state and municipal unitary enterprises might delay the passage of a Russian ant-crisis bill that would exempt small and medium businesses from competition regulation, introduce a register of small entrepreneurs and reduce the number of spot inspections. The State Duma is supposed to consider the bill on Tuesday, but the Federation Council has criticized it and warned it might be rejected (Vedomosti, p. 4).
Low oil prices could lead to a second wave of crisis in the Russian economy. The depth of the slump will depend on commodity prices. The World Bank believes the drop in oil prices will reduce Russia's budget revenues in the first quarter of 2016 and it has revised its forecast for contraction of GDP in 2016 to 0.7% from 0.6%. Consumer demand will continue to fall in 2016 and the budget deficit will widen to 4.3% of GDP, the bank expects (Vedomosti, p. 5).
Interview: Denis Butsayev, Deputy Chairman of the Moscow Region Government (Vedomosti, p. 8).
UTILITIES
Crimea will legally remain a zone that is isolated from Russia's energy system until 2018. Russian electricity will probably be sold on the Black Sea peninsula by a little-known unit of Federal Grid Company, which has already become a participant of the wholesale market. A subsidiary of Inter RAO could have also bought power for Crimea on the wholesale market, but its sanctions risks are high (Kommersant, p. 1).
METALS & MINING
Russian pipe makers will benefit from the suspension of the free trade agreement with Ukraine. In addition to anti-dumping duties, Ukrainian steel pipes will be subject to import duties, raising duties to 25-30%. Pipe imports from Ukraine, which reached $1 billion in 2011, have already fallen steeply due to the anti-dumping duties, weaker ruble and deterioration of political relations, and the extra duties could completely shut the Russian market to Ukrainian pipes (Kommersant, p. 7).
BANKING, FINANCE & INSURANCE
The Russian government, after nearly two months of debating how to help VEB, is finally near a decision to extend deposits held at the state development bank by the National Welfare Fund and Central Bank. In addition, the interest rate on NWF deposits will likely be lowered so the difference in interest rates will give VEB extra paper profits that will go into its capital. VEB owed the NWF alone 195 billion rubles and $6.2 billion as of December 1 (Vedomosti, p. 1).
In an unprecedented move, Russia's Central Bank might announce a second tender for the bailout of Trust Bank. Otkritie FC, which is currently handling the bailout, wants about another 50 billion rubles for Trust's financial recovery in addition to the 127 billion rubles already provided, but the contract does not allow for this. But while Otkritie already has competitors, analysts do not believe the bailout will be handed to someone else (Kommersant, p. 8; Vedomosti, p. 11).
RETAIL & CONSUMER MARKET
Russian shoppers at retail chains might be deprived of promotions and deferred payments on credit for goods offered by banks as of the start of 2016. Retailers are insisting on raising the commissions that banks pay for working at their outlets in order to offset falling sales. Commissions could jump 25-50%, which would leave banks no room to offer consumer promotions (Kommersant, p. 1).
Fast food and pizza delivery services, which saw orders grow 10% and 6% respectively in the year to the end of September 2015, will be the growth leaders on the Russian restaurant market this year, NPD Group reports. The growth of fast food was driven by the ongoing expansion of market leaders McDonald's, KFC and Burger King. Meanwhile, restaurants are trying to offset the drop in number of guests with growing demand for food delivery to homes and offices (Vedomosti, p. 11).
REAL ESTATE & CONSTRUCTION
The State Duma passed the bill to hand out land in the Far East to Russian citizens in the first reading on Friday. The Far East Development Ministry now wants to give residents of the region an advantage by stipulating a transition period when only they will be able to get land. In addition, the authorities are working on a way to provide discount mortgages for residential construction on land received under the program (Kommersant, p. 2).
Neftegazindustriya, a company owned by Uralsib Bank's new owner Vladimir Kogan, owns nearly 1 hectare of land next to the Christ the Saviour Cathedral in central Moscow. The businessman plans to build 38,000 square meters of luxury residential real estate on the property at a cost of up to $380 million. There are currently almost no available development sites available in the prestigious Golden Mile area where Kogan's property is located (Kommersant, p. 7).
AUTOMOTIVE & ENGINEERING
Nissan has suspended production of the Tiida hatchback due to the steep drop in sales of new vehicles in Russia. The company has also slashed production of its Nissan Sentra compact sedan at Avtovaz's plant in Izhevsk. Nissan plans to resume production of the Tiida in Izhevsk when the market stabilizes. Sales of cars and LCV in Russia tumbled 34.5% in the first eleven months of 2015, while Nissan's sales in Russia dropped 42% (Vedomosti, p. 10).
AGRICULTURE, FISHING & FORESTRY
Russia's Agriculture Ministry is considering restructuring United Grain Company (UGC), which conducts grain interventions on behalf of the government. The ministry is proposing to hand over state agent duties to its own institutions and then privatize UGC, citing the need to maintain control over grain reserves. Market players warn this could reduce UGC's valuation (Kommersant, p. 1).