Moscow press review for June 29, 2015
MOSCOW. June 29 (Interfax) - The following is a digest of Moscow newspapers published on June 29. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
Russia's economic slump deepened in May, as GDP contracted by 4.9% year-on-year compared to 4.2% in April, the Economic Development Ministry estimates. GDP fell 3.2% year-on-year in January-May. Industrial production dropped 5.5% in May after falling 4.5% in April, with the manufacturing sector contracting by 8.3%. Consumer and investment demand are not supporting the economy and the last driver of growth is state investment, analysts believe (Vedomosti, p. 4).
The government might establish an additional reserve within the Pension Fund of Russia that could be used to pay pensions in periods of crisis. The reserve could have totalled at least 600 billion rubles in 2012-2014. Discussion of the fund's budget for 2016-2018 could resume the debate about the status of the PFR and a more consistent implementation of the insurance principles of its operation given that the fund will not be able to give up budget transfers in the foreseeable future (Kommersant, p. 1).
OIL & GAS
The Russian government decided on Friday to approve another tax experiment in the oil industry - a tax on financial result for pilot oil projects - despite the objections of the Finance Ministry. Sixteen projects at Rosneft, Lukoil, Surgutneftegas and Gazprom Neft are expected to participate. The terms of the program could change as the relevant bill goes through the State Duma, sources said (Vedomosti, p. 1; Kommersant, p. 9).
Despite earlier assertions to the contrary, Gazprom is prepared to discuss transit shipments of gas through Ukraine to Europe after 2019, when the current transit contract expires. The Russian gas giant's CEO said on Friday that Gazprom would hold talks to extend the contract when it ends and that President Vladimir Putin had given a direct order to do so. There is uncertainty about alternative routes and Putin wants to reassure European countries, analysts believe (Vedomosti, p. 10).
Rosneft's net debt has reached 2.5 trillion rubles. The Russian state oil major is due to pay down $15.5 billion in the second through fourth quarters of 2015. It will make payments on its debt this year thanks to a prepayment for oil from China's CNPC, and also expects to refinance a portion of the debt. The prepayment from CNPC could total $10 billion-$15 billion, one analyst reckons (Vedomosti, p. 12).
UTILITIES
The protests in Armenia over electricity price hikes and the country's promises to nationalize Electric Networks of Armenia could force its owner, Russia's Inter RAO to sell the company. Inter RAO has already held talks with Russian businessmen of Armenian origin, including Tashir Group owner Samvel Karapetyan. But finding a buyer will not be easy, as imbalanced rates have left ENA with large debts and the protesters do not want the government to compensate the company's losses (Kommersant, p. 1).
BANKING, FINANCE & INSURANCE
Sberbank will continue to participate in the loyalty program of Russian flag carrier Aeroflot, which it wanted to abandon at the end of 2014. The airline has agreed to maintain the favorable, pre-crisis terms of the program for the state lender's clients, who will still get air miles for 30 rubles, half the price of other banks' clients. This has raised questions among analysts, but neither Sberbank's competitors nor the Federal Anti-Monopoly Service are ready to file official complaints yet (Kommersant, p. 1).
Ahead of the introduction of higher contributions to Russia's deposit insurance fund for banks that offer inflated deposit interest rates, lenders are quickly adjusting to the new rules of the game. As July 1 approaches deposit interest rates are getting lower. Many have taken advantage of a loophole to maintain previous deposit returns without extra costs, but the Central Bank intends to pay particular attention to non-standard contract terms (Kommersant, p. 7).
RETAIL & CONSUMER MARKET
Russian legislators are proposing to include two restrictions for retail chains in a bill to amend the retail law that the State Duma passed in the first reading in May. One would slash the ceiling for retroactive bonuses that suppliers pay retailers to 1% from the current 10%. The other would reduce the threshold for market dominance for food retailers to 15% from the current 25%. This would restrict the growth of food retailers (Vedomosti, p. 11).
REAL ESTATE & CONSTRUCTION
The drop in rents on the Moscow office market, which suffered more than other segments of commercial real estate due to last year's currency fluctuations, has slowed. Rental rates at Class A business centers slumped just 4% in the second quarter compared to a drop of 10% in the first quarter. The market will not fully recover before next year, consultants expect (Kommersant, p. 7).
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY
Russia's Communications Ministry earlier this month declared the consortium of Finland's Jolla, Grigory Berezkin's ESN group software firm ESK and Yandex the winner of a tender for import substitution of operating systems for mobile devices. Jolla last week held talks on how to adapt its Sailfish OS for the Russia-developed dual-screen smartphone YotaPhone, which now runs on Google's Android OS (Vedomosti, p. 10).
AUTOMOTIVE & ENGINEERING
European Union sanctions against Russia have forced France's Safran group to reconsider the development strategy for TM Innovation, its Russian joint venture with system integrator Technoserv to promote new technologies in the area of biometrics. The French engineering group has already frozen several projects with Russian state corporation Rostec (Kommersant, p. 1).
PCMA Rus, the Russian joint venture between France's PSA Peugeot Citroen and Mitsubishi Motors, will only restart the sedan assembly line at its Kaluga plant on August 17, more than a month later than planned, due to the continued weak car market and sufficient inventories for the summer. Peugeot and Citroen saw sales in Russia drop 79% and 76% respectively in January-May while overall car and LCV sales in the country fell 37.7% (Vedomosti, p. 11).
