Moscow press review for March 19, 2015
MOSCOW. March 19 (Interfax) - The following is a digest of Moscow newspapers published on March 19. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The implementation of the peace plan for Ukraine is in jeopardy after the country's parliament passed amendments to the law on the special status of the Donetsk basin and a resolution declaring some parts of the self-proclaimed Donetsk and Luhansk republics "temporarily occupied." The Kremlin said this undermines the Minsk peace process. One expert believes Kyiv is trying to revise what it sees as unfavorable peace agreements. Analysts said this could lead to a new escalation of the conflict (Vedomosti; Kommersant, p. 6).
Inflation in Russia has stopped accelerating and has stabilized at 16.7% in annual terms, Rosstat data show. Inflation has been steady at 0.2% for the third consecutive week, as the ruble has stabilized and consumer demand has weakened. In two or three years Russia could even see deflation as the money supply will begin to shrink due to high interest rates, curbing inflation as soon as the impact of the ruble depreciation and accelerated indexation of tariffs wanes, economists at BAML believe (Vedomosti).
Russia's Audit Chamber has assessed the effectiveness of the privatization of federal assets in the past four years, finding that revenues from sold assets amounted to just 21% of the targets. The fiscal watchdog has the most complaints about frustrated privatization plans against the Economic Development Ministry. The auditors plan to send a report to the Prosecutor General's office (Kommersant, p. 2).
Russia is prepared to reboot dispute resolution with the European Union within the context of the WTO, moving it away from arbitration panels back to the level of negotiations. Moscow believes the ruble's depreciation has changed the situation, as Russian companies now have a natural advantage and cannot be accused of dumping. Russian import duties that the EU objects to could become a subject of these talks if the EU agrees to soften its position (Kommersant, p. 7).
METALS & MINING
After Tuesday's meeting between Mechel principal shareholder Igor Zyuzin and VTB president Andrei Kostin, the state bank said that the Russian steel and coal company presented constructive proposals to settle its debt. Mechel's share price was up 8.5% by closing in Moscow. One of the points they agreed on is that Mechel will pay off interest debt of 4.5 billion rubles to the bank, which earlier this month said it planned to have the company declared bankrupt (Vedomosti).
BANKING, FINANCE & INSURANCE
Russia's Finance Ministry is drafting amendments to the Tax Code that will change penalties for both taxpayers and the government budget by calculating penalties for tax arrears and interest on overpaid taxes using the Central Bank's key rate rather than its refinancing rate, which has remained at 8.25% since September 2012. Since the key went as high as 17% in December and is now 14%, pushing up lending rates, tax arrears have become a cheap form of credit for companies (Vedomosti).
RETAIL & CONSUMER MARKET
Russian fashion designer Valentin Yudashkin has made a proposal to the Moscow Region to build a design and technology cluster, investment in which could total $200 million-$250 million. The region has more than 200 textile enterprises that shipped 23.3 billion rubles of goods last year. The cluster's training facility could resolve the problem of the industry's lack of skilled workers, manufacturers believe (Kommersant, p. 1).
Lenta, a major Russian food retailer, plans to carry out a secondary public offering. The chain hopes to raise about $250 million, one source said. Lenta has aggressive plans for expansion, but financing is currently very expensive, so a small offering makes sense while multipliers are high, one analyst said. Lenta, which plans to open 20-25 hypermarkets and 10-15 supermarkets in 2015, expects sales to grow 34-38% this year (Vedomosti).
REAL ESTATE & CONSTRUCTION
Russia's Federal Road Agency plans to cut financing for road construction by 28%, or 36.8 billion rubles in 2015 as part of overall federal budget cuts. As a result, new road projects will not be begun in 2015 and previously launched projects might to partly suspended. This could affect the reconstruction of roads such as the ring road in St. Petersburg and M5 Ural highway in Moscow Region (Kommersant, p. 1).
President Vladimir Putin's orders for Russia's regions to double the pace of road construction are becoming ever less realistic, 2014 showed. Regions, chronically short of money even to maintain existing roads, are steadily behind schedule, while the amount of money in road funds is continually shrinking. Regional road funds will spend 394.4 billion rubles on road infrastructure in 2015, about the same as in 2013, the Rador association reckons (Vedomosti).
Capital Group has acquired the rights to build a multiuse complex on a Sofiyskaya Embankment property on the 'golden island' in central Moscow. The deal was reportedly worth 10 billion rubles. There are plans to build a low-rise development with a boutique hotel, residential properties and offices at an estimated cost of 15 billion rubles. Completion is scheduled for the end of 2018 (Vedomosti).
Interview: Veniamin Golubitsky, President of Kortros (Kommersant, p. 11).
AUTOMOTIVE & ENGINEERING
General Motors announced on Wednesday that it is shutting down automobile production in Russia indefinitely. The company, which saw sales in Russia tumble 74.6% in January-February after a drop of 26.4% in 2014, is taking its Opel brand and mass market Chevrolet models off the Russian market. It will sell only imported cars in the premium segment, such as Cadillacs and Corvettes (Vedomosti, p. 1; Kommersant, p. 1).
AGRICULTURE, FISHING & FORESTRY
The sanctions war with the West is forcing Russian agriculture companies to look for investors in Asia. The Kuban agribusiness group, a division of billionaire Oleg Deripaska's Basic Element, is holding negotiations on the sale of shares with a number of Asian funds and investment companies, including China Investment Corporation, which is interested in BasEl's livestock farming division. BasEl hopes to raise over $200 million (Kommersant, p. 7).