Moscow press review for March 6, 2015
MOSCOW. March 6 (Interfax) - The following is a digest of Moscow newspapers published on March 6. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The Russian government did not approve amendments to the current federal budget on Thursday, giving the Finance Ministry another week for revisions. The ministry is essentially proposing to amend only the budget for 2015, while leaving all figures in the budget for 2016 and 2017 unchanged, ignoring the depreciation of the ruble and subsequent spike in inflation. This would mean a dramatic real reduction of spending that could result in a balanced budget in 2017, the ministry reckons (Kommersant, p. 1).
Russia's Federal Anti-Monopoly Service plans to create an appeal process to review the decisions of its regional divisions. The process is defined in amendments to the fourth anti-monopoly package that the regulator has prepared for a second reading in the State Duma. The appeals commission would help even out regulatory practice across the country and be able review cases in as little as a month, compared to upwards of a year for complaints taken to court, the regulator believes (Vedomosti).
Russia's economic slump in 2015 will be deeper than the Economic Development Ministry expects, despite the government's anti-crisis efforts, analysts at the Gaidar Institute, the Russian Academy of the National Economy and Public Administration and the Academy of Foreign Trade forecast. The economy will bottom out in the second half of the year if oil prices remain at the current level and could contract by 6.8% in 2015, they project (Kommersant, p. 2).
Prime Minister Dmitry Medvedev gave orders on Thursday to investigate reports of delays in stipend payments at Russian post secondary institutions. The problems with payments might have been triggered by the government, which decided in December to reduce the stipend fund for all such institutions in the country by 10%. Institutions and their founders were expected to find the lacking funds themselves, but this process may have run into delays in some cases, officials said (Kommersant, p. 1).
Annual inflation in Russia accelerated to 16.7% in February from 15% in January, as food price inflation (not including alcohol) soared to 24.9% from 6.2% a year earlier. Consumer prices jumped 6.2% in the first two months of 2015, compared to an increase of 1.3% a year earlier (Vedomosti).
OIL & GAS
The UK has given LetterOne, the investment fund of Russian billionaire Mikhail Fridman and his partners, a week to submit new proposals to safeguard the fund's British gas assets from possible western sanctions against LetterOne or its owners. Otherwise, LetterOne might be required to sell the British assets, which it acquired with the purchase of oil and gas company Dea from Gemany's RWE for 5 billion euros, in a deal closed earlier this week (Vedomosti).
METALS & MINING
Uralkali has revised it development strategy for 2015-2020 due to the suspension of operations at the flooded Solikamsk-2 mine that accounted for 18% of its output. The Russian potash giant is accelerating current and new projects in order to ramp up output. Capacity will increase to 14.4 million tonnes in 2020 from the current 11 million tonnes. The company, which for the first time closed the year with a loss of 33.3 billion rubles to IFRS, plans to spend $4.5 billion on the new program (Vedomosti; Kommersant, p. 8).
BANKING, FINANCE & INSURANCE
The first five Russian banks - Sovkombank, Petrocommerce, Bank Rossiya, Moscow Industrial Bank and Novikombank - have already submitted applications to participate in the program to recapitalize lenders through OFZ federal bonds totalling 830 billion rubles, and another nine are preparing to do so. More than half of the 27 potential candidates are therefore prepared to recapitalize with state funds and sacrifice some of their freedom in doing business (Kommersant, p. 7).
RETAIL & CONSUMER MARKET
The successor of the restructured government company Ritual has inherited the debts of Moscow's funeral services monopoly along with its assets. The company owes suppliers and creditors 456 million rubles, which amounts to a quarter of its revenue. Ritual's search for additional sources of revenue could end in a price hike for funeral services, though the city authorities say this would be a last resort (Kommersant, p. 1).
REAL ESTATE & CONSTRUCTION
Funding for construction of infrastructure for the 2018 World Cup championships will be allocated in full, according to budget amendments released by Russia's Finance Ministry. Although there are plans to cut spending on federal programs by 10%, funding for sports venues for the championships will be reduced by only 108 million rubles to 30.9 billion rubles, while preparation of transportation infrastructure for the event will still get another 29.8 billion rubles in 2015, including 10.75 billion rubles for roads (Vedomosti).
Russia's Special Construction Agency is asking the government to increase advance payments for construction of the Vostochny cosmodrome to 85%. Sources said the request will be granted and construction companies will shortly get about 30 billion rubles. Meanwhile, incomplete reporting on earlier advances to an agency company, making it impossible to fully account for the spending of over 12.8 billion rubles, has drawn the attention of prosecutors and auditors (Kommersant, p. 2).
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY
The Kremlin administration recently discussed additional taxation of foreign Internet companies. The meeting on the issue was held after Russian search engine Yandex complained to regulators about unfair competition from Google, one source noted, while another said Russian officials began thinking about taxing Google after recent statements by the EC about forcing U.S. Internet and IT companies to pay taxes in the European Union (Vedomosti, p. 1).
Russia's Rostelecom has decided to cancel all of the treasury stock on its books - 6.14% of common and 13.7% of preferred shares. As a result, the national telecom provider's largest shareholder, the Federal Property Agency, will see its stake increase from 46.99% of common shares to a controlling interest of 50.06%. The price of the shares has fallen by over 25% since Rostelecom had to buy them last year from shareholders opposed to the spinoff of mobile assets (Vedomosti).
AUTOMOTIVE & ENGINEERING
Foreign automakers, who hiked prices dramatically after the December collapse of the ruble, have seen a steep drop in sales and are beginning to offer discounts. Renault, Peugeot and Ford have decided to lower prices like Daewoo and Great Wall have. Prices for some Ford models could drop 4-20%. But dealers doubt the discounts will help to significantly slow the drop in sales, which reportedly reached 46-76% in February (Kommersant, p. 7).