Moscow press review for February 2, 2015
MOSCOW. Feb 2 (Interfax) - The following is a digest of Moscow newspapers published on February 2. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The drop in oil prices will cost Russia's federal budget 2.35 trillion rubles in lost revenue in 2015, which will widen the budget deficit to 3.8% of GDP and force the government to spend more than half of the Reserve Fund, the Economic Development Ministry forecasts in project. Government anti-crisis measures costing about the same as the losses could slow the decline of GDP by 0.9 percentage points (Kommersant, p. 1).
The Economic Development Ministry's updated macroeconomic forecast, based on an average annual oil price of $50 per barrel and lower prices for other key exports, projects that the Russian economy will contract by 3% in 2015, wiping out the weak GDP growth of the previous two years, while inflation will accelerate to a six-year high. Real wages are forecast to fall by almost 10%, the decline of investment is expected to accelerate to 14% and capital outflow is expected to remain high at $115 billion (Vedomosti, p. 4; Kommersant, p. 2).
Russia's Central Bank unexpectedly cut its key interest rate by 2 percentage points to 15% on Friday in order to support the economy. However, this will not help the economy and inflation could get out of control, analysts said, suspecting that the regulator was not acting independently. The ruble tumbled on the news of the rate cut, bringing its depreciation against the dollar to 13% in January (Vedomosti, p. 4).
HEADLINE NEWS
A fire raged through the library of the Russian Academy of Sciences' Institute of Scientific Information for Social Sciences in Moscow on Friday and Saturday, destroying thousands of books, manuscripts and unique catalogues. The cause of the fire at Russia's fourth largest library, seen as a catastrophe by the scientific community, is still unclear. An approximate estimate of the damage might be given on Monday (Kommersant, p. 1).
OIL & GAS
Gazprom is changing the way it works with contractors for the construction of the Power of Siberia gas pipeline to China. The project will be broken up into many small lots. Awarding large contracts like the Russian gas giant usually does has become risky because some of the major potential bidders have been hit by sanctions and cannot import some of the needed equipment, and sanctions are also causing financing problems for contractors (Vedomosti, p. 1).
Ahead of a meeting of the Russian president's energy commission, the government is again discussing changes to the tax maneuver in the oil industry. Oil companies are hoping for a reduction of their tax burden due to the drop in oil prices, which has had a worse impact on production than expected. The Energy Ministry is proposing to lower the natural resource extraction tax by changing the formula for calculating it (Vedomosti, p. 10).
The market capitalization of Lukoil, Russia's largest private oil company, surpassed that of Rosneft on the Moscow Exchange for a time at the end of last week, even though the state oil major produced nearly twice as much oil in 2014. Investors have more confidence in private capital. Lukoil is promising growth of dividends in rubles and dollars, while Rosneft has a big foreign currency debt (Vedomosti, p. 11).
Interview: Igor Yusufov, Founder of Energy Fund, Former Russian Energy Minister (Vedomosti, p. 8).
BANKING, FINANCE & INSURANCE
The Crimean authorities have sold Russian National Commercial Bank, the biggest lender on the Black Sea peninsula, to the little-known company LLC Complex Energy Solutions. The new owners plan to use the bank to finance public-private projects in Crimea in the areas of electricity, heat and road construction. Major players did not want to risk their reputation and sanctions by getting involved in the deal, analysts believe (Kommersant, p. 1).
The shareholders of Otkritie Holding, a major Russian banking group, might cede a 10% stake in the company to state bank VTB for the debts of the Rusenergo fund, which they have not owned for five years. The fund, which posted losses in the reform of Russia's former electricity monopoly UES, received a loan from VTB that was secured by Otkritie shares and VTB is calling in the collateral (Vedomosti, p. 11).
Despite the claims of Central Bank chief Elvira Nabiullina that Friday's reduction of the key lending rate to 15% from 17% will jumpstart lending to the real sector of Russia's economy, banks are not prepared to lower interest rates on loans just yet. For households, however, the Central Bank's actions will lead to lower interest rates on bank deposits (Kommersant, p. 7; Vedomosti, p. 15).
RETAIL & CONSUMER MARKET
The sale of a 25% stake in Gloria Jeans, Russia's leading clothing company, for $250 million has been called off due to the economic crisis, company owner Vladimir Melnikov said. Baring Vostok, Russian Direct Investment Fund (with China Investment Corporation) and Goldman Sachs were in talks to buy the stake. Investors are still reportedly interested in Gloria Jeans and there could be a deal if the ruble stops falling (Vedomosti, p. 10).
One of Russia's oldest alcohol importers and the second largest supplier of French wines to the Russian market, Rusimport has filed for bankruptcy for five of its companies. The group's insolvent firms conducted foreign currency operations. This is the first major alcohol supplier to declare bankruptcy since the collapse of the ruble, but far from the last, analysts believe, forecasting that a third of companies could leave the market this year (Kommersant, p. 7).
REAL ESTATE & CONSTRUCTION
The head of Russia's Audit Chamber, Tatyana Golikova said that the cost of ground infrastructure for the Vostochny cosmodrome has been inflated by 13 billion rubles and accused construction companies of placing government funds in bank deposits to earn a profit. Such schemes generated over 707.6 million rubles in extra income in the period from September 2012 to February 2014. Auditors believe this money was used by Dalspetsstroy to deal with its own business problems rather than spent on building the cosmodrome (Kommersant, p. 3).
AGRICULTURE, FISHING & FORESTRY
Due to the dramatic depreciation of the ruble, it has become more lucrative for Russian pulp-and-paper mills to export their products. As a result, domestic paper prices have rise by more than 50% since last fall, threatening to paralyze the printing industry and forcing the government to intervene. Prime Minister Dmitry Medvedev has ordered the government to look into the problem and draft proposals to protect the printing industry from the "unfair price policy of domestic paper producers" (Kommersant, p. 1).
