Moscow press review for December 18, 2014
MOSCOW. Dec 18 (Interfax) - The following is a digest of Moscow newspapers published on December 18. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
Russia's Central Bank and government have drawn up a program to stabilize the panicked financial market, the key points of which might be announced by President Vladimir Putin on Thursday. It might then be presented at a meeting between Putin and business leaders on Friday. Measures being discussed include elements of currency control only for state companies and a buyout of some forex corporate debt with money from the National Welfare Fund (Kommersant, p. 1).
A day before President Vladimir Putin's press conference, Russia's Investigative Committee issued an order to release Sistema principal owner Vladimir Yevtushenkov, who faces laundering charges related to the acquisition of oil company Bashneft, from house arrest. This is seen as a positive sign for the market, but is unlikely to significantly improve the investment climate. Meanwhile, a Moscow court issued an arrest warrant for the second person in the case, Ural Rakhimov, the son of Bashkortostan's former president, who is living in Austria (Kommersant, p. 1; Vedomosti, p. 10).
Russia's State Council will discuss measures to support small and medium businesses, but only in March 2015, by which time many businesses could be in trouble. It is technically impossible to agree on such important decisions earlier, governors say. The initiatives could include extending tax holidays to small businesses (Vedomosti, p. 2).
Russians' real disposable incomes dropped 4.7% year-on-year in November and 0.3% in the first eleven months of 2014, amid accelerating inflation and depreciation of the ruble, Rosstat reported. Forecasts project a further decline in living standards due to the economic crisis (Vedomosti, p. 4).
Russian President Vladimir Putin spoke by phone with the leaders of Germany, France and Ukraine Tuesday evening, discussing steps to resolve the situation in eastern Ukraine and carry out agreements reached in Minsk. Efforts to resolve the situation in Ukraine are being intensified due to the growing political and economic costs being borne by all parties due to the conflict. The resumption of the Minsk process could become a turning point in resolving the Ukrainian crisis (Kommersant, p. 6).
The Russian government is preparing across-the-board spending cuts. The December 10% cut in budget limits for 2015 is to be confirmed in March with changes to the federal budget. There are also plans to cut spending on off-budget funds and the operating costs of state companies by 10%, while regions are being asked to reduce spending by 5% in 2015. But all this will not be enough, and the Finance Ministry is preparing to take at least 500 billion rubles from the Reserve Fund to plug holes (Kommersant, p. 8).
Interview: Alexei Ulyukayev, Economic Development Minister of Russia (Vedomosti, p. 8).
METALS & MINING
Russian steel and coal company Mechel has proposed a new debt restructuring plan to its creditor banks. In addition to the previously proposed conversion of forex debt into rubles and rescheduling, Mechel's new proposal would give banks 75% of new shares in the company as collateral. Sberbank and VTB are unlikely to agree to these conditions, one analyst said (Vedomosti, p. 12).
BANKING, FINANCE & INSURANCE
Russian legislators are prepared to double retail deposit insurance to 1.4 million rubles from the current 700,000 rubles in order to keep depositors from taking their money out of banks amid financial instability. The relevant bill will be tabled at a meeting of the State Duma financial market committee Thursday. It is unclear whether this would stop withdrawals, as people are now more worried about their deposits being frozen than about bank bankruptcies, analysts said (Kommersant, p. 1).
After meeting with Russia's biggest exporters on Wednesday, Prime Minister Dmitry Medvedev issued orders for the authorities to daily monitor sales of forex earnings, which are supposed to be steady in order to help stabilize the situation on the forex market. Meanwhile, the Finance Ministry said it would sell $7 billion from its forex balances. The ruble recovered somewhat after its record drop the previous day, pushing the dollar down 8.7% to 61.62 rubles by midday (Vedomosti, p. 11; Kommersant, p. 10).
The Russian authorities have decided to improve on the mechanism of recapitalizing banks through OFZ federal bonds that was developed during the last crisis. The process of selecting banks and making decisions would be carried out through the Deposit Insurance Agency rather than the Finance Ministry in order to significantly accelerate the process, and up to 1 trillion rubles could be allocated, rather than several hundred billion rubles as before (Kommersant, p. 9).
After two days of panic on Russia's financial market, the Central Bank announced a set of measures to support the financial sector that should reduce the pressure on banks' capital. In addition to easing requirements for statutory ratios and quality of assets, the regulator might support banks with subordinated loans. Banks generally welcomed the measures, but are eager to see the details of how they will be implemented (Kommersant, p. 10; Vedomosti, p. 14).
RETAIL & CONSUMER MARKET
The depreciation of the ruble could lead to empty shelves at Russian stores. Importers of consumer goods are halting shipments to allow the situation on the forex market to stabilize, while some suppliers and distributors of food and alcohol have suspended deliveries to adjust prices for the new exchange rates (Vedomosti, p. 1; Kommersant, p. 9).
REAL ESTATE & CONSTRUCTION
Moscow is seeing a surge in demand for residential real estate as Russians rush to invest their depreciating cash rubles. Sellers cannot revise prices fast enough to keep up with the ruble's changing exchange rate. However, supply might decrease dramatically soon as new housing completions are expected to fall considerably in 2015 given the economic situation (Vedomosti, p. 11).
AGRICULTURE, FISHING & FORESTRY
The Russian authorities have restricted grain exports without imposing an official ban. The country's plant and animal health watchdog has stopped issuing certificates for grain exports, except shipments destined for Turkey, Egypt, India and Armenia. The restrictions could put farmers in a difficult financial position. Exporters have already asked the government to allow them to meet contractual obligations (Vedomosti, p. 10; Kommersant, p. 12).
