Moscow press review for October 30, 2014
MOSCOW. Oct 30 (Interfax) - The following is a digest of Moscow newspapers published on October 30. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The European Union might impose harsher sanctions against Russia if the Russian authorities recognize the November 2 elections in the self-proclaimed people's republics in eastern Ukraine, a source said. Brussels believes holding elections on this date contradicts the Minsk agreements, so by recognizing the vote Russia would be helping to transform the Ukrainian crisis into a frozen conflict rather than to resolve it (Kommersant, p. 1).
The authorities are considering allowing Crimean companies to be reregistered under Russian law without the agreement of their owners - the decision of the chief executive might be deemed sufficient. All Crimean companies must reregister as Russian legal entities or divisions of foreign companies by January 1, 2015, until which time the local authorities will be able to independently regulate registration of businesses (Vedomosti, p. 4).
The Global Forum on Transparency and Exchange of Information for Tax Purposes has recognized Russia as an almost completely transparent country for foreign tax authorities. This will enable Russia to gain access to the mechanism of automatic exchange of information (Vedomosti, p. 4).
OIL & GAS
Russian state oil major Rosneft saw its net profit tumble to 1 billion rubles in the third quarter of 2014 from 141 billion rubles a year earlier, and even this profit came from minority interests in affiliated companies. The main reason for the drop in profit was the depreciation of the ruble, resulting in record negative exchange rate differences in revaluation of foreign currency debt (Vedomosti, p. 1).
UTILITIES
VTB has filed a lawsuit against Rusenergo Fund seeking repayment of 64.3 billion rubles in debt. If the debt is not paid, the Russian state bank will sell off fund assets held as collateral - minority stakes in Russian power companies, though it might hold on to some shares. The fund's assets were reportedly worth about $600 million in the middle of 2013, but the shares of Russian power companies have fallen by a third since then (Vedomosti, p. 12).
BANKING, FINANCE & INSURANCE
The ruble might be recognized as a settlement currency next year by leading clearing system Continuous Linked Settlement. CLS Bank has opened an account at Russia's Central Bank. The ruble will be traded there just like freely convertible currencies. This is expected to significantly reduce risks in settlements on exchange transactions with rubles and dramatically increase the number of potential participants in the Russian forex market (Vedomosti, p. 11).
Banks borrowed only a little more than $200 million from Russia's Central Bank using securities as collateral in the first direct forex repo auction on Wednesday, although $1.5 billion was offered. Despite the forex liquidity crunch, banks are not yet prepared to borrow dollars at the Central Bank's high interest rates and assume forex risks (Kommersant, p. 7).
RETAIL & CONSUMER MARKET
The R-Pharm Group has reached an agreement to buy a 51% stake in one of Russia's largest pharmaceuticals distributors, SIA International, which announced the death of its owner and president Igor Rudinsky on Wednesday. The deal is worth an estimated $550 million-$600 million. The Rudinsky family will retain 49% of SIA, but R-Pharm will have an option to buy these shares (Vedomosti, p. 10).
X5 Retail Group, once Russia's leading retailer, has raised its annual revenue forecast for the first time in five years, as it now expects sales to grow by 17-19% rather than 10-12%. The company is also considering a listing on the Moscow Exchange. Investors are feeling optimistic about the company for the first time in quite a while (Vedomosti, p. 11).
Russian consumers expect the economic situation in the country to worsen and are already reconsidering spending on food, clothing and entertainment, advertising group ADV said in a report. Some 75% of respondents are even prepared to reduce spending on New Year celebrations and gifts. Meanwhile some consumers, in anticipation of a crisis, have begun to invest in expensive purchases such as home electronics and furnishings (Kommersant, p. 10).
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY
A Russian arbitration court on Wednesday upheld the legality of the long-disputed golden parachute of 200.88 million rubles awarded to former Rostelecom president Alexander Provotorov. Despite the fact that the huge payout was disputed by both the national telecom provider's minority shareholders and the state as represented by the Federal Property Agency, the court overturned earlier rulings that found the golden parachute to be illegal (Kommersant, p. 1; Vedomosti, p. 16).
U.S. media group Hearst does after all want to buy out the Russian assets of Finland's Sanoma, but only some of them. This could hold up the sale of Sanoma Independent Media, one of the largest publishing houses in Russia. In mid-October Sanoma informed Hearst, its partner, that it had received a binding offer for its Russian assets from Peter Gerwe, who offered to pay 50 million euros (Vedomosti, p. 10).
Russia's Internet market grew 31% to 1.1 trillion rubles, or 1.6% of GDP in 2013, a new study shows. The Internet business in Russia is expected to grow another 30% this year, but in the next few years analysts expect growth to slow to 15-20% due to the economic slump and decline in consumer activity (Kommersant, p. 10).
TRANSPORTATION
Russian Railways, which has already secured agreement for allocation of National Welfare Fund money to overhaul the Baikal-Amur Mainline and Trans-Siberian Railway, has proposed another ambitious project to the government costing about 677 billion rubles - upgrading 22,000 km of rail lines to accommodate heavy trains. The company sees the state as the main source of financing, as investment in the project will never pay for itself (Kommersant, p. 1).
AUTOMOTIVE & ENGINEERING
Avtovaz, which recently suspended sales of vehicles under a government scrapping program as it had exhausted its quota, has resumed selling all of its models, except the Lada Granta, at a discount. A final decision on extending the program has not been made, but the leading Russian carmaker has probably received certain guarantees of compensation from the government, otherwise the company would hardly have ventured to give 15% discounts on its popular models, sources said (Kommersant, p. 7).
AGRICULTURE & FORESTRY
Additional financing for the revised agriculture development program to 2020 that will be submitted to the Russian government on Thursday will total 20 billion rubles instead of the 77.5 billion rubles the Agriculture Ministry previously requested. The ministry reckons the implementation of the program amid accelerated import substitution will make it possible to increase Russian agricultural production by 23.4% by 2020 and food production by 35%. But producers, of milk for example, believe this will be impossible with the current amount of financing (Kommersant, p. 1).
