Moscow press review for October 28, 2014
MOSCOW. Oct 28 (Interfax) - The following is a digest of Moscow newspapers published on October 28. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The European Union will conduct an official review of sanctions against Russia on Tuesday. Sources at EU institutions say the sanctions are unlikely to be eased despite the improvement of the situation in Ukraine, and will probably remain in full force until the middle of March 2015. Italy, which currently holds the presidency of the Council of the EU, tried to raise the issue of accelerating the reconsideration of sanctions, but its proposal was blocked. The traditional Russia-EU summit will not be held this winter (Kommersant, p. 1).
The pro-presidential Petro Poroshenko Bloc and Prime Minister Arseniy Yatsenyuk's People's Front will become the core of the new parliamentary coalition being formed in Ukraine following Sunday's elections. Yatsenyuk, who is expected to remain prime minister, said the most urgent objective was to form a "strong pro-European majority." Russian officials expressed a willingness to recognize the results of the elections, but said they have led to a dramatic increase in the representation of "aggressively anti-Russian forces" in parliament (Kommersant, p. 1; Vedomosti, p. 2).
The Russian economy grew by 0.8% in the first nine months of 2014, and given an "optimistic combination of circumstances" will not contract by more than 0.3% in the fourth quarter, the Economic Development Ministry said on Monday. Seasonally adjusted, the economy did not grow in a single quarter this year. The government's economic team, which remained moderately optimistic until recently, has begun to prepare the public for an economic slump in 2015 (Kommersant, p. 6).
Russia's Economic Development Ministry is proposing to extend immunity from antimonopoly prosecution to all small businesses - companies with annual revenues of up to 400 million rubles. This would slash the number of investigations into collusion and market domination by 18%. The Federal Anti-Monopoly Service, however, is opposed to the idea, arguing that local monopolies could easily include companies with less than this amount of revenue (Vedomosti, p. 4).
OIL & GAS
The St. Petersburg International Mercantile Exchange plans to launch trading of futures for delivery of Urals crude oil with settlements in rubles in 2015. The exchange is now negotiating standard delivery terms with oil companies. Companies might not be interested in exchange trading, but Russian officials want to force them to sell 5% of their oil on the exchange. Rosneft, whose president chairs the SPIMEX board, could become the market maker (Vedomosti, p. 12).
Gunvor, the Swiss commodities trader cofounded by Gennady Timchenko, wants to sell off its assets in Russia, which include port terminals and a stake in coal miner Kolmar. Although the billionaire sold his stake in Gunvor earlier this year, the company is trying to reduce risks in the eyes of creditors and counterparties. Sources believe it also needs money to settle up with Timchenko, but it will not be easy for Gunvor to dispose of the Russian assets (Kommersant, p. 11; Vedomosti, p. 12).
UTILITIES
In an extremely unusual situation for the Russian electricity market, prices in Siberia are almost even with prices in Europe and the Urals, although they are usually a third lower. Electricity prices have fallen in European Russian amid excess supply, but risen in Siberia due to a drop in output by hydro plants caused by the record-low level of Lake Baikal. Consumers in Siberia will probably be paying high prices for electricity at least until the spring (Kommersant, p. 9).
BANKING, FINANCE & INSURANCE
The ruble continues to depreciate, despite the announcement of long-awaited forex auctions by the Central Bank, which will offer $1.5 billion on October 29 and another $2 billion on October 30, and the fact that Russian companies need to pay billions in taxes. The currency sank to new lows of 42.295 rubles against the dollar and 53.681 rubles against the euro on Monday, and the Central Bank had to conduct forex intervention totaling another $2.45 billion (Vedomosti, p. 1; Kommersant, p. 10).
RETAIL & CONSUMER MARKET
The federal Transport Ministry is meddling in the placement of outdoor advertising in Moscow Region. An inspection of billboards along a random section of the Novorizhskoye highway, the most expensive highway for ads in the region with prices comparable to Moscow, found they were all installed with infractions. Operators, including Russ Outdoor, see the situation with the region selling locations and other agencies eliminating them as a "bad example from the practice of underdeveloped Third World countries" (Kommersant, p. 1).
X5 Retail Group, one of Russia's leading food retailers, is holding negotiations with online retailers to sell 75% of its online project E5.ru. The deal could be worth $10 million-$40 million and involve 2,000 purchase pickup points. One of the potential buyers is Wikimart (Vedomosti, p. 10).
Interview: Sandro Veronesi, Founder and President of Calzedonia Group (Vedomosti, p. 8).
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY
The joint venture between Tele2 Russia and Rostelecom, T2 RTC Holding is changed the terms of partnerships with mobile phone shops operating as franchises, making them more attractive for dealers. The mobile operator, which recently opened its 600th store, hopes to double the number of retail outlets under its brand by the end of 2015 (Vedomosti, p. 11).
TRANSPORTATION
The Russian government wants to retain a 25% stake in the future management company of Sheremetyevo, at least until the Moscow airport's reconstruction is finished. This is supposed to happen in 2018, but could be delayed due to financing problems caused by western sanctions. This means the private investors - TPS Avia of Arkady Rotenberg and his partners - will be under the blocking control of the state until they meet all obligations. The private shareholders will have an option to buy out the state stake, but at a hefty premium (Kommersant, p. 1).
Russian officials are proposing that Moscow's Domodedovo Airport build a third runway on project financing terms through a state bank that would raise money from the Central Bank. The runway, which would cost about 35 billion rubles in 2016-2018 prices not including land, could become the first major infrastructure project to be financed under the new mechanism (Vedomosti, p. 10).
AUTOMOTIVE & ENGINEERING
The Lada Granta has accounted for more than half of the vehicles that leading Russian carmaker Avtovaz has sold under the government scrapping program. There are now waiting lists for the model, which is the cheapest in Avtovaz's lineup, but the company has had to suspend assembly of the cars for a few days due to problems with supplies of components (Vedomosti, p. 11).
