Moscow press review for August 5, 2014
MOSCOW. Aug 5 (Interfax) - The following is a digest of Moscow newspapers published on August 5. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The Russian government is considering restricting or even prohibiting transit flights through Russia by European airlines flying from Europe to Asia in response to EU sanctions against low-cost airline Dobrolyot, which was grounded Monday. European airlines could suffer over 1 billion euros in losses over three months of sanctions, while Russian flag carrier Aeroflot would lose millions in fees they pay for using the shorter Trans-Siberian route (Vedomosti, p. 1).
The Russian government intends to extend the moratorium on contributions to the funded portion of pensions. This would essentially kill the funded pension system, officials acknowledge. The extension of the freeze might be approved at a Tuesday budget meeting with Prime Minister Dmitry Medvedev, but sources said Medvedev has already made the decision and cleared it with the president (Vedomosti, p. 1).
U.S. and EU sanctions could deal a major blow to Russia's international reserves, Moody's warns. If capital outflows remain high, Russia will have to spend a large part of its reserves on propping up the ruble, the agency said. Fitch expects Russia's reserves to shrink from $472.5 billion (as of July 25) to $450 billion in 2014 and to $400 billion next year (Vedomosti, p. 5).
Interview: Maxim Reshetnikov, Head of the Economic Policy Department of Moscow (Vedomosti, p. 8).
OIL & GAS
Gasoline prices in Russia have begun to drop after reaching new highs on both the wholesale and retail markets last week. Market players disagree on where prices will go, but the Federal Anti-Monopoly Service might have a say in this. The regulator believes the current price level is the maximum allowable and has made it clear to oil companies that it is prepared to launch a new wave of competition cases (Kommersant, p. 1).
Russian billionaire Gennady Timchenko, who has been hit by U.S. sanctions, said that the interests of the country are more important than business and pledged to give everything to the state if necessary. Independent gas producer Novatek, which needs financing for its Yamal LNG project, is currently suffering most because of Timchenko, who own 23% of the company, analysts said (Vedomosti, p. 10).
Rosneft has awarded a contract worth 46.9 billion rubles to build a pipeline branch that will connect the state oil major's Komsomolsk refinery to the Eastern Siberia - Pacific Ocean oil pipeline to Transstroymekhanizatsia, a subsidiary of Mostotrest, the construction group controlled by Arkady and Igor Rotenberg. All major state contracts will now be handed to companies or individuals hit by sanctions, one political analyst believes (Vedomosti, p. 12).
BANKING, FINANCE & INSURANCE
Foreign investors, who increased investments in OFZ by 10% in the second quarter, have stopped buying the Russian federal government bonds in the wake of the new round of sanctions against Russia announced last week. There has not been a massive selloff of government bonds, but even in the absence of bad news it will be difficult to find new western buyers for them, analysts believe (Kommersant, p. 7).
RETAIL & CONSUMER MARKET
The Russian authorities suspect the Moscow division of Sweden's Oriflame Cosmetics of evading at least 3.5 billion rubles in taxes. Investigators suspect the company artificially reduced income by making licensing payments to its head office in the Netherlands and inflating advertising costs, but a criminal case has not been launched yet. Oriflame claims it did not break any laws (Kommersant, p. 1).
The conflict between Russia and Ukraine, combined with a slump in consumer demand, reduced the number of tourists to Kyiv by over 40% and hotel occupancy rates to an all-time low of 28% in the first half. The number of guests at hotels in Moscow also dropped, but by a more modest 4% and the occupancy rate was 59%. The situation will not improve in the next six months, analysts warn (Kommersant, p. 7).
The grounding of Dobrolyot due to EU sanctions calls into question the Russian low-cost airline's fate. The company is scrambling to find new leasing companies, but there are few available aircraft on the market. An alternative would be to build a fleet of Russian SSJ-100 liners, but then the project would be doomed to suffer losses, sources believe (Kommersant, p. 7).
The recent collapse of two major Russian travel companies might have been caused by poor planning. They expected demand to remain at least at last year's level, but sales to some destinations plunged by a quarter amid the gloomy economic and political climate. Weakened by years of dumping in the industry, the agencies did not have the financial strength to ride out a bad season (Vedomosti, p. 11).
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY
Russia's Safe Internet League is proposing to impose a filter on the whole Internet at the level of telecommunications providers in order to protect children. Market players say the idea is unconstitutional and just an excuse to filter all content. Furthermore, the costs per provider could run into the tens of millions and push up rates for their services (Kommersant, p. 1).
China has shut Russian security software company Kaspersky Lab out of tenders for government contracts. China currently accounts for less than 4% of the company's sales, but strategically this is a major loss (Vedomosti, p. 10).
TRANSPORTATION
Russian Railways will need about another 574 billion rubles to expand the capacity of the Baikal-Amur Mainline and Trans-Siberian Railway to 75 million tonnes per year, a Transport Ministry presentation shows. It is unclear whether the company will get this money, as the Economic Development Ministry is reportedly opposed to the extra funding (Vedomosti, p. 11).