Moscow press review for July 31, 2014
MOSCOW. July 31 (Interfax) - The following is a digest of Moscow newspapers published on July 31. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
The United States and the European Union have almost simultaneously restricted Russian state banks' access to financing. The sanctions will apply to the country's five largest banks, with the U.S. adding Russian Agricultural Bank and VTB Group to its sanctions list, which already included Gazprombank and VEB. The EU sanctions will reportedly also apply to national savings bank Sberbank (Vedomosti, p. 1).
The Central Bank's decision to raise its key rate to 8% on July 25 has worsened its relations with the Economic Development Ministry. The ministry has proposed to the prime minister and president to create a "special mechanism" for determining inflation targets with input from it and the Finance Ministry. The Central Bank's transformation into a 'mega-regulator' has clearly not resolved the issue of a mechanism for a unified monetary policy (Kommersant, p. 1).
The sanctions against Russia have increased the risks of a recession in 2014-2015 and extended stagnation in the subsequent years, analysts and government officials fear. Restrictions on access to foreign financial markets for state banks and major companies will affect the whole economy and could increase the risk of political instability, they reckon (Vedomosti, p. 4).
Russia is preparing to unilaterally suspend the free trade regime with Ukraine and impose duties on 135 goods, according to a draft resolution published Wednesday. The first to be hit will be food products, which accounted for 11.4% of Ukrainian exports to Russia in 2013. Duties will also go up on alcohol and cigarettes, household chemicals, some processed metal products and cars, among other goods (Kommersant, p. 3; Vedomosti, p. 5).
President Vladimir Putin has approved the gradual introduction of the Finance Ministry's bill on controlled foreign companies that is aimed against offshore tax havens. At a meeting with the president on Wednesday, businesses proposed to adopt the new measures as it becomes clear what the attempt to tax the owners of offshore companies will mean in practice, rather than specify the stages in the bill (Kommersant, p. 3).
OIL & GAS
Total has stopped buying up shares in Novatek, Russia's largest independent gas producer, due to risks related to sanctions. The French company, which now owns 18.2% of Novatek and 20% of its Yamal LNG project, is supposed to decide in August whether it will be able to continue working in Russia (Vedomosti, p. 12).
BANKING, FINANCE & INSURANCE
The Central Bank is considering a bailout for Baltiysky Bank, one of the largest lenders in Russia's Northwest. The bank, which has been plagued by a shareholder feud for over a year, attracted retail deposits at high rates and invested in assets that do not offer the highest returns. Retail deposits shrank 12.4% and corporate deposits fell by half in the first half of 2014 and the bank is now having liquidity problems (Vedomosti, p. 10).
RETAIL & CONSUMER MARKET
Russia's third largest airline, UTair has become the first carrier to acknowledge a looming crisis in the industry and has approved a program to boost efficiency and cut costs that it hopes will save it 5 billion rubles. The company plans to eliminate ineffective routes, reduce management personnel by a third and liquidate or restructure many subsidiaries and affiliates (Vedomosti, p. 10).
Eight companies are bidding in a tender for the rights to measure Russia's television audience. International companies Nielsen and GfK are among those that will compete against current ratings provider TNS Russia. The winner will have considerable influence on a TV advertising market worth over 150 billion rubles annually (Kommersant, p. 7).
Russia is banning imports of almost all fruits and vegetables from Poland effective August 1, citing certification violations and sanitary concerns. Poland sees this as retaliation for EU sanctions against Russia. Although Russia is the biggest market for Polish apples, Russian retailers do not expect shortages of fruit and vegetables due to the ban (Kommersant, p. 10).
REAL ESTATE & CONSTRUCTION
Two thirds of the commercial properties in the Moscow Metro are leased by five companies, which sublease them to retailers. However, they could soon lose this business. The city is looking to nearly double the subway's lease revenues to 3 billion rubles, so the Metro is reportedly planning to cancel current leases after it completes a renovation of underground walkways (Vedomosti, p. 11).
The VTB Group intends to consolidate 100% of shares in Hals Development through the Bank of Moscow. The next step might be a delisting from the London Stock Exchange. The developer's free float is now 21%, which was worth $87 million Wednesday. The delisting was considered in the event of sanctions against the developer's principal shareholder, which were announced Wednesday (Kommersant, p. 7).
TRANSPORTATION
The Russian government's plans to boost the capacity of the Moscow air hub are in jeopardy. The opening of a new air traffic control center planned for December will be delayed, as the Federal Air Transport Agency and general contractor Almaz-Antei cannot agree on over 450 citations and recommendations. The introduction of a new plan for the air space over Moscow depends directly on the opening of the center (Kommersant, p. 1).
AUTOMOTIVE & ENGINEERING
United Shipbuilding Corporation has been added to the list of Russian defense companies hit by U.S. sanctions. Sources suspect the sanctions against USC are intended to force France to halt delivery of Mistral helicopter carriers to Russia. But USC and its partners might be harder hit by EU and U.S. sanctions that could jeopardize the ambitious offshore oil projects of Russian companies (Kommersant, p. 1; Vedomosti, p. 12).
AGRICULTURE & FORESTRY
Interview: Zakhar Smushkin, Chairman of Ilim Group (Vedomosti, p. ).
