Russia 111117 Basic Political Developments

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07:43 17/11/2011ALL NEWS

Budget Committee advises Duma to adopt 2012-2014 budget in 2nd reading

http://www.itar-tass.com/en/c154/274109.html

MOSCOW, November 17 (Itar-Tass) —— The State Duma Budget and Tax Committee has recommended the lower house of parliament to pass the 2012-2014 budget in the second reading.

The draft budget is scheduled to be debated in the second reading on November 18 and in the third reading on November 22.

More than 270 amendments were considered when preparing the document for the second reading.

Budget revenues in 2012 are projected at 11.78 trillion roubles, budget expenditures at 12.66 trillion roubles, budget deficit at 0.88 trillion roubles.

In 2013, budget revenues will be set at 12.71 trillion roubles, expenditures at 13.73 trillion roubles, deficit at 1.02 trillion roubles.

In 2014, budget revenues are expected to be 14.09 trillion roubles, expenditures 14.58 trillion roubles, and deficit 0.49 trillion roubles.

The government plans to have a deficit-free budget in 2015.

All calculation are based on the assumption that the Urals blend in 2012 will cost 100 U.S. dollars per barrel, GDP will be 58.683 trillion roubles and inflation 6 percent.

These indicators are projected to be 97 U.S. dollars per barrel, 64.803 trillion roubles and 5.5 percent respectively in 2013, and 101 U.S. dollars per barrel, 72.493 trillion roubles and 5 percent respectively in 2014.

The ceiling for the state internal debt has been set at 6.33 trillion roubles as of January 1, 2013; 7.87 trillion roubles as of January 1, 2014; and 9.22 trillion roubles as of January 1, 2015.

The ceiling for the state foreign debt has been set at 48.4 billion U.S. dollars or 34.6 billion euros as of January 1, 2013; 59.4 billion U.S. dollars or 42.4 billion euros as of January 1, 2014; and 69 billion U.S. dollars or 49.3 billion euros as of January 1, 2015.

In the current year, the Russian budget may have a surplus of 0.1-0.2 percent of GDP this year, the Finance Ministry said.

“At any rate, we expect no deficit,” Deputy Finance Minister Tatyana Nesterenko said.

She did not provide any data regarding budget implementation in the first ten months of the year, but noted that there was a surplus as well.

Earlier, President Dmitry Medvedev signed amendments to the federal budget for 2011 and the projected period of 2012-2013.

The amendments were drafted taking into account the results of the budget implementation in January-August 2011 and also on the basis of updated forecasts of socio-economic development of Russia and the expected results of budget implementation in 2011.

The amendments approve the key parameters of the budget for the current fiscal year, which increase the projected GDP, federal budget revenues and expenditures, lower the ceiling for the state internal and foreign debts, and envisage a deficit-free budget.

The amendments also increase budget appropriations for the fulfilment of public regulatory obligations in 2011, redistribute budget appropriations within the approved amount of expenditures, and specify contributions to the authorised capital of open joint stock companies.

At the same time, Russia will not avoid a budget deficit if oil prices continue to fall, the Finance Ministry said in a medium-term forecast presented by acting Finance Minister Anton Siluanov earlier.

The draft budget for 2012 is based on the average annual oil price of 100 U.S. dollars per barrel and GDP of 58.683 trillion roubles.

Indicators for 2013 are 97 U.S. dollars per barrel and 64.803 trillion roubles. The projected oil price for 2014 is 101 U.S. dollars per barrel, and GDP is 72.493 trillion roubles.

If the average annual price falls to 90 U.S. dollars per barrel, the budget deficit in Russia will be 2.5 percent of GDP, and about 5.4 percent of GDP is the oil price is 60 U.S. dollars per barrel.

“In this case we will not be able to direct money to the Reserve Fund and will have to use it,” the acting finance minister said, adding that this would make it hard to balance the budget.

RTS Futures Rise as Crude’s Gain Buoys Outlook: Russia Overnight

http://www.businessweek.com/news/2011-11-17/rts-futures-rise-as-crude-s-gain-buoys-outlook-russia-overnight.html
November 17, 2011, 1:29 AM EST

By Leon Lazaroff and Halia Pavliva

Nov. 17 (Bloomberg) -- Russian stock futures rose as crude surged above $100 a barrel for the first time in five months, while rising U.S. factory production and homebuilder confidence boosted prospects for the world’s largest energy exporter.

Futures expiring in December on Moscow’s dollar-denominated RTS index jumped 1.4 percent to 153,325 yesterday as oil prices in New York climbed. The Bloomberg Russia-US 14 Index of Russian companies traded in New York dropped 1.7 percent, the most in a week, to $98.51. Internet search engine operator Yandex NV tumbled to a four-week low on speculation investors are selling shares before a ban on divesting stock bought in an initial public offering expires next week.

Russia benefits from rising oil, which along with natural gas sales makes up about 17 percent of the $1.5 trillion economy and provides as much as 40 percent of government revenue. Reports showing U.S. industrial production advanced more than economists expected in October and homebuilder confidence gained this month to the highest level since May 2010 supported the outlook for the world’s biggest economy and for natural resources demand around the world.

“Crude higher is positive but because investors don’t know how the Europe situation is going to be resolved, and where global growth is headed, they remain quite cautious on Russian equities,” said Chris Osborne, chief executive officer of Troika Dialog USA, a unit of Russia’s oldest investment bank, said in a phone interview in New York yesterday.

Urals Crude

Crude for December delivery jumped 3.2 percent to $102.59 a barrel on the New York Mercantile Exchange, the highest settlement price since May 31. Brent oil for January delivery dropped 0.3 percent to $111.88 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to West Texas crude narrowed to $9.28 a barrel, the smallest gap since March 8. The spread widened to a record of $27.88 on Oct. 14.

Urals crude, Russia’s chief export oil blend, slipped 1.7 percent to $110.80. The Standard & Poor’s 500 Index retreated 1.7 percent to 1,236.91, and the Dow Jones Industrial Average lost 1.6 percent to 11,905.59 as Fitch Ratings said further contagion from Europe’s debt crisis will pose a risk to American banks.

The Hague, Netherlands-based Yandex fell 5.2 percent to $23.51, the lowest level since Oct. 10 and leading decliners on the Bloomberg Russia-US 14 Index. Yandex filed for an initial public offering on April 28, and its 180-day lock up on the sale of shares bought by Baring Vostok Capital Partners and Tiger Global Management LLC expires on Nov. 21, according to a regulatory filing.

‘Stock Volatility’

“The upcoming expiration of the lock up increases Yandex’s stock volatility,” Konstantin Belov, a media analyst at UralSib Financial Corp. in Moscow, said in a phone interview yesterday.

OAO Mechel, Russia’s largest coal producer for steelmakers, fell 4.9 percent to $11.35 in New York trading. Mechel’s American depositary receipts have lost 14 percent this month. The company’s shares in Moscow lost 3.8 percent to 365.10 rubles, or the equivalent of $11.85.

OAO GMK Norilsk Nickel’s ADRs dropped 3.8 percent to $16.25, the lowest price since Sept. 23, after shares of the world’s largest nickel producer dropped 4.2 percent on Moscow’s Micex index to 5,055 rubles, or $164.25. One Norilsk ADR represents one-tenth of an ordinary share. The Standard & Poor’s GSCI index of 24 raw materials rose 0.9 percent to 672.89 yesterday, the highest level since Aug. 31.

‘Hit Twice’

“When people get rid of risky assets they sell both Russia and commodities, so Russian commodities-related stocks get hit twice as much,” Maxim Matveev, an analyst at ING Bank in Moscow, said by phone.

Russian stocks may fall as looming end-of-year tax payments sap free cash from the market, according to Rye, Man and Gor Securities in Moscow.

“Liquidity squeeze and capital flight add pressure on the market,” Vladimir Aleksandrov, a trader at Rye, Man and Gor in Moscow, said in a phone interview. “It’s very volatile. We expect declines in blue chip prices in the near future.”

Russia’s three-month MosPrime interbank rate, the cost banks say they are charging to lend to one another, rose to 6.86 percent yesterday, the highest level since December 2009. The shortage of cash on the Russian market may intensify through December as companies and banks face tax deadlines, Natalia Orlova, chief strategist at Alfa Bank in Moscow, said in a phone interview.

Cheapest Index

Companies need to pay about 1.29 trillion rubles ($42 billion) of taxes through to the end of 2011, according to Alfa. Capital flight from Russia may double this year to a net $70 billion, according to the central bank’s estimates.

Russia’s benchmark Micex index, which trades at 5.3 times analysts’ earnings estimates for member companies, is the cheapest of the 21 major emerging markets tracked by Bloomberg. The 30-stock index lost 0.3 percent to 1,483.24 yesterday, a one-week low. The RTS Index fell 0.4 percent to 1,527.59.

The Micex has lost 12 percent in 2011 compared with a 16 percent slide for Brazil’s Bovespa index, which trades at 10.5 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 11.6 times estimated earnings, and the BSE India Sensitive Index has a ratio of 14.5.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, fell for the second time in three days, losing 2.1 percent to $29.86, while the Bank of New York Mellon Russia ADR Index dropped 1.6 percent to 728.69.

The RTS Volatility Index, which measures expected swings in the index futures, slipped for a second day, falling 1.6 percent to 46.22 points.

--With assistance from Ksenia Galouchko in New York. Editors: Emma O’Brien, Marie-France Han

To contact the reporters on this story: Leon Lazaroff in New York at [e-mail]; Halia Pavliva in New York at [e-mail]

To contact the editor responsible for this story: David Papadopoulos at [e-mail]