Russia 110214 Basic Political Developments

National Economic Trends Russian Growth May Accelerate to 6% as Oil Climbs, RenCap Says

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National Economic Trends

Russian Growth May Accelerate to 6% as Oil Climbs, RenCap Says

By Scott Rose

Feb. 14 (Bloomberg) -- Russia’s economy may expand next quarter at the quickest pace since 2008 as companies boost investment and higher oil prices help the government ramp up spending before national elections, Renaissance Capital said.

Gross domestic product may grow an annual 6 percent in the second quarter, the Moscow-based investment bank said today in a report. That would be the fastest expansion since the third quarter of 2008. Growth in the first three months of 2011 may be 4.3 percent, down from a previous forecast of 4.7 percent, RenCap said.

Russia’s economy expanded 4 percent last year, beating estimates from both economists and the government, after shrinking 7.8 percent a year earlier. Rising energy exports and increasing domestic sales by manufacturers including automaker OAO AvtoVAZ prompted companies to boost investment, helping counter a record heat wave that triggered crop losses and crimped consumer spending.

“We believe that the Finance Ministry will boost spending in a pre-election year and because the budget outlook for 2011 is not so gloomy,” RenCap economists led by Anton Nikitin wrote in the report, which was co-authored by Moscow’s New Economic School.

If oil prices average $90 a barrel, the ministry has a “good chance” of ending the year with a deficit of less than 2 percent, according to the report. Finance Minister Alexei Kudrin said on Feb. 2 that economic growth this year may exceed last year’s 4 percent rate.

The economy will probably grow slower in the first three months of 2011 than previously estimated as “dormant” consumption threatens to stall the recovery, RenCap said.

Consumer spending has dropped off as the inflation rate quickened at the fastest pace in 15 months in January and unemployment jumped in December to a seven-month high.

“Personal consumption is currently dormant,” the economists wrote. “We believe that unless policy makers stimulate consumption, the shrinking foreign trade sector contribution will bring down headline economic growth.”

To contact the reporter on this story: Scott Rose in London at

To contact the editor responsible for this story: Willy Morris at

Last Updated: February 14, 2011 02:00 EST

VTB 10% stake placement successful says Putin

10:26 14/02/2011

Russia's second largest bank VTB has successfully completed a sell-off of 10% of its shares , kicking off the government's $59 billion privatization program, Prime Minister Vladimir Putin said on Monday.

The sale of the 10% stake at $6.25 per GDR, and 9.1468 kopecks per share raised over 95 billion rubles ($3.22 billion).

"Today I have signed a resolution on the completion of this deal. According to preliminary estimates of experts, the work was successful and brought good results," Putin told VTB head Andrei Kostin.

Kostin said the shares were twice oversubscribed, while the price of the placement was in line with market estimates.

NOVO-OGARYOVO, Russia, February 14 (RIA Novosti)

Putin decrees VTB bank stock privatization

14.02.2011, 09.55

NOVO-OGAREVO, February 14 (Itar-Tass) -- Russian Prime Minister Vladimir Putin signed a decree on privatization of the VTB bank stock. Putin has made a statement at a meeting with Vneshtorgbank Chairman Andrei Kostin on Monday.

“I signed a decree for the deal closed,” he said. “The number of bids exceeded twice the supply that allowed reaching the highest price, which corresponds to the current market price,” Kostin underlined.

Russia Raises $3.3 Billion in VTB Sale, Biggest in Four Years
February 14, 2011, 2:53 AM EST

By Denis Maternovsky

Feb. 14 (Bloomberg) -- Russia raised $3.3 billion selling a stake in VTB Group in the largest state asset sale since the bank’s initial public offering almost four years ago.

Prime Minister Vladimir Putin’s government sold 10 percent of the state-run bank to a group of investors for 95.7 billion rubles, VTB said in a regulatory filing today. The per-share price of 9.1468 kopeks is 33 percent less than the 13.6 kopeks the government got in May 2007, when it raised $8 billion in that year’s biggest IPO.

The sale is the first major transaction in the government’s three-year privatization plan in which it aims to raise at least 1 trillion rubles to help plug its budget gap and lessen the state’s role in the economy. Three non-state companies, Nord Gold NV, OAO Koks and ChelPipe, all pulled their London IPOs this month, citing market conditions.

“This move to attract investors clearly demonstrates confidence in our financial system as well as in our economic policies,” Putin told VTB Chief Financial Officer Andrei Kostin at a meeting near Moscow today.

The shares gained as much 3.3 percent to 9.76 kopeks at 10.49 a.m. in Moscow, valuing the company at 1.02 trillion rubles.

Neither the government nor VTB identified the buyers of the stake. Transactions involving global depositary receipts, at $6.25 each, are scheduled to be completed Feb. 17, while those for ordinary shares are due Feb. 21. Deutsche Bank AG, Merrill Lynch and VTB Capital managed the sale.

--Editor: Brad Cook, Torrey Clark.

To contact the reporter on this story: Denis Maternovsky in Moscow at

To contact the editor responsible for this story: Gavin Serkin at

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