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Monday, November 27, 2006

Dollar at 7-year low against ruble

11-27-2006 RBC News - And it is losing value by the day
The ruble rose to its seven-year high against the dollar yesterday, to 26.556 RUR/USD. Western analysts expect the euro to rise above 1.3 USD/EUR soon. The dollar is set to depreciate in both the short and the long term. The euro could climb to $1.45 in 2007. And the ruble will also rise against the dollar to 25.7 RUR/USD. The dollar’s decline on Tuesday and Wednesday was due to short-term reasons: investors were fixing profits before Thanksgiving Day in the United States and Labor Thanksgiving Day in Japan. The US currency continued to fall on Thursday but there were more substantial reasons behind it. Adam Cole at the Royal Bank of Canada thinks the euro’s rise against the dollar on Thursday was due to the better than expected Ifo business climate index published by Germany’s Ifo Institute. The index went up 1.5 points to 106.8 in November, while it was expected to drop by 0.1 point. The euro was also buoyed by remarks by European Central Bank Governor Miguel Angel Fernandez Ordonez who said that economic growth in the euro zone was set to continue after the Central Bank raises its interest rates in December. He said the eurozone economy could grow by 2.5 percent in 2006. Analysts interpreted this statement as a sign that the European Central Bank was going to raise interest rates not only in December 2006 but in 2007 as well. Meanwhile, data from the US suggest that the Federal Reserve System will lower its interest rate. The consumer sentiment index published by Michigan University dropped by 1.5 points in November, to 92.1, though it was not expected to go down by more than 0.6 points. William Poole, President of the Federal Reserve Bank of St. Louis, said inflation was currently about to stabilize or go down in the United States. “Declining inflation and further economic slowdown in the United States mean that the Federal Reserve System has no need to raise interest rates. On the contrary, it has reasons to lower them,” said Stanislav Kleshchev, analyst at Vneshtorgbank 24. Over the past three days, the euro has failed to break through the level of 1.3 USD/EUR, which was registered on 26 April 2005. In this respect, Jan Lambregt of Rabobank says Ifo’s forecast could be too optimistic. He said Rabobank’s analysts did not expect the euro/dollar exchange rate to rise above 1.298 USD/EUR over the next few days. Alexander Morozov, chief economist at HSBC bank, is convinced that the euro will certainly rise to $1.3 by the end of this year. And Stanislav Kleshchev thinks this will happen before the end of November. He expects the European currency to buy $1.33 by the end of the year. Next year the dollar will drop further to 1.45 USD/EUR, Alexander Morozov reckons. Vladimir Abramov, at Globex bank, says the situation could yet improve. “Tough rhetoric by the Central Bank or the US Federal Reserve System about the dangers of a weak dollar for the global economy could improve things,” he told RBC Daily. The ruble/dollar market is expected to become more stable. The dollar dropped by RUR 0.04 to 26.6122 RUR/USD on Wednesday, and the Central Bank set the official exchange rate at 26.556 RUR/USD on Thursday. The ruble has risen to its seven-year high against the US currency, despite the Central Bank’s efforts to control the situation. “Inflation has slowed down in Russia, and the Central Bank does not want to strengthen the ruble further. We think the dollar will not drop below 26.5 RUR/USD before the end of 2006, but the ruble could appreciate by 5 percent (to 25.7 RUR/USD) next year,” Morozov said.

Monday, November 20, 2006

German Gref - Signing the protocol with the US brings Russia back to the market principles

11–20–2006 Regnum News – Hanoy, Veitnam – Head of the economic development industry German Gref called signing the Russia-US protocol on Russia's joining the WTO a historic step that would bring the country back to the market principles by which the world economy functions. According to Gref, the membership gives Russia an opportunity of a full-fledged and equal competition in the international market. Gref made the statement after signing the protocol in Vietnam Nov 19, RSN reports. Gref admitted that Russia and the US have “long negotiated and agreed on liberalization of access to financial markets.” Russia and the US in their trade negotiations have agreed on 100 items in which they both undertook certain obligations. For example, Russia has within the seven years after its joining the WTO to lower tariffs on industrial goods' imports by 3% and automobile imports' duties from 25% to 15%, aircraft from 20% to 10%. Besides, Russia and the US have reached the deal on lowering import tariffs on pharmaceuticals, clothing and footwear, and electronic products. The US government has bound itself with guaranteeing safety of US agricultural produce exported to Russia according to international norms.

Russia's Gref hails WTO accession deal with U.S. as "historic"

HANOI, November 19 (RIA Novosti) - Russia's economics minister on Sunday hailed the signing of a final protocol on the country's accession to the World Trade Organization with the United States as a "historic step," one that would help it integrate into the global economy. The agreement, signed by German Gref and U.S. Trade Representative Susan Schwab on the sidelines of this weekend's Asia-Pacific Economic Cooperation (APEC) summit, sets the stage for Russia's entry into the world's largest trade body. "This is a historic, ultimate step, which heralds Russia's return onto the market track, to equal competition on the world market," Gref told reporters after the signing ceremony. He said Russia will make every effort to protect intellectual property rights, one of the major issues to have impeded the deal, along with restrictions on U.S. meat exports and on the access of American companies to the Russian banking and insurance sectors. "All our actions will be aimed at creating favorable conditions that would ensure maximum protection for copyright holders," he said. Russia has signed a binding blueprint for measures to improve copyright protection and to stop piracy and counterfeiting of foreign goods before it joins the WTO. It has also agreed to cut customs tariffs on U.S. agricultural and manufactured goods and to liberalize its banking sector. The U.S., for its part, has pledged to guarantee the safety of its pork and beef supplies to Russia in compliance with requirements of the international veterinary watchdog. Gref said Central Bank Deputy Chairman Andrei Kozlov, slain in a contact-style killing in Moscow two months ago, had been instrumental in bringing Russia's WTO accession talks with the U.S. to completion. "I would like to thank our colleague, who did a lot to prepare the financial part of the agreement," he said. Kozlov, who oversaw an ambitious campaign against money laundering in Russia's banking system, was gunned down on September 13, and died in hospital the following day. His revocation of licenses from unscrupulous banks is widely believed to have been the main motive behind the killing. Agreements signed with the U.S. alongside the bilateral protocol on Russia's WTO accession allow foreign companies to own up to 100% in Russian banks and to operate on the country's insurance market through local subsidiaries. But it will retain the right to limit direct foreign investment in banking and insurance if the ratio of foreign investment to total investment in the sector exceeds 50%. Russia will have to consolidate the bilateral agreements it has signed with 57 WTO countries before it is able to join the trade club. Gref said this could be done by the middle of 2007. But Georgia and Moldova, both angry with Russia over export bans on their wine and mineral water, have threatened to block Russia's 13-year-old WTO bid. Another remaining obstacle is the 1974 Jackson-Vanik amendment, which tied trade with the former Soviet Union to the rights of Jews to emigrate from the country. The Soviet-era trade restrictions will be harder to remove now that the U.S. Democratic Party, less inclined to liberalize trade than the Republicans, has won a majority in the House of Representatives and the Senate alike. Gref said the issue had been raised in discussions with U.S. President George W. Bush on the APEC summit's sidelines. "We agreed we will be working with the U.S. Congress, and that the State Duma [Russia's lower house of parliament] should engage in the process more proactively."

Thursday, November 09, 2006

Russian Companies Non-Transparent Despite Wave of IPOs - S&P

08.11.2006 MosNews - The largest and most liquid Russian companies remain largely non-transparent and keep their vital information undisclosed, despite a wave of initial placement offers (IPO), which hit the Russian stock market. This evaluation was given by the experts of Standard & Poor’s international ratings agency. According to an S&P report published on Wednesday, Nov. 8, the Transparency Index of Russian companies represents an average score of about 53 percent as compared with the average 2005 score of 50 percent. Net of methodological changes, the improvement measures only 0.9 percentage points for the group of 50 companies included in both the 2005 and 2006 surveys, the report said. In 2003 the Transparency Index was 40 percent, and in 2004 — 46 percent. In 2006, 32 companies showed positive dynamics of their scores with an average increase of 10 percentage points while 18 demonstrated negative dynamics going down on average by 5 percentage points, the report said. “What these scores tell us is that although there have been some improvements, the overall trend in Russian corporate T&D is one of stagnation,” the experts said, quoted by the Interfax agency. S&P examined a total of 70 Russian companies, most of which are represented in the first and second quotation lists on the MICEX. In first place in the transparency rating is occupied by the leading mobile services operator Mobile TeleSystems. Steelmaker Mechel rose to second place from third a year earlier, and Golden Telecom was in third place. Long-distance call operator Rostelecom slid from second to fourth place. Investment conglomerate AFK Sistema rose by 13 places to ninth place. Among oil and gas companies the highest place was occupied by state-controlled Rosneft with 66 points. The state company, which carried out an IPO in the summer, was in the S&P rating for the first time and immediately overtook Lukoil (16th place, from ninth a year ago) and Gazprom (14th place, up from 16th).

Top Prosecutor Says Russian Corruption Amounts to $240 Billion a Year

Photo from www.gettyimages.com07.11.2006 MosNews - Corrupt Russian officials are estimated to take bribes of US$240 billion a year, an amount almost equal to the state’s entire revenues, a senior prosecutor said in an interview with the government daily printed Tuesday. Deputy Prosecutor General Alexander Buksman told the Rossiiskaya Gazeta that prosecutors had uncovered over 9,000 cases of bribery in the first eight months of the year. His comments marked the first time a senior Russian official had publicly put a monetary figure on the problem of corruption in Russia, which has flourished since Czarist times but has markedly increased in recent years under President Vladimir Putin. Putin, a former KGB colonel, was elected in 2000 promising to set Russia on the path to modernization and impose a “dictatorship of the law” to eliminate graft. But anti-corruption campaigners say the state-driven assault launched in mid-2003 against now jailed billionaire tycoon Mikhail Khodorkovsky and his Yukos oil giant gave bureaucrats at all levels of government a green light to extort money from businesses. The global anti-corruption group Transparency International and Russia’s business-funded National Anti-Corruption Committee last year estimated that the level of graft had jumped as much as sevenfold since 2001. Russia is near the top of Transparency International’s scale of corruption, at No. 121 out of 163 in 2006, along with such countries as Rwanda and Burundi. Four years ago, it had been rated 71. On that scale, the least corrupt is Finland, while Haiti and Myanmar occupy the top two places. The prosecutor said that Putin had ordered him to take charge of a new anti-corruption task force after the apparent contract killing of Central Bank First Deputy Chairman Andrei Kozlov on Sept. 13. Kozlov was shot in the head as he left a soccer game between bank employees in Moscow and his murder is widely believed to be connected to his campaign against money-laundering and criminality in the banking sector. Buksman complained of a lack of cooperation between law enforcement bodies in combatting money-laundering and other economic crimes and conceded that so far only lower-ranking officials were being prosecuted for corruption. In one case, the deputy head of the state property fund’s subsidiary in the southern region of Krasnodar is accused of pocketing US$410,000 (euro323,000) in bribes, said Buksman. A study published in September 2005 by the respected Indem Institute concluded that bribes paid by businesses to police, licensing bodies and state inspectors had soared by nearly 10 times between 2001 and 2005 to US$316 billion (euro249 billion). Indem head Georgy Satarov said that the government’s decision to shine a spotlight on its anti-corruption efforts appeared to be aimed at voters ahead of national parliamentary elections next year and the 2008 presidential vote. But he said that the gradual erosion of democratic checks and balances that has taken place under Putin the squeezing of opposition parties, the independent media and civil society made it impossible to rein in greedy Russian bureaucrats. “An essential condition for fighting corruption is to have the means to control the bureaucracy,” Satarov told The Associated Press, alleging that there was no rule of law in Putin’s Russia.

IMF Predicts Healthy Economic Growth in Russia in 2007

07.11.2006 MosNews – Russia’s economy will likely continue to grow at a healthy pace through 2007, but with growth running close to potential, more challenging times lie ahead, the International Monetary Fund said on Monday, Nov. 6. The IMF said demand pressures should remain strong in 2007, and could possibly intensify, allowing the economy to expand at around 6.5 percent this year and next. This is slightly higher than 6.4 percent growth in 2005. It said inflation had picked up and is likely to exceed the official end-of-year target of 8.5 percent. “Domestic resource constraints are tightening, causing increased leakage through the balance of payments and accelerated ruble appreciation,” the IMF said in its annual review of the Russian economy, which was quoted by Reuters. The fund’s experts also said that consumption and investment growth are expected to remain strong, largely thanks to the oil sector. They pointed out that the rise in investment and employment levels has been limited. The fund said Russia should refrain from further fiscal relaxation, given the buoyancy of demand and still strong inflationary pressures. It said it was concerned with the slow pace of economic reforms and called for urgent action in the “inefficient and undercapitalized monopolies” as well as in public administration. The reforms should be carefully sequenced, the fund added, including in the socially sensitive areas of health, education and communal services. The fund also said it was worried by the Russian government’s increasing stake in the oil sector, which could impinge on its future performance. “The disappointing performance of the state-controlled gas sector during recent years, despite record high energy prices, was seen as a sobering reminder in this regard,” the IMF said.

Tuesday, November 07, 2006

Russia's foreign debt declines 31.3% q/q to USD 50.1bn as of Oct 1

01.11.2006 - IntelliNews Today - According to FinMin, Russia ’s sovereign foreign debt stood at USD 50.1bn as of Oct 1. Thus, the debt saw a 31.3% q/q decline in Q3/06. The debt to PC countries amounted to USD 1.9bn as of Oct 1 after Russia repaid most of the debt in August. The debt to non-PC countries amounted to USD 2.9bn as of Oct 1 against USD 3.5bn as on Jan 1. The debt to former communist bloc states stood at USD 2bn as of Oct 1, flat in ytd terms. The trade debt and sovereign bond debt also remained unchanged at USD 1.1bn and USD 5.7bn respectively. According to deputy PM Alexander Zhukov’s recent statement, Russia ’s foreign debt will be gradually reduced to USD 40bn during next three years. The foreign debt is mainly repaid from the stabilization fund which accumulates the abnormal profits received due to high oil prices on the world market.

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