Economic News from Russia

[RussiaPrussia]

Russia to launch its payment system in months, as disruption fears mount — RT Business
Published time: March 24, 2014 14:14
Get short URL



Universal electronic card (Image: Federal authorized organization "Universal electronic card")

TweetShare on tumblr


Tags

Banking, Big deal, Finance, Russia and the global economy
The move by international payment systems Visa and MasterCard to block their use in Russia has unnerved some Russian businesses. Meanwhile, Moscow says its own national payment system may become fully operative within months.

Last week MasterCard and Visa stopped servicing some Russian banks, which shows the Russian market remains the monopoly of international operators.

Although the payment systems resumed operations with Russia’s SMP Bank on Sunday, it is estimated clients withdrew about $111 million from their accounts in just two days.

After years of rhetoric over the need to launch a domestic payment system in Russia, it may become a reality soon.

“The payment system PRO 100 is technologically ready to provide national processing in the near future. We estimate it will take a couple of months, as key Russian banks, that account for more than 40 percent of the market, are already linked to the PRO 100 payment system,” Andrey Nesterov, director of corporate communications at the Universal Electronic Card told RT.

Launched as a pilot in 2010, the project Universal electronic card provides for settlements of government, municipal and commercial services via Internet and self-service machines. The card’s electronic banking application is based on the payment system ‘Universal electronic card’, which has a logo PRO 100.

Four Russian banks are technically ready to use the Russian payment system – Sberbank, Uralsib, AK BARS and Moscow Industrial Bank.

[RussiaPrussia]

PressTV - Crimea adopts Russian ruble as official currency

Crimean PM says Russian ruble has become the official currency of the peninsula. (File photo)

Mon Mar 24, 2014 3:46PM


Russian currency, the ruble, has become the official currency of Crimea, the Black Sea peninsula’s prime minister says.

“From this day, we can officially make payments in rubles. The [Ukrainian] hryvnia remains in use until the 1st of January, 2016," Sergei Aksyonov stated on Monday.

Meanwhile, Crimea’s First Deputy Premier Rustam Temirgaliyev announced plans to pay pensions in rubles, with some 300 million rubles (8.3 million dollars) being set aside for the payment.

He also said all retail and service institutions in Crimea will start taking rubles along with hryvnias and double price tags will become available.

“There is a short transitional period of two, maximum three weeks underway now,” he added.

The Crimean parliament announced on March 17 that the Russian ruble will become the second official currency of the territory and will be circulating alongside the hryvnia until it is withdrawn in 2016.

Crimea declared independence from Ukraine and formally applied to become part of the Russian Federation following a referendum on March 16, in which 96.8 percent of Crimeans voted for union with Russia, with a turnout of 83.1 percent.

On March 21, Russian President Vladimir Putin signed into law documents that officially made the Black Sea peninsula part of the Russian territory despite condemnation from the West and the new Ukrainian government.

[RussiaPrussia]

http://www.mondaq.com/x/294860/Corpo...ussian+Economy
Last Updated: 24 February 2014
Article by Olga Boltenko
Recent times were difficult for Russian entrepreneurs and Russian businesses with an international presence. The future looks even more uncertain.

Russia has been speculating about introducing anti-offshore measures already for several years. Some measures have already been introduced. However, as the volume of capital flight from Russia to foreign jurisdictions shows no sign of shrinking, the Russian President in his state-of-the-nation address in December 2013 stressed the need for urgent measures to "deoffshorise" the economy. The new legislation may be in force as early as 2015.

It is now the right time to review your existing structures – both corporate and private - so as to assess possible risks and identify future strategies. New structures should be carefully thought through to ensure compliance with the best international practices.

What happened?

According to the President's address, companies registered in offshore jurisdictions should pay taxes in Russia if they are owned by Russian residents. Also these companies should not be able to access state support mechanisms and state contracts.

As a result, the Russian Finance Ministry and Economics Ministry have been instructed to put forward draft legislation aimed at combating the use of low-tax jurisdictions to minimize tax payments. We set out below a summary of the main tax legislative initiatives.

1. Controlled foreign company legislation

A definition of a controlled foreign company ('CFC') is planned to be introduced into Russian tax legislation together with a regime for taxing CFCs. The introduction of CFC rules would effectively mean that tax is levied on income of foreign companies that are directly or indirectly controlled by Russian resident individuals or Russian resident legal entities if those foreign companies do not distribute their profits to a Russian shareholder.

2. Russian tax residence of companies – "effective management" test

Currently, a company can be a Russian tax resident only if it is registered in Russia. Foreign company is only taxed in Russia if it has a permanent establishment or receives passive income from Russian sources. The current proposal is to introduce the test of effective management as an alternative test to define Russian tax residency of a company. It means that companies which are managed and controlled in Russia will be subject to Russian taxes regardless of the place of their registration.

3. Definition of beneficial ownership

According to the majority of Russian double tax treaties, only beneficial owners can obtain preferential tax rates, for example, the 5% withholding tax rate on dividends paid from a Russian company to its Cypriot parent. Currently, the Russian domestic tax legislation does not have a clear definition of beneficial ownership. As a result, the term "beneficial ownership" is open to interpretation. It is proposed to introduce an unambiguous definition into Russian tax legislation, so to allow the government to tackle tax avoidance and treaty abuse.

4. Exchange of information

Exchange of tax information between states allows the Russian tax authorities to obtain information about foreign operations of Russian taxpayers. Presently, Russia has limited instruments for obtaining tax information from abroad, i.e. only bilateral tax treaties. It is proposed to widen the means of obtaining tax information. One suggested measure is to conclude bilateral tax information exchange agreements with offshore jurisdictions. Another measure is to ratify the international convention on mutual administrative assistance in tax matters.

What to do?

At this stage it is hard to predict how the new legislation will be drafted, and therefore, to make specific recommendations. However, as all the above proposals are in line with current international trends, it is possible to suggest a number of steps which can be taken now.

1. Substance and proper management of international corporate structures

Many Russian companies with international presence often establish subsidiaries in low-tax jurisdictions to enjoy the advantages that this can provide. As a part of the "deoffshorisation" campaign in Russia and also the global fight against tax fraud and 'treaty shopping", companies can be challenged to show their overseas operations are genuine subsidiaries and are run from the host countries.

In practice, many Russian corporate groups might not have an appropriate level of substance in the jurisdictions of incorporation of their holding, trading, financing or licensing structures. This means that companies cannot show that the management, control and day-to-day decisions concerning business activity are taken in the country where such company is based.

Implementation of the proposed "deofshorization" measures will provide the Russian tax authorities with a legal mechanism for taxing structures with insufficient substance. Increased exchange of information will allow the authorities to track down those structures and tax their Russian owners. Consequently, we strongly recommend that as a matter of urgency you should review your international arrangements from a management and control perspective.

2. Trusts and foundations

It is also important to review your trust and foundation structures to ensure compliance with the present day legal environment.

Whether you have a family trust or a trust set up to support your children, a trust which holds only real estate or your businesses - these structures serve various purposes, have different tax implications and should be reviewed and revised in accordance with specifics and planning options available for each of them separately.

[RussiaPrussia]

In the first month of 2014, Russian trade surplus widened to USD 18.86 billion, up from USD 15.8 billion a month earlier and USD 17.21 billion in the same month last year, as imports dropped to the lowest value in three years.

Exports increased 1.5 percent on the year to USD 39.6 billion, but fell sharply by 19.7 percent over the previous month.

Sales to countries outside the Commonwealth of Independent States which account for around 85 percent of total exports, decreased 17.9 percent compared with the previous month. On a monthly basis, sales rose 3.2 percent.

Exports to the Commonwealth of Independent States shrank for the third straight month by 7.7 percent year-on-year, while dropping sharply by 29.9 percent over December.

Imports fell to USD 20.6 billion, down by 4.8 percent year-on-year and by 38 percent on a monthly basis.

http://www.tradingeconomics.com/russ...-trade#article

[RussiaPrussia]

Russia to limit state procurement of imported cars - Ifax - Yahoo!7
March 25, 2014, 12:22 am
MOSCOW (Reuters) - Russia plans to restrict state procurement of imported cars in a move that is aimed at helping carmakers which produce domestically to weather a slump in demand.

Car sales have been falling as Russia's economy falters and a sharp depreciation of the rouble increases prices for imports, prompting people to delay making large purchases.

Although western carmakers have invested heavily to set up local production with an eye to tapping demand from Russia's growing middle class, many parts still come from abroad, making prices vulnerable to fluctuations in the rouble's exchange rate.

Russia's Industry Minister Denis Manturov said on Monday a draft resolution on restricting the procurement of imported cars by state institutions and regional governments has been submitted to the government, Interfax reported.

"It is to be issued and start working in the nearest future," Manturov was quoted as saying.

He added the government did not have any immediate plans to support the domestic car industry with lending subsidies as was the case in 2013.

The ministry earlier forecast that Russian car sales might fall by between 2.8 percent and 6.5 percent this year after contracting by 5.5 percent last year.

(Reporting by Maria Kiselyova; Editing by Megan Davies, Greg Mahlich)

[RussiaPrussia]

Japan's Carmakers Gain Ground, As Russian Rouble Tumbles - Forbes
Comment Now
Follow Comments
As the list of winners and losers of the Crimean crisis is tallied, Japan’s carmakers rank among the unexpected winners. That’s because the Russian rouble has fallen more steeply against strong currencies, such as the euro, than it has against weaker ones, such as the recently depreciating yen. Japanese carmakers are also slower than others to hike up their car prices to adjust to the Russian currency’s weakness, say executives from rival automakers.


European and US automakers were hit hardest among foreign automakers. (Most foreign automakers have set up local production facilities in Russia to avoid duties, but they still import cars and car parts.) Sales of VW vehicles fell 9% in February; GM Opel sales were down 8%, and Peugeot sales were down 19%. Their sales were also down in January, as the crisis in the Ukraine brewed. Sales of middle-market Russian brand cars made by GAZ and Lada also tumbled.


Meanwhile, Nissan sales were up 31%, Toyota sales were up 43%, Mitsubishi sales were up 14%, Mazda sales were up 13%, and Honda sales surged 54% last month The Japanese are likely to come out of this sad tale with a little bit more of the Russian market, which is expected to be Europe’s largest by 2020.

Russian assets remained under pressure after U.S. President Barack Obama said on Thursday that Washington was now considering sanctions against key economic sectors in Russia, including financial services, oil and gas, if Russia moved against eastern or southern Ukraine.

[RussiaPrussia]

Yandex.Translate
4.03.2014
RUSSIA-2014-CRIMEA-CRISIS-RUBLES-MARKET-CRASH-SANCTIONS
THE CAR MARKET IS SUFFERING

CAR PRODUCTION IN RUSSIA
With increased production on the spot want some carmaker, the fluctuations of the ruble escape

© Getty Images
The Crimea-Crisis 2014 also has an impact on the Automotive Market Of Russia . Already now is a marked reluctance noticeable

Even before the EU tougher sanctions against Russia has decided to respond to the Rubles sensitive to the conflict between Moscow and Ukraine. By the Krimkrise-induced depreciation of the Russian currency will now also with car manufacturers for first losses. «We feel already loads by the exchange rate of the ruble,» said OpelCEO Karl-Thomas Neumann, the Branchenzeitung «Automobilwoche».

THE CAR MARKET, RUSSIA IN 2014: CRIMEA-CRISIS IMPACTED THE RUBLE
Russia is one of the most important growth market for Opel. Neumann relies on a normalisation of the situation: «is Safe: Russia to 2020, the largest car market in Europe. And the development is up to then, is like a Marathon run - it will be UPS and Downs.» Also Ford and Renault see the developments with concern and want to be stronger in the long run locally produce, to exchange rate fluctuations is to work.

Ford Germany boss Bernhard Mattes said the Automobilwoche: «in the Short term we can only with the price respond. In the long term, it goes to a higher localization level.» Similarly expressed Renault-Europe-Executive Board Stefan Mueller.

Ruble crash and Inflation are, according to the assessment of Audi rather volume manufacturer to meet. «I believe that we are in the premium segment, with less impact can be expected,» said Audi Chairman Rupert Stadler the «Automobilwoche». However, the exchange rate risk is a major challenge. BMW-Chief financial officer Friedrich Eichiner stressed: «Where are we the risks feel, is on the currency page: The rouble is very weak». As long as the crisis is not further eskaliere, must BMW his forecast for 2014, but not change.

Meanwhile, strengthened Gesamtmetall-Chef Rainer Dulger the politics of the issue of economic sanctions the back. «Sanctions are important to Russia, in particular, Mr Putin to show that he does not approve of everything,» said Dulger the SWR. While doing the industry is Worried about the economic impact. «On the other hand, we can not offer anything. Because that is ultimately at some point, economic consequences for us.» Dulger stressed at the same time, you should have with Russia in the dialogue to stay. «A new Cold war brings no what.»

Currently, made the exports to Russia about four percent of the exports of the metal and electrical engineering industry. «We are talking here about roundabout 25 billion euros. It is significant, therefore, we must not trifle.» Should be the aim of a political solution.

[RussiaPrussia]

Russian metal companies to redirect to Asia if sanctions hit — RT Business
Published time: March 24, 2014 13:41
Get short URL



RIA Novosti/Sergey Pivovarov



Tags

China, Europe, Russia, Trade
Russian metal producers are looking to expand into Asian markets, in case the US and the EU impose sanctions on Russia.

The CEO of Norilsk Nickel, Vladimir Potanin said his company won't rule out increasing supplies of nickel and palladium to China and Japan, Vedomosti reports. Other Russian metal producers such as Mechel and Metalloinvest say they could switch to Asian markets, while they didn’t specify the sales volumes.

Andrey Varichev, the CEO of Metalloinvest, said that taking into account the capacity of Russian Railways, Metalloinvest logistics could move deliver part of its production to markets in the Far East, including China, but the target market for Metalloinvest will always remain Russia, he added.

According to Potanin, Norilsk Nickel is also considering measures to shield against possible sanctionsfrom the US and EU.

"We have large volume of operations in the Chinese market, but the main payment currencies are dollar and euro. In principle, nobody hinders settlements in such currencies as the yuan for deliveries to China. We decided to explore this issue, to look how it’ll function," Potanin said.

Metalloinvest and Mechel also confirmed they are considering using the yuan as the main currency in deals with China.

Meanwhile, Potanin doesn't believe there will be tough sanctions as "they are unnecessary, uninteresting and harmful to both parties". "But in a case of specific emotional actions of regulators or of certain countries — just in case — it is necessary to study what we will do in this situation,” he said.

However a BKS analyst Kirill Chuyko says the reorientation to the Chinese market would be too expensive for companies such as Evraz, as firstly the logistic costs are too high. On top of that, “China is the largest steel producer. Even some subsidized national plants go bankrupt. There would be no opportunity to compete with domestic producers, while selling steel below cost won’t make economic sense.”

[RussiaPrussia]

http://rt.com/business/russia-uk-gas-imports-825/

UK to start directly buying Russian gas
Published time: March 24, 2014 11:02
Get short URL



Reuters/Paul Hackett



Big deal, Crisis, Gas, Russia and the global economy, UK
Britain will begin buying Russian gas directly this year, while the rest Europe is attempting to cut its reliance on supplies from Moscow amidst the crisis in Ukraine.

Under a deal signed in 2012 the UK’s biggest utility company Centrica will start importing Russian gas from October this year, Reuters reports.

The deal remains in the pipeline, despite EU calls to move away from energy reliance on Russia. On Friday European Union leaders discussed the possible ways to diversify, as they say Crimea’sannexation by Russia made them more determined to take action.

UK domestic gas production is falling by about 7 percent annually, and the country is looking for alternative sources to fill the gap.

Supplies of Russian gas, which already provide a third of Europe’s needs, reach Britain through the central and south eastern parts of the continent, rather than directly. Most of Britain’s imports comes piped from Norway and liquefied natural gas (LNG) shipments from further afield.

Most Russian supplies have recently been from storage in Germany.

Russia’s energy major Gazprom sells between 11 billion and 12 billion cubic metres to the UK, which is about 15 percent of country’s total need.

[RussiaPrussia]

20 March, 10:48
Russia to write off $10 bil a debt of DPRK - News - Economy - Russian Radio


Photo: EPA

Committee of the State Duma for the budget and taxes has issued a recommendation to the MPs to ratify an agreement between the Russian government and the Democratic People’s Republic of Korea on settling the DPRK’s debt to Russia on the Soviet-era loans issued to that country.

The document that was submitted for ratification by the Russian government features the agreements reached at the negotiations that lasted almost twenty years and took account of the special features of financial, political and economic relations between Russia and North Korea.

Debt settlement embraces all the categories of reciprocal financial claims and obligations of the former USSR and the DPRK, with the precise parameters registered on the date when the agreement is signed.

Overall amount of the DPRK’s financial obligations to Russia stood at an equivalent of $ 10.96 billion as of September 17, 2012.

“We applied a standard pattern in which we write off 90% of the debts amount and 10% is left over,” Sergei Storchak, a deputy minister of finance said at the session. “We agreed to utilize this 10% for financing the joint projects implemented on the North Korean territory.”

There projects are related to the energy sector, healthcare, and the country’s foodstuff security.
Read more: Russia to write off $10 bil a debt of DPRK - News - Economy - Russian Radio