Industry Forecast

Industry Forecast - Russia - Q3 2015
26 May 2015 Russia Autos

AUTOS TOTAL MARKET - HISTORICAL DATA AND FORECASTS (RUSSIA 2013-2019)
Vehicle production, units
Vehicle production, units, % y-o-y
Vehicle sales, units
Vehicle sales, units, % y-o-y
Motorbike sales, units
Motorbike sales, units, % y-o-y
Vehicle trade balance, units
Vehicle trade balance, units, % y-o-y
Vehicle fleet, units
Vehicle fleet, % y-o-y
Vehicles per 1,000 of population
2013e
2014e
2015f
2016f
2017f
2018f
2019f
2,184,266 1,886,646 1,529,812 1,486,179 1,658,786 1,825,614 1,950,035
-2.2
-13.6
-18.9
-2.9
11.6
10.1
6.8
2,820,810 2,446,144 1,735,304 1,913,174 2,293,232 2,373,837 2,434,547
4.6
-13.3
-29.1
10.3
19.9
3.5
2.6
306,235
313,939
250,159
254,037
281,353
313,285
347,849
5.5
2.5
-20.3
1.6
10.8
11.3
11.0
-636,544
-559,498
-205,492
-426,994
-634,445
-548,223
-484,512
37.4
-12.1
-63.3
107.8
48.6
-13.6
-11.6
43,298,549 44,492,030 45,590,112 46,514,556 47,072,516 48,135,998 49,131,605
-3.0
2.8
2.5
2.0
1.2
2.3
2.1
303.1
312.3
320.8
328.2
333.0
341.5
349.7
e/f = BMI estimate/forecast. Source: National sources, BMI

Click here to explore data
Sales
Looking forward, BMI believes that Russia's automotive industry will experience a sharper
slowdown in 2015 than the 10.3% slump in vehicle sales seen in 2014. The government's announced
efforts to buoy the market - such as the extension of the car scrappage scheme and subsidised auto
loans scheme - will fail to address the key problems of rising inflation and the increasingly
unaffordable costs of borrowing. We therefore forecast vehicle sales to fall by 29.1% in 2015, with
passenger cars (-29.1%) set to fare slightly worse than commercial vehicles (-28.6%).
In 2014, the sales slump came as Russia's economy slipped into recession caused by a variety of
factors, including international financial sanctions imposed on the country in response to Russia's
military intervention in the Ukraine crisis, the resulting currency weakness, a slump in the global
price of oil over H214, and sluggish fixed investment and private consumption levels.
Subsidies Not Enough To Keep The Market Afloat
The Russian government is seeking to prop up sales in the country using a fresh round of fiscal
stimulus into the market. In early 2015, the Russian government earmarked a further RUB20bn
(USD0.4mn) for the extension of its car scrappage scheme followed by a further USD10bn
(USD166mn) in March. The program subsidises the purchase of new vehicles in return for the
scrappage of older vehicles. Further to this, the government added a RUB25bn (USD424mn)
extension to its subsidy program in mid-march. Of this RUB25bn budget, RUB15bn has been
earmarked for the extension of the government's current scrappage scheme. On top of this, the
scheme also includes RUB3bn for state purchases of commercial vehicles and RUB5bn dedicated to
servicing automakers' interest on loans specifically used for re-tooling and plant modernization.
More importantly, the government also committed RUB1.5bn to the reintroduction of its
preferential lending scheme, first introduced in 2009 to 2011 and re-introduced for the full year
2013. The scheme offers a discount on auto loan interest equal to two-thirds of the current central
bank key policy rate. This means that at the current key policy rate of 12.5%, consumers are
eligible for an 8.3% discount, bringing the average car loan interest rate down to around 11.5%
from 21.1%. The scheme requires consumers to provide an upfront deposit of at least 30% of the
value of the car, which is far higher than the 15% deposit required in the previously successful
2009-2011 loan scheme.
As we have stated before, a program targeted at reducing effective lending rates on car loans is a
useful stimulus measure for markets such as Russia where interest on car loans have risen
dramatically following the dramatic rate hikes seen since November 2014. This is especially
pertinent in Russia where more than 45% of new cars are traditionally purchased on credit.
However, while we think the preferential loan scheme and scrappage schemes will help slow the fall
in sales, we do not believe the stimulus will be enough to reverse the market slowdown over 2015.
The scheme will struggle to turn sales declines into growth due to three key reasons: (a) rising
vehicle prices, (b) worsening private consumption factors, (c) declining corporate investment.
Firstly, car price inflation continues to remain an issue since the run on the rouble in Q414 led to a
significant drop in the currency's exchange value. Carmakers have been forced to increase prices
after the rouble's collapse led to higher inflation of components - especially imported components and dragged down repatriated earnings. Highlighting the pricing pressures automakers are
feeling, AvtoVAZ raised the prices of its Lada models by 9% in January 2015 despite the automaker
boasting that up to 81% of components are sourced locally. With prices rising in conjunction with
interest rates, consumers are seeing their real purchasing power diminishing dramatically as wage
growth fails to keep pace.
Secondly, with our Country Risk team forecasting a 5.2% decline in GDP, Russia's macroeconomic
foundations are looking increasingly unstable, which will weigh on consumer demand for cars over
the year. More consumers will steer clear of locking themselves into loan contracts owing to falling
real wages across the country. With our Country Risk team forecasting inflation to average 15%
without an equivalent rise in wages in 2015, consumers will remain less able to service their car loan
debts over the year. The rise in unemployment will also force consumers to cut back on big-ticket
items in an effort conserve savings in case of a future job loss.
Thirdly, high interest rates and a poor growth outlook for the economy will also slow business and
government purchases of new vehicles. With a poor outlook for growth and an expectation of future
monetary easing over 2015 and 2016, Russian firms will delay their investments this year, waiting
for a more opportune moment to ramp up capital expenditure. As a result, we expect sales of new
vehicles, especially commercial vehicles to remain weak.
As a result, we maintain that risks in the Russian automotive market remain heavily weighted to
the downside. The worsening mix of falling consumer confidence, currency fluctuations, growing
unemployment and falling fixed investment will increase uncertainty in the economy over 2015.
Subsidy Stimulus Is No Remedy For Stagnation

Russia - Vehicle Sales Forecast, Units
e/f=BMI estimate/forecast. Source: AEB, BMI

Production
In 2015, we forecast production of new vehicles to fall 18.9% to a five-year low of 1.529mn vehicles
thanks to tumbling domestic demand and the weakness in the Russian rouble, which has raised
input costs for automakers in the country. More specifically,we forecast passenger car and
commercial vehicle output in 2015 to fall by 20.1% and 9.1%, respectively. This represents an
acceleration of declines seen in 2014 when production fell by 13.6%.
Output Mirroring Sales Declines
Russia - Vehicle Output Forecast, Units
f=BMI forecast. Source: BMI, OICA

With Russia's automotive manufacturing industry geared towards domestic consumption rather than
exports, falling domestic sales (see 'sales' section of this chapter) will provide the main headwind to
domestic production in 2015 and 2016. Indeed, the fall in domestic has already pushed a number of
major manufacturers to trim their work schedules and workforces in H115 with total vehicle
production in the country having fallen 20.7% year-on-year in Q115, according to the Federal State
Statistics Service (Rosstat).
Q1 Output A Sign Of Things To Come
Vehicle Output, Units
Source: Rosstat
The most notable of decisions by major automakers to cut back production was General Motor
Company's decision to idle its operations in the country indefinitely. At a charge of USD600mn the
company is shuttering production at its wholly-owned St Petersburg plant and freezing its joint
ventures with Avtotor and GAZ Group. The closure will have a significant impact on production
since we estimate that in 2014, GM-produced passenger cars accounted for 8.1% of total output in
the country.
The fall in output created by GM's exit is also being exacerbated by cuts from other major
manufacturers.
Low
sales
have
indeed
prompted
major
companies
such
as Renault, Nissan, AvtoVAZ, Ford Motor, PSA Peugeot Citroen and Volkswagen to all announce
significant suspensions to production up until July with a significant cut in staff numbers as well. In
the heavy truck and bus segments, Russia's largest truck maker, Kamaz, will impose a three-day
working week from March 2 until May 24, whileUAZ has planned for the possible lay-off of up to
2,400 workers from April this year.
Furthermore, direct investment into the sector will also dried up in 2015. In 2014, new greenfield
investments from foreign automakers were still flowing into the country despite declines in sales.
These included, Chinese autos manufacturer Great Wall Motor'sCNY2.1bn (USD337mn)
investment into in a vehicle production site in Tula Oblast, Russia with an expected annual capacity
of 150,000 units. However, in 2015 we expect announcements such as this to remain minimal. In
evidence of this, BMW Motorannounced in May it was delaying its decision on whether or not it
would commit to building a plant in the country.
Trade
In an effort to protect revenues from falling domestic sales, automakers in Russia have pledged to
ramp up exports. Most notable of these announcements have come from home-grown vehicle
manufacturers KAMAZ, AvtoVAZ and GAZ group. These producers have pledged to double
exports over the next five years when compared with export volumes in 2014. More specifically,
AvtoVAZ will seek to double exports to 100,000 cars in 2015, GAZ group is aiming to raise exports
from 17% of total production to 30% of total production by 2019 and KAMAZ aims to raise export
sales up from 18% of total sales in 2014 to 20-30% by 2020. Currently, vehicle exports are heavily
focused on CIS countries such as Kazakhstan and Belarus.
This is a significant change to pre-2014 years when exports historically accounted for a small 6-7%
of the total production. While we believe there is scope for Russian autos exports to grow in the
longer term as trade ties are strengthened through the country's membership of the WTO, we
believe that Russian main export markets, CIS countries like Kazakhstan, Uzbekhistan and
Belarus, still remain largely undeveloped. As a result, we believe total sales of new vehicles in these
countries will continue to remain limited when compared to more developed countries, which is
therefore limiting export growth opportunities in the region.
On the import side, In August 2014, Iranian carmaker Iran Khodro Industrial Group (IKCO)
announced that it plans to export 10,000 vehicles to Russia. According to CEO Hashem Yekehzare,
the move is in line with the company's efforts to increase its world market share, reports the Fars
News Agency. IKCO intends to sell one-third of its cars in international markets, according to
Yekehzare. He said: 'Meeting Russian standards is the first step to enter this market. But what is
important is to provide suitable after-sales services to our customers in this market.'
Economic Analysis - Shift To Free Float Will Not Impact Rouble, Short-Term
19 Aug 2014 Russia Monetary Policy
The Central Bank of Russia (CBR) introduced changes to its managed-float exchange rate regime
on August 18, in accordance with its plan to gradually transition from a managed-float towards a
purely inflation-targeting regime by end-2014. Over the long-term, abandoning of FX intervention
will allow Russia's deteriorating macroeconomic fundamentals to drive gradual depreciation of the
rouble in the coming years (see 'Even More Bearish On The Rouble', January 20).
However, over a multi-month time horizon, the CBR's shift towards a free-float regime will have
limited impact on the rouble, and, as such, we expect sideways trading of the unit by year-end.
From a fundamental perspective, the expansion of Russia's current account surplus that we
forecast for 2014 (driven mainly by the sharp drop in import growth, which will benefit the trade
surplus) will provide solid support for the unit.
In addition, geopolitical risks from the Ukraine crisis appear to have been already priced in by the
markets, eliminating another potential trigger for a rouble sell-off in the coming months. Market
selling pressure on the currency has eased, even though geopolitical tensions between the West and
Russia over Ukraine remained elevated in recent months, as reflected in the amount of total FX
sales by the CBR decreasing from USD22.3bn in March to zero in both June and July. We do not
expect selling pressure to mount in the near future, barring any direct military confrontation
between Russia and Ukraine.
CBR's Steps To Have Limited Impact On Rouble, Short-Term
Russia - RUB/USD Exchange Rate, Daily
Source: BMI, Bloomberg

The abandoning of FX intervention means that the CBR will rely on its benchmark interest rate as
a monetary policy tool. This should simplify the CBR's communication with market participants
and improve the effectiveness of monetary policy transmission. The transition should also bolster
perceptions of CBR independence and inflation fighting credentials, as the CBR shows it is
committed to its transition plan despite slowing economic growth.
Against this background, we reiterate that the CBR will remain focused on inflation targeting in the
coming months. Since we expect inflation, at 7.5% in July, to abate by year-end, we reiterate our
view that the CBR will hold rates in the coming months. Slower consumer price growth will be
driven by both weak demand-side inflationary pressures and limited upside risk from Russia's
recent food embargoes on Western states.
For 2015, the transition means that the CBR may be prone to tighten monetary policy to tighten
rouble sell-off and rising inflationary pressures. Nevertheless, our core scenario remains that in line
with receding geopolitical risks, stabilising rouble and weaker inflationary pressures, the CBR will
cut its benchmark rate to 7.25% by end-2015 from 8.00% in August 2014.
Industry Trends And Developments - Industry Trends & Developments - Russia - Q3
2015
07 Apr 2015 Russia Medical Devices
Poor Medical Device Import Performance Expected In 2015
We note that quarterly import growth was negative between Q213 and Q214, and only started to
show positive signs of growth in Q314. Due to the import restrictions imposed in February 2015 as
well as the weakened currency, we believe that medical device imports will post further declines in
2015.
Russian medical device imports increased by 5.3% in the three months to October 2014, to
USD1,221.0mn; this performance was worse than 8.4% growth recorded in Q314 but an
improvement over the H114 growth rate of -18.5%. Only two product areas recorded growth, other
medical devices (18.9%) and diagnostic imaging consumables (0.5%). However, all other categories
recorded decreases led by dental products (-7.9%), orthopaedics & prosthetics (-4.3%) and patient
aids (-2.0%).
In the 12 months to October 2014, imports fell by 22.8% to USD4,544.9mn. Only two product areas
recorded a very small amount of growth, consumables (0.4%) and dental products (0.2%). All other
categories recorded double-digit decreases led by diagnostic imaging (-44.4%), patient aids (17.8%) and other medical devices (-14.2%).
Slow Medical Device Export Growth Expected In 2015
We note that quarterly export growth has gradually slowed down since Q313 and it fell by double
digits in Q414. Due to the poor economic performance of key trade partners such as Ukraine, and
slow economic recovery in the eurozone markets, we believe that exports will continue to post
negative growth in 2015.
Russian medical device exports decreased by 18.9% in the three months to October 2014, to
USD33.6mn; this performance was a slight improvement over the Q314 growth rate of -21.8%, but
worse than the H114 growth rate of 13.0%. All product areas fell in value apart from orthopaedics
& prosthetics, which rose by 50.4%. Strong declines were recorded in patient aids (-41.6%),
diagnostic imaging (-28.3%), other medical devices (-22.1%) and consumables (-19.6%).
In the 12 months to October 2014, exports rose by 4.4% to USD148.4mn. All categories increased in
value apart from consumables (-8.3%) and dental products (-2.4%). Patient aids recorded the
fastest growth rate (14.5%), followed by other medical devices (11.5%) and diagnostic imaging
(7.3%). The largest product areas were other medical devices, worth USD48.3mn, and diagnostic
imaging, worth USD42.5mn.
Medical Device Market To Contract In US Dollar Terms
The latest market forecasts from BMI indicate that the medical device market will contract by a
CAGR of 2.9% to 2018, in US dollar terms; this is the lowest growth rate in the region. The CAGRs
will range from -1.6% for consumables to -4.0% for diagnostic imaging. The market is forecast to
decrease from USD6.7bn in 2013 to USD5.8bn in 2018, due to the weakening of the rouble.
However, in local currency terms, the market is forecast to grow by a 2013-2018 CAGR of 7.2%,
from RUB214.0bn in 2013 to RUB302.3bn in 2018.
Spending On High-tech Medical Care To Increase

In February 2015, the government allocated over RUB26bn (USD433.3mn) for the provision of
high-tech medical care that is not covered by the compulsory health insurance system. A grant of
RUB5bn (USD83.3mn) will be provided to various regions in the country from the federal
budget, while the regions themselves will fund approximately RUB21bn (USD350.0mn) of their own
capital. The federal budget allocation will rise to R6bn (USD100mn) in 2016 and R6.2bn
(USD103.3mn) in 2017. The purpose of the subsidies is to ensure that spending on high-tech care
grows by 1.5 times between 2013 and 2017, helping to reduce mortality. High-tech medical care
includes treatment of the abdominal cavity, neurosurgery, oncology, paediatrics and cardiovascular
surgery.
New Health Insurance Legislation Will Lead To Savings
On January 1 2015, new legislation came into force regarding the financing of the healthcare
system. The costs of medical facilities will no longer be funded by the federal budget; instead they
will be covered entirely by the Obligatory Medical Insurance (OMI) fund. The amount of funding
for each hospital, clinic or diagnostic centre will be determined by the number of potential patients
in the area. Critics of the reform, such as the Independent Institute for Social Policy, have stated
that healthcare professionals were not consulted on the amendment, and that the aim of the
legislation is to cut costs rather than improve the quality of services for those who cannot afford
private care.
Federal Programme To Improve Geographical Distribution Of Physicians In 2015
In November 2014, the government extended the Zemsky Doctor programme that provides
financial incentives to young doctors to work in rural areas. The programme was implemented in
2011 as there is an excess of physicians in major cities and an acute shortage in rural areas. Doctors
aged up to 45 are paid R1mn (USD20,408) to live and work in rural areas. Over the 2012-2014
period, 18,000 doctors signed up to the programme. The government has allocated R3.2bn
(USD653,061) to draw a further 6,400 doctors into rural areas in 2015.
Access To Healthcare Expected To Decline Due To Hospital Closures
In November 2014, thousands of medical staff and patients protested in Moscow over reforms that
are taking place in the health system. Vladimir Putin made healthcare reform a priority when he
returned to the presidency in May 2012, and a plan was formed to reduce the health system's
reliance on the federal budget and have the costs of all health centres across covered by the
Obligatory Medical Insurance (OMI) system by January 2015. However, the transition has involved
hospital closures and staff redundancies, which are placing huge pressure on remaining staff. Some
specialists have to consult with 50 patients in a six-hour period leaving them with very little time to
examine patients, complete paperwork and prescribe the required tests. Doctors are expecting this
situation to worsen due to a leaked document from Moscow's City Hall which indicates that there
are plans to close 28 medical centres over the next two years, including 18 hospitals, and to merge
smaller centres with larger hospitals.
Leonid Pechatnikov, Deputy Mayor for Social Issues, pointed out that the document was not a final
plan, but a proposal based on the results of an expert assessment. City officials had ordered three
separate expert studies on the healthcare system in order to produce the modernisation plan.
Pechatnikov stated that it would be necessary to merge smaller facilities with larger ones as some
hospitals lack the full range of facilities. Therefore, under the new system, patients would no longer
need to be sent urgently to a larger institution for treatment that cannot be obtained at a smaller
facility. Pechatnikov also claimed that merging facilities would ensure a more efficient use of space
and that Russia should emulate what is happening globally and create large, multi-specialisation
hospitals.
Medical personnel argue that the document is more than a proposal and that cuts and redundancies
have already begun. The number of redundancies is escalating every day and there are fears that
there will be a severe shortage of staff at the time of year when there is a spike in the number of
illnesses. Doctors claim that the transformation has been motivated more by profit than the
optimisation of Moscow's medical institutions, as the vacated premises, which reportedly occupy
expensive plots of land, will be handed over to the Mayor's Office. Private centres are opening in
tandem with the closures, which charge patients considerably more for services. Everyone is in
agreement that healthcare reform is necessary, but medical staff feel that it shouldn't be carried out
so rapidly. The research guiding the document has also been criticised with doctors claiming that it
was conducted over the summer when people are away on holiday and hospitals have fewer
patients.
In 2013, Moscow's Hospital No. 11 was merged with the city's Clinical Hospital No. 24 as part of the
reform. A neurologist from Hospital No. 11 said that salaries fell from an average of RUB60,000
(USD1,602.6) RUB20,000 (USD534.2) after the move, and the new leadership viewed the staff as
freeloaders. He thinks that the reorganisation will adversely affect the city's patients, with the rich
few going to commercial centres for expensive consultations and the masses with an average
monthly salary of USD300 visiting 'barefoot doctors'. Another doctor from Hospital No. 11 believes
that the reform should be carried out by professionals who won't be guided by profit rather than
officials who are more interested in profits than improving healthcare.
Days before the protest, the government acknowledged that the reform was being conducted solely
by administration officials rather than medical professionals, so members of the State Duma
submitted a draft law calling for the establishment of a public commission which will make
decisions on how to carry out the ongoing reforms. Sergei Kalashnikov, head of the Duma's health
committee, said that legislation must be put in place to ensure that the reforms are only
implemented after they have been approved by members of public commissions which are
composed of medical professionals, patients and members of the public. Following the protest,
Health Minister Veronika Skvortsova promised that the MoHSD would take into account all views
expressed by doctors and patients as it works on the reforms.
Non-communicable Diseases On The Rise Due To Poor Lifestyle Choices

In October 2014, Nikolai Gerasimenko, first deputy chairman of the Health Committee of the State
Duma, commented on the impact that lifestyle choices are having on the population's health. He
stated that non-communicable diseases are on the rise as people tend to eat and drink whatever
they like without any regard for their health, and they visit the doctor if they subsequently become
ill. Gerasimenko claimed that personal lifestyle choices are to blame for 55% of disease cases, while
genetics account for 15-20% of cases, environmental factors such as water, air and labour
conditions are responsible for a further 15-20% of cases, and limited medical resources 10-15%. In
order to improve the situation, Gerasimenko said that parents need to educate their children at an
early age about the importance of adopting healthy choices in order to protect their health. A
hindrance is the lack of promoting healthy lifestyles in the media and the vast advertising of fast
food and sugary drinks on television. More education is also required on how to cook healthy meals.
Gerasimenko stated that, at the legislative level, various projects are being developed in order to
motivate people to monitor their health. For example, a law has been passed authorising companies
to invest 0.2% of their profits in improving employees' fitness levels. The government has
introduced a number of laws aimed at reducing tobacco and alcohol consumption, and while these
have been deemed hostile, they have been effective, and mortality through alcohol and tobacco use
has declined. Gerasimenko believes that employers and the state have a responsibility to help
people quit smoking as well as the individuals concerned. Obesity is huge problem in Russia, and
suggestions to help combat this include requesting cafes and supermarkets to display the nutritional
values of their products.
Expensive Medical Equipment Underused Due To Lack Of Warranties
In June 2014, it was reported that up to 40% of expensive medical equipment that was purchased
under the national Health project has spent a significant amount of time out of use due to
malfunctions, even in the most remote regions, according to the International Medical Device
Manufacturers Association (IMEDA). It takes months to repair equipment and replace worn parts
due to the shortage of funds and competent staff in clinics, lack of parts and the bureaucracy
involved in conducting tenders for repairs. In order to make a one-off repair, it is required by law to
hold a competition to hire a specialist who can make a diagnosis of the broken instrument.
Documentation then needs to be prepared and a competition announced for the repairs. The
competition lasts for one month but the whole procedure can take around three months to
complete. This leads to delays in treatment for patients, who in some cases are suffering from
serious diseases such as cancer.
A lot of equipment is purchased without a service package and is therefore not regularly checked;
the domestic company Electron sold 458 units of diagnostic equipment in 2013, including 28
scanners, but only product one was purchased by the public health system with an extended
warranty. The company believes that up to 25% of the X-ray machines and scanners it has
previously sold are now not being used due to the lack of servicing and improper handling. Becton,
Dickinson and Company claims that 10-15% of the 1,000 diagnostic devices it has sold to Russian
clinics are malfunctioning or idle due to a lack of consumables. GE Healthcare in Russia estimates
that only around 15% of the 1,000 MRI and 2,000 CT scanners installed in Russian hospitals by
different manufacturers are on service contracts and regularly serviced, compared with 70-80% of
such equipment in Europe.
New Cancer Centre To Be Built In The Voronezh Region
In June 2014, plans to construct a new cancer centre in the Voronezh region at a cost of around
RUB8bn (USD0.2bn) were announced. The new centre will be jointly developed by experts from
Voronezh and Germany. Land for its construction has already been obtained. The existing
Voronezh Oncology Center is the only hospital in the region that can provide care for cancer
patients, including high-tech medical treatment. Since mid-2013, RUB650mn (USD18.5mn) has
been spent on new equipment and repairs at the hospital as part of the healthcare modernisation
programme. Over 10,000 patients are treated at the hospital every year.
Midwife Points And GP Offices To Be Constructed In The Kirov Region
In May 2014, it was reported that 65 midwife points (FAPs) and seven GP offices will be
constructed in the Kirov region over a two-year period at a cost of RUB195mn (USD5.5mn). The
work will be completed by Kirov-Chepetskoye Construction Management. Over the 2011-2013
period, major repairs were carried out at 81 FAPs and 95 GP offices in the region, under the
healthcare modernisation programme. Around 65 FAPs require complete reconstruction.
New PET Centre Opens In Ufa
In May 2014, a new positron emission tomography centre was opened in Ufa, construction of which
began in October 2012. The centre was built under a joint project between the state corporation
RUSNANO, local manufacturer RosMedTechnology and the Hungarian company Medilux to create
the first federal network of diagnostic PET centres in Russia. Further centres are to be opened in
Lipetsk, Orel, Tambov, Bryansk, Yekaterinburg, Samara, Novosibirsk and Kaluga.
The centre received investment worth RUB6.4bn (USD0.2bn), RUB2.4bn (USD0.1bn) of which
came from RUSNANO. It has been equipped with high-tech equipment manufactured by GE
Healthcare. Production of short-lived isotopes and radiopharmaceuticals takes place at the centre,
which has a total area exceeding 2,800 square metres. A robotic radiosurgery 'CyberKnife' capable
of removing tumours close to vital organs with sub-millimetre accuracy will also be launched at the
centre in the near future. The centre has a radiosurgery department, allowing patients to be
diagnosed and treated in the same facility. All procedures at the centre are free of charge for
residents of Bashkiria. As of May 2014, over 170 patients had been diagnosed at the centre. It is
hoped that the capacity for diagnostic procedures will reach 5,000 by the end of 2015.
RUB26.6trn Allocated to Healthcare Development Programme
In April 2014, the government issued a document stipulating that RUB24.4trn will be allocated to
the state programme Development of Health for 2013-2020. Funds worth RUB2.4trn (USD0.1trn)
will be sourced from the federal budget, RUB11.1trn (USD0.3trn) from consolidated budgets and
RUB13.1trn (USD0.4trn) from OMI budget. The programme is being carried out in two stages; in
2013-2015, the structure of the health system will be changed and in 2016-2010, innovation in
healthcare will be developed. The main objectives of the state programme include improving
prevention and diagnosis through innovative technologies, developing primary healthcare,
improving the provision of specialised medical care, developing palliative care and obstetric care
and increasing the efficiency and transparency of supervisory functions.
New Online Accounts For Patients
In April 2014, the government was preparing to launch a new medical IT system that will enable
patients to create personal accounts and access information on their doctor visits, services
received and discharge summaries. The service is not expected to be available in all health
facilities, but the National Medical Chamber will encourage providers that haven't integrated the
system to do so.
New Regulations For The Pricing Of Implantable Medical Devices
In December 2014, the MOHSD published a list of 205 implantable medical devices that are subject
to state reimbursement programmes; the list will be reassessed annually. The MOHSD set a
deadline of March 1 2015 for proposals to be submitted for the list in 2015; all medical
devices proposed after this date will be considered for inclusion on the list in 2016. The government
also set a target date of Q315 to develop and implement regulations that will govern the pricing of
medical devices included in the list.
In January 2015, the MoHSD prepared the draft regulations which were open for public discussion
until February 4 2015, and on March 9 2015, President Putin signed an amendment to Article No.
80 of the Russian Federal Law No. 323 introducing the price regulations for implantable medical
devices on the reimbursement list. The competent authority, Roszdravnadzor, is now expected to
introduce a separate state procedure for the registration of manufacturers' maximum sale prices of
such medical devices, as well as maximum wholesale and retail mark-ups. It will also be responsible
for maintaining a national open public register which contains this information. In March 2015, the
regulator launched a website for the weekly monitoring of price dynamics. The methodology for
determining maximum wholesale prices will be available for public discussion by April 19 2015 and
is expected to come into force at some point in Q215. According to the MoHSD, the regulation will
affect around 10% of medical devices on the market.
New Restrictions On Medical Device Imports To Reduce Trade
On February 6 2015, the government published Order No. 102, which specifies that tenders for
state procurements will be closed to foreign manufacturers if at least two bids are received from
manufacturers located in a Eurasian Economic Union (EAEU) country i.e. Russia, Belarus,
Kazakhstan or Armenia. We believe that the restrictions will result in a fall in medical device
imports. The constraint applies to a wide range of medical devices including:
Surgical needles;
Certain disposable syringes;
Microsurgical scissors and pincers;
ECG machines;
Holter ECG monitors;
1-65 slice CT scanners;
Gamma chambers;
Certain types of X-rays diagnostic complexes;
Pneumatic micro motors for dental equipment;
Dental carbide burs;
Implants for ostheosynthesis;
Non-implantable hearing aids;
Microsurgical ophthalmic instruments;
Antiseptic and sterile drapes and wipes;
Gynaecological tool sets;
Blood coagulation analysers;
Individual blood glucose meters; and
Certain blood transfusion devices.
The Ministry of Industry and Trade (MIT) has been looking to protect domestic producers by
restricting imports since December 2012 when the ministry produced a first draft on the
prohibition of trading for foreign manufacturers and the requirement of localisation of production.
However, in January 2013, the Federal Antimonopoly Service (FAS) blocked the law from coming
into force, claiming that it restricted competition. The initiative unexpectedly resurfaced in March
2014, when the MIT proposed to ban the importation of 66 types of medical equipment and
supplies, causing alarm amongst doctors and patients with expectations of declining quality, higher
prices and cartel agreements.
The resolution was due to take effect in April 2014, but its adoption wasn't possible as only around
10% of imported products were also produced locally, meaning domestic production would not be
able to meet most requirements. According to Philips Health in Russia, the volume of local
production would not be able to fully meet the demand for high-tech equipment, a claim that
Russian producers believed was groundless. Hartmann stated that the ruling would reduce its
annual turnover by R1bn (USD28.4mn), force it to cut around 100 jobs and prevent the
implementation of its investment projects. Local companies argued that the ruling would solve the
problem of an ever-increasing volume of poor quality imports entering the country, which are
provided without service support from countries such as China.
Following extensive consultations, in July 2014, the MIT abandoned its plan to impose a total ban
on the importation of medical devices and instead decided to apply restrictions only to products
whose production capacity is able to meet the demand; where there is sufficient competition
between domestic companies; and which comply with Russian GOST standards and ISO 13485. It
also decided to allow foreign companies to take part in public tenders if only one bid had been
submitted by a company from a Customs Union country. The MIT believed that this would promote
effective competition between domestic manufacturers and support the development of innovative
medical devices within the industry, although there were concerns that competition would in fact
decline as that this would lead to price increases. The restrictions that were implemented in
February 2015 are less severe than those initially proposed, and apply to only 45 different types of
medical device.
Harmonisation Of Medical Device Regulations Across The EAEU Continues
On May 29 2014, a treaty on the establishment of the Eurasian Economic Union (EAEU or EEU)
was signed by the leaders of Russia, Belarus and Kazakhstan. The treaty came into force on
January 1 2015, coinciding with the termination of the Eurasian Economic Community.
Additionally, the Customs Union was incorporated into the EAEU's legal framework. Armenia
signed a treaty to join the EAEU on October 9 2014 and this came into force on January 2 2015.
Kyrgyzstan signed an accession treaty on December 23 2014 and this is expected to come into force
on May 1 2015. Modelled on the EU, the EAEU has a Moscow-based executive body, the Eurasian
Economic Commission (EEC), and a political body, the Supreme Eurasian Economic Council.
In December 2014, the members of the EEC signed the Agreement on the Single Principles and
Rules for the Turnover of Medical Devices, which will come into force on January 1 2016. The
document aims to harmonise the regulatory systems governing medical devices across the EAEU,
and covers the manufacturing process, market access, state registration, post-market surveillance,
labelling and quality control. After January 2016, current registration certificates will be valid until
December 31 2021. Over ten legal acts are expected to be drawn up in 2015; as of February 2015,
the guidelines to define a safety class for medical and in-vitro devices had been agreed upon and
accepted. It is possible that the list of Essential Principles of Safety and Performance of Medical
Devices and common marking, labelling, and testing requirements may be published in H115.
Currently, the main topic of discussion is Kazakhstan's proposal to base the common Eurasian
medical device registration rules on Kazakhstan's existing medical device approval model.
New Measures To Reduce Circulation Of Unregistered Medical Devices
In January 2015, the government implemented amendments to the civil and penal codes and
significantly increased penalties for the manufacturing, sale or trade of counterfeit and
unregistered medical devices, in accordance with the MEDICRIME European convention signed in
2011. Penalties of up to R2mn (USD33,333) and a jail term of up to 12 years can now be given for
such offences. The distribution of unregistered medical devices which exhibit characteristics unlike
those declared during the registration process has also been listed as a separate crime. For this
reason, Roszdravnadzor is to double the number of inspections that it conducts in the medical
device sector in 2015.
Potential Medical Device Price Freeze Would Prevent Severe Drop In Demand
According to the Agami Center dental clinic in Moscow, medical equipment prices rose by an
average of 35% in the last two weeks of December 2014, with implants increasing by 50%, due to
escalating exchange rates. Only large players with a narrow specialisation were unaffected by the
currency devaluation. For instance, the S. Fyodorov Eye Microsurgery State Institution, which
carries out 300,000 operations annually, is able to dictate procurement terms to their suppliers as
they will purchase goods elsewhere if prices increase. In 2013-2014, the institution was able to
purchase consumables at previous years' prices.
However, the government is preparing a special cost containment programme which could see the
prices of medical devices frozen for three years, as contracts of that duration replace annual
tenders. According to the Center of Social Economy, this would be advantageous for manufacturers
as it would enable them to secure long-term product sales, although margins would be smaller, and
they could also cut marketing costs. State institutions would benefit from obtaining medical devices
at 2014 prices.
Medical Advertising Ban May Be Lifted
In April 2014, the Duma Economic Policy, Innovative Development and Entrepreneurship
Committee recommended to the State Duma that it cancels the law on advertising medical services
and equipment that came into force in January 2014. The law allows medical products and services
to be advertised only in specialist medical publications and at medical fairs and exhibitions.
However, since its introduction, the Duma State Regulation of Excise Goods and Advertisement
Committee has seen a growing number of fraudulent advertisements for so-called miraculous
medical devices, as genuine healthcare providers have not been allowed to advertise their services.
The suggestion to lift the ban has been supported by the Federal Anti-Monopoly Service.
Recession To Stifle Spending In 2015
BMI is expecting Russia to enter a severe recession in 2015, mainly due to the credit market
tightness and elevated inflation that will result from the sharp FX sell-off that took place in
December 2014. BMI now expects real GDP to contract by 5.6% in 2015, compared with previously
forecasted growth of 0.5%. Real GDP growth for 2016 has been revised down from 1.1% to 0.2%.
While Russia's currency crisis has stabilised since December 16 2014, when the rouble lost 35% of
its value, the rouble is now trading at levels equal to one-third of its value at the beginning of 2014.
Unless oil prices rise, the rouble is unlikely to strengthen in the coming quarters.
Banks have started to face growing funding shortages due to accelerating deposit flight, and
excessively high funding costs in 2014 that resulted from aggressive monetary tightening by the
Central Bank of Russia (CBR) and financial sanctions from the West. The 3-month interbank
lending rate - Mosprime - has reached an all time high of 28.2%, a sign that there is a growing
liquidity crunch in the system. Additionally, the FX sell-off has increased the banking sector's
external debt, with the total due to be repaid by end-2015 valued at USD35.8bn.
The five emergency rate hikes by the CBR will lead to prohibitively high interest rates for
borrowers, effectively halting credit demand. The non-financial sector also has to repay USD62.9bn
in external debt by end-2015. With this debt burden doubling in value in rouble terms as of
December 2014, both households and businesses will struggle to meet their debt obligations,
meaning credit defaults will dramatically increase in 2015.
Elevated inflation is expected to affect domestic demand, as the FX sell-off further inflated import
prices. CPI accelerated to 9.1% y-o-y in November 2014, and double-digit inflation readings are
expected in 2015. Due to this, BMI has downgraded its household consumption growth forecast
from 1.2% to -5.0% in 2015. The deep recession in 2015 and possibly 2016 will lead to a sharplyreduced demand for imports, as the severe currency weakness will make foreign goods extremely
expensive for the average Russian.
Currency Forecast - Rouble To Find Temporary Strength
04 Nov 2014 Russia Forex
BMI RUSSIA CURRENCY FORECAST
Spot
2014
RUB/USD, ave
36.09
37.44
RUB/EUR, ave
48.48
50.17
BMI RUSSIA CURRENCY FORECAST
Policy Rate, % eop
Spot
2014
9.50
9.50
Source: BMI, Bloomberg. Last updated: November 4, 2014
BMI View: The current selloff of the rouble is becoming overdone and we expect the currency to
consolidate against the US dollar going into 2015. Beyond this we expect the rouble to return to a
long-term trend of gradual depreciation owing to lack of structural reform, high inflation and a
deteriorating current account position.
Short Term Outlook
We believe the Russian rouble has moved into a weaker trading range against the US dollar, which
will become entrenched as the central bank reduces its intervention in FX markets. Over the
remainder of 2014 we believe the sharp depreciation will abate with the rouble experiencing
temporary reprieve before returning to its depreciatory path on the back of underlying economic
fundamentals in H115.
Rouble Takes Out All Previous Resistance
RUB/USD Spot Weekly
Source: Bloomberg, BMI
Despite having broken though all previous resistance lines we feel that the current breakout is
overdone and a retracement is likely in the short term. Technical momentum indicators also suggest
that the rouble has become heavily oversold on daily, weekly, and monthly timeframes.
Fundamental factors align with this view as a consolidation in the price of Brent crude around the
USD85/bbl level should bring support to the rouble given their recent correlation. We also believe
the sharp 150 basis point October rate hike by the central bank will lend support to the rouble over
the coming weeks. Finally, the gradual easing of political tensions will reduce uncertainty in the
markets and contribute to the stabilisation. Therefore we expect the rouble to pull back to
RUB41.80/USD at end-2014, averaging RUB37.44/USD for the year.
Core View
Beyond a short-term correction we believe the Russian rouble will return to a depreciatory trend,
potentially as early as H115, due to lack of any visible structural reform by the Russian authorities.
The state currently controls large portions of the country's energy, transport and banking sectors.
This situation will be slow to change as the current privatisation schedule mostly proposes stake
reductions as opposed to full exits (see 'Balance of Payments Crisis Risk Rising', September 15,
2014). This substantial state footprint in the economy contributes to a significant lack of
competitiveness which exerts pressure on the current account via increased import reliance.
We expect the ongoing erosion of the current account surplus to contribute to further depreciation
of the rouble over the next few years, particularly given that heavy government involvement in the
economy will limit capital inflows due to a lack of domestic investment opportunities. Slowing
economic activity, and waning consumer import demand has likely slowed the erosion of the
current account surplus until now. However we expect this dynamic to subside with Russia
eventually realising a current account deficit in 2017 of roughly USD10bn, equating to -0.50% of
forecasted GDP for that period.
Current Account Sliding
Russia - Current Account Balance, USDbn
Central Bank of Russia

We also believe that weak productivity will keep supply-side inflation elevated as demand for goods
and services continually exceed domestic production. In light of this we expect Russian inflation to
remain considerably higher than its main trading partners for a considerable period of time. Since
this inflation differential will be driven by weak productive capacity rather than strong growth, we
believe this will play out via rouble depreciation against other major currencies. As a result we
forecast the rouble to depreciate to an average value of RUB41.08/USD over the course of 2015; this
incorporates a modest pull back in early 2015 and then subsequent depreciation. For 2016 we
forecast the rouble to average RUB42.13/USD.
Lofty Russian Inflation
Russian Inflation vs. Other Major Economies
Market Strategy - Oil Prices A Major Risk To Rouble Stabilisation
19 Dec 2014 Russia Forex
Russia's currency crisis has abated since December 16 when the currency lost 35% of its value
versus the US dollar at one point despite FX intervention and aggressive monetary tightening by
the Central Bank of Russia (CBR). Support for the rouble has come from stabilising global oil
prices; regulatory relaxation and liquidity support from the CBR to the banking sector; further FX
sales; and verbal intervention by the government pledging to use fiscal buffers to support the unit.
Oil Prices Key

Russia - RUB/USD Exchange Rate, Weakly And Brent Crude, USD/bbl (RHS, Reversed)
Source: Bloomberg
If oil prices head further down, however, we would expect the rouble to again suffer steep losses,
presenting the authorities with a set of unpalatable policy choices. Policymakers have signalled
reluctance to hike rates further - following 10 percentage points of rate hikes throughout 2014 - or
to burn through FX reserves - deemed of strategic significance in the context of restricted access to
international capital markets. But if they fail to do so, then the authorities would be likely to resort
to a form of capital controls to stave off further erosion in the rouble's value, such as requiring
exporters to convert hard currency assets into roubles. Even in a light form, capital controls would
be a highly risky strategy, as they might bar Russia from external financing for quite some time.
National Sources/BMI
Risks to Outlook
The main risks to our short-term forecast are to the downside. Given the pace at which the
currency has been depreciating, this may continue longer than expected, particularly if the recent
sell-off mutates into a currency run. Nevertheless, over the longer term there remains a risk that we
are overly pessimistic on the outlook for structural reform as a hastened privatisation schedule
would bode well for domestic productivity, the current account position and the value of the rouble.
Industry Forecast - Russia Power Forecast Scenario
06 Feb 2015 Russia Power
Electricity Generation And Power Generating Capacity
TOTAL ELECTRICITY GENERATION DATA AND FORECASTS (RUSSIA 2013-2018)
Generation, Total, TWh
Generation, Total, % y-o-y
Generation, Total, KWh per capita
Generation, Thermal, TWh
Generation, Thermal, % y-o-y
Generation, Thermal, KWh per capita
Generation, Thermal, % of total generation
Generation, Coal, TWh
2013
2014e
2015f
2016f
201
1,014.670 1,004.278 979.240 992.236 1,004.92
0.217
-1.024
-2.493
1.327
1.27
7,103.857 7,049.164 6,891.290 7,000.930 7,109.59
672.767 636.285 617.214 611.997 618.19
-0.921
-5.423
-2.997
-0.845
1.01
4,710.143 4,466.170 4,343.577 4,318.071 4,373.56
66.304
63.357
63.030
61.679
61.51
184.075 177.632 172.303 173.561 175.01

Generation, Coal, % y-o-y
Generation, Coal, KWh per capita
Generation, Coal, % of thermal electricity generation
Generation, Coal, % total electricity generation
Generation, Natural Gas, TWh
Generation, Natural Gas, % y-o-y
Generation, Natural Gas, KWh per capita
Generation, Natural Gas, % of thermal electricity generation
Generation, Natural Gas, % of total electricity generation
Generation, Oil, TWh
Generation, Oil, % change y-o-y
Generation, Oil, KWh per capita
Generation, Oil, % of thermal electricity generation
Generation, Oil, % of total electricity generation
Generation, Nuclear, TWh
Generation, Nuclear, % y-o-y
Generation, Nuclear, KWh per capita
Generation, Nuclear, % of total electricity generation
Generation, Hydropower, TWh
Generation, Hydropower, % change y-o-y
Generation, Hydropower, KWh per capita
Generation, Hydropower, % total electricity generation
Hydro-Electric Pumped Storage, TWh
Hydro-Electric Pumped Storage, % y-o-y
Hydro-Electric Pumped Storage, KWh per capita
Hydro-Electric Pumped Storage, % total electricity generation
Generation, Non-Hydropower Renewables, TWh
Generation, Non-Hydropower Renewables, % change y-o-y
Generation, Non-Hydropower Renewables, KWh per capita
Generation, Non-Hydropower Renewables, % of total electricity
2013
-0.500
1,288.737
27.361
18.141
474.329
-1.000
3,320.847
70.504
46.747
14.363
-3.602
100.560
2.135
1.416
161.380
-2.954
1,129.846
15.905
177.912
8.204
1,245.589
17.534
-0.919
17.972
-6.434
-0.091
3.530
0.425
24.714
0.348
2014e
-3.500
1,246.826
27.917
17.688
445.869
-6.000
3,129.616
70.074
44.397
12.783
-11.000
89.728
2.009
1.273
184.038
14.040
1,291.786
18.325
181.292
1.900
1,272.516
18.052
-0.971
5.682
-6.817
-0.097
3.634
2.954
25.509
0.362
2015f
-3.000
1,212.566
27.916
17.596
432.493
-3.000
3,043.622
70.072
44.166
12.418
-2.860
87.389
2.012
1.268
170.879
-7.150
1,202.543
17.450
188.544
4.000
1,326.858
19.254
-1.003
3.225
-7.055
-0.102
3.605
-0.809
25.368
0.368
2016f
0.730
1,224.598
28.360
17.492
426.352
-1.420
3,008.214
69.666
42.969
12.084
-2.690
85.259
1.975
1.218
185.199
8.380
1,306.709
18.665
192.315
2.000
1,356.919
19.382
-1.034
3.124
-7.295
-0.104
3.760
4.294
26.527
0.379
201
0.84
1,238.21
28.3
17.41
431.68
1.25
3,054.04
69.83
42.95
11.49
-4.89
81.30
1.85
1.14
190.29
2.75
1,346.26
18.93
193.56
0.65
1,369.44
19.26
-1.06
3.02
-7.53
-0.10
3.93
4.68
27.84
0.39

Generation, Total, TWh
Generation, Total, % y-o-y
Generation, Total, KWh per capita
Generation, Thermal, TWh
Generation, Thermal, % y-o-y
Generation, Thermal, KWh per capita
Generation, Thermal, % of total generation
2019f
2020f
2021f
2022f
202
1,026.638 1,036.237 1,059.776 1,070.835 1,078.01
1.464
0.935
2.272
1.044
0.67
7,306.978 7,401.123 7,598.556 7,710.107 7,796.58
636.720 647.435 649.441 657.023 666.25
1.326
1.683
0.310
1.167
1.40
4,531.781 4,624.176 4,656.466 4,730.621 4,818.55
62.020
62.479
61.281
61.356
61.80

Generation, Coal, TWh
Generation, Coal, % y-o-y
Generation, Coal, KWh per capita
Generation, Coal, % of thermal electricity generation
Generation, Coal, % total electricity generation
Generation, Natural Gas, TWh
Generation, Natural Gas, % y-o-y
Generation, Natural Gas, KWh per capita
Generation, Natural Gas, % of thermal electricity generation
Generation, Natural Gas, % of total electricity generation
Generation, Oil, TWh
Generation, Oil, % change y-o-y
Generation, Oil, KWh per capita
Generation, Oil, % of thermal electricity generation
Generation, Oil, % of total electricity generation
Generation, Nuclear, TWh
Generation, Nuclear, % y-o-y
Generation, Nuclear, KWh per capita
Generation, Nuclear, % of total electricity generation
Generation, Hydropower, TWh
Generation, Hydropower, % change y-o-y
Generation, Hydropower, KWh per capita
Generation, Hydropower, % total electricity generation
Hydro-Electric Pumped Storage, TWh
Hydro-Electric Pumped Storage, % y-o-y
Hydro-Electric Pumped Storage, KWh per capita
Hydro-Electric Pumped Storage, % total electricity generation
Generation, Non-Hydropower Renewables, TWh
Generation, Non-Hydropower Renewables, % change y-o-y
Generation, Non-Hydropower Renewables, KWh per capita
Generation, Non-Hydropower Renewables, % of total electricity
2019f
177.850
0.837
1,265.827
27.932
17.324
447.798
1.600
3,187.154
70.329
43.618
11.072
-1.730
78.801
1.739
1.078
191.906
3.360
1,365.870
18.693
195.019
0.100
1,388.028
18.996
-1.128
2.856
-8.027
-0.110
4.120
2.019
29.327
0.401
2020f
179.329
0.832
1,280.821
27.698
17.306
457.202
2.100
3,265.476
70.618
44.121
10.904
-1.515
77.879
1.684
1.052
189.795
-1.100
1,355.574
18.316
195.955
0.480
1,399.573
18.910
-1.159
2.777
-8.279
-0.112
4.211
2.205
30.079
0.406
2021f
180.584
0.700
1,294.781
27.806
17.040
458.116
0.200
3,284.677
70.540
43.228
10.740
-1.500
77.008
1.654
1.014
209.932
10.610
1,505.207
19.809
197.317
0.695
1,414.754
18.619
-1.191
2.702
-8.536
-0.112
4.277
1.557
30.665
0.404
2022f
182.318
0.960
1,312.704
27.749
17.026
464.072
1.300
3,341.359
70.633
43.337
10.633
-1.000
76.558
1.618
0.993
211.906
0.940
1,525.740
19.789
198.717
0.709
1,430.776
18.557
-1.222
2.631
-8.797
-0.114
4.412
3.158
31.766
0.412
202
183.73
0.77
1,328.83
27.57
17.04
472.00
1.71
3,413.71
70.84
43.78
10.50
-1.16
76.00
1.57
0.97
208.37
-1.66
1,507.05
19.33
200.15
0.72
1,447.58
18.56
-1.25
2.56
-9.06
-0.1
4.48
1.70
32.45
0.41
f = BMI forecast. Source: National sources, BMI

ELECTRICITY GENERATING CAPACITY DATA AND FORECASTS (RUSSIA 2013-2018)
Capacity, Net, MW
Capacity, Net, % y-o-y
Capacity, Conventional Thermal, MW
Capacity, Conventional Thermal, % y-o-y
Capacity, Conventional Thermal, % of total capacity
Capacity, Nuclear, MW
2013
2014e
2015f
2016f
201
237,808.2 246,161.5 247,746.6 250,816.3 251,809
1.4
3.5
0.6
1.2
0
162,523.9 164,201.2 165,801.3 166,250.7 166,250
0.8
1.0
1.0
0.3
0
68.3
66.7
66.9
66.3
66
23,643.0 26,960.1 25,031.7 27,131.8 27,877

Capacity, Nuclear, % y-o-y
Capacity, Nuclear, % of total capacity
Capacity, Hydropower, MW
Capacity, Hydropower, % y-o-y
Capacity, Hydropower, % of total capacity
Capacity, Non-Hydroelectric Renewables, MW
Capacity, Non-Hydroelectric Renewables, % y-o-y
Capacity, Non-Hydroelectric Renewables, % of total capacity
2013
0.0
9.9
50,642.5
4.3
21.3
998.7
6.4
0.4
2014e
14.0
11.0
53,908.9
6.5
21.9
1,091.3
9.3
0.4
2015f
-7.2
10.1
54,170.4
0.5
21.9
2,743.2
151.4
1.1
2016f
8.4
10.8
54,594.6
0.8
21.8
2,839.3
3.5
1.1
201
2
11
54,731
0
21
2,950
3
1

Capacity, Net, MW
Capacity, Net, % y-o-y
Capacity, Conventional Thermal, MW
Capacity, Conventional Thermal, % y-o-y
Capacity, Conventional Thermal, % of total capacity
Capacity, Nuclear, MW
Capacity, Nuclear, % y-o-y
Capacity, Nuclear, % of total capacity
Capacity, Hydropower, MW
Capacity, Hydropower, % y-o-y
Capacity, Hydropower, % of total capacity
Capacity, Non-Hydroelectric Renewables, MW
Capacity, Non-Hydroelectric Renewables, % y-o-y
Capacity, Non-Hydroelectric Renewables, % of total capacity
2019f
2020f
2021f
2022f
202
257,653.0 259,885.7 264,625.8 266,635.5 267,658
1.4
0.9
1.8
0.8
0
167,412.7 167,580.2 166,792.5 165,958.6 164,962
0.2
0.1
-0.5
-0.5
-0
65.0
64.5
63.0
62.2
61
28,114.4 27,805.5 30,755.6 31,043.2 30,527
3.4
-1.1
10.6
0.9
-1
10.9
10.7
11.6
11.6
11
59,032.8 61,346.4 63,775.6 66,327.0 69,007
3.9
3.9
4.0
4.0
4
22.9
23.6
24.1
24.9
25
3,093.0
3,153.7
3,302.1
3,306.8
3,160
2.8
2.0
4.7
0.1
-4
1.2
1.2
1.2
1.2
1
f = BMI forecast. Source: National sources, BMI

While Russia maintains its position as one of the world's biggest power markets, benefiting from
widespread electricity export links and an abundance of natural resources for use in power
generation, we maintain there is unlikely to be significant growth in the power market over our tenyear forecast period to 2024.
Instead, we expect only moderate growth as severe macroeconomic headwinds and a prolonged
period of geopolitical uncertainty take a toll on economic growth. The annexation of Crimea and
perceived Russian belligerence towards the West has shattered investor confidence and will deter
significant foreign investment in both the domestic economy and the power sector. Meanwhile, the
plunge in global oil prices has led to a sell-off in the rouble. Subsequent emergency rate hikes have
served to tighten credit conditions. At the same time, a shrinking population, structural risks such
as the opaque business environment and weak institutional capacity continue to deter significant
foreign investment.
Ukraine Crisis And Falling Oil Prices Temper Growth
The risks to our forecasts for the Russian economy and the domestic power sector will remain
significant, and are firmly to the downside in 2015. Our Country Risk (CR) team forecast a severe
recession as a consequence of credit market tightness and elevated inflation - a result of the sharp
Russian rouble sell-off at the end of December 2014.
On the back of the steep losses suffered by the rouble - due to plunging oil prices - we now forecast
a 5.6% contraction in real GDP in 2015 (we previously expected growth of 0.5%). While Russia's
currency crisis has stabilised since December 16 2014 - when the rouble lost 35% of its value despite
aggressive monetary tightening - the rouble is now trading at levels equal to one-third of its value at
the beginning of 2014. Barring any resurgence in oil prices, we fail to identify any drivers of rouble
strength in the coming quarters, with the FX sell-off likely to bring about severe credit market
tightness, which is the main factor underpinning our recessionary outlook for the economy.
Until recently, the 58% fall in the price of oil in dollar terms has been mitigated by the 47%
depreciation of the Russian rouble against the dollar, which has ensured the price of oil in roubles
stayed broadly in line with government budgetary assumptions. However, the decline in the price of
oil has now exceeded that of the rouble; in other words, the rouble price per barrel of oil has fallen
nearly 14.0% since July 2014. This will reduce government revenue intake during 2015,
particularly as our Oil and Gas team expects the price of Brent to remain suppressed averaging just
USD55.0/bbl over the course of the year. In the face of the looming recession, we do expect the
government to enact counter-cyclical fiscal policy, but this will be subject to tighter budgetary
constraints due to reduced revenues.
At the same time, Russian banks have started to face growing funding shortages on the back of
accelerating deposit flight. Funding costs are also prohibitively high as a result of aggressive
monetary tightening by the Central Bank of Russia (CBR), while Western sanctions have imposed
restrictions on access to foreign capital. These sanctions could be extended as fighting intensifies in
eastern Ukraine in early 2015 - taking a greater toll on some segments of the economy. Non-oil
revenues will also suffer due to decreased consumption in the economy largely brought on by stifled
economic activity and damaged purchasing power.
Weak Economic Outlook To Feed Into Weak Power Demand
In this environment, the operating environment for both domestic and foreign utilities operating in
the Russian power market will become increasingly challenging over 2015. This will present
significant challenges for domestic utilities such as Inter Rao, RusHydro, Gazprom and Rossetti, as
well as foreign firms like E.ON and Fortum, which have domestic subsidiaries.
Taking the aforementioned macroeconomic factors into account, higher inflation, and a near-term
slowdown in household spending and broader investment will weigh on overall electricity
consumption - depressing sales. Power demand in Russia correlates highly with economic
development and industrial production. As such, we have downgraded our estimates for electricity
generation in 2015 and 2016. We now expect generation to contract by 2.5% in 2015 and remain
relatively flat in 2016. Total electricity generation will grow at an annual average rate of 0.7% to
reach 1,084 terawatt hours (TWh) by 2024.
Any fall in demand for electricity will feed into lower revenues for utilities. In particular, weak
electricity demand could feed through into lower capacity payments in some of Russia's wholesale
electricity pricing zones - weighing on the margins of utilities that have capacity in those zones. The
price in the 2015 capacity auction covering Russia's first wholesale pricing zone (spanning
European Russia and the Urals), fell by 3.5% to RUB128,400 (USD3,350) per megawatt hour per
month. The decline was a symptom of surplus capacity due to falling demand for electricity and the
introduction of new more efficient power plants. This will reduce revenues generated by utilities
that are present in that pricing zone.
Furthermore, a two-year freeze in electricity tariffs will have an impact on earnings as inflation
surges. Russia froze tariff growth on state-regulated services including gas and electricity in 2014 in an effort to ease pressure on household budgets and help lower inflation. With regards to the
tariff freeze, Economy Minister Alexei Ulyukayev was quoted by Bloomberg as saying that gas and
electricity rates, which are normally raised in July, would not be raised until July 2015 - and then
only at the level of inflation in 2014.
Notably, the last time that Russia failed to increase tariffs was 1999 (following the 1998 financial
crisis). The annual rises have marked the final stage of power sector reforms that have dismantled
previous state-owned monopolies and moved power generation assets into private hands (electricity
prices for industrial users were deregulated altogether in 2011).
Tightening Credit Conditions To Stall Utility Investment
In addition to weaker demand, tightening credit conditions are also emerging as a major downside
risk to domestic utilities, as are a series of downgrades to Russia's credit rating (and the ratings of
some Russian utilities themselves) over late 2014/early 2015 - to just above 'junk status'.
Both credit constraints (as a result of aggressive monetary tightening by the CBR) and ratings
downgrades will result in higher borrowing costs for domestic utilities and this will in turn starve
the power sector of much-needed funding for new, more efficient generation capacity. State-owned
banks in Russia account for a significant portion of infrastructure project financing and limiting
their access to external capital is bound to have an effect on their capacity to fulfil this role. Planned
projects might be delayed, particularly amongst those utilities that have large amounts of rubledenominated debt, such as Inter Rao (64%), Rossetti (100%) and RusHydro (86%), according to
Bloomberg data.
We also reiterate that Western sanctions are designed to block loans from multilateral organisations
such as the European Bank for Reconstruction and Development (EBRD) and the European
Investment Bank (EIB). These loans had been earmarked for new public sector infrastructure
projects in Russia; in 2013, Russia borrowed USD2.4bn from the EBRD and USD1.3bn from the
EIB. We believe that one of the projects that will be targeted by the sanctions is a USD285mn
EBRD loan to modernise the Russian grid infrastructure. Furthermore, apart from funding, the
EBRD and the EIB provide considerable expertise in project management and the structuring of
project finance - experience that Russia will not be able to tap for the time being.
Additionally, although the weak rouble has mitigated against the adverse impact of weaker
hydrocarbons export revenues (contracts are in US dollars) on the public purse, we do not expect
the government to significantly boost expenditure in the power sector. On the contrary, despite
recent announcements of come country-cyclical government spending, the Kremlin has repeatedly
reaffirmed its commitment to the 'fiscal rule', which ties spending to the price of Ural prices
(Russia's equivalent crude benchmark). This indicates growth in Russian public spending on
infrastructure and power projects is unlikely to pick up any slack from the private sector and, as a
consequence, we question Russia's capacity to live up to its financial commitments to fund power
projects.
The Russian government's promise to developed infrastructure in the newly annexed Crimean
territory is a case in point. The promise of three new power plants and a gas pipeline in Crimea is
already detracting from funds for projects at home - with the Russian government shelving plans
for a domestic port and a bridge in Eastern Siberia. Alexei Ulyukayev, Russia's Minister of
Economic Development, declared in May 2014 that the federal government was planning to spend
USD4.5bn a year on Crimea's transport, energy, and water infrastructure. However, we warn the
political will for the large-scale investment Moscow has promised in Crimea could fade as Russian
economic growth slows.
Utilities To Freeze Capex Plans
Although there will not be an exodus of foreign utilities, overseas investors in the utilities sector will
withhold investment and will concentrate on repatriating profits rather than channelling capital
into their Russian subsidiaries. Capital spending by Italy'sEnel and Germany's E.ON was set
already to fall post-2014, once they had met their government-mandated power plant investment
targets (which are decided on the basis of government-led capacity supply agreements).
E.ON's Russia earnings have already been hit hard by rouble volatility and its impact on eurodenominated earnings, and we note that the utility announced plans in November 2014 to break
itself in two and spin off its fossil fuel-focused operations into a new company in 2016. The Russian
subsidiary will be part of the new business that emerges - a unit we believe could become a bad
bank for some of E.ON's more unattractive assets.
With much of the country's ageing power generation capacity having been built in the 1960s and
1970s, we expect any investment that is channelled into the country's power sector to be aimed at
modernising and substituting ageing thermal and nuclear power plants. Improving the inadequate
transmission infrastructure will also be critical to enhancing energy efficiency.
Real GDP Growth To Take A Hit
Russia - Real GDP Growth (% change y-o-y)
e/f = BMI estimate/forecast. Source: Federal State Statistics Service, BMI

Deteriorating Relations With The West To Reorient Power Policies
Over a longer timeframe, geopolitical risks in Russia will remain high. At the time of writing, the
conflict with Ukraine is escalating and fighting has continued around Donetsk International
Airport, with Ukrainian government forces capturing it from pro-Russian rebels in January 2015,
only to withdraw on January 22.
Regardless of what happens next, we believe that the outcome will be a long-term stalemate.
Ukrainian government forces will not be able to recapture Donetsk and Luhansk for as long as
Russia continues to support the rebels with arms and personnel. At the same time, the rebels lack
the strength to undertake a major offensive. Given that the Russian economy is reeling from
Western sanctions and falling oil prices, President Vladimir Putin has good reasons to refrain from
further escalation, for this would trigger even tighter sanctions. Negotiations involving Ukraine,
Russia, Germany, France, and possibly other countries will continue, and this should act as a
partial constraint on Kiev's and the separatists' actions.
This impasse will continue to depress the domestic economy and - by extension - the outlook for the
power sector.
Domestically, we expect Russia to retaliate to Western sanctions by targeting specific Western
companies and restricting their operations in Russia. In the power sector, we note that Gazprom
Energoholding, which manages the power generating assets of gas monopoly Gazprom, has
responded to sanctions by declaring it will source spare parts for its gas turbine locally instead of
relying on imports. In announcing its import substitution plan on July 30 2014, Gazprom
Energoholding said that the Uralsky Turbine Factory will produce spare parts for its gas turbines,
while its power generating assets - Mosenergo, TGK-1 and OGK-2 - had signed long-term
maintenance services agreements with local firm, TER-Service, according to Bloomberg. This could
hit turbine manufacturers such as General Electric (and now Alstom) and Siemens, which supplied
the majority of Russia's turbines between 2009 and 2011.
The difficult operating environment will also push domestic Russian utilities to carve out
opportunities elsewhere. To this end, we maintain that Russian energy policy is orienting eastwards
toward China in the wake of deteriorating relations with Europe. This will feed through into the
power sector, where we have already seen projects mooted that would deliver export electricity
flows to the Chinese market - presumably with backing from Chinese investors.
Reports that Inter RAO is planning to build the world's biggest coal-fired power plant in Russia
and export the electricity to China align with this view. This development would not only boost the
economies of Siberia and Russia's pacific regions, but also underscore the Kremlin's focus on
becoming an emerging economic force in Asia.
While construction of the coal power plant is certainly not a foregone conclusion, Russia's desire to
enhance Sino-Russian relations could help push the plant along the project pipeline. The proposed
eight gigawatt (GW) power plant would be built in the Amur region in the Russian Far East and
will utilise coal from the Erkovetskaya deposit - meaning there will be a plentiful and cheap supply
of domestic coal for electricity generation. We have already seen Russia make significant
concessions to China in order to secure the geopolitical and diplomatic dividends - evidence by the
historic Sino-Russian gas supply agreement.
Similarly, Russia is also considering relocating Moscow-headquartered utility RusHydro to Siberia
and is looking at establishing electricity trading links and a power corridor with Central Asian
states, Afghanistan and ultimately Pakistan.
We also highlight that the weak rouble boosts the potential for Russian utilities to benefit from
exporting electricity to some Baltic countries, and Finland. Russia's electricity exports to Finland
rose to a two-year high at the end of 2014, as Inter Rao exported more electricity over the border so
as to access payments in euros and benefit when transferring earnings back into roubles. This type
of strategy could help offset weaker domestic earnings elsewhere.
Thermal Generation To Dominate
Russia's domestic energy consumption is high due to extremely cold weather across the country for
much of the year. Despite inefficiencies within the energy sector and the cost of producing energy,
the country's domestic reserves have enabled Moscow to offer its citizens and manufacturing
industries low energy prices.
In order to keep pace with muted but growing demand and ensure there is reliable supply for its
manufacturing and energy-intensive extractive industries, Russia adopted its 'Energy Strategy
2030' in 2009. The strategy, which was released partly in response to the global financial crisis and
the deleterious impact of falling demand on Russian oil export revenues, outlined three stages of
energy sector development.
During the first stage (2009-2013) the emphasis was placed on overcoming the consequences of the
global economic downturn; the second phase (2015-2020) will be aimed at increasing energy
efficiency and implementing energy saving measures across the energy sector, while also developing
new oil and gas fields on the Arctic shelf, in Eastern Siberia and the Far East. During this stage
there is to be a greater focus on encouraging private rather than state investment in the sector via
public private partnerships (PPPs). Phase three (2022-2030) envisages the highly efficient use of
traditional sources of generation and places a greater emphasis on use of renewables in electricity
generation.
It envisaged a possible doubling of generation capacity from 225GW in 2008 to 355-445GW in 2030.
A revised scheme in mid-2010 projected 1,288TWh of power demand in 2020 and 1,553TWh by
2030, requiring 78GW of new plant by 2020 and 1,78GW by 2030. Across this whole period it is
hoped that the energy sector will decrease as a share of the overall economy.
However, while the strategy will also focus on the expansion of the nuclear and non-hydropower
renewable industries, delays to the construction of nuclear installations, and slow progress in
establishing an appropriate regulatory framework to stimulate demand and attract investors to the
renewables industry, reinforces our belief that these targets will not be realised.
Instead, BMI believes that Russia's heavy reliance on thermal energy sources, particularly gas, will
continue into the next decade. According to our forecasts thermal generation currently dominates
(and will continue to dominate) Russian power generation. We expect gas generation to register an
annual average growth rate of 0.79% between 2015 and 2024 and account for just under 45% of all
generation at the end of our forecast period. Large indigenous reserves of coal will also continue be
utilised in power generation (as well as for export) and coal will account for 17% of total generation
by 2024, having registered slower annual average growth of just 0.35% between 2015 and 2024.
There have been a number of recent developments to support our view that thermal sources of
power generation will continue to make the biggest contribution to Russia's energy mix over our
forecast period.
In October 2014, it was reported that Russian equipment manufacturer Power

Machines had developed and tested a new 140MW power turbine that would be deployed at a
new 420MW combined cycle power plant at the Verkhnetagilskaya SDPP. The new turbine has
been developed as part of a contract awarded to Power Machines by Inter RAO. All of the
equipment was due to be delivered by end-2014.
Inter RAO UES plans to undertake an 800MW coal-fired power plant project in
Kaliningrad, Russia. The USD2bn project involves the construction of the power facility as well
as building substations, powerhouses, coal washer units, storage facilities, access roads and
other related facilities. The project also includes laying transmission lines and the installation of
turbines and other power related facilities. Construction is expected to start in Q215, with
completion due in Q420.
It was reported in March 2014 that French engineering firm Alstom had commenced work
on the first of its GT13E2 gas turbines that are under commissioning supervision at
Nizhneturinskaya thermal power plant (TPP) in the Urals. Alstom signed a framework
agreement in 2011 under which it would supply five of the 180MW turbines to IES-Holding for deployment at the Nizhneturinskaya and Novogorkovskaya, and Akademicheskaya TPPs.
The deal is valued at RUB20bn and commissioning of power generating units is scheduled for
December 2015.
E.ON is pushing ahead with its investment plans in the country and plans to commission the
Berezovskava GRES. The plant will include 800MW coal-fired unit in Kranovarsk in central
Russia. The power plant is located in the area which is rich in lignite, near the KanskoAchinsky coal pit. The power plant will be one of the most efficient coal-fired power stations in
Russia when it is commissioned in 2015.
E.ON has also commissioned new and upgraded gas-fired capacity under a EUR2.8bn
investment programme in the Russian power sector, which it stated it would meet on time and
within budget. Gas-fired facilities include the Shaturskaya, Yaivinskaya GRES and
Surgutskaya GRES-2- standard single-shaft condensation power units, which were constructed
with the use of CCGT technology.
In January 2014, German engineering conglomerate Siemens and Finnish energy company
Fortum have signed a six-year service contract for the latter's Nyaganskaya GRES combined
cycle power plant in Nyagan, Western Siberia. As per the contract, Siemens will provide service
and maintenance for the plant's steam turbines, gas turbines and generators. The power plant is
installed with three combined cycle power units, with a total capacity of 1,254MW. The first and
second units have already commenced commercial operations and the third unit is undergoing
construction. Once completed, the power plant will consist of three 418MW units. The last unit
was due to be operational by end-2014.
In June 2013, General Electric (GE) said it has signed a memorandum of understanding
with Russian state-backed private equity fund the Russian Direct Investment Fund to build a
series of 25MW mini power plants across Russia. The mini power plants will be built
independently of the federal power grid and will not need transmission lines. The project will
focus on providing electricity to manufacturing plants and infrastructure projects in the
Russian regions.
In May 2013, Finland's Wrtsil was awarded the contract to supply a new 110MW gasfired power plant. According to PennEnergy, the plant will be the first to rely on combustion
engine technology of this size in the country. The order was placed in April 2013 by independent
power producer Transmashenergo, and the power plant is to be located in Tikhvin in Russia's
Leningrad region. It will run on natural gas using six Wrtsil 50SG engines. The primary
purpose of the project, set to be constructed by the end of 2014, is to provide a reliable and
efficient electricity supply for local industrial consumers.
Nuclear: A Critical Role To Play

Looking beyond conventional thermal energy sources, we forecast that nuclear will account for
17.44% of total generation in Russia in 2015. However, as a result of Russia's energy policy calling
for an expansion of nuclear power, this figure is set to increase - with the majority of existing plants
set to be uprated and granted life extensions. In July 2012, the country's Energy Ministry
(Minenergo) published draft plans to commission 83GW of new capacity by 2020, with nuclear
power to account for 10GW of that new capacity. This would have taken total nuclear capacity to
30.5GW - with nuclear power plants generating 238TWh annually. In 2013, Minenergo cut the
target to 28.26GW.
That said, we note that there are downside risks to Russia's ambitious nuclear expansion plans with the nuclear sector blighted by delays. To this end, with aging capacity due to come offline over
our forecast period, we have seen delays to original timelines for new nuclear capacity and as a
result we have only included those that are in operation or under construction in our forecasts. We
currently forecast that nuclear generation will grow at an annual average of 0.94% between 2015
and 2024.
We currently expect Russia to fall short of the aforementioned nuclear generation targets. We
expect Russia will generate 185.48TWh by 2020, which will potentially account for just under
18.0% of total generation. According to the World Nuclear Association (WNA), Russia has 33
operating reactors totalling 24.2GW capacity, and steps have been taken to add capacity, both by
upgrading existing plants and building new installations.
Half of the reactors, which are currently operational, use the RBMK design employed in Ukraine's
ill-fated Chernobyl plant. The working life of a reactor is considered to be 30 years - nine of
Russia's plants are between 26 and 30 years old, with a further six approaching 25 years of age.
However, the WNA stated that all RBMK plants (except Leningrad 1) would be upgraded by 2013.
Furthermore, the state nuclear energy company Rosatom announced in February 2012 that it
would invest RUR30bn in upgrading and extending the operating lives of the Kursk 2-4 plants,
which are all RBMK type.
A number of plants are due to be decommissioned in the coming decade and this will further
impede Russia's nuclear expansion plans. It is unlikely that the decommissioning timetable will be
altered in favour of increasing output as the Fukushima nuclear disaster has weighed heavily on the
minds of the Russian population; a downside risk that could potentially be heightened by the
emergency shutdown at Russia's Kursk nuclear plant. On May 26 2013 the first turbine generator
of the plant, located about 500km south of Moscow, was brought to a halt due to an emergency
protection system alarm.
Aligning with our view that delays are a major problem in the nuclear segment, state-owned
Rosatom decided in June 2013 to revise plans to build the 2,300MW Baltic Nuclear Power Plant
(NPP) near the town of Nieman in Kalingrad. This decision was based on new plans to build small
and medium-sized reactors which could prove more economical taking sunk costs into account.
We have also seen delays to a host of other nuclear projects in recent months including reports in
June that the 1,150MW Nizhny Novgorod NPP has been delayed yet again because an investment
decision has still not been made - with reports a new gas-fired plant may come online in the region
instead. The Nizhny Novogorod project was first mooted in 2006 but the investment decision has
been delayed repeatedly. Furthermore, a plant near Ozersk has been postponed twice, and the first
unit of the Seversk AES-2006 plant was due to come online in 2015, but its development has also
been marred by delays.
On a more positive, reports have emerged from one of Russia largest shipbuilders - the Baltic
Shipyard in St Petersburg - indicating that Russia's first floating nuclear power plant (FNNP)
would be operational by 2016. The first ship will be called the Akademic Lomonosov and is
intended to be the first of a small fleet of FNNPs that will provide power for isolated port cities,
large industrial companies and offshore oil and gas platforms. It is likely the plants, if they prove
viable, could provide power to energy assets in the Russian Arctic as oil & gas activity in the area is
ramped up. The ship's power-generating capabilities will be based on the nuclear reactors that are
already on-board icebreaker ships; although the vessels will not have a propulsion system so will
have to be towed to the required location, according to global news service, RT.
The Akademic Lomonosov will be fitted with two modified KLT-40 reactors that will be able to
provide enough energy to supply 200,000 people. Together the reactors will have a capacity of
70MW. However, while construction appears to be proceeding, we will refrain from including the
plant in our forecasts for the time being. Notably, construction of the vessel has been delayed in the
past. To this end, assembly of the first ship originally started in 2007 at that Sevmash SubmarineBuilding Plant in Severodvinsk, but the unfinished vessel was later moved to the Baltic plant after
financing ran out where it sat for two years before a deal between the Baltic shipyard and Rosatom
secured the necessary financing in December 2012.
Meanwhile, On August 1 2014, state-owned nuclear company Rosatom's subsidiary Rusatom
Overseas signed a memorandum of understanding (MoU) with China's CNNC New Energy
Corporation to jointly develop six floating nuclear power plants (NPPs). The plants may be selfpropelled or barge-mounted. The floating NPPs will provide a reliable power supply to remote
areas and large industrial facilities. The two firms will now establish a joint Chinese-Russian
working group to implement the project.
Total Net Generation, By Type TWh
(2014-2024)

Hydropower: RusHydro - Powering Ahead
Hydropower generation makes only a limited contribution to the energy mix relative to the
country's vast potential. Although Russia has hydropower plants with total capacity of just over
55.1MW (according to BMI forecasts for 2015), hydro-generated electricity constitutes around
19.25% of total electricity generation.
That said, given the substantial resources concentrated especially in Siberia and in the country's
Far East, Russia has been looking to make significant investment in the segment, with state-owned
hydropower RusHydro planning to invest massively in upgrading its creaking infrastructure and
developing Siberia's potential to produce hydropower for export to energy-hungry China.
To this end, it was reported in April 2014 that RusHydro had been shortlisted as a company that
might be relocated. According to the Siberian Times, this would mean the company's headquarters
in Moscow would be relocated to Siberia. Such a move is being driven by the Russian government
in an effort to orient eastwards and boost the economies of eastern Siberia and Russia's pacific
regions. The move would also underscore Russia's focus as an emerging economic forced in Asia.
The company was one of three named by Yuri Trutnev, the Russian president's envoy in the Far
Eastern Federal District.
RusHydro is in the process of adding more than 5GW of new hydropower capacity, according to the
company's website. A great deal of this new capacity appears to have included installation of units
at the Boguchanskaya hydropower project (HPP), a hydropower station on the Angara River in the
Krasnoyarsk region, which is jointly owned by RusHydro and UC Rusal. As of end-December 2014,
the plant was operating at a capacity of 2,880MW, after the launch of the ninth and last 333MW
unit. The HPP will reach the full 3,000MW capacity in 2015, after the reservoir is filled to its design
level of 208m. Notably, although construction at Boguchany started in 1974, the first turbine was
only launched in October 2012 - making the longest running project in Russian hydroelectric
engineering.
Another significant project that is not included in the aforementioned 5GW of capacity is Russia's
biggest hydropower station, the Sayano Shushenskaya plant. Work on the facility is reportedly
advancing following the violent breaking apart of turbine two in an accident that killed 75 people in
2009. Work has focused on the repair and refurbishment of 10 turbines at Sayano Shushenskaya.
As of October 2014, nine 640MW units were operating at the complex - with Russian supplier
Power Machines having installed the final giant generator rotor to unit 2. RusHydro expected to
switch on two more units at the HPP in June 2014 and October 2014 respectively. All of the units
were expected to be operational at end-2014, with the plant set to reach its maximum capacity of
6,400MW. The lifespan of the new units will be extended to 40 years.
In April 2014, it emerged that Power Machines had manufactured and shipped the third of 22
umbrella-type vertical-shaft synchronous hydrogenerators, with maximum capacity of 144.5MW.
The units are designed to be deployed at hydropower unit number 12 at Rushydro's Volzhskaya
HPP. According to the terms of a contract, Power Machines is to design, manufacture, test and
deliver 10 hydropower turbines and 22 generators to the plant. The equipment deliveries are
scheduled to be completed in 2021.
In March 2014, RusHydro secured EUR190mn (USD261.59mn) via two export credit lines to
upgrade its 1,360MW Saratovskaya hydroelectric power plant (HPP) in Saratov region. ING Bank
has arranged and extended a 14-year credit line of EUR95.4mn (USD131.34mn) for the project.
Meanwhile, a 15-year credit line of EUR94.9mn (USD130.66mn) will be provided by Crdit
Agricole Corporate & Investment Bank Deutschland. The funds will be directed towards the
replacement of eight turbines - to be carried out by German HPP equipment supplier Voith Hydro.
Both loans have been guaranteed by Austrian financial service provider Oesterreichische
Kontrollbank.
Total Capacity MW, by Type
(2014-2024)

A Lacklustre Forecast For Non-Hydro Renewables
There is certainly potential in Russia for renewable energy development and the government has
started to mobilise investment into the sector - by implementing a subsidy programme and
renewable energy auction system. Although this has undoubtedly improved the prospects for the
industry, progress has been slow and there are still a number of barriers that are likely to limit the
growth in renewables. These include the government's apparent preference for thermal and nuclear
power generation, limited levels of market liberalisation and long-standing questions over
transparency and corruption.
Despite there being vast potential for renewable energy generation, Russia's electricity mix remains
dominated by hydrocarbons and nuclear power, and the cheap price of fossil fuels means there is
little economic incentive to diversify. The Energy Strategy 2030 outlines plans for renewables
expansion, with the original aim of generating 4.5% of the country's power from renewable sources
by 2030. However, this was lowered to 2.5% in May 2013 when the government proposed the
'Renewable Energy Source Development Measures' package, which aims to encourage investment
in renewable energy projects, up to around 6GW in total by 2020.
Despite a strengthening project pipeline, our forecasts are still bearish relative to the government's
ambitions. Additionally, we have only taken into consideration projects that are in the pipeline. As
such, we expect non-hydro renewables capacity to reach just under 3,500MW by 2020 (from our
estimate of 1,141MW in 2014), driven primarily by the wind and solar segments. The impact this
will have on Russia's broader power sector is limited, with non-hydro renewables generation
contributing less than 1% to the country's total generation at the end of our forecast period in 2024.
Electricity Consumption
TOTAL ELECTRICITY CONSUMPTION DATA AND FORECASTS (RUSSIA 2013-2018)

Consumption, Net Consumption, TWh
Consumption, Net Consumption, % y-o-y
Consumption, Net Consumption, KWh per capita
2013
885.8
-0.4
6,201.4
2014e
876.9
-1.0
6,155.2
2015f
851.5
-2.9
5,992.2
2016f
852.6
0.1
6,015.6
201
862
1
6,104
e/f = BMI estimate/forecast. Source: EIA, BMI

TOTAL ELECTRICITY CONSUMPTION DATA AND FORECASTS (RUSSIA 2019-2024)
Consumption, Net Consumption, TWh
Consumption, Net Consumption, % y-o-y
Consumption, Net Consumption, KWh per capita
2019f
890.6
1.3
6,339.1
2020f
902.1
1.3
6,443.3
2021f
910.5
0.9
6,528.0
2022f
919.6
1.0
6,621.0
f = BMI forecast. Source: EIA, BMI Calculation

BMI's Country Risk team downgraded its forecasts for the Russian economy following the
annexation of Crimea in March 2014 and has since downgraded them again due to Western
sanctions and the precipitous fall in global oil prices. Subdued sentiment will not only keep a lid on
domestic and foreign direct investment (FDI), but will also accelerate net private capital outflows.
As a consequence we expect the main driver of growth over the past decade - household
consumption - to continue to weaken. We forecast electricity consumption will contract by 2.9% in
2015.
Total Net Generation And Consumption TWh
(2014-2024)
202
928
1
6,717

At the same time, demand-side measures taken by the government to boost investment will do little
to address the supply-side problems, further reinforcing our expectations for subdued growth for
the foreseeable future. This is likely to weigh on electricity consumption, which will register an
annual average of 0.68% y-o-y over 2015-2023 - hindered by adverse demographic trends.
Transmission & Distribution, Imports & Export
ELECTRIC POWER T&D LOSSES DATA AND FORECASTS (RUSSIA 2013-2018)
2013
121.5
12.0
Electric power distribution losses, TWh

Electric power distribution losses, % of output
2014e
118.9
11.8
2015f
116.6
11.9
2016f
116.8
11.8
20
11
1
e/f = BMI estimate/forecast. Source: BMI

ELECTRIC POWER T&D LOSSES DATA AND FORECASTS (RUSSIA 2019-2024)
2019f
118.8
11.6
Electric power distribution losses, TWh

Electric power distribution losses, % of output
2020f
118.6
11.4
2021f
121.9
11.5
2022f
123.1
11.5
20
12
1
f = BMI forecast. Source: BMI

TRADE DATA AND FORECASTS (RUSSIA 2013-2018)
2013
-13.7
Total Net Imports, TWh
2014e
-8.4
2015f
-11.2
2016f
-22.9
2017f
-25.1
2022f
-28.2
2023f
-24.7

TRADE DATA AND FORECASTS (RUSSIA 2019-2024)
Total Net Imports, TWh
2019f
-17.2
2020f
-15.5
2021f
-27.4
f = BMI forecast. Source: EIA, BMI

Much of the country's energy infrastructure is old and in need of either repair or replacement; and
there has been a distinct lack of investment into distribution networks over the past 20-30 years.
The electricity grid is severely underdeveloped, with historically high levels of T&D losses
(averaging 11.8% of the total between 2000 and 2011) and low quality of supply. In fact, the World
Economic Forum's Global Competitiveness Report (2014-2015) scores Russia 4.5 out of seven for
quality of electricity supply, lower than the majority of its regional peers.
That said, the Regulated Asset Base regulation was adopted in 2010 to target the lack of investment
into electricity networks, by increasing operational and investment incentives, and investment has
been slow but forthcoming. For example, the Federal Grid Company (FGC) owns Russia's
118,000km high-voltage transmission grid and planned to invest EUR12bn over 2010-2013 to
modernise the system. It signed a strategic cooperation agreement with contractor Siemens to
implement this strategy, using the German company's low-loss high-voltage DC transmission
technology.
Furthermore, in an environment where greater investment is needed and there are delays to
nuclear and renewables expansion, the development of the Russian grid and better energy
efficiency will be key if the Russian power sector is to meet growth in demand and power its
extractive industries (with energy assets dispersed across the vast Russian territories). This is
fundamental to the trajectory of Russia's power sector and will be necessary as the country's supply
surplus shrinks due to delays to the commissioning of new capacity.
This view underpins our belief that T&D losses will fall over our forecast period. It also aligns with
a government policy announced in May 2013, which indicated that consumer spending on
electricity would be reduced by 40% (per consumer) and there would be a 3.5% reduction in
distribution losses across the unified national grid. The government also aims to gradually cut the
number of regional distribution companies to 800 by 2030 from the current 3,241. It is hoped such
consolidation will push out inefficient power companies and encourage improved operational
performance.
That said, EU sanctions that is likely to starve Russia of EBRD funding are likely to have a
significant impact on the T&D segment. The EBRD was due to grant a 12-year, EUR100mn loan to
state-owned RusHydro that would have then been partially channelled into the Far East
Distribution Company (FEDC). FEDC would have used the loan to upgrade and develop the grid
system. The Russian Far East region was badly affected by floods in August 2013, which reportedly
left 300 of FEDC's transformer sub-stations damaged; investment is, therefore, sorely needed.
Russia will now have to find the funding from an alternative source.
Additionally, it should be noted that as part of the FEDC investment programme, upgrading the
metering system is a top priority, and the EBRD loan would have helped to support the installation
of smart meters across the region. A modern metering system would lead to higher levels of energy
efficiency and also has the potential to better incorporate renewable-sourced electricity generation
into the national grid system. At present, Russia's electricity infrastructure is not equipped to
facilitate renewables integration and considering the country's ambitious renewable energy plans,
improving the power grid will be essential so as to avoid constraining the industry's future growth.
Trans -Boundary Connections
President Vladimir Putin indicated in December 2014 that he would export cheaper Russian
electricity to Ukraine, which has historically been a net exporter of electricity. Ukraine is in the
midst of a power crisis - largely because domestic coal production has plummeted due to instability
in key mining regions in the east of the country.
Putin has claimed that his motivation is to support the Ukrainian population during the winter
when the risk of electricity shortages will be greatest. The move is, however, clearly designed to
ensure that Ukraine does not cut electricity supplies to Crimea, with Putin's announcement coming
a day after Ukraine threatened to cut supply to the annexed territory amidst power shortages.
Although the power crisis in Ukraine necessitates that Russia's offer is taken seriously - we remain
cautious with regard to the volumes that will ultimately be delivered and note that 500,000 tonnes is
a limited volume considering that total domestic production of coal for power plants was 60mn
tonnes in 2013 (according to the Ukrainian energy ministry).
Other notable trans-boundary connections include:
Finland is set to begin trading electricity with Russia early 2015, according to Finland's grid
operator Fingrid. The plan makes economic sense for Finland because the introduction of
capacity mechanisms in Russia has made electricity more expensive. Although a high-voltage,
400kV electricity transmission has been in operation between Russia and Finland since 1982,
technical restrictions had blocked exports to Russia. Once trading begins, Finland will be able
to sell equivalent to 350MW of capacity to Russia, and later as much as 800MW, according to
Fingrid. Rao Nordic, a unit of Russia's Inter RAO will pay for the electricity via bilateral
contracts.
Meanwhile, we highlight that the weak rouble boosts the potential for Russian utilities to
benefit from exporting electricity to some Baltic countries, and Finland. Russia's electricity
exports to Finland rose to a two-year high at end-2014, as Inter Rao exported more electricity
over the border so as to access payments in euros and benefit when transferring earnings back
into roubles. This type of strategy could help offset weaker domestic earnings elsewhere.
In May 2014, it was reported that Russia, Kazakhstan and Belarus will create a single
market for electricity by January 1 2019 (according to Russian news agency Interfax).
During a government meeting on March 31 2014, Prime Minister Dmitry Medvedev was
quoted by ITAR-TASS news agency as stating that Crimea could join Russia's integrated grid
system. In an effort to ensure that annexation does not harm the socioeconomic development of
Crimea or Sevastopol. While options reportedly include the construction of a new nuclear
power plants, the most likely outcome is that traditional thermal-fired power plants will be built
instead, Pavel Ipatov, Deputy Director-General of the Rosenergoatom Company, describing
discussions about nuclear power plants as 'premature' and 'pointless'.
In July 2013, Georgia announced plans to build a new 500kV transmission line in order
establish better connections with Russia. According to Georgian state-owned Electrosystem, the
transmission line will be commissioned in 2017 and cost USD50mn. The 500kV Kavkasioni
power transmission line already enables power exchanges between Georgia and Russia.
A cross-border electricity transmission project between Russia and China was put in
operation in January 2012.
Political Risk Analysis - Putin's Popularity Masks Rising Medium-Term Risks
28 Oct 2014 Russia Political Risk

BMI View: President Vladimir Putin's near-record popularity belies the rapidly rising medium-term
risks he faces, mostly stemming from economic weakness. Once the 'high' of the Ukraine conflict
wears off, and ordinary citizens' livelihoods suffer, Putin will become vulnerable to opposition protests,
or even internal rivals, meaning that he will not be guaranteed re-election in 2018.
Russian President Vladimir Putin is far from being politically unassailable, despite his popularity
hovering close to all-time highs of 86% in September 2014, according to the Levada Centre. The
main reasons for Putin's surge in popularity in 2014 are Russia's seizure of Crimea from Ukraine in
March, and Moscow's subsequent support for pro-Russian separatists in Eastern Ukraine, both of
which have allowed Putin to benefit from patriotic fervour. Prior to 2014, Putin's approval rating
touched a low (albeit still high) of 61% in November 2013, and seemed to be set for further decline.
Although near-term threats to Putin's popularity are limited, we believe that the damage done to
Russia's investment appeal and economy as a result of sanctions and falling oil prices will harm
Putin's reputation over the medium term (two to five years). This is likely to prompt a revival of
opposition protests, by the time the December 2016 parliamentary elections approach.
Ukraine Rebel Gains Fulfil Putin's Wishes
In the near term, Putin's high popularity will persist. The September 5 ceasefire between the
Ukrainian government and pro-Russian rebels is generally holding, despite ongoing skirmishes
around Donetsk International Airport, and the truce has largely frozen the rebels' gains. In
addition, Ukrainian President Petro Poroshenko has agreed to grant the Donetsk and Luhansk
regions temporary autonomy, thereby fulfilling a key Russian objective. Moscow favours the
federalisation of the Ukrainian state that would allow pro-Russian regions to veto decisions by Kiev
aimed at bringing Ukraine closer to the EU and NATO. Had the Ukrainian conflict continued in full
force, Putin would be facing growing discomfort among Russians due to rising casualties and the
'fratricidal' nature of the war. Russia would also be facing tougher sanctions from the West. Thus,
the ceasefire came at an opportune time for Putin.
Moldova To Test Russia-West Relations Again
Relations between Russia and the West face another key challenge from Moldova's general
elections, which are due to be held on November 30, 2014. Moldova shares two major similarities
with Ukraine - it is a former Soviet republic that seeks closer ties with the EU, while retaining
considerable pro-Russian elements, including a Russian-backed separatist territory, Transnistria.
At the height of the Ukraine conflict in 2014, there was considerable speculation that Russia might
create a land bridge across Ukraine, connecting both countries to Transnistria. This did not
materialise, and Moscow has rejected calls in Transnistria to join Russia, but the breakaway state
remains a lever for the Kremlin in its dealings with Chisinau.
BMI expects that Moldova's elections will be won by a pro-EU coalition, which will attempt to steer
the country closer towards Brussels (Moldova signed an EU Association Agreement on June 27).
That being the case, there is a possibility that Russia could interfere in Moldova to derail its
Westward moves. This might entail increasing its military presence in Transnistria, or supporting
secession amongst the pro-Russian Gagauz minority, which has its own autonomous district. Russia
will also be concerned by comments from Romanian Prime Minister Victor Ponta in early
September that he would like to see Moldova reunified with Romania by 2018. Ponta is the
frontrunner in Romanian presidential elections scheduled for November 2, 2014, and he
subsequently said that his comments referred to reunification within the context of the EU, but his
original words could be used to justify a pre-emptive move by Russia. Any perceived Russian
meddling in Moldova would prompt a very negative reaction from the US and EU, thereby delaying
any easing of Western sanctions on Russia.
Elevated Inflation Driven By Rouble Weakness Hurting Consumers
Russia - RUB/USD Exchange Rate
Source: Bloomberg, BMI

Falling Oil Prices To Exacerbate Economic Risks
The sharp fall in oil prices from a nine-month high of USD115/bbl in June 2014 to USD85/bbl in
late October will exacerbate Russia's weakening economic position (see October 17, 'Oil Prices
Aggravating An Already Grim Macro Outlook'). BMI sees a possibility of a further decline to
USD60/bbl. Given that oil and oil product revenues generate 54% of exports (2013 figures) and
around 50% of fiscal revenues, any sustained period of lower oil prices would be very harmful to
Russia's economy, which had already slowed sharply in recent years as a result of the lack of
structural reforms.
Falling oil prices have magnified downward pressure on the rouble from Russian corporations'
growing demand for US dollars in H2 2014 to meet pending external debt obligations. Rouble
depreciation has stoked imported inflation, which will lead to further monetary tightening by the
Central Bank of Russia (CBR), potentially before the end of 2014. This will raise funding costs for
banks, whose profit margins are already under significant pressure from three emergency rate
hikes in H1 2014 and Western restrictions on access to funding, reducing their incentive to lend to
the domestic economy. This will exacerbate the deceleration in private sector lending already
underway throughout 2014.
While we expect sanctions to be lifted through the course of 2015 (provided that the Ukraine
conflict remains frozen), and rate hikes reversed, loan growth will struggle to recover rapidly in
2015-2016. In addition, higher inflation will weaken private consumption. Against this overall
backdrop, we cannot preclude a balance of payments crisis emerging in Russia (see September 15,
2014, 'Balance Of Payments Crisis Risks Rising'). For now, President Putin will be hoping that
Russia's deepening trade and investment ties with China will mitigate the effect of Western
sanctions and falling oil prices. However, this will bring two risks for Russia. Firstly, China's own
economy is slowing, with BMI forecasting a deceleration to below 6.0% over the coming decade.
This will reduce Chinese demand for Russian energy. Secondly, Russia's increased economic
dependency on China could lead to Moscow becoming geopolitically subordinate to Beijing something that will cause resentment in the Kremlin.
Economic Losses To Raise Criticism Of Putin
A few years of economic weakness will prompt rising dissatisfaction with Putin, mainly from
ordinary Russians, but potentially from the elite, too. Putin and his core supporters appear to
regard preserving Russian geopolitical influence in Eastern Ukraine as an existential issue, and are
thus willing to tolerate economic adversity to defend this. However, middle-class Russians will not
necessarily support Putin indefinitely, and many in business circles will be concerned about
Russia's drift to quasi-pariah status. Moreover, it is also questionable whether Putin's actions in
Ukraine over the course of 2014 constitute success. Crimea has been cleanly annexed by Russia, but
parts of Eastern Ukraine have been devastated, and the victory of pro-EU parties in Ukraine's
October 26 parliamentary election suggests that Moscow has alienated many Ukrainians,
potentially irreversibly.
Thus far, Putin has proved highly adept at managing Russia's various crises, including numerous
Chechen terror attacks, and a severe economic contraction in 2009 as a result of the global financial
crisis. His popularity has never dropped below 60%, which is remarkably high by world standards.
In addition, there are no robust opposition figures who could unseat him. Nonetheless, the external
economic backdrop is more challenging for Russia now than in 2010, due to greater investor
scepticism about the prospects for reform. Russia's weak economic trajectory points to renewed
opposition protests in the run-up to the December 2016 parliamentary elections, potentially on a
greater scale than those that followed the December 2011 elections. Eventually, a figure from
Putin's inner circle could conceivably move against him. Even if Putin remains secure as president,
the elites could experience increased infighting, as was the case in Boris Yeltsin's second term (19961999), making policy-making much more erratic.
North Caucasus Remains A Wild Card
Finally, Russia continues to face the threat of Islamist militancy in the North Caucasus. Although
the Sochi Winter Olympics passed by without incident, the region's low-level insurgency persists,
and could receive a major boost if the Islamic State in Iraq and al-Sham (ISIS, ISIL) strengthens its
position. ISIS in early September 2014 publicly warned Putin that it would seek to 'liberate' the
Caucasus from Russian rule. Given that several hundred Chechens are reportedly fighting in the
ranks of ISIS, and that Syria is only a thousand kilometres from the North Caucasus, the risk of
terror attacks in Russia is very real.
Economic Analysis - Russia: Assessing The Global Risks
18 Dec 2014 Global Economy
The ongoing crisis and forthcoming economic contraction in Russia will have negative
global ramifications. We identify three main channels through which other countries will be
impacted: trade, debt markets, and broad-based investor sentiment towards emerging markets
(EMs).
On the trade front, Russia's regional neighbours, including Belarus and Ukraine, will be
most negatively impacted.
Even with the rouble sell-off, Russia has a relatively manageable external debt load as a
proportion of GDP, and the sovereign external debt load is relatively small. But the liabilities
still comprise a substantial proportion of global bond markets. Some creditors may be forced to
take a haircut and outright default cannot be ruled out on the corporate side.
The knock-on effect on sentiment toward EMs is difficult to quantify, but countries with a
strong dependence on 'hot money' for financing large current account deficits are most
vulnerable to asset sell-offs. Turkey, South Africa and Brazil stand out in this respect, with the
currencies likely to bear the brunt.
Regarding global monetary policy, apart from some smaller countries in emerging Europe,
we see only a limited effect.
The crisis in Russia has stabilised somewhat in the days since December 16, when the Central Bank
of Russia raised interest rates by 650bps to 17% and the rouble sold off by more than 35% at its
nadir. In EM currency runs, the likes of which Russia has experienced this week, the endgame is
sometimes difficult to call, because psychology tends to trump the 'fundamentals'. Much will
depend on the next response from the Russian authorities, and we believe that any further
deterioration in the currency is likely to lead to further rate hikes and potentially some targeted
capital controls. And some solutions are out of the hands of the monetary authorities: reconciliation
with the West that reduces sanctions could alleviate the short-term liquidity problems, and a
significant bounce in oil prices would significantly ease the coming drag on the Russian economy.
Nonetheless, the ongoing crisis and economic contraction will have negative global ramifications,
which will become more severe if it escalates out of control. While the domestic Russian economy
has been dealt a severe blow - with a major real GDP contraction likely in 2015 - here we focus on
the global implications. We identify three main channels through which other countries will be
impacted: trade, debt markets, and broad-based investor sentiment towards emerging markets
(EMs).
Trade - Regional Impact Most Acute: As regards trade, Russia is one of the world's largest EMs
and as such, an important driver of global demand. Prior to the crisis, the country accounted for
around 2% of global GDP measured in US dollar terms. The precipitous drop of the rouble in 2014
means that this figure is approximately halved. But comparing the situation to the 1998 crisis,
Russia represented between 3-4% of emerging market GDP in 1998 (depending on what point in
time and exchange rate is used), whereas its importance has grown since then, measuring between
4-7% of EM GDP in 2014.
Russian Dollar GDP Taking A Tumble
Russia - Real GDP In USD (At Current Spot Rate of RUB63/USD and Trough of RUB80/USD)
Source: Macrobond, BMI

Russia plays a key role in global and particularly regional trade. The deep recession in 2015 and
possibly 2016 will entail sharply-reduced demand for imports in Russia, not least because severe
currency weakness will mean that foreign goods are exorbitantly expensive for the average Russian.
Added to this is the services trade, with countries that typically receive high numbers of Russian
tourists (such as Cyprus) set to be hurt by the rouble's weakness. Belarus and Ukraine will feel the
pain most acutely. Russia accounts for around 45% and 24% of exports, respectively. Ukraine,
alongside Kazakhstan, will face additional pressure owing to a fixed exchange rate regime,
as rouble weakness obliterates competitiveness.
Belarus And Ukraine Highly Dependent
Trade Exposure To Russia
Source: ITC, BMI. 2013 data.

Ukraine is already precariously close to default, and as we have argued for some time, a credit
event is likely at some point in the coming quarters; the meltdown of the Russian rouble has done
little to alter our outlook. All else equal, it will make matters worse by dampening Russian demand
for Ukrainian exports and further limiting hard currency revenues. Meanwhile, Kazakhstan is also
highly vulnerable, given that it is a major oil exporter with strong trade and investment links with
Russia. At a minimum, a further devaluation of the Kazakh tenge will be necessary to alleviate
pressure on international reserves and mitigate the massive loss of FX competitiveness. We see
scope for substantial widening of Kazakhstan's sovereign credit default swap (CDS) spreads, which
are currently trading well inside of Russia. A handful of other European countries will also bear the
brunt of the fallout in Russia. Armenia, Uzbekistan, Lithuania and Estonia all send between 1723% of their exports to Russia. The sharp reduction in demand will severely dent the four
countries' export and fiscal revenues.
Debt Markets - Impact Should Be Relatively Limited: Moving onto the bond markets, Russia
presents a mixed picture. The country has a relatively manageable external debt load as a
proportion of GDP (approximately 50% for the public and private sector combined, up from
around 26% prior to the FX sell-off in December 2014), and the sovereign external debt load is
relatively small (around 5% of GDP), but the liabilities still comprise a substantial proportion
of global bond markets. As a gauge of Russia's importance, its debt accounts for around 6% of the
JP Morgan EMBI Global index, and around 5% of the JP Morgan Corporate EMBI Broad
Diversified index. It is difficult to extricate Russia's role from the general role of falling oil prices in
the major downside moves in high-yield global bonds, which have revolved largely around oil
companies and sovereigns. But clearly, a Russian corporate default would reinforce our negative
view on high-yield debt.
The extreme rouble weakness will make it vastly more costly for Russian companies and the
government to meet debt obligations; some creditors may be forced to take a haircut and outright
default cannot be ruled out on the corporate side. As a rough estimate, total Russian external debt
is nearing 50% of GDP now that the exchange rate has sold off to worse than RUB60/USD; as
recently as June 2014 this ratio was below 25%. Of the current figure, around 5pp was government,
with banks representing 19pp, and 'other' (mainly corporates) making up 24.4pp - above the 2009
peak of 23.3pp (data prior to 2004 is unavailable).
Rouble Depreciation Has Spiked External Debt Ratios
Russia - External Debt to GDP (%)
Latest data extrapolated from Q214 data and December 18 RUB/USD exchange rate. Source:
Macrobond, CBR, BMI
These debt ratios have clearly spiked, which raises alarm bells, but even at 50%, this external debt
figure puts Russia on a par with Poland, the Czech Republic and other countries that are not
considered massive credit risks. Meanwhile, short-term debt is only around 5% of GDP. True,
Russia's foreign reserves have fallen sharply to under USD420bn, from USD537bn in December
2012. And while there is some debate about the liquidity of those reserves (some estimates put the
actual 'usable' amount at closer to USD200bn), the coverage of short-term external debt appears to
be ample. While the short-term external debt to FX reserves ratio of 19% is up from 15% earlier in
the year, in 1998 the ratio fluctuated between 33% and 127%, (depending on the date one chooses).
At this stage the problem looks more like one of liquidity rather than solvency, and the Russian
authorities are choosing to save some powder to meet foreign obligations, sacrificing the rouble to
some extent by avoiding the sale of reserves. Among the most significant problems is the roll-over
risk, with sentiment clearly having soured massively towards Russian credits in the past couple of
weeks, adding to the squeeze posed by Western sanctions. If the cash crunch does not ease up in the
next few months, and/or the rouble heads lower, default risk will become more acute.
Much Better Covered Than 1998
Russia - Short-Term External Debt as % of Foreign Reserves
Source: Macrobond, BMI Estimates

From a banking sector perspective, the fallout should be relatively limited. According to data from
the Bank of International Settlements, foreign bank claims on Russia make up 0.8% of banks' total
global claims, and 4.0% of banks' total claims on emerging markets. By comparison, foreign banks'
claims on Brazil are more than twice as large, and on China, four times as large.
Global Banks Have Relatively Limited Lending Exposure To Russia
Foreign Banks' Claims On Russia, as % of World and EM Total
Source: Bank for International Settlements, BMI

French banks have the strongest bank lending exposure to Russia (23% of the total global
exposure), followed by Italy (13.3%), the US (12.6%), Japan (8.9%) and Germany (8.5%). It will
take some time for individual banks' or investors' exposures to be revealed, and while we believe
that the global financial system is relatively well-insulated from the fallout in Russia, there is sure to
be some panic going on behind the scenes. Looking outward, Russian banks' presence in emerging
Europe is more difficult to assess, but it is substantial in some countries (we will be looking at this
question in an upcoming Russian commercial banking sector analysis).
French Banks Most Exposed
BIS Reporting Banks, Foreign Claims On Ultimate Risk Basis, Total Vis--vis Russia, USD Amount
Outstanding, % Of Total
Source: Bank for International Settlements

Sentiment - EM Still On Shaky Ground: While investors wait for the skeletons to come out of the
closet, sentiment towards emerging markets generally will remain on shaky ground. The confidence
factor may be the most difficult to quantify. The crisis in Russia reverberated around global
markets as indicated by a broad-based sell-off across FX, equities and bonds on December 16.
Assets were already under selling pressure stemming from the strengthening US dollar, rising US
real rates and the normalisation of US monetary policy - not to mention the uncertainty created by
the Q414 drop in oil prices. In addition to the emerging European countries mentioned above, EMs
with a strong dependence on 'hot money' for financing large current account deficits are most
vulnerable to asset sell-offs. Turkey, South Africa and Brazil stand out in this respect, with the
currencies likely to bear the brunt.
Global Monetary Policy Unlikely To Be Affected: Regarding global monetary policy, apart from
some smaller countries in emerging Europe, we see only a limited effect. US monetary policy in
particular looks likely to be unmoved by the Russian crisis. In the 1998 crisis, when US hedge fund
Long-Term Capital Management was failing and asset prices were feeling the brunt, the Greenspan
Fed cut rates by 75bps between August and November 1998. The Fed then waited until June 1999 to
begin a new rate hike cycle, taking the funds rate from 4.75% to 6.50% in May 2000. Arguably, the
US economy was strong enough to withstand the Russian crisis without the Fed easing. The rate
cuts proved premature and ultimately costly as rates had to soar in order to rein in the booming
economy. This time around, it looks very unlikely that the Fed will provide any sort of relief to
Russia. The FOMC post-meeting statement released on December 17 made no mention of downside
risks from the global economy, and when pressed on the subject in the press conference Chair Janet
Yellen noted that US banks' exposure to Russia was 'really quite small'. The Fed will remain
undeterred and raise rates over the course of 2015, continuing to put pressure on Russia and other
emerging markets.
Unlike 1998, Fed Unlikely To Come To Russia's Rescue
RUB/USD And Fed Funds Rate In 1998-99
Source: Macrobond, BMI

The Russian crisis may have more of an effect on European Central Bank policy given Europe's
relatively high economic exposure to Russia, though it is likely to be only a marginal effect, given
that we already expect a fairly substantial quantitative easing policy to be introduced in Q115. One
direct effect the Russian crisis has had is on Swiss monetary policy, with the Swiss National Bank
announcing a negative deposit rate in addition to its floor on the CHF/EUR rate; and arguably, the
continued downside pressure on German bunds is to some extent a safe haven bid from Russians
getting their money out.
Market Strategy - RUB: Long-Term Depreciatory Trend In Place
24 Jul 2014 Russia Forex
BMI ROUBLE CURRENCY FORECAST
Spot
2014
RUB/USD, ave
35.02
35.20
RUB/EUR, ave
47.22
47.17
7.50
7.50
CBR Rate, % eop

Source: BMI, Bloomberg. Last updated: July 24, 2014
BMI View: The Russian rouble is poised for modest appreciation in the next few months as
geopolitical risks stemming from the Ukraine crisis recede. Beyond the short term, however, narrowing
current account surplus, tepid demand for Russian financial and real assets, and the central bank's
transition towards a free-float exchange rate/inflation-targeting regime will underpin gradual rouble
depreciation.
Short-Term Outlook (3-6 months)
We see the potential for further gains for the Russian rouble in the coming months mainly due to
receding geopolitical risks, which should buoy investor sentiment. Our core view remains that
despite ongoing violence in Eastern Ukraine, Russia's President Vladimir Putin and his Ukrainian
counterpart Petro Poroshenko are approaching an agreement, as the latter has insufficient financial
help from the West and as such, likely to come to an arrangement with Russia. This will likely entail
granting autonomy to the pro-Russia Eastern Ukrainian provinces in exchange for gas price
discount.
A slowdown in the pace of capital outflows will also provide support for the rouble, as investor fears
of substantive Western sanctions wane. In addition, a modest expansion in Russia's current account
surplus will also prop the unit, as weaker domestic demand suppresses import growth and benefits
the trade balance this year. Against this backdrop, we forecast the rouble to bounce off trendline
support around the RUB35.00/USD level, and average RUB35.20/USD in 2014, following all-time
lows near RUB37.00/USD in H114.
Bouncing Off Trendline Support
Russia - RUB/USD Exchange Rate, Daily

Long-Term Outlook (6-24 months)
Beyond this timeframe, however, we expect the currency to resume on a long-term depreciatory
trajectory, underpinned by worsening macroeconomic fundamentals. Following a short-lived
respite in 2014, we expect Russia's current account surplus to narrow in 2015-2016, and turn into
deficit by 2017. The main driver of this trend will be deteriorating outlook for export growth,
especially hydrocarbons, which account for the lion's share of the export basket. Despite heightened
geopolitical risk premium in oil prices in 2014, abundant supply in the coming years will underpin
negative price growth. Our Oil & Gas team's forecast for Brent crude to drop to an average of
USD103.0/bbl in 2016 does not bode well for Russia's trade surplus, which will weigh on the rouble
over our forecast horizon.
Russia's financial account balance will similarly offer little support to the rouble. Net private
capital outflows have been historically high in Russia, as Russians look to escape the unpredictable
domestic political and regulatory environment by sending savings abroad. This dynamic has been
highlighted by the Ukraine crisis, with outflows at USD74.6bn in H114 exceeding total outflows for
2013, at USD61.0bn, and while we maintain that H214 will see abatement in capital flight, capital
exodus will remain a structural feature of Russia's financial accounts for the foreseeable future.
Worsening Macro Fundamentals Driving Long-Term Weakness
Russia - RUB/USD Exchange Rate, Weekly

In addition, the outlook for foreign direct investment (FDI) has also darkened on the back of the
Ukraine crisis. While we do not expect further Western sanctions to entail restrictions on Russia's
investment and trade flows, the latest round of US sanctions and ongoing violence in Eastern
Ukraine will likely dissuade businesses from launching long-term oriented projects until there is
full-fledged solution to the Ukraine crisis. In addition, the Ukraine crisis has reminded investors
that the Kremlin is a strong-minded leadership willing to sacrifice economic gains for political ones.
This will keep a lid on FDI inflows to Russia in 2015-2016.
Finally, monetary policy will further underpin rouble weakness. While the Central Bank of Russia
(CBR) stepped in to stave off a precipitous drop in the rouble in H114 in the wake of Crimea's
annexation, it has not swerved away from its plan to transition from a managed float to an
inflation-targeting regime by 2015. The abandoning of the managed float regime will allow the
deteriorating macroeconomic dynamics to come into force, underpinning rouble weakness in the
coming years. Taking into account these factors, we forecast the rouble to average RUB35.9.00/USD
in 2015 and RUB37.25.00/USD in 2016.
Risk To Outlook
Energetic steps by the government to dismantle the heavy footprint of the state in the economy and
implement market-friendly reforms might ramp up foreign investors' demand for Russian assets,
and reverse net private capital outflows. This would drive rouble appreciation, prompting us to
adjust our strategically bearish outlook for the unit. However, we do not see the political will for
such reforms emerging any time soon.
Trei crize din Rusia. Cum au picat rubla i piaa n 1998, 2008 i 2014
11:30 AM, 17 DECEMBRIE 2014 DE OLEG COJOCARU NICIUN COMENTARIU
Am supravieuit anilor 1990 se

ncurajeaz ntre eioamenii de afaceri rui, n legatura cu criza valutar
izbucnit. Dar economitii sunt mai sceptici: criza actualeste diferit de cele dou anterioare i se
pare c nu se va termina repede, scrie RBC.ru.
La sfritul anilor 90 ara s-a lasat furat de jocul piramidal numit GKO (obligaiuni de stat pe
termen scurt), n anii 2008-2009 a avut loc o criz global, dar criza prin care trecemchiar acum este o
criza auto-provocat. Este trist i regretabil. Am fi putut sa evitam aceast situaie , spune Igor
Nikolaev, directorul Institutului de Analiz Strategic FBK.
n toate cele trei crize a existat un singur lucru comun ocul iniial a fost provocat de scderea brusca a
preurilor la petrol, comenteaza Evsey Gurvich, eful Grupului de Experi Economic, dar de fiecare
dat Banca Central a folositdiferite modele ale politicii cursului de schimb valutar.
n 1998, rata cursului valutar era aproape fix. Dar

nconditiile caderii preurilor la petrol, investitorii se ateptau cadolarul va ncepe s
creasc. Aceste ateptri erau puse pe seama GKO un instrument-cheie pentru finanarea
bugetului. Guvernul nu a putut s se mprumute la dobanzidin ce in ce mai ridicate i s-a declarat in
incapacitate de plata.
n 2008, Banca Central a reuit s menin cursul mult timpdup ce pretul petrolului s-a prbuit. Dar
credina n dolar era mare. Banca Central a sprijinit rubla si a trebuit s cheltuiasa aproximativ
130 miliarde dolari din rezervele valuatrentr-un singur trimestru. Ratele dobnzilor n cele din
urm au srit, ceea ce a dus la declinul produciei.
ncercrile actuale a Bncii Centrale de a menine rata de schimb sunt cu mult sub ateptri.
Exist i alte diferene. n 1998, criza s-a terminat repede.Economia purta in pantec copilul numit
crestere, toate reformele dificile erau n spate, iar Rusia a fost ajutata de toata
lumea, afirma Nicolaev. n timpul crizei globale din 2008-2009, toate tarile erau, de asemenea, n
aceeai barc. n ambele cazuri economia si-a revenit mpreun cupreul petrolului.
Acum, situaia este diferit i este mult mai rea, spune expertul: Avem probleme cu
lipsa reformelor, nu amrestructurat economia. Dar cel mai important lucru este ca suntem
singuri.
Suntem o tara ostracizata, intangibila, nu ne va ajuta nimeni i de data aceasta nu se va termina repede
(criza n.r.), a mai spus expertul. Toate cauzele fundamentale ale crizeiraman neschimbate: scderea
preului petrolului, recesiune i sanciuni. Probabil ca nu va mai fi la fel de abrupta ca acum, dar vom
merge pe curba descendenta cel puin 2-3 ani, estimeaza experii.
Rubla ruseasc s-a prbuit mari, nregistrnd o depreciere de peste 20%, dupa ce luni deprecierea a fost
de 10%, astfel c moneda euro a atins un nivel fr precedent de 100 de ruble, iar dolarul american a atins
nivelul record de 80 de ruble, n pofida deciziei Bncii Centrale a Rusiei de a majora dobnda de baz cu
6,5 puncte procentuale. Acesta este cel mai grav declin nregistrat de rubl, dup criza financiar ruseasc
din 1998. Atunci, rubla s-a prbuit n cteva zile, fapt care a obligat autoritile de la Moscova s declare
intrarea n incapacitate de plat.
Miercuri, oficialii Bncii Centrale a Rusiei au anunat c au cheltuit 1,96 miliarde de dolari pentru a
sprijini rubla, n 15 decembrie. Anul acesta, autoritile de politic monetar au investit peste 80 miliarde
de dolari n intervenii menite s stopeze deprecierea rublei.
Rubla s-a apropiat astzi de nivelul de 80 de uniti pentru un dolar dup o a doua zi consecutiv
avnd o depreciere de dou cifre
Devalorizarea monedei ruseti a continuat sfidnd decizia bncii centrale de a ridica dobnda la
17%, de la 10,5%
Este un adevrat crah, comenteaz pe Twitter Joseph Weisenthal, editor la Business Insider
Un bolovan care se rostogolete la vale prea violent pentru a putea fi oprit chiar i de puterea unei bnci
centrale. Aa ne apare rubla ruseasc ce acum cteva ore a atins un minim istoric de 79,16 uniti pentru
un dolar n pofida celei mai drastice msuri de politic monetar din aceast ar din 1998 ncoace.
Dobnda cheie a fost ridicat ieri la 17%, de la 10,5%, transmite Bloomberg amintind c o astfel de
micare nu i are echivalentul dect n majorarea instantanee a costurilor mprumuturilor cu 100% dup
falimentul Rusiei de acum 16 ani.
Nu este singurul record consemnat astzi. Un website de divertisment i glume din Rusia a atins ieri cel
mai ridicat numr de vizitatori i accesri, potrivit The Telegraph, n msura n care ruii ncearc s se
monteze pozitiv fa de dificultile econoomice pe care le au n fa sau s fac haz de necaz.
Investitorii nu au reuit, ns, sp fie la fel de senini. Piaa i-a continuat prbuirea, sfidnd decizia bncii
centrale. Dac decizia radical de politic monetar a survenit dup o depreciere ieri de 10% a rublei pn
n zona de 65 uniti pentru un dolar, turbulenele de astzi nu au putut opri alunecarea monedei naionale
dincolo de pragul de 70 ruble pentru un dolar.
Pe Bursa de la Moscova, picajul este la fel de abrupt. Aciunile Sberbank, prima banc a Rusiei, cdeau
cu 17,77%, iar cele ale celui de-al doilea competitor, VTB, sufereau un declin de 14,29%, alturi de
scderi semnificative ale titlurilor guiganilor energetici Gazprom, Rosneft i Sugurt, conform Russia
Today. Este un adevrat crah, comenteaz pe Twitter Joseph Weisenthal, editor la Business Insider.
Premierul Dmitri Medvedev convocase ieri o ntlnire la nivel nalt a factorilor de decizie. Speculaii n
media de business spun c ar fi fost solicitate noi intervenii pe curs care ar fi favorizat o revenire parial
ctre nivelul de 73 ruble pe dolar.
Ce a vrut banca central

i n zilele precente au mai fost ncercri. 80 de miliarde de dolari cheltuii din rezerva valutar a rii nu
au fost suficieni pentru a opri declinul rublei. La nceputul edinei de ieri, aceasta era la nivelul de 59
uniti pentru un dolar, ns cderea s-a accelerat pn la 66 ruble pentru un dolar. Este nivelul la care
Elvira Nabiullina, guvernatorul bncii centrale, consider c moneda este mult subevaluat.ntr-o
intervenie pentru postul de televiziune Rossiya 24, citat de Bloomberg, aceasta a explicat c declinul
rublei a reprezentat un semnal ctre economie c trebuie s se adapteze noilor condiii, ns c momentul
de ieri a fost cel nimerit pentru o rebalansare. Totodat, autoritatea de politic monetar se angajeaz c
va oferi lichiditate n valut bncilor comerciale ruseti.
Este o situaie de panic; banca central a luat cea mai drastic msur la care s-ar fi putut gndi, a
declarat pentru CNBC Uwe Purpart, managing director la Reorient Financial Market. El spune c exist o
limit pn la care rezerva va putea fi folosit i de aceea autoritile de la Moscova s-au gndit i la alt
msur pentru ca banii s nu mai prseasc ara n acelai ritm.
Sacrific economia n ncercarea de a salva rubla
Micarea semnific predarea obiectivului creterii economice n favoarea salvrii sistemului financiar,
explic Ian Hague, fondator al firmei new-yorkeze Firebird Management care are n administrare 1,1
miliarde dolari. Era micarea corect de fcut i nu a fost uor s fie fcut, a comentat acesta pentru
Bloomberg.
Banca central ncearc s opreasc avalana, dar aceast majorare masiv a dobnzilor ar putea s nu
fie suficient, anticipa micarea pieei i Slava Breusov, analist la Alliance Bernstein. Nimeni nu pare s
se mai gndeasc la economie de vreme ce prioritatea este aceea de a opri picajul rublei, a continuat
acesta.
Trei scenarii negative pentru economia Rusiei
Dobnda ridicat amenin stabilitatea unei economii deja cu probleme, spune Timothy Ash, head of
emerging markets la Standard Bank, contactat de CNBC. Pentru Rusia, situaia din zilele urmtoare ar
putea fi nc i mai rea dect criza din anul 2008, spune i Serghei veov, guvernator adjunct al bncii
centrale, preluat de Telegraph.
Publicaia britanic preia trei scenarii de la Capital Economic, n niciunul dintre acestea economia Rusiei
neartnd bine. Astfel, la un nivel peste 70 de ruble pentru un dolar, ar fi un oc inflaionist cu creteri de
preuri de 20% n anul 2015, bncile i corporeaiile ar fi sub presiune, falimentele s-ar nmuli n sectorul
privat, iar Produsul Intern Brut ar suferi o cdere de anvergura celei de 7,8% din 2009. Dac vom asista la
o stabilizare a cotaiei n jurul reeprului de 65 ruble pentru un dolar, vom avea un vrf de inflaie de 1520%, cu cteva falimente i un declin de 2-5% al PIB, ns o criz bancar ar fi improbabil. La un nivel
de 60 ruble pentru un dolar, inflaia ar atinge un maxim de 12-15% n al doilea trimestru al anului viitor,
n timp ce scderea economic ar fi de 1-2%.
Exist i optimiti
Credem c problemele Rusiei sunt numai pe termen scurt, spune, ns, Markus Allenspach, head of
fixed income reasearch la Julius Baer. Argumentul su este c preul petrolului nu poate cobor la infinit i
c deja rapoarte din sectorul energetic avanseaz o cotaie de 670 dolari pe baril n a doua parte a anului
2015.
Banca american de investiii Goldman Sachs caracterizeaz drept pozitiv decizia de ridicare a
dobnzii cheie pe rubl la 17%. n opinia raportului instituiei de credit preluat de portalul financiar Zero
Hedge, hotrrea clar ndeprteaz incertitudinile din pia legate de strategia bncii centrale a Rusiei, una
dintre factorii cei mai importani n influenarea volatilitii rublei.
Benoit Anne, strategist la Societe Generale, afirm c ridicarea de dobnd schimb regulile jocului i
reprezint o adevrat bazooka folosit de autoritatea de politic monetar a Rusiei. Dup sptmni
de lamentri asupra indeciziei bncii centrale, sunt, n sfrit, impresionat de rspunsul de politic
monetar, a declarat acesta pentru CNBC.
Pe de alt parte, Nicholas Ferres, director de investiii la banca francez, este printre cei care spun c
merit aruncat o nou privire asupra pieei de bonduri ruseti dup ce s-a vzut c autoritile sunt
preocupate de a apra moneda. Rusia are mijloace s-i plteasc obligaiile ei suverane i chiar s
acopere obligaiile corporaiilor, a declarat acesta.
Argumentele favorabile pot fi i de ordin tehnic. Max King, manager de portofoliu la Investec Asset
Management avertizeaz c oricine vinde aici risc s asiste ulterior la un ricoeu consistent.
Poarta ruseasc spre o criz global?
De o revenire facilitat de banca central ar putea beneficia marii oligarhi i companii precum Rosneft
pentru a mai vinde ce au de vndut, ns aceasta ar putea dura numai cteva zile, a afirmat ntr-o
intervenie televizat Denis Gartman, autor al unui newsletter cu tiri financiare. El nu exclude alunecarea
perechii de schimb valutar ctre nivelul de 100 ruble pentru un dolar. Dac treci de 100, dup aceea poi
s alegi orice numr doreti, a continuat acesta. Acestea sunt condiiile n care Rusia ar putea trece la
vnzri mai consistente din rezerva valutar, inclusiv de aur, care este un activ foarte lichid.
Orice relansare a Rusiei este condiionat de scumpiri n piaa ieiului, spune Purpart. Dac preurile
petrolului vor merge mai jos, msurile bncii centrale vor fi covrite de nc i mai mult panic n
termen de zile, declara acesta. Este o situaie destul de rea; singurul loc unde este mai ru este
Venezuela.
Directorul de la Reorient Financial Market a adus n discuie i ntrebarea n ce msur mutaiile din piaa
energiei nu ar puteab atrage chiar o criz global. Lumea tinde s treac cu vederea c o ar ce ar putea fi
puternic lovit este chiar SUA. n ultimii cinci ani, locurile de munc ce au fost create n prima economie
a lumii au fost concetrate n statele care au dezvoltat noi exploatri de petrol i gaze de ist. SUA vor
avea probleme. Lumea nc nu anticipeaz aceasta nb momentul de fa, a conchis Purpart.

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Industry Forecast

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Industry Forecast - Russia - Q3 2015

26 May 2015 Russia Autos

e/f = BMI estimate/forecast. Source: National sources, BMI

Subsidy Stimulus Is No Remedy For Stagnation

e/f=BMI estimate/forecast. Source: AEB, BMI

f=BMI forecast. Source: BMI, OICA

Source: BMI, Bloomberg

Spending On High-tech Medical Care To Increase

Non-communicable Diseases On The Rise Due To Poor Lifestyle Choices

Certain disposable syringes;

Microsurgical scissors and pincers;

Holter ECG monitors;

1-65 slice CT scanners;

Certain types of X-rays diagnostic complexes;

Pneumatic micro motors for dental equipment;

Dental carbide burs;

Implants for ostheosynthesis;

Non-implantable hearing aids;

Microsurgical ophthalmic instruments;

Antiseptic and sterile drapes and wipes;

Gynaecological tool sets;

Blood coagulation analysers;

Individual blood glucose meters; and

Certain blood transfusion devices.

BMI RUSSIA CURRENCY FORECAST

Policy Rate, % eop

Source: BMI, Bloomberg. Last updated: November 4, 2014

Source: Bloomberg, BMI

Central Bank of Russia

Oil Prices Key

TOTAL ELECTRICITY GENERATION DATA AND FORECASTS (RUSSIA 2013-2018)

e/f = BMI estimate/forecast. Source: National sources, BMI

TOTAL ELECTRICITY GENERATION DATA AND FORECASTS (RUSSIA 2019-2024)

f = BMI forecast. Source: National sources, BMI

ELECTRICITY GENERATING CAPACITY DATA AND FORECASTS (RUSSIA 2013-2018)

e/f = BMI estimate/forecast. Source: National sources, BMI

f = BMI forecast. Source: National sources, BMI

e/f = BMI estimate/forecast. Source: Federal State Statistics Service, BMI

In October 2014, it was reported that Russian equipment manufacturer Power

Nuclear: A Critical Role To Play

e/f = BMI estimate/forecast. Source: National sources, BMI

e/f = BMI estimate/forecast. Source: National sources, BMI

TOTAL ELECTRICITY CONSUMPTION DATA AND FORECASTS (RUSSIA 2013-2018)

e/f = BMI estimate/forecast. Source: EIA, BMI

f = BMI forecast. Source: EIA, BMI Calculation

e/f = BMI estimate/forecast. Source: EIA, BMI

Click here to explore data

Electric power distribution losses, TWh

e/f = BMI estimate/forecast. Source: BMI

Electric power distribution losses, TWh

f = BMI forecast. Source: BMI

Total Net Imports, TWh

e/f = BMI estimate/forecast. Source: EIA, BMI

f = BMI forecast. Source: EIA, BMI

Political Risk Analysis - Putin's Popularity Masks Rising Medium-Term Risks

28 Oct 2014 Russia Political Risk

Source: Bloomberg, BMI

Source: Macrobond, BMI

Source: ITC, BMI. 2013 data.

Source: Macrobond, BMI Estimates

Source: Bank for International Settlements, BMI

Source: Bank for International Settlements

Source: Macrobond, BMI

CBR Rate, % eop