Yandex.Market changes its Game

Russian business daily RBK reported that the leading Russian online search engine Yandex.ru decided to change the rules for featuring products on its marketplace Yandex.Market. The new system gives preference to the products sold directly in Yandex’s store, which is currently the option of choice for approximately 20% of the suppliers present on the marketplace. Naturally, this is advantageous for Yandex, as the Russian online heavyweight earns a higher commission for products sold on its pages than for redirection to retailers’ sites. According to Yandex, it currently earns 5.38% of the total sales generated on its Yandex.Market platform.

Yandex will give preference to suppliers that agree to sell their products in its store, placing their offer at the top of respective search results. The new model will be introduced in phases, starting with Moscow and ending with distant regions by the end of 2017. At this point, it will affect 179 most popular product categories, including computers, home appliances, car accessories and baby program. Yandex.Market features approximately 2.000 product categories from 20.000 domestic and foreign Internet stores.

While Yandex believes that a single interface will contribute to customer loyalty, the new system will probably force some products with lower margins to leave its marketplace.

Privation on the Rise in Russia

Gazeta.ru reports that the disposable real income in Russia dropped by 8.3% on a yearly basis in August 2016. This turns out to be an even worse drop than the one registered in August 2009, when the disposable income fell by 8.2%.
Real income in Russia continues to fall at an increasing rate – the annual drop in June was 4.8%, while in July it already increased to 7.3%. Real income in Russia has been in continuous decline since October 2014.

Russia Adds Salt to the Sanctions List

…but not just to hurt the biggest exporter of salt to Russia that happens to be Ukraine. 
Business daily Vedomosti reports that the Russian Government added salt to the list of banned imports, a countermeasure to the western sanctions introduced after Russia annexed Crimea in March 2014. Salt suppliers from the Ukraine, United States, European Union, Canada, Australia, Norway and some other countries can no longer export to the Russian Federation. The ban would seem like just another jab in Russia’s continuing exchange with the West if there wasn’t for a peculiar coincidence: at the end of July 2016, Russian General Prosecutor’s son Artem Chayka became the owner of the second largest Russian salt producer, Tiretsky Salt Plant.  
Russian Consumer Protection Service already banned salt imports to Russia from Ukrainian “Artemsol” in 2015 for alleged noncompliance with quality requirements. As a result, Tiretsky Salt Plant’s sales jumped by 42% to 1.3 billion rubles (USD 20 million).  
Russian Government’s Analytical Center warned that the food embargo has a negative effect on the competition in the market, leads to price increases and lower food quality. 

Yevtushenkov on Arrests of Russian Businessmen: “This is Our Homeland”

Russian portal Slon.ru published a transcript of the interview with Vladimir Yevtushenkov, Russian businessman who enjoyed USD 9 billion of his worth before he was apprehended for participation in the allegedly illegal privatization of Bashneft oil company that the Russian Government seeked and managed to annul, apparently for the purpose of re-privatization (in lack of a better term for this uncanny process), this time by the state-owned Rosneft. The interview is interesting for Evtushenkov’s blase attitude to what certainly looks like a coarse extortion (not long before his arrest, Evtushenkov refused Rosneft’s offer to take Bashneft off his hands) and his complete resignation to the state of affairs in Russia. Asked about the frequent crackdowns on Russian businessmen including Viktor Vekselberg, Mikhail Slobodin (former CEO of a Russian mobile operator Vimpelkom), Mikhail Prokhorov, former director of Rosnano Leonid Melamed, owner of the Domodedovo airport Dmitry Kamenshchik (apprehended under ridiculous charges of gross negligence for failing to prevent the 2011 terrorist attack at the airport that left 37 people dead), Evtushenkov calmly replied: “What can I tell you? This is our homeland”. Perhaps this is a point that too many people in Russia tend to carry home.

Should Russians Brace for a Tax Hike?

According to Vedomosti.ru, the Russian Ministry of Finance believes that balancing the federal budget in the short term will require the Government to sell assets, drain the reserve funds and rise taxes. In order to cut the deficit from the projected 3.2% of GDP in 2017 to 1.2% of GDP in 2019, the Ministry of Finance needs to collect additional 2.5 trillion rubles (USD 38 billion) in the period 2017-2019. Revenues will be sourced from oil and gas companies, tobacco and soft drinks sales, e-commerce and state-owned companies.
The Ministry of Finance is not considering spending cuts, as the Government fixed the planned annual expenditures for the period at 15.79 trillion rubles (USD 242 billion). Therefore, the only option is to look for other sources of revenue, such as the increase of corporate tax, VAT, personal income tax and social security contributions. For example, the Ministry of Finance is considering increasing the personal income tax from the current 13% to 15-16%. The Ministry warns against rising the corporate tax rate, as it would negatively affect the investment climate. It advocates for the reduction of a unified social insurance rate to 20% and the VAT rate increase from 18% to 24%.
While Russian government officials are uncertain what measures will be undertaken to tackle the budget deficit, a source with the Federal Government stated that changes will have to take place by July 2018 or January 2019.

Monetary Value of Human Life in Russia

Russian daily Kommersant writes about the value of human life in Russia – this time not in numinous terms, but in rubles. Having reviewed government compensations and standard life insurance policies, Kommersant came to the conclusion that there is no widely accepted value: life of a person deceased in a psychiatric ward was estimated at 500.000 rubles (USD 7.867) by the government, accidental death from explosive ordnance brought 300.000 rubles (USD 4.720) in compensation, death in fires and floods – 1-2 million rubles (USD 15.735-31.470), death in terrorist attacks – 2-3 million rubles (USD 31.470-USD 47.205). Family of a child killed by malfeasance was awarded as much as 15 million rubles (USD 236.000) in a civil lawsuit. It could be worse: families of the 13 victims killed in a terrorist attack on Pushkin square in 2000 received approximately USD 1.000. For the sake of comparison, families of victims of the recent terrorist attack in Nice stand to receive approximately EUR 1 million for each killed relative from a special French government fund.
According to a Russian insurer “Rosgosstrah”, mandatory insurance in civil transportation covers the passengers up to 2 million rubles (USD 31.470). In their 2014 paper, Karabchuk, Nikitina, Remezkova and Soboleva used a mixture of indicators including projected lifetime earnings and estimated the value of human life in Russia at USD 1,6 million. This is still much lower than the respective figure in the United States (USD 6,7 million) or United Kingdom (USD 13 million).
Given that half of the working population in Russia lives on less than 23,5 thousand rubles (USD 370) per month, it is no wonder that most of them would consider 1-1,4 million rubles as a just compensation for the loss of human life, as the polls indicate. Even the Russian traffic police values human lives more than that: according to their calculations, it is justified to invest 11 million rubles (USD 173.000) to prevent the loss of a single human life.
One of the direct consequences of the low monetary value of human life in Russia is increased risk in domestic flights – since the potential liability for passenger death is much lower in Russia than abroad, Russian airlines can afford to risk flying outdated equipment on domestic routes. Citizens don’t seem to put too much value on their lives, either: while life insurance makes up 55-60% of total insurance premiums in Poland, Slovakia or Hungary, in Russia it accounts for mere 2%.

Two Large Insurers Quitting the Russian Health Insurance Market

Slon.ru reports that Uralsib and Alliance, two major insurance companies, are looking to sell their health insurance businesses.  Slon.ru cites Russian business daily Vedomosti and its three sources from the companies’ top management.

Allianz spent the last three months collecting bids for its Rosno-MS subsidiary. The value of Allianz’s health insurance business is estimated at between 2-3 billion rubles (USD 31-46 million). Prior to spinning off its health insurance, Allianz started to wind down its retail insurance business. Allianz is the second largest insurance company in Russia, with more than 17 million clients.

Approximately a month and a half ago, Uralsib followed Allianz’s suit and put up its health insurance business for sale.