Russian Ministry of Economy reduces its GDP growth projection for 2013

According to the business daily RBK News (, Russian Deputy Minister of Economy Klepach briefly commented on the GDP growth forecast for 2013 by saying “it won’t even reach three percent”, significantly reducing the previous forecast of 3.6 percent. The Deputy Minister promised to present the official forecast in April, but it is already clear that the tendency is not encouraging. Following a 0.8 percent growth in January, Russian GDP grew by mere 0.1 percent in February. Given the economic slowdown, it is expected that the central government will have to increase transfers to regions experiencing budget deficits. Prime Minister Medvedev stated that the Government plans to merge two types of subsidies provided to the regions – incentives for the expansion of the tax base and increased efficiency of the local administration – as well as to consider their increase. In 2012, the Government transferred 10 billion rubles (USD 325 million) in the form of incentives to the local administrations that implemented measures to increase their tax base, RBK reports.

Russian healthcare professionals in competition with soothsayers and psychics

Vedomosti’s recent editorial analyzes the preferences of Russian inhabitants when it comes to taking care of their health, quoting, among others, Moscow’s chief cardiologist Yuriy Buziashvili, who complains that medical professionals in Russia compete not only with their foreign colleagues, but with the local soothsayers and psychics as well. According to Buziashvili, Russians spend approximately USD 17 billion on medical treatments abroad and as much as USD 30 billion for services from the realm of „paranormal“.

The authors draw certain disturbing conclusions from the data indicating that two thirds of Russians (according to a poll performed by a research agency Levada Center) have no confidence in the quality of the local healthcare. Citizens have gotten used to paying for healthcare that used to be completely free – in 2009, private expenditures for healthcare reached 3 percent of the GDP, while the Government healthcare expenditures were at 4.7 percent of the GDP. Related to that is the popularity enjoyed by healers, soothsayers and psychics, who end up serving the people distrusting traditional medicine. According to Levada Center, 52 percent of Russians believe in omens, 43 percent believe in prophetic dreams, and 38 percent rely on astrology. However, only 26 percent believe in the existence of aliens. Such tendencies are supported – even fueled – by the mass media, which expanded the production of content involving paranormal phenomena after the financial crisis in 2008. Such channels enjoy solid ratings and are not likely to give them up, thriving on their audience’s credulity.

Russian Ministry of Economy estimates the capital outflow for February at USD 6 billion

Business daily reported that the Russian Ministry of Economy estimated the capital outflow from the Russian Federation in February at USD 6 billion, down from an estimated outflow of USD 8-10 billion in January. Economists believe that the capital outflow in the immediate future will depend, among other things, on the solution to the Cyprus banking crisis. That said, some Russian government officials actually expect that the Cyprus crisis will steer investors towards Russia. Experts don’t share their enthusiasm and believe that the capital outflow is caused by a decline in industrial output (0.8 and 2.1 percent for January and February, respectively) and a perceived weakness of the Russian economy, and that it might reach USD 80 billion in 2013.

The Ministry of Economy still forecasts that the total capital outflow for 2013 will be no higher than USD 10 billion, as it expects that the outflows in the first half of the year will be compensated by an inflow in the second half. The Russian Central Bank supports the Ministry’s expectations, forecasting a capital outflow of USD 10 billion for the entire year should the price of oil remain at USD 97 per barrel. Earlier in March, the Minister of Finance Anton Siluanov stated that he’d like to be optimistic and forecasted a capital outflow of USD 10-15 billion for 2013. On the other hand, the Minister of Economy Andrey Belousov stated in February that the outflow for 2013 might reach USD 50 billion. According to the Central Bank, the capital outflow from Russia in 2012 reached USD 56.8 billion, down from USD 80.5 billion in 2011.

It is known that figures might vary depending on the methodology, and so in 2012 an accounting company Ernst&Young, together with Russian partners, suggested that capital investments made by Russian companies abroad should not be treated as capital outflow. According to such methodology, the capital outflow figure for 2011 would be reduced from USD 80.5 billion to USD 32.3 billion. The Central Bank, however, decided to stick with its usual methodology.

Latvian bank awarded a temporary injunction against Russian debtor

Business daily Vedomosti ( reported that the Commercial Court of the Yamal-Nenetsk region ordered a preliminary injunction against a Russian company Severneft, based on a lawsuit filed by a Latvian bank Reverta after Severneft’s decision to liquidate. The Latvian bank is attempting to collect a loan of USD 75 million approved to another Russian company, Severorgsintez, for which Severneft acted as a guarantor. The latter company offered one of its oil and gas extraction licenses as collateral, but in 2011 it transferred the license to one of its daughter companies, which it subsequently sold to a Russian company Eurohim. While Severneft disputes the existence of such a guarantee, Eurohim already received the preliminary injunction order.

Eurohim believes that the court’s decision is based on misunderstanding and stated that it merely prevents the disposal of the aforementioned license, which is a measure that will not affect company’s operations in any way. Eurohim also has the right to annul the deal and claim USD 403 million paid for Severneft’s daughter company plus interest should it turn out that Severneft withheld essential information – such as third parties having rights over its daughter company’s assets.

At the same time, Severneft is confident that the sale of its daughter company to Eurohim was legal and is preparing its own suit, disputing Reverta’s right to file for temporary injunction as the bank was not formally registered as a creditor at the time. Reverta did file for its inclusion in the list of creditors on February 1, but Severneft disputed its filing and the inclusion is postponed until the court hears the case on March 25. A representative of Kinson International Corp., another large Severneft’s creditor with an exposure of USD 160 million, refused to comment on the case.

One of the Russian lawyers commented that the Russian bankruptcy law allows the deals concluded by a party undergoing bankruptcy to be disputed. Russian commercial courts tend to side with the plaintiffs in such instances. The central question of the dispute between Reverta and Severneft is whether the latter formalized its guarantee – it isn’t clear that the company’s manager at that time (Zhan Hudoinatov, coincidentially a brother of Rosneft’s Vice-President Eduard Hudoinatov) ever signed any such document. Should the existence and the validity of the guarantee be proven, Severneft’s creditors will be allowed to compensate their claims in accordance with their seniority. Reverta also filed a lawsuit against Hudoinatov, accusing Severneft’s former manager of fraud and deliberate bankruptcy.