Seb Country Analysis Feb 2009 Russia

Russian Federation SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS

February 24, 2009

Analyst: Rolf Danielsen. Tel : +46 8 763 83 92. E-mail : [email protected]

The weakening of the exchange rate appears to have slowed in recent weeks as the central bank  flexed its muscles by tightening monetary policies, and the global oil market showed some signs  of stabilization.  However, that comes after a massive capital outflow which reduced reserves by  at least  $160 bill. in the course of a few months. 

USD/rub

lîÉêÜÉ~íáåÖ=íìêåë=áåíç=êÉÅÉëëáçåK==cçääçïáåÖ=ëÉîÉê~ä=óÉ~êë=çÑ=ìåÉñéÉÅíÉÇ=ê~éáÇ= ÖêçïíÜ=ëáåÅÉ=íÜÉ=oìëëá~å=Åêáëáë=áå=NVVUI=íÜÉ=ÉÅçåçãó=ÄÉÖ~å=íç=Åççä=áå=íÜÉ=ëÉÅçåÇ=Ü~äÑ= çÑ=OMMU=~ë=çáäJéêáÅÉë=éÉ~âÉÇ=~í=~äãçëí=ANRMLÄ~êêÉä=áå=gìäóI=êÉÇìÅáåÖ=çîÉê~ää=ÖêçïíÜ=íç= RISBI=Ççïå=Ñêçã=ãçêÉ=íÜ~å=UB=áå=OMMTK==^ë=íÜÉ=ÅççäáåÖ=~ÅÅÉäÉê~íÉÇ=íçï~êÇ=íÜÉ=ÉåÇ= çÑ=íÜÉ=óÉ~ê=íÜÉ=Åçìåíêó=ï~ë=ãçëí=äáâÉäó=áå=íÉÅÜåáÅ~ä=êÉÅÉëëáçå=áå=íÜÉ=Ñáêëí=èì~êíÉê=çÑ= OMMVK==cçê=íÜÉ=ÅìêêÉåí=óÉ~êI=ïÉ=ÉñéÉÅí=~=Åçåíê~Åíáçå=íÜ~í=ã~ó=ÉñÅÉÉÇ=OB=áå=êÉ~ä=íÉêãëI= ~ë=Éñéçêíë=ÖêçïíÜ=íìêåë=åÉÖ~íáîÉ=áå=é~êíáÅìä~ê=çÑ=ãÉí~äë=~åÇ=çíÜÉê=åçåJçáä= ÅçããçÇáíáÉë=~åÇ=~ë=ÅçåëìãÉêë=~åÇ=áåîÉëíçêë=êÉ~Åí=íç=íÜÉ=åÉÖ~íáîÉ=ÉÅçåçãáÅ= éêçëéÉÅíë=Äó=êÉáåáåÖ=áå=íÜÉáê=çïå=ÇÉã~åÇ=Ñçê=ÖççÇë=~åÇ=ëÉêîáÅÉëK==qÜ~í=áë=ÇÉëéáíÉ=~= ÖçîÉêåãÉåí=ëíáãìäìë=é~Åâ~ÖÉ=~ååçìåÅÉÇ=áå=kçîÉãÄÉê=OMMU=Ñçê=~=íçí~ä=çÑ=OBLdamK== få=Ñ~Åí=íÜÉ=Ñáêëí=ãçåíÜ=çÑ=íÜÉ=óÉ~ê=ëÜçïÉÇ=~=Åçåíê~Åíáçå=çÑ=ãçêÉ=íÜ~å=UBI=Åçãé~êÉÇ= ïáíÜ=íÜÉ=ë~ãÉ=ãçåíÜ=áå=OMMUK==^äíÜçìÖÜ=íÜ~í=êÉÑäÉÅíÉÇ=ÄçíÜ=~å=ìåìëì~ä=Ä~ëÉ=ÉÑÑÉÅí=E~= ÜáÖÜ=êÉ~ÇáåÖ=Ñçê=g~åì~êó=OMMUF=~åÇ=íÜÉ=íÉãéçê~êó=ÅäçëáåÖ=çÑ=Ö~ëJÉñéçêíë=áå=íÜÉ=Ñáêëí= ïÉÉâë=çÑ=íÜÉ=óÉ~ê=ÇìÉ=íç=íÜÉ=ÅçåÑäáÅí=ïáíÜ=íÜÉ=râê~áåÉI==çÄëÉêîÉêë=Ü~îÉ=ëíáää=ÄÉÖ~å=íç= Ñ~Åíçê=áå=íÜÉ=äáâÉäáÜççÇ=çÑ=~=ëíÉÉéÉê=Åçåíê~Åíáçå=çÑ=dam=áå=OMMVI=éÉêÜ~éë=Äó=~êçìåÇ= RBK== = Exchange rate ^ÄçìíJíìêå=áå=íÜÉ=Ä~ä~åÅÉ=çÑ=é~óãÉåíëW== 5,5 22,5 cáå~åÅá~ä=ã~êâÉíë=Ü~îÉ=êÉ~ÅíÉÇ=áå= 6,0 í~åÇÉã=ïáíÜ=íÜÉ=êÉ~ä=ÉÅçåçãóK==qÜÉ= 25,0 6,5 åÉÖ~íáîÉ=ëÉåíáãÉåí=ã~áåäó=Å~ìëÉÇ=Äó= 27,5 ÉñíÉêå~ä=Ñ~Åíçêë=Ü~ë=ÄÉÉå=êÉáåÑçêÅÉÇ=Äó= 7,0 30,0 ä~êÖÉ=Å~éáí~ä=çìíÑäçïë=~ë=áåîÉëíçêë=Ü~îÉ= 7,5 32,5 êìëÜÉÇ=íç=ÜÉÇÖÉ=íÜÉáê=ìåÄ~ä~åÅÉÇ= 8,0 ÑçêÉáÖå=ÉñÅÜ~åÖÉ=éçëáíáçåë=~åÇ=~äëç= 35,0 8,5 Hopes the Rouble may have reached a floor í~âÉå=ëéÉÅìä~íáîÉ=éçëáíáçåë=áå=êÉëéçåëÉ= 9,0 37,5 íç=íÜÉ=~ìíÜçêáíáÉëÛ=êÉä~íáîÉäó=ä~ñ= jan mar maj jul sep nov jan 2008 2009 ãçåÉí~êó=éçäáÅáÉëK==^ë=~=êÉëìäíI=~åÇ= Russia, USD/RUB Sweden, USD/SEK ÇÉëéáíÉ=íÜÉ=ÅÉåíê~ä=Ä~åâÛë=áåíÉêîÉåíáçåë= Ñçê=~í=äÉ~ëí=ëçãÉ=ANSM=ÄáääK==~áãÉÇ=~í= ÅìëÜáçåáåÖ=íÜÉ=Ñ~ääI=íÜÉ=ÉñÅÜ~åÖÉ=ê~íÉ=ÇêçééÉÇ=~êçìåÇ=PMB=êÉä~íáîÉ=íç=~=Ä~ëâÉí=ã~ÇÉ= ìé=çÑ=RRB=rpa=~åÇ=QRB=ÉìêçI=áå=é~ê~ääÉä=ïáíÜ=ã~åó=çíÜÉê=bìêçéÉ~å=åçåJÉìêç= ÅìêêÉåÅáÉëK==qÜÉ=êÉ~ëçå=Ñçê=íÜáë=~éé~êÉåí=éçäáÅó=áåÅçåëáëíÉåÅó=ï~ë=éêçÄ~Ääó=íç=~îçáÇ= ~=íçç=ëÜ~êé=Ñ~ää=áå=íÜÉ=ÅìêêÉåÅóI=Ñçê=Éñ~ãéäÉ=~=çåÉJçÑÑ=ÇÉî~äì~íáçåK==qÜÉ=~ìíÜçêáíáÉë=

USD/sek

Country Risk Update

Source: Reuters EcoWin

important your attention is drawn to the statement on the back cover of this report which affects your rights.

SEB Merchant Banking Country Risk Analysis February 24, 2009

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The chart presents three scenarios: Base – U-shaped global recovery with oil price at $60-70 from 2010 Long recession – a) L-shaped recession with oil price around $60/barrel from 2010 b) Long recession with oil price at $30/barrel 2

SEB Merchant Banking Country Risk Analysis February 24, 2009

éêáÅÉ=áå=íÜÉ=ãÉÇáìãJíç=äçåÖÉê=íÉêã=êÉÑäÉÅíáåÖ=ã~êÖáå~ä=áåîÉëíãÉåí=~åÇ=éêçÇìÅíáçå= Åçëíë=çÑ=ÖäçÄ~ä=çáäK==få=~=iJëÜ~éÉÇ=ÖäçÄ~ä=êÉÅÉëëáçåI=ÜçïÉîÉêI=ëìÅÜ=åÉï=çáä=ã~ó=åçí=ÄÉ= Å~ääÉÇ=Ñçê=~åóíáãÉ=ëççå=~åÇ=íÜÉ=çáä=éêáÅÉ=ÅçìäÇ=êÉã~áå=ëçÑí=Ñçê=~=äçåÖ=íáãÉK=== = mçäáíáÅ~ä=ëí~ÄáäáíóW=få=~=ÄÉ~êáëÜ=çáä=éêáÅÉ=ëÅÉå~êáçI=áKÉK=çáä=éêáÅÉë=ÅäÉ~êäó=ÄÉäçï=íÜÉ= éêÉëÉåí=äÉîÉä=~êçìåÇ=AQMLÄ~êêÉäI=íÜÉ=oìëëá~å=ÉÅçåçãó=ïçìäÇ=ÄÉ=ëÉêáçìëäó=íÉëíÉÇK== qÜÉ=éçäáíáÅ~ä=äÉ~ÇÉêëÜáé=ìåÇÉê=jÉëëêëK=mìíáå=~åÇ=jÉÇîÉÇóÉîI=áë=ëíáää=éçéìä~ê=ëÅçêáåÖ= ~êçìåÇ=TMJUMB=áå=~ééêçî~ä=ê~íáåÖë=ÅçåÇìÅíÉÇ=Äó=äçÅ~ä=éçääáåÖ=áåëíáíìíÉë=êÉÖ~êÇÉÇ=~ë= êÉ~ëçå~Ääó=êÉäá~ÄäÉ=Äó=êÉëéÉÅíÉÇ=ÑçêÉáÖå=çÄëÉêîÉêëI=áåÅäìÇáåÖ=lñÑçêÇ=^å~äóíáÅ~K== eçïÉîÉêI=íÜ~í=ÅçìäÇ=ÅÜ~åÖÉ=~ë=íÜÉ=~ìíÜçêáíáÉë=~êÉ=ÑçêÅÉÇ=íç=~ëâ=îçíÉêë=íç=íáÖÜíÉå=íÜÉáê= ï~áëí=ÄÉäíëK==qÜ~í=ÅçìäÇ=áåÅêÉ~ëÉ=áåîÉëíçê=ÅçåÅÉêå=êÉÖ~êÇáåÖ=éçäáíáÅ~ä=ëí~ÄáäáíóK== = ^í=íÜÉ=éêÉëÉåí=AQMLÄ~êêÉä=oìëëá~=ëÜçìäÇ=ÄÉ=~ÄäÉ=íç=ãìÇÇäÉ=íÜêçìÖÜ=Äìí=ïáää=Ñ~ÅÉ= ÖêÉ~í=ÅÜ~ääÉåÖÉë=íç=ÄÉÖáå=~=äçåÖ=çîÉêÇìÉ=êÉëíêìÅíìêáåÖ=çÑ=áíë=ÉÅçåçãóI=ïÉ~åáåÖ=áí=çÑÑ= íÜÉ=éêÉëÉåí=çáä=ÇÉéÉåÇÉåÅóK==qÜÉ=ÖçîÉêåãÉåí=ÇÉÑáÅáí=íÜáë=óÉ~ê=ã~ó=ÉñÅÉÉÇ=UB=çÑ=dam= ~åÇ=íÜÉ=ÅìêêÉåí=~ÅÅçìåí=ÇÉÑáÅáí=ÅçìäÇ=êÉ~ÅÜ=QBLdam=~í=~å=áåíÉêå~íáçå~ä=çáä=éêáÅÉ=çÑ= AQRLÄ~êêÉäK==EqÜÉ=oìëëá~å=èì~äáíó=J=rê~äI=áë=éêáÅÉÇ=ëçãÉïÜ~í=äçïÉêKF==fíë=Ñê~ÖáäÉ= Ä~åâáåÖ=ëÉÅíçêI=Äó=Åçåíê~ëíI=ïáää=éçëÉ=~=ÅÜ~ääÉåÖÉ=íç=íÜÉ=ÉÅçåçãóI=ïÜáÅÜ=áë=ãçêÉ= äáâÉäó=íç=ã~åáÑÉëí=áíëÉäÑ=áå=~=ÄÉ~êáëÜ=ÖêçïíÜ=ëÅÉå~êáçK=^ãçåÖ=oìëëá~Ûë=NMMM=Ä~åâëI= çÄëÉêîÉêë=àìÇÖÉ=äÉëë=íÜ~å=Ü~äÑ=íç=ÄÉ=éêçéÉê=~åÇ=îá~ÄäÉK==qÜÉ=ëí~Äáäáíó=çÑ=íÜÉ=ëóëíÉã= Ü~ë=ëç=Ñ~ê=ÄÉÉå=ã~áåí~áåÉÇ=Äó=íÜÉ=Ççãáå~åÅÉ=çÑ=íÜêÉÉ=ëí~íÉ=çïåÉÇ=Ä~åâëK==^ãçåÖ= íÜÉ=éêáî~íÉ=Ä~åâëI=~Äçìí=~=íÜáêÇ=êÉéêÉëÉåíë=ëã~ää=äçÅ~ä=Ä~åâëI=~=íÜáêÇ=Ä~ëáÅ~ääó= “íêÉ~ëìêó=ÉåíáíáÉëÒ=çÑ=ä~êÖÉ=Åçêéçê~íáçåë=~åÇ=íÜÉ=êÉã~áåÇÉê=“éçÅâÉí=Ä~åâëÒ=çÑ= áåÇáîáÇì~äë=çê=ÇìÄáçìë=Åçãé~åáÉëK== JGJ= ^í=APUM=ÄáääK=oìëëá~Ûë=êÉëÉêîÉ=äÉîÉä=áë=ëíáää=íÜÉ=íÜáêÇ=ÜáÖÜÉëí=áå=íÜÉ=ïçêäÇ=EÑçääçïáåÖ= `Üáå~=~åÇ=g~é~åF=~åÇ=êÉéêÉëÉåíë=~=ÅìëÜáçå=~Ö~áåëí=ÑìíìêÉ=ëÜçÅâëK==eçïÉîÉêI= oìëëá~Ûë=ÑçêÉáÖå=ÇÉÄí=áë=ÉîÉå=ä~êÖÉê=EAQTM=ÄáääKF==çÑ=ïÜáÅÜ=íÜÉ=éêáî~íÉ=ëÉÅíçê=êÉéêÉëÉåí= VRBK==qÜ~í=áë=ëíáää=äÉëë=íÜ~å=RMB=çÑ=dam=~åÇ=åçêã~ääóI=áåîÉëíçêë=ïçìäÇ=êÉÖ~êÇ=~= êÉëçìêÅÉ=êáÅÜ=Åçìåíêó=~ë=oìëëá~=~ë=ÑìåÇ~ãÉåí~ääó=ëçäîÉåíK==eçïÉîÉê=áå=~=îÉêó= ÄÉ~êáëÜ=ÖäçÄ~ä=ÖêçïíÜ=ëÅÉå~êáç=ïáíÜ=äçï=çáä=éêáÅÉë=~í=äÉëë=íÜ~å=íÜÉ=éêÉëÉåí=äÉîÉä= ÑçêÉáÖå=áåîÉëíçêë=ÅçìäÇ=äççëÉ=é~íáÉåÅÉ=~åÇ=êÉÑìëÉ=íç=êçää=çîÉê=oìëëá~å=ÇÉÄíK==råÇÉê= ëìÅÜ=ÅáêÅìãëí~åÅÉë=oìëëá~=ã~ó=ÉåÇ=ìé=áå=~å=áääáèìáÇ=ëáíì~íáçå=íÜ~í=ïçìäÇ=äáâÉäó= íêáÖÖÉê=ëÉîÉêÉ=ëíê~áåë=çå=áíë=Ñáå~åÅá~ä=ëóëíÉã=~åÇ=íÜÉ=ÉÅçåçãó=~í=ä~êÖÉK==m~êíäó=áå= êÉÑäÉÅíáçå=çÑ=íÜáë=~åÇ=ÇÉëéáíÉ=äçï=ÖçîÉêåãÉåí=ÇÉÄíI=íïç=ê~íáåÖ=~ÖÉåÅáÉë=Ü~îÉ= êÉÅÉåíäó=ÇçïåÖê~ÇÉÇ=oìëëá~=çåÉ=åçíÅÜ=íç=___=ïáíÜ=åÉÖ~íáîÉ=çìíäççâK== K ey ratios

2009

Population (m ill)

141,1

G D P/capita ($)

988

G D P/capita (U S$)

12,7%

C urr.A cc.Balance/G D P

-4,2%

R eserves/im ports (m onths) Investm ents/G D P

12 10

6

M acro balance

4

Liquidit

2 0

A bsence of event risk

15

Inform ation

25,4%

G overnm ent debt/G D P

=

R esilience 8

7006

Inflation

bñíÉêå~ä=ê~íáåÖëW= cáíÅÜW===___LåÉÖ pC mW==___LåÉÖ

H ow to read the chart? M oving out from the center reduces risk.

R ussia

6,8% mÉÉêëW _ê~òáä= i~íîá~= h ~ò~âÜëí~å=

A verage E M

G raph: R ussia's risk profile is "flater" tha average with strengths on liquidity and m acro balance , but weaker on long term factors including resilience . T he steep oil price fall may pose a new threat to political stability, hence higher event risk than the average.

3

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SEB Merchant Banking Country Risk Analysis February 24, 2009

Key data: 2004 2005 2006 2007 591,8 763,2 990,9 1 294,1 GDP (bill.US$) 4090 5302 6919 9082 GDP/capita (US$) 7,2% 6,4% 7,3% 8,1% GDP (%chg) 19% 20% 22% 25% Investments/GDP 4,5% 7,7% 8,4% 6,0% Budget balance/GDP 24% 16% 10% 7% Govt debt/GDP 10,9% 12,7% 9,7% 9,0% CPI inflation (% chg) Money demand (%chg) 40% 36% 45% 50% 33% 31% 92% 27% Stock prices Avg. (%chg) 13,3% 12,8% 11,5% 10,1% Interest rates 29 28 27 26 Exch. Rate ($) 47% 48% 47% 45% Trade/GDP (%) $38 $54 $65 $73 Oil price (Brent) Millions US $ 183 207 243 799 303 550 354 400 Export of goods 97 382 125 433 164 280 223 485 Imports of goods -26 312 -33 958 -44 930 -54 675 Other: 59 513 84 408 94 340 76 240 Current account ($ mill) 10,1% 11,1% 9,5% 5,9% (% of GDP) 1 662 119 6 551 9 159 FDI -12 718 -32 475 -37 474 -24 249 Loan repayments -15 394 7 175 32 327 92 037 Net other capital flows 33 063 59 227 95 744 153 187 Balance of payments 94 060 153 287 249 031 402 218 Reserves 198 450 232 850 285 475 412 433 Total debt 32 325 39 950 54 300 90 125 o/w short term debt Source: OEF (Oxford Economic Forecasting) and SEB estimates. Rating history Fitch (eoy) S&P (eoy) Type of government: Next elections Other: Latest PC deal Latest IMF arrangements

BBBB+ BBBBB BB BB+ Presidential democracy Presidential elections 2012

BBB BBB

2008

2009

2010

2011

1 677,5 11832 5,6% 26% 4,3% 5% 14,1%

988,2 7006 -2,4% 25% -6,0% 7% 12,7%

1 001,5 7137 2,7% 26% -2,2% 7% 8,6%

1 220,0 8741 5,6% 26% 0,8% 6% 7,4%

24%

-3%

9%

16%

-17% 11,3% 25 45% $98

12,2% 38 54% $45

10,3% 38 62% $60

10,0% 35 63% $74

468 953 292 490 -77 549 98 914 5,9% 12 934 -22 450 14 568 103 966 506 184

279 243 254 114 -66 678 -41 549 -4,2% 480 -21 350 -101 515 -163 934 342 250

346 075 275 229 -68 510 2 336 0,2% 5 526 -24 446 -17 166 -33 750 308 500

440 346 332 187 -63 764 44 395 3,6% 5 893 -27 004 -32 174 -8 890 299 610

BBB+ BBB+

1999/active 1998/SBA S to c k m a r k e t

S p r e a d (E M B I) 1300

2500

1200

2250

1100 2000

900

1750

800

1500 Index

Basis Points

1000

700 600

1250 1000

500 400

750

300

500

200

250

100

0

0 03

04 R us s ia ( b o tto m )

05

06

07

08

01

09

02

03

04

05

06

07

S o u rc e : R e u te rs E c o W in

S o u r c e : R e u te rs E c o W i n

B a n k C re d it to P riv a te s e c to r

In te rn a tio n a l R e s e rv e s

1 7,5

6 00

1 5,0

5 00

1 2,5 USD (billions)

RUB (thousand billions)

08

G lo b a l (to p )

1 0,0 7,5

4 00 3 00 2 00

5,0

1 00

2,5

0

0,0

01

02

03

04

05

06

07

08

S o u rce : R e u te rs E co W in

01

02

03

04

05

06

07

08

S o u rce : R e u te rs E co W in

4

=