Page 8 - RusRPTJun21

Russia’s GDP per year. With the extra revenues there is also talk of reducing Russia’s borrowing programme this year.
The official forecast for growth this year is 2.9% and 3% is the consensus guess, but given all the good news coming out in May analysts are already revising up their expectations: BSC GM is predicting growth of 3.3% this year with possible surprises on the upside.
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The new US sanctions on Russian domestic OFZ bond issues imposed on April 15 are due to kick in on June 14, but the MinFin has already almost completed its borrowing programme for 2021 and could stop issuing OFZ completely in June if it wished. However, to keep the markets liquid it will almost certainly continue to issue more OFZs and the ministry is already starting to issue new debt to retire the most expensive debt issued last year during the height of the crisis.
At the same time the ministry tapped the international capital markets with a €1.5bn Eurobond issue the day after Russian foreign minister Sergei Lavrov and his counterpart US Secretary of State Antony Blinken met in Reykjavik on May 20 in a positive meeting – the first top level meeting between the new Biden administration and the Kremlin. Demand was decent, but the issue was not seen as a knock out success. The Kremlin seems to be following a policy of continued debt issues partly to keep international investors exposed to Russian debt and so make it more difficult to sanction.
Geopolitical tensions remains the main political issue, but the Biden administration has made it very clear that it wants to wind the confrontation down and is willing to compromise. The main even in May was the US decision not to sanction the operating company that is building the Nord Stream 2 gas pipeline and thus more or less assuring its completion this summer. A state department official commenting on the decision said that Washington’s relationship with Germany, which wants the pipeline, is more important than its argument with Russia. This decision will go down very well in Moscow and clears the path to constructive talks between Putin and US president Joe Biden slated to happen in the middle of June. A further de-escalation of tensions will lead to lower borrowing costs and more investment that should act as a tailwind to Russia’s already better than expected economic recovery.
Against the positive news on the international stage, the Kremlin has been ramping up its repression of political opposition groups and the free press on the domestic front ahead of September Duma election. Jailed anti-corruption activist and opposition politician Alexei Navalny group has been effectively labelled a terrorist organisation and outlawed. Its members can now not do anything at all without facing heavy prison sentences for participating in “extremist” activities. Likewise, a raft of publications, including Meduza.io and VTimes.ru (a new title set up by the staff of top newspaper Vedomosti, who quit en masse after the Kremlin took the paper over) have both been ladled “foreign agents” that will kill their commercial viability. It seems that after the
8 RUSSIA Country Report June 2021 www.intellinews.com