Page 24 - IFR Opportunities in Russian capital markets

CHAPTER 01
ifrintelligence reports/Opportunities in: Russian Capital Markets
Figure 1.11: Oil price – Brent quarterly average, 1Q2006–4Q2007F (US$/bbl)
US$/bbl 75
70 65 60 55 50
Source: Raiffeisen
1Q06 2Q06 3Q06
4Q06 1Q07
2Q07 3Q07 4Q07
Trade and the balance of payments
Russia continues to enjoy a very strong positive balance of payments. The trade turnover with foreign countries other than the CIS increased 28.7%, to US$371.4bn in 2006, while trade turnover with the CIS countries was up 25.4%, to US$64.7bn, according to figures released in January 2007 by the Federal Customs Service.
The EU is the largest economic partner of Russia, accounting for 53.2% of trade turnover in 2006 and 52.1% in 2005. The CIS countries accounted for 14.8% (15.3% in 2005) and Asia made up the remaining 7.8% (7.8% in 2005). Russia’s main trading partners outside the CIS in 2006 are shown in Table 1.4.
Imports were up 45% to US$115.7bn in 2006 and while the absolute value of imports remains less than those of exports, the rate of growth of imports was higher than exports for the first time in recent years, rising 37.7% against the 25.5% increase of exports over the same period. Russian external trade details are shown in Table 1.5 and the composition of exports in 2006 in Figure 1.12.
UBS said in January: "The current account surplus has peaked as imports continue to outpace exports. In dollar terms imports grew by 34% y-o-y in 2H06 compared to 25% in 1H06, an accelera- tion that we attribute to the rapid increase in investment spending."
Some 40% of imports in 2006 were heavy machinery, which Peter Westin, chief economist at MDM bank, says is a good sign and indicates that Russian industry is tooling up for more growth.
However, experts say that the Federal Customs Service's statistics overstate the real growth rates of imports because of corruption, leading to significant amounts of unregistered trade.
"The European Union is Russia's main partner in the sector of registered trade. The greatest increase of imports was registered in this direction, because the ruble grew stronger against the euro significantly," says Igor Belyakov, an analyst at the Expert Economic Group. The Middle East is now an insignificant trade partner and the US is only a minor partner.
Table 1.4: Russia's main trading partners outside the CIS, 2006 (US$bn, %)
Country Trade (US$bn) Increase on 2005 (%)
Source: Russian tax service
Germany
The Netherlands Italy
China
Turkey
United States Poland
Britain
France Switzerland
42.9 30.1 38.5 45.1 30.8 31.4 28.6 41.0 17.0 35.6 15.3 40.7 14.9 30.9 14.0 26.9 13.5 37.5 13.4 14.7
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