Page 11 - RusRPTMay19

At the end of March, the Danish regulatory authority mentioned that it did not plan to examine the previous two Nord Stream 2 route applications until the company had considered an alternative route in the waters south of Bornholm, Kommersant reports.
According to the paper, the delay in the approval of the Nord Stream 2 route through Denmark might require Gazprom to discuss a new transit contract with Ukraine for a significantly higher volume than the 10-15bcm/a previously announced by Gazprom CEO Alexey Miller. Volumes of 65bcm via Ukraine would effectively make Nord Stream 2 useless.
“Gazprom has received permissions from all the countries along the route (Sweden, Finland, Germany and Russia), except Denmark,” VTBC said. “The potential risk that the pipeline might not be commissioned on time is negative for the company, given that the gas transit contract with Ukraine expires at the end of this year, and the gas monopoly had previously planned to reduce gas transit via Ukraine from 87bcm/a in 2018 to 10- 15bcm/a after 2019. Therefore, were the commissioning of the 55bcm/a Nord Stream- 2 to be delayed, that might require Gazprom to discuss the transit of 65-70bcm/a through Ukraine in 2020. Such negotiations could, in our view, be quite tough. Since the Ukrainian route might require higher transportation costs compared with Nord Stream 2 (around 30% on our estimate, based on the company’s financials), we deem the news as negative for sentiment on the name.”
Gazprom’s stocks have been punished as the political uncertainty swirls around its business. In 2008 Miller famously boasted that the company was on the way to becoming the world’s first trillion dollar concern with a market capitalisation of $300bn at the time. Since then Apple managed to make it to the trillion dollar market line and Gazprom’s market cap has fallen back to $53bn. It is now one of the most undervalued stocks on the Russian exchanges and smaller independent oil and gas producers Novatek and Lukoil are threatening to overtake it as bne IntelliNews reported in a recent piece “King of the castle.”
2.6 Share of middle class falls from 60% to half as income stagnates
The number of Russians that consider themselves to be part of the middle class has fallen from 60% to half (47%) in 2018, as real income stagnate and years of crisis weight on confidence, according to the quarterly “Ivanov Consumer Index” poll conducted by state-owned retail lender Sberbank.
“Ivanov” is the most common name in Russia and the survey studies the economic situation in Russia as a leading indicator of development and change. The share of respondents who believe that their income is below the average level increased by the same amount - from 35 to 48%.
A sharp reduction in the middle class occurred in 2015–2017 following the collapse of the oil prices and associated ruble devaluation but in the past 15 months its share has remained stable, says Yaroslav Lissovolik , head of research at Sberbank CIB.
“If a person can postpone, travel, go to restaurants, then he considers himself to be middle class,” Lissovolik said as cited by Vedomosti. “If there is enough money only for basic spending then they consider themselves to be below average.”
In Moscow, the share of the middle class from 2014 to 2018 decreased from 63% to 54%, and low-income increased from 27% to 39%, Sberbank CIB said in the study
The situation is worse in the region where the income levels are widely spread, but also connected what the region produces. As bne IntelliNews reported,
11 RUSSIA Country Report May 2019 www.intellinews.com