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The main thing that can allow Gazprom to reverse the decline of the gas business is the construction of a new gas pipeline, Power of Siberia-2, which will allow gas to be redirected to China from the Yamal fields of Western Siberia, which was previously sold to Europe. But for two years now, despite periodic loud statements from the Kremlin and the “friendship without borders” announced by Xi Jinping two weeks before Russia’s invasion of Ukraine between the two countries, there has been no progress in negotiations on the construction of a gas pipeline. In May, after his inauguration, Vladimir Putin plans to visit China; It is unclear whether the trip will have any results in terms of “Power of Siberia-2”.
Earnings from gas exports became Russia's first and most obvious irreversible economic loss due to the war. No “Power of Siberia-2” will return gas excess profits - gas is sold to China at 30-40% cheaper.
2.6 Russia’s car sector makes almost full recovery from sanctions shock
After coming to a total stand still in the months after the invasion of Ukraine two years ago, Russia's automotive sector has almost made a complete recovery and is on course to sell 1.3mn cars this year.
Passenger car and light commercial vehicles (LCVs) sales in Russia grew by 102% in March 2024 y/y and by 86% year on year in 1Q24, to 150,640 sales according to the latest report by the Association of European Business’s Automobile Manufacturers Committee (AEB) Automobile Manufacturers' Committee that tracks car sales. (chart).
The all-time high was set in December 2019 with 179,000 sales. This March’s results were the highest result since June 2021 when 157,800 cars were sold. (chart).
Russia’s car production came to a screeching halt after all the international European Original Equipment Manufacturers (OEMs) halted imports of parts that make up some two thirds of their inputs at Russia-based factories, bringing production to a standstill. By the end of 2022 there were only 11 foreign carmakers left in Russia from over 60 pre-war, almost all of them Chinese. At its low point, Russia was producing just over 3,000 vehicles a month in the summer of 2022.
Russia remains a very attractive market and briefly overtook Germany as the largest car market in Europe in the first six months of 2008, churning out over a million cars in that period and was on track to break through the two million mark by the end of that year. However, the Great Financial Crisis of that year knocked back income and sales tanked, never to fully recover.
The coronavirus pandemic also hurt sales during the lockdown months that started in April 2020. But as the chart shows, the self-sanctions imposed by OEMs in the second half of 2022 have had by far the most negative effect on
18 RUSSIA Country Report June 2024 www.intellinews.com