Page 10 - RusRPTDec18

50mn tonnes this year.
After the landmark deal signed between Russia's largest oil company Rosneft and China National Petroleum Corporation (CNPC) in 2013, Rosneft has extended cooperation with CNPC and CEFC China Energy. Most recently the contract of troubled CEFC has been overtaken by CITIC Resources (a subsidiary of the Chinese government fund CITIC).
Analysts surveyed by Vedomosti confirm the trend of increased output by Rosneft in Eastern territories and focus on long-term supply deals and joint extraction ventures with Chinese and Indian companies. In the meantime the European market is stagnating due to lower economic growth, renewable energy policies, and transition to a service-driven economy.
This week bne IntelliNews reported that Rosneft gave a bullish capital expenditure guidance for 2019 as it prepares to boost output. However, the company is trying to shield itself from possible future sanctions by revising contracts with its major buyers. Previous reports suggested that Chinese banks have so far complied with the sanctions imposed by the US and the EU against Russia.
2.4 Russia’s bank sector clean up enters end game
The number of banks in Russia fell below 500 for the first time ever, as the Central Bank of Russia (CBR) campaign to clean up the sector moves into its end game.
Since taking over in 2013 CBR governor Elvira Nabiullina has steadily closed about 100 banks a year. Altogether the Central Bank has revoked licenses from more than 400 banks and sanitized more than 30 credit organizations, according to Nabiullina.
“In recent years, we have withdrawn more than 400 banking licenses, sanitized more than 30 banks, including three very large banking groups,” Nabiullina said at the Congress of Financiers of Kazakhstan.
There was an explosion of banks in the 1990s during what came to be know as the “wildcat” banking days. Regulations on starting a bank were eased and as only a small amount of capital was needed to establish a bank companies and businessmen established thousands of what Renaissance Capital analyst Kim Iskyan famously called “bank-like institutions.” At the peak there were some 4,500 banks registered in Russia.
However, few of these banks actually did any real banking business. At best they were “glorified treasury operations” (another Iskyan epithet) and at worst they were “money chutes” established to facilitate capital flight through non- transparent schemes.
Sod business bank
The sheer number of banks is a major headache for the CBR, which was overwhelmed and so unable to physically regulate the sector. That poses a systemic risk to Russia’s entire financial sector, which is otherwise one of the most sophisticated in the emerging markets (EM) universe. A lack of manpower meant the CBR was simply unable to prevent the stealing, scams and schemes to whisk cash overseas as it doesn't have enough inspectors to oversee everyone.
The need to clean up the sector has been obvious for years and dovetails with President Vladimir Putin’s “deoffshorisation” initiative which at first banned Duma deputies from holding bank accounts abroad, but has since been broadened to include managers of state-owned enterprises as well as “encouraging” Russian companies domiciled overseas to bring their legal
10 RUSSIA Country Report December 2018 www.intellinews.com