Page 109 - RusRPTFeb19

rail line will be taken by Putin. The Moscow-Kazan high-speed route is estimated to cost nearly $25 billion in total. Budget funds are only supposed to provide about one-third of the total capital needed, with the rest coming from loans, the concessionaires, and investors. The plan aims to achieve 7.6 million people in annual passenger turnover within three years of completion and revenue growth of 10% in the early-going. It's completely unclear these are feasible. The line is reportedly supposed to operate without subsidies, but not only serve the rich. How the state plans to reconcile those two aims with real wages stagnant or falling is an open question.
The Northern Sea Route (NSR) will be funded to the tune of RUB900bn
($13.5bn) over the next five years, a third of, which will go towards funding Rosmorrechflot. The spending authorization should raise eyebrows given that last year, the Arctic development budget had, at one point, been cut nearly 90% and roughly three-quarters of investment concerned Yamal LNG. Novatek is clearly pushing hard, but the real story here is Rosatom. River freight investments are needed, but won't significantly alter trade patterns. It's the development contracts and ability to inflate costs that Rosatom seriously needs to help cover its inefficient business model abroad, particularly with a new plant in the works for Uzbekistan as well as potential lost market share to Chinese competitors in time.
● The May decrees call for annual freight turnover of 80mn tons a year by 2024, though experts expect the figures will not exceed 60-70mn tons.
● Nuclear monopoly Rosatom has now legally been handed jurisdiction over the NSR, which grants it considerable leeway over spending priorities.
● The Environmental Ministry (MinPrirody) is estimating cargo flows will not exceed 65.8mn tons annually by 2024.
● Novatek is a primary lobbyist for spending in support of infrastructure and programs that aid the firm's development strategy for Arctic LNG as well as existing investments into Yamal LNG.
The management of Moscow Region airport Zhukovksy is working on creating a new charter airline WeGo Air, Interfax and Ria Novosti reported on December 10 citing unnamed sources. The new carrier may launch its first flights in the spring of 2019, but no details were given. The airline will specialize in international charter flights, and in the first stage of the rollout it plans to use four Airbus A321 jets out of Zhukovsky airport in Moscow 36km from the centre. Among the potential destinations are popular resorts in Russia, Europe and Tunisia.
The rate of growth of freight turnover maintained a slight downtrend during 2018, stopping at an increase of 2.3% y/y in December. Some 29mnt of additional cargo (for a total of 1.3bnt) was transferred by rail in 2018, +2% y/y. We expect the same growth next year. Meanwhile, gondola lease rates continued to climb and established a new record in December of RUB 1,925/day (+20% y/y). Combined with the shortage of gondolas and high prices for new ones, Globaltrans (12-mo TP of USD 14.5; 78% ETR; Buy) could benefit from the positive tariff dynamics.
Coal. Rising global thermal coal prices pushed Russian exporters’ appetites up and supported volume growth in 2018 (+5% y/y). However, demand for such
109 RUSSIA Country Report February 2019 www.intellinews.com