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Sunday, March 11, 2018

Russia was allowed to take money in the West

International rating Agency Standard&Poor’s raised its Outlook on the credit rating of Russia from “negative” to “stable”. Although the rating itself was left at the same level, i.e. so-called junk or non-investment, the prospects for Russia’s return to the Western credit markets are greatly increased.

photo: Gennady Cherkasov

So what is the current state of the Russian economy has softened the hearts of the sharks of wall Street? Analysts at Standard&Poor’s noted the following settings.

First. External risks have decreased. This does not mean that will be canceled Western sanctions. On the contrary, they will be saved until at least 2019. Also in the S&P do not expect a significant increase in oil prices.

However, to predict the latter figure is difficult. Some experts expect from the coming meeting of OPEC member countries and Russia in Algeria on 28 September of the comprehensive agreement on the freezing of production and, therefore, some increase in prices, others complete failure, after which oil prices will fall down. Perhaps up to $30 per barrel.

So where is the mitigation of external risks? Essentially, it is not. But there is growing adaptability of the Russian economy to such pressure.. In the result, Russia’s GDP in the years 2017-2019 will grow on average by 1.6% (after expected decline of 1% in 2016). S&P also forecasts that net capital outflow from Russia in 2016 will drop to $40 billion to 58 billion in 2015.

In addition, the current account surplus in the years 2017-2019 will average 3.8% of GDP, which will lead to the growth of the international reserves of the Central Bank. However, while the Reserve Fund, which operates the Ministry of Finance, seeks to complete the ruin. According to a source from the Finance Department, the last 2 trillion rubles from the Fund will be exhausted already in the beginning of next year, and then at the end of this.

However, in any case, GDP per capita will grow from $8.4 million in 2016 to $10.3 million in 2019.

In General, investors can think: of course, the rating, Russia is garbage and here to invest money you shouldn’t. But another question arises: Russian Eurobonds imitated abroad, to purchase quite possible, since S&P still improved forecast.

This is a very important support. Finance Minister Anton Siluanov, commenting on the decision of S&P, noted that the improvement of the forecast of Russia’s sovereign rating was the first positive assessment by international rating agencies since September 2010.

Of course, this begs the question, because the Western sanctions has not been canceled. But they really are directed either against specific individuals and companies and even entire sectors: oil and gas, and banking. Against the Russian Federation as the state in General they were not introduced. Therefore, to place Eurobonds is quite possible. Another thing that Washington warned major Western banks not to buy the Russian bonds. Indeed, the first attempt this year to throw at the bond market for $3 billion was sold for only $1.75 billion But in November–December of this year opens a corridor for the placement of our securities. After the election of the President of the United States, the Washington bureaucracy will be a while before us. At least the missing $1.3 billion, it is possible to collect. And then — and more.

In this situation, the decision of the rating Agency just in time. Special risks in buying Russian bonds should not be.

And no external borrowings will be tight. Experts say that the privatisation programme this year is unlikely to fully be made. Even with the sale of a package of 19.5% of the largest oil companies is not so simple — there is still a strategic investor. And how could he be, while maintaining sanctions against the Russian energy sector?

So S&P acted at the time. Especially when you consider that another rating Agency — Fitch — holds still is not trash, a little investment rating of Russia.

Sanctions . Chronicle of events

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