Research & Insights #50

US has urged Ukraine to halt strikes on Russian oil refineries

The US has urged Ukraine to halt its attacks on Russian energy infrastructure, according to the Financial Times. Washington fears that drone strikes could drive up world oil prices and provoke retaliation from Moscow. Since January, Ukraine has stepped up drone attacks on Russian crude processing facilities. Their aim is to paralyse fuel supplies, an important source of income for the Russian state. The extent of the losses caused by this year’s strikes is unclear. However, they have prompted Moscow to ban gasoline exports for a period of six months from 01 March. At least nine major refineries have been successfully attacked this year, putting an estimated 10-15% of the country’s total refining capacity offline. Despite Western sanctions, Russia remains one of the world’s leading energy exporters. US President Joe Biden, who is beginning his re-election campaign, takes a dim view of the recent 15% rise in oil prices to US$ 85 a barrel.

Vladimir Putin re-elected President of the Russian Federation

Vladimir Putin was officially re-elected on 17 March for a fifth term as President of Russia, with 87.28% of the vote and an overall turnout of 77.49%. Of the three parliamentary opposition candidates allowed to stand, Communist Party (PCFR) candidate Kharitonov came second with 4.31% of the vote, followed by New People’s Party candidate Davankov with 3.85% and Liberal Democratic Party (PLDR) candidate Slutsky with 3.2%. These results appear to be in line with the latest poll conducted by VCIOM (Levada) on 15 February. It gave Putin 70%, Kharitonov 3.4%, Slutsky 2.3% and, above all, indicated that 20.5% of voters who had decided to cast their ballot had not yet decided for whom, giving a turnout rate of 87%. If the Western media attribute these results to ballot-box stuffing and other rigging, they are probably underestimating the “flag effect” produced by the war in Ukraine.

Russia’s central bank keeps rates at 16%

Last week, Russia’s central bank maintained its key interest rate at 16% for the second time in a row. According to the institution, domestic demand continues to outstrip the capacity to expand production of goods and services. As a result, inflationary pressures remain high, and tight monetary conditions must be maintained in an attempt to bring inflation back to the bank’s 4% target. Governor Elvira Nabiullina said a rate cut was more likely in the second half of the year. Inflation was 7.4% in 2023, compared with 11.9% in 2022. “The personnel shortage remains a serious limitation for further production growth,” said Ms. Nabiullina. The central bank forecasts GDP growth of 1-2% in 2024, while the International Monetary Fund anticipates an increase of 2.6%. The next meeting of the Board of Directors of the Bank of Russia is scheduled for 26 April.

VK’s revenues are up, but its debt is soaring

VKontakte, the “Russian Facebook”, is growing in a context where the online market has been severely shaken by Kremlin measures and Western sanctions. In 2023, VK’s annual revenues rose by 36% to 132.8 billion rubles (US$ 1.5 billion), according to its IFRS accounts. This increase is mainly due to the integration of advertising into the content that VK produces itself, reports Kommersant. At the same time, however, its debt increased even faster, by 41.8%, to 139 billion rubles in the same year. VK is seeking to consolidate its position as Russia’s new Internet champion by investing heavily and taking advantage of Yandex’s setbacks. Analysts note an increase in the debt/equity ratio, which “significantly reduces the level of financial autonomy”. In 2023, Adjusted EBITDA amounted to 0.5 billion rubles. VK confirmed that the company was “in an active investment phase”, but added that the holding planned to complete it in 2024.

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