Russia: Emergency fund planned for companies hurt by sanctions

Yesterday, Russian Finance Minister Anton Siluanov announced that a new multi-billion dollar emergency fund would be created to counteract the effects of Western sanctions with a state funded stimulus. The bailout fund will last at least through next year, despite allegations by Russian authorities that sanctions would have little to no effect on the Russian economy. About 100 billion roubles (or $2.65 billion) will be reappropriated from the government pension fund to support companies that are the target of Western sanctions, the latest round of which targeted the Russian energy industry. Yesterday, Rosneft announced that it was allowing Chinese state oil company CNPC to acquire a 10 percent stake, which will provide a line of capital for Rosneft to manage its substantial liabilities.

The sanctions target foreign-held assets in banks, travel bans on top officials and tycoons, and technology transfers for larger Russian oil and gas companies like Gazprom. The Russian Economy Ministry additionally slashed growth prospects to 1% in 2015 and 2.5% in 2016. The emergency fund is likely to be tapped if crude oil sinks lower than 96$ a barrel, which is the prospective level factored into the budget for 2015. Russian Energy Minister Alexander Novak met OPEC officials yesterday in Vienna, as the fall in the price of oil coupled with a decrease in domestic oil production puts pressure on state coffers.

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News Briefs:

  • Genie Energy announced that it has signed a new agreement with Mongolia to continue exploration throughout the country. The new agreement will allow Genie’s Mongolian subsidy, Genie Oil Shale Mongolia, LLC, to have access to more than 25,000 square kilometers in Central Mongolia, to the southeast of the Mongolian capital of Ulaanbaatar. The agreement will also allow for a means by which the company can request a production agreement once resources have been identified.
  • Kyrgyzstan played host to the first ever Nomad Olympics. The gathering will see more than 400 athletes converge from 19 countries and is a throwback to the time of Genghis Khan, when thousands of nomads convened on the Mongolian steppes to celebrate their unification. The initiative has been hailed by supporters of Kyrgyz President Almazbek Atambayev as the first event in Kyrgyzstan’s relatively short history to unify the nation. Others, however, were less impressed by the event’s emphasis on ethnic Kyrgyz traditions to be insulting, as not all within Kyrgyzstan share or relate to Kyrgyzstan’s past.
  • Russia has announced that it will boost the number of troops stationed in Crimea. The Russian defense minister announced that maneuver, citing that the “situation in Ukraine has escalated sharply.” The issue of escalation in Ukraine has been, of course, attributed to Russian tampering and intentional provocation, though Russia remains adamant about its role and denies culpability for the situation, despite the presence of Russian soldiers within Ukraine. The decision to increase the amount of troops has already been denounced by NATO as a move that would undermine the ongoing Russia-Ukraine cease fire.
  • Turkmen gas output rose by 111.17% during the period stretching from January-August of this year. The total is indicative of significant Turkmen activity in the gas and oil sector, including new deals to sell to China, Russia and Iran. Current pipeline infrastructure is largely Russian, though increased cooperation with China represents a Turkmen policy of diversification that will likely see the little-known Central Asian nation play an increasingly important role in world energy affairs.
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