Russia’s economy is on the brink of a technical recession this quarter after gauges of manufacturing and services showed that seasonally adjusted output probably shrank between January and March for the first time since 2010, Bloomberg News reported. The composite purchasing managers’ index dropped to 47.8 last month from 50.2 in February, HSBC Holdings Plc said today in a statement, citing data compiled by London-based Markit Economics. A reading below 50 indicates contraction. Business expectations in the services industry were close to a record low seen at the end of 2008, HSBC said.
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Russia
Rusal, the world's largest aluminium producer, could default on some of its multi-billion dollar debt if it fails to reach a new deal with creditors this week, it said after reporting its biggest annual loss since 2008, The Sydney Morning Herald reported. The company's earnings have been hammered by low aluminium prices, which in 2013 fell back to levels last seen in the aftermath of the financial crisis.
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Russia faces a growing risk of recession as a hemorrhaging of $100 billion in capital this year may bring the economy to a near standstill, according to analysts and government officials, Bloomberg News reported. Gross domestic product will expand 1.2 percent in 2014, according to the median estimate of 37 economists in a Bloomberg survey. That compares with a 2.2 percent forecast in last month’s poll. The economy may stagnate at rates below 1 percent and contract if capital outflows reach $150 billion, Economy Minister Alexei Ulyukayev said at a conference in Moscow today.
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The Russian government is braced for the country’s capital outflows to soar to $70bn in the first three months of the year as investors seek cover from the fallout of President Vladimir Putin’s Ukrainian land grab, the Financial Times reported. Andrei Klepach, Russia’s deputy economy minister, said on Monday that capital outflows in the first quarter were expected to be closer to the top end of a $65bn-$70bn government estimate, as fears of tighter sanctions hit the economy.
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Two companies have filed bankruptcy suits against Kosmos, one of the country's oldest construction firms, The Moscow Times reported. Moskapstroi-Nedvizhimost, a Sistema subsidiary, said it paid Kosmos 100 million rubles ($2.7 million) last fall as part of a reconstruction project in central Moscow, but that work had still not begun, Vedomosti reported. A Sistema employee said that the two sides had reached a settlement agreement and that the money would be returned. The second bankruptcy case, filed by Tsniis, a civil engineering company, is due to be heard April 4.
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As Russia's military secured the Crimean peninsula, its currency hit a record low and its stock market plunged in the face of U.S. and European warnings of sanctions over the incursion into Ukraine, The Wall Street Journal reported. The Obama administration took the first steps late Monday, suspending military cooperation with Russia as well as talks aimed at boosting trade and investment, in a bid to isolate Moscow. President Barack Obama said Russia is "on the wrong side of history" as well as international law.
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OAO Gazprom’s threat to end natural gas discounts for Ukraine adds to the financial burden on the near-bankrupt government in Kiev and makes Europe’s energy supply part of the escalating crisis, Bloomberg News reported. Russia’s gas-export monopoly said on March 1 it may end last year’s agreement to supply Ukraine at a cheaper rate unless it’s paid $1.55 billion owed for fuel. It’s the first time since the otherthrow of pro-Moscow president Viktor Yanukovych last month that Russia has directly used its position as Ukraine’s dominant energy supplier to pressure the new regime.
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There is a small risk that Ukraine may default on $3 billion in Eurobonds that Russia recently acquired, Russia's Deputy Finance Minister Sergei Storchak said on Tuesday. "We probably have risks, but not so big ones," he said. "It's possible to begin with the fact that the debtor has a difficult financial situation, that it can't return the money to us in two years." Storchak added that while the possibility existed of substituting one instrument for another, he was opposed to including Ukraine's debt to Russia in a general restructuring. "This wouldn't be right.
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Russian state lender Sberbank is negotiating with loss-making aluminium group Rusal on a debt restructuring deal to help the company weather low aluminium prices, two banking sources told Reuters on Friday. United Company Rusal, the world's biggest producer of the metal used in transport and packaging, has been hit by weak aluminium prices and its heavy net debt levels of around $10 billion. "The model has been broadly agreed... We cannot afford the world's largest producer to fail," one of the sources said. Rusal declined to comment. Sberbank could not be reached for immediate comment.
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Russia Buys First Tranche of Ukrainian Eurobonds $3 Billion Paid as Part of Moscow's Bailout Package
Russia has made its first payment of $3 billion for Ukraine's newly issued eurobonds, as part of Moscow's bailout package for its struggling neighbor, Russian Prime Minister Dmitry Medvedev said Tuesday, Interfax reported yesterday. The payment was first announced by Russian Finance Minister Anton Siluanov on Monday. Ukraine's President Viktor Yanukovych last month unexpectedly refused to sign a landmark association agreement with the European Union that would have removed significant trade barriers.
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