What does Brexit mean for Russia?

No direct or immediate implications for Russia. The UK’s decisions to leave the EU will have no direct impact on the Russian economy over the short term. However, the uncertainty created by the decision will unsettle global markets for years and that will have indirect consequences for all developing economies. 

Relatively insulated from any negative contagion. After two years of adjusting to sanctions and the lower oil price, the Russian economy and the ruble are relatively well insulated from further weakness even if growth in the UK and or the EU slides on the back of the UK exiting the union and the uncertainty that created.

Oil price not vulnerable to EU weakness. The price of oil is not particularly vulnerable to economic weakness in the EU – the bigger factors driving the oil price include Chinese and Asian growth, the trend in the supply from North American shale projects and from Iran plus the risk of further outages in Nigeria or the Middle East. EU oil usage has fallen by an average of 1.7 million barrels per day since 2007, while usage in China and other Asian countries has risen by almost 7 million barrels per day in the same period.

CBR will limit currency volatility. The ruble fell as a result of the vote but only in line with the shift in investor sentiment to all EM currencies and in line with the oil price dip. The Central Bank of Russia (CBR) should be easily able to contain any volatility given the low level of investor involvement in Russia’s capital markets.

Weak sterling opens opportunities for UK businesses to compete in Russia. Sterling’s weakness against the euro (down 20% over the past six months) creates opportunities for UK exporters to take market share in Russia from EU competitors. While the Kremlin’s priority is to push localization as a new growth driver, there are clear opportunities in such areas as e-commerce, equipment supply, and services.

Brexit may weaken sanctions resolve in the EU. There is no basis to assume that Brexit will have any near-term impact on sanctions. But the UK has been a strong supporter of tough sanctions and that resolve may now weaken as, a) London becomes distracted by the unwinding process, b) it will have new leadership with different priorities, and c) the UK looks for new export markets to develop.

EU will renew sectoral sanctions for another 6 months. It is expected that the sectoral sanctions will be fully renewed in July but only for six months. The next renewal will then take place during the interval between the US presidential election and inauguration day. Given that the decision on US sanctions is under the remit the president and not Congress and that the White House consistently reminds that the sanctions are scalable, there is now a growing hope for some easing of financial sector sanctions in early 2017.

Sanctions dissatisfaction is growing in any event. In any event, Chancellor Merkel is facing growing pressure from within her coalition government, from German industry and from other EU countries, most notably Italy, to agree to the start of a process to unwind sectoral sanctions.

No macro forecast changes. We see no reason to adjust our medium-term macro forecast models as a result of Brexit or the expected contagion from the vote. We remain confident of our Base Case assumptions.

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New export certificates for fish are required

Norwegian Food Safety Authority (Mattilsynet) informs that as from 01 June 2016, new export certificates for fish are reqired for export to member countries of the Eurasian Economic Union (Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia). Information about the new requirements was forwarded to the Norwegian authorities in the beginning of May 2016 by Russian veterinary authorities. The Norwegian Food Safety Authority requested to prolong the validity of "old" certificates during the transition period, but the request remains unanswered as for June 2016. Read more at www.mattilsynet.no (in Norwegian only).

Norwegian-Russian Business Journal №1, 2016 (in English with Russian summaries)

The Norwegian-Russian Business Journal is the member journal for NRCC members, where subjects of relevance to the economic cooperation between Russia and Norway are discussed.  

The latest issue was published in April 2016 and contains articles about activities of NRCC and its member companies, recent developments and updates on Russian and Norwegian markets and relevant news from Norwegian and Russian business communities. This issue's "Economy and Trade" section contains statistical evaluations of Norwegian-Russian trade for the period 1993-2015, as well as Russian trade with Nordic Countries in 2015.

Please download here Business Journal in pdf format.

18 May 2016, during the announcement of the winners of the 23rd licensing round, the Russian NRCC member company LUKOIL Overseas North Shelf was awarded a 20% stake in operating license PL858 in blocks 7234/7235 located directly along the Norwegian-Russian maritime border in the Barents Sea. In this round, the Norwegian Ministry of Petroleum and Energy awarded ten new licenses, consisting of 40 blocks in total.
Thirteen companies are offered participating interest, whereof five companies are offered operatorship. In the press release from the Ministry of Petroleum and Energy of Norway in connection with the announcement, it is underlined that access to new, attractive exploration acreage is a precondition for long-term activity and value creation in the petroleum sector of Norwegian industry, and thus employment throughout the country. This is a cornerstone of the government's petroleum policy and is particularly important in the current challenging times for the industry.

Press release from the Norwegian Ministry of Petroleum and Energy of 18 May 2016.

Russian Economic Developments - №5 - 2016

The newest issue of the "Russian Economic Developments" prepared by experts of Gaidar Institute for Economic Policy in Moscow, is now available.

In this issue:

Forecast 2016-2017: Russia’s economy to enter a stabilization zone • Foreign currency and Russian ruble: what does the balance of payments tell us? • Inflation: limits of slowdawn • Regions - focus on reduction of expenses • Demand on foreign assets is falling, bank currency accounts are stable • Russian industry in Q1 2016: the onset of stagnation? • Enterprises retain high propensity for adaptability • The way flows of food products changed in the wake of embargo • Foreign trade: trade balance down due to decline in export • Resources of migration growth have run dry • Privatization program for 2014-2016: formal shifts and uncertain prospects • The defense industry failed to underpin the national economy

"Norwegian-Russian Partnership in Business Education and Research: Impacts on individuals, institutions and society"

15 SEPTEMBER 2016 08:30 - 15 SEPTEMBER 2016 17:00, Saint Petersburg, Russia

The conference is organized as a part of celebrating the 25-years anniversary of cooperation between High North Center, Business School at NORD University with Baltic State Technical University and aims at sharing experiences of Norwegian-Russian cooperation, and discusses future opportunities for building a partnership in business, higher education, and research. The Conference will take place September 15. 2016 at the facilities of the Presidential Library named under Boris Yeltsin (http://www.prlib.ru/en-us/Pages/about.aspx).

The conference assembles various stakeholders from Norway and Russia representing industry, governmental and non-governmental bodies, and higher education and research institutions. During the conference, opportunities connected to projects, study programs, and institutions will be presented and discussed. Graduates, who occupy important positions, will share own experiences. More information and registration here!