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RUSSIA | STRATEGY JANUARY 2011

Russia: 20 Years of Change Collapse, Recovery and Transformation

Kingsmill Bond, CFA

+44 (207) 822 0771 Kingsmill_Bond@troika.ru

Andrey Kuznetsov +7 (495) 933 9844 Andrey_Kuznetsov@troika.ru

In accordance with US SEC Regulation AC, important US regulatory disclosures and analyst certification can be found at http://www.troika.ru/eng/research/disclosure.wbp. research@troika.ru, www.troika.ru

RUSSIA: 20 YEARS OF CHANGE COLLAPSE, RECOVERY AND TRANSFORMATION

JANUARY 2011

Contents
Key Themes .............................................................................. 3 Twenty years of change......................................................4 The end of the Soviet Union................................................5 The creation of a market economy .....................................6 Collapse and recovery.........................................................7 Macroeconomic stabilization..............................................8 The evolution of a middle class ...........................................9 Adoption of developed market tools.................................10 Global integration.............................................................11 The shift to the East ..........................................................12 The return of the state ......................................................13 Relative decline.................................................................14 Macro Changes ...................................................................... 15 GDP ..................................................................................16 The ruble and inflation......................................................17 Privatization......................................................................18 Government revenues and expenditures ..........................19 Debt .................................................................................20 Reserves and M2 ..............................................................21 The structure of GDP ........................................................22 Trade ................................................................................23 Capital flows.....................................................................24 FDI....................................................................................25 Consumption ....................................................................26 The Russian middle class...................................................27 Unemployment and equality ............................................ 28 Capital markets ................................................................ 29 Demographics .................................................................. 30 Population........................................................................ 31 Energy usage and pollution .............................................. 32 Corruption........................................................................ 33 Government size and spending ........................................ 34 Sector Changes...................................................................... 35 Agriculture ....................................................................... 36 Banks ............................................................................... 37 Cars.................................................................................. 38 Coal and steel ................................................................... 39 Consumer......................................................................... 40 Consumer discretionary.................................................... 41 Electricity.......................................................................... 42 Fixed line telecoms ........................................................... 43 Gas production and exports ............................................. 44 Gas pricing and global production share .......................... 45 Media............................................................................... 46 Mobile and broadband..................................................... 47 Non ferrous metals .......................................................... 48 Oil production and exports............................................... 49 Oil global share and state control ..................................... 50 Real estate........................................................................ 51 Commodity prices ............................................................ 52

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RUSSIA: 20 YEARS OF CHANGE COLLAPSE, RECOVERY AND TRANSFORMATION

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Key Themes

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RUSSIA: 20 YEARS OF CHANGE COLLAPSE, RECOVERY AND TRANSFORMATION

JANUARY 2011

Twenty years of change


To coincide with Troikas 20 years in Russia, we bring together data to illustrate the spectacular amount of change that has taken place as Russia has moved from bankrupt communist empire to cash rich capitalist state. From this, we highlight 10 themes relevant to the market.

The end of the Soviet Union. The creation of a market economy. Collapse and recovery. Macroeconomic stabilization. The evolution of a middle class. Adoption of developed market tools. Global integration. The move to the East. The resurgence of the state. Relative decline.

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RUSSIA: 20 YEARS OF CHANGE COLLAPSE, RECOVERY AND TRANSFORMATION

JANUARY 2011

The end of the Soviet Union


Borders of Soviet Union and modern Russia
R
C

Number of Russian nuclear warheads


St. Lawrence I.

E A S T S I B E R I A N S E A

S E A

V
S

B AR AL D

12,000 10,000 8,000 6,000 4,000

R
E

Y
N
D

B A R E N T S S E A
N
NO

DENMARK

L A P T E V
A
ZE
ML

YA

BA

L TIC

SE

F I N
Tallinn

A
V
W

S
R

S E A

In

d
r ka igi

K ol yma

I T E

A S E

POLAND

R.F.

Riga

1
S ev .D
na Le

2
Vilnius Minsk

ra P e cho
Y enisei

BELARUS
Ob

S E A

B E R I N G

vin a

Moscow
ANIA

Kyiv

O F O K H O T S K

2,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

UKRAINE
a
K am
D
SEA OF AZOV

ROM

Chisinau
b To
ol

ys h

SEA

Ob

BLACK

Le na

on

V ol g

Irt

Am ur

5 TURKEY 6
Tbilisi

Astana

m ur

ei nis Ye

K A Z A K H S T A N
CA SPI AN SEA

Yerevan

Baku

ARAL SEA

Source: Wikipedia

M
UZ
BE

A D.P.R. OF KOREA

IRAQ

TURKMENISTAN
Ashgabat

K
IS

TA

Tashkent

Bishkek

IRAN
Dushanbe

9 8
AN I ST AN
PAKISTAN

1. 2. 3. 4. 5.

REP. OF ESTONIA 6. KOREA LATVIA 7. LITHUANIA 8. REP. OF MOLDOVA 9. GEORGIA

ARMENIA AZERBAIJAN TAJIKISTAN PACIF KYRGYZSTAN I C OCEAN

FG

Source: Troika

While not strictly a market theme, it was of course the political changes that set in place the environment that made possible what followed. The end of the Soviet Union saw a major fall in the size of the territory and population controlled by the Kremlin. In 1991, the Soviet Union had a population of 293 mln; in 2011, Russia has a population of 142 mln, less than half the level of 20 years ago. The period has also seen a dramatic reduction in the size of the military complex. This can be illustrated by the fall in the number of nuclear warheads, from over 10,000 to under 3,000 (and falling) as the tensions of the Cold War fell away.
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The creation of a market economy


Private sector share of GDP
80% 60% 40% 30% 20% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 15% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Russian domestic gas prices as % of US prices


75% 60% 45%

Source: EBRD

Source: Troika estimates, Bloomberg

The period saw the formation of the building blocks of a market economy, with radical change across the board.

Privatization and the reduction of state control. The private sector share of GDP went from negligible to 65% today. The introduction of free market prices. First of all with Gaidars famous rapid price liberalization, and then with the increase in utilities tariffs and the slow reduction in state subsidies, a process that is still ongoing. The setting up of the necessary legal and tax infrastructure, and the formation of capital markets. The more efficient use of resources, especially energy resources. So, although Russia produces no more coal or oil than in 1990, it exports considerably more as domestic energy consumption has fallen by 33%.

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RUSSIA: 20 YEARS OF CHANGE COLLAPSE, RECOVERY AND TRANSFORMATION

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Collapse and recovery


Index of real Russian GDP
120% 100% 80% 60% 40% 20% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Russian oil production, mln bpd


12 10 8 6 4 2 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: State Statistics Service, Troika estimates

Source: BP

The period is conventionally divided into two main parts, with a coda at the end: 1991 98 collapse; 1999 2008 rapid recovery; 2008 11 crash and recovery. This dynamic can be seen not just in real GDP, electricity production and housing construction, but also in oil production, the grain harvest, and even birth and death rates. The key driver of this was commodity prices, arguably responsible for the parlous position of the Russian state in the 1990s, the final coup de grace in 1998 and the miraculous recovery thereafter.

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Macroeconomic stabilization
Russian inflation*, y o y
10,000% 1,000% 100% 10% 1% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government debt/GDP
160% 120% 80% 40% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

* log scale Source: State Statistics Service

Source: Central Bank

The start of the period saw economic chaos as the country struggled with the legacy of the Soviet Union amid low commodity prices. Inflation was over 1,000%, and the savings of the middle class were wiped out. There was a second bout of turmoil after the 1998 default as inflation spiked, the ruble fell sixfold and much of the banking sector went bust. Significant structural reform and higher commodity prices then enabled the government to create and entrench macroeconomic stability. Government debt/ GDP fell from nearly 100% to just 9% today, inflation fell to single digits, forex reserves rose from under $10 bln to $500 bln today, and M2/GDP rose from around 10% to nearly 40%. From this followed a huge appreciation in the real value of the ruble, which rose from 13% of its PPP fair value to 66% today. This transformation has underpinned many of the domestic stories in Russia in the last decade.

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The evolution of a middle class


Annual consumption per person, $
9,000 7,500 6,000 4,500 3,000 1,500 0 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Proportion of the population earning over $6,000 in PPP terms per annum
60% 45% 30% 15% 0% 2004 2005 2006 2007 2008 2009 2010 2011

Nominal

PPP

Source: State Statistics Service, Troika estimates

Source: State Statistics Service, Troika estimates

A property owning, educated and moderately well off middle class has emerged thanks to Soviet education, the transfer of property rights over most of Russias 50 mln dwellings to those living in them, the rebalancing of the entire economy from investment toward consumption, and the recent growth in wealth. Consumption has increased spectacularly, from under $1,000 per capita for most of the 1990s to nearly $6,000 today. This has set the scene for an explosion in sales of consumer goods beer sales are up nearly sixfold since the mid 1990s, and the amount of modern format retail space has increased at least twentyfold since the early 1990s. Russia has become Europes largest volume market for most consumer goods. According to data from the Levada Center, 65% of the population has middle class consumption habits, and we estimate from State Statistics Service data that 55% of the population will have PPP income per head of over $6,000 this year, the traditional threshold for the emerging market middle class.

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Adoption of developed market tools


Credit and debit cards in Russia, mln
150 120 90 60 30 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 10m10

Mobile subscribers, mln


250 200 150 100 50 0 2010E 2011E 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Central Bank

Source: AC&M

Russia was very fast to adopt developed market tools and techniques once macroeconomic stabilization had set in. Examples of this are the rise of a real domestic banking sector (loans and deposits rose from $50 bln in 2001 to $600 bln today), the adoption of credit and debit cards (nonexistent in the early 1990s, 11 mln in 2001, and 138 mln today), the building of modern retail format supermarkets, containerization, warehousing, offices, advanced recovery techniques in the oil sector, digitization of the telecoms sector, and so on. More recently, the adoption of mobile phones (with 220 mln subscribers, Russia is the largest market in Europe) and the internet has been rapid. This process is still ongoing. Entrepreneurs are today seeking to apply developed market techniques to the agricultural and construction sectors, and many areas remain where we believe there can be a major impact.

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Global integration
Exports and imports, $ bln
600 500 60 400 300 200 20 100 0 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 40

FDI, $ bln
80

Exports

Imports

Source: Central Bank

Source: Central Bank

Russia has integrated far more with the rest of the world, leaving behind the autarchy of the Soviet Union. Total foreign trade has increased sixfold since the early 1990s, from just over $100 bln per annum to nearly $800 bln at present. Real export volumes have more than tripled since 1991 (and more than doubled since 1995) as Russia has reduced some of its excessive use of energy and exported the surplus. Oil exports are up by 70%, gold production by 59% and copper production by 67% from 1991. FDI has gone from $1 2 bln a year in the early 1990s to $40 bln a year at present, and is matched by outward FDI of the same order. People are able to travel abroad with much greater frequency, and a much wider group of Russians has traveled the world.
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The shift to the East


The share of Asia in Russian trade
40% 30%
ESTONIA RUSSIA

Energy links to the East


U. K.

NORWAY
DENMARK

SWEDEN

FINLAND

20% 10% 0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

LATVIA LITHUANIA

BELARUS

UKRAINE

GEORGIA ARMENIA AZERBAIJAN

KAZAKHSTAN MONGOLIA
NORTH KOREA KYRGYZSTAN

Exports

Imports
IRAN

UZBEKISTAN TURKMENISTAN

JAPAN

Source: State Statistics Service

TAJIKISTAN

SOUTH KOREA

AFGHANISTAN Gas pipelines in operation

Gas pipelines in construction and design stage


U.A.E.

Oil pipelines in operation Oil pipelines in construction and design stage


NEPAL

PAKISTAN

OMAN

Source: Institute of Energy Research of the Russian Academy of Sciences, Troika estimates

The period has seen the start of a shift in Russias focus to the East, with a final resolution of the border with China and a major drive for additional infrastructure to link the two economies. The two key hydrocarbon projects are the ESPO and the Altai gas pipeline. Russia now has active or under construction enough capacity to send a quarter of its hydrocarbon exports to Asia, while at present it exports less than 10% of hydrocarbons to Asia, and only minimal amounts went there in 1991. Imports from Asia have increased to over a third of total imports, more than double the level in the early 1990s.
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The return of the state


Oil price required for fiscal breakeven, $/bbl
120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011E

Russias ranking on the Corruption Perception Index


0 30 60 90 120 150 180 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Central Bank, Troika estimates

Source: Transparency International

After a weak period in the early 1990s when it ran a huge budget deficit, the state has returned in force. The number of state employees has more than doubled from 0.7 mln in 1991 to 1.7 mln today. Meanwhile, the state has reasserted its dominance over the economy and its power to tax and control the countrys raw material wealth. As an example of this, the percentage of Russian oil production controlled by the state has risen from 7% in 2003 to at least 36% today. Meanwhile, corruption has deteriorated considerably. In 1998, Russia ranked 76th in the world for corruption perception according to Transparency International. That has now fallen to 154th in the world. And as a result of higher state spending, the breakeven level for the oil price has risen dramatically. In the early 1990s it was $20 30/bbl; today it is over $100/bbl. For all the considerable achievements elsewhere, this implies a dangerous degree of dependency on external variables.

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Relative decline
The share of Russia and China in global GDP*
16% 12%

Russias share of global gas production


30% 28% 26%

8% 4%

24% 22% 20%

0% 2011E 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

18% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

China

Russia

Source: BP

* GDP in PPP terms Source: IMF

The relative decline of Russia in global terms is quite notable. Russia's share of global GDP has fallen from 4% to 3% as the share of population has fallen from 3% to 2%. Russias share of global gas production has also fallen from 29% to 18% as the country has failed to keep up with global developments.

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Macro Changes

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GDP
Index of real Russian GDP
120% 100% 80% 60% 40% 20% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1,000 500 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Russian GDP, $ bln


2,500 2,000 1,500

Source: State Statistics Service, Troika estimates Source: IMF

GDP

PPP

Real Russian GDP is the clearest example of collapse and recovery. As the old system gradually collapsed during the 1990s, real GDP fell, reaching a nadir in the financial crisis of 1998 that was 43% below 1990. Thanks to devaluation, reform and the recovery of commodity prices, real GDP then grew rapidly for a decade. However, in real terms, GDP in 2011 will be only 14% above that of 1991. Thanks to real ruble appreciation, GDP in dollar terms is dramatically higher, increasing from under $100 bln in 1992 to $1.6 trln this year; and as a result of global inflation, Russias PPP GDP has doubled over the period. Russias share of global GDP has declined from over 4% to around 3%, in a similar manner to the UK.

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The ruble and inflation


Russian inflation, y o y, log scale
10,000% 1,000% 100% 30% 10% 1% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 15% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Ruble exchange rate as % of PPP


75% 60% 45%

Source: State Statistics Service

Source: IMF

The early 1990s saw financial chaos, inflation peaking at over 1,000%, the nominal ruble falling from R0.20/$1 to R5.00/$1 and the populations savings being destroyed as a result. The financial crisis of 1998 saw another bout of high inflation, and another huge fall in the ruble/dollar rate to R30/$1. Inflation did not fall sustainably below 20% until 2002, and only recently has it fallen below 10%. Real ruble appreciation since 1999 has underpinned much of the re rating of Russian domestic assets. In 1993 and again in 1998 the ruble traded at just 13% of its fair value in PPP terms, while at present it trades at 66%.

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Privatization
Share of private sector in GDP
80% 60% 40% 20% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Percent of population employed by state enterprises


90% 75% 60% 45% 30% 15% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: EBRD

Source: State Statistics Service

The last 20 years have seen private ownership replace state ownership. According to data from the EBRD, at the start of the period only 5% of the economy was in private hands. Thanks to the very ambitious privatization program launched by Gaidar, some 70% of the economy was in private hands by 1997. The State Statistics Services data indicate that the percentage of those working for state enterprises has fallen from over 80% to around 30%. Meanwhile, the government has started to set up the legal and institutional infrastructure to sustain this transformation.

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Government revenues and expenditures


Fiscal revenues and expenditures as a % of GDP
30% 25% 20% 15% 10% 5% 0% 2010E 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fiscal balance as a % of GDP


12% 8% 4% 0% 4% 8% 12% 2010E 2011E 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Revenues

Expenditures

Source: State Statistics Service, Troika estimates

Source: State Statistics Service

At the start of the period, the government was weak, with revenues that in 1993 and in 1998 amounted to only 10% of GDP. Huge fiscal deficits of up to 10% of GDP characterized the early 1990s, while most of the 2000s saw large surpluses. It is notable that the recent fiscal deficit is dramatically lower than that faced in the early 1990s.

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Debt
Government debt as a % of GDP
160% 120% 400 80% 40% 100 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 300 200

Russian foreign debt, $ bln


600 500

Source: Central Bank Source: Central Bank

Public

Private

In 1992, government debt was 154% of nominal GDP, with over $100 bln in forex debt balanced by only a small nominal GDP. The mid 1990s saw a rapid buildup in ruble debt (the notorious GKOs), culminating in the 1998 domestic debt default. After 2000, the Russian government was able rapidly to pay down its foreign debt, and total government debt/GDP has now fallen to just 9%. Meanwhile, the private sector has been able to take advantage of macroeconomic stability to borrow externally, with some $450 bln in debt to foreign entities at present.

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Reserves and M2
M2/GDP
50% 40% 30% 20% 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Russian forex reserves, $ bln


700 600 500 400 300 200 100 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: State Statistics Service

Source: Central Bank

When the reformers took power in 1992, Russia had forex reserves sufficient for only a few months of imports, and throughout the 1990s, reserves remained low. At the start of the period, monetization was very low, and in the 1990s barter was often used. However, as foreign reserves increased, so did the domestic money supply, and M2 is now nearly 40% of GDP. As commodity prices rose in the 2000s, the government was careful to husband the reserves, and has been able to build up foreign reserves of $500 bln, the third largest in the world.

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The structure of GDP


Russian savings and investments/GDP
60% 50% 40% 30% 20% 10% 0% 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 100% 50% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Investments Retail

Index of real retail and real investment spending


250% 200% 150%

Savings

Investments

Source: State Statistics Service

Source: State Statistics Service

The period has seen a sustained decline in the savings rate, in response to macroeconomic fragility, high inflation and low interest rates. At the end of the Soviet period, savings rates were over 50%, but they have now fallen to below 30%. Investment/GDP has seen the typical pattern of collapse and recovery. It fell from 24% in 1992 to 14% in 1999, rising back to 22% in 2009. And the economy has shifted dramatically away from investment (which in real terms is at only just half of its level in 1990) and toward consumption, with real retail spending nearly 2.5 times the level in 1990.

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Trade
Exports and imports, $ bln
600 500 300% 400 300 200 100% 100 0 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0% 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 200%

Index of export volumes


400%

Exports

Imports

Source: State Statistics Service

Source: Central Bank

There has been a secular increase in trade. The start of the period saw total annual exports plus imports of just over $100 bln, and during the 1990s, they never exceeded $200 bln. However, the early 2000s saw a spectacular increase in trade, reaching $900 bln in 2008 and likely to be only a little lower this year. The key driver has clearly been commodity price increases. However, export volumes have also increased markedly, up more than threefold in the period. There have been two main drivers to higher export volumes. On the one hand, Russian domestic consumption of energy (above all) fell in response to higher prices and more market efficiency. On the other hand, greater global demand and investment were able to stimulate growth in overall production in certain areas, such as gold or copper production.

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Capital flows
Current account, $ bln
125 100 75 50 25 0 25 2011E 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Capital flows into Russia 1994 2010, $ bln


3,500 3,000 2,500 2,000 1,500 1,000 500 0 Incomes received Other investment in Russia Investments abroad Incomes paid Capital outflow Exports Imports FX reserves accumulation FDI

Source: Central Bank, Troika estimates Source: Central Bank

For most of the 1990s, Russia struggled to run a current account surplus. In 1994 it was $8 bln, but by 1997, it had fallen to zero. However, devaluation in 1998 and the commodity price increases thereafter radically changed the position, and Russia has run large current account surpluses since 1999. Over the period, Russia has sold some $3.3 trln of exports and imported $2.3 trln of goods. As most other capital flows balance, the remaining $1.0 trln can be shown to have gone half into forex reserves accumulation and half into capital outflows.

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FDI
FDI into Russia, $ bln
80 60 40 40 20 10 0 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 30 20

Russian investment abroad, $ bln


60 50

Source: Central Bank

Source: Central Bank

The huge increase of both foreign FDI into Russia and Russian investments abroad is indicative of global integration. At the start of the period, FDI was running at $1 2 bln per annum. Now it is at nearly $40 bln per annum, as a series of major foreign companies have moved into the Russian market, including almost all of the worlds top 100 by capitalization. Whether it is Danone, Carlsberg or Unilever in the consumer sector, BP, Total or Schlumberger in the oil sector, or HP, Microsoft and Cisco in the tech space, the lure of Russia is too great to be ignored. This FDI has been nearly matched by Russian investments abroad, where the track record has been, to put it mildly, rather mixed.

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Consumption
Annual consumption per person, $
9,000 7,500 6,000 4,500 3,000 1,500 0 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Real wages and disposable income


150% 125% 100% 75% 50% 25% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Real disposable income Real wages

Nominal

PPP

Source: State Statistics Service

Source: State Statistics Service

At the start of the 1990s, annual consumption in dollar terms was well under $1,000, and throughout the 1990s, it rarely exceeded this level. It has risen to nearly $6,000 today. Real wages and disposable income have seen a fall and recovery in a similar way to GDP. However, as a result of the rebalancing of GDP toward consumption and away from investments, they are now markedly higher than in 1990.

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The Russian middle class


Share of the population earning over $6,000 PPP
60% 45% 60% 30% 40% 15% 20% 0% 2004 2005 2006 2007 2008 2009 2010 2011 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Lower middle class Middle class

Share of the population with middle class spending patterns


80%

Source: State Statistics Service, Troika estimates

Source: Levada Center, Troika estimates

The period has seen the rise of the Russian middle class, assisted by the effective transfer of all housing assets into the hands of the people living in them at the start of the 1990s. The other great Soviet contribution to the formation of such a class was the excellent education levels inherited from that period. Traditionally, a level of around $6,000 per capita in PPP terms has been seen as the emerging market threshold for a middle class. The number of people in Russia that meet this definition has grown from well under 20% of the population for most of the 1990s to around 55% this year. Data from the Levada Center on spending habits shows that 64% of the population now has sufficient income for food, clothing and some discretionary items. Self definition is one of the other key determinants of middle class status. Surveys differ, but an average of around 75% of the population considers themselves as belonging to the middle class.

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Unemployment and equality


Unemployment rate
15% 12% 9% 0.35 6% 3% 0% 2010E 2011E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0.30 0.25 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Gini coefficient
0.45 0.40

Source: IMF

Source: State Statistics Service

Employment has seen the familiar pattern of collapse and recovery. Unemployment peaked in 1999 at 13%, and this year it will fall below 7%. The start of the period was clearly characterized by hidden unemployment, with unpaid wages, barter and redundant factories. The Gini coefficient, the well known measure of income inequality, rose markedly in the early 1990s, but has been relatively stable since then.

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Capital markets
RTS Index
2,500 2,000 1,500 1,000 500 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Russian daily equity trading volumes, $ mln


10,000 8,000 6,000 4,000 2,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Bloomberg

Source: Bloomberg, Troika estimates

The Central Moscow Stock Exchange was registered in November 1990, and Troika Dialog was founded on January 18, 1991. In 1992, voucher schemes were launched, and the market was off. Capital markets saw spectacular growth after a bumpy start. The RTS, launched in 1995 at 100, fell to 38 points in October 2008, but is now trading at over 1,800. There has been a huge increase in trading. Volumes for much of the 1990s were under $100 mln a day (and much less after crises); today they are in the region of $5 bln a day. Large domestic bond markets have arisen, and today are over $100 bln in size.

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Demographics
Fertility rate: babies per woman
1.8 1.6 1.4 65 1.2 1.0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 60 55 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Life expectancy in Russia, years


80 75 70

Source: State Statistics Service

Average

Males

Females

Source: State Statistics Service

The fertility rate has also seen collapse and recovery. It finished the 1980s at over 2.0 children per woman, fell to under 1.2 in 1999, and has now risen back to 1.5. Life expectancy has seen a similar collapse, falling from nearly 70 to under 65 in 1994, before rising back to nearly 70 again today.

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Population
Russian population, mln
151 148 145 142 139 136 133 130 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2.2% 2.0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2.6% 2.4%

Russia's share of global population


3.0% 2.8%

Source: IMF

Source: IMF

The population has fallen from 149 mln in 1991 to 142 mln today, a decline of some 5%. However, as a result of rising populations elsewhere, Russias population has fallen from around 3% of global population to around 2%. Given that the Russian Empire in 1900 apparently ruled over some 10% of the global population, this is a dramatic long term decline. It should thus drive a radical change in strategic thinking by Russia and the West about the countrys place in the world, as outlined by Dmitri Trenin. Regrettably, however, old Cold War warriors continue to fight the last war and ignore this new reality.

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Energy usage and pollution


Index of energy consumption per unit of real GDP
120% 110% 100% 90% 80% 70% 60% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1,800 1,600 1,400 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Russian CO2 emissions, mln tonnes


2,400 2,200 2,000

Source: BP, State Statistics Service

Source: BP

Energy consumption has fallen 25% from 850 mln toe in 1991 (around half that of the US at the time and more than China) to 635 mln toe in 2009. It is the sale of this spare energy at high prices that has underpinned the resurgence of the country. Energy consumption per unit of real GDP has fallen 33% as some of the Soviet dinosaur industries were closed down. As a result, Russia, nearly alone among major counties, has seen a sharp fall in CO2 emissions (down 33%), albeit from a high base.

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JANUARY 2011

Corruption
Transparency International Corruption Perception Index Russia's global ranking
0 30 60 90 120 150 180 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Control over corruption Russia's global percentile


30 25 20 15 10 5 0 1996 1998 2000 2002 2003 2004 2005 2006 2007 2008

Note: The lower the number, the better. Source: Transparency International

Note: The higher the number, the better. Source: World Economic Forum

We lack statistics from the early 1990s, but those that we do have indicate that corruption has deteriorated over the last decade. Transparency International data show that Russia has fallen from the 76th position globally in 1998 to the 154th over the last decade. The WEF measurement of control over corruption indicates that corruption got worse in the aftermath of the 1998 crash, improved after 2000, and then deteriorated again after 2005. The data ranks each country by its global percentile, with 100% being the best. The latest data has Russia at the 15th percentile, while Brazil is at the 58th and China at the 41st. As we have argued for some time, Russia is in an anomalous position to have so much corruption amid such high levels of wealth, education and internet usage. This is thus an area where we expect change.
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Government size and spending


Number of government officials in Russia, mln
1.8 1.5 1.2 0.9 0.6 0.3 0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Oil price required for fiscal breakeven, $/bbl


120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011E

Source: State Statistics Service

Source: Central Bank, Troika estimates

We have seen a secular rise in the number of government employees, from just 0.7 mln in 1991 and 1.1 mln in 2001 to 1.7 mln today. This is symbolic of the huge increase in government spending and, as a result, in oil price dependency. In the early 1990s, the breakeven oil price (the price at which the fiscal budget balances), was around $20 30/bbl. This has risen inexorably, and now stands at over $100/bbl this year.

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Sector Changes

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Agriculture
Russian agriculture
150 120 90 60 30 0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Land yield, tonnes/ha


1.5 1.2 0.9 0.6 0.3 0.0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Land farmed, mln ha

Grain crop, mln tonnes

Source: State Statistics Service

Source: State Statistics Service

In 1991, Russia farmed 116 mln ha of land. The move to profit based farming and the lack of capital meant that the area farmed fell continually until 2008, stabilizing at just under 80 mln ha. However, the total grain crop has not fallen to the same degree. With the exception of the poor harvest in 2010, there has been a 50% increase in yields. In 1991 94, they averaged 0.8 tonnes/ha, and in 2006 09, they averaged 1.2 tonnes/ha. Recent years have seen a large number of Russian and foreign entrepreneurs enter the agriculture sector, brining new equipment, know how and capital, and forming giant farms capable of transforming the space.

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Banks
Loans and deposits, $ bln
750 600 450 300 150 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 10m10

Credit and debit cards in Russia, mln


150 120 90 60 30 0
10m10 2001 2002 2003 2004 2005 2006 2007 2008 2009

Loans

Deposits

Source: Central Bank

Source: Central Bank

Russias modern banking history begins only after the sector was largely wiped out in 1998. Since 2000, there has been a spectacular increase in both deposits and loans, with the former largely tracking forex reserves. They have each grown from around $50 bln to around $600 bln today. The credit card industry has taken off in a similar way. Negligible in the early 1990s, there were only 11 mln cards in 2001, but there are nearly 140 mln credit and debit cards today.

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Cars
Russian automobile fleet, mln
40 30 2.0 20 10 0.5 0
2009E 2010E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Car sales, mln


3.0 2.5

1.5 1.0

0.0 2004 2005 2006 2007 2008 2009 2010E 2011E

Source: State Statistics Service, Troika estimates

Source: Ernst & Young, PricewaterhouseCoopers, Vedomosti, Association of European Businesses, Troika estimates

In 1991, there were just 10 mln cars on Russia's roads; today there are nearly 35 mln, a statistic endured each day on Moscows traffic clogged roads. In 2008, the sale of cars in Russia challenged Germany for the top market in Europe. This year, around 2 mln cars will be sold. There has been a transformation of the car fleet as foreign brands have flooded into the country, forcing domestic producers to upgrade their quality.

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Coal and steel


Coal production and consumption, mln tones
180 150 60 120 90 60 20 30 0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Russian steel production, mln tonnes


80

40

0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Production

Consumption

Source: State Statistics Service

Source: BP

There has been a secular decline in consumption of coal, from 165 mln tonnes in 1991 to 83 mln tonnes in 2009. As with many other sectors, there was also a collapse and recovery in production of coal and steel. As a result, exports have increased significantly.

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Consumer
Russian beer sales volumes, mln hl
120 100 80 60 40 20 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Modern retail selling space, mln m2


18 15 12 9 6 3 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: State Statistics Service, Troika estimates

Source: State Statistics Service, Troika estimates

Consumer markets have seen spectacular growth from a low base in both volume and value terms as incomes have risen and consumer goods have become more widely available. The industry at the forefront of the change has been brewing, as the purveyor of a low price item. Consumption rose nearly sixfold from 20 mln hl in 1996 to 116 mln hl in 2007 as foreign brewers broke into the country and established production and distribution networks deep into the hinterland. We have seen similar developments in many consumer goods markets, from chocolate to fruit juice to baby food. Manufacturers have also increasingly set up factories inside Russia to produce locally. The organized retail sector has also seen necessary and spectacular growth over the period. From tiny beginnings in the 1990s it has now risen to operate 16 m2 of space, and is still growing fast. The amount of choice now available is dramatically different to the deficit days of the early 1990s.

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Consumer discretionary
International flights, bln passenger km
80 60 40 20 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Washing machine sales volumes in Russia, mln


7 6 5 4 3 2 1 0
2011E 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Transport Clearing Chamber

Source: Euromonitor

Higher ticket consumer discretionary goods have also seen a tremendous increase in spending. Washing machine sales in 1998 were under 1 mln, but by 2010 had risen to 6 mln, and were by far the largest market in Europe. In the early 1990s, international flights were only 30 bln passenger km. With wealth and curiosity, this has doubled to over 60 bln passenger km, and we expect much growth yet to come.

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Electricity
Electricity generation in Russia, TWh
1,100 1,050 1,000 950 900 850 800
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Electricity price, $/MWh


30 25 20 15 10 5 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: BP

Source: State Statistics Service, Troika estimates

Electricity generation is the typical story of collapse and recovery. Once more it is worth noting that total generation is below that in 1991, and that the efficiency of energy use per unit of GDP is low in Russia even today. The introduction of market prices has seen dramatic increases in the cost to businesses and households. The average price has risen from $7/MWh in 2000 to nearly $30/MWh today.

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Fixed line telecoms


Fixed lines in Russia, mln
50.0 40.0 30.0 20.0 10.0 0.0
1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
26.8 51% 34.7 36.5 70% 38.4 74% 40.8 78% 45.2 45.5 45.4 42.9 44.2 90% 87% 87% 82% 85%

Digitalization of fixed lines


100% 80% 60% 40% 40% 20% 0% 20% 0%
1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

80% 60%

33.1

64% 67%

Total fixed lines in service

Penetration, % of households (rhs)

Source: State Statistics Committee, ITU, Troika estimates

Source: State Statistics Committee, ITU, Troika estimates

The fixed line telecoms sector is a good example of the adoption of existing technology in a system where consumers had the power to demand it. In the early 1990s, as can be well attested by those of us who had to endure it, there were few digital lines to speak of. By 2009, some 80% of lines were digitized. The number of fixed lines also increased markedly, from 27 mln in 1995 to 45 mln by 2007.

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Gas production and exports


Gas production and consumption, bcm
700 600 500 400 300 200
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Russian gas exports, bcm


300 250 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Production

Consumption

Source: Gazprom

Source: BP

Gas has been a sector where government control has thus far shielded it from the deep changes that we have seen elsewhere. Production and consumption held up better than most other areas in the 1990s, but are still down over the entire period. Exports have risen, but this is in part a result of re exporting Central Asian gas, where the margins are lower.

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Gas pricing and global production share


Russian gas production as a % of global
30% 28% 26% 24% 22% 20% 18% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 30% 15% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Russian domestic gas prices as % of US prices


75% 60% 45%

Source: BP

Source: Troika estimates, Bloomberg

Most worryingly, there has been a secular decline of Russias share in global gas production as the country has failed to capitalize on its enormous gas resources as rapidly as the rest of the world. Meanwhile, there has been secular growth in domestic prices toward international levels. In 2000, Russian gas was sold domestically at the (now) mouth watering price of $10/mcm, 9% of the erstwhile US price. Today, the gas is sold at around $80/mcm, more than 60% of the US price.

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Media
Advertising spending in Russia, $ mln
12,000 10,000 8,000 6,000 4,000 2,000 0 2010E 2011E 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20% 10% 0% 2001 2002 2002 2003 2004 2005 2006 2007 2008 2009 2010

Internet penetration
50% 40% 30%

Source: AKAR

Source: FOM, Internet World Stats

There has been spectacular growth in spending on advertising. Total ad spend in the 1990s rarely was higher than $1 bln, but has today risen to over $8 bln. Meanwhile, the streets have filled with light and advertising, the most visible aspect of the transformation from the drab Soviet period. Internet penetration in Russia has mimicked that of Europe, albeit with a delay, as we saw with mobile phones. Over 40% of the population now uses the internet, with much higher proportions in the cities and among the young or middle class. Data from TNS on those aged over 12 and living in cities indicates that 55% are internet users today.

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Mobile and broadband


Mobile subscribers, mln
250 200 150 100 50 0 2010E 2011E 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Broadband household penetration


30% 25% 20% 15% 10% 5% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source AC&M, Troika estimates

Source: AC&M

The mobile sector is an excellent example of Russia being a late starter but having the education and wealth to challenge European levels of penetration. There are 220 mln mobile subscriptions in Russia today, making it the largest market in Europe. Equally, broadband penetration has increased rapidly to over 25% and is still rising fast.

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Non ferrous metals


Russian gold production, tonnes
250 200 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Russian copper production, kt


1,200 1,000 800 600 400 200 0 2008E 2010E 2011E 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009

Source: GFMS, Troika

Source: CRU

The non ferrous metals sector has seen more growth than the energy sectors or the ferrous metals space, perhaps because of the more advantageous taxation regime and a lower starting point. We estimate that gold production increased 59% from 146 tonnes in 1992 to 232 tonnes today, and the sector has laid the foundations for much higher production levels than this. Copper production has increased 67% from 0.7 mln tonnes in 1991 to 1.1 mln tonnes expected this year.

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Oil production and exports


Russian oil production and consumption, mln bpd
12 10 6 8 6 4 2 2 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 4

Russian oil net exports, mln bpd


8

Production

Consumption

Source: BP

Source: BP

Oil production has seen the typical pattern of collapse and recovery. Production was 11 12 mln bpd in Soviet times, had fallen to 9.3 mln bpd in 1991, and the trough came in 1996 99 when it was just over 6 mln bpd. Thereafter, devaluation, new ownership and the adoption of new extraction techniques have led to a renaissance of the sector, which in 2010 produced 10.1 mln bpd. Domestic consumption of oil fell from 5 mln bpd to under 3 mln bpd as a result of higher domestic pricing and the shutting down of some value destructive heavy industries. As a result, Russias net oil exports have increased spectacularly, surging 70%, from 4.3 mln bpd to 7.3 mln bpd.

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Oil global share and state control


Russian oil exports as a % of global
16% 12% 8% 4% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

State control of Russian oil production


40% 30% 20% 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: BP

Source: Troika estimates

The recovery of Russias share of global oil exports is in contrast to gas. In 1991, Russia made up 13% of global oil exports; this fell to 9% in the mid 1990s, and has now recovered to 13%. The state control of oil production fell consistently from 100% to a trough in 2003 of 7%. It then rose again after the YUKOS affair, and we now estimate it at a very conservative 35%.

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Real estate
Housing completions, mln m2
75 60 45 30 15 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Moscow housing prices, $/m2


7,500 6,000 4,500 3,000 1,500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: State Statistics Service

Source: www.irn.ru

Housing construction has seen a similar pattern of collapse and recovery. The total housing built fell from 50 mln m2 in 1991 to 30 mln m2 in 2000 before bouncing back to 60 mln m2 today. Given the still low level of housing per capita in Russia, we expect this to rise further. Meanwhile, housing per capita has risen 36% from 16 m2 in 1991 to 22 m2 today, and the fresh developments are visible in new suburbs, which have sprung up around every major Russian city. There has been a secular rise in other areas of real estate construction. Office construction, for example, rose from 0.9 mln m2 in 2000 to 7.7 mln m2 in 2009. There was a massive (and arguably excessive) increase in real estate prices after economic stability returned in 2000. The price of Moscow apartments has increased from under $1,000/m2 in 2000 to $4,500/m2 today.

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Commodity prices
Global oil prices, $/bbl Brent spot
150 120 90 60 30 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Copper prices, $/tonne


10,000 8,000 6,000 4,000 2,000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Bloomberg

Source: Bloomberg

As is widely appreciated, commodity prices have been the key drivers of change over the course of the last 20 years, albeit with a generous admixture of domestic politics. A glance at the oil price alone shows that it sets the scene for the fragility of the 1990s, the collapse in 1998, the recovery thereafter, and the 2008 09 crash and recovery. Many would go further and argue that a low oil price also set the scene for radical reform after 1998 and has in recent years impeded reforms.

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Chairman of Board of Directors and CEO, Troika Dialog

Chief Business Officer Ruben Vardanian Head of Global Markets

Jacques Der Megreditchian Peter Ghavami

Chief Economist, Managing Director

Evgeny Gavrilenkov

Research Department Head of Research Paolo Zaniboni Strategy Chief Strategist Strategist Oil and Gas Senior Analyst Senior Analyst Analyst Utilities Senior Analyst Analyst Assistant Analyst

+7 (495) 258 0511 +7 (495) 787 2381 Financials Senior Analyst Analyst Consumer Senior Analyst Assistant Analyst Real Estate Analyst Chemicals Senior Analyst Analyst Transport Analyst Fixed Income Head of FI Research Alexander Kudrin Senior Analyst Alexey Bulgakov Analyst Ekaterina Sidorova Analyst Stanislav Ponomarenko Assistant Analyst Boris Krasnenkov Ukraine Strategist Economist Senior Analyst Senior Analyst Senior Analyst Analyst Analyst Kazakhstan Analyst Analyst

Kingsmill Bond, CFA Andrey Kuznetsov

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Andrew Keeley Olga Veselova

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Oleg Maximov Alex Fak Valery Nesterov

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Mikhail Stiskin Irina Lapshina

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Telecoms, Media and IT Senior Analyst Evgeny Golossnoy Analyst Anna Lepetukhina Metals and Mining Senior Analyst Senior Analyst Analyst Assistant Analyst Manufacturing Analyst Assistant Analyst

Roman Zakharov Iryna Piontkivska Yevhen Hrebeniuk Ivan Kharchuk Sergey Nevmerzhitsky Alexander Tsependa Maria Repko

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Anton Stroutchenevski

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Head Office, Moscow


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1, Prospekt Dimitrova Novosibirsk, 630004, Russia Phone +7 (383) 210 5502; fax +7 (383) 210 5503

Voronezh
43, ul. Plekhanovskaya Voronezh, 394000, Russia Phone +7 (4732) 35 5647;fax +7 (4732) 619 961

Irkutsk
19, ul. Lenina Irkutsk, 664003, Russia Phone/fax +7 (3952) 563 636

Perm
58, ul. Lenina Perm, 614000, Russia Phone +7 (342) 218 6146; fax +7 (342) 218 6149

Yaroslavl
22, ul. Trefoleva Yaroslavl, 150000, Russia Phone +7 (4852) 67 0407; fax +7 (4852) 670 406

Kazan
Suvar Plaza Office Center 6, ul. Spartakovskaya Kazan, 420107, Russia Phone/fax +7 (843) 526 5522

Rostov on Don
206, ul. Krasnoarmeyskaya Rostov on Don, Russia Phone/fax +7 (863) 268 8899

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