1. www.TheRussiaForum.com
RUSSIA
FEBRUARY 2 3, 2012
Russia Forum Buzz
Interest Rates, Exchange Rate and
Liquidity: Are There Resources for
Investment?
█ At the beginning of the discussion, panel moderator Ksenia Yudaeva (Director,
Center for Economic Research, Sberbank) gave an overview of the
macroeconomic situation. The main feature of today’s market is high volatility
and ample fluctuations in liquidity. Investors have differing views, and this does
nothing to heighten stability. The policy of the Central Bank plays a big role now.
█ First Deputy Central Bank Chairman Alexei Ulyukaev said that the regulator sees
a balance between inflation risks and economic growth in the current situation,
which means that the regulator is unlikely to move rates within the next couple
of months. At the moment, the Central Bank is maintaining a “dirty” floating
exchange rate, but plans to switch to a full fledged floating regime soon. The
amount of Central Bank operations on the open forex market is minimal. He
sees commercial banks continuing to use refinancing at the Central Bank, as
capital flight is continuing. He expects inflation to come in at 5.5 6.0% in
2012, but believes achieving this level will be complicated. The Central Bank is
ready to heighten the transparency of its policy and plans to start publishing
quarterly reports on monetary policy. In addition, Mr Ulyukaev mentioned that
the Central Bank may use lending in hard currency only as an extraordinary
measure and prefers to see balanced positions among commercial banks.
█ Werner Gey van Pittius, Portfolio Manager from Investec Asset Management,
appreciates the recent changes in Russian monetary policy and the
Central Bank’s greater transparency (such as publication of the minutes of
BoD meetings). He expects more foreign investors to come to the OFZ market
after its opening for international investors, and considers these bonds as
undervalued relative to current fundamentals (e.g. slowing inflation and
current account surplus). Lastly, he said he is ready to continue lending
money to the Russian authorities.
█ Deputy Economics Minister Andrei Klepach thinks that the Central Bank’s
policy creates a comfortable environment for development of the real sector.
He expects interest rates to decline in 2H12, but remain high until mid year.
The existing volatility is forcing companies to think more about hedging their
risks. Mr Klepach thinks that capital outflow may turn into an inflow in 2H12.
In addition, he expects the primary markets for both bonds and equities to
start operating normally. Lastly, he mentioned that about 10% of Russian
GDP is concentrated in the Reserve and National Wealth funds, which are not
working in the economy. Attraction of this money to the market is one of the
challenges facing the authorities.

2. FEBRUARY 2 3, 2012 RUSSIA FORUM BUZZ – INTEREST RATES, EXCHANGE RATE AND LIQUIDITY: ARE THERE RESOURCES FOR INVESTMENT?
2 TROIKA DIALOG
█ Giacomo Baizini, CFO of Evraz Group, mentioned that his company still uses the dollar as its
main operating currency (as steel prices, even domestic, are linked to the dollar). At the same
time, it widely uses opportunities to borrow in different markets. Over the past two and a half
years, Evraz Group has placed R60 bln in ruble bonds, but all these funds were swapped into
hard currency, as the company wants to hedge exchange rate risk. Mr Baizini thinks that in the
current environment borrowers should find the proper balance between cost of funding and
risk. Evraz Group is very opportunistic in terms of choice of instrument for borrowing. At the
moment, the company is considering project financing.
█ Jonathan Muir, CFO of ТNК ВР, agreed with the previous speaker that the bulk of exporters in
Russia use the dollar as their operational currency. At the same time, borrowers need to be more
flexible in the current environment. According to him, about 60% of foreign lending came to
Russian borrowers from the EU. Due to the European debt crisis, many European banks may be
out of the syndicated loan market, which could have a negative impact on borrowers. At the
moment, TNK BP is considering borrowing in different currencies and does not rule out funding in
rubles. At the same time, the cost of borrowing will be critical. Mr Muir considers volatility on
financial markets to be manageable if policy is transparent.
█ Thomas Rutz, Fund Manager from Clariden Leu, mentioned that emerging markets offer unique
opportunities in an environment of low interest rates globally. He said that diversification is
critically important now. The firm prefers investment in the corporate sector in EMs, rather than in
Sovereigns or quasi Sovereigns. Mr Rutz expects rates to remain low, appreciates the heightened
transparency of the Central Bank’s interest rate policy and likes investment in the ruble.
█ Deputy Finance Minister Sergei Storchak said that the Finance Ministry received about R20 bln in
interest in 2011 from the placement of money on deposit at commercial banks, and expects such
placements to continue. The Finance Ministry is moving toward greater transparency and is
talking with investors on a regular basis.
█ Ksenia Yudaeva summarized the views of the panel members, who believe that inflation may
decline further. In addition, the Central Bank and Finance Ministry are likely to be more focused on
their core activity, while the real sector will be more concentrated on using existing opportunities
in capital markets.
Panel
Ksenia Yudaeva Director, Center for Economic Research, Sberbank of Russia
Giacomo Baizini Vice President of Corporate Affairs, CFO, Evraz Group S.A.
Andrei Klepach Deputy Head of the Ministry of Economic Development of the Russian Federation
Jonathan Muir CFO, ТNК ВР
Thomas Rutz Fund Manager, Clariden Leu
Sergei Storchak Deputy Finance Minister of the Russian Federation, Government of the Russian Federation
Alexei Ulyukaev First Deputy Chairman of the Central Bank of Russia
Werner Gey van Pittius Portfolio manager, Investec Asset Management

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