Russian Federation

Facts and Figures

January 2011

Russian Federation – Key Social and Economic Data

Capital – Moscow

Russia is located in the eastern part of Europe and in the northern part of Asia

Total area1 - 17,098.2 thousand sq.km (as

of 1 January 2009 agricultural acreage amounted to 13% of the total area, forests – 51%, surface waters (including marsh) – 13%)

Population as of 1 January 2010 – 141,914.5 thousand people

Density of the population as of 1 January 2010 – 8.3 people per sq.km

Maximum length, thousand km:

Longitudinal direction - 4

Latitudinal direction - 9

State border:

North-west – Norway and Finland;

West – Poland, Estonia, Latvia, Lithuania, and Belarus;

South-west – Ukraine;

South – South Ossetia, Abkhazia, Azerbaijan, Georgia, and Kazakhstan;

South-east – China, Mongolia, Democratic People’s Republic of Korea;

East (marine) – the USA and Japan

Longest rivers, km:

Lena

Irtysh

Ob

Volga

Enisey

Amur

4,400

4,248

3,650

3,531

3,487

2,824

Russia is washed by: Largest lakes, thousand sq.km:

Seas of the Arctic Ocean (Barents Sea, White Sea, Kara Sea, Laptev Sea, East-Siberian Sea, Chukotka Sea)

Seas of the Pacific Ocean (Bering Sea, Okhotsk Sea, Sea of Japan)

Seas of the Atlantic Ocean (Baltic Sea, Black Sea, Azov Sea)

Baikal

Ladoga

Onega

31.5

18.1

9.7

Highest elevation, m:

Elbrus 5,642

Largest islands, thousand sq.km Average temperatures:

Archipelago Novaya Zemlya

Sakhalin

Archipelago Novosibirsky

Archipelago Severnaya Zemlya

82.6

76.4

38

37

January from 0°,-5°С (Northern Caucasus) to -40°, -50°C (east of Saha (Yakutia) where the lowest temperatures can reach -65°, -70°C);

July from 1°С (northern Siberian coast) to 24-25°C (Caspian lowlands)

The Russian Federation has the largest area in the world; it is ninth by population globally2

and sixth by GDP denominated in USD at purchase power parity3.

1 Source: Russian Register.

2 According to preliminary data.

3 Source: World Bank 2009.

1st

by total area, 6

th by GDP

3

Map of Russia

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Ura

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Far

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Fed

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Sib

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State Structure

Administrative Entities as of 1 January 2010

Republics 21

Krais 9

Regions 46

Cities of federal importance 2

Autonomous regions 1

Autonomous okrugs 4

Districts 1,868

Cities (incl. cities of federal importance) 1,099

Municipal districts and okrugs 328

Townships 1,295

According to the estimate as of 1 January 2010, the Russian Federation has 11 cities with a population of more than 1 mln people: Moscow (10.6 mln), Saint Petersburg (4.6), Novosibirsk (1.4), Yekaterinburg (1.3), Nizhny Novgorod (1.3), Kazan (1.1), Samara (1.1), Omsk (1.1), Chelyabinsk (1.1), Rostov-on-Don (1.0), and Ufa (1.0).

Russia and ROW Comparison

Russia’s position in the world in production of certain industrial and agricultural products

Crude Oil Production 2009

mbpd

2.5 2.52.63.03.8 3.2

9.77.2

4.2

10.0

0

5

10

15

Russia Saudi

Arabia

USA Iran China Canada Mexico UAE Iraq Kuwait

Source: BP

Gas Production 2009

bcm

72

593

131161

528

89103 85 81 77

0180360540720

USA Russia Canada Iran Norway Qatar China Algeria Saudi

Arabia

Indonesia

Source: BP

Coal Production 2009

mln tons

102

3,050

409558973

252298 250 184 135

0875

1,7502,6253,500

China USA India Australia Russia Indonesia RSA Germany Poland Kazakh-

stan

Source: BP Global Leader in Metal Reserves

% of total global reserves

18%

4%

9% 11%9%

0%6%

13%19%25%

Iron Ore PGM Gold Nickel CopperRussia's

Ranking 1 2 3 3 9

Source: US Geological Survey, 2010

1st

by crude oil production, gas and iron ore reserves

Russia and ROW Comparison (continued)

Wheat 2008

USD bn

2.6 2.4

15.8

6.79.3

11.7

4.44.5 3.0 2.7

0

6

12

18

China India USA Russia Canada France Pakistan Australia Ukraine Turkey

Source: FAO

Sugar Beet 2008

USD bn

0.3 0.20.40.40.7

0.4

1.31.1 1.1

1.4

0.0

0.5

1.0

1.5

France Russia USA Germany Turkey Ukraine Poland China UK Nether-

lands Source: FAO

Milk 2008

USD bn

3.6 3.2

22.8

7.89.511.7

7.37.4 6.4 4.0

05

10152025

USA India China Russia Germany Brazil France New

Zealand

UK Poland

Source: FAO

Meat 2008

USD bn

1.5 1.4

19.0

3.0

11.913.0

1.82.3 1.8 1.6

0

5

10

15

20

25

USA China Brazil Mexico Russia Iran Indonesia Japan UK Argentina

Source: FAO

Key Macroeconomic Indicators

2006 2007 2008 2009

Production Indicators

GDP change (%), year-on-year 1 7.7 8.1 5.6 -7.9

Industrial output, change (%), year-on-year 6.3 6.8 0.6 -9.3

Manufacturing, change (%), year-on-year 8.4 10.5 0.5 -15.2

Extraction of mineral resources, change (%), year-

on-year

2.8 3.3 0.4 -0.6

Fixed capital investment, change (%),year-on-year 16.7 22.7 9.9 -16.2

Fiscal and Monetary Indicators

Deficit (surplus) of the federal budget, (% of GDP) 7.5 5.4 4.1 -5.9

Federal government balane, share of GDP (%) 1 2

8.4 6.0 4.9 -6.3

M2, change (%), year-on-year 3 44.5 48.0 20.2 9.1

Inflation (CPI), change (%),year-on-year 9.0 11.9 13.3 8.8

GDP deflator 15.1 13.9 18.4 2.5

Producer price index (PPI), (%), at year-end 10.4 25.1 -7.0 13.8

Nominal exchange rate, average, RUB/USD 27.19 25.58 24.85 31.75

Real effective exchange rate, 2000 = 100 (IMF) 163.4 172.7 184.4 172.3

Real effective exchange rate, change (%), year-on-year (IMF)

9.4 4.2 5.1 -5.6

Reserve Fund, USD bn, at the end of period 137.1 60.5

National Wealth Fund, USD bn, at the end of the

period

88.0 91.6

Reserves (including gold), USD bn, at the end of the period

303.7 478.8 426.3 439.5

Source RusStat, Central Bank of RF, EEG, IMF, company estimates.

3 YoY change is calculated for annual average money mass of M2

Key Macroeconomic Indicators (continued)

Key Indicators

2006 2007 2008 2009

Balance of Payment Indicators

Trade balance, USD bn (monthly) 139.3 130.9 179.7 111.6

Share of energy resources in export of goods, % 63.3 61.5 65.9 62.8

Current account, USD bn 94.7 77.8 103.6 49.4

Export of goods, USD bn 303.6 354.4 471.6 303.4

Import of goods, USD bn 164.3 223.5 291.9 191.8

Gross foreign direct investments, US bn 29.7 55.1 75.0 36.8

Average export price of Russian crude oil, USD/bbl 61.1 69.3 94.4 61.1

Financial Markets Indicators

Weighted average corporate loan rate, % 1 10.4 10.0 12.2 15.3

CBR refinancing rate, %, at the end of the period 11.0 10.0 13.0 8.75

Real average rate on RUB loans, % (deflated py PPI) 1.6 0.9 -1.7 3.2

Stock market index (RTS, in RUR, at the end of the period)

1.922 2.291 632 1.445

Corporate Financial Condition

Share of loss-making companies 1 29.7 23.4 25.2 30.1

Share of loans in capital investments 1 14.3 15.5 17.6 20.1

Profitability (net profit/paid sales), % 1 25.6 36.8 21.5 28.7

Income, Poverty, and Labor Market

Real disposable income, (1999 = 100%) 219.0 245.6 251.3 257.1

Average wages in USD 390.9 532.2 695.8 587.0

Unemployment 2 (%, according to ILO definition) 6.7 5.7 7.0 8.2

Source RusStat, Central Bank of RF, EEG, EIU, IMF, company estimates.

1 Average weighted rate for RUR loans to non-financial institutions up to 1 year.

2 According to a random poll of population on employment issues as of the end of November.

Employment and Education

DISTRIBUTION OF EMPLOYED POPULATION BY AGE AND EDUCATION IN 2009

1

(as of the end of November; percentage of total)

Total Men Women

Employed – total 100 100 100

Including people aged, years:

Less than 20 1.1 1.4 0.8

20 - 24 9.5 10.3 8.6

25 - 29 13.6 14.5 12.8

30 - 34 12.7 13.0 12.4

35 - 39 12.1 12.0 12.2

40 - 44 11.7 11.2 12.2

45 - 49 14.4 13.4 15.4

50 - 54 12.9 11.9 13.9

55 - 59 8.0 8.4 7.7

60 - 72 3.9 3.8 4.0

Average age of employed population, years 40.0 39.4 40.5

Employed – total 100 100 100

Including those with:

Higher professional education2 29.0 25.8 32.2

Secondary professional education 27.5 22.5 32.8

Primary professional education 18.7 23.0 14.1

Secondary education 20.1 23.0 17.1

Primary education 4.5 5.4 3.6

No education 0.3 0.3 0.2

1 According to a random poll of population on employment issues.

2 Including post-university education.

Economically Active Population

As percent of the total1

1992 1995 2000 2004 2005 2006 2007 2008 2009 2010

Economically Active Population – total

100 100 100 100 100 100 100 100 100 100

Including:

Employed 94.8 90.5 90.2 92.1 92.9 93.3 94.3 93.0 91.8 93.2

Unemployed 5.2 9.5 9.8 7.9 7.1 6.7 5.7 7.0 8.2 6.8

Men 100 100 100 100 100 100 100 100 100 100

Including:

Employed 94.8 90.3 89.8 92.2 92.5 93.0 94.0 92.5 91.6 92.9

Unemployed 5.2 9.7 .10.2 7.8 7.5 7.0 6.0 7.5 8.4 7.1

Women 100 100 100 100 100 100 100 100 100 100

Including:

Employed 94.8 90.8 90.5 92.0 93.4 93.5 94.7 93.6 92.1 94.6

Unemployed 5.2 9.2 9.5 8.0 6.6 6.5 5.3 6.4 7.9 6.4

1 According to the data obtained from a random poll of population on employment issues: 1992, 1995, 2010 – as of the end of October; 2000-

2009 – as of the end of November. Starting from 2006 data includes Chechen Republic.

Unique Geographical Location

Unique location and transport access

The longest border in the world: ca. 60,000 km

Border with 18 countries in Europe, Asia, and America

Direct access to 12 seas and 3 out of 4 oceans

Proximity of the largest developing countries, i.e. China and India

Vast land resources

Largest country in the world

Total area of land – over 17 mln sq.km (6.5 mln sq. miles)

Different climatic and natural environmental zones (zone of arctic desert, tundra zone, forest tundra zone, zone of mixed and hardwood forests, forest steppe zone, steppe zone, zone of semi-deserts and zone of deserts)

Unique opportunities in the renewable energy industry

Availability of resources for cheap hydro power in European part of Russia and in Siberia

Around 120,000 rivers of more than 10km each, total length of waterways over 2.3 mln km

Substantial potential to generate alternative power based on wind, geothermal, sun power, and energy of biomass

Economic Ties and Integration with CIS Countries

Opportunities for further economic growth through economic and institutional integration with CIS countries

Recently-formed Customs Union between the Russian Federation, Kazakhstan and Belarus increases the total market by ca. 20%

Current initiatives on Common Economic Space and Free Trading Zone target further integration

Common trading zone, common unified customs tariffs and other regulatory requirements for Russia, Kazakhstan and Belarus

Kyrgyzstan and Tajikistan have requested to join the Union

Comes into effect from January 1, 2010

2010-2011 Initiatives

Cancellation of customs control within the Customs Union

Elimination of Customs Posts

Customs Union

Common Economic Space

Consists of Russia, Kazakhstan, and Belarus

Kyrgyzstan and Tajikistan have requested to join Free movement of goods, services, capital and labour

Common tariff for natural monopolies

Expected for completion in 2012

Free Trade Zone

Substitution of existing bilateral agreements between CIS countries with a common agreement aimed at creating favorable conditions for exchange of resources, establishment of a common market and partnership in financial policy and activities of companies

Draft agreement was prepared in 1Q2010 Negotiations on establishing Free Trading Trade Zone with

New Zealand, European Association on Free Trading, Vietnam

Enormous internal market potential of Common

Economic Space (CES)

Human Capital

Highly educated labour force.

One of the 7 leading countries by the number of Nobel Prize winners, most of prizes awarded for achievements in the field of physics.

High level of basic education.

Significant scientific research and technical resources base.

Substantial human capital supporting favorable opportunities for innovative growth.

Level of Education – BRIC Countries

%

94%92%

96%91%94%

87%

52%

78%

26%26%

74%

15%

0%

30%

60%

90%

120%

Russia Brazil India China

Primary Secondary Higher

Source: report of UNESCO, 2006

Share of Literate Education – BRIC Countries

%

99% 98%99%

66%

90%93%99%

82%

0%

30%

60%

90%

120%

Russia China Brazil India

Adults Children

Source: report of UNESCO, 2006

Highest level of educated population among BRIC

countries

Russia – Investment Priorities

Diversification of Economy –Development Priority

Share of mineral resources sector in GDP and in export is still fairly high; however, specific measures are taken in order to diversify Russian economy, this should have a positive effect on competitiveness of Russia in the world market

Key areas of diversification identified by the Russian President:

Energy efficiency;

Nuclear technologies;

IT and software;

Space technologies and telecommunications;

Medical technologies and pharmaceuticals.

Historical Structure of Russian Export

0.0

20.0

40.0

60.0

80.0

100.0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

MachineryMinerals

Wood

Metals

Food and agricultural goods

Chemicals

Other Source: Federal State Statistics Service

The goal is to modernize and to diversify the economy

Priorities in Modernization of RF Economy

Main Objectives

Launched Projects

Count, Save & Pay: forming and promoting prudent energy consumption, coordination of manufacture and installation of meters

New Light: gradual replacement of incandescent lamps by energy-efficient light sources, including development of domestic production of energy-saving replacements

Energy-Efficient Homes: overall improvement of energy efficiency in residential blocks in selected cities

Energy-Efficient Social Sector: implementation of power saving programmes in public schools and clinics

Small-Scale Complex Power Generation: improving heat and electric power supply in Russian regions through manufacture and use of energy-efficient equipment for local power generation

Innovative Energy: encouraging innovative solutions in power generation through a national energy efficiency competition

Reduce Russia’s energy intensity to GDP ratio by 40%

through energy saving, improving energy efficiency and

eliminating regulatory gaps by 2020

Energy Efficiency

Main Objectives

Launched Projects

Count, Save & Pay: forming and promoting prudent energy consumption, coordination of manufacture and installation of meters

New Light: gradual replacement of incandescent lamps by energy-efficient light sources, including development of domestic production of energy-saving replacements

Energy-Efficient Homes: overall improvement of energy efficiency in residential blocks in selected cities

Energy-Efficient Social Sector: implementation of power saving programmes in public schools and clinics

Small-Scale Complex Power Generation: improving heat and electric power supply in Russian regions through manufacture and use of energy-efficient equipment for local power generation

Innovative Energy: encouraging innovative solutions in power generation through a national energy efficiency competition

Reduce Russia’s energy intensity to GDP ratio by 40%

through energy saving, improving energy efficiency and

eliminating regulatory gaps by 2020

Energy Efficiency

Priorities in Modernization of RF Economy (continued)

Launched Projects

Increase the efficiency and quality of information services

Develop a modern information infrastructure in all sectors

of the national economy

Space Navigation, GLONASS: enabling the provision of

navigation services to broad range of users: emergency

services, transportation, construction, oil and gas, logistical,

power companies, individual users

Space-Based Monitoring and Tracking: remote sensing of

the Earth atmosphere and surface; search for minerals,

monitor the environmental situation, weather forecast,

rescue operations in remote regions

Space-Based Targeting Systems: military and emergency

assistance, monitoring of global atmospheric processes and

other applications

Space Telecommunications as Part of Broadband

System: switching to broadband systems, especially to

digital broadcasting

Main Objectives

Space Technologies and Telecommunications

Priorities in Modernization of RF Economy (continued)

Projects related to development and manufacture of

pharmaceuticals, medical equipment and health products

aimed to promote the growth of innovative biotechnology,

cell, nuclear, and nanotechnologies in healthcare

Launched Projects

Production of the most actual medications and medical

equipment in Russia

Development and production of innovative medical

products, expansion of Russian manufacturers into new

markets

Main Objectives

Medical Technologies and Pharmaceuticals

Priorities in Modernization of RF Economy (continued)

Development of Supercomputers and Grids: building a high-performance, application-oriented computing environment based on multiple supercomputers; development of the grid infrastructures

E-Government: acceleration of the introduction of electronic public services and remote paper-free interaction between government bodies and individuals and companies

ICT Services in Education and Social Development: new educational Internet resources, focused on improving the accessibility, efficiency and quality of general and professional education

ICT Services in Healthcare and Social Services: computerisation and quality improvement for social services, personal health monitoring; medical reference systems aimed to unify the medical decision-making process in diagnosis, treatment selection, and drug prescription; automation of information flows

ICT Services for Life Safety: speech recognition, processing and enhancement, voice synthesis and biometry systems, real-time video surveillance, target recognition and emergency detection systems aimed to increase efficiency of emergency activities

Develop a high-performance, application-oriented computing systems

Improve the efficiency and quality of information services Develop a modern social and industrial information

infrastructure

Information Technologies and Software

Main Objectives

Launched Projects

Development of Supercomputers and Grids: building a high-performance, application-oriented computing environment based on multiple supercomputers; development of the grid infrastructures

E-Government: acceleration of the introduction of electronic public services and remote paper-free interaction between government bodies and individuals and companies

ICT Services in Education and Social Development: new educational Internet resources, focused on improving the accessibility, efficiency and quality of general and professional education

ICT Services in Healthcare and Social Services: computerisation and quality improvement for social services, personal health monitoring; medical reference systems aimed to unify the medical decision-making process in diagnosis, treatment selection, and drug prescription; automation of information flows

ICT Services for Life Safety: speech recognition, processing and enhancement, voice synthesis and biometry systems, real-time video surveillance, target recognition and emergency detection systems aimed to increase efficiency of emergency activities

Develop a high-performance, application-oriented computing systems

Improve the efficiency and quality of information services Develop a modern social and industrial information

infrastructure

Information Technologies and Software

Main Objectives

Launched Projects

Priorities in Modernization of RF Economy (continued)

VVER-1000 Standard Optimised Computerised Power

Generating Unit: creation in 2012 of a modern nuclear

power plant utilising a water-moderated reactor, adapted for

the Russian, European, and US markets

New Technology Platform: closed nuclear fuel cycle and

Fast-Neutron reactor - forming a brand new platform for

the nuclear power industry based on fast-neutron reactor

plants

Controlled Thermonuclear Fusion: implementation of

power generation technologies based on controlled

thermonuclear fusion, allowing for power generation

independent from fossil fuel

Fundamental Research: development of fundamental

science for nuclear energy

Overall and consistent development of the national nuclear

power potential

Guarantee long-term supply of cheap energy

Maintain Russia’s leadership on the global nuclear market

Substantially reduce uranium consumption

Mitigate environmental impact and nuclear proliferation risk

Nuclear Technologies

Launched Projects

Main Objectives

VVER-1000 Standard Optimised Computerised Power

Generating Unit: creation in 2012 of a modern nuclear

power plant utilising a water-moderated reactor, adapted for

the Russian, European, and US markets

New Technology Platform: closed nuclear fuel cycle and

Fast-Neutron reactor - forming a brand new platform for

the nuclear power industry based on fast-neutron reactor

plants

Controlled Thermonuclear Fusion: implementation of

power generation technologies based on controlled

thermonuclear fusion, allowing for power generation

independent from fossil fuel

Fundamental Research: development of fundamental

science for nuclear energy

Overall and consistent development of the national nuclear

power potential

Guarantee long-term supply of cheap energy

Maintain Russia’s leadership on the global nuclear market

Substantially reduce uranium consumption

Mitigate environmental impact and nuclear proliferation risk

Nuclear Technologies

Launched Projects

Main Objectives

Capital Inflow into Russia

In Russia there are no restrictions on free movement of capital both in case of

investments by foreign investors into Russia and in case of export of capital out of

Russia

The only limitation is investment in strategic companies which have special

importance for national security and economic stability

At the same time, there are restrictions on direct foreign investments in China and

India, and Brazil is planning to limit free movement of capital

Unlike China and India, in Russia there are no foreign currency limitations

The only limitation is the regime of managed floating RUR exchange rate, when

the conventional floor and cap values for ruble are set with respect to the dual

currency basket

At the same time, there are foreign currency limitations in China and India

Structure of Foreign Investments in Russia1

2006 2007 2008 20092 2010 (9 months)

2

Direct 29.8 55.1 75.0 36.7 25.1

Portfolio 8.1 13.1 -38.1 -4.9 0.6

Other 30.3 139.8 63.2 -25.2 4.4

Total 68.2 207.9 100.1 6.6 30.1

1 Source: Bank of Russia, according to balance of payments 2 Foreign investments in private sector; «-» means net reduction of liabilities to non-residents

Virtually no restrictions on free movement of capital

Goals of the Programme on Improvement of the Investment Climate in Russia

New liberalized procedure for issuance of work permits to foreign citizens

Simplification of the registration procedures, possible extension of the visa term

for up to 3 years

Abolishment of quotas for issuance of work permits and their unification

Optimization of procedures for access of business entities to the infrastructure

Development of a standard agreement and material provisions for connection to

the grid and networks

Identification of the list of users entitled to mandatory

receipt of services

Simplification of conditions and procedures for allocation and receipt of land plots and

construction activities, shorter period for issuance of construction permits

Simplification of customs formalities in case of export of high-technology goods and

machinery

Coordination of assistance to investors and protection of investor’s rights

Creation of a “one-stop shop” principle for requests review at the level of the

Ministry of Economic Development; complaints may be submitted directly to

I.I.Shuvalov, First Deputy Prime-Minister of the RF

Liberalization of the Russian tax policy

Separate tax regime for companies working in high-technology industries

Profit tax exemption:

In case of sale of securities if over 5 years and over 10% in ownership

For companies providing services in education and health care sectors

Large-scale measures to improve investment climate

Russian Banking System

At the beginning of 2010, total assets of the Russian banking system

amounted to approximately $973 Bn

Relatively low deposit activity in retail banking among BRIC countries – 12%

in Russia vs. 30% in China

State-owned banks account for over 40% of the total banking assets,

around 33% of all corporate deposits and 59% of all retail deposits

In India around 75% of all banking assets are controlled by the state,

in China – up to 80%

101 Russian banks are controlled by non-resident entities, representing

around 19% of all banking assets

In Russia there are over 800 medium and small regional banks,

representing around 5.4% of all assets

Russian banking system is characterized by high share of own funds –

around 15% in 2009

In Brazil – around 15%, in China – around 4%, in India – 6%

At European banks, the share of own funds in liabilities is around 6%

on average

Relatively low competition in domestic banking sector: on average one

Russian bank (except SberBank) has 3 branches (75 in Brazil, and 163 in

India)

The scope of anti-crisis measures taken by the Bank of Russia in 2008-

2009 has been estimated at 14% of the total banking assets

The highest share of own funds in the banking system among BRIC countries

Taxes in Russia vs. Other BRIC Countries

Country

Income Tax

VAT Corporate Income Tax

Personal Income Tax

China 25% 5-45% 23%

Brazil 34% 7.5-27.5% 17-25%

India 30-40% 10-30% 12.5%

Russia 20% 13% 18%

Taxes in Different Countries in 2009, as % of GDP1

Belarus 27.5% Italy 43.3%

Brazil 35.3% Japan 27.9%

Canada 33.3% Kazakhstan 26.7%

China 18.3% South Korea 28.7%

France 45.0% Great Britain 37.9%

Germany 40.8% USA 28.3%

India 18.8% Italy 43.3%

In 2009 the total taxes in Russia as % of GDP (39,064 trln RUR) amounted to 30.8 %

Russia has the most liberal and favorable tax regime among all other BRIC

countries:

Lowest corporate income tax - 20%

Personal income tax of 13%, regardless of income size

Opportunity to have a one-time write-off of 30%

of depreciation costs for tax purposes

From January 2011 – zero profit tax for educational and health care

institutions

From 2011 there will be no capital gain tax in case of long-term direct

investments

1 Source: The Heritage Foundation – index of economic freedom for 2010.

Low corporate and

personal taxes

Privatization Plans

The main objectives of the government policy in the area of federal property

privatization during 2010-2012 are

Structural reforms in the respective sectors of the national economy

Privatization of the federal property that does not support government

functions and federal powers of the Russian Federation

Creating favorable conditions in order to attract off-budget

investments for the development of companies

Income formation for the federal budget

The list of investment banks to be involved in organization of the federal

property privatization and/or to perform other functions of a seller on behalf

of the Russian Federation includes Credit Suisse, VTB Capital, Deutsche

Bank, VEB Capital, JPMorgan, Merrill Lynch, Morgan Stanley, Goldman

Sachs, Renaissance Broker and the Russian Auction House

In 2010 it is planned to complete privatization of about 250 federal state

unitary enterprises, privatization procedures for which started in 2009

Privatization Plans (continued)

The following privatization programme has been developed for 2011-2015:

Company Government stake

Stake / comments

VTB 85.5% In 2010: 10% of shares, in 2011: 10%, in 2012:

15.5%-1 share

SovComFlot 100%

In 2011: 25% of shares, in 2012-2013: 25%-1 share

with the possibility of reducing the RF interest in 2014

- 2015 below controlling stake

United Grain

Company 100% By 2012: 100% of shares

RusHydro 57.97% During 2011-2013: 7.97%-1 share

FGC UES 79.11% During 2011-2013: 4.11%-1 share

SberBank 57.58% During 2011-2013: 7.58%-1 share owned by the

Bank of Russia

Rosneft 75.1% By 2015: 25%-1 share

RosAgro-

Leasing 99.9%

During 2013 – 2015, with RF retaining the controlling

stake (50%+1 share)

RAB 100% By 2015: 25% of shares

RZD 100% Starting in 2013 up to 25%-1 share