EFTA Document EFTA01453242

7 March 2014 Special Report: Russia: macro implications of increased geopolitical risk At this juncture there is scope for capital outflows to be significant this year given that, along with rising risks, oil prices are high and the current account is enjoying a surplus. I Figure 6: Ruble dynamics vs. CA surplus and capital outflows. 2005-2013 90 60 40 20 0 A .20 .40 -60 -80 -100 •120 -140 2005 2006 ACA USDbn 2007 2008 2000 2010 ImosCap flaN. USDbn San* C6 troen...7 France LP. DIFfileb0 Bea —I -2° •10 • o 2011 2012 2013 ---austiso %yoy RH% 10 - 21 -20 301. -40 -eo 40 -80 • 50 -1C0 Figute 7: Quarterly dynamics of Brent, MSCI EM, RUBILISD. period average. to yoy. 2005-2013 loo 60 60 40 2006 2035 2007 —Brent 440y 20013 2000 2010 2011 2012 2013 —14SO EM, %WY % yoy (RMS) Sows Wenn Rhino, LP. Dam** Sint As regards January data, the Ministry of Economy estimates net capital outflow from Russia at USD17bn in January 2014. Given the seasonality of this indicator, outflows appear to be in line with previous years (USD17bn in January 2013 and USD16bn in January 2012). According to Economy Minister Ulyukaev, this is related to an increase in FX assets in the banking sector. In addition, the population actively purchased currency in January, which contributed to the outflow. We now proceed to look at the sensitivity of Russia's economy to various scenarios of capital outflows. Impact on the whit) At this stage we see upside risks to our base case capital outflows scenario for 2014, which we set at USD30bn (see 'Russia-2074: nexus of growth and dividends' published on 12 December). • Base case! Capital outflows moderate to a level of USD30bn from USD62bn in 2013. • Scenario 1: Capital outflows intensify to USD60bn, the level of 2011-2013. • Scenario 2: Capital outflows intensify beyond the average levels of the past several years, namely to USD100bn. ▪ Scenario 3: Capital outflows resemble 2008 and reach USD130bn. Our analysis implies that capital outflows of USD60bn would prompt a surge in the RUB/USD rate to a year-average of RUB/USD36.2, while much higher outflows of USD100bn could lead to an average of RUB/USD39.1. iFigure & Impact of higher capital outflows on RUB/USD, scenarios 2014 Cap. QUIHOW (15011n Base ono a) Scowl in 1 60 Sceoorx 2 100 SCON1110 2 130 501000. Oil( Stan N Peg Anne LA aware !(eta: em Page 4 Impart on RUB, % RUB/USO, pert' ftliBiEl1M. pang 00 34.0 44.20 11.9 35.6 46.25 19.8 38.1 49.52 26.7 40.0 61.97 -100 -80 -60 0 20 ao * 60 60 lop Deutsche Bank AG/London CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0110752 CONFIDENTIAL SDNY_GM_00256936 EFTA01453242