Russian Economy: An Overview
After a war of more than two years now, the Russian economy is thriving despite the Western sanctions. The World Bank has promoted Russia from an ‘upper-middle income’ to a ‘high-income’ country. Russia’s per capita gross national income was around $14,250 in 2023, growing by 11.2% year-over-year. The military-related activity in 2023 was high which influenced the economic activity in Russia. In addition, the economy was boosted by further growth in trade by 6.8%, construction by 6.6%, and the financial sector by 8.7%. The growth across these sectors helped in increasing both real and nominal GDPs by 3.6% and 10.9% in 2023 year-over-year, respectively.
Russia’s economy is projected to grow faster than all advanced economies in 2024, as per the IMF. Russia’s expected growth rate for 2024 is 3.2%, surpassing the forecast growth rates for the US at 2.7%, the UK at 0.5%, Germany at 0.2%, and France at 0.7%. Russia believes that the Western sanctions have strengthened its critical industries over the past two years and have made it more self-sufficient. According to the Russian News Agency, the Russian president pointed out that the investments in fixed capital soared by 12.6% in the second quarter and by 13.3% in the fourth quarter of 2023. President Putin said:
“Investments are growing. This means that conditions are being created for future development in the medium term. It is necessary to support growing business activity and ensure the availability of financial resources for businesses in those areas that cover the needs of the domestic market and export demand.”
Russia is expanding its contracts with countries in the Middle East, Africa, and Latin America, boosting the growth potential of the Russian economy. The president further added that the domestic light industry enterprises have expanded by 80% in a year and a half, as of December 2023. Furniture production and children’s toys production have increased by 30% and 20%, respectively. Meanwhile, Russia continues oil and commodity exports to major economies including India and China. Russia is the third largest oil exporting country in the world in 2024. That is one of the reasons that the majority of Russian billionaires belong to the oil and gas industry.
Billionaires in Russia
In 2021, the Russian billionaire’s total net worth was accumulated at around $606 billion by Forbes. Russian billionaires after facing sanctions and heavy losses have gained fortune in the last year. The high commodity prices and the country’s war-focused economic growth have boosted the wealth of its billionaires in 2023. Russia’s wealthiest people added nearly $72 billion to their fortunes over the past year, taking their collective wealth to $577 billion by the end of first quarter of 2024. On July 9, Bloomberg reported that around a dozen business people gained over $11.3 billion in dividend income in 2023 and the first quarter of 2024.
The majority of leading Russian corporations are state-controlled including Public Joint Stock Company Gazprom (MCX:GAZP) and Sberbank of Russia (MCX:SBER). Both these companies made record profits in 2023. Sberbank of Russia approved a record 752 billion RUB in dividends for 2023. The companies from the oil and gas sector have been top performers for a long time. Many of the top richest billionaires in the energy sector are Russian.
One of Russia’s Top Oil Companies
Russia’s strong presence in the energy sector makes it a leading producer and exporter in the oil and gas segment. Russia is the second leading natural gas producing country in the world in 2024. Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) is one of the most valuable state-controlled energy firms. Rosneft Oil Company holds a 6% share in global oil production and a 40% share in oil production in Russia. In addition, the company has an 8% share in gas production in Russia. Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) has 13 big oil refineries and around three thousand fuel-filling stations in the country. Rosneft has operations in all major oil and gas provinces in Russia including Western and Eastern Siberia, Krasnodar Krai, Timano-Pechora, the Urals, the Volga region, the Far East, and Russian offshore. Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) has the 2030 agenda of fighting greenhouse gas emissions and reducing them by 5% in 2025 and further reducing methane emissions to below 0.2% by 2030. By 2035, the company expects to minimize absolute greenhouse gas emissions by over 25%.
Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) reported 9.16 trillion RUB in total revenue in 2023, increasing by 1.3% in 2022. The company’s net income increased by 52.6% year-over-year to 1.53 trillion RUB in 2023. The EBITDA and adjusted free cash flow were around 3 trillion RUB and 1.42 trillion RUB in 2023, up by 17.8% and 44.3% year-over-year, respectively. These key financial metrics reflect strong growth in 2023. In order to improve its outcomes, Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) units lifting costs dropped by $2.6/boe in 2023. In addition, the company’s main focus was to reduce its debt burden and it was successful in reducing the net financial debt and prepayments by 0.7 trillion RUB. On the downside, the company’s interest expenses increased due to a higher interest rate by the Bank of Russia. During the first quarter of 2024, Rosneft’s revenue was reported at around 2.59 trillion RUB, a slight increase of 1.7% year-over-year, while EBITDA reached 857 billion RUB, up by 42.4% compared to Q1 2023. The company has kept its unit lifting costs at $2.6/boe, as of Q1 2024. Russia is looking forward to new allies and trading with large economies such as China and India. This will continue to boost sales for companies such as Public Joint Stock Company Rosneft Oil Company (MCX:ROSN).
President Putin and Prime Minister Modi have set a target of increasing bilateral trade by $100 billion by 2030, up from $65 billion at present. In the recent tour of the Indian Prime Minister to Russia, both the leaders spoke of cooperation in the energy sector. Russian giant, Rosneft, has a majority stake in India’s private refiner Nayara Energy. Similarly, Indian companies are also involved in oil exploration and production projects in the Far East in Russia.
On June 28, Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) announced the payment of dividends for 2023 at 29.01 RUB per share. The nominee shareholders are to receive the dividend payment no later than July 23 and other shareholders are to receive the payment no later than August 13. Earlier on April 1, the Rosneft board had approved the share buyback program at an open market price, with its implementation period until December 31, 2026. The company is to buy back shares not more than worth $1.13 billion or 102.6 billion RUB. This means that the company’s share capital will reduce, resulting in potentially higher dividends in the future.
Public Joint Stock Company Rosneft Oil Company (MCX:ROSN) is a leader in its segment and the trade agreement with India will further increase sales of the company. Rosneft’s five-year average gross profit is around 70.52%, which is almost 31.37% higher than the five-year sector average.
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Our Methodology
To compile our list of the 30 wealthiest people in Russia, we utilized the real-time billionaires data from Forbes and ranked the wealthiest people in Russia in ascending order of their net worths, as of July 8.
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The Wealthiest Person in Russia
Vagit Alekperov
Net Worth as of July 8, 2024: $28.6 Billion
Vagit Alekperov is a self-made billionaire and has made a majority fortune in the oil industry. Alekperov served as an oil rig worker in the Caspian Sea before starting his business. In 1991, Alekperov took three large ministry-controlled oil fields and established Russia’s largest independent oil firm, Lukoil. Alekperov owns around 30% share in Lukoil. In April 2022, Alekperov stepped down as the president of Lukoil following sanctions by the UK. With a net worth of almost $28.6 billion, Vagit Alekperov is the wealthiest person in Russia in 2024.
Curious to learn about other wealthy individuals in Russia? Check out our report on the 30 Wealthiest People in Russia.
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