The Russian economy (catch all)

[Dayuhan]

So Dayuhan--now that you have seen "official" Russian oil/gas statements and noticed they tended to be out of touch with "reality" then is really Russia one large supper Ponzi scheme just teetering?

Of course; it's been that way for ages, it's only recently that people are looking. As I said, any information from Russian sources has to be assumed to be unreliable. They are in a bad way on a lot of levels, not as bad as Venezuela, but no oil producers are as bad off as Venezuela. That doesn't mean a collapse is imminent: they can carry on for some time just by shuffling the numbers faster. Long term it is not sustainable, but as we've seen in Venezuela things can stagger on for quite a time.

Dayuhan---by the way a side question--was the press release for internal Russian consumption and or external global consummation?

Which press release? If you mean the unsourced price quote from Twitter, if it's Urals it's export; it's an export blend. I don't know of any source that reports internal Russian prices.

This would interest you:

http://www.platts.com/latest-news/sh...crude-26875445

and:

http://af.reuters.com/article/energy...BrandChannel=0

The unusual Chinese purchases of Urals might be an effort to prop up the market, or it might just be taking advantage of low prices.

Data from Platts or based on the Platts window are always interesting because they report actual transactions, not just rolling average price quotes.

[OUTLAW 09]

Of course; it's been that way for ages, it's only recently that people are looking. As I said, any information from Russian sources has to be assumed to be unreliable. They are in a bad way on a lot of levels, not as bad as Venezuela, but no oil producers are as bad off as Venezuela. That doesn't mean a collapse is imminent: they can carry on for some time just by shuffling the numbers faster. Long term it is not sustainable, but as we've seen in Venezuela things can stagger on for quite a time.



Which press release? If you mean the unsourced price quote from Twitter, if it's Urals it's export; it's an export blend. I don't know of any source that reports internal Russian prices.

This would interest you:

http://www.platts.com/latest-news/sh...crude-26875445

and:

http://af.reuters.com/article/energy...BrandChannel=0

The unusual Chinese purchases of Urals might be an effort to prop up the market, or it might just be taking advantage of low prices.

Data from Platts or based on the Platts window are always interesting because they report actual transactions, not just rolling average price quotes.

Again Dayuhan reported via twitter which you seem to dismiss, but then again it came via yahoo another internet reporting site not quite as fast as twitter.

The sentence is this article is "telling"---do not "panic" Russian population we have a plan........

You will also notice they quote falling oil prices.

http://news.yahoo.com/ruble-plunges-...110647010.html

Deputy foreign minister Alexei Moiseyev sought to put on a brave face, saying authorities were taking steps to curb inflation.

"Don't panic," he said on Tuesday

[OUTLAW 09]

Dayuhan--more on the falling Russian economy:

Ruble Drops to Record as Russia Sanctions Fuel Dollar Shortage


By Vladimir Kuznetsov and Ksenia Galouchko Sep 16, 2014 11:48 AM ET 0 Comments Email Print




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The ruble fell to a record for a fourth day as sanctions over the Ukraine crisis exacerbated a foreign-currency shortage in Russia, while the government canceled its ninth straight debt sale. Stocks advanced.

The exchange rate tumbled 0.9 percent to 43.8454 against the central bank’s dollar-euro basket at 7:10 p.m. in Moscow, depreciating for a seventh day to a record low. That’s within 56 kopeks of 44.40, the level that would trigger the central bank to intervene. The Micex Index climbed 1.6 percent to a two-month high, led by OAO Sberbank, the nation’s biggest lender, which was named under expanded U.S. sanctions last week.

Foreign-currency liquidity has come under pressure as the European Union and U.S. imposed new penalties to curtail access of Russian companies to their debt markets. The one-week dollar-ruble swap rate traded at the widest discount to the central bank’s main interest rate in six months today, signaling traders are willing to pay a premium for the U.S. currency.

“Sanctions and closed access to foreign-exchange liquidity from the West” is feeding demand for dollars, Dmitry Polevoy, the chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said in an e-mailed note. “The market is now targeting the upper boundary of the ruble corridor at 44.40.”

The ruble, which has lost 15 percent of its value against the U.S. currency this year, depreciated as much as 1.4 percent to 38.9300 per dollar, before trading at 38.7145. It lost 1 percent versus the euro.

Dollar Shortage

The implied yield on a one-week swap fell for a third day to 6.43 percent, taking the spread over the central bank interest rate to minus 157 basis points, compared with minus 105 basis points yesterday.

Foreign-exchange liquidity has “virtually dried out,” with volumes sinking to about $100 million per day, compared with $1 billion to $2 billion previously, according to Natalia Orlova, the chief economist for OAO Alfa Bank in Moscow.

The currency pared declines after Deputy Finance Minister Alexey Moiseev said the ministry and central bank were discussing ways to alleviate the “structural” shortage of foreign currency in the market.

“An injection of dollar liquidity by the central bank could push the ruble higher, back to 38 versus the dollar,” Moscow-based Sberbank CIB analyst Iskander Abdullaev said by e-mail.

Auction Pulled

Companies have $22 billion in dollar-denominated payments to make in September and local banks are “anticipating demand for hard currency from retailers and accumulating additional dollar liquidity,” Abdullaev said.

“The geopolitical background remains unstable,” Dmitriy Gritskevich, an analyst at OAO Promsvyazbank, said in an e-mailed note. The ruble may move “without any serious obstacles” straight to the upper limit of the dollar-euro basket, he said.

Government bonds due in February 2027 climbed, sending the yield down four basis points to 9.66 percent, trimming the increase since President Vladimir Putin started his incursion into Ukraine’s Crimea region in March to 130 basis points. The Finance Ministry cited “unfavorable” market conditions today for pulling a domestic bond auction.

Tougher penalties were announced last week even amid a cease-fire between pro-Russian separatists in eastern Ukraine and the government in Kiev, stoking concern Russia would retaliate with measures of its own and deepen the six-month crisis.

Stocks rose after Ukraine’s parliament approved a law giving special status to two regions controlled by pro-Russian separatists. That boosted optimism the crisis may ease and sanctions would be lifted, Vadim Bit-Avragim, who helps oversee about $4.1 billion at Kapital Asset Management LLC in Moscow, said by phone.

[OUTLAW 09]

Dayuhan--more on the falling Russian economy:

Ruble Drops to Record as Russia Sanctions Fuel Dollar Shortage


By Vladimir Kuznetsov and Ksenia Galouchko Sep 16, 2014 11:48 AM ET

The ruble fell to a record for a fourth day as sanctions over the Ukraine crisis exacerbated a foreign-currency shortage in Russia, while the government canceled its ninth straight debt sale. Stocks advanced.

The exchange rate tumbled 0.9 percent to 43.8454 against the central bank’s dollar-euro basket at 7:10 p.m. in Moscow, depreciating for a seventh day to a record low. That’s within 56 kopeks of 44.40, the level that would trigger the central bank to intervene. The Micex Index climbed 1.6 percent to a two-month high, led by OAO Sberbank, the nation’s biggest lender, which was named under expanded U.S. sanctions last week.

Foreign-currency liquidity has come under pressure as the European Union and U.S. imposed new penalties to curtail access of Russian companies to their debt markets. The one-week dollar-ruble swap rate traded at the widest discount to the central bank’s main interest rate in six months today, signaling traders are willing to pay a premium for the U.S. currency.

“Sanctions and closed access to foreign-exchange liquidity from the West” is feeding demand for dollars, Dmitry Polevoy, the chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said in an e-mailed note. “The market is now targeting the upper boundary of the ruble corridor at 44.40.”

The ruble, which has lost 15 percent of its value against the U.S. currency this year, depreciated as much as 1.4 percent to 38.9300 per dollar, before trading at 38.7145. It lost 1 percent versus the euro.

Dollar Shortage

The implied yield on a one-week swap fell for a third day to 6.43 percent, taking the spread over the central bank interest rate to minus 157 basis points, compared with minus 105 basis points yesterday.

Foreign-exchange liquidity has “virtually dried out,” with volumes sinking to about $100 million per day, compared with $1 billion to $2 billion previously, according to Natalia Orlova, the chief economist for OAO Alfa Bank in Moscow.

The currency pared declines after Deputy Finance Minister Alexey Moiseev said the ministry and central bank were discussing ways to alleviate the “structural” shortage of foreign currency in the market.

“An injection of dollar liquidity by the central bank could push the ruble higher, back to 38 versus the dollar,” Moscow-based Sberbank CIB analyst Iskander Abdullaev said by e-mail.

Auction Pulled

Companies have $22 billion in dollar-denominated payments to make in September and local banks are “anticipating demand for hard currency from retailers and accumulating additional dollar liquidity,” Abdullaev said.

“The geopolitical background remains unstable,” Dmitriy Gritskevich, an analyst at OAO Promsvyazbank, said in an e-mailed note. The ruble may move “without any serious obstacles” straight to the upper limit of the dollar-euro basket, he said.

Government bonds due in February 2027 climbed, sending the yield down four basis points to 9.66 percent, trimming the increase since President Vladimir Putin started his incursion into Ukraine’s Crimea region in March to 130 basis points. The Finance Ministry cited “unfavorable” market conditions today for pulling a domestic bond auction.

Tougher penalties were announced last week even amid a cease-fire between pro-Russian separatists in eastern Ukraine and the government in Kiev, stoking concern Russia would retaliate with measures of its own and deepen the six-month crisis.

Stocks rose after Ukraine’s parliament approved a law giving special status to two regions controlled by pro-Russian separatists. That boosted optimism the crisis may ease and sanctions would be lifted, Vadim Bit-Avragim, who helps oversee about $4.1 billion at Kapital Asset Management LLC in Moscow, said by phone.

[OUTLAW 09]

Now the Yukos Two case:

After the arrest of the Basneft oligarch owner yesterday the stock dropped this morning by a whopping 26%.

Who needs sanctions when Russians shot themselves in their own feet--which just adds to the current sanctions misery.

[OUTLAW 09]

Are sanctions working?---this tends to prove they are in fact hitting Russia hard--will they change Russia's stance---check the last sentence and one sees the economy will truly tank before Putin accepts "failure".

From NYTs 17/9/2014

MOSCOW — President Obama has warned Russia that “there will be costs” for its policies in Ukraine. European leaders and the head of the North Atlantic Treaty Organization have done the same.

On Tuesday, an influential figure in the Russian political elite and a longtime aide to President Vladimir V. Putin drove home this argument.

European Union and American sanctions have pushed Russia to a tipping point between growth and recession, Aleksei L. Kudrin, a former finance minister, told an audience of Western executives at a conference in Moscow hosted by the American chamber of commerce. Mr. Kudrin then outlined, in unvarnished and detailed terms, what awaits Russia if a fragile cease-fire in the war in eastern Ukraine breaks down: possibily a contraction over 5 percent lasting one to two years.

“The ceasefire is important for everybody, and for Russia most of all,” Mr. Kudrin said. “We should study these consequences, and avoid a worsening of the situation.”

Already, Mr. Kudrin said, sanctions have trimmed about 1 percent from Russia’s $2 trillion gross domestic product this year, with the effects now being felt beyond the tight coterie of businessmen deemed close to President Putin who first felt the sting. Economic growth slowed to what Citigroup projects will be 0.5 percent this year. Since January, $110 billion has left Russia as capital flight.

Aleksei L. Kudrin, a former finance chief for Russia, said sanctions have trimmed about 1 percent from Russia’s $2 trillion gross domestic product this year. Credit Olga Maltseva/Agence France-Presse — Getty Images

Faint consumer demand caused car and other durable goods sales to contract. Rosneft, the state oil company has asked for a government bailout. Yevraziya, a chain of sushi restaurants, closed in Moscow after the price of salmon doubled.

Bob Foresman, the chief executive of Barclays bank in Russia, in a speech to the gathering cited a survey of businessmen’s views on the Russian economy, highlighting phrases like “fatigue,” “caution,” “false hope” and “false dawn.”

In Ukraine this week, Separatist gunmen and the Ukrainian army are exchanging artillery fire daily over military objectives like a regional airport and a strategic village, Debaltsevo, northeast of Donetsk, where Organization for Security and Cooperation in Europe observers came under fire Sunday.

If European leaders decide the cease-fire has failed, they have vowed to leave in place financial and oil industry sanctions imposed last week, rather than repeal them. That, Mr. Kudrin said, would stall the Russian economy with zero growth in 2015, or push it into a mild recession.

If the European Union and United States escalate sanctions on the banking sector by prohibiting Russian banks from accessing SWIFT, the international secure money transfer system, the Russian economy will go into deep recession with a contraction of at least 5 percent lasting one or two years, Mr. Kudrin said.

Turning inward and relying on a revival of domestic manufacturing and agriculture helped by the weakening ruble, the plan to fortify the Russian economy of so-called import substitution outlined by an acting deputy prime minister who also spoke at the gathering, is unrealistic, Mr. Kudrin suggested.

Soft-spoken and with a wry sense of humor, Mr. Kudrin seems at times to almost take pleasure in pointing out the dismal realities of the global economy, when nobody else here will.

Europe and the United States, the governments imposing sanctions on Russia, spend about $1.5 trillion on research and development annually, while Russia spends $20 billion, he noted. As such, Russia can never hope to replicate a wide range of these nations’ imported goods. The Russian government should designate only select niches of the economy for this policy, he said.

The Russian leadership, he said, understands the costs but may be willing to pay them. Earlier, he described the economic blow as the price for Russia having a foreign policy independent of the United States.

“At a minimum, two or three years are needed to resolve the questions,” of the Ukraine crisis, he said, even if no escalation takes place.

“Until then, we won’t know what investment climate we have and the final state of our relations with the West,” he added, and the Russian economy will be in a “period of instability.”

Mr. Kudrin, whose ties to Mr. Putin stretch back two decades to the city hall of St. Petersburg, where both worked, is retired from government. His is a rare public voice of a liberal wing of the Russian elite on the mounting economic costs of the war and sanctions. Kremlin watchers, though, are divided on whether such sentiments carry any weight now with Mr. Putin.

One attendee at the conference questioned whether the Kremlin, already hurt by sanctions, sees no point in changing its behavior in Ukraine, citing Winston Churchill saying “If you’re going through hell keep going.”

[OUTLAW 09]

Chart depicting the anticipated fall rate of the Rubel out to 2017/2018--and the Russian CB cannot do anything to stop it---might help in the end for exports but Russia does not export tons of manufactured quality products outside of oil and gas.

http://t.co/amjn6bHA7C

[Dayuhan]

The question is whether the economic oligarchs, both licit and illicit, have sufficient influence to persuade Putin to change course. Not sure anyone knows the answer to that question... we'll find out.

[OUTLAW 09]

The question is whether the economic oligarchs, both licit and illicit, have sufficient influence to persuade Putin to change course. Not sure anyone knows the answer to that question... we'll find out.

Dayuhan--arrest a major oligarch who many say did his business by the book and letter of Russian law after Yukos---his company takes a 27% loss on it's stock and this is the Russian governments response.

Today from Interfax:

09:07
PESKOV: WE ACKNOWLEDGE POSSIBILITY OF EMOTIONAL MARKET REACTION TO YEVTUSHENKOV'S SITUATION BUT THIS IS NOT REASON TO HINDER INVESTIGATIVE PROCEDURES

That "emotional market reaction" was a total of 27.3% loss in stock value in a single day on a company estimated before the arrest of 8.9B USD.

Does any current Russian government official including Putin "understand" the law of the markets and basic economics 101?