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Thread: The Russian economy (catch all)

  1. #101
    Council Member Firn's Avatar
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    Capital controls, what capital controls? The Russian Minister of Economic Development says njet, at least he has now plans. Of course he wouldn't say so, wouldn't he? Capital controls are that kind of stuff you want to blitz the markets with.

    He is of course right that Russia has not imposed any of that in the recent past, but the situation is of course unique, as the Russian economy shrinks, survey suggests and capital flight has reached record heights.

    In the first quarter of this year, the net outflow of foreign capital from Russia has reached some $70 billion, according to an estimate announced March 24 by the Ministry of of Economic Development. That is already more than the $62.7 billion outflow for all of 2013.
    As long as investors have to fear heavy economic sanctions and Russian reactions it is difficult to see how we don't end up north of a $ 150bn - in a $ 2000bn GDP economy. As some have already pointed out in this thread the key Russian figures are almost singing sweet songs now to foreign investors after rather gross initial reactions from the Duma floor. A couple of smart guys must have told them what was already clear in the first pages of the thread - if Russia hits foreign investors hard it cuts much deeper into it's own flesh...

    It may be seen as a very unfair advantage of Western economic power, but a huge advantage it still is.
    Last edited by Firn; 04-03-2014 at 06:00 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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    Speech at the Kriegsakademie, 1935

  2. #102
    Council Member Firn's Avatar
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    And as capital flees from Russia raising it's borrowing costs it flows to a large degree into Western treasuries reducing theirs. The irony.

    Some good background music from the bad old days.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  3. #103
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    Quote Originally Posted by Firn View Post
    Nobody knows what will happen in political terms in Russia if a recession or even a depression hits the economy. As you said in some instances you are puzzled just how bad things can go worse and worse. Perhaps Putin might endure all political attacks with the large power he has concentrated over the years and with the 'new' enemy at the gates as a culprit to target.

    I don't doubt however that his bunch will gobble up their large share even if the whole cake shrinks, as long as they can...
    Firn---have spent time going back over a large number of Interfax press releases concerning Russian economic development and their banks--if one looks at the math and compares their statements to western financial analyst statements one has a distinct feeling---their economic conditions currently are in serious straits---not even their own CB statements make financial math sense.

    The oligarch's have been great at ripping off the system so what is the true foreign currency assets in 2014 of the CB? If 36B in foreign currency assets disappeared from the Ukraine overnight where did it go-which oligarch or Russian ministry got it?

    Reason for asking---they are trying virtually every trick in the trade to make any form of money---check this article on Russia leaving the 1954 UN run TIR customs program which has been working great for Russia up to now---then suddenly they leave allowing them to take illegal border fees and additional customs also illegally---and the sum is not chum change.

    By charging illegal fees it just drives up the Russian consumer pricing which in turn drives up inflation as well and it can on the long run even reduce consumer products as companies will refuse to ship products due to the extra hassle for the truckers.

    So if they are having to do this just to make money the next question is why?

    http://www.nytimes.com/reuters/2014/...ref=world&_r=0

  4. #104
    Council Member Stan's Avatar
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    Quote Originally Posted by OUTLAW 09 View Post
    ... check this article on Russia leaving the 1954 UN run TIR customs program which has been working great for Russia up to now---then suddenly they leave allowing them to take illegal border fees and additional customs also illegally---and the sum is not chum change.
    There is anywhere from five to 10 miles of parked rigs enroute to the Russian border. Sufficiently enough in delays that drivers are going to Belarus to cross the border. The Russian Border Guards are no longer taking bribes and inspecting each and every truck.

    Sadly, as you point out, the only people that will suffer from spoiled goods will be Russians.
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  5. #105
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    Stan---Belarus is still in the TIR and can still cross into Russia with no issues---thus the trucker shifts to there.

    What is interesting to me is the why----in the face of it being illegal why do they feel the need to come up with innovative ways to earn foreign currency when their own central bank is claiming of 500B in foreign currency assets.

  6. #106
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    Firn---there was an article today in the FT and I have to dig up the link that stated the rampant and massive corruption in Russia has virtually destroyed the local economy and that Russian activities lately have been pointed towards gaining new territory in order to contribute to the Russia economy.

    Might in fact be true if one looks at the cheap products the SU would get through trade deals with say members of the Warsaw Pact ie Poland ,Hungary or the GDR especially the GDR which was still paying WW2 reparations up to 1989.

    This TASS press release caught my attention and goes to these cheap product deals----wonder just why Russia would go to the WTO with complaints against the Ukraine if they leave the CIS and or join the EU which they already are getting EU preferences through no customs barriers.

    Unless the former Ukrainian government had some on the side quiet cheap priced grain and meat products that Russia was getting that they see now as being threatened by the Ukraine getting world market prices for say their grain and meat via the EU thus the potential complaint to the WTO about none compliance with signed trade deals.

    But on the other hand Russia is cancelling a number of signed Gazprom and Black Sea Fleet deals so I am not sure what they are up too.

    http://en.itar-tass.com/russia/726633

    The last sentence is telling---we will invest in the agriculture base "if" we have "additional financing" with a supposedly 500B foreign currency reserve one would think they have "additional financing" unless the actual foreign currency reserves are much lower due to corruption.

    "It does not affect agrarian programmes. I emphasize once more all of them will be preserved, and when there is additional financing, we will channel it into state support," Medvedev assured.
    Last edited by OUTLAW 09; 04-05-2014 at 04:44 PM.

  7. #107
    Council Member Firn's Avatar
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    Some news about the Russian budget

    The government’s use of the sovereign funds would be separate from the 130 billion rubles allocated from the budget this year to raise state pensions and salaries in Crimea.

    “Failing to observe the budget rules during stagnation is a strategic mistake,” Alexei Kudrin, a member of Putin’s economic council and a former finance minister, said by phone. “The government is tapping reserve funds instead of pursuing reforms. Augmenting the budget deficit at a time when we cannot borrow on the market is wrong.”
    Russia was recently unable to sell it's bonds at it's conditions, as written earlier in this thread, the market is demanding a higher yield to compensate for the greatly increased risk. With considerably better offers it should be able to borrow on the market.

    It is interesting to note that quite a few advocate against stimulating the weakening Russian economy, which seems to be heading towards a recession. The RCB is fighting a delaying action against the fall of the ruble with market interventions and the big interest raise and can hardly use the printing press to finance a defict if Putin wants one. With both the fiscal policy and the monetary seemingly tied up there is little support indeed available for the Russian economy.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  8. #108
    Council Member Firn's Avatar
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    Illegal vodka floods the Russian market seems to be a trivial aspect of the Russian economy, but that happened also in the 80s in the SU when the leadership tried to curb alcoholism by price hikes and laws. The revenue stream is this time of course not that important for the budget, but it shows that one's actions in a difficult social context can result in unintended, sometimes counterproductive outcomes.
    Last edited by Firn; 04-15-2014 at 07:10 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  9. #109
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    Firn---thought you might like these economic press releases from Interfax today;


    April 22, 2014 13:15 Govt will honor all social obligations despite economic problems - Medvedev
    MOSCOW. April 22 (Interfax) - For all the economic difficulties, the Russian social sector will not be affected, and the government will honor all the social obligations, said Russian Prime Minister Dmitry Medvedev.
    "I want to state as follows: whatever happens around our country, whatever the difficulties our economy experiences, we shall fully honor all the social obligations we've assumed," Medvedev told the State Duma while presenting a government report.

    13:13 RUSSIA TO MINIMIZE CONSEQUENCES OF POSSIBLE EU SANCTIONS BY TURNING TO OTHER MARKETS – MEDVEDEV

    April 22, 2014 13:06 Blacklists swap will lead Russia, West into deadlock - Medvedev (Part 3)
    MOSCOW. April 22 (Interfax) - The continuation of exchange of blacklists in the wake of the incorporation of Crimea into Russia will result in an absolute deadlock, said Russian Prime Minister Dmitry Medvedev.
    "Of course, we can continue swapping blacklists but I do not even consider it necessary to prove now that this is an absolute deadlock," he said while presenting a government report to the Duma on Tuesday.
    Already Russians have experienced the restrictions, and not just in getting visas: foreign partners have removed certain Russian banks from international payment systems, the prime minister said.
    "For us, it is an additional incentive to create a national payment system that would hardly depend on the international situation and operate smoothly on a nationwide scale," Medvedev said.

    13:59 Russia must try to shift foreign trade to the ruble for ruble to become reserve currency – Medvedev

    13:26 Russian GDP should grow in line with EU economies in 2014 - PM (Part 2)

    14:02 Medvedev: 20%-40% of outflow was 'gray capital'

  10. #110
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    There are an interesting number of economic indicators that Russia is financially struggling and that might be the single reason Putin has not moved yet.

    1. Russia attempted for the fourth time to sell Sovereign bonds yesterday at a 200M USD range ---not a single taker AND by the way not a single Interfax press release on the topic or as well in TASS

    2. they announced that inflation was up to 3% but that it was not a problem which is interesting as European rates are sinking

    3. and they pushed back on outside statements saying that in Q2 Russia was a full blown recession

    And then this today in Interfax:

    16:03 RUSSIAN CORPORATE PROFITS PLUMMET A THIRD IN JAN-FEB, MANUFACTURING POSTS LOSSES

  11. #111
    Council Member Firn's Avatar
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    Quote Originally Posted by Stan View Post
    Kaur,
    President Ilves told the Ukrainians this months ago.

    What a shame that our 2007 lesson, free of charge, fell on deaf ears.

    Close the borders
    Find the money
    All Russian passports are suspicious

    How difficult to follow ?

    But, we don't have Russian sympathizers on our borders
    Hey, at least no sensible person can say anymore that the has been no little effort to 'understand' Putins position on the 'Russian necessities'. It seems that much of the energy spent on 'de-escalating' has served as a incentive to Vova to escalate further.*

    In any case time isn't on the side of the Russian economy. We will see how things shape up around that key Russian weakness in the long run.

    *As stated before I'm against military adventures but the US and EU could inflict considerable financial and economic costs on Russia at likely pretty cheap price. Others will hurt especially the EU more, but will hit Russia far harder. Needless to say the US could easily come up with a couple of additional billions to support Ukraine, helping to break a good deal of the economic leverage Russia enjoys over it's weak neighbour.
    Last edited by Firn; 04-24-2014 at 01:46 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  12. #112
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    David, this energy firms aspect is wierd to read in situation, where 2 days ago Putin had to be arbiter between Gazprom and Rosneft in their dealing with Shell and Exxon. The fight is going on because of Sakhalin LNG project, which must be exproter to the Asia market. Diversification of energy routs from Europe to Asia with the help of western firms.

    This seems to be good article.

    Russia Is in No Economic Shape to Fight a War
    By Anders slund Apr. 22 2014

    http://www.themoscowtimes.com/articl...mes+Opinion%29

  13. #113
    Council Member Firn's Avatar
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    Quote Originally Posted by OUTLAW 09 View Post
    Who would have thought that countries can even suffer from PTSD.

    Interesting link and article:

    http://www.newrepublic.com/article/1...tress-disorder
    Nice to see somebody else picking up Gaidars comments in his great book and expending on them.

    Personally I would not be worried too much about NG demand for various reasons already outlined in this thread long ago. Btw I also gave the Austrian Verbund a closer look after it's long fall, and it is quite stunning how uncompetitive gas is also in the electricity sector in Austria. In the long run I doubt that the Russians will get as much for their stuff as today.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  14. #114
    Council Member Firn's Avatar
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    Quote Originally Posted by OUTLAW 09 View Post
    Firn---noticed today that Putin in a press released admitted the sanctions were causing damages ie increased lending costs, or no loans or financing being available due to bank questions caused by the sanctions.
    Sounds like Putin is trying to prepare 'his' people for some economic sacrifice for the greater good and proper needs of Great Russia. The state's balance sheet is pretty strong but the foundations of the economy and it's prospects are quite shaky. We will see how the GDP will shrink according to neutral analysts.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  15. #115
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    Quote Originally Posted by Firn View Post
    Sounds like Putin is trying to prepare 'his' people for some economic sacrifice for the greater good and proper needs of Great Russia. The state's balance sheet is pretty strong but the foundations of the economy and it's prospects are quite shaky. We will see how the GDP will shrink according to neutral analysts.
    Firn---yesterday they were again unable to place a 200M USD Bond offering and pulled it back---the fourth failed attempt in the last three months---risk rates were to high for their CB.

  16. #116
    Council Member Firn's Avatar
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    Even Without Sanctions, Russia's Economy Is Looking Sicklier Than Ever

    “What we’re seeing now is a pretty permanent exodus from Russia, and it will be very difficult for the Russian central bank to fight it,” Lars Christensen, chief emerging-markets analyst at Danske Bank in Copenhagen, tells Bloomberg News. “The central bank is very much between a rock and a hard place. They frankly seem quite desperate in their actions.”
    I wrote earlier that Russia might be forced to raise again it's interest rate and last week it did so. Higher inflation and (unofficially) pressure on it's foreign reserves are the two reasons. The RCB finds itself indeed between a rock and hard place and has to hurt demand and growth due to Putin's primacy of politics...

    The Ruble has fallen quite a lot in the last year due to the economic woes in Russia and the strenght of the Euro and Dollar in the last years. It's large losses in the last months after Putins military adventures are especially impressive if one takes into account the 40+ bn USD spent on market interventions and the 200+ base points hike relative to the actions of the FED and ECB.
    Last edited by Firn; 04-29-2014 at 07:14 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  17. #117
    Council Member Stan's Avatar
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    Firn,

    Quote Originally Posted by Firn View Post
    I wrote earlier that Russia might be forced to raise again it's interest rate and last week it did so. Higher inflation and (unofficially) pressure on it's foreign reserves are the two reasons. The RCB finds itself indeed between a rock and hard place and has to hurt demand and growth due to Putin's primacy of politics...
    Not sure I understand this chart. Seems 2004 and 2005 were far worse.


    Historic inflation Russia (CPI) - This page features an overview of the historic Russian inflation: CPI Russia. The inflation rate is based upon the consumer price index (CPI). Two overviews are being presented:
    the annual inflation by year for Russia - comparing the december CPI to the december CPI of the year before and
    the average inflation by year for Russia - the average of 12 monthly inflation rates of a calendar year
    I don't do pie charts
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  18. #118
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    Quote Originally Posted by Stan View Post
    Firn,



    Not sure I understand this chart. Seems 2004 and 2005 were far worse.
    The target is 5% IIRC, now RCB's indicator seems to have hit 7.2% after 6.2% in Feb. The rate of change might have caused the RCB's reaction more then the absolute percentage...

    The graph suffers from the start year with over 800%. Compared to that everything other seems inflationwise tiny



    A better one. One has to keep in mind that wages, especially the public ones (I guess lots of bonuses for the FSB, Cossacks and so forth ) have outstripped productivity growth (maybe not for the FSB&Co, sorry ) for quite some time...
    Last edited by Firn; 04-29-2014 at 07:29 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  19. #119
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    Firn---you will enjoy this article--in addition to this MC with it's cutting off card operations to two Russian banks is costing themselves 3-4B USD in lost Russian business per month but that translates into even more in lost internal Russian business sales. It is interesting that the Russians are arguing the card business is over 780B USD per year.

    Russians are arguing that they need now their own rating agency but that is 10 years away and with Russian criminal activity no one would trust the agency so they are tied to the three US rating agencies forever so to speak.

    http://www.themoscowtimes.com/busine...es/499195.html

    If one looks at this Interfax press release that just came out one wonders where Putin's mind is as it is the Russian oil industry that is dependent on critical specialized US oil industrial products, equipment and critical engineers---they cannot be in certain oil production areas substituted by other oil producing countries---so I am not sure just where the threat is to the US oil industry. One hears for the last three days out of Moscow the drumbeat that the sanctions are actually beneficial for us as we will and or must develop our own industries---but they forget to say at the same time just how long it will take they to build substitutions. IE for the military industrial base in the Ukraine will require up to 10 years to replicate in Russia.

    04/29 23:25 PUTIN: IF EU'S, U.S.' SANCTIONS CONTINUE, WE WILL HAVE TO THINK ABOUT THEIR PRESENCE IN STRATEGIC SECTORS OF RUSSIA'S ECONOMY, PARTICULARLY IN ENERGY SECTOR
    Last edited by OUTLAW 09; 04-29-2014 at 08:51 PM.

  20. #120
    Council Member Firn's Avatar
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    Quote Originally Posted by Fuchs View Post
    Hardly.
    Besides, rating agencies are so very useless, nobody "needs" them - other than for rackets. It's about time we establish test runs to expose how useless the financial sector's judgement on risks is. I've seen it myself many times; flipping coins would be quicker, cheaper and in no way inferior to bankers deciding on business loan requests.
    Partly true, but it does underestimate the mostly positive impact of ratings as a way to incentivize debtors to better their financial policies to get an easier and cheaper access on the market. It is only a tendency which comes at a price with plenty of counterexamples but it is a positive tendency.

    For individuals on the investment side perhaps the best aspect is the ability to party shift responsability - at least you can shout that you bought only A+ or so. As most things this might have a negative impact on the mental effort to analyze the thing itself.

    As the service of the rating agencies is relatively cheap compared to market volume I believe that they are worth it. In any case a bad rating might be unfair or plain wrong but it is still a real problem for the business, especially since the spread of tighter rules in entities like pension funds etc. A drop below 'investment grade' forces them to disinvest.
    Last edited by Firn; 04-30-2014 at 07:16 AM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

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