The Russian economy (catch all)

[Firn]

Aid Elusive, Crimea Farms Face Hurdles

A rather in-depth look at the problems faced by the Crimean agriculture some months after the Russian invasion.

SIMFEROPOL, Crimea — Sergei V. Tur, a significant landowner, scowled beneath his desert camouflage cap as he watched a hulking combine chew through one of his golden barley fields, reaping part of what he predicts will be the best harvest in Crimea in three years.

The weather may be cooperating, but since the Russian annexation of the Black Sea peninsula in March, the political crisis has disrupted virtually every other aspect of farming — from irrigation to credit to exports.

“On a scale of one to five, we are at negative three,” said Mr. Tur, the head of the Association of Farmers and Landowners of Crimea, with 300 members among the largest 1,700 farms.

Russia has a terrible economic record in it's de-facto occupied territories as we noted earlier and the classic problems of it's economy are all surfacing, plus those specific to annexed Crimea:

Mr. Polyushkin, the agriculture minister, said produce trucks were waived right onto the ferry. Farm managers said that was news to them. Not only does the produce have to wait, but once the trucks get into Russia, Ukrainian license plates make them targets for constant stops, searches and shakedowns by the Russian police, producers said.

A steady parade of senior Kremlin officials, including Prime Minister Dmitri A. Medvedev and numerous ministers, have all promised help, farmers said. But little that is concrete has materialized.

“Russia talks about patriotism all the time, but they do not seem to be taking the simplest steps to promote Crimean goods,” said Gennadi V. Potabenko, a publicist working for Skvortsovo.

[Firn]

Russian Billionaires in ‘Horror’ as Putin Risks Isolation

It sounds a bit alarmistic, but it is worth a read.

If Putin doesn’t move to end the war in Ukraine in the wake of last week’s downing of a Malaysia Air jet in rebel-held territory, he risks becoming an international outcast like Belarus’s Aleksandr Lukashenko, whom the U.S. famously labeled Europe’s last dictator, one Russian billionaire said on condition of anonymity. What’s happening is bad for business and bad for Russia, he said.

“The economic and business elite is just in horror,” said Igor Bunin, who heads the Center for Political Technology in Moscow. Nobody will speak out because of the implicit threat of retribution, Bunin said by phone yesterday. “Any sign of rebellion and they’ll be brought to their knees.”

It is difficult to see capital flight easing after the recent events and with a high likelyhood of a weaker economy and reduced demand investments are dropping. Maybe Russia is already entering one of those vicious recession cycles, but it is still early to tell.

[Firn]

Russia's surprise interest rate rise 'to curb inflation'.

BBC economics correspondent Andrew Walker

There's a key phrase used by the Russian Central Bank: "the aggravation of geopolitical tensions".

The shooting down of the Malaysian airliner over eastern Ukraine is now having an economic impact, indirectly, on Russia.

I will comment later on it, time has run out.

[Firn]

On Key rates by the Central Bank of Russia.

Of course the 'geopolitical factors' took it's toll, but in the long run this part confirms earlier statements and independent research:

Low economic growth rates are largely caused by structural factors. Utilisation of production factors — labor force and commercially viable production capacities — is high. Labour productivity growth is sluggish. Due to the demographic trends labour force shortage will continue to affect economic growth in the long term. Along with structural factors, external political uncertainty has a negative impact on economic activity. Investment demand remains weak amid low business confidence, limited access to long-term financing in both international and domestic markets, and declining profits in the real sector. Besides, consumer activity is cooling. Economic slack in most countries that are Russia’s trading partners does not contribute to acceleration in economic growth. At the same time, persistently high oil prices support domestic economy.

It seems harsh, but yes, Russia is in budget terms a bit like those oil states in the Gulf. Without high prices for ressources, especially oil and gas it's economic model doesn't work.

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The Central Bank of the Russian Federation (Bank of Russia)

Press Service

12 Neglinnaya Street, Moscow, 107016 Russia; tel: +7 495 771-44-17, +7 495 771-46-69; fax: +7 495 924-92-16;
www.cbr.ru

[Firn]

The German FAZ, Bloomberg (which also has a short historical overview with links) and the Sole 24 ore offer views from different countries. The strategy seems to be clear, with harsher ones possible, but for now the execution and the moral impact will matter.

After the last months it is still true that the balance sheet of Russia looks fairly strong but it's economic prospects increasingly grim. Russia is already paying a considerable price for Putin's war and now we have for the first time sanctions which show intent to harm the economy.

Treasury Secretary Jacob J. Lew, speaking to reporters today in Riverdale, Iowa, said U.S. sanctions are designed to maximize the economic pain on Russia while minimizing the effects elsewhere.

“If we are doing the sanctions effectively and smartly, we will put an enormous amount of pressure on Russia, and we shouldn’t see terribly negative economic impacts here in the United States,” Lew said. “Russia is barely growing now. With these increased sanctions, it’s going to grind Russia into either a flat or a negative economy.”

Personally I think that Russia is already in a recession but we will only find out once the adjusted figures come out.

The sanctions felt the earliest will likely be those bans on the bond market, unless the Russian Central Bank or the Kremlin react quickly and strongly.

European Union and U.S. sanctions jeopardize funding for Russian companies, which have tapped international capital markets for more than $600 billion in debt and equity since the country emerged from its 1998 default.

Russian businesses have about $165 billion in U.S. and European bonds and more than $100 billion in offshore syndicated loans currently outstanding, according to data compiled by Bloomberg. Whether banks based in China, which remains friendly with President Vladimir Putin’s regime, can replace that lending remains to be seen.

The sanctions against Russia “will likely force a further contraction in domestic credit growth and hence the economy,” said Alexander Moseley, senior portfolio manager in New York with Schroders Plc, which oversees $100 billion in fixed-income assets. “Asian debt and equity markets are probably not able to substitute entirely for curbed access to the dollar and euro markets.”

Orysia Lutsevych, research fellow at Chatham House in short Bloomberg video. She makes the point I raised earlier, some sanctions will work in the long term like those technology bans in the oil sector.

[OUTLAW 09]

firn---the EU is estimating the cost of this last round to be in the 100B range over two years thus 20% of their foreign currency reserves---the problem is that they can use those funds to support internally their economy---but to get to them they must cross through the NYC money exchanges centers and or thru the EU currency center which is now sanctioned and virtually any other exchange center will deny them as well as they do not want to get tangled up in the US long reach that they have in fines for those not holding to the financial sanctions ie the French and German banks right now with their fines.

Add the Yukos decision of 50B which they must pay if they want further foreign investment to come in and feel their investments are protected--that's another 10% from the foreign currency they hold.

Not a good week for the Russian Central Bank.

[OUTLAW 09]

firn--a really good article on the internal balancing at of the four pillars of Russian power 1) the military, 2) the security services, 3) the oligarch's, 4) the Russian mob and how the sanctions are starting to impact the internal politics of Russia.

http://www.nytimes.com/2014/07/30/wo...-tactics.html?