Seems the current Russia failed to remember the Soviet days that also failed for the exact same reasons it is now---massive corruption and planned state economic decisions.Originally Posted by Firn
#Oil Shock Streaks Across Globe From #Moscow to Tehran to Caracas. Ready for $40?
http://www.bloomberg.com/news/2014-1...s-to-iran.html …
pic.twitter.com/xkhZzEkxZa
Expert:#Putin can not freeze conflict in #Ukraine,#Russia's #economy is collapsing before our eyes.
pic.twitter.com/tMeBGioDB5
Last edited by OUTLAW 09; 12-02-2014 at 06:08 AM.
I think one has to be quite careful with an assumption of oil around 45 or less, or with any. That it gets discussed shows how many animal spirits react to the often mentioned supply glut.
High Inflation should persist in Russia if we don't see any short-term strenghtening, as a considerable amount of prices of imported services and products have not been adjusted due to various reasons as market share, contracts and so forth. It is not far away from the high rates of the RCB, so the real returns are not quite as attractive as the Central Bank might suggest.
And btw South Stream seems to be dead.
Offering a discount seems to be the new Russian way of trying to sell it's NG. OF course in this case the discount may be just a reflection of current price events on the markets...The announcement on scrapping South Stream came during a visit by Russian President Vladimir Putin and Gazprom chief executive, Alexei Miller, to Turkey, during which Putin proposed building it to Turkey instead, offering its gas at a discount.
"I don't think Putin is bluffing. I think he's really adapting to a fundamentally new geopolitical situation in Europe," the IISS' Noel said.
Last edited by Firn; 12-02-2014 at 07:53 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
South Stream
The Russian idea of North Stream and South Stream was, to avoid the usage of Ukrainian and Polish pipelines, i.e. to end the theft of NG by Ukraine and to re-gain some strategic freedom in respect to Ukraine and Poland.
The capacity of North Stream is IIRC sufficient to reduce the flow through Ukraine by ~50%.
When the EU delayed the the construction of South Stream in summer 2014 the situation for Russia became worse:
1) The capacity of North Stream and then Ukrainian pipelines are more than sufficient for deliveries to western Europe, however, the Russians have to use Ukrainian pipelines and may become victim of some kind extortion again.
2) The Russian investments for South Stream are substantial and not finishing the project hurts therefore twofold.
3) Alternatives like Blue Stream to Turkey connect Russian fields with a customer who will not pay as much as the EU customers.
What is not being mentioned was the Israeli offer last week to build a NG pipeline into Italy and Greece---therefore actually undercutting Russian efforts and their pricing levels are rumored to be a good deal lower than Gazproms---that is why GP is giving reductions--also their delivery contracts had tied NG prices to the oil price levels.
...and busy they are, and doing well it seems.
Looks like a Russian robbery in scale both large and small. Dark days (no electricity pun intended) for many in Crimea...The studio, nestled in hills overlooking the Black Sea, is just one of thousands of businesses seized from their owners since Crimea was annexed by Russia eight months ago. Crimea's new pro-Moscow leaders say the takeovers, which they call nationalizations, are indispensable to reverse more than two decades of wholesale plunder by Ukrainian politicians and oligarchs.
But an Associated Press investigation throughout this peninsula the size of Massachusetts found many instances of less noble practices: legal owners strong-armed off their premises; buildings, farms and other prime real estate seized on dubious pretenses, or with no legal justification at all; non-payment of the compensation mandated by the Russian constitution; and targeting of assets belonging to or used by independent news media, the Crimean Tatar ethnic minority and the pro-Kiev branch of the Orthodox Church.
More will now. We will see how the mood is in a couple of years. With Russia's economy in or sliding into recession, the state-supported robbery, the legal limbo, the crash in tourism, the Ukrainian water-blockage, criminals in charge, very high inflation and the financial outfall of the bank busting it is difficult to see bright spots for Crimea's economy.The attorney for a labor union whose property holdings in many Crimean cities have been threatened with nationalization said people here are living in legal limbo. "It's a circus — everything is up in the air," said the lawyer, who requested anonymity out of fear of official reprisal.
When Crimea joined Russia, she added, "nobody understood that."
Last edited by Firn; 12-02-2014 at 06:04 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
Russian Cent Bank spent $700m propping up ruble on Dec. 1, first intervention since Nov. 10:
http://bit.ly/1yhgUIw
According to Business Week, Russia has another drainage problem:http://uk.businessinsider.com/russia...a-2014-12?r=US
There is a second graph that shows emigration into Russia.
davidbfpo
The jump in emigration in 2014 is quite large, still I'm pretty sure that the partly ethnic Russians fleeing the fighting and dispair in Dobnas over the open border will more then balance it out even if fewer should come from other areas due to the economic crisis. Of course the demographics of the people moving is of great importance...
I'm sure there are. Strangly I recalled after that sentence the rants of masked men blocking the road to Crimea on the economic power of Russian and the collapsing Western economy, especially of course the USA. Plenty of gay this and gay that, of course."There are opportunities for my children in Moscow that aren't found anywhere else," one parent told BI.
P.S: Yes the RCB has intervened again. It has become more likely to see another rate hike.
Last edited by Firn; 12-03-2014 at 07:19 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
At first Russia "laughed off" the EU and US threat to cut them out of SWIFT.
Seems they are no longer "laughing".
Cutting Russia from SWIFT is the "finance nuclear strike" without using nukes.
Cutting Russia Off from SWIFT 'Will Mean War': Top Russian Banker
http://www.interpretermag.com/russia...nce-1998/#5207 …
Looks like senior Russian political types are starting to "panic" and blame everyone else instead of their own actions causing the Ukraine to impact the Russian economy.
Russian Leader Accuses Central Bank of Economic Sabotage
The Fiscal Times
By Rob Garver
2 hours ago
The current government of Russia has a talent for denying the obvious. Vladimir Putin spent months denying that Russian troops were invading Ukraine, despite massive amounts of evidence to the contrary. In the face of overwhelming evidence that Russia-backed rebels shot down a commercial airliner over the summer, Russian leaders spun webs of conspiracy theories in an effort to implicate the Ukrainian government.
One Russian institution, though, has been consistently willing to admit to the existence of an observable reality. And it appears that it is now paying a price. After months of providing honest, if gloomy, appraisals of the state of the Russian economy, the Russian Central Bank this week finds itself facing accusations from lawmakers that it is trying to sabotage the country’s economy.
Yevgeny Fyodorov, a senior member of Putin’s United Russia party and chair of the Russian Duma’s economic policy committee, reportedly told Russian News Service Radio that the bank is “an institutional enemy of the country” and accused it of orchestrating a steep decline in the value of the Russian ruble against international benchmark currencies. At Fyodorov’s request, the Russian Prosecutor General’s Office has begun inquiries into the bank’s activities, bank officials confirmed to Interfax on Monday.
The status of the ruble has been a vexing problem for the bank, as it has lost close to 40 percent of its value against the U.S. dollar and the euro this year. The bank spent some $70 billion of the country’s foreign currency reserves in an effort to protect the ruble earlier this year.
And, despite announcing last month that it would abandon its increasingly fruitless effort to prop up the plunging currency, the Central Bank of Russia on Wednesday confirmed that it had yet again dipped into its foreign currency reserves this week in an effort to halt the currency’s slide.
The bank announced that it had sold $700 million in reserves Monday, after the ruble dropped another six percent against the dollar. As of Wednesday morning in the U.S., the intervention appeared to have had little effect. The ruble was trading at between 54 and 55 to the dollar on Moscow markets, a record low.
The ruble’s decline illustrates the challenge facing the Central Bank of Russia. Many of the problems driving the decline in the ruble’s value are outside the control of both the central bank and the Russian government more broadly.
The Russian economy has been pummeled by international sanctions in the wake of Russia’s invasion of Ukraine’s Crimean peninsula, its continued support of a violent uprising in eastern Ukraine, and increasingly aggressive military posture toward its neighbors.
Additionally, the oil markets have been severely hurting the Kremlin’s biggest revenue stream. Oil prices have dropped from well over $100 a barrel to about $70 in recent months. The Russian government’s primary source of income is tied to the sale of oil and natural gas on the international markets. Analysts believe Russia needs oil prices to be at or above $100 per barrel to keep its extraction industry profitable and the stream of tax revenue flowing to Moscow.
Last week’s decision by the Organization of Petroleum Exporting Countries to keep production at current levels, ignoring a call from some members to create an artificial shortage in order to boost prices, was terrible news for Russia. The biggest players in international oil markets, particularly Saudi Arabia, can tolerate lower prices, and are willing to do so in order to put pressure on U.S. shale oil producers. But a side effect is the significant damage it is doing to the Russian economy.
Until now, the country’s central bank has been fairly matter-of-fact about the headwinds facing both the ruble and the economy more generally. As Russian political leaders, most notably Putin, shrugged off the impact of international sanctions, the bank last month issued a report predicting that the Russian economy would almost certainly fall into recession in the near future.
The bank has also had to make a series of embarrassingly unsuccessful forays into the international debt markets throughout the fall and winter, where it has been unable to sell its bonds at interest rates it deemed acceptable because of investors’ nervousness about the long-term value of any security denominated in rubles.
But with terms like “enemy of the country” being thrown around by powerful lawmakers, and prosecutors knocking on the door, it looks as though the independence of the Bank of Russia may be facing a challenge.
.
Last edited by OUTLAW 09; 12-03-2014 at 10:48 PM.
Ruble going all over the place on Chechnya and Putin's speech.
pic.twitter.com/2lL6cfHKAw
Putin talks rubel down
pic.twitter.com/MJefmuknr7
KSA lowers the price of oil for Asia beginning in January then this;
SAUDI ARABIA CUTS ALL JAN. OIL PRICES TO U.S., ASIA; SAUDI ARAMCO CUTS JAN. ARAB LIGHT ASIA OSP TO $2 DISCOUNT: BBG
Saudis announced this morning another price drop to oil shipped to USA
This is escalation
Maybe Russia will declare war on the KSA, occupy it and take the oil.
Russian Inflation Surges to 9.1 Percent in November; Food Prices Skyrocket: http://www.themoscowtimes.com/busine...et/512594.html …
Putin can't explain why last decade's petro-windfall ended up in oligarchs' pockets instead of in jobs, roads, etc.
http://windowoneurasia2.blogspot.com/2014/12/window
Last edited by OUTLAW 09; 12-04-2014 at 05:44 PM.
Two extreme's of the same Russian economics in the sanctions phase.
#Russian Prostitutes Hike Rates Over Slumping Ruble
http://tmt-go.ru/512596 #news
Russia Faced With 'Massive' Liquidity Problem, Says Sberbank Chief: http://www.themoscowtimes.com/busine...ef/512573.html
Oil prices continue to slide. @ 3:47 GMT: <WTI $65.48 /bbl> <Brent $68.47/bbl>
On Thursday the Russian central bank cut the foreign exchange repo rate, the interest rate it charges on the currency it gives to banks. The rate fell from 1.5% above the London Interbank Offered Rate (Libor) — the benchmark interest rate at which banks lend to one another — to 0.5% above Libor. A lower interest rate should make it less expensive for banks to borrow from the central bank and therefore more appealing.
The rate cut illustrates that the central bank is growing concerned about the ability of Russian banks to meet their debt repayments. If they fail to pay, it could trigger a wave of defaults that would further hit the fragile Russian economy, which is already expected to fall into a recession in 2015.
Yet if the problem is a shortage of collateral, these measures are unlikely to be enough. Back in February, JPMorgan analysts warned of just such a scenario: about 60% of available collateral was already pledged of an upper limit of about 75%. That top level is the point at which JPM says the stress in the banking system, in the form of increased risk of default, may start rising rapidly.
We appear to be near that point.
Judging by Thursday's news, banks appear to have been forced instead to seek help from the state.
This would explain Putin's move to divert money usually earmarked for infrastructure investment (for example, in Russia's ageing road and rail network) into a bank bailout.
Reuters reports that VTB and Gazprombank have already applied for 250 billion roubles ($4.7 billion) and up to 100 billion roubles in additional support. This would put a further dent in Russia's reserves after the country saw total international reserves drop some $90 billion so far in 2014, mostly in failed attempts to buoy the rouble.
It might also open the door for non-bank companies to lobby for additional support. The oil company Rosneft requested 2 trillion roubles last month but was turned down.
Russian finance: a very serious worry of a few smaller banks losing total confidence when a lot of non-preforming loans hit in early 2015.
Putin's speech strenghtens some the fears for the Russian economy. He wants to appear strong and to avoid any sign of weakness and thus strides firmly down the ever darker economic road.
Of course the oil price might jump before inflicting too deep wounds but it really looks as if the new Russia is in surprisingly similar economic situation as the Soviet Union was in one sense: It is highly dependent for it's economic well-being on prices of the commodities it exports, especially oil. Sad indeed for such a country. It is very hard to see upsides for the Russian economy. Maybe I will make a seperate post trying to play devil's advocate, because so much seems to confirm my earlier opinions.
@outlaw: There are quite a few de-facto state companies deep in (foreign-currency) debt which makes their balance sheets vulnerable. State support seems needed and has already been given. Maybe some people will understand the though lessons especially the Irish, Cypriots and Spanish had to learn: even countries with nominally low debt can find quickly a lot of it when sierra hits the fan ...
Last edited by Firn; 12-05-2014 at 08:42 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
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