The Russian economy (catch all)

[Firn]

The article by Silvia Merler is well-written and most importantly contains a number of neat graphics.

I think it is important to put the points raised into the wider economic context:

1. Making the access to the Western financial markets more difficult is just one outcome of the sanctions. It's effects, much discussed here, a far broader and cut deeper, especially together with the Russian 'counter'-sanctions.

2. As already mentioned before there are excellent reasons why Russian companies have foremost tapped into the European financial markets and not the Chinese one. The latter has been somewhat of a stop-gap, as it seems from the numbers. Shifting comes at a considerable price.



P.S: A good update about the currency reserves:

[AmericanPride]

Firn,

I wonder what your take is on this Economist article from several days ago measuring government spending and ethnolinguistic diversity. The focus is of course on Scotland, but I'm also wondering how many of the same issues are applicable to Ukraine's internal conditions. I don't have the data to point out where Ukraine (or Russia) falls on the linked chart.

Also - since we're talking about separatism, why do you think Scotland's movement for independence gained mainstream legitimacy while the same of ethnic Russians in Crimea and Donbas did not (even before direct Russian intervention)? This seems like both a political (is it legitimate?) and institutional (can it be resolved peacefully through the mechanisms of government?) problem.

[OUTLAW 09]

Now the Russian business leadership is starting to tell the "truth" concerning the impact of the sanctions.

Herman Gref, head #Russia biggest bank, Sberbank tells biz confab government is wrecking the economy, ignoring lessons Soviet collapse.

Now that is brave---in the current Russian environment.

[Firn]

An good find, outlaw.

Speaking at an investment conference in Moscow, Herman Gref, chief executive of state-run Sberbank, pilloried a state-led model of economic development, pointing to a lack of competition and poor governance.

"Why did the Soviet Union break up?" Gref, a former liberal economy minister, told foreign and Russian investors.

"There is one key reason which determined the rest: it`s mind-boggling incompetence of the Soviet leadership. They did not respect the laws of economic development," he said at the annual "Russia Calling" investment forum.

Seems I was not the only one reading an old book.

Citing a book by the key architect of Russia`s market reforms, Yegor Gaidar, "Collapse of an Empire," Gref said Russia must learn lessons from history.

"We cannot allow the same situation," he said, noting that the Soviet Union also faced a combination of high oil prices and "huge structural problems."

The high oil prices allowed the Soviet regime to do bad business as usual while the huge structural problems grew. The shock of low oil prices kicked away under it's economy what was left of it's legs...

German Gref is a son of German Russian which were deported during the war and speaks fluent German and his oldest son studied in Germany. From an older German article:

As director of a think tank set up by Putin, he worked in 2000 for a long-term oriented, liberal economic program. In the same year he was also appointed Minister of Economic Affairs. Putin and Gref know each other from the early 1990s at the Law Faculty of the University in St. Petersburg and developed mutual respect. Under the legendary Petersburg mayor Anatoly Sobchak, who was also Gref's thesis advisor, the lawyer as Putin began a management career in St. Petersburg. The dismissal of Gref as economy minister in 2007 can be understood as atmospheric disturbance in the relationship between Putin and Gref.

Google translated with some corrections.

@AP: I will responds perhaps later, no more time.

[kaur]

Oil Prices Are Falling, Not Oil Regimes

But for all the turmoil in oil markets, not all petrostates are panicking. Although big producers, from Saudi Arabia to Russia, rely on high crude prices to balance their budgets, the price hasn't dropped low enough, or long enough, to fiscally squeeze them just yet.

Russia could feel the pain next. Oil far outweighs gas in Russia's energy-export mix, but Moscow's budget is predicated on Brent crude prices north of $100 a barrel. What's more, Russia's economy has also been battered by Western sanctions in the wake of the Ukrainian crisis, leading to ruble flight, slumping markets, higher interest rates, and slashed growth forecasts.
Now, falling oil prices have Russian policymakers worried: One former finance minister said cheaper oil could punch a $30 billion to $40 billion hole in Russian revenues. The Russian Central Bank, meanwhile, is scrambling to prepare for oil prices as low as $60 a barrel, Reuters reported. Russia's current finance minister said Thursday that cheaper oil is a huge risk to its wobbly economy.

http://www.foreignpolicy.com/article...ia_saudis_iraq

[AmericanPride]

A concern about the economic stability of the Eurozone:

The energy war, coupled with the trade war that has broken out due to the implementation of the sanctions regime against Russia, may result in Europe’s backsliding into a recession next year. We may already be seeing signs of it. On Wednesday, the eurozone PMI (Purchasing Managers Index) hit a fourteen-month low, while France’s continued to contract and Germany’s fell to a fifteen-month low. Meanwhile, a sanctions-induced reduction in oil flows from Russia could further stifle eurozone growth by 1 to 1.5 percentage points in 2015.

[AmericanPride]

And despite it all, Putin's approval rating is even higher than when Russia seized Crimea:

We shouldn’t assume that Putin is “losing” because…well, because so far Russians haven’t held him responsible for any of the negative consequences of his Ukraine policy. Perhaps they will in the future, but the reality is that Putin might very well be more politically powerful at the moment than at any other time in the past decade and a half.

[OUTLAW 09]

An good find, outlaw.



Seems I was not the only one reading an old book.




The high oil prices allowed the Soviet regime to do bad business as usual while the huge structural problems grew. The shock of low oil prices kicked away under it's economy what was left of it's legs...

German Gref is a son of German Russian which were deported during the war and speaks fluent German and his oldest son studied in Germany. From an older German article:



Google translated with some corrections.

@AP: I will responds perhaps later, no more time.

Interesting blog report on the actual inflation rate in Russia at over 18% not the "official" 7-8%.

Appears Putin cancelled his annual financial budget report to the Duma and country---wonder why?

Current inflation in #Russia:
Official: 6-8%
Actual: 18.3%
It is BAD.
#AP
pic.twitter.com/MhVtjCQCx4

[Firn]

Two points have to be taken into account when reading current Russian estimates of inflations or other variables:

1) They are estimates and as in all other countries they are subject of revision in periods to come as more reliable data comes in.

2) They are Russian. Institutes like the Bank of Russia have been reliable in the past but the difficult current situation may well result that fewer want to bear bad messages.

@AP: Your link is broken, which happens. In any case like I said months ago, it looks like a long conflict and Russia's economy is as far as I can see in a pretty bad stagflation. Already in January it was seen as a potential problem. Time will tell how bad it will become and how heavy the political implications will be for Putin. It is quite possible that Putin and his circle will be able to hold it's firm grip on power, as we have seen in other circumstances. At the very least the economic damage should show other potential aggressors that such actions can have high economic costs. As a bonus the Russian military built-up will also be more costly and difficult for the Kremlin.

Regarding a whole range of developing countries, including Russia, we can speak about such a problem as stagflation, that is a rapid deceleration of economic growth accompanied by a spurt in inflation,” Kseniya Yudayeva, a deputy head of Russia’s Central Bank, said Wednesday.

Yudayeva, who was speaking at the Gaidar Forum, one of the country’s major economic conferences, said the tendency could also be observed in India, Brazil and a number of other countries.

[Firn]

Just some quick points about the economic risks for Europe as a whole:

1) Obviously the current Russian aggression is a negative factor for European growth.

2) Obviously it is so far a very small one for the huge economy as a whole even if there are sectors and countries suffer more.

3) Obviously Russia can greatly increase the damage but only if it shoots into an economic leg called gas.

Once again time will tell. I actually wouldn't even rule out point 3 after the latest Russian actions, which says quite a lot.