The Russian economy (catch all)

[Firn]

An area which wasn't discussed much in this thread so far is the increasing number of import bans by Russia, with Ukrainian juice being the latest. Such trade restriction on, to put it midly, dubious claims are nothing new but have now reached a considerable width and degree.

Such Russian actions will hit mostly both European producers and Russian consumers. It will put additional pressure on inflation which has risen a good deal, despite the large rate hikes of the RCB. Certainly Russia is walking further along the path towards increasing isolation.

[Firn]

After the energy exports and the Russian important bans in strategic sectors it is time to look at the banking sector. This thread has a good number of links on it. With debt financing over Western markets and with it's capital getting harder for targeted companies and those suffering from the collateral damage Russia looks increasingly at Asia even big success was rare in the past months.

Asia No Answer to Russian Companies' Capital Crisis by Reuters points out some of the difficulties faced.

SINGAPORE/LONDON — Russian banks and companies shut out of Western funding markets are unlikely to be greeted with open arms and ready wallets in Asia, international bankers and industry experts say.

New sanctions imposed by Washington and Europe over the Ukraine crisis have prompted firms such as VTB — Russia's second-largest bank by assets — and Gazprombank to look east for new sources of funding.

Banks and investors in Asia, however, are reluctant to get involved. This leaves the Russian Central Bank as the only obvious alternative, apart from Chinese currency bonds where borrowing costs are rising and the market is too small to plug the gap left by Western capital markets.

The Islamic bond market is also problematic.

It is imporant to keep basic stuff in mind. Just like the Crimea has a hard time to switch from the deep economic links with Ukraine to the so far shallow ones with Russia, Russia itself faces problems with such a financial scenario. Deep economic ties take a long time to grow and rapid changes come at a (high) price. Even in the best case there will be friction and stumbling blocks.

[OUTLAW 09]

After the energy exports and the Russian important bans in strategic sectors it is time to look at the banking sector. This thread has a good number of links on it. With debt financing over Western markets and with it's capital getting harder for targeted companies and those suffering from the collateral damage Russia looks increasingly at Asia even big success was rare in the past months.

Asia No Answer to Russian Companies' Capital Crisis by Reuters points out some of the difficulties faced.



It is imporant to keep basic stuff in mind. Just like the Crimea has a hard time to switch from the deep economic links with Ukraine to the so far shallow ones with Russia, Russia itself faces problems with such a financial scenario. Deep economic ties take a long time to grow and rapid changes come at a (high) price. Even in the best case there will be friction and stumbling blocks.

firn---looks like Lukoil will be cutting back on their investment projects as they cannot get capital--they are the second largest producer so in the coming months it will be hard for Russia long term to increase oil product which they have to do to keep the increased cash needs flowing.


http://uk.reuters.com/article/2014/0...0Q645520140731

[OUTLAW 09]

firn---looks like Russian companies are trying to slide out of USDs and trying to use other currencies to run their businesses.

From Interfax today:

18:52 Norilsk Nickel transfers some cash into Hong Kong dollars - source (Part 2)

.

[OUTLAW 09]

firn---more indicators that the Russian companies are now in free swim mode.

Interfax today:
19:59 Bashneft board of directors recommends postponing SPO due to unfavorable market conditions

19:55 Russian stock market loses morning growth in evening trading Thursday

[Firn]

Unfavorable market conditions have indeed been cited quite a lot by Russian companies and their government in those last months as they postponed and postponed. So far it only bought time to help to some degree alternative sources and avoided a higher benchmark.

As I stated earlier even if they eventually find alternatives one can not just replaced one to one the world biggest markets and movers without suffering due higher costs, friction and disruptions. With less fresh capital at acceptable conditions available, an economy heading into recession and facing big geopolitical risks non-state investments won't increase...

With Sanctions, Russia Becomes Crimea's Sole Investor fits in this regard, as the state might be forced to step in and carry the burden alone.

Almost a third of that vast sum, or 247 billion rubles ($6.9 billion), must be channeled to building a bridge across the Kerch Strait, creating the first direct road and rail connection with Russia's mainland there, Savelyev said, speaking at a meeting with Deputy Prime Minister Dmitry Kozak.

With the recent rounds of hefty punishments for banks and the limited size of the Russian market it will be interesting to see who will deem the risk worth it. As a whole interest will be turned down quite a bit.

Contradicting earlier reports, Kozak said that the bridge, which will be the most expensive one ever built in Russia, is now to be funded on state money alone. Construction is scheduled to begin later this year, he added.

In short it is not Russia's end but the longer Putin's war continues the greater the toll for it's economy, up to a point which isn't quite attractive. If harsh sanctions are not that good at achieving the desired political effect they do a pretty good job at hitting the economy hard. The latter will at least decrease the ability of Russia to modernize it's forces and maybe help other powers to think twice before doings something as stupid.

[Firn]

Russia continues to hit strategic markets with duties of bans, in this case raising the costs for Moldavan imports. It certainly strenghtens the impression in European countries that Russia isn't the most reliable of trade partners and alternative destinations are inter alia more attractive. The latest round adds to the already quite strong inflationary pressure caused by devaluation.

Putin to Introduce Consumer Tax to Help Stuttering Economy, Sources Say is, if true, an important article.

President Vladimir Putin has decided to introduce a sales tax on Russian consumers, two sources acquainted with the issue said on Thursday, raising the tax burden earlier than expected as Western sanctions deepen the country's financial woes.

The levy will be applied on a region-by-region basis, allowing each administrative district to decide on a sales tax of up to 3 percent to make up for budget shortfalls, which the Finance Ministry estimates will reach up to 1 trillion rubles ($27.99 billion) in the next three-year budget.

The decision ends a rift among policymakers over whether to introduce a consumer tax or boost a current value-added tax.

"The VAT will not be touched. Sales tax will be up to three percent depending on the decision of the region. Everything will go to the budget of the region," said one of the sources acquainted with the issue.

"It's obvious that a consequence of introducing the tax will be an increase in retail prices by the size of the tax," analysts at Russia's Sberbank said in a report.

From the perspective of a Russian economy facing (or already in) recession this looks at the first glance only like the stupidity it is. However it also shows once again what lessons Russian decision makers took away from history, that state debt makes Russia vulnerable to Western countries and has to be avoided at almost all costs.

All in all Russia does hit back and itself to ready itself for increased isolation.

[OUTLAW 09]

An area which wasn't discussed much in this thread so far is the increasing number of import bans by Russia, with Ukrainian juice being the latest. Such trade restriction on, to put it midly, dubious claims are nothing new but have now reached a considerable width and degree.

Such Russian actions will hit mostly both European producers and Russian consumers. It will put additional pressure on inflation which has risen a good deal, despite the large rate hikes of the RCB. Certainly Russia is walking further along the path towards increasing isolation.

firn--Poland launched today a purchase an apple and support Polish growers campaign and by all signs the Poles are into it---side affect increased apple prices vs what they were getting from Russian exports.

the rest what cannot be purchased by the locals will be recovered via a EU internal price support for lost markets---the same goes for the Baltics hit by the coming bans. The Ukraine is already getting import free duties on anything sold.

So it looks like the Russian consumer will be paying the price of the bans not the EU.

http://khpg.org.ua/en/index.php?id=1406748323