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Thread: The Russian economy (catch all)

  1. #601
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    Russia National Wealth Fund illiquid soon? Moscow Times: http://www.themoscowtimes.com/busine...ew/515524.html … pic.twitter.com/p35lyAO7on

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    Oops! Russia's foreign trade with China fell by 36,4% in January 2015 http://tass.ru/ekonomika/1752527 … Turning East seems not going well either

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    #Russian bank “Sudostroitelny” with 20 million of individual deposits went bankrupt. Sign of things to come? http://www.gazeta.ru/business/2015/02/16/6413969.shtml

  4. #604
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    Oil had a big rally recently. As I pointed out earlier the commodity markets and especially oil are liable to big swings which are in my humble opinion impossible to anticipate. Obviously the oil prices are still far too low to balance the Russian budget but every period of less low prices helps financially. Overall it is certainly a shame that a large European country like Russia is to such an extent dependable on the situation on the commodity markets.

    'Putin Has Stolen Hundreds of Billions of Russia's Wealth' is not a new accusation by any means. Still it makes for an interesting interview.

    "Some people, including myself, believe that he's the richest man in the world, or one of the richest men in the world, with hundreds of billions of dollars of wealth that was stolen from Russia," said Browder, whose company was once Russia's largest foreign investor
    Last edited by Firn; 02-16-2015 at 04:44 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

  5. #605
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    Russia calls in $1.16m Soviet-era debt from Nepal. Signs it's starting to hurt
    http://www.minfin.ru/ru/press-center/?id_4=33101

    Russia's insider traders know Putin's plans http://www.bloombergview.com/article...-putin-s-plans

    Russian consumption of meat dips for the first time in 10 years. http://slon.ru/fast/economics/potreb...-1219268.xhtml

  6. #606
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    Russia in Free Fall

    by Anders Aslund, Peterson Institute for International Economics
    Op-ed in Capital
    February 25, 2015

    Since November 2014, it has been obvious that the Russian economy would shrink sharply this year, and the January statistics indicate a serious decline has started. The Russian Ministry of Economic Development has forecast a decline of GDP of 3 percent this year, while the Central Bank of Russia predicts a decline of 4.5 to 5 percent at an oil price of $50 per barrel. These forecasts appear overly optimistic. An abrupt fall of 10 percent seems more likely, because key Russian indicators look worse than in 2009, when Russia's GDP contracted by 8 percent.

    In July 2014, the United States and the European Union imposed serious financial sanctions on Russia. In parallel, the global oil price started falling and with it the ruble. As if these factors were not bad enough, the Kremlin is pursuing an economic policy that aggravates the decline.
    http://piie.com/publications/opeds/o...esearchID=2756

  7. #607
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    It will be rather interesting to see how, how much and how quickly Russia continues to spend it's funds like the NWF. Aslund does seem to support an old opion of mine, that Putin thinks that he knows how to handle the current crisis because he could deal with the big recession and Georgia. However Ukraine is not Georgia and the economic crisis of 14/15 is not 08/09 (nor 1998 for that matter).

    Naturally, Putin is reacting against this blow, but his reactions are not the least reassuring. His bottom line is that he knows how to handle crisis because he did so in 2008–09. That is true, but none of the G-20 leaders did so worse than Putin, and now he wants to repeat his failure. His flawed idea then was to pour money into state corporations and his cronies, and they have grown even worse in recent years. Then, Putin wasted $200 billion on his flawed bailouts. Now, he can only afford $38 billion on his anti-crisis program, which will not make any difference, which is perhaps the best one can say about it.
    All in all Putin does so far a fine job at squeezing the Russin economy and he is coming closer to the breaking point. We will see things develop. Lots of variables involved with commodity prices not the least ones.
    Last edited by Firn; 02-27-2015 at 10:16 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

  8. #608
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    Gazprom Neft Reports Massive Quarterly Loss After Ruble, Crude Plunge http://www.bloomberg.com/news/articl...e-crude-plunge

    Will oil prices double dip and hit a new low at $30? http://oilprice.com/Energy/Oil-Price...cond-Time.html … pic.twitter.com/BV7MkrVmi1

    Economy Min says Russia's 'anti-sanctions' fueled unprecedented food-price rises in Jan: +22.1% for fruits/vegetables


    Squeezed? 45% of Russians say directly affected by sanctions now, up from 5% in Aug (50% not affected, vs 92% in Aug) http://wciom.ru/index.php?id=459&uid=115168
    Last edited by OUTLAW 09; 03-04-2015 at 10:05 AM.

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    Selling the Family Jewels by Stephen Blank http://www.interpretermag.com/sellin...family-jewels/ … - Russia selling off assets to China

  10. #610
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    The ruble recovered in recent months considerable against the USD and obviously more so against the Euro which push against inflation. Much depends of course on the commodity prices, especially oil and the depth of the Russian recession.

    The state is under increasing pressure to act as the lender or equity injector of the last resort for the many businesses just above water.

    Russia will provide carmakers with 10 billion rubles ($166 million) in subsidies, the government said Thursday, in a bid to support an industry struggling to cope with the country's economic downturn.

    However, the industry is only expected to return to growth in 2016 and is therefore likely to need more government support than the measures announced on Thursday.
    Of course it was easy to predict that due to the high foreign portion of the value chain costs would be driven up by the ruble rout. Factor in the expected contraction of demand and it becomes quite a problem...

    In addition to lower sales car producers have seen their margins fall by 10 to 15 percent as a result of the ruble weakening, which has increased the cost of imported components, as well as higher metals prices, the government said on its website.
    Last edited by Firn; 03-20-2015 at 06:36 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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    Serbank CEO stated yesterday that over 45% of all Russian banks will be facing serious financial difficulties within the next four months. the finance sector is facing some serious and major issues and there seems on answers.

    Then this yesterday as well:

    Russian central bank: 1/5 banks experiencing difficulties. 2/3 banks will account for a loss, end of 1st quarter. http://top.rbc.ru/finances/20/03/201...79471b923eaa6c

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    Russians who have bank accounts in UK receiving requests from UK authorities to prove the origin of deposited funds. http://www.interfax.ru/business/431556


    Russian Central Bank claiming the UK is trying to prevent the return of funds back to Russian under the new Russian Tax/Fines Amnesty Law.

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    Siluanov: if the budget deficit not reduced the entire emergency Reserve Fund will be spent & Russia will have to start printing money

    Russian railways chief Yakunin says Russia can overcome neoliberal, Western-style economics by....building railroads http://siberiantimes.com/business/in...with-atlantic/

  14. #614
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    Russian Cheese production surged 30% in the first four months of the year after sanctions against the West, well ahead of meat, chicken and fish. Of course it is worth to point out that the changes were more extreme for the categories with smaller tonnage. It is also no suprise that ramping up cheese production is easier then to catch (besides the fish farming) even if less milk was produced...

    According to the FAO, in 2005 the Russian fishing industry harvested 3,190,946 tonnes of fish from wild fisheries and another 114,752 tonnes from aquaculture. This made Russia the ninth leading producer of fish, with 2.3 percent of the world total.[4]
    Source:Wiki

    All in all, inflation hit pretty hard:

    Combined with a steep devaluation of the ruble currency late last year, Moscow's ban on Western food imports spurred year-on-year food price inflation to 23.7 percent in the first quarter of the year, according to Rosstat.
    ------

    I often wrote about the deeper long-term damage inflicted by Putin's war and the tensions and sanctions between Russia with it's receding economy. Western technology and expertise, key in many areas, will be harder to access and use.

    Import substitution is one of them, be in pharma or ships

    Despite the incentives for Russian business to substitute the industrial output has fallen. The latest month seems a bit on the high side, maybe a bit too much noise. Overall this points to a deeper crisis, especially if the budget cuts will be harsh.
    Last edited by Firn; 05-20-2015 at 08:48 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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    Sergei Guriev explains "Political Origins and Implications of the Economic Crisis in Russia"

    This simple fact pinpoints a very intuitive explanation for the slowdown: Russia is no longer attractive for investors, neither foreign nor Russian. This explanation is also consistent with the fact that Russia experienced a net capital outflow of 3 percent of its GDP in 2012 and 2013. Also, Russian stocks were traded at about a 50 percent discount to other emerging markets even before Crimea.

    .

    The investors are leaving Russia for a very simple reason: Russia’s investment climate (the rule of law and protection of investors’ rights) is very poor—at least relative to competing capital destinations. For a high-income, urbanized, and educated country, Russia is unusually corrupt.

    .

    Rule of law and fighting corruption constrain the elite’s ability to extract rents from the economy and, thus, to hold on to power. Although these reforms are likely to result in faster GDP growth and prosperity for the whole country, they will reduce the incumbent elite’s ability to enjoy this prosperity.

    .

    This problem is the key explanation of the Russian elite’s pref- erence for the status quo. The elite chooses to avoid institutional reforms that may raise the probability of political transition. More- over, high oil prices, and therefore substantial resource rents, further increase aversion to reforms by making incentives for staying in con- trol even higher.
    The situation is therefore very close to the Brezhnevist zastoi (lit- erally, “stagnation”), the last period of Soviet history when high oil prices resulted in a lack of economic dynamism in the Soviet Union. Important economic reforms were delayed, economic growth dis- appeared, and once oil prices went down in the mid-1980s—the Soviet Union went bankrupt and disintegrated.

    .

    The Crimean adventure has shown the world that Russia’s eco- nomic development and its integration into the global economy are a second-order priority for the Russian elite and can certainly be sac- rificed if the regime feels threatened. In the long run, this will under- mine investor confidence and remove the plausibility of restoring economic growth in Russia. Russian economic performance may still temporarily improve—for example, in the form of another oil price surge. However, long-term economic growth is unlikely to return, at least until a political transition takes place.
    Sergei Guriev is a professor of economics at Sciences Po, Paris. From 2004 to 2013, he was a tenured professor of economics and rector of the New Economic School in Moscow. In 1997–98, Guriev vis- ited the Department of Economics at the Massachusetts Institute of Technology for a one-year postdoctoral placement, and in 2003–04, he worked in the Department of Economics at Princeton University as a visiting assistant professor.

    https://www.aei.org/wp-content/uploa...ia.pdf#page=27

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    Russian author of Four Russias concept Natalia Zubarevich, who expressed her thought in AEI book already mentioned comments situation in Russian regions.

    Four Russias and a New Political Reality
    NATALIA ZUBAREVICH
    https://www.aei.org/wp-content/uploa...ia.pdf#page=27

    Paul Goble. Staunton, June 11 – Novgorod oblast was technically in default earlier this year because of poor management and because Moscow paid the region what it owed a month after debt payments became due, Natalya Zubarevich says, but she suggests that there won’t be series of defaults. What there will be is something worse – the destabilization of finances at that level.

    This means, the director of regional programs at the Moscow Independent Institute of Social Policy, that there will be something “worse than default,” a situation in which regional governments will have to impose draconian cutbacks in health, education and housing and the population will suffer
    And it can be summed up this way, Zubarevich says: Earlier, budgets were balanced by money from the center. Now, however, the regions have had to cut social spending: “26 regions without taking inflation into account have cut spending on education, 21 on health care, and 16 on social policies. If the figures are adjusted for inflation, these numbers would be much higher.
    http://windowoneurasia2.blogspot.be/...n-russias.html

  17. #617
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    I think that Guriev points into the right direction, althought the future is generally rather difficult to predict. Lots of brainpower has certainly left Russia as it has become a far less attractive place to do business.

    I found the latest Guardian article rather interesting:

    Irina Rodionova, a manager at a cleaning business that has contracts with a number of shopping centres, said 30% to 40% of the company’s labour needs are unmet because lots of Kyrgyz and Uzbeks have left. In a bid to find more workers, it recently raised salaries from 15,000 to 20,000 roubles a month for men and from 12,500 to 17,500 roubles a month for women. “With the smaller salary, we couldn’t find anyone,” she said.
    The food price shock should hit those generally the hardest. Stioll clearly the Russian economy is still far better then in the countries mentioned, including Ukraine:

    “If America was next door, [migrants] would all leave,” Karimov said. “But what’s next door is Ukraine, Uzbekistan, Tajikistan, where the level of living is lower and there are no jobs. There’s nowhere to go.” Says Vladimir Anandiyev, 24, from Kirovohrad, Ukraine, who worked with his twin brother Vitaly at a construction materials store for four years until it cut wages and laid off staff this year: “[In Ukraine] you need to search for work, and even if you do find it, it will pay a low salary. Here, it’s bad. But there, it’s critical.”
    Last edited by Firn; 06-12-2015 at 01:41 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

  18. #618
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    Quote Originally Posted by Firn View Post
    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.

    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.
    1) We know that Russian already imposed informal capital controls.

    As Putin Stalls on Economic Reforms, Investors' Frustration Grows sums up many feelings about the Russian economy.

    2) Actually I wasn't that bad with the estimate I made a year ago:

    But the ruble is down by more than a third against the U.S. dollar compared to before the crisis in Ukraine, capital flight was more than $151 billion in 2014 and the Central Bank expects the economy to decline 3.2 percent this year.
    3) At least by now it should be obvious that Putin hit Russia far harder with his 'counter'-sanctions then the West.

    Point three was certainly the easiest score, the second one was an educated guess and point one was a clever move by the Bank of Russia which had obviously, as it was it's job, prepared for a spectrum of capital controls.

    4) I also predicted very early a Russian recession for the right reasons even if I was supported by events I didn't see coming like the oil crash.

    5) I saw a longer term conflict coming pretty quickly after the Russian invasion of Crimea.


    Quote Originally Posted by Firn View Post
    It is very hard to see how the Russian government can avoid a (deep) recession if the crisis continues for (months) weeks. Lots of shocks hitting the economy at the same time just as the monetary policy is forced to move into the wrong direction and fiscal policy will very likely be quite costly to finance...
    Now I will go through some of the older stuff to check for stuff I did get wrong, which should be also a good deal

    1) I didn't expect outright Crimean annexation by Russia.

    2) I also didn't think Putin would be as 'stupid' to invade the Donbas.

    3) I underestimated the extent of the Russian inflation, even if I was on the high side compared to official Russian ones.

    4) I didn't saw the oil crash coming.

    5) The Bank of Russia suprised me with some of their actions which were obviously aimed at some market participants.

    Such political decisions tend to be (far) harder to anticipate compared to a good deal of the economic trends. The same goes for timing on the stock market. While I outperformed it by a double-digit large margin in the last two years I firmly convinced that nobody can know what it will do in the short run.
    Last edited by Firn; 06-25-2015 at 04:41 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. #619
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    A nice update on the current state of Russia's gold reserves.



    Posted those earlier:





    Interesting to see that the stop their sell-off of US securities:

    According to the U.S. Treasury, after keeping its investment below $70 billion in February, March and April, the Russian central bank increased it to $70.6 billion in May. Yet gold purchases continue. After a hiatus in January and February, the central bank acquired almost 2.2 million ounces over the next four months.
    If they can handle the liquidity side of the problem the recent purchases might prove to be a pretty smart decision in the mid term - or not. I'm far from a Gold bug but who knows where the price will go in the next years. In any case the lower oil prices are a far bigger problem...
    Last edited by Firn; 08-03-2015 at 06:53 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

  20. #620
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    Russia: Gazprom, a Behemoth No More tracks the fall of Putin's favorite geopolitical weapons. Indeed it was never a normal company, a mystery inside an engima which certainly didn't focus on increasing the value for it's shareholders. From the heights of 2008 and predictions of a trillion $ market value it has shrunk to a 1/7, trading at somewhat over 50 billion $.

    When it comes to Gazprom’s commitments to Chinese exports, the news for the company may not be much better. Initially, when the $400-billion, 30-year deal was announced in May 2014, it was widely seen as a major geopolitical victory for Putin and Russia. But details of the agreement remain a secret, suggesting that there is little good news for Gazprom in it. The limited information that has emerged supports this assumption.
    Lots of interesting bits in that articles with many links to follow. Maybe I will take a closer look at it's financial reports. The price seems really low even if the recent sanction troubles of one offshore gas field reinforce the political risk but sometimes the market get it wrong.

    Overall the Russian economy is like it's former giant in bad shape and it is difficult to find positive signs.

    Fortune has also covered Gazprom:

    The bigger, and chronic, problem is that the company is having to service those debts from a narrowing sales base: the 444.9 billion cubic meters (15.7 trillion cubic feet) that it produced last year was down 9% on the year, the lowest in its two decades as a joint-stock company, and nearly a third below what it was producing a decade ago. European customers cut their demand by 15 billion cubic meters last year, or 8.5%, while sales to the former USSR (mostly Ukraine) fell by 19%, or over 10 bcm. It’s no exaggeration to say that they will prefer any alternative source of gas (except maybe the shale under their own feet) to Gazprom’s as long as economics will allow them to.
    Last edited by Firn; 08-08-2015 at 09:00 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"

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

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