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Thread: The Russian economy (catch all)

  1. #301
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    It does now seem that in fact the Russian economy is and or was just one great Ponzi scheme meaning borrowing from the left hand to pay the right and doing it on cheap interest loans on shot 90 day lines of credit and or bank loans ---all in USDs---the sanctions have been in effect for how long now? and the targeted companies are now screaming for Russian government support which they will have to provide unless they want to the banks and oil companies to declare bankruptcy.

    The core question just how long can the Russian CB hold out under the strain?

    Better yet just how long can Russian Foreign Reserves hold out---a number of companies are having extreme difficulty in getting their hands on USDs due to the high exchange rates and they need upwards of 41B USDs to pay back bank/private venture groups lines of credit and loans due this month.

    #Sberbank is seeking financing from Russia's pension funds & insurance companies to bolster its strained capital base http://www.themoscowtimes.com/article/507992.html

    IMO Putin and his inner circle absolutely did not see this freight train coming at them when they annexed the Crimea and went into the Ukraine.
    Last edited by OUTLAW 09; 09-29-2014 at 01:20 PM.

  2. #302
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    Seems Russia is now complaining the sanctions did not go through the UN or WTO-----and they had anticipated the whiplash to hurt Europe which it has apparently not done as Russia had hoped for.

    From Interfax today:

    Duma chief: West bypassed UN, WTO in sanctioning Russia

    MOSCOW. Sept 29 (Interfax) - The head of Russia's lower house of parliament has accused the West of unlawfully bypassing the United Nations and World Trade Organization in slapping its Ukraine-related sanctions on Russia.

    "All this time the sanctions that have been introduced bypassed UN decisions and WTO rules, have run against common sense, and have had nothing at all to do with the course of settlement of the internal Ukrainian crisis," State Duma Chairman Sergei Naryshkin said in a letter to the president of the Parliamentary Assembly of the Council of Europe and the leaders of political groups in PACE.

    It was five months after the West came up with its first set of sanctions that Russia took retaliatory measures, which is "a degree of restraint that is hard not to notice," Naryshkin said in his letter, whose text has been published by his office on Monday.

    "We believed that the entire senselessness of this race of inflicting losses on each other would come home to our European partners, but this has never happened," he said.

    Meanwhile, the war of sanctions has already done considerable harm to all European countries, Naryshkin said. "Responsibility for this now lies with all those who have given direct or indirect support to their main initiators," he said.

    He claimed that "arbitrary interpretations" of facts had led to groundless accusations against Russia and to sanctions against Russian officials and businesses.

    "Everyone has noticed that Europe did this as a follow-up to American measures," he said. "Was this not the reason that the European Union countries were prompted to be the first to introduce the so-called 'sectoral sanctions?"

    "However, now that a new cold war is being forced onto the world, European politicians would be well-advised to be more careful - not to lie about a threat from Russia. That depends on the United States," Naryshkin said.

  3. #303
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    Russian Roulette, reloaded
    - Russia latest financial account data show Moscow may not be the first to blink
    by Silvia Merler on 30th September 2014
    http://www.bruegel.org/nc/blog/detai...ette-reloaded/

  4. #304
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    Red face

    kaur---all good points but the inherent problem is Russian banks and companies needing dollars to balance out outstanding lines of debt due this month and next month and again in early 2015 all totally well over the 130B USD mark as well as the Russian companies and banks needing USDs to pay for their overseas imports which are targeted in USDs and contracts that are still delivering even in the face of the various Russian bans.

    Shifting to China has always been an idea but shifting as fast as they Russian economy is sinking ----they will not make the shift in time.

    Yesterday they were only .3 away from CB involvement in supporting the Ruble---the market will push the CB to provide support and once that support wall is broken through there is no telling where it will go and the CB cannot support the Rubel for long is the general take even from Russian economists.

    Again it seems the Russian economy is really just one very large Ponzi scheme which hit the wall when the sanctions came into play---the bigger question is just how much foreign currency reserves does the CB currently really have and can one trust even their numbers?

    If the article figures are correct they have lost easily over 10% of their FC reserves just in the last month and that type of hit cannot go on for long for any country.
    Last edited by OUTLAW 09; 09-30-2014 at 04:15 PM.

  5. #305
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    And the Russian economy news just keeps on getting bad-----

    Another miserable day for the Russian ruble
    http://www.businessinsider.com/ruble-falls-2014-9
    (though, partly good news for Russia's budget, which earns in dollars)

    BBG story forces ruble to weaken to a threshold where Central Bank says it will intervene

    Huge Scoop by BBG's Pismennaya ``Russia Said to Weigh Capital Controls If Net Outflows Intensify.'' Watch the markets now !

  6. #306
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    And the price of oil just keeps falling and falling even though OPEC oil production is climbing.

    IMO OPEC is driving up production to just get the same amount of USDs as before just doing it with more oil--and there is a weak demand coming out of china that is not helping.

    Will be interesting to see how the Russian stock market takes this news today and the rest of the week.

    A report from Reuters that OPEC had increased its output to a level not seen in nearly two years, combined with a stronger dollar, torched crude prices following the report. OPEC produced nearly 31 million barrels of crude per day in September, according to Reuters, up from 30.15 million barrels in August.

  7. #307
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    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:

    Last edited by Firn; 10-01-2014 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

  8. #308
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    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.
    When I am weaker than you, I ask you for freedom because that is according to your principles; when I am stronger than you, I take away your freedom because that is according to my principles. - Louis Veuillot

  9. #309
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    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.

  10. #310
    Council Member Firn's Avatar
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    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.
    Last edited by Firn; 10-02-2014 at 01:06 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

  11. #311
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    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

  12. #312
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    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.
    When I am weaker than you, I ask you for freedom because that is according to your principles; when I am stronger than you, I take away your freedom because that is according to my principles. - Louis Veuillot

  13. #313
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    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.
    When I am weaker than you, I ask you for freedom because that is according to your principles; when I am stronger than you, I take away your freedom because that is according to my principles. - Louis Veuillot

  14. #314
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    Quote Originally Posted by Firn View Post
    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
    Last edited by OUTLAW 09; 10-06-2014 at 03:17 PM.

  15. #315
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    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.
    Last edited by Firn; 10-06-2014 at 07:00 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

  16. #316
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    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.
    ... "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

  17. #317
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    Whose is Russia’s external debt?
    - 90% of the country’s external debt was attributable to banks and other (non-government) sectors
    by Silvia Merler on 7th October 2014
    And when is this debt coming due?
    54% of Russia’s external debt has maturity of over two years (unspecified); 10% is between 1 and 2 years whereas about 23% has maturity of 1 year or less. For part of the external debt, the schedule is not available or inexistent (debt without schedule). Of that part of debt that is coming due within 1 year, the biggest redemptions will be in December 2014 - with 32 USD billions of banks and other sectors’ debt coming due - and Q5-2015, with 28 billion.
    http://www.bruegel.org/nc/blog/detai...external-debt/

  18. #318
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    How an average oil price of $90/barrel would give #Russia a budget deficit of 1.2% of GDP year

    http://www.bloomberg.com/news/2014-1...f-the-day.html

    pic.twitter.com/H0BXBsnf0Z

    And even more good news: "Brent Crude down almost 1% so far today."

    pic.twitter.com/fa64R8NBve
    Last edited by OUTLAW 09; 10-07-2014 at 04:21 PM.

  19. #319
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    Russia spends $1.68 billion to prop up the ruble in just two days: http://bloom.bg/1nYmYXN
    pic.twitter.com/D07JEjq19b

  20. #320
    Council Member Firn's Avatar
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    A nice slide From the first Bloomberg report:



    Of course the usual caveats like inter alia apply.

    “In the short-term, the falling oil price will be a big blow to the economy, especially if it reaches $80 a barrel,” Alexei Kudrin, the finance minister from 2000 to 2011 who helped return Russia’s budget to surplus, said by phone today. “However, in the long run, the sanction will have a more serious impact.”

    Russia will require an oil price of about $104 to balance its budget in 2015, Sberbank estimates. Brent crude, a benchmark for more than half the world’s oil including Urals, Russia’s main export blend, declined more than $20 since its 2014 peak in June and traded at about $92 a barrel today. It closed at $92.31 on Oct. 3, the lowest since June 2012.
    The oil price might well rise, but every month around the current level will have it's negative impact. Sure, Russia's budget should handle it but it will sap fiancial strenght. I already talked before about the long term harm the sanction plus the counter-sanctions have should do.
    ... "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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