Quote Originally Posted by Firn View Post
Someone raised the positive aspects of devaluation. Of course there are undeniable upsides to the 'Ruble Rout' experienced this year, despite the painful and costly steps undertaken by the Russian Central Bank to stop or at least slow it down like pushing your key rate roughly 9% up above your main trade partner and burning dozens of billions of hard currency comes clearly. Now I'm not quite sure if the RCB does this for fun but after taking into account the various facts one might think of the remote possiblity that the wise guys there think that such a stark and rapid loss of valuation isn't the ideal outcome for the Russian economy.

The big problem with the boost to the Russian industry can be summed up in a single provocative question: What Russian industry?



Now Russia does have of course an industry, but one which can clearly only replace imports to a certain small degree in the short run and a somewhat bigger degree in the long run. Things like smartphones made in China won't get suddendly produced in Russian plants. When it comes to exports it is difficult to see much of a boost given the small slice of exports which the lower ruble will make more competitive.

Needless to add that with the high rates and high inflation act as additional gravity to Russian investment, beside the usual, well-known factors as corruption, little rule of law, etc.


P.S: I have no idea what the oil price will do in next years. The decline of oil has contribuited to the ruble's rout and higher oil prices would help the RCB a lot to stem the tide.
In general Russia is a raw resources exporting country much as the rest of the 3rd world raw resource exporters---after that there is little to no actual product lines that earn them massive income on.

The Chinese deals are sweet heart deals for the Chinese but end up not really earning much for say Gazprom because the Chinese set the gas costs not Gazprom. the Chinese are using Russia just as they do Uganda---cheap raw resources.

Part of the problem with their dislike of the EU Ukrainian agreements is the simple fact that millions of dollars of current exports to the Ukraine will not be allowed into the EU free trade zone simply because they could not pass the safety and food standards that the EU even demands for say Romania and or Slovakia.