The Russian economy (catch all)

[OUTLAW 09]

The Russian economy death spiral still continues and only gets worse.

Oil Price Set To Fall to $76-77 -- Oil Minister of #Kuwait
No reduction in OPEC production to support prices either
http://www.theinsider.ua/business/543b98aaa8039/ …

Appears the Russian CB has also given up on supporting the Rubel.

#Russia|n Central Bank Admits Defeat as Ruble plunges to new low:
$1 = 40.460
€1 = 51.342
http://www.businessinsider.com/russi...-ruble-2014-10 …
@AP pic.twitter.com/LSnOpxDcZ4

More reports on the KSA oil price effects on Russia--the "real sanctions" against Putin.

RUB - 51.3120 versus EURO, 40.4350 against USD.
Real sanctions against Putin imposed by Saudi Arabia.

http://www.bloomberg.com/news/2014-1...sens-rout.html …

[Firn]

It is certainly not easy for many oil-producing states which, as was discussed in this forum before, need increasingly high oil revenues to balance their budget. New participants won't be part of a restriction of supply and the increased vulnerability makes it harder for key players to cut big against their short-term interests. From Bloomberg:

Iraq will sell its Basrah Light crude to Asia at the biggest discount since January 2009 as it follows Saudi Arabia and Iran in cutting prices amid a slump in Brent futures to the lowest in almost four years.

Iraq, the second-biggest producer in the Organization of Petroleum Exporting Countries, trimmed the price differentials for supplies to Asia and Europe for November, the country’s State Oil Marketing Co., known as SOMO, said today. Futures slid as much as 2.7 percent in London to the lowest intraday level since December 2010, and West Texas Intermediate lost 1.2 percent after tumbling into a bear market last week.

The world’s two most-traded oil futures are collapsing as demand growth slows and output expands in the U.S., Russia and other nations. OPEC’s biggest producers are responding by cutting prices, sparking speculation they are ready to compete for market share. Iran last week said it will sell oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia.

Still I have no idea what the oil price will do in the next months or years...

[OUTLAW 09]

It appears that after one war and several rounds of sanctions now Russia wants to discuss a free trade zone between the EEC and the EU.

BUT again it is all smokescreen because for EEC products to move freely and or with limited duties the products must be able to pass EU health and safety standards---that was the massive scream by Russia and the Ukraine/EU agreement which implementation was delayed to 1 Jan 16 to give Russia time to pickup their quality and safety standards to EU levels---Russian products now come nowhere close to EU standards thus would have been cut out of the Ukrainian EU market--roughly 400M per year loss. Currently very very few Russian products make it into the current EU due to health and safety standards problem--Russia loves tons of products not quality of products--an old Soviet holdover.

That is why Putin is basically telling Moldavia what do with their EU membership--do not join---what is strange there is that Russian products in Moldavian do not have a large market.

MOSCOW, October 14 (RIA Novosti) – Moscow is ready to discuss a free-trade zone with the European Union, Russian Foreign Minister Sergei Lavrov said Tuesday.

He said that the Russian-led Eurasian Economic Union will formally start its activities on January 1, 2015.

“We remain open to cooperation with other states, other regional groups, ready to discuss free trade zone with the European Union and are ready to build the integration model step-by-step,” Lavrov said.

[OUTLAW 09]

One must ask one's self what economical world Russia resides in--they have been attacking the EU from day one on their latest gas deregulation law 3 which is being used to stop the South Stream pipeline construction because Gazprom will not deregulate itself and allow a 3rd party to maintain the pipeline and all gas producers who want to ship gas will be able to ship gas--just not only Gazprom but there are at least another 14-18 suppliers that would love to ship and sell inside the EU.

Seems like Russia just does not like competitive pricing and competition for business as a State-owned company that the EU now demands from gas suppliers.

NOTE: if one looks at the countries Russia says supports the South Stream many of them favored no EU sanctions on Russia--connection maybe?

Russia has never liked the business, safety, and health regulations that the EU has and at every turn has attempted to either ignore them and or find a way around them.

MOSCOW, October 14 (RIA Novosti) – Russia expects that the European Commission will pay attention to interests of the European population and businesses while considering the South Stream gas pipeline project, Russian Foreign Minister Sergei Lavrov said Tuesday.

"We expect the European Commission to reject politically biased approaches to the construction of this gas pipeline and will take into account interests of the EU population and businesses, including the stance of participating states, who have repeatedly spoken in favor of its implementation," Lavrov said.

Russia's Gazprom energy giant started building the South Stream gas pipeline across the Black Sea in 2012 to reduce the unreliable passage of Russian natural gas to central and southern Europe through Ukraine. The pipeline is expected to be fully operational by 2018.

The South Stream pipeline route is expected to come ashore in Bulgaria and continue to Serbia, where it is to split in two, with the first branch going through Hungary to Austria and the second through Hungary and Slovenia to Italy. Under the plan, branches are also to be constructed in Croatia and the Bosnian Serb Republic.

Intergovernmental agreements were earlier signed with Serbia, Bulgaria, Hungary, Greece, Slovenia, Austria and Croatia in order to implement the construction of the pipeline's onshore sections. However, in August, Bulgaria suspended operations, saying that they did not meet European Commission requirements.

Brussels has long been trying to hamper the project saying it violates EU's Third Energy Package, which stipulates that pipelines in its member countries cannot belong to natural gas producers. Moscow insists that the construction of the pipeline does not contradict the regulations in any way.

[OUTLAW 09]

Ruble is again in free fall today as it appears that the Russia CB cannot continue to throw Billions at the problem--up to now over 4B was used to just slow down the slide--not even to stop the slide.

The ruble continuing to slide, now 40.72 to the dollar, 64.99 (!!) to the pound.

[OUTLAW 09]

Bloomberg TV ✔ @BloombergTV

BREAKING: Russian finance ministry cancels Ruble bond auction for tomorrow

Russia cancels debt auction as yields near 10% ---by the way the last time it was cancelled the yield was running at 8.14%----almost a 2% increase in little under three weeks.

http://on.ft.com/11irS7B

[OUTLAW 09]

It is certainly not easy for many oil-producing states which, as was discussed in this forum before, need increasingly high oil revenues to balance their budget. New participants won't be part of a restriction of supply and the increased vulnerability makes it harder for key players to cut big against their short-term interests. From Bloomberg:



Still I have no idea what the oil price will do in the next months or years...

US oil fracking killing Russia w/ lower prices. Putin needs over $100. We can do w/ $60. Saudis w/ us.

http://online.wsj.com/articles/iea-c...4259#printMode …

[OUTLAW 09]

And the Ruble is still sinking as is the price of oil:

The ruble beat its own low against the dollar many times today. Lowest at 40.8793.

pic.twitter.com/6Sdb7GnYsU

18.00 GMT +2: Crude Oil (Brent) USD/bbl. 86.45 -$2.44, -2.74%.

OPEC stated today they are not concerned over the current oil glut and are OK with the price fall--wonder just how Russia will take that news?

[OUTLAW 09]

Now "official Russia" is starting to panic on the current economic collapse of the Rubel and oil prices.

From Interfax this evening:

10/14 19:34 POTENTIAL RUSSIAN RATING DOWNGRADE WOULD MAKE REFINANCING TERMS FOR COMPANIES WORSE, HAVE NEGATIVE IMPACT FOR ECONOMY - ULYUKAYEV

10/14 19:34 RUSSIAN RATING DOWNGRADE WOULD INDICATE EITHER INCOMPETENCE OR POLITICAL BIAS - ULYUKAYEV

10/14 19:32 ULYUKAYEV: DISCUSSIONS AND RUMORS CIRCULATE OVER POSSIBLE DOWNGRADE IN RUSSIA'S SOVEREIGN RATING

BUT then this from Interfax this evening--concerning oil impacting them at the 80-90 price ranges--notice they think the 60 range is the worst case scenario although some Me oil analysts are saying that is even possible right now if it break through the 80 range and the KSA has signaled they can live with the 60 range.

Gref: oil at $80-$90 per barrel 'not fatal'

MOSCOW. Oct 14 (Interfax) - Sberbank of Russia (MOEX: SBER) President and CEO German Gref believes oil priced in the range $80-$90 per barrel is "not fatal."

"It depends on how low it drops. If it is in the range $80-$90 [per barrel], it would be difficult, but not fatal. Nothing terrible. Industry experts, including those I respect most, are not forecasting a drop below $80," Gref told journalists on Tuesday.

The chance that oil prices will drop below $80 per barrel is small. "The probability it goes to $80 is higher. We must wait and see. All of those scenarios are in the realm of possible fluctuations," Gref said.

Central Bank Chairman Elvira Nabiullina said in the State Duma the day before that the Central Bank conducted economic stress testing assuming oil priced at $60 per barrel, but that the probability the most negative scenario would come to pass was exceedingly small.

[Firn]

I would be surprised to see oil prices that low, but then I again I have no idea about the oil market. It might well recover, in any case one shouldn't rule that out.

Overall the picture is pretty grim for the Russian economy: Hefty staflation and falling state revenues, plus the huge long-term economic costs of increased isolation. As discussed before the trajectory of federal expenditures looked troubling even a year ago due to increasingly large public pay and generous pensions promises made in better times.

Obviously the situation in some EU countries, including Italy, is also bad with slight deflation* but thankfully considerably better then in Russia.

*Despite all that noise about the mad money-printing ECB. While the 'virtous' RCB has to do shoot all lot of it's arrows to suppress the high inflation...

[OUTLAW 09]

I would be surprised to see oil prices that low, but then I again I have no idea about the oil market. It might well recover, in any case one shouldn't rule that out.

Overall the picture is pretty grim for the Russian economy: Hefty staflation and falling state revenues, plus the huge long-term economic costs of increased isolation. As discussed before the trajectory of federal expenditures looked troubling even a year ago due to increasingly large public pay and generous pensions promises made in better times.

Obviously the situation in some EU countries, including Italy, is also bad with slight deflation* but thankfully considerably better then in Russia.

*Despite all that noise about the mad money-printing ECB. While the 'virtous' RCB has to do shoot all lot of it's arrows to suppress the high inflation...

Firn--from the blog world

Another week or so and the ruble defence will have cost more than the Olympic games in Sochi which was 40plus b.

pic.twitter.com/Hc1fBaNaf8

[OUTLAW 09]

The Russians are trying everything in their play book to slow down the Ruble and it is failing badly;

1. claim to want a reset US/Russian relations in the recent UN speech
2. then claim to withdraw Russian troops from the border regions to the Ukraine-but leave troops inside the Ukraine
3. claim Putin will "explain" Russian efforts in settling the Donbas fighting at the EU Asian conference and on and on
4. keep claiming they never did support the mercenaries with anything

BUT then they seem to fail to truly see that if they fully implemented the Minsk 1 and 2, fully and verified their eastern Ukraine troop pullout, if they truly shut down the border and fully stopped supporting their own mercenaries---THEN and just maybe THEN the Rubel might just stop falling.

BUT that is still to hard for Putin as that then means his strategy for the Ukraine is and was a failure and that his own doctrine is and was a failure and his new military UW strategy is and was a failure--that he will never do.

Ruble falling sharply in morning trade. New low is 41.0173 against the USD. pic.twitter.com/bJi4yl3W1M

Interfax from today:
13:03 CB to quote ruble at 40.9416 rubles/$1 and 51.7829 rubles/EUR1 on October 16

Oil hit $87.26 per barrel the Urals Crude is now at its lowest since December 2010.
pic.twitter.com/ytD7RSn4gG

From Interfax today:
10:19 Russian stocks open lower on Wednesday amid plunging oil prices

10:17 Central Bank sold $2.763 bln in forex on Friday, Monday

[OUTLAW 09]

Now "official Russia" is starting to panic on the current economic collapse of the Rubel and oil prices.

From Interfax this evening:

10/14 19:34 POTENTIAL RUSSIAN RATING DOWNGRADE WOULD MAKE REFINANCING TERMS FOR COMPANIES WORSE, HAVE NEGATIVE IMPACT FOR ECONOMY - ULYUKAYEV

10/14 19:34 RUSSIAN RATING DOWNGRADE WOULD INDICATE EITHER INCOMPETENCE OR POLITICAL BIAS - ULYUKAYEV

10/14 19:32 ULYUKAYEV: DISCUSSIONS AND RUMORS CIRCULATE OVER POSSIBLE DOWNGRADE IN RUSSIA'S SOVEREIGN RATING

BUT then this from Interfax this evening--concerning oil impacting them at the 80-90 price ranges--notice they think the 60 range is the worst case scenario although some Me oil analysts are saying that is even possible right now if it break through the 80 range and the KSA has signaled they can live with the 60 range.

Gref: oil at $80-$90 per barrel 'not fatal'

MOSCOW. Oct 14 (Interfax) - Sberbank of Russia (MOEX: SBER) President and CEO German Gref believes oil priced in the range $80-$90 per barrel is "not fatal."

"It depends on how low it drops. If it is in the range $80-$90 [per barrel], it would be difficult, but not fatal. Nothing terrible. Industry experts, including those I respect most, are not forecasting a drop below $80," Gref told journalists on Tuesday.

The chance that oil prices will drop below $80 per barrel is small. "The probability it goes to $80 is higher. We must wait and see. All of those scenarios are in the realm of possible fluctuations," Gref said.

Central Bank Chairman Elvira Nabiullina said in the State Duma the day before that the Central Bank conducted economic stress testing assuming oil priced at $60 per barrel, but that the probability the most negative scenario would come to pass was exceedingly small.

Firn---if the President of the Sberbank thinks that the oil price range dropping below 80 per barrel is small and above 80 is not "fatal" then what is a drop below 80 --"fatal"?

Ever wonder if bank CEOs really believe what they say and or state for the press?

THEN today oil price just keeps going South.

Breaking: Oil price falls off a cliff..
$81.84 currently.

4m 4 minutes ago
#Putin's nemesis, Oil, falls further south.
Current price $80.54

[OUTLAW 09]

Ruble Erases Gain as $9 Billion Intervention Fails to Stem Rout http://bloom.bg/1rx3FPP
via @BloombergNews

BREAKING #Russia has lifted ban on cheese & butter from #European Union. Very covertly, w/o much fuss & PR statements

"The supply and price of Russian #gas has been part of [the Ukrainian] crisis from the start": BBC's @paulkirbyuk
http://bbc.in/101jkBE

[OUTLAW 09]

Russian CB again trying to stem the tide against the Rubel with all kinds of press releases--appears to be an attempt to influence the markets.

From Interfax today:

13:21 LIMIT IN FIRST DOLLAR REPO AUCTIONS TO BE UP TO $1.5 BLN FOR 28DAYS, $1.5 BLN FOR WEEK - CENTRAL BANK

13:21 BI-CURRENCY BASKET FALLS 15 KOPECKS ON NS CENTRAL BANK COULD HOLD FX REPO AUCTIONS FOR $50 BLN BY END 2016

13:20 CORRECTED: CENTRAL BANK SAYS WILL HOLD FIRST 28 DAY AND 1-WEEK FX REPO AUCTIONS ON OCT 29 AND OCT 30

13:17 CENTRAL BANK TO SET MINIMUM RATES AT USD, EUR REPO AUCTIONS AT LIBOR + 2% FOR ONE WEEK AND +2.25% FOR 28-DAYS

13:16 CENTRAL BANK TO OFFER $50 BLN AT FX REPO AUCTIONS BY END-2016 - BANK

13:14 CENTRAL BANK SAYS WILL HOLD FIRST FX REPO AUCTION ON OCT 27

[OUTLAW 09]

firn--just 3 USD shy of breaking the 80 bottoming barrier and then there is nothing to stop the fall into the mid 70s.

Brent #oil price are continuing to decline - $83.35 today. Putin's regime is loosing money.

pic.twitter.com/gbA91GICTZ

[OUTLAW 09]

firn--more bad news for the Russian CB.

Ruble slid to a record as Central Bank's pledge to provide $50bn of foreign currency till 2016 failed to ease rout

http://www.bloomberg.com/news/2014-1...ervention.html …

[Firn]

It seems now quite likely that the Russian central bank will hike it's rates, accepting the trade-offs. We will see, maybe they can weather the storm without but if the pressure on the ruble continues like that...

[Firn]

Stepping back it is important to look again at the link between the economy and public support for the leadership. According to the Moscow Times most Russians think western sanctions will Boost nation's economy, an opinion which is quite difficult to square with reality even if (or especially because) it gets pushed by the state-controlled media.

Putin seems indeed immune to the economic troubles, so far at least. I share the minority opinion within Russia it seems:

Alexei Makarkin, deputy director of the Center for Political Technologies think tank, said the current situation can be compared to the Soviet Union in the mid-1980s, when economists were sounding the alarm but the population at large was lulled into a sense of false security by relative stability.

But when oil prices dived in 1986, people suddenly felt that "they can be economic experts too," according to Makarkin.

"As the Soviet Union collapsed, everybody realized that the economy is relevant and its indicators affect everybody," he said.

Some analysts have claimed that economic ills are being camouflaged by state-run media, which blames factors that are not under Russia's control for them. According to Makarkin, this view is simplistic.

"Propaganda only stirs up authentic sentiments, such as imperial nostalgia and so forth. If there was a significant dissonance between what they said on television and what people felt and saw around them, propaganda would not work," he said.

"No one will take action until all hell breaks loose," he concluded.

That makes it especially dangerous for the simple Russian citizien, which might only wake up and react politically until very deep damage has been already inflicted.

[OUTLAW 09]

Stepping back it is important to look again at the link between the economy and public support for the leadership. According to the Moscow Times most Russians think western sanctions will Boost nation's economy, an opinion which is quite difficult to square with reality even if (or especially because) it gets pushed by the state-controlled media.

Putin seems indeed immune to the economic troubles, so far at least. I share the minority opinion within Russia it seems:



That makes it especially dangerous for the simple Russian citizien, which might only wake up and react politically until very deep damage has been already inflicted.

firn--they are already asking just why the Ruble is falling and the common Russian on the street can no longer take that trip to Paris because it is now to costly.

Bank of Russia Raises Ruble Trading Band to Let Currency Fall to New...

The Bank of Russia continued adjusting the ruble trading band, letting the ruble weaken gradually to new all-time lows, the bank’s data showed.
Wall Street Journal @WSJ