Russian Economy General News: #2

MOSCOW, July 09. /ITAR-TASS/. The parliaments of Russia, Belarus and Kazakhstan will synchronize the process of ratifying the Eurasian Economic Union Treaty, Speaker of Russia’s upper house of parliament Valentina Matviyenko said on Wednesday.
“We have agreed on synchronizing the fulfillment of intra-state procedures and ratifying this most important historic document,” the speaker said.

MOSCOW, July 09. /ITAR-TASS/. BRICS leaders will sign a framework agreement to establish a pool of reserve currencies at the upcoming summit in the Brazilian resort city Fortaleza on July 15-16, Russian Finance Minister Anton Siluanov told journalists.

TOKYO, July 09./ITAR-TASS/. Major Japanese shipping company Mitsui O.S.K. Lines decided to be the first in the world to launch a route of round-the-year regular supplies in the Arctic Ocean. This project will be launched starting from 2018, Mitsui’s Tokyo head office told ITAR-TASS on Wednesday.

Austin wrote:Nuland: USA ready to impose more sanctions on Russia very soon

http://en.itar-tass.com/world/739754

sepheronx wrote:

Austin wrote:Nuland: USA ready to impose more sanctions on Russia very soon

http://en.itar-tass.com/world/739754

Let them. Regardless what Russia does, they are gonna throw sanctions at Russia. Like a mp.net member said that they are throwing a hissy fit because Russia isnt helping them achieve their goal. Since trade between Russia and US is so low, guess it wont do much. Oh, except hurt oligarches like Phokorov and his multibillion rouble basketball stadium in NYC or someones flat in LA.

Maybe US is secretly helping Russia deal with its oligarchy problem and Putin can save face? So many other conspiricy theories being thrown out their.

Russia and the EU would both suffer if sanctions escalate, energy markets the most, according to a World Bank report. The loss of the European market would cut Russian government revenue by 10 percent of GDP, and European gas prices would jump 50 percent.'

Most dependent EU countries could see higher gas prices. Countries from Central and South East Europe like Germany, Italy, Hungary, and Poland are up to 80 percent dependent on Russian gas imports, says the World Bank.

Increased tension between Russia and the EU is a key downside risk to regional forecasts.

“Should tensions further escalate, more intrusive sanctions, possibly interrupting trade and banking flows, cannot be ruled out,” the World Bank report said. “Given the close economic interdependence between the EU and Russia, the escalation of sanctions would likely impose large economic costs, damaging recoveries in both.” In Russia, oil revenues represent 9 percent of GDP and a quarter of government revenues, and “a loss of EU export markets could reduce government revenues by 10 or more percent of GDP,” according to World Bank analytics.

Europe depends on Russia for nearly 30 percent of its natural gas supplies. In case of supply disruption or sanctions, the economic costs could be high. Additional LNG imports to Europe from elsewhere in the world would boost global demand and prices.

However even assuming no boost to LNG prices, EU import costs would rise by 50 percent or about 0.15 percent of GDP says the report. The losses would be much higher for major importers.

Russian economic growth in 2014 is expected to be at 0.5 percent. The longer outlook forecast is a bit more optimistic with 1.5 percent in 2015 and 2.2 percent in 2016.

Global GDP growth is projected to gradually rise from 2.4 percent in 2013 to 2.8 percent in 2014, 3.4 percent in 2015 and 3.5 percent in 2016.

MOSCOW, July 10 - RIA Novosti. External Debt of the Russian Federation on July 1, 2014 amounted to 720.926 billion compared to $ 728.859 billion as of January 1, 2014, according to preliminary data of the Bank of Russia.


Thus, the country's external debt has decreased since the beginning of the year to $ 7.9 billion, or 1.1%.  In annual terms, foreign debt rose by $ 13.2 billion, or 1.9%.


Of the total debt on the state governing bodies have to 54.638 billion dollars, CB - 16.04 billion.  The lion's share of the debt accounts for banks (206.531 billion) and other sectors (443.716 billion).


For the second quarter foreign debt increased by 0.7%, or $ 5.1 billion (from 715.819 billion).
At the same time the Central Bank revised estimates of debt on January 1 and April 1 of this year.  Earlier regulator estimated external debt at the beginning of the year to 727.062 billion dollars, and in the first quarter - to 723.8 billion dollars.

Austin wrote:Makes a very good read on reality of EU Energy Dependency

Russia’s Grip Over EU Energy Unlikely to Change Soon

Hannibal Barca wrote:By 2030 there will be no EU my friend. Take this for granted   

HAVANA, July 12 /ITAR-TASS/. Russia and Cuba have signed a package of cooperation documents. The signing ceremony was held on Friday in the presence of Russian President Vladimir Putin and his Cuban counterpart Raul Castro after their talks.

Russia ratifies Cuba debt write-off of $35 billion
The documents included a bilateral statement on non-placement of weapons in outer space and an intergovernmental agreement on cooperation in the area of international information security.
Apart from that, the sides signed a number of memorandums, including a memorandum of cooperation between the two countries’ ministries of culture; a memorandum of cooperation between the two countries’ ministries of industry and trade; a memorandum of cooperation between the two countries’ ministries of health in the area of protection of men’s health; a memorandum on the development of a special centre for training fire fighters and rescuers.

YEKATERINBURG, July 12, /ITAR-TASS/. Russia plans to organise in Crimea four industrial parks, where investments will be about five billion roubles (about 148 million dollars), Deputy Minister of Industry and Trade Georgy Kalmanov said on the sidelines of the Innoprom industrial exhibition on Saturday.
“The peninsula will have industrial parks, most probably four: three in the Republic of Crimea and one in the federal city of Sevastopol. The investments will make about five billion roubles. The money will be used for organisation of necessary facilities of the industrial parks, to where we shall attract investors,” he said.

YEKATERINBURG, July 10. /ITAR-TASS/. Russian car manufacturer AvtoVAZ will raise the level of localization to 90% of all produced car components from 84%, CEO Bo Andersson told reporters on Thursday.
“The general localization is 84% for the whole LADA model range. Localization for LADA Largus amounts to 51%, for Chevrolet Niva stands at 95% and for Kalina amounts to 85%,” Andersson said.

MOSCOW, July 11. /ITAR-TASS/. Rosneft, a leading Russian oil company, has closed a deal to purchase a 50% share in capital of Camfin S.p.A., a holding company, owning 26.19% of the Pirelli & C. S.p.A. Company, press service of the Russian oil company reports on Friday.
The Russian company has bought the share from an international consortium of Unicredit Bank, Intesa Bank and Clessidra Fund. Rosneft paid 12 euro per every share of Pirelli & C. S.p.A.

"We have developed high expenditure growth rate, first of all by means of increasing wages to the public sector employees and defense spending that increases annually," Siluanov said. "A considerable amount of funds is spent on ensuring the Pension Fund balance. The pension reform is not over, the volume of subsidies and grants-in-aid of the Russian Pension Fund in 2015 will be some three trillion rubles with the total federal budget volume of 15 trillion rubles."

Siluanov recalled that initially it had been planned to make the pension system self-sufficient, and in the current state it is deficit-plagued. "In these conditions we have prepared proposals on cutting the expenditures, this is the main task: the constant increase in expenditure obligations cannot continue forever, it is necessary to stop and begin the work to improve efficiency of budgetary allocations," he said.

"We also consider a second option," the finance minister stressed, "possibilities for increasing revenues. First, increase in taxes and duties, including by means of better administration. We have the value-added tax (VAT) collection rate of 94%, we set the task to increase it to 98% within the next three years. Second, it has been proposed to equalize the taxation of revenues from dividends and wages."

"Increasing the tax on dividends, by the way, is not our idea," the finance minister said. "It has been borrowed from the MPs who talk of justice in taxation: why public sector employees, low-paid citizens pay a 13-percent income tax, and businessmen who get the main revenue from investment instruments - just 9%? Some other tax innovations that make the budget system more balanced have also been proposed."

"Assuming considerable expenditure obligations such as the armaments program, increasing pension payments, we will have to take uneasy and unpopular decisions. This time has come. When we considered the 2015 - 2017 draft budgets, we paid our attention to the fact that at the time when all these costly decisions had been made we had entirely different forecasts of the (economy) growth tempos and revenues to the treasury. We don't have these revenues. But we have assumed the expenditures, which must be financed," Siluanov said.

In his view, "the sense in expenditure restraint is that we as a country dependent on oil and natural gas should not take the risk of external influences," because "the oil price does not depend on us, it's a factor that is formed under the influence of many causes. It is necessary to prevent the investment rating downgrading, otherwise foreign investors will leave Russia," Siluanov stressed that increasing expenditures "is a road to nowhere with unpredictable economic and financial consequences".

"We have reached the limit of expenditures, because we are practically not replenishing the reserve fund anymore. In 2015 we plan to add to it some 430 billion rubles, but this may not happen," he said.

Answering the Vedomosti question whether, in the view of the Finance Ministry, the full tax amnesty for offshore capitals is expedient, the finance minister said in conclusion: "We should grant amnesty for those revenues that may appear as a result of the transfer of funds from offshore jurisdictions to Russian jurisdiction. That is, additional taxation of income should not take place during money transfer. In general, we don't talk of the transfer of all resources to Russian jurisdiction. If a company works in an offshore jurisdiction, so let it stay there, but pay taxes here under our legislation. There is no such idea that all offshore companies should be closed and businesses must transfer money to Russia. It is just necessary to pay taxes honestly.

Austin wrote:Looks like diffcult days , months and years ahead for Russian Economy.

With the 3rd round of sanctions likely to come with US Pressure on Europe , Things will get more difficult for Russian Economy specially when it comes to Investment and Supporting the Rouble which will greatly diminish the forex

“We also consider a second option,” the finance minister stressed, “possibilities for increasing revenues. First, increase in taxes and duties, including by means of better administration. We have the value-added tax (VAT) collection rate of 94%, we set the task to increase it to 98% within the next three years. Second, it has been proposed to equalise the taxation of revenues from dividends and wages.”
“Increasing the tax on dividends, by the way, is not our idea,” the finance minister said. “It has been borrowed from the MPs who talk of justice in taxation: why public sector employees, low-paid citizens pay a 13-percent income tax, and businessmen who get the main revenue from investment instruments - just 9%? Some other tax innovations that make the budget system more balanced have also been proposed.”

“We have developed high expenditure growth rate, first of all by means of increasing wages to the public sector employees and defence spending that increases annually,” Siluanov said. “A considerable amount of funds is spent on ensuring the Pension Fund balance. The pension reform is not over, the volume of subsidies and grants-in-aid of the RF Pension Fund in 2015 will be some three trillion roubles with the total federal budget volume of 15 trillion roubles.”

“All countries that face budget difficulties take one and the same steps: cut the expenditures, increase the number of revenue sources, including at the expense of property sale,” the minister said.

Austin wrote:For as long as the Rouble is pegged against USD/Euro and is a free floating currency i.e freely convertable from Rouble to USD and vice verse , It will be under tremendous pressure against external sanctions specially by EU.

CBR will have to spend huge amount of USD to prevent from free falling of Rouble.

If sanctions come against Russia , they should temporarily stop free floating of currency and try to peg the Rouble against  Renminibi/Yuan and Natural Resources if possible. 


Taxes are flat in Russia to encourage more spending for ordinary people and to attract investement for Businessman.

Raising taxes in period of sanction will also prevent business from Investing.

sepheronx wrote:Oh look, another Russian Oligarch with Russian money in London: http://rt.com/news/172552-billionaire-buys-london-house/

He shouod be stripped of his position.

sepheronx wrote:Or make him pay some sort of excessive tax (obviously he can afford it) for foreign property. And use the tax money to build modern infrastructure and posh communities for any future oligarches who want to blow money on a mansion, can do it in Russia.