Russian Economy General News: #4

sepheronx wrote:Well, it comes off weird in that claim when it has been documented by various groups/parties that there was a gdp growth of 0.6% in 2014.

The other thing is, it would be first time in history that a country was hit in sich a hard way (the way they figured in whom Austin is I suppose quoting) from sanctions and drop of oil value and currency value dropping, when Iran faced at most, a small drop of 1.5% and semi growth/stagnation when they were slapped with economic sanctions, banned from SWIFT, currency devaluing in the thousand % range and oil fluctuation over the last 30 years. And Russia has far more manufacturing and industrial good production, mining and agricultural development than Iran does.

So it sure sounds very iffy to me.

The irony is that the USSR's economy under sanctions was significantly larger than the when it became the Russian Federation with no sanctions.

magnumcromagnon wrote:

sepheronx wrote:Well, it comes off weird in that claim when it has been documented by various groups/parties that there was a gdp growth of 0.6% in 2014.

The other thing is, it would be first time in history that a country was hit in sich a hard way (the way they figured in whom Austin is I suppose quoting) from sanctions and drop of oil value and currency value dropping, when Iran faced at most, a small drop of 1.5% and semi growth/stagnation when they were slapped with economic sanctions, banned from SWIFT, currency devaluing in the thousand % range and oil fluctuation over the last 30 years. And Russia has far more manufacturing and industrial good production, mining and agricultural development than Iran does.

So it sure sounds very iffy to me.

The irony is that the USSR's economy under sanctions was significantly larger than the when it became the Russian Federation with no sanctions.

Most people stated soviet Unions economy was a fake. Instead, reality was, subsidies and investments were not in the right places. If there was more concentration on agricultural development, removal of price controls, while liberalizing smaller sectors of the economy (textiles, construction, agriculture, and automotive), soviet Union would probably still be around. From what I am seeing, Russia is doing just what I mentioned now under sanctions - subsidizing all new industries till they can become profitable (2 year tax exemption), liberalization of agriculture while investing much more in it, and concentrating in development of tooling industry (increasing self sufficiency). If Russia keeps it up, they will not only have more than enough food development for themselves, but more for export, as well, be producing expensive goods themselves. No longer is automotive in Russia is 100% state owned, and now major new agricultural facilities are opening up either through private or through investment from the provinces/republics/territories.

Interesting flaw in the nominal GDP definition being dealt with in this thread.

It should be rather clear now that using the currency of one country to measure the GDP of another
is total nonsense. The GDP is a glorified accounting ledger. There has not been any collapse in
money flow in the Russian economy. Companies are still making money and paying their employees.
A 50% decline in GDP would require actual declines in economic activity in Russia. All that
the exchange rate measures is the exchange rate. It does not measure the GDP.

kvs wrote:Interesting flaw in the nominal GDP definition being dealt with in this thread.

It should be rather clear now that using the currency of one country to measure the GDP of another
is total nonsense.   The GDP is a glorified accounting ledger.   There has not been any collapse in
money flow in the Russian economy.   Companies are still making money and paying their employees.
A 50% decline in GDP would require actual declines in economic activity in Russia.   All that
the exchange rate measures is the exchange rate.   It does not measure the GDP.

http://en.wikipedia.org/wiki/Purchasing_power_parity#Extrapolating_PPP_rates

For example, if the value of the Mexican peso falls by half compared to the US dollar, the Mexican Gross Domestic Product measured in dollars will also halve. However, this exchange rate results from international trade and financial markets. It does not necessarily mean that Mexicans are poorer by a half; if incomes and prices measured in pesos stay the same, they will be no worse off assuming that imported goods are not essential to the quality of life of individuals. Measuring income in different countries using PPP exchange rates helps to avoid this problem.

This is where I got the info from, and where many in Canada and well, western countries measure Russia's GDP and try to use it as an example of "sanctions working" when it is a joke. In reality, GDP that is measured in the west is measured against USD. So as soon as the currency drops in value, so does the theoretical GDP. See the quote from above.

I know about purchasing power parity adjustments. The point is that the nominal GDP only makes sense in the national
currency and not in some foreign currency. Russia and Mexico do not use dollars as their currency. This is aside from
PPP GDP. PPP gives an idea of the relative sizes of the economies of the different countries adjusted for price differences.

The actual impact of a 50% forex change is measured in terms of inflation. For some poor economies dependent on
imports the inflation shock can be large. For Russia it is small since there is a lot of domestic production. The Russian
economy is too big and diversified to be affected by the forex rate. Under normal market conditions the ruble exchange
rate would not move this much since there is no reason for it do so. It is experiencing such large changes because of
the propaganda war convincing forex consumers/investors that Russia is a oil banana republic and because of outright
market manipulation. The forex market is not some fish market and a few key players based in New York and London
have an excessive amount of influence.

magnumcromagnon wrote:

The irony is that the USSR's economy under sanctions was significantly larger than the when it became the Russian Federation with no sanctions.

True, but USSR's population was also almost twice as big. However, nowadays Russians are probably better off when compared to the richest countries in the world than at any point during Soviet times, PPP per GDP is around 23K IIRC. Not to mention that availability of consumer - and other - goods is totally different.

This crisis has really shown how absurd results you get if you only look at nominal GDP. The funny thing is that you can actually see people celebrating that Russia is going down and now it can't afford evil Putin's military "build-up". You can also see comments how PPP doesn't matter at all. Yeah right. So if the value of you currency decreases... let's say by 10% compared to the US dollar, it means that your economy is now one tent smaller? Ridiculous.

You can't simply measure the world's economic activity with US dollars! I read on Zerohedge that the global economy is going to decrease by 2 trillion this year due to dollar's strengthening, but at the same time the global growth rate is forecasted to be at around +3%. But now some say that we should only look at the nominal figures? Total BS. Of course, PPP is also superior because it makes emerging countries look stronger. (Which they are, to be honest.) I'm personally LOVING the fact that China, not the US, is now the world's biggest economy by purchasing power.

The worst thing is when military budgets, especially in countries such as China and Russia, are listed in dollars. Seriously, WTF is up with that? Now Russian military budget has "decreased" to $50 billion even though it increased by 30%. Oh well, it certainly is the most straightforward way to do it and atleast many sources, like Pentagon add up those official (dollar) numbers. (I guess that is also a great way to try to get some additional funding... How about a military budget of 1 trillion? 500+ billion is not enough!)

While Irans GDP nominal dropped last year by nearly 3%, its gdp PPP increased. Good for them as they produce most of what they need.

Even if Russian defence budget is smaller now in USD conversion, I bet it is higher in PPP terms. Good thing is majority of components used in military equipment, be it airforce, ground force, space, navy or whatnot, is made in Russia. If they can solve the electronics import issue for domestic, it will be even better. Russian gov can buy a lot more weapons/equipment for less than US or other western one. Perfect example are costs for a T-90A or for an Su-30MK2. Russia can buy a lot more for less.

Nice  

Western sanctions my prove to be the best thing that could happen to Russia

Industrial production in Russia in January increased by 0.9%

MAYOR: The amount of the Reserve Fund and National Welfare Fund at the end of 2015 will be 8.7% of GDP

MAYOR: financing of road infrastructure in 2015 will grow by 26%

MAYOR: agricultural production in Russia in 2015 will grow by 1.1%

Ushakov: Russia and Hungary sign five agreements

Mexican Interjet approved the purchase of ten more aircraft SSJ-100

I imagine agriculture production in Russia is up far more than 1.1% for this year. They banned eu foods and all you see now on sdelanounas are news of new dairy and meat processing plants opening up everywhere.

As for industrial production up, I am glad, but should also be hire due to many new import substiution going on.

I hope the Western sanctions are extended.

While the financial/loan restrictions are hurting, and so are some of the broken projects in the oil/gas, defense and other spheres - it also continues to represent a great opportunity for domestic producers - provided they can get the money together for expansion, and there is some guarantee that the situation will continue and that they will continue to have an open market.
More than anything this applies for the agricultural sector - but not only.

flamming_python wrote:I hope the Western sanctions are extended.

While the financial/loan restrictions are hurting, and so are some of the broken projects in the oil/gas, defense and other spheres - it also continues to represent a great opportunity for domestic producers - provided they can get the money together for expansion, and there is some guarantee that the situation will continue and that they will continue to have an open market.
More than anything this applies for the agricultural sector - but not only.

Care to explain the broken oil/gas and defense or other spheres?  I heard nothing.  All current projects still ongoing, especially oil and gas. As well, there seems to be money, as has been mentioned by Victor, so what limitations? So far, already more and more western companies are reinvesting in Russia?

Not sure where you are getting your info from Python. Maybe I am missing something?

How One Russian Farmer Repaid His "Lickspittle Good-For-Nothing" Bankers

Good, screw the bankers and screw CBR for high interest rates.

sepheronx wrote:Not sure where you are getting your info from Python.  Maybe I am missing something?

I'm pretty sure a lot of those major deals with Western oil majors are on standby right now. No work is progressing. Total, Statoil, Shell, those sort of companies.
However this mostly applies just to those projects that hadn't really started yet or were in their early stages. This one for example: http://www.ibtimes.com/french-oil-company-total-halts-project-russias-lukoil-over-western-sanctions-1693467

Those ones which are generating money and which have had investments in already are still running.

Same with all of the defense-industry projects and JVs with Germany/France/Italy; they're halted too.

Some deals with other spheres with Britain too - the extension of Nord Stream they were thinking on, and Rosatom's tender for building NPPs in Britain.

Probably some deals in Eastern Europe too, whatever there may have been.

But like I said the cutting of of long-term credit and so on to Russian banks is a big one. Albeit not insurmountable.

Ah, mostly projects that has not started or ones that seemed odd. German military deals like for armour for apc and such was haulted a while ago, and Russia ended up with their VR mil sim setup anyway without Germany. France is so far Mistral and Atom apc, which amounts to nothing (since Mistral was a joke to begin with and they already manufacture thermal imaging equipment under license. If France screws more with Russia, they can end up making it regardless of licensr and turn to the other one - Irbis K.

As for Credit, this is a joke beyond measure. No way that nearly bankrupt countries who live in debt that is over what they produce and pay, has "free" money to hand out. Technically, Russia can print their own cash or credit in trillions like US or EU does and lend that out as cheap credit. Will eventually hurt value over time, but they can back it with Russias vast resources, gold, energy and such. But due to CBR being the pathetic bunch they are, follows the only system they know/seem to grasp - borrow from someone else. Hence why the Rus gov is now handing out money in loans via their own rules through these venture funds and piggy banks for national development. They could effectively use their reserves and surplus, hand it to agribank as example to give out as loans at low rate interests.

Last crisis, 2008/9, private credit unions under guise of pawn brokers and stores, provided large loans to small companies at interest rates of 5% while CBR was setting ot at 15%. This will probably happen again.

sepheronx wrote:Ah, mostly projects that has not started or ones that seemed odd. German military deals like for armour for apc and such was haulted a while ago, and Russia ended up with their VR mil sim setup anyway without Germany. France is so far Mistral and Atom apc, which amounts to nothing (since Mistral was a joke to begin with and they already manufacture thermal imaging equipment under license. If France screws more with Russia, they can end up making it regardless of licensr and turn to the other one - Irbis K.

What you're missing is that there were a lot of such deals in the pipeline. Yes not all of them would have worked out anyway, but perhaps half would have.

There were also projects for cable-laying ships and new communications equipment with the French. A cheap sub and a naval patrol aircraft with the Italians. Even some prospective projects with Britain that never got announced in the end, but were hinted at a few months before the crisis erupted.

And yes not only military-technical ventures, but many others too were in the pipeline - nuclear energy, oil & gas exploitation, some high-tech ventures that are now also held back because of the restrictions on certain dual-use technology work with Russia.

Ultimately none of this is particularly critical - but it does represent a lot of lost opportunity. If you extrapolate, you can suppose that Russia would have stood to gain some of the defense market even in NATO within a few years, and make more and more integration and high-tech investments with Europe. This wave of not-yet-started projects represented the next big jump in Russian-European integration.

It will be hard to replace all that with Asian, South American and Middle Eastern countries.

Nontheless it is neccessary - Europe wanted the Ukraine and now it got it, it seems, hope they're happy with the price they're paying.

As for Credit, this is a joke beyond measure. No way that nearly bankrupt countries who live in debt that is over what they produce and pay, has "free" money to hand out. Technically, Russia can print their own cash or credit in trillions like US or EU does and lend that out as cheap credit. Will eventually hurt value over time, but they can back it with Russias vast resources, gold, energy and such. But due to CBR being the pathetic bunch they are, follows the only system they know/seem to grasp - borrow from someone else. Hence why the Rus gov is now handing out money in loans via their own rules through these venture funds and piggy banks for national development. They could effectively use their reserves and surplus, hand it to agribank as example to give out as loans at low rate interests.

That may well be so but there's also no escaping around the fact that in the short-term at least, this will hurt. In addition to living in debt these banks and nations are also the lynchpins of the world financial system and thus control huge amounts of its liquidity.

With the rise of the BRICS and this organizations own alternate instruments and finances, this is starting to change but still nothing will change immediately. Perhaps the current crisis could accelerate the process though. In fact, I'm sure it will. In the meantime, Russia's banks and financial options are in for a tough time.

Maybe, but these are needed as Russian banks became far too reliant on foreign entities. This obviously has to change since Russia is the resource rich nation as well as a forever growing industrial power as well as energy power. Essentially, Russia can call a lot of shots. Instead, they follow suite. Cant blame them as this is all they know since they were educated elsewhere regarding economics in banking. There are options to bypass these "credit issues" but they refuse to go this route, maybe because they are afraid of what it may do with their relations with other countries.

The other option as well besides private loaners or credit unions, is China as they are swimming in liquidity, and I do believe the Russians have access to Chinese banks but this wont solve the long standing issue.

Demand payments in Rubles with west, while giving their own QE for long term loan system, then use their own credit to finance assets abroad in order to increase liquidity. There are other options of course.

As well, your idea of integrating more with western systems in military is both sad to hear even from you and as well, sickening. All it would have amounted to is more Russian reliance on them as well as more pressure against them. Cable laying ships or such technology isnt new nor hard. Cheap sub and helicopters from Italy? That would have taken more money away from local developers much like KRET is now having to save your sorry asses in avionivs because you guys simply imported rather than use them, your own developers. I am sorry, but none of those projects you mentioned would have amounted for much if anything and oil and gas in Russia is being explored anyway at your own expenses and other investors. Instead of relying on someone else to do things for you, maybe it is time you guys started doing it yourselves like once before. Much may have been lost, but you will never gain it by simply hoping someone else would have done it for you.

Example is Mistral. Shil was BS and they really wouldnt learn much about comm systems used in it compared to anyone with even a hint of knowledge in such tech. Russian shipyards mentioned the deal is a sham.

Mind telling me as well which civil projects in high tech has been cancelled? Most important one in your country, the rusnano project with the dutch in making lithography tech, is still ongoing. All other JV are simply ways for someone else to bring the tech to you, and not impossible to do yourselves. Recent example is Rusnano and the french company making MRAM in Russia. People cried the end was nigh when the US company denied them the tech to manufacture the RAM due to sanctions. Rusnano simply purchased the same equipment from China.

These days, all tech can be purchased from someone else. All European miltech development was simply Russia skipping a step and hoping to use it as some leverage in politics as well. That failed. Same tech and JV are now being done with China or European companies bypassing sanctions. I repeate, most of these deals would not have amounted to anything, and now local producers are actually given a chance, like KRET (maybe I should link you the article I posted already in civil airforce thread?).

Sorry if I come off as an ass, but I expected better than this type of reasoning. BTW, that sub with Italy? No one was interested in it. All were either in current subs like Kilo or upcoming lada.

Just looked up cable laying ships. Ones used in Netherlands are from China. Lol, so much for European cable laying ships Russia can learn from.

Regardless, this is where I heavily disagree with you on Flaming. I am sorry if I am being rude so please forgive me, but I would be damned if anyone becomes reliant on Europe in terms of technology. As all their tech is US, made in China and evident is their frail economies evident now in their quasi empire called the EU. Only strong one is Germany and now their issues are starting to sprout. It would be good if Russia could work again with Europe, but it now has been evident that they are willing to throw hundreds of billions in relations with Russia over a bunch a bunch of banderite mongrols, who have no care for human lives, and a failed state. If that is the case, they should go cold. But your government seems to be either Nieve or simply soft hearted.

Just looked up cable laying ships. Ones used in Netherlands are from China. Lol, so much for European cable laying ships Russia can learn from.

Regardless, this is where I heavily disagree with you on Flaming. I am sorry if I am being rude so please forgive me, but I would be damned if anyone becomes reliant on Europe in terms of technology. As all their tech is US, made in China and evident is their frail economies evident now in their quasi empire called the EU. Only strong one is Germany and now their issues are starting to sprout. It would be good if Russia could work again with Europe, but it now has been evident that they are willing to throw hundreds of billions in relations with Russia over a bunch a bunch of banderite mongrols, who have no care for human lives, and a failed state. If that is the case, they should go cold. But your government seems to be either Nieve or simply soft hearted.

Good news! Sergei Dubik has been fired, a mighty blow against the monetarists in Russia.

http://www.newsweek.com/putin-fires-medvedev-ally-kremlin-rift-grows-307046

magnumcromagnon wrote:Good news! Sergei Dubik has been fired, a mighty blow against the monetarists in Russia.

http://www.newsweek.com/putin-fires-medvedev-ally-kremlin-rift-grows-307046

Just watch the comments there a source you should never post again pure propaganda shit.

I dont understand why Russia does not go for a big economic deal with china where they would sell Energy in Renminbi ( other than USD/Euro ) and keep a part of Forex in Renminbi in return for Big Investment from China.

What stopping them doing so as I dont see Russia trusting Western Economic even if the crisis gets resolved.

Granted Renminbi is not a Full Convertable Currency but looking at huge China Trading Base , Growth prospects and Huge Reserves its worth keeping it as Reserve Currency.

sepheronx wrote:The other option as well besides private loaners or credit unions, is China as they are swimming in liquidity, and I do believe the Russians have access to Chinese banks but this wont solve the long standing issue.

Reliance only on China will not solve the issue.

Russia should diversify successfully, not simply divert dependency from one partner onto another.

Therefore some reliance on the West is actually usefull. What's not useful is when they're the only ones Russia can rely upon as interconnection with them has outstripped the pace of integration with everyone else

As well, your idea of integrating more with western systems in military is both sad to hear even from you and as well, sickening. All it would have amounted to is more Russian reliance on them as well as more pressure against them. Cable laying ships or such technology isnt new nor hard.

It is not hard at all, nor is it particularly sensitive technology. So when there is an opportunity to split the costs evenly with a partner and share expertise in order to come up with a vessel that can be used by the navies of both countries, and perhaps jointly-produced - then why not?

There was always some kind of comm equipment JV too. That would probably have been French involvement in building new comms for Russian military use. Perhaps too sensitive to leave to them.

Cheap sub and helicopters from Italy?

The sub is designated the S-1000. It's a farily cheap diesel-electric sub, with apparently mostly Italian components - and was designated not for service in either navy, but as a budget option for 3rd countries. Could have been a good business opportunity and of course extra hands-on experience is always welcome.

And the maritime patrol aircraft is not a helicopter, think A-40 or A-42 instead. In fact if I were to hazard a guess, then it would be exactly a revival of the A-42 project they were talking about; they said that it would be a Russian aircraft but fitted with Italian equipment.
Again, this would be a product for the export market.

Finally there was some talk of the Italians modernizing the Be-200 too. If that project went ahead, it would have opened the doors for the Be-200 to be more widely exported to Europe - this is a class of aircraft that's quite clearly in demand in Europe and has been bought by a few countries already. A Euro modernization would make it more acceptable for purchase.

That would have taken more money away from local developers much like KRET is now having to save your sorry asses in avionivs because you guys simply imported rather than use them, your own developers. I am sorry, but none of those projects you mentioned would have amounted for much if anything and oil and gas in Russia is being explored anyway at your own expenses and other investors. Instead of relying on someone else to do things for you, maybe it is time you guys started doing it yourselves like once before. Much may have been lost, but you will never gain it by simply hoping someone else would have done it for you.

The problem is that if you do everything yourself, you take all the risk and investment upon yourself too.

It makes more sense to find a partner and split the risks with them. You can learn something from them too.

It's the same principle as with the many military-industrial JVs with India, China, South Korea, etc... yet you wouldn't say that those are amounting to nothing or a mistake, would you?

Same with the oil/gas. Russia has plenty of JVs already; operating not only with European and US majors, but Vietnamese, Venezuelan, Chinese, Turkish and so on. What's wrong with that?

Mind telling me as well which civil projects in high tech has been cancelled? Most important one in your country, the rusnano project with the dutch in making lithography tech, is still ongoing. All other JV are simply ways for someone else to bring the tech to you, and not impossible to do yourselves. Recent example is Rusnano and the french company making MRAM in Russia. People cried the end was nigh when the US company denied them the tech to manufacture the RAM due to sanctions. Rusnano simply purchased the same equipment from China.

That's great but there is a lot of nuance and details in any such deals. It might well be possible to get the tech from China instead, but it might also not match the specifications exactly or be produced to the same quality.

You gave an example - I'm sure there are plenty more too, for every one we might hear about there might be others that we don't.

A New Gold Standard In The Making

I heard Russia doesnt have enough gold in its bank reserves to count much if they went gold backed. But I imagine they would start mining for gold in excess amounts and Siberia is rich with gold.