Russian Economy General News: #5

Project Canada wrote:

Rumor still stands though on the $21B contract but we are not sure if ssj-100 involved or not.

I read on RT that the deal involves ssj-100s, im not sure why a source from the Iranian side denied this

Originally appeared at Russia & India Report

Economic sanctions on Russia seem to be hurting the imposer more than the intended target. Britain’s oldest conservative think tank, the Bow Group, has published a paper from six Eastern European analysts on the affect of sanctions against Russia on Eastern Europe and the wider West. The report reveals the estimated financial costs of sanctions to the West could exceed $755 billion – roughly equal to the annual US defence budget.

The paper details the potential costs: the UK will lose $9.6 billion in exports, 119,000 jobs and $41 billion of Russian capital invested in the country. The US economy is expected to take a hit of $137 billion in trade, including $38 billion in exports, and up to $30 billion in US capital tied up in Russia.

To illustrate why and how this is happening, let’s start with what’s happening in a key sector – oil.

In September 2014, Russian oil giant Rosneft and US oilco ExxonMobil announced the discovery of a huge new oil deposit in the Kara Sea northeast of Murmansk. The Arctic well – with a drilling area the size of Moscow – contains around nine billion barrels of crude oil. At today’s prices it would be worth $43 trillion – or 43 times the annual income of Australia.

Exxon executives had barely raised a toast to one of the most spectacular discoveries in their long history when the hangover happened. The US ban on ties with Russia forced the company to call off its partnership with Rosneft.

Strategic risk consultant and author William Engdahl explains the significance of the American company’s loss. For more than two decades Russian oil companies had dreamed of tapping this gusher. It took the combined resources of Exxon and Rosneft to finally drill in the Arctic, with the first well – the most expensive in ExxonMobil history – costing $600 million.

And here’s the cruellest part. According to Engdahl, “Conveniently for Rosneft, ExxonMobil is forced out just after finishing the most complex and difficult part of the project.”

According to him, until the Ukraine crisis and sanctions, Russia had jealously limited foreign share-holding in its state-owned oil and gas companies. That’s now changing with deepening energy ties between China and Russia, ironically, the opposite result of what America’s Eurasia strategy is intended to achieve.

According to Stephen Kinzer of Brown University, “By pushing Russia away, we are driving it toward China, thereby encouraging a partnership that could develop into a true threat to American power.”

If the Russia-China partnership morphs into a military alliance, all bets are off America.

Pain at the pump

Other measures aimed at hurting Russia are boomeranging. When the US – in cahoots with its Saudi sidekick – started driving down the price of oil, the Americans scarcely knew they’d be the ones falling in their own trap. With the price of oil sloshing around the sub $50 mark, the US finds its own oil sector reeling.

Low oil prices are leading to investment cutbacks across America. UPI reports that “$1.5 trillion of investment spend destined for new and US tight oil projects is now out of the money”, with 40 major projects on hold.

Falling investment is having a cascading impact on production. “There are signs that US production has started to respond to reduced investment activity,” the Organization of Petroleum Exporting Countries says in its monthly market report. “All eyes are on how quickly US production falls.”

America can say goodbye to its plans to be an oil exporter.

Financial harakiri

Finance is the bedrock of the western economic system. It is a measure of the world’s confidence in the stability of this system that its two primary nerve centres are in New York and London. The latest sanctions are eroding confidence in this financial ecosystem and driving finance to places like Shanghai. This won’t take long because unlike investments in automobile plants or engineering enterprises, financial flows are easy to reroute.

When the US imposed sanctions on Russia’s SMP Bank in March 2014, the hawks behind the move thought the 170,000 Russians losing access to their Visa and MasterCard accounts would turn against the Russian government. But ordinary Russians are not easily fooled and clearly know who approved and implemented the sanctions.

Guess who the real loser is. “In the longer term, damage to the initiator can be much greater, and in this case erodes US credit card dominance,” Scott Semet, an expert on Russian financial markets, writes in a detailed analysis on sanctions in the National Interest.

And the unexpected winner: China’s UnionPay, which was already set to be a major challenger to Visa and MasterCard due to its dominance in settlement and payment services in the world’s largest market. “Western readiness to sanction credit cards no doubt served as a wakeup call to China and others, and will lead them to redouble their efforts,” Semet explains.

It is clear that denying access to western capital markets undermines their attractiveness to borrowers from other regions. Countries such as India and Iran, which have been hit by western sanctions in the past, are likely to be wary of fickle western capital. “Imposition of these sanctions was a wake-up call that borrowers can be shut off markets if they refuse to toe the line,” says Semet. “The damage is amplified as currently the world is awash in capital, and profitable opportunities to employ it are limited. Such opportunities are more likely to be found in developing countries, not stagnating western ones.”

That is exactly right. Russian companies are now seeking finance from China, which has foreign currency reserves of $3.3 trillion. Plus, private Russian companies can borrow from the BRICS New Development Bank and the China-led AIDB.

The really curious part is that western nations are showing such alacrity in hurting Russia at a time when the BRICS – Brazil, Russia, India, China, South Africa – group is erecting alternate systems that are independent of western control. Russia which is at the core of virtually every group – including BRICS, SCO and the Eurasian Customs Union – aiming to realign the world away from the West, would be thrilled that its efforts are gaining traction.

Russia’s resilience

To be sure, sanctions will take their toll on Russia too. According to Citicorp, every $10 decline in the price of crude shaves 2 per cent from the country’s GDP.

But here’s what Russia is doing – while it may appear counterintuitive, Moscow is pumping even more oil into the global markets than before. This is aimed at protecting its market share. For, if the Russians cut back, the suicidal Saudis will make a grab for it.

And it seems the strategy is paying off. Citicorp says Russia’s GDP could grow – by western standards, a healthy – 3.5 per cent per year. And this is without expecting a recovery in crude prices.

Counter sanctions – imposed by Moscow – are forcing Russians to find alternatives for a variety of products such as French cheese and Italian olive oil. Plus, the fall in the ruble has driven up the prices of many imported items, leading to companies buying cheaper Russian products. Both factors have caused a spurt in national economic activity which any economist will tell you is a good thing.

The benefits of forced import substitution would not be lost on other countries that are watching with interest the West’s economic warfare on Russia. For, they too can replace western goods and services and boost their own economies, avoiding the classic “drain of wealth” syndrome.

Stop digging in your hole

When sanctions begin to hurt the imposer more than the target, it is a sign that the imposer should either withdraw the existing sanctions or at least stop imposing new ones. In layman’s language, when you are in a deep hole, it’s best to stop digging. But clearly the Americans and their sidekicks in the West are way over their heads in events they can’t begin to understand, let alone control.

Perhaps the hawks in Washington are now dusting up Plan B.

When Russian goods exports come to mind, people tend to think of things like oil, gas, vodka and high-tech weaponry. But as Russia's Gazeta.ru has found, the country's exports are, in fact, becoming “sweeter and more peaceful.”

Here are the top-10 most interesting facts about the shifting dynamic of Russian exports, according to the newspaper.

1. Despite arms exporters continuing to enjoy a cushy position among Russia's non energy-related export earnings, the country's exports are becoming more peaceful. Over the past year, Russian agricultural producers exported $20 billion worth of food goods, growing by 15 percent compared to the previous year, and leading agricultural products to outstrip weapons as a total share of exports.

2. Russia's T-90 main battle tank is one of the best-selling tanks in the world, with India alone expected to have 2,000 units in service by 2020, roughly half of them produced locally on export license. Other operators of the $2.5 million-a-piece tank include the former Soviet republics of Azerbaijan, Turkmenistan, along with developing countries in the Middle East and Africa, including Algeria and Uganda. Sales of Russian tanks and armored vehicles abroad far outstrip their American and German competitors, with Russia continuing to serve as the second-largest conventional arms exporter in the world after the United States.

3. Russia's shipments of agricultural machinery abroad are on track to reaching record levels for the post-Soviet period. In the first six months of 2015, Russian producers sold 3.8 billion rubles worth (about $60 million USD) of equipment. While it might not seem like much at first, this figure is over double the amount sold last year. In the past year, exports of equipment from producers like Rostselmash have tripled to countries including Canada, Germany, France, Bulgaria, Turkey and Azerbaijan, and doubled to countries including Kazakhstan, Mongolia and Tajikistan.

4. Russia is uptight about sharing its waste paper. This summer, Prime Minister Dmitri Medvedev signed a decree according to which waste paper was added to a list of important goods in the Russian market. Moreover, earlier this month, the Ministry of Economic Development decided to temporarily ban the export of recyclable paper and cardboard products. It cited the rising profitability of exporting paper products given a weak ruble, and the resulting pressures on domestic enterprises dependent on recyclables. In 2014, over two million metric tons of waste paper were collected in Russia, an estimated 350 thousand tons of which was exported, generating about $65 million in revenue.

5. Russia does not want to share its vodka anymore either. Exports of the distilled beverage have fallen by half in dollar terms since the beginning of the year, to $57.7 million, declining 36 percent in volume compared to last year, to 0.8 million deciliters. The largest fall in exports was recorded among CIS countries (whose purchases fell by 72 percent). The decline in vodka exports is associated with reduced production of the drink, whose output fell 22.5 percent over the past year, with exports facing an even greater decline than domestic consumption.

6. In 2015, the export of Russian pork products exploded from previous levels,growing by 700 percent, even though the nominal volumes remain relatively low (15,000 metric tons). Still, it's a good start. By comparison, export of poultry over the past year amounted to 70,000 metric tons, growing by 12 percent over the past year.

7. Bran Makes You Strong Comrades: Turkey can't seem to get enough Russian bran. In the past year, between July 2014 and July 2015, Russia exported over 680,000 metric tons of bran, 80 percent more than a year earlier. Moreover, 90 percent of Russia's bran exports went to Turkey. Despite the fact that the country has its own bran growers, apparently they do not have enough for the production of animal feed.

8. State guarantees supporting Russian industrial exports have grown five-fold over the past two years, while the amount of state-backed loans has increased by 30 times.About 350 billion rubles ($5.3 billion) has been allocated to support Russian exports, with another 550 billion rubles ($8.3 billion) in loans in the pipeline.Speaking of pipelines, the main industries supported by the government's initiatives include producers of industrial goods in the energy sector, transport engineering equipment, agricultural machinery, aviation and the automotive industry.

9. Japan is crazy about the Soviet-Russian children's story character Cheburashka.In 2013, a Japanese director made a full-length cartoon about the beloved character. A toy version of Cheburashka is one of the most popular children's products in the country. Although Russia's share in the global toy market is not very developed, the country's toy industry has big plans to change all that in the near future, planning to export roughly a quarter of the country's most innovative toys abroad, mainly to Europe, by 2018.

10. Over the past several decades, Russian passenger cars have become the source of jokes and ridicule over their antiquated designs and shoddy finish. Nonetheless, given impressive new designs and improving quality, demand for Russian cars is steadily growing abroad, exports increasing in 2015 by 20 percent to Kazakhstan, and by over 4.5 times in Germany. One of the most popular vehicles in the Avtovaz lineup remains the legendary 4x4, known on export markets as the Lada Niva.

Austin wrote:As per IMF projection PPP wise , Russia is 3976 ..... India PPP GDP is 4x times Russia.

https://en.wikipedia.org/wiki/List_of_IMF_ranked_countries_by_past_and_projected_GDP_%28PPP%29#Graphical_projection_of_economies_in_2020_by_IMF

I was under the impression Russia would over take Germany and even Japan by 2020

Austin wrote:I am trying to find out offical Public Debt figure for Russia like via CBR , Cant find it really.

2015 has small budget surplus Vedemosti reports , about 600 billion Rouble or so

higurashihougi wrote:Let's do some Russian manga bro

sepheronx wrote:

Austin wrote:As per IMF projection PPP wise , Russia is 3976 ..... India PPP GDP is 4x times Russia.

https://en.wikipedia.org/wiki/List_of_IMF_ranked_countries_by_past_and_projected_GDP_%28PPP%29#Graphical_projection_of_economies_in_2020_by_IMF

I was under the impression Russia would over take Germany and even Japan by 2020

Look at the projections and then look at this:
https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

I see something really wrong here. While they show India jumping ridiculously high and same with China and other bullcrap, Russia barely changed in the amount.  So in other words, IMF, being the piece of shit they are in predicting anything, thinks the current issues are projected all the way to 2020. So in other words, no economic movement at all.  I think you know better than that to know its bs.

I think we had this conversation with you more than once. Simply put, take the predictions and throw them out. Next year, if there was a major war lets say, the gdp ppp of many nations would drop. Or lets say oil increased again to $100bbl, many nations gdp ppp would skyrocket.  Or if inflation in Russia drops and turns to deflation, and people started making more money, then its gdp ppp will increase.  We have 4 1/4 years to go till we reach that time frame, so be prepared to have a very different outlook.  India may face total collapse as an example due to growing border conflicts and not being involved in silk road project while Russia is as an example.

http://www.zerohedge.com/news/2014-01-21/comedy-imf-forecasting-errors-global-trade-tumbles-more-50-imfs-2012-prediction

Shows how "accurate" IMF predictions are (over 50% error).

As well, the Japanese one is the biggest joke. We are talking about a nation that is over 300% in debt, their currency dropped as well, infation increased and their wages dropped on average, while prices on homes as an example are extortion rate.

kvs wrote:

sepheronx wrote:

Austin wrote:As per IMF projection PPP wise , Russia is 3976 ..... India PPP GDP is 4x times Russia.

https://en.wikipedia.org/wiki/List_of_IMF_ranked_countries_by_past_and_projected_GDP_%28PPP%29#Graphical_projection_of_economies_in_2020_by_IMF

I was under the impression Russia would over take Germany and even Japan by 2020

Look at the projections and then look at this:
https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

I see something really wrong here. While they show India jumping ridiculously high and same with China and other bullcrap, Russia barely changed in the amount.  So in other words, IMF, being the piece of shit they are in predicting anything, thinks the current issues are projected all the way to 2020. So in other words, no economic movement at all.  I think you know better than that to know its bs.

I think we had this conversation with you more than once. Simply put, take the predictions and throw them out. Next year, if there was a major war lets say, the gdp ppp of many nations would drop. Or lets say oil increased again to $100bbl, many nations gdp ppp would skyrocket.  Or if inflation in Russia drops and turns to deflation, and people started making more money, then its gdp ppp will increase.  We have 4 1/4 years to go till we reach that time frame, so be prepared to have a very different outlook.  India may face total collapse as an example due to growing border conflicts and not being involved in silk road project while Russia is as an example.

http://www.zerohedge.com/news/2014-01-21/comedy-imf-forecasting-errors-global-trade-tumbles-more-50-imfs-2012-prediction

Shows how "accurate" IMF predictions are (over 50% error).

As well, the Japanese one is the biggest joke. We are talking about a nation that is over 300% in debt, their currency dropped as well, infation increased and their wages dropped on average, while prices on homes as an example are extortion rate.

These predictions are so phony it hurts the brain.   The US is supposed to increase to $22.5 trillion but Russia will experience zero net PPP GDP growth.  
Where is this growth going to come from for the US?   Since 2008 it has lost a lot of well paying permanent jobs in the longest jobless
recovery in post WWII history.   The US is continuously offshores good jobs and fills them with low paying temp crap in retail and other
services.   Good pensions for workers are a thing of the past unless you work a long time for government or the lucky few who managed
to have long term jobs at big companies.  

In contrast, Russia has a lot of room to grow just like China.   Russia is nowhere near saturated in development like the US which is
actually undergoing anti-development or reversion to 3rd world status.   I am sick and tired of all these two-bit politically motivated
evaluations of Russia and its economy.   They are transparent BS projection and wishful thinking.

Austin wrote:Check the new Interview with Russian Finance Minister Anton Siluanov , He also explains why high Fisical Deficit is bad for Russia , Gives examples too

Nice Interview

Anton Siluanov - RBC: "Cheap oil - bitter medicine, but it treats"

http://daily.rbc.ru/interview/economics/01/10/2015/560d62f29a7947ddebd9b53c