Russian Economy General News: #5

zg18 wrote:

Karl Haushofer wrote:Well, cheap oil also makes cost of transport cheaper, and therefore it also makes services and goods more affordable for the consumers in the US.

That`s the only benefit of cheap oil.

Makes any sort of business that relies on transport & logistics more viable/profitable. To various extents, that's pretty much most of them.

zg18 wrote:

Karl Haushofer wrote:Well, cheap oil also makes cost of transport cheaper, and therefore it also makes services and goods more affordable for the consumers in the US.

That`s the only benefit of cheap oil.

And it is a major benefit because basically cheap energy = easy life.

There is a reason why our ancestors died young and and to work 12-16 hours a day: a lack of cheap energy. Well, sources of energy were always there but they did not know how to use them.

The British industrial revolution would not have been possible without coal. And the US rise to a superpower would not have been possible without endless abundance of cheap oil.

Take away cheap oil/energy and the Western civilization collapses like house of cards. This is why they fight wars.

Russia also needs cheap energy/oil in their domestic market to make life good for her citizens and in this regard Russia is no different from the West.

But where Russia is different from the West is the fact that the economy of Russia more or less relies on income that it gets from exporting oil. Good life for millions of Russians depends on Russia getting cash from selling oil and gas abroad. If this money flow stops, then millions of people will lose their purchasing power and have to settle for a far modest lifestyles.

The West does not have this problem since they are net importers of oil (save Canada and possibly Australia).  Cheap oil is great for them, and shale oil firms going bankrupt is peanuts compared to overall benefits that cheap oil gives them. And besides, shale oil is not going anywhere. It can wait under ground to be drilled when the oil price goes up again (whether it will take 10 or 50 years). Until then the US can just keep importing cheap oil and fight wars abroad to keep the oil producers using USD as the petro currency.

Karl Haushofer wrote:Russia also needs cheap energy/oil in their domestic market to make life good for her citizens and in this regard Russia is no different from the West.

But where Russia is different from the West is the fact that the economy of Russia more or less relies on income that it gets from exporting oil. Good life for millions of Russians depends on Russia getting cash from selling oil and gas abroad. If this money flow stops, then millions of people will lose their purchasing power and have to settle for a far modest lifestyles.

The West does not have this problem since they are net importers of oil (save Canada and possibly Australia).  Cheap oil is great for them, and shale oil firms going bankrupt is peanuts compared to overall benefits that cheap oil gives them.

Well the price of Oil is now a fraction of what it was. There's a deficit in the budget, the rouble has devalued (and Russian's spending power abroad and for imports along with it), there's a recession in the country and people are tightening their belts - but I wouldn't say that they have settled for far more modest lifestyles. They are still going abroad, still buying property, still buying luxury consumer goods. Less of everything, but it's still pretty much there. And once the recession gives way to a recovery, the economy will learn to live with cheap oil - which is something I'm very much looking forward to.

flamming_python wrote:

Karl Haushofer wrote:Russia also needs cheap energy/oil in their domestic market to make life good for her citizens and in this regard Russia is no different from the West.

But where Russia is different from the West is the fact that the economy of Russia more or less relies on income that it gets from exporting oil. Good life for millions of Russians depends on Russia getting cash from selling oil and gas abroad. If this money flow stops, then millions of people will lose their purchasing power and have to settle for a far modest lifestyles.

The West does not have this problem since they are net importers of oil (save Canada and possibly Australia).  Cheap oil is great for them, and shale oil firms going bankrupt is peanuts compared to overall benefits that cheap oil gives them.

Well the price of Oil is now a fraction of what it was. There's a deficit in the budget, the rouble has devalued (and Russian's spending power abroad and for imports along with it), there's a recession in the country and people are tightening their belts - but I wouldn't say that they have settled for far more modest lifestyles. They are still going abroad, still buying property, still buying luxury consumer goods. Less of everything, but it's still pretty much there. And once the recession gives way to a recovery, the economy will learn to live with cheap oil - which is something I'm very much looking forward to.

You have to remember that the period of low oil price has lasted only a year. We can only measure Russia's ability to withstand low oil price after three or five years. Russia's currency reserves have proven to be valuable asset so far, but I understand that they are steadily declining. What happens if Russia runs out of money and has to borrow abroad?

But yeah, Russia's only way out of this is to generate more industries that fill the needs of domestic market and are able to export. Otherwise they will be in trouble if the period of low oil price lasts for several more years.

Karl Haushofer wrote:You have to remember that the period of low oil price has lasted only a year. We can only measure Russia's ability to withstand low oil price after three or five years. Russia's currency reserves have proven to be valuable asset so far, but I understand that they are steadily declining. What happens if Russia runs out of money and has to borrow abroad?

But yeah, Russia's only way out of this is to generate more industries that fill the needs of domestic market and are able to export. Otherwise they will be in trouble if the period of low oil price lasts for several more years.

Actually, Russian FOREX reserves are now about $365 bln, up some $20 bln from Q1 lows.

Also, Russia is actively deleveraging, what you hear about outflows from Russia is mostly debt repayment:



Russian current account is now one the best performing*recovering in the world this year even with low oil prices, which means one thing, Russia is NOT petrodollar economy, which is good for the Russians.

zg18 wrote:

Karl Haushofer wrote:You have to remember that the period of low oil price has lasted only a year. We can only measure Russia's ability to withstand low oil price after three or five years. Russia's currency reserves have proven to be valuable asset so far, but I understand that they are steadily declining. What happens if Russia runs out of money and has to borrow abroad?

But yeah, Russia's only way out of this is to generate more industries that fill the needs of domestic market and are able to export. Otherwise they will be in trouble if the period of low oil price lasts for several more years.

Actually, Russian FOREX reserves are now about $365 bln, up some $20 bln from Q1 lows.

Also, Russia is actively deleveraging, what you hear about outflows from Russia is mostly debt repayment:



Russian current account is now one the best performing*recovering in the world this year even with low oil prices, which means one thing, Russia is NOT petrodollar economy, which is good for the Russians.

Dont bother trying to use logic on Karl.  Both KVS and myself pointed this stuff out to him long ago and proved him wrong continuously, and he still posts nonesense claims which were proven wrong and he had nothing, yet still making the claims.  He is a useless troll.

A couple of news items on Vnesheconombank (VEB), Russia's state development bank.  VEB's chairman, Vnesheconombank got sacked about a week ago. Not much being said about it publicly.

http://www.reuters.com/article/russia-veb-chairman-idUSR4N13K02M20151203#5HV5x8oQTJ2kLgB4.97

Economic Development Minister Alexei Ulyukayev is proposing VEB's recapitalization through the issuance of OFZ's (treasury bonds).

Reuters article

Obviously, VEB will need some sort of short and long-term government assistance to shore up its finances.

"On the heels of the International Monetary Fund’s approval for the yuan, Russia said it’s preparing to raise $1 billion in yuan-denominated sovereign bonds in Moscow, the Financial Times reported Monday. yuanLast week, the IMF made the yuan, also known as the renminbi, a world reserve currency by including it in its Special Drawing Rights basket. By integrating the yuan to the SDR, the IMF boosted the credibility of the currency and acknowledged it would be an accepted part of the global economic system. The latest move by Russia will aid the yuan’s international expansion and could lead to ruble-denominated bonds being issued in China and help promote similar cross-currency issuance by other big emerging markets, eating into the dominant role of the US dollar in global capital, said the FT.

This isn’t just a diplomatic nicety by Russia, but an opportunity to do an end-around the sanctions imposed by the US and Europe. In September 2014, the US and EU imposed sanctions in response to Russia’s annexation of Crimea and its backing of separatists in eastern Ukraine. Since then many Russian companies have been barred from issuing foreign currency bonds in dollars or euros. The yuan-denominated bonds would potentially open a new source of foreign funding for Russian banks and businesses shut out of capital markets in the US and Europe by the sanctions. Denis Shulakov, head of capital markets at Gazprombank, which is providing informal assistance in preparing the issue, said the bond’s first objective would to set a benchmark interest rate in renminbi for the Russian Federation and, subsequently, for corporate issuers. “The second [objective] is to diversify the investor base [for Russian borrowers] and bring in a new source of liquidity that comes with the internationalization of the renminbi,” Shulakov told the FT. He added that even if US and EU sanctions were lifted, Russia would still seek new funding options.

The Financial Times said Russia’s move could further the development of money-market instruments to allow more trade and investment between China, Russia and other emerging markets to be conducted in those countries’ own currencies, bypassing the need for foreign exchange contracts typically expressed in dollars. Over the past two years, several Russian banks have issued renminbi-denominated bonds in Hong Kong, but the new bond would be Russia’s first sovereign issue, and the first in Moscow. Russia is not the first to issue renminbi-denominated sovereign debt. Last year, the United Kingdom became the first western country to do so. “In London the renminbi is seen as an opportunity, but in New York it is seen as a threat,” Jon Vollemaere, chief executive of R5FX, a currency trading company specializing in emerging markets, told the FT. “The best thing to happen recently for the Chinese money market is Washington deciding not to do business with Russia for a while.”

Source: http://atimes.com/2015/12/russia-issuing-yuan-denominated-bonds/

Quite interesting forecast, showing 3 emerging powers of 2025 - China, Brazil and Russia will surpass US by miles. OFC with wrongdoings, affairs meddling Brazil we can't be sure if South American country should be taken into equation of new world axis. Also I'm not really keen with the website providing decline for births in Russia, but PPP is supreme among all the countries when paired with peaking GDP . No wonder US is making so much noise

http://www.deagel.com/country/forecast.aspx

Dunno where people get the population decline mantra from.  Population of Russia has been pretty steady for the past couple of years with ladt year and this year still showing growth.  Birth rates are up again.

Can anyone give me a quick honest summary on RUssian economy ,
the RUble is at 69 now vs dollar..  and now they are contrary to before
in the middle of a war.. spending a lot because every missile or bomb they drop is one
they will need to re-make again. So if for example they use one Kalibr missile in Syria
that cost half a million dollars.. the real cost of that will be twice about 1million ,because is a missile they could have sold with modifications for export and is a missile that they will need to make again for its inventory.

So how is the Russia economy now? with RUble at 69?
Can Russia sustain its economy and have a positive GDP ,end recession while having
the RUble at ~70 vs dollar?

What was the last prediction of Russia central bank ,their estimate when 1)Russia will leave recession 2)inflation controlled 3) and its GDP will start to grow and be positive and have stable economy?

For every ruble spent on bombing the ISIS-Turkey-rest of the world oil pipeline you get two rubles back.

Plus friends in Syria, Iraq, Iran which have their own oil reserves.

Yuan isn't top currency too and you can see real growth taking place in China. They are literally overtaking US. Currency value compared to dollar doesn't really mean much and is less and less important as world is heading for national currencies in transactions rather than relying on US dollar.

Vann7 wrote:Can anyone give me a quick honest summary on RUssian economy ,
the RUble is at 69 now vs dollar..  and now they are contrary to before
in the middle of a war.. spending a lot because every missile or bomb they drop is one
they will need to re-make again. So if for example they use one Kalibr missile in Syria
that cost half a million dollars.. the real cost of that will be twice about 1million ,because is a missile they could have sold with modifications for export and is a missile that they will need to make again for its inventory.

So how is the Russia economy now? with RUble at 69?
Can Russia sustain its economy and have a positive GDP ,end recession while having
the RUble at ~70 vs dollar?

What was the last prediction of Russia central bank ,their estimate when 1)Russia will leave recession 2)inflation controlled 3) and its GDP will start to grow and be positive and have stable economy?

Exchange rates mean very little. While there are still issues with the fact that Russia wont see much benefits in the import substitution market for at least another 2 - 3 years, the agriculture business is quite booming compared to previous years, even though harvest this year wasn't as good as last years, they are getting far more money than before. As well, agriculture enterprises dealing with machinery are also doing very well thanks to the devaluation of the Ruble (meaning Russian local production and products are much cheaper than alternatives, thus getting the domestic consumers a cheaper option that so happens to help domestic economy, and also far more competitive for export.

Valuation of the Ruble effects the economy very little these days as KVS and many pointed out (even the head of the CBR pointed it out) on inflation. At least for all domestic goods. Imported goods become more expensive. Many foreign enterprises have taken advantage of the lower Ruble and increased domestic production in the country like Volkswagon, Ford, etc.

Militarov wrote:

Where is this graphic from. It is rather meaningless without defining what ST means.

fragmachine wrote:Quite interesting forecast, showing 3 emerging powers of 2025 - China, Brazil and Russia will surpass US by miles. OFC with wrongdoings, affairs meddling Brazil  we can't be sure if South American country should be taken into equation of new world axis. Also I'm not really keen with the website providing decline for births in Russia, but PPP is supreme among all the countries when paired with peaking GDP . No wonder US is making so much noise

http://www.deagel.com/country/forecast.aspx

I hope Latin America can break free from Uncle Scam and his meddling, but reality is much harsher. We can see open destabilization attempts
in Brazil already with some sort of colour revolution based around "corruption" being staged. The collapse of Barzil's economy is very strange
since developing countries have development as a buffer from various recessions triggered by the 1st world consumer demand cycles. Developing
countries have a sort of minimum demand associated with construction and increasing spending power. Back in 2008 and 2009 China was acting as a type
of governor on the global economy and helped shorten the recession.

I think India will advance more than Brazil since it is more independent in spite of its problems and various Uncle Scam fanbois.

kvs wrote:

Militarov wrote:

Where is this graphic from.  It is rather meaningless without defining what ST means.  

I belive its shortcut for Short Term.

Militarov wrote:

kvs wrote:

Militarov wrote:

Where is this graphic from.  It is rather meaningless without defining what ST means.  

I belive its shortcut for Short Term.

Thanks.

How quickly Russian business is unloading foreign debt over the last year should tell people all they need to know about
Russia's ability to service its debts.

As usual this graphic is deceptive since it does not properly distinguish between sovereign debt and total private and
public foreign debt (aka gross external debt). The Malaysian total debt is gross external debt:

http://www.tradingeconomics.com/malaysia/external-debt

http://www.tradingeconomics.com/malaysia/foreign-exchange-reserves

The figures for South Africa look off but this graph is probably not current.

kvs wrote:

fragmachine wrote:Quite interesting forecast, showing 3 emerging powers of 2025 - China, Brazil and Russia will surpass US by miles. OFC with wrongdoings, affairs meddling Brazil  we can't be sure if South American country should be taken into equation of new world axis. Also I'm not really keen with the website providing decline for births in Russia, but PPP is supreme among all the countries when paired with peaking GDP . No wonder US is making so much noise

http://www.deagel.com/country/forecast.aspx

I hope Latin America can break free from Uncle Scam and his meddling, but reality is much harsher.   We can see open destabilization attempts
in Brazil already with some sort of colour revolution based around "corruption" being staged.   The collapse of Barzil's economy is very strange
since developing countries have development as a buffer from various recessions triggered by the 1st world consumer demand cycles.   Developing
countries have a sort of minimum demand associated with construction and increasing spending power.    Back in 2008 and 2009 China was acting as a type
of governor on the global economy and helped shorten the recession.

I think India will advance more than Brazil since it is more independent in spite of its problems and various Uncle Scam fanbois.    

India will advance even more than Russia.

max steel wrote:

kvs wrote:

fragmachine wrote:Quite interesting forecast, showing 3 emerging powers of 2025 - China, Brazil and Russia will surpass US by miles. OFC with wrongdoings, affairs meddling Brazil  we can't be sure if South American country should be taken into equation of new world axis. Also I'm not really keen with the website providing decline for births in Russia, but PPP is supreme among all the countries when paired with peaking GDP . No wonder US is making so much noise

http://www.deagel.com/country/forecast.aspx

I hope Latin America can break free from Uncle Scam and his meddling, but reality is much harsher.   We can see open destabilization attempts
in Brazil already with some sort of colour revolution based around "corruption" being staged.   The collapse of Barzil's economy is very strange
since developing countries have development as a buffer from various recessions triggered by the 1st world consumer demand cycles.   Developing
countries have a sort of minimum demand associated with construction and increasing spending power.    Back in 2008 and 2009 China was acting as a type
of governor on the global economy and helped shorten the recession.

I think India will advance more than Brazil since it is more independent in spite of its problems and various Uncle Scam fanbois.    

India will advance even more than Russia.

I doubt India will have the average income per capita that Russia has today by 2030. The same goes for China. The size of the GDP
is large thanks to the huge population, but it will take a long time for the trickle down to reach the vast majority of the people.

max steel wrote:India will advance even more than Russia.

What is that supposed to mean? Advance where? In what fields? Elaborate.

OminousSpudd wrote:

max steel wrote:India will advance even more than Russia.

What is that supposed to mean? Advance where? In what fields? Elaborate.

It means larger economy than Rus Fed.

Kvs: Yup gdp per capita wise India cant reach to that level but I guess China will

I would wager that Indias economy up until recently was stronger than Russias in terms of less reliability in foreign direct investments.  India had a very low FDI than Russia. Now Russia has a low FDI and it was a huge contributor to Russian GDP growth (even though imo it should never have been counted in first place). So India is less reliant on foreign agents than Russia was.  Now things are changing as India is pushing for more FDI which IMO is dangerous in long run.  It is also showing as dangerous for China too as China scurries to increase it or even stabilize it.  India wants it to become a China.