Russian Economy General News: #6

Gold is the Real Wealth that has proven its worth in centuries and has stood test of times, Unlike Fiat Currency it introduces a lot of discipline in your Economy and you cannot print your way to glory at cost of Public Debt.

The current problem we see of Generating Wealth Out of No-Where getting generated by select few and passing on its inflation to other countries without introducing any discipline to its economy and bubble in every sector is the sign of what problems Fiat Currency can cause.

Russian Oil Industry to Attract Some $20.6Bln Investment in 2016

http://sputniknews.com/business/20160322/1036781698/russian-oil-industry-investment.html


Russian Gov't Protected Public From Oil Price Fall by Devaluing Ruble

Read more: http://sputniknews.com/business/20160323/1036788757/russia-protected-public-with-ruble.html#ixzz43jAMio6h

Something that is bothering me.

Russia's largest contributor to its GDP, the consumer and retail sales, industrial output and manufacturing, are all affected by the economic crisis in the sense that people have severely cut back in spending due to high expenses now due to high inflation.

Well, the issue they keep talking about is the fact that people are spending less due to making less:

Golodets: a very sharp drop in household income is designated in Russia

But here is the thing, average business (large ones at least) saw massive profits last year:

"Rosnano" increased its total comprehensive income under IFRS up to 17 billion rubles

and

Gross profit of the Russian enterprises in January-November 2015 increased by 48.6%

Then how come people are not being paid accordingly? How come indexation of peoples wages is not happening? The problem that people cannot seem to grasp is that their very workers and the people of Russia, are the main drive to Russia's economy. If they are not paid, they cannot pay for goods. If they cannot pay for goods (or refuse to buy goods), then industrial production drops, demand drops etc etc etc. Eventually these companies will have problems. Does the state not realize this? Of course they do. My first link indicates exactly that, that they are very much aware. But the GDP is decreasing not because of oil prices, but basically due to the piss poor management in Russian businesses, overall greed, and lack of actually stamping down on this. Such profit margins are rarely ever seen in the west for a single year. So clearly this is a good proof that wealth does not trickle down like many proclaim it to happen in the west.

sepheronx wrote:Something that is bothering me.

Russia's largest contributor to its GDP, the consumer and retail sales, industrial output and manufacturing, are all affected by the economic crisis in the sense that people have severely cut back in spending due to high expenses now due to high inflation.

Well, the issue they keep talking about is the fact that people are spending less due to making less:

Golodets: a very sharp drop in household income is designated in Russia

But here is the thing, average business (large ones at least) saw massive profits last year:

"Rosnano" increased its total comprehensive income under IFRS up to 17 billion rubles

and

Gross profit of the Russian enterprises in January-November 2015 increased by 48.6%

Then how come people are not being paid accordingly?  How come indexation of peoples wages is not happening?  The problem that people cannot seem to grasp is that their very workers and the people of Russia, are the main drive to Russia's economy.  If they are not paid, they cannot pay for goods.  If they cannot pay for goods (or refuse to buy goods), then industrial production drops, demand drops etc etc etc.  Eventually these companies will have problems.  Does the state not realize this?  Of course they do.  My first link indicates exactly that, that they are very much aware.  But the GDP is decreasing not because of oil prices, but basically due to the piss poor management in Russian businesses, overall greed, and lack of actually stamping down on this.  Such profit margins are rarely ever seen in the west for a single year.  So clearly this is a good proof that wealth does not trickle down like many proclaim it to happen in the west.

I believe wages went up 3% in 2015 and did not drop. That is quite good for a recession year and wages are not indexed to inflation in NATO.
Pensions aren't either in most countries. The problem of comparing specific companies is that general statistics don't reflect all the local decision
making. So did Rosnano freeze the wages of its workers?

Also, inflation is now under 9% cumulative over the preceding 12 months. The inflation shock on spending and production was in the 2nd quarter
of 2015. The situation today is rather different and consumers are not hiding their fiat in mattresses and staying at home instead of shopping.

How about a new TPP with the leadership of Russia

https://www.rt.com/business/336977-mordashov-russia-tpp-asia-sanctions/

‘Russia should embrace TPP,’ steel magnate Mordashov tells RT

Alexey Mordashov, the billionaire shareholder of Russian steel giant Severstal, has told RT that Asia is a “natural” trading partner for Russia, while calling for the “politically driven” Western sanctions against Russia to be scrapped.

“The Asian Pacific region is critically important for the Russian economy because of its size and geographical proximity – we already have a relationship with this region, but there is potential for growth,” Mordashov, whose fortune is estimated at $12.4 billion, said in an interview on the sidelines of a Moscow forum dedicated to developing Asian trade ties.

The 50-year-old Mordashov, who leads the WTO integration committee at the Russian Union of Industrialists and Entrepreneurs, admitted that Russia “doesn’t have many joint projects so far” with TPP members, though he noted that it was building a power plant in Vietnam, a member of the union.

The steel tycoon noted, however, that the continuing sanctions from the EU, US, and other Western states, mean that Russia “needs our Asian partners.”

Another good article from Alexander Mercouris:

http://russia-insider.com/en/business/russian-economy-waiting-lower-interest-rates/ri13564

Current Russian inflation rate is about 6% and the cumulative from last year is 7.7%. Yet the CBR is screwing Russia
over with its retarded rate of 11%. That is a 5% markup on the current inflation rate which is huge. Under the
economic stress conditions imposed by sanctions, the CBR should be setting the lending rate to below the inflation
rate to stimulate the economy. So the CBR should be setting its key lending rate to 4%-5%.

http://www.fort-russ.com/2016/03/shocking-statistic-russias-military-is.html

The magic factor of six. This is what can be seen the major hardware prices for Russian military production. The PPP
adjustment for the military component of Russia's GDP is much larger than for the consumer sector. Unfortunately,
the PPP adjusted GDP figures produced by the World Bank and other institutions for Russia use the consumer prices
as the basis of the intercomparison and not all prices including military ones. So Russia's PPP GDP is underestimated
by a significant amount:

Suppose the military sector is 20% of Russia's GDP for the sake of argument and that the consumer based PPP adjustment
factor is 2. Then,

2*(0.8X+0.2X)=2X < 2*0.8X + 6*0.2X = (1.6+1.2)X = 2.8X where X = GDP

Russia Adds $6 Billion to Its Gold Reserves in a Week

sepheronx wrote:Russia Adds $6 Billion to Its Gold Reserves in a Week

The end is nigh.

kvs wrote:

sepheronx wrote:Russia Adds $6 Billion to Its Gold Reserves in a Week

The end is nigh.

hah, I know. I wonder if all those naysayers are not taking any calls these days? Waiting for the dust to settle.

Russian billionaire Viktor Vekselberg will transfer all assets registered overseas to Russia, Swiss media reported.

MOSCOW (Sputnik) — Vekselberg has already transferred some of his holdings to Russia, including assets of Akado, Russian Utility Systems, Orgsyntes Group and Aeroporty Regionov companies, Neue Zürcher Zeitung newspaper reported Sunday.

The newspaper said the move was linked to the tighter regulations Russia imposed on offshore business last year. The representatives of the Russian authorities have repeatedly discussed this issue with Vekselberg, according to the newspaper.

Businessman Vekselberg is Russia's fourth richest man, according to Forbes' 2015 ranking. His fortune is estimated at approximately $13.6 billion. He is an owner and a president of Renova Group, a conglomerate with interests in oil, energy, aluminum and other fields.

Read more: http://sputniknews.com/russia/20160328/1037082772/russian-billionaire-assets.html#ixzz44COs0ojt

http://www.awarablogs.com/share-of-oil-and-gas-in-russias-tax-revenue-dropped-to-21/

Share of oil and gas in Russia’s tax revenue dropped to 21%, but the threatened devastation failed to materialize

Last week more cold water was poured on the Russia bashers as it was reported that the share of oil and gas in the country’s tax revenues had fallen to only 21% as per the situation at end of February. This is a far cry from the 50% that Western “experts” habitually claim that oil and gas account for. Once more, this shows that Russia has a sufficiently diversified economy and other sources of income when oil is down. Hereby Russia runs a quite acceptable, by Western standards, budget deficit, which is expected to be 3.8% of the GDP (consolidated budget), down from 4.6% in the previous year.

I actually swallowed the 50% BS propaganda figure. This article has opened my eyes.

kvs wrote:http://www.awarablogs.com/share-of-oil-and-gas-in-russias-tax-revenue-dropped-to-21/

Share of oil and gas in Russia’s tax revenue dropped to 21%, but the threatened devastation failed to materialize

Last week more cold water was poured on the Russia bashers as it was reported that the share of oil and gas in the country’s tax revenues had fallen to only 21% as per the situation at end of February. This is a far cry from the 50% that Western “experts” habitually claim that oil and gas account for.  Once more, this shows that Russia has a sufficiently diversified economy and other sources of income when oil is down. Hereby Russia runs a quite acceptable, by Western standards, budget deficit, which is expected to be 3.8% of the GDP (consolidated budget), down from 4.6% in the previous year.

I actually swallowed the 50% BS propaganda figure.   This article has opened my eyes.

So what's the final figures of hydrocarbon %...18% of GDP and only 21% for budget?

BTW, I have a question. Natural gas is the main moneymaker for hydrocarbons, and thus falls under contractional obligations. If it falls under contractional obligations, why are so many peddling fear-porn about lost natural gas revenue, wouldn't the natural gas revenue be shielded from market speculation because of the terms agreed under contract?

Less than 18%.  Figures for 2014 was 14%.  So it should be around 13% or less.

Yes, they are still making big money from the contracts. But once contracts are done, they have to negotiate new price. But, as far as my understanding, even with gas being tied to oil somehow (Even though demand is very high currently), I believe Russia has its own benchmark for it in the St.Petersburg exchange market. I remember reading this before the plan for oil benchmark of recent mention.

Check this Interview with Russia’s Minister of Economic Development Alexei Ulyukaev

Economy has adapted to sanctions: Ulyukaev

http://in.rbth.com/economics/finance/2016/03/28/economy-has-adapted-to-sanctions-ulyukaev_579655

Reading the interview I was thinking what was the domestic saving rate of russia in 2014 and 2015 ? Do we have any data ?

Post sanction and low oil price that must be reduces I would guess ?

Also what constitues domestic savings ?

In interview he says

The debt that Russian companies owed was drastically reduced and consequently, so was their exposure to external risks. This meant changing to domestic sources of financing. Before, the gap between the rate of domestic savings (30 percent of the GDP) and investments (20 percent of the GDP) was generally covered with capital inflows from abroad, but now this model no longer exists. We are painfully moving to a new model of economic development, which is significantly less risky.

magnumcromagnon wrote:

kvs wrote:http://www.awarablogs.com/share-of-oil-and-gas-in-russias-tax-revenue-dropped-to-21/

Share of oil and gas in Russia’s tax revenue dropped to 21%, but the threatened devastation failed to materialize

Last week more cold water was poured on the Russia bashers as it was reported that the share of oil and gas in the country’s tax revenues had fallen to only 21% as per the situation at end of February. This is a far cry from the 50% that Western “experts” habitually claim that oil and gas account for.  Once more, this shows that Russia has a sufficiently diversified economy and other sources of income when oil is down. Hereby Russia runs a quite acceptable, by Western standards, budget deficit, which is expected to be 3.8% of the GDP (consolidated budget), down from 4.6% in the previous year.

I actually swallowed the 50% BS propaganda figure.   This article has opened my eyes.

So what's the final figures of hydrocarbon %...18% of GDP and only 21% for budget?

BTW, I have a question. Natural gas is the main moneymaker for hydrocarbons, and thus falls under contractional obligations. If it falls under contractional obligations, why are so many peddling fear-porn about lost natural gas revenue, wouldn't the natural gas revenue be shielded from market speculation because of the terms agreed under contract?

As of 2013 the total export of natural gas accounted for $56 billion and oil for over $290 billion. The gas prices fall if the oil prices
fall subject to a certain formula built into Gazprom's contracts. So Russia does not "screw over" "poor EU". I think the taxes on oil
bring in more than gas just by sheer volume of sales. I also suspect that there is some propaganda where Gazprom is treated as
if it was Putin's personal wallet and every cent it makes is treated like "Putin's revenue". So I highly doubt natural gas is really the
main tax source.

Austin wrote:Reading the interview I was thinking what was the domestic saving rate of russia in 2014 and 2015 ? Do we have any data ?

Post sanction and low oil price that must be reduces I would guess ?

Also what constitues domestic savings ?

In interview he says

The debt that Russian companies owed was drastically reduced and consequently, so was their exposure to external risks. This meant changing to domestic sources of financing. Before, the gap between the rate of domestic savings (30 percent of the GDP) and investments (20 percent of the GDP) was generally covered with capital inflows from abroad, but now this model no longer exists. We are painfully moving to a new model of economic development, which is significantly less risky.

They are mixing up terms. Savings means all bank deposits including corporate in the discussion above. It is normal to talk about consumer savings in such
financial news pieces in the anglophone press.

https://www.rt.com/business/russians-crisis-saving-spending-257/

The household savings rate in Russia is 12%.

sepheronx wrote:

kvs wrote:

sepheronx wrote:Russia Adds $6 Billion to Its Gold Reserves in a Week

The end is nigh.

hah, I know.  I wonder if all those naysayers are not taking any calls these days?  Waiting for the dust to settle.

Meanwhile, last month Russia overcome China to become the biggest buyer...

https://www.rt.com/business/337554-russia-gold-reserves-central-bank/

https://www.rt.com/business/337989-lithuania-exports-russia-embargo/

While Lithuania has been one of the fiercest proponents of sanctions against Russia, it has also become one of the main losers from Moscow’s trade ban. Lithuania’s exports to Russia plummeted by 38 percent last year.

According to Russia’s Foreign Economic Information Portal, food exports from the Baltic country to Russia plummeted almost 60 percent in the first three quarters of 2015. Clothes exports fell 41 percent with machinery exports sinking 43 percent in the same period.

Why has China not become a logical source of fund for Russian Companies with EU and US banks being banned ?

Is it because Renminbi has available at higher interest rates 5 % compared to EU/US NIRP or is it because the Russian companies dont want to borrow from Chinese banks for some other reasons ?

Mixture of everything. Not wanting more debt, possible higher interest rates than what is considered official from China due to higher risk for Chinese banks, and many banks dont want to operate with Russian companies cause they also have ties in the west.

But that doesn't mean it isn't happening. Just not on the grand scale that some expected.

well roshydro got credits to build few hydropower plant in far east and supply electricity to china, its big potential there.

Economic news/predictions have been mixed recently.

Worldbank's baseline scenario prediction is mixed. It predicts sanctions being lifted in 2018 and refers to an important price advantage for Russian exporters due to the ruble's depreciation. Its previous report baseline scenario was based upon $53 oil when it predicted that GDP would shrink by 0.7% in 2016 and grow by 1.5% in 2017.

It's current report baseline scenario is based upon $37 oil and predicts that GDP will shrink by 1.9% in 2016 and grow by 1.1% in 2017.

TASS article on Worldbank report

Minister of Economic Development Alexey Ulyukayev said that Russia will come out of recession in 2016 and grow in 2017.

Ulyukayev predicts end to recession

Wells Fargo predicts good prospects for an economic recovery. Predicts that GDP will shrink by a modest 0.5% in 2016 and grow by 2.0% in 2017. Echos the common sentiment that inflation is receding.

Wells Fargo prediction

China wants to move factories to Russia

https://www.rt.com/business/338655-china-chemical-plants-far-east/

The only reason i think why China is willing to move these factories to Russian territory is because of their environmental effects..