Russian Economy General News: #6

Project Canada wrote: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..

No, because it is becoming even cheaper to produce in Russia, mixed in with China to capture some markets within Russia due to now newer demand. Don't forget, Russia provides special benefits in the far east regarding business investments.

"An expected contraction in Russia's economy this year may be less than 1.3-1.5 percent, Central Bank Governor Elvira Nabiullina said on Thursday, assuming oil prices stay around current levels."

Nabiullina also referred to the fact that inflation had been drastically reduced (to 7.3% in March).


econ. may contract less than forecast

Regarding the topic of Russian state policy favoring import substitution, I pose the question of whether it will result in malinvestment. Currently, the Russian government is pushing for import substitution in its economy. There are a number of reasons for this policy. Many (but not all) of the underlying causes for the policy are temporary in nature. They include a weak ruble, weak hydrocarbon and commodity prices, a recession, and sanctions along with others reasons. Investments are being made in producing domestically for export and for consumption in Russia to replace items produced abroad.

If the underlying conditions prompting the import substitution policy change, to what degree will the policy have resulted in malinvestment? Economic conditions will improve in Russia. It may be next year. It may be the year after. But things will improve. Oil prices will stabilize at a higher level than now. the ruble's value will increase. Government spending will increase. The recession will end and so will sanctions. When these things happen, the goods that Russia invested to be able produce will have no market. Russia will no longer be a lower costs producer. Cheaper and better goods will again flood in from abroad. Will the import substitution policy be judged a wise economic policy 5 years from now?

An example for discussion purposes is investment in food production. Once sanctions are lifted, wages increase, the ruble's value increases, etc. what will be the economic return on the investments made in food production?

Ruble won't go higher again, not to where it once was. As well, the west damaged relations with Russia and after said investments are operable, domestic prices will drop considerably. And besides agricultural goods and equipment, most import substitution is in military at the moment, so government will favor domestic as they learned from their mistake buying from west.

As you may have noticed, most major moves to domestic development is happening as JV between other companies from other nations. So they will see to it their investments sticks. Others like drilling equipment and or other heavy industrial equipment manufacturing, are partially owned or operated by the companies who purchase said equipment, I Gazprom. Dunno if this is bad due to monopolizing, but it is needed.

And after a while of production, prices will be cheaper than EU because initial investment cost I gone and Ruble will always be cheaper than Euro.

We may never see oil at prices like $80bbl. And with Ruble floating now, CBR can always devalue it through speculators or currency dump if it becomes too expensive.

sepheronx wrote:Ruble won't go higher again, not to where it once was. As well, the west damaged relations with Russia and after said investments are operable, domestic prices will drop considerably. And besides agricultural goods and equipment, most import substitution is in military at the moment, so government will favor domestic as they learned from their mistake buying from west.

As you may have noticed, most major moves to domestic development is happening as JV between other companies from other nations. So they will see to it their investments sticks. Others like drilling equipment and or other heavy industrial equipment manufacturing, are partially owned or operated by the companies who purchase said equipment, I Gazprom. Dunno if this is bad due to monopolizing, but it is needed.

And after a while of production, prices will be cheaper than EU because initial investment cost I gone and Ruble will always be cheaper than Euro.

We may never see oil at prices like $80bbl. And with Ruble floating now, CBR can always devalue it through speculators or currency dump if it becomes too expensive.

You are wrong in both claims. You have too much trust in Euro, but EU is actually bankrupt with too large debt and when domino effect will start, Euro will be worthless paper and very quickly disappear as well as EU will.

Other thing is, that value of Ruble is artificially lowered. When RCB stop supporting Ruble and leave it in free float, it actually prove to be extremely stable currency. There was shocks in world markets, which causes to lower the value, but when it is over, Ruble grow again. It have little ups and downs, but all in all it is very stable currency. The main problem for Russia is, how to keep Ruble value that low. They have low debt, big reserves, stable economy and more and more gold in their stocks. Sooner or later it will have to grow and its value will be higher than that of $ and Euro.

A Different Voice wrote:If the underlying conditions prompting the import substitution policy change, to what degree will the policy have resulted in malinvestment? Economic conditions will improve in Russia. It may be next year. It may be the year after.  But things will improve. Oil prices will stabilize at a higher level than now. the ruble's value will increase. Government spending will increase. The recession will end and so will sanctions. When these things happen, the goods that Russia invested to be able produce will have no market. Russia will no longer be a lower costs producer. Cheaper and better goods will again flood in from abroad. Will the import substitution policy be judged a wise economic policy 5 years from now?

Import substitution policy would work much better if the government spent more.

A Different Voice wrote:An example for discussion purposes is investment in  food production. Once sanctions are lifted, wages increase, the ruble's value increases, etc. what will be the economic return on the investments made in food production?

Greater share of the Russian market. Even if Western products return, they will face a stronger competition.

bullshit, not the government needs to spent more of something it doesnt have in the first place but reforming the trading policy's across borders, russia is one of the hardest nations for privet business to trade

compare our hours needed and licenses needed (43 hours of paperwork)
http://www.doingbusiness.org/data/exploreeconomies/russia/#trading-across-borders

to a country were its really easy
http://www.doingbusiness.org/data/exploreeconomies/austria/#trading-across-borders

why the hell joining WTO if the government wants to fuck russian business's in the ass long and deep anyway

NationalRus wrote:bullshit, not the government needs to spent more of something it doesnt have in the first place but reforming the trading policy's across borders, russia is one of the hardest nations for privet business to trade

compare our hours needed and licenses needed (43 hours of paperwork)
http://www.doingbusiness.org/data/exploreeconomies/russia/#trading-across-borders

to a country were its really easy
http://www.doingbusiness.org/data/exploreeconomies/austria/#trading-across-borders

why the hell joining WTO if the government wants to fuck russian business's in the ass long and deep anyway

That doesn't make any sense what you are referring to.  Russian businesses usually only sell domestically.  It is said something like 10% of all enterprises in Russia export, and the rest rely entirely on domestic consumers.  They could reduce these regulations but then it ends up happening both ways and will end up crushing Russian businesses as Europe will simply flood Russia.

What has hurt businesses is everything else, like the obscene tax code that makes it difficult when dealing with taxes for a business, or due to authorities and the number of visits by a regulator and regulators being extremely anal either for a bribe or just because of the rules.

That is changing though.

ExBeobachter1987 wrote:

A Different Voice wrote:If the underlying conditions prompting the import substitution policy change, to what degree will the policy have resulted in malinvestment? Economic conditions will improve in Russia. It may be next year. It may be the year after.  But things will improve. Oil prices will stabilize at a higher level than now. the ruble's value will increase. Government spending will increase. The recession will end and so will sanctions. When these things happen, the goods that Russia invested to be able produce will have no market. Russia will no longer be a lower costs producer. Cheaper and better goods will again flood in from abroad. Will the import substitution policy be judged a wise economic policy 5 years from now?

Import substitution policy would work much better if the government spent more.

A Different Voice wrote:An example for discussion purposes is investment in  food production. Once sanctions are lifted, wages increase, the ruble's value increases, etc. what will be the economic return on the investments made in food production?

Greater share of the Russian market. Even if Western products return, they will face a stronger competition.

Yes and no regarding spending more.  The government is reducing spending but the population is actually increasing spending.  One thing that was mentioned by the economic minister was that spending among Russians has increased in Ruble terms but obviously less in dollar terms due to exchange rate.  But it isn't just exchange rate either, it is also the fact that the cost of goods have changed.  So instead of Russians purchasing T-Shirts and jeans for an average of $20 - $80 equivalent, they are doing it at $20 even instead.  Thus it looks like a drop when it really isn't.  Discount and thrift shops are the booming industry in Russia.  This is of course all in consumer goods.  Things that require heavy industrial equipment import substitution and the like, is indeed due to government spending and investments.  Which they are not holding back on.  They are just moving money around as something like Vladimir said regarding about debt payments.  Kinda interesting stuff.

medo wrote:

sepheronx wrote:Ruble won't go higher again, not to where it once was. As well, the west damaged relations with Russia and after said investments are operable, domestic prices will drop considerably. And besides agricultural goods and equipment, most import substitution is in military at the moment, so government will favor domestic as they learned from their mistake buying from west.

As you may have noticed, most major moves to domestic development is happening as JV between other companies from other nations. So they will see to it their investments sticks. Others like drilling equipment and or other heavy industrial equipment manufacturing, are partially owned or operated by the companies who purchase said equipment, I Gazprom. Dunno if this is bad due to monopolizing, but it is needed.

And after a while of production, prices will be cheaper than EU because initial investment cost I gone and Ruble will always be cheaper than Euro.

We may never see oil at prices like $80bbl. And with Ruble floating now, CBR can always devalue it through speculators or currency dump if it becomes too expensive.

You are wrong in both claims. You have too much trust in Euro, but EU is actually bankrupt with too large debt and when domino effect will start, Euro will be worthless paper and very quickly disappear as well as EU will.

Other thing is, that value of Ruble is artificially lowered. When RCB stop supporting Ruble and leave it in free float, it actually prove to be extremely stable currency. There was shocks in world markets, which causes to lower the value, but when it is over, Ruble grow again. It have little ups and downs, but all in all it is very stable currency. The main problem for Russia is, how to keep Ruble value that low. They have low debt, big reserves, stable economy and more and more gold in their stocks. Sooner or later it will have to grow and its value will be higher than that of $ and Euro.

Maybe, but the future is always uncertain.  It is true that the Ruble has been doing quite well in terms of balancing out and finding its "right" spot.  Issue is though, its value is significantly less than it was before.  And as I said, they can always "hedge" against it via selling Rubles or in this case, increasing the supply of it.  Dirty trick that I am not entirely sure I would agree with, but we have seen the CBR manipulate the valuation of the Ruble in the recent year through various methods.  When the Ruble was climbing back up in the low 50's, the CBR dumped rubles and thus dropped the value again.  I was worried it was a bad tactic, but I imagine it was mainly due to try to keep the Ruble low so that it makes import substitution valuable, as well as cheap for foreigners to set up shop.  Now they got engine manufacturers and such in Russia, 3 of them (foreign), in 1 and 1/2 years.  Not bad.

That doesn't make any sense what you are referring to. Russian businesses usually only sell domestically. It is said something like 10% of all enterprises in Russia export, and the rest rely entirely on domestic consumers. They could reduce these regulations but then it ends up happening both ways and will end up crushing Russian businesses as Europe will simply flood Russia.

of course its low BECAUSE they cant export for shit or import what they need since the government that has the one of the most strict RIDICULES trade laws in the world actively STOPS them from doing so

we want to trade with the world, we want to be more competitive, thats what putin and all the government talks about all the fucking time we go ahead and join WTO but then we fuck OUR OWN businesses so they cant do what we claim we want them to do (be more competitive and trade with the world)

look at these regulations this paperwork this crazy corruption inviting bureaucracy , half of the shit they are asking doesn't even make sense and has no reason not be able to do electronically online in 1-2 hours max and of course they ALL claim to be fighting it, how many times putin and medvedev said that the crazy bureaucracy needs to be dismantled

then they put up sanctions against foreign products (good) and want the business to import the food and other consumer good products from other country's... the problem is they barely can do it ! because even in god damn sierra leone, gabon or fucking myanmar (a country that was 4 years ago a totalitarian military dictatorship) it would be easier to get it done

NationalRus, I agree with you. Even Turkey has more exporting capability than Russia... Even with their restrictions, On what and who to export to.

Hmm, well, doing business in Russia drastically increased over the years. Above China now. As well, the Russian agriculture industry is the fastest growing, so I am not sure what you are aiming that Rus, I think you used the wrong example.

Add to that, Russia's various business grew by 47% in export last year. So the question comes the validity of the claims. If it was hard to export, the growth wouldn't be as high. I think things have improved and growth in online sales increased significantly, and I provided a link about it here. Could be better but they have aimed for it.

Being reliant on export though is also bad. IE: Turkey. The world economy is gone to the shitter. But hopefully things will change.

BTW, national Rus, if you can point where Putin and Medvedev stated they will make it easier to export, please do. Cause they said about making it easier to do business, and even the international community admits that it has.

The fixation on exports is strange.   Most of the US GDP is associated with its internal demand.   The US has a large
and persistent trade deficit because it is a net importer.   Why does Russia need to be dependent on exports?   Exports
are for banana republics.

kvs wrote:The fixation on exports is strange.   Most of the US GDP is associated with its internal demand.   The US has a large
and persistent trade deficit because it is a net importer.   Why does Russia need to be dependent on exports?   Exports
are for banana republics.

Essentially this. Domestic consumer demand is the biggest part of most major developed countries economy. Internal consumption is over 70% to GDP dependence in USA. Russia on the other hand has a trade surplus nearly every year.

KVS , Spheronx , Check the Data for Exports in 2015 plus other data

http://www.worldstopexports.com/russias-top-10-exports/

kvs how does Russia manages to conduct operation in Syria at such low cost may be at the cost of US single day operation while US ends up spending billions and trillions.

Is this due to PPP put into good effect ?

Austin wrote:kvs how does Russia manages to conduct operation in Syria at such low cost may be at the cost of US single day operation while US ends up spending billions and trillions.

Is this due to PPP put into good effect ?

I am not KVS but I could help answer if you are interested.

If Russia used nothing but heavy guided munitions like JDAM's (Kh-38 or others), the costs would drastically go up. The bombs used were said to cost Russia only a few thousand dollars each, which is significantly lower than what US drops. As well, maintenance on American jets are costly. Very costly. And also quite time consuming too (although I don't think the time used for maintenance really counts here, just simply cost of parts and cleaning material). These are only part of the costs.

US and Russia both also add in costs for training of Syrian (or in US case, Iraqi) soldiers and equipment, so on so forth. Russian equipment and training and such overall is significantly less costly. Also, US heavily relies upon third party companies (private) to do things like logistics and such, which is also very costly, while Russian companies simply seem to be only with providing food and sanitation needs (at least judging by the videos/photos available to us).

I think in the US war, for a single year, it cost well over a billion $ for Haliburton to provide logistics. A single year. That is quite a bit of money.

kvs wrote:The fixation on exports is strange.   Most of the US GDP is associated with its internal demand.   The US has a large
and persistent trade deficit because it is a net importer.   Why does Russia need to be dependent on exports?   Exports
are for banana republics.

Russia is blessed with having amazing natural resources to export. It is a very good thing. The export of these natural resource-based commodities and derived products is absolutely crucial to Russia's future. As the value of these commodities goes back up in the future, things will get better in Russia. The down side to things getting better is that investments in import substitution are likely to be deemed poor investments. On the whole it'll be better to have $60 oil again and some bad investments in domestic production (food, machinery, etc.). The import substitution policy addresses short term conditions with a policy that has longer-term effects on the economy.

An example of such policy was the US bail-out of large parts of its auto industry. The US had an auto industry that due to internal inability to reform and a recession could not produce and sell competitive vehicles. Wanting to keep autos produced in the US instead of having to import more autos from abroad, the US bailed out the industry via various policies and methods. In the longer term these bailed out companies are closing more and more auto factories in the US. They are replacing them with new factories in Mexico and elsewhere. The bail out was a policy in response to short term conditions. It was a failure in the long run.

Austin wrote:KVS , Spheronx , Check the Data for Exports in 2015 plus other data

http://www.worldstopexports.com/russias-top-10-exports/

Fish export since 2011

Fish: $1.4 billion (Up by 1,711%)

ExBeobachter1987 wrote:

Austin wrote:KVS , Spheronx , Check the Data for Exports in 2015 plus other data

http://www.worldstopexports.com/russias-top-10-exports/

Fish export since 2011

Fish: $1.4 billion (Up by 1,711%)

I am one of the customers so I can attest, especially those canned smoked sprats from Kaliningrad are to die for!!!

kvs wrote:The fixation on exports is strange.   Most of the US GDP is associated with its internal demand.   The US has a large
and persistent trade deficit because it is a net importer.   Why does Russia need to be dependent on exports?   Exports
are for banana republics.

You are exaggerating here.

Germany and Japan economies rely a lot on exports. They are not considered banana republics.

Of course, internal demand should be the basis of a strong economy and GDP. Exports are just the gravy on top.

TheArmenian wrote:

kvs wrote:The fixation on exports is strange.   Most of the US GDP is associated with its internal demand.   The US has a large
and persistent trade deficit because it is a net importer.   Why does Russia need to be dependent on exports?   Exports
are for banana republics.

You are exaggerating here.

Germany and Japan economies rely a lot on exports. They are not considered banana republics.

Of course, internal demand should be the basis of a strong economy and GDP. Exports are just the gravy on top.

Both Germany and Japan are US protectorates (aka banana republics) and are totally exposed to foreign export markets and
associated blackmail. Japan is in chronic stagnation mainly because China has taken over as the main producer-for-export.
People who are bitching for Russia to trip over itself to become an exporter need to STFU.

sepheronx wrote:

Austin wrote:kvs how does Russia manages to conduct operation in Syria at such low cost may be at the cost of US single day operation while US ends up spending billions and trillions.

Is this due to PPP put into good effect ?

I am not KVS but I could help answer if you are interested.

If Russia used nothing but heavy guided munitions like JDAM's (Kh-38 or others), the costs would drastically go up.  The bombs used were said to cost Russia only a few thousand dollars each, which is significantly lower than what US drops.  As well, maintenance on American jets are costly.  Very costly.  And also quite time consuming too (although I don't think the time used for maintenance really counts here, just simply cost of parts and cleaning material).  These are only part of the costs.

US and Russia both also add in costs for training of Syrian (or in US case, Iraqi) soldiers and equipment, so on so forth.  Russian equipment and training and such overall is significantly less costly.  Also, US heavily relies upon third party companies (private) to do things like logistics and such, which is also very costly, while Russian companies simply seem to be only with providing food and sanitation needs (at least judging by the videos/photos available to us).

I think in the US war, for a single year, it cost well over a billion $ for Haliburton to provide logistics.  A single year.  That is quite a bit of money.

The US system is pure corporate pork (or welfare).   The prices are excessive even for simple services and goods.   It attests to the epic failure of the
US government to protect the interests of taxpayers.   Instead US politicians are elected on special interest money and pander to those special interests.

Even dumb bombs in the USA are expensive (they are only cheap if they are inventory disposal) and the JDAM upgrade is a price gouge at $25,000 for
some stamped sheet metal.

kvs wrote:Both Germany and Japan are US protectorates (aka banana republics) and are totally exposed to foreign export markets and
associated blackmail.

You do not seem to understand what the term "banana republics" means. No, it does not mean US protectorate. It is more specific.
Neither Germany nor Japan count.

The Irony...