Russian Economy General News: #8

Russia sells via strategic buyers. So in this case, it's not total sale off, but sell off to allied nation or nations friendly. So let Belarus buy into it, Vietnam, etc. No US.

Russia's response to US sanctions affects the atom, aircraft construction and rocket engines

April 13, 2018, AEX.RU - The draft law on sanctions measures provides for suspension of cooperation with the United States in the nuclear, aircraft and rocket-propulsion industries, said the first vice speaker of the State Duma Ivan Melnikov. This is written by RIA Novosti .

"It's about stopping or suspending international cooperation of the Russian Federation, Russian legal entities with the United States and organizations that are under the jurisdiction of the United States, in the nuclear industry, in the aircraft building and rocket industry," Melnikov told reporters on Friday.

Russia sells via strategic buyers. So in this case, it's not total sale off, but sell off to allied nation or nations friendly. So let Belarus buy into it, Vietnam, etc. No US.

And what makes you think a nation friendly to Russia does not have companies that think only of money and not about their workers or ethics?

Do you think new owners from Belarus or Vietnam or Cuba would not accept a very generous offer from a US company, or US shell company?

Big western companies have a long history of buying up competing companies.... either to exploit their advantages or to crush them and eliminate competition...

That's true, but I'm certain they research before selling it. Selling even shares (not majority) is a good idea and gives prospects to nations like Vietnam, who wouldn't sanction Russia, to invest in their production and facilities. Gives more in FDI, and most likely keeps money flowing in and out as the Vietnamese can prospect foreign sales.

‘Ironically, US sanctions are helping the Russian budget’ – ex-Central Bank official to RT

The latest round of US penalties targeting Russian businesses paradoxically helps the country's budget instead of harming it, said Konstantin Korischenko, former deputy chairman of the Central Bank of Russia (CBR).

Talking to RT, he pointed to the rebounding Russian currency which weakened initially after the announcement of penalties. “This trend for strengthening will continue, mainly because Russia currently has a balance of payments surplus,” Korischenko said, explaining that “this is largely due to rising oil prices.”

He expressed confidence that the sanctions, along with the growing oil price and the rebounding ruble, could strengthen the Russian budget.

“We haven’t seen such a price for oil even before the crisis of 2014… Speaking ironically, the Americans only help the Russian budget with their sanctions.”

According to the official, speculation about possible sanctions against Russian sovereign debt has calmed down after US Treasury Secretary Steven Mnuchin voiced his opposition. Mnuchin said it could have a destabilizing effect on global markets.

“All this means that the increased profitability, which has now been formed by the Russian sovereign debt, will attract the most aggressive investors. And this will also entail the inflow of capital and the strengthening of the ruble.”

The possibility of the Russian Central Bank’s interventions is very low as the regulator adheres to its position of floating exchange rates, Korischenko said.

“So far there is no reason to believe that it will renounce it.”

When asked about the long-term consequences of sanctions, he said that people would have to wait and see how the sanctioned Russian companies modified their businesses.

Korischenko also stressed the importance for all the Russian companies to revise their business models as any of them could one day be in the same perilous position as RUSAL.

The Russian aluminum giant bore the biggest brunt of the latest US penalties. RUSAL's stock dropped 50 percent after trading of the company's shares was suspended on major international exchanges in line with Washington's sanctions.

“Therefore, generally speaking, the Russian state and economy should gradually rebuild their model, diversifying towards other partners who are not inclined to such harsh actions,” he said.

Kimppis wrote:‘Ironically, US sanctions are helping the Russian budget’ – ex-Central Bank official to RT

..........

So keeping your budget balanced and saving money on the side for rainy days results in stable economy?

Go figure...

Selling even shares (not majority) is a good idea

WTF?

Are you going to sell 49% ownership in your house so that some one else has to cut your grass every second week? That is stupid.... what happens in 2 years when they decide to sell their 49% of your house? Do you think you will be able to tell them who they can or cannot sell to just because you own 51% of the house?

You built the fucking house... why sell even part of it for a little bit of money in a one off sale?

It is really really stupid and is something someone up to their eyeballs in debt would do to keep the creditors at bay for a little while longer... something that is likely to happen because people stupid enough to get into that sort of debt make stupid decisions anyway...

So keeping your budget balanced and saving money on the side for rainy days results in stable economy?

Cheap credit makes people do stupid things... and when they realise there is a problem they are already caught in the spiral of debt and they can't escape... and often they don't want to escape because it is the debt that pays for the fantastic lifestyle and extras... till it all goes tits up and you either get a really good lawyer or you go to jail... or you take the money you stole from the company and run away to the UK and buy a Soccer club...

Anyone claiming Russia has been running on deficit financing would be either malicious or an idiot.  
The notion that balanced budgets are great things is itself idiotic.   It totally ignores opportunity cost
and is subset of the monetarist voodoo religion.  I see a lot of right wingers bashing Keynes all the
time who clearly have no clue what he proposed.   They claim he came up with the idea of a perpetual
deficit financing by governments.   He did not such thing.   His idea was actually an example of an
economist thinking like a physicist or mathematician, i.e. someone with enough IQ to come up with
rational ideas.   It proposed that the biggest element of any developed economy, the government,
run deficits during recessions to stimulate the economy and to run surpluses during boom times.  
Thus, this fiscal policy acts as a governor on the business cycle and reduces peak to trough magnitude.

US and Canadian right wingers are one note Johnny tax cutters and big spenders.   Yet there is a
myth that they are fiscally responsible.    Look at Reagan and Clinton.   Reagan like Canada's Mulroney
kept cutting taxes for the rich and running large deficits.   His CIA boss successor Bush even yapped
about no new taxes.   These governments never reduced spending in tandem with the tax cuts.   By
contrast, Clinton ran surpluses and was continuously assaulted for being a "tax and spend liberal" even
though he did not jack up taxes, but reduced spending.    Basically the western right wingers have no
credibility when it comes to government budget management.    In Canada, we have the myth that
Trudeau left a massive debt in 1984.   This is rubbish.   It was Mulroney who tripled the debt
and by 1992 Canada saw an epic deficit.    It was Chretien another "tax and spend liberal" who fixed
Mulroney's deficit mess but the debt has been hard to pay off.

Russia has a trivial sovereign debt and a 13% flat income tax.   The hysteria about running deficits to
enable financing of military upgrades is grotesque.   Saving this money today will cost more money
and resources in the future.   Managing various trends that affect the existence of the state is the
obligation of the government.   Pretending these trends do not exist and obsessing with some budget
balance is simply criminal.   The 13% flat income tax in Russia is too low.   If Russian citizens want more
state benefits (e.g. healthcare, etc.) then they need to pay more.

GarryB wrote:

Selling even shares (not majority) is a good idea

WTF?

Are you going to sell 49% ownership in your house so that some one else has to cut your grass every second week? That is stupid.... what happens in 2 years when they decide to sell their 49% of your house? Do you think you will be able to tell them who they can or cannot sell to just because you own 51% of the house?

You built the fucking house... why sell even part of it for a little bit of money in a one off sale?

It is really really stupid and is something someone up to their eyeballs in debt would do to keep the creditors at bay for a little while longer... something that is likely to happen because people stupid enough to get into that sort of debt make stupid decisions anyway...

So keeping your budget balanced and saving money on the side for rainy days results in stable economy?

Cheap credit makes people do stupid things... and when they realise there is a problem they are already caught in the spiral of debt and they can't escape... and often they don't want to escape because it is the debt that pays for the fantastic lifestyle and extras... till it all goes tits up and you either get a really good lawyer or you go to jail... or you take the money you stole from the company and run away to the UK and buy a Soccer club...

It's either they cooperate with others or shut down the plants because they can't sell to third parties cause third parties get sanctioned if they buy from Rusal. So what's better Garry? Keeping people employed and still able to sell externally but with partners who get a cut, or shutting it down and letting people go?

Russia should keep firm in improving weapons technology, and China should take down the dollar/euro/petrodollar bond, then civilian revenues and market deals will come naturally. In this, very likely scenario, Western Europe might reach the point of humanitarian aid in the not too distant future.

Lol, US is mad at their own failures in Syria so they are planning to add more sanctions to Russia for their support of Assad.

Russia still has yet to respond for last round of sanctions.

The US will announce new sanctions against Russia on April 16

The US Treasury is going to announce new sanctions against Russia on Monday. As Kommersant reported, this time restrictions will be imposed "for support" by Syrian President Bashar Assad, whom Washington accuses of using chemical weapons. This is the US permanent representative to the United Nations Nikki Haley said on the air of CBS .

"Sanctions against Russia are on the way. Minister Mnuchin will announce them on Monday, if he has not already done so, and they will be directed to all companies that worked with technical equipment related to Assad and the use of chemical weapons, "she said.

Recall that the United States accused the Syrian government of the chemists in East Gut and, together with France and the United Kingdom, carried out a series of missile strikes against objects in Syria. The Russian General Staff reported that only 103 rockets were fired, 71 of them were intercepted. As a result of the attacks, three people were injured, no one was killed. The UN Security Council rejected the draft resolution of Russia, condemning the attacks on Syria. The United States, Great Britain and France have introduced their version of the resolution, which condemns the use of chemical weapons. Russia promised to study it critically.

miketheterrible wrote:Lol, US is mad at their own failures in Syria so they are planning to add more sanctions to Russia for their support of Assad.

Russia still has yet to respond for last round of sanctions.

Russia has to do the military game, China has to do the economic game. China's progress is also rapid. Although here, Trump is more on his element and delays more the turning point.

miketheterrible wrote:Lol, US is mad at their own failures in Syria so they are planning to add more sanctions to Russia for their support of Assad.

Russia still has yet to respond for last round of sanctions.

Sanctioning entities and individuals who ''assisted Syrian chemical weapons program''.

Will they be sanctioning Konashenkov or Gerasimov? I doubt they give a crap. And Russian companies should have had plenty of heads-up by now, anyone still exposed is an idiot.

Best response is to make sure everything works as usual and to keep creating backups and redundancies.

Keep budget balanced and keep stockpiling money and gold.

What idiots in DC don't seem to get is that while they are ranting at Russia, Chinese are taking notes and planning options for themselves (and that Chinese Navy does not seem to be getting any smaller, quite the opposite in fact...)

You know, Papa, Amis think they are exceptional. One who is exceptional can make no mistakes.

Hole wrote:You know, Papa, Amis think they are exceptional. One who is exceptional can make no mistakes.

this is exceptionally good analyze


As for oligarchs'  loosing thier factories. I hope that Putin can use it buy back stolen in 90's factories. Cheap

Austin wrote:Russia's response to US sanctions affects the atom, aircraft construction and rocket engines

April 13, 2018, AEX.RU - The draft law on sanctions measures provides for suspension of cooperation with the United States in the nuclear, aircraft and rocket-propulsion industries, said the first vice speaker of the State Duma Ivan Melnikov. This is written by RIA Novosti .

"It's about stopping or suspending international cooperation of the Russian Federation, Russian legal entities with the United States and organizations that are under the jurisdiction of the United States, in the nuclear industry, in the aircraft building and rocket industry," Melnikov told reporters on Friday.

That would be stupidity IMHO. Hurting Russian companies even more then US. Something like closing Russian airspace for US cargo, kicking out big 3 auditor companies, stopping US food import to Russia or stopping any US software -compulsory in state entities and taxed 3x in private ones. This could work better.

Hole wrote:You know, Papa, Amis think they are exceptional. One who is exceptional can make no mistakes.

Hubris before Nemesis.

GunshipDemocracy wrote:

Austin wrote:Russia's response to US sanctions affects the atom, aircraft construction and rocket engines

April 13, 2018, AEX.RU - The draft law on sanctions measures provides for suspension of cooperation with the United States in the nuclear, aircraft and rocket-propulsion industries, said the first vice speaker of the State Duma Ivan Melnikov. This is written by RIA Novosti .

"It's about stopping or suspending international cooperation of the Russian Federation, Russian legal entities with the United States and organizations that are under the jurisdiction of the United States, in the nuclear industry, in the aircraft building and rocket industry," Melnikov told reporters on Friday.

That would be stupidity IMHO. Hurting Russian companies even more then US. Something like closing Russian airspace for US cargo, kicking out big 3 auditor companies, stopping US food import to Russia or stopping any US software -compulsory in state entities and taxed 3x in private ones.  This could work better.

Your list is kind of a joke. Russia is cutting off in areas where its "partners" contribute nothing in return and cannot reciprocate with similar sanctions.
Why would Russia cut off overflight access if it did not want to have this affect it as well. NATO occupies a lot of overflight territory so it is best not
start this particular war. Russia is already controlling food imports from Yankistan and those auditing companies are not worth much.

So far Russia's low key response to NATO provocations has been ideal and pure genius. NATO leaders were banking on Russia getting angry and
crazy. Instead they get nothing. Nothing in terms of real impact of their sanctions and no response to their provocations. But Russia makes them
look like total losers. Russia orchestrated the massive shootdown of NATO cruise missiles over Syria. American generals are left spewing retarded
lies that they sent 73 missiles to destroy one facility. The world is laughing.

kvs wrote:Russia orchestrated the massive shootdown of NATO cruise missiles over Syria.    American generals are left spewing retarded
lies that they sent 73 missiles to destroy one facility.    The world is laughing.

Exactly, and all they managed to achieve with all those missiles against some empty buildings was save the Syrians the work of demolishing that facility:
"On the subject of Syria’s chemical weapons production facilities (CWPFs), the Secretariat has verified the destruction of 25 of the 27 former CWPFs declared by the Syrian Arab Republic. In November 2017, the Secretariat conducted an initial inspection of the last two stationary above-ground facilities in accordance with paragraph 44 of Part V of the Verification Annex to the Chemical Weapons Convention. The Secretariat, together with the United Nations Office for Project Services, is to conclude a contract in the next couple of weeks with a company that will assist the Syrian Arab Republic in the destruction of the facilities located at these two sites. Destruction work could take another two to three months."
https://www.opcw.org/fileadmin/OPCW/EC/87/en/ec87dg21_e_.pdf

It's either they cooperate with others or shut down the plants because they can't sell to third parties cause third parties get sanctioned if they buy from Rusal. So what's better Garry? Keeping people employed and still able to sell externally but with partners who get a cut, or shutting it down and letting people go?

Giving up ownership is not a good option for any reason... first of all stop selling any products to countries that impose sanctions of any kind on Russian companies... there are plenty of markets around the world they can sell their products in.... they could create their own shell companies or independent companies to sell their products to that can onsell to western companies to bypass the sanctions... and make a little extra profit.

The 13% flat income tax in Russia is too low. If Russian citizens want more
state benefits (e.g. healthcare, etc.) then they need to pay more.

Start increasing taxes now and it will become an easy option in the future... much better to manage costs than to increase income that way.

GarryB wrote:

The 13% flat income tax in Russia is too low.   If Russian citizens want more
state benefits (e.g. healthcare, etc.) then they need to pay more.

Start increasing taxes now and it will become an easy option in the future... much better to manage costs than to increase income that way.

If all you have is $1 in you pocket then no amount of belt tightening and balanced budgets will let you buy the $1000 car.
You need revenue to buy goods and services. The Russian tax imposes a lid on the amount of money the government
receives every year. If the citizens want more social services, then they have to pay for them. Either directly or through
the government. Nothing obscure about this fact.

As for the phobia about deficits. Who says that Russia is just like any NATO state in this regard? You can't use forecasting
based on the past history of different countries to predict future government policy in Russia.

Internal debt isn't bad. In this case, Russian bonds are rather popular not just outside of Russia, but inside too, thanks to it's low debt overall debt.

As for Rusal, it appears Rusal stocks are at the lowest it's ever been since it got into the stock market, believe it or not, only 8 years ago (2010).

Rusal has little options. Sad fact of life is, due to US rather control on world economy, most nations (especially those favorable to Russia) have their economies reliant, especially businesses, on US market, investments, loans, etc. Only nations who would be favorable would be: Iran, North Korea, Zimbabwe, Syria and Venezuela. Because these nations are already sanctioned up the ying yang by the US so they couldn't give a hoot. But only nations out of those that would be able to afford anything of the sort is Iran and Syria. Maybe Venezuela.  In this regard, Iran most probably cause they have money but Syria doesn't. In all, Rusal can set up a company in Syria that will help supply and maybe even refine aluminum in Syria, which their products will grow in massive demand due to rebuilding both military and infrastructure. Venezuela may be also an option in terms of investments and purchases, but Venezuelan economy and industry are in shambles as is right now due to really bad management.

China won't purchase, neither will Europe or most of Asia because of them having far too much money and cooperation with United States. Already Chinese companies had refused business with Russia cause they didn't want to get sanctioned. So only way they worked around the sanctions was opening up shop in Russia. Same went with EU nations too.  So what can be done? I mean, Rusal can try in the other sanctioned markets. Try to corner their market and get a good share. But in the end, they will probably have to sell off the plants or shut down ones that are producing initially for export, completely.

You seem to think the whole world revolves around the US... it does not.

If the US wants to break the WTO rules by imposing sanctions that is fine... Russia can impose tarriffs on all US products in the Russian market including other products that include US components or companies and use the revenue generated to pay companies effected by US sanctions.

If that is not enough they can seize US company assets... like Coca Cola bottling factories and nationalise them...

Kick out all US diplomats and US NGOs from Russia... if they want to impose sanctions then there is nothing to talk about.

Unfortunately, they managed to gain full control of WTO and international trade. Like it or not. So Rusal and all Russian companies will need to take extra measures and develop plan out of this mess by moving away from US. But that is hard when the rest of the world relies on US. I wish it wasn't true but it is, and hence why so few nations back up Russia over this ordeals. They are afraid of being sanctioned too.

Vladimir Gutenev
FIRST DEPUTY CHAIRMAN OF THE STATE DUMA COMMITTEE ON ECONOMIC POLICY
APRIL 13, 15:13 THE ECONOMY


https://m.rns.online/opinions/Kto-bolshe-vseh-postradaet-ot-otvetnih-ekonomicheskih-sanktsii-Rossii-2018-04-13/
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The draft law "On measures of influence (counteraction) against unfriendly actions of the United States of America and (or) other foreign states", which joined the American sanctions against Russia, was submitted to the State Duma . The document implies a ban on the importation of a wide range of goods to Russia and other restrictions.

The main essence of the bill is that it is a demonstration of our readiness not to wait patiently, when our opponents finally wake up, who call sanctions what actually is actually an economic war in fact, and make Friday, 13, on a real black day for politicians, especially European ones.

I believe that this bill, of course, will also cause some damage to the levers of influence on the Russian economy by the US, but the main economic blow will fall on those European countries that every time recklessly support the initiatives of Americans and violate all the principles of international law, the WTO. They introduce discriminatory measures, because they can not be called sanctions, since sanctions are taken by the UN decision.


Against Russia, a full-fledged economic war was unleashed, and I am sure that the damage to European politicians will be huge, as European businesses are already tired of losing Russian markets.

We understand that import substitution by Russian producers is not a momentary process, therefore, in the majority of deliveries of raw materials, food, agricultural products, alcohol-containing and tobacco products will be replaced by other countries.

As a result, the US will largely lose its leverage over our economy, and of course, various consulting and other companies will suffer substantial losses due to the curtailment of the work. They earn very substantial money in the Russian market.

On the other hand, counter-sentiments will become sensitive to the US and because of the termination of cooperation in the areas of space engine building and nuclear industry. We will make it clear that the principle of reciprocity is not only diplomatic, but also economic. I emphasize that the biggest economic losses will be incurred by the European Union, I am sure that not only business, but also European voters will express their position unequivocally at the next elections, which will be held in several European countries this year.

The provisions of the bill will affect all countries that have joined the American anti-Russian sanctions. And since Ukraine joined a whole number of them with great enthusiasm, I am sure that there will be no exceptions for Ukraine. Moreover, going in the wake of Washington's policy, Ukraine puts itself on the priority place, as a country, against which measures of economic reaction will be undertaken.