Russia and economic war by the west

Novak announced the readiness of some countries to pay for gas supplies from Russia in rubles, 07.04.2022.

European companies that consume Russian gas are studying the issue of paying for supplies from Russia in rubles, some of them have already agreed with this approach, Russian Deputy Prime Minister Alexander Novak said on the Rossiya 24 TV channel.

“Now European countries and companies that are consumers of Russian gas are studying this issue. We hear different statements. There are those who have already agreed with this approach, there are countries that are studying [payment for gas in rubles],” TASS reports.his words.

In addition, Novak expressed confidence that payments for Russian gas supplies will be made in accordance with the decree of the President of Russia and in accordance with the procedure established by the government.

Earlier it became known that China transferred payment for coal and oil from Russia to yuan. In addition, Moscow is offering India to pay for oil in rupees, and Saudi Arabia is negotiating with Beijing on the price of some of its oil in yuan.

Meanwhile, the United States noted the rapid recovery of the ruble against the backdrop of sanctions.

https://vz.ru/news/2022/4/7/1152626.html

The Russian government claims that it manages to resist Western sanctions, 07.04.2022.

MOSCOW (Sputnik) — Russia manages to resist the negative effect of the sanctions that the West has imposed to destroy the Russian economy, Prime Minister Mikhail Mishustin assured, presenting a report to the State Duma (Lower House of Parliament).

"The authors of that strategy expected that the storm of sanctions would sink our economy in a few days. His script did not come true. Almost no other state, except Russia, could have coped with that. We have resisted," Mishustin stressed.

The head of the Cabinet stressed that the new sanctions "have an unprecedented scope, their number exceeds the restrictions imposed on any other country, in total there are already more than 6,000."

"These are individual and sectoral sanctions against the state, but the most important thing is that they are directed against all citizens," the official emphasized.

In Mishustin's opinion, the purpose of the restrictions of the countries hostile to Russia was, above all, to create panic and attack the inhabitants.

"Their goal was to delay us for years or even decades. Isolating ourselves from the world. Forcing Russia to abandon promising economic and social projects. Attacking the standard of living of our citizens. They are doing everything possible to boost inflation, create a deficit of consumer goods. And, ultimately, provoke social tension," the prime minister noted.

Mishustin recalled that "the financial system was the first to take a hit," and at that time "hostile countries could not think of anything better" than to return to the methods "used by pirates," since, by freezing Russian assets, they "actually robbed the country."

"Our financial system, which is the blood artery of the entire economy, resisted. The Bank of Russia and the government, together, in constant contact with the president [Vladimir Putin], were able to prevent the collapse. Preserve the trust of citizens. Payments at the national level are made without interruptions. The stock market and the exchange rate of the ruble will be stabilized," the head of the Cabinet added.

The prime minister also denounced the political pressure exerted by the West on global companies, which have already invested billions of dollars in Russian projects, as well as their time and effort.

According to Mishustin, logistics chains are currently disrupted, the supply of high-tech imports is limited, and in addition flights to hostile countries were stopped, accompanied by an attempt to deprive Russian airlines of aircraft. The export of Russian products to many countries also suffers from limitations.

The prime minister assured that his Government is following a five-point plan to deal with sanctions, in which the main task is to ensure uninterrupted work of all domestic enterprises.

"Secondly, we must expand the freedom of national investments within the country, priority number three is to support the most vulnerable," he said, adding that fourthly, his Government pursues the goal of avoiding shortages in stores, and fifthly, aid to the sectors of the economy that need it most.

According to the head of the Cabinet, for the country the main task is to ensure the stable work of enterprises, through new production chains, which do not depend on the enterprises that left the Russian market, and ensuring that wages continue to be paid.

"I would like from this rostrum to make a separate appeal to foreign companies. For those who are still thinking about whether to stay working in our country or leave. Russia remains open to constructive dialogue," he said.

Mishustin urged companies leaving Russia to allow their plants to continue working, so that their workers continue to earn their salaries.

"People's standard of living cannot depend on the whim of foreign politicians," the Russian prime minister stressed.

The sanctions, as Mishustin noted, did not bypass the sphere of culture, as artists were called upon to abandon their language, their spiritual heritage, their faith.

"But they didn't stop there. They began to rename the paintings. They canceled the teaching of Russian literature in universities. They insulted and took athletes out of competitions, organized harassment of participants of the Paralympic Games," he recalled.

Mishustin asserted that the current sanctions against Russia exceed those that existed "in the darkest years of the cold war."

At least 6 months to recover from sanctions

The prime minister emphasized that Russia's economy will need at least six months to recover from sanctions.

"The economy needs time to rebuild. After such a blow, you need to have at least six months to remake yourself," Mishustin said.

This is how he commented on the deputies' proposal to create a model of import substitution industrialization in Russia.

"Now this is a strong stimulus to see and make a total substitution of imports or find new [production] chains in friendly countries. We know this perfectly well and our entire policy is oriented towards that," he stressed.

Mishustin, in addition, recalled that the Government takes all possible measures to support enterprises and employment, but companies should also properly assess their capabilities.

Numerous countries condemned the military operation that Russia launched on February 24 to "demilitarize" and "denazify" Ukraine and activated several batteries of individual and sectoral sanctions that seek to inflict the greatest possible damage on the Russian economy.

For the first time, the sanctions include the partial disconnection of Russia from the SWIFT system, the freezing of the international reserves of its Central Bank and, in the case of countries such as the United States, Canada, the United Kingdom and Australia, the embargo on the import of Russian oil.

Yandex Translate from Spanish

https://mundo.sputniknews.com/20220407/el-gobierno-ruso-asevera-que-consigue-resistir-las-sanciones-de-occidente-1124119352.html

What ruble exchange rate is comfortable for the Russian economy, by Olga Samofalova for VZGLYAD. 07.04.2022.

The exchange rate of the ruble symbolically strengthened to those levels that were before the start of the special operation in Ukraine. And he did this even after the announcement of new US sanctions. Why is the Russian currency behaving in such an unusual way and will it continue to strengthen to 50-60 rubles per dollar?

The Russian ruble rallied sharply in Thursday trading to levels last seen before Russia launched a special operation in Ukraine. Thus, the ruble rose almost 6% to 75.3 against the dollar after briefly touching 74.3, the highest level since February 11. By the end of trading, the dollar fell to 75.75 rubles, the euro - to 81.45 rubles.

The unusual situation is that such a symbolic strengthening of the ruble to the levels that were before the start of the special operation in Ukraine occurred the next day after the introduction of the next tough US sanctions, in particular against Sberbank and Alfa-Bank. Previously, sanctions led to a logical fall in the exchange rate of the Russian currency. Why is everything different now?

“You have to understand that the pricing system that has been established for many years on the Russian exchange currency market is currently broken and completely redrawn. The Central Bank of the Russian Federation and the government have taken a number of measures aimed at stabilizing the ruble exchange rate, and these measures have brought the desired result,” says Vitaly Manzhos, senior risk manager at Algo Capital.

In particular, the introduction of a protective commission for the purchase of dollars and euros on the stock exchange in the amount of 12% made speculative purchases for the short and medium term pointless. Foreign investors still cannot sell ruble assets, buy foreign currency and withdraw capital from the country. The purchase of foreign currency on the domestic market has also been stopped as part of the budget rule. Exporters are required to sell 80% of foreign exchange earnings on the domestic market. It has also become more difficult for individuals to withdraw currency from the country.

“With restrictions on the movement of capital and requirements for the sale of 80% of the proceeds by exporters, there is no one to play against the ruble. Previously, the ruble was declining mainly due to the volatile behavior of non-residents on domestic sites, to which local players connected, but now operations on the Russian market are not available to foreigners,” - explains the head of the analytical department of the bank "Zenith" Vladimir Evstifeev.

In addition, imports have fallen sharply. “Imports of goods worth $220-280 billion were partially banned or suspended, mass outbound tourism to Europe, in fact, was stopped, and this is another $10-20 billion, dividends cannot be withdrawn from the country - this is about 150-160 billion a year . Taken together, all this has repeatedly reduced the demand for foreign currency in the domestic market,” says Alexander Potavin, an analyst at FG Finam.

The measures of the Central Bank and the government "removed" the demand for currency from the market. Almost no one can or does not want to buy it, because there is nothing for it. You can't make money on speculation, you can't buy imports, you can't export them abroad, etc. What is the currency rate guided by now that the Central Bank has withdrawn? It, in fact, reflects the balance of supply and demand on the part of buyers and sellers, importers and exporters. And from the beginning of the special operation, there was a clear interruption in the import of goods.

“Unlike imports, exports from Russia remain significant, so the largest companies will continue to determine the value of the ruble. About 30 billion dollars of foreign currency enters the market per month from exporters, which is more than 65% of the trading volume in the dollar / euro pair on the Moscow Exchange, ”says Evstifeev.

However, these fundamental factors do not explain the unusual strengthening of the ruble on April 7, immediately after the introduction of US sanctions against Sberbank and Alfa-Bank. There are speculations on the market that Sberbank and Alfa-Bank began to hastily sell foreign exchange assets (so that they would not suffer due to sanctions), thereby providing additional demand for rubles, which supported the Russian currency on Thursday. “It's difficult to judge which organizations are selling foreign currency on the market,” says Manjos. However, the strengthening of the ruble on Thursday may be due precisely to the massive dumping of the currency. “Sales of the dollar at a rate above 80 rubles, which were bought before the start of the March events, were still profitable. At the same time, a large number of dollars were bought on the exchange ahead of time, at a rate lower than now,” says Manzhos.

What will happen to the ruble next? If the oversupply of foreign currency on the market lingers, imports do not revive, and capital restrictions are not lifted, then the ruble may continue to strengthen further, Potavin said. At this rate, the ruble may well strengthen to 70, or even up to 50-60 rubles per dollar. “The 2022 budget includes the ruble price of a barrel of oil in the amount of 3.2 thousand rubles, but in March it was three times higher - almost 10 thousand rubles per barrel, even despite problems with the sale of oil due to sanctions and logistics. This means that in the short term, the ruble can afford to strengthen up to 50-60 rubles per dollar,” says Evstifeev.

However, experts doubt that the Central Bank of the Russian Federation will allow the ruble to strengthen so much. It is likely to start acting in the direction of weakening the exchange rate. Namely: to cancel the imposed restrictions on the purchase of foreign currency and the export of capital, and may even decide to lower the key rate.

Why is a strong ruble dangerous? For the population, the strengthening of the ruble is always favorable, but a strong and expensive national currency is not always good for exporters, as it makes their products more expensive in dollar terms, and they receive less revenue and profit, analysts at Freedom Finance say.

But the main thing is that a strong ruble is unprofitable for the Russian budget, which may receive less revenue, and now more than ever they are needed to support the population and companies affected by sanctions. The deficit budget will require additional printing of rubles, and this will disperse the already high inflation even more.

“Therefore, for some short time, the ruble exchange rate can indeed strengthen, if only to relieve the psychological discomfort of ordinary citizens and curb inflation.

But we do not expect the ruble to depreciate significantly below the 80 mark against the dollar,” says Potavin. In the next month, he expects the Central Bank of the Russian Federation to ease the imposed restrictions on the movement of capital. This will raise the demand for dollars from the euro and lower the ruble to more comfortable levels for the budget and government.

It is difficult to say unequivocally which ruble exchange rate the Central Bank and the Ministry of Finance will consider comfortable for the budget. Evstifeev believes that in the medium term it is advisable to keep the exchange rate above 70 rubles per dollar. Potavin speaks of a mark of at least 80 rubles per dollar.

“Comfortable levels for both manufacturers and the budget will be in the range of 80-90 rubles per dollar and 90-100 rubles per euro.

But so far, opinions regarding the reduction of Russian GDP are very different - the contraction of the economy can be within 7%, or it can reach 20%, as Goldman Sachs predicts, for example. So far, there are no exact estimates and it is difficult to predict them,” says Artem Deev, Head of the Analytical Department at AMarkets.

Manzhos assumes that the Central Bank of the Russian Federation nevertheless set some indirect benchmark regarding the desired and expected US dollar exchange rate until the middle of this year. “The regulator will purchase physical gold on the domestic market at a price of 5,000 rubles per gram. In terms of the relatively stable dollar value of gold (1930 dollars per ounce or 31.3 grams), this means that the expected US dollar exchange rate should approach the level of 80 rubles. If the exchange rate of the dollar is significantly higher, it will be unprofitable for suppliers to sell gold to the Central Bank,” concludes Vitaly Manzhos.

https://vz.ru/economy/2022/4/7/1152609.html

The Crimean Parliament submitted to the State Duma a bill on the right to seize the property of unfriendly countries without compensation
https://t.me/rian_ru/157842


**** yeah !

lancelot wrote:I think the Russian Central Bank will just reduce the amount of capital control and decrease the key interest rates in case this continues. There is little point in letting the ruble appreciate too much.

it's not about appreciating Ruble but about making loans cheaper imho

lancelot wrote:I think the Russian Central Bank will just reduce the amount of capital control and decrease the key interest rates in case this continues. There is little point in letting the ruble appreciate too much.

Well predicted

The Yanks really screwed this up, the reverse of what they planned and in a matter of weeks.




While the rest of the world is engaged in tightening monetary policy to tame the self-inflicted inflation beast, Russia’s central bank unexpectedly cut its key interest rate the most in nearly two decades last night in an attempt to stave off a domestic recession and bolster confidence in the economy.

Taking the market completely by surprise, the central bank slashed rates by 300bps (from 20% to 17%) at an unscheduled meeting overnight and said further cuts could be made in the months ahead if conditions permit.

As Bloomberg reports, it’s a policy pivot that echoes Governor Elvira Nabiullina’s surprise 200 basis-point rate cut in 2015, which reversed an emergency hike made weeks earlier. At the time, Russia was entering an economic contraction following the first round of sanctions over Ukraine and the collapse in oil prices.

“The central bank wants to be a locomotive of the economic rebound, not a brake,” said Luis Saenz, head of international distribution at Sinara.

What is even more surprising to many is that the Ruble - previously dismissed as "rubble" by President Biden - actually strengthened further on the rate-cut, surging to 72/USD.

https://www.zerohedge.com/markets/ruble-surges-5-month-highs-after-russia-unexpectedly-slashes-rates-300bps

Chinese companies initiate yuan payments for Russian oil and coal

RT, via Telegram - the first shipments of coal bought in yuan are expected to arrive in China this month, followed by Russian oil in May as the two countries maintain their energy trade.

These will be the first commodity shipments paid in yuan since the U.S. and Europe penalized Russia and cut several of its banks from the international financial system.

Moscow is also offering payments in rupees and rubles to Indian oil buyers, while Saudi Arabia is in talks with Beijing to price some of its oil in yuan, as the two countries try to reduce the dollar's dominance in global trade.

Yandex Translate from Portuguese

https://www.brasil247.com/mundo/empresas-chinesas-iniciam-pagamentos-em-yuan-por-petroleo-e-carvao-russos

The Dollar Devours the Euro

By Michael Hudson and posted with the author’s permission

It is now clear that today’s escalation of the New Cold War was planned over a year ago, with serious strategy associated with America’s plan to block Nord Stream 2 as part of its aim of blocking Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.

As President Biden and U.S. national-security reports announced, China was seen as the major enemy. Despite China’s helpful role in enabling corporate America to drive down labor’s wage rates by de-industrializing the U.S. economy in favor of Chinese industrialization, China’s growth was recognized as posing the Ultimate Terror: prosperity through socialism. Socialist industrialization always has been perceived to be the great enemy of the rentier economy that has taken over most nations in the century since World War I ended, and especially since the 1980s. The result today is a clash of economic systems – socialist industrialization vs. neoliberal finance capitalism.

That makes the New Cold War against China an implicit opening act of what threatens to be a long-drawn-out World War III. The U.S. strategy is to pry away China’s most likely economic allies, especially Russia, Central Asia, South Asia and East Asia. The question was, where to start the carve-up and isolation.

Russia was seen as presenting the greatest opportunity to begin isolating, both from China and from the NATO Eurozone. A sequence of increasingly severe – and hopefully fatal – sanctions against Russia was drawn up to block NATO from trading with it. All that was needed to ignite the geopolitical earthquake was a casus belli.

That was arranged easily enough. The escalating New Cold War could have been launched in the Near East – over resistance to America’s grabbing of Iraqi oil fields, or against Iran and countries helping it survive economically, or in East Africa. Plans for coups, color revolutions and regime change have been drawn up for all these areas, and America’s African army has been built up especially fast over the past year or two. But Ukraine has been subjected to a U.S.-backed civil war for eight years, since the 2014 Maidan coup, and offered the chance for the greatest first victory in this confrontation against China, Russia and their allies.

So the Russian-speaking Donetsk and Luhansk regions were shelled with increasing intensity, and when Russia still refrained from responding, plans reportedly were drawn up for a great showdown to commence in late February – beginning with a blitzkrieg Western Ukrainian attack organized by U.S. advisors and armed by NATO.

Russia’s preemptive defense of the two Eastern Ukrainian provinces and its subsequent military destruction of the Ukrainian army, navy and air force over the past two months has been used as the excuse to start imposing the U.S.-designed sanctions program that we are seeing unfolding today. Western Europe has dutifully gone along whole-hog. Instead of buying Russian gas, oil and food grains, it will buy these from the United States, along with sharply increased arms imports.

The prospective fall in the Euro/Dollar exchange rate

It therefore is appropriate to look at how this is likely to affect Western Europe’s balance of payments and hence the euro’s exchange rate against the dollar.

European trade and investment prior to the War to Impose Sanctions had promised a rising mutual prosperity between Germany, France and other NATO countries vis-à-vis Russia and China. Russia was providing abundant energy at a competitive price, and this energy was to make a quantum leap with Nord Stream 2. Europe was to earn the foreign exchange to pay for this rising import trade by a combination of exporting more industrial manufactures to Russia and capital investment in developing the Russian economy, e.g. by German auto companies and financial investment. This bilateral trade and investment is now stopped – and will remain stopped for many, many years, given NATO’s confiscation of Russia’s foreign reserves kept in euros and British sterling, and the European Russophobia being fanned by U.S. propaganda media.

In its place, NATO countries will purchase U.S. LNG – but they will need to spend billions of dollars building sufficient port capacity, which may take until perhaps 2024. (Good luck until then.) The energy shortage will sharply raise the world price of gas and oil. NATO countries also will step up their purchases of arms from the U.S. military-industrial complex. The near-panic buying will also raise the price for arms. And food prices also will rise as a result of the desperate grain shortfalls resulting from a cessation of imports from Russia and Ukraine on the one hand, and the shortage of ammonia fertilizer made from gas.

All three of these trade dynamics will strengthen the dollar vis-à-vis the euro. The question is, how will Europe balance its international payments with the United States? What does it have to export that the U.S. economy will accept as its own protectionist interests gain influence, now that global free trade is dying quickly?

The answer is, not much. So what will Europe do?

I could make a modest proposal. Now that Europe has pretty much ceased to be a politically independent state, it is beginning to look more like Panama and Liberia – “flag of convenience” offshore banking centers that are not real “states” because they don’t issue their own currency, but use the U.S. dollar. Since the eurozone has been created with monetary handcuffs limiting its ability to create money to spend into the economy beyond the limit of 3 percent of GDP, why not simply throw in the financial towel and adopt the U.S. dollar, like Ecuador, Somalia and the Turks and Caicos Islands? That would give foreign investors security against currency depreciation in their rising trade with Europe and its export financing.

For Europe, the alternative is that the dollar-cost of its foreign debt taken on to finance its widening trade deficit with the United States for oil, arms and food will explode. The cost in euros will be even greater as the currency falls against the dollar. Interest rates will rise, slowing investment and making Europe even more dependent on imports. The eurozone will turn into an economic dead zone.

For the United States, this is Dollar Hegemony on steroids – at least vis-à-vis Europe. The continent would become a somewhat larger version of Puerto Rico.

The dollar vis-à-vis Global South currencies

The full-blown version of the New Cold War triggered by the “Ukraine War” risks turning into the opening salvo of World War III, and is likely to last at least a decade, perhaps two, as the U.S. extends the fight between neoliberalism and socialism to encompass a worldwide conflict. Apart from the U.S. economic conquest of Europe, its strategists are seeking to lock in African, South American and Asian countries along similar lines to what has been planned for Europe.

The sharp rise in energy and food prices will hit food-deficit and oil-deficit economies hard – at the same time that their foreign dollar-denominated debts to bondholders and banks are falling due and the dollar’s exchange rate is rising against their own currency. Many African and Latin American countries – especially North Africa – face a choice between going hungry, cutting back their gasoline and electricity use, or borrowing the dollars to cover their dependency on U.S.-shaped trade.

There has been talk of IMF issues of new SDRs to finance the rising trade and payments deficits. But such credit always comes with strings attached. The IMF has its own policy of sanctioning countries that do not obey U.S. policy. The first U.S. demand will be that these countries boycott Russia, China and their emerging trade and currency self-help alliance. “Why should we give you SDRs or extend new dollar loans to you, if you are simply going to spend these in Russia, China and other countries that we have declared to be enemies,” the U.S. officials will ask.

At least, this is the plan. I would not be surprised to see some African country become the “next Ukraine,” with U.S. proxy troops (there are still plenty of Wahabi advocates and mercenaries) fighting against the armies and populations of countries seeking to feed themselves with grain from Russian farms, and power their economies with oil or gas from Russian wells – not to speak of participating in China’s Belt and Road Initiative that was, after all, the trigger to America’s launching of its new war for global neoliberal hegemony.

The world economy is being enflamed, and the United States has prepared for a military response and weaponization of its own oil and agricultural export trade, arms trade and demands for countries to choose which side of the New Iron Curtain they wish to join.

But what is in this for Europe? Greek labor unions already are demonstrating against the sanctions being imposed. And in Hungary, Prime Minister Viktor Orban has just won an election on what is basically an anti-EU and anti-U.S. worldview, starting with paying for Russian gas in roubles. How many other countries will break ranks – and how long will it take?

What is in this for the Global South countries being squeezed – not merely as “collateral damage” to the deep shortages and soaring prices for energy and food, but as the very objective of U.S. strategy as it inaugurates the great splitting of the world economy in two? India has already told U.S. diplomats that its economy is naturally connected with those of Russia and China. Pakistan finds the same calculus at work.

From the U.S. vantage point, all that needs to be answered is, “What’s in it for the local politicians and client oligarchies that we reward for delivering their countries?”

From its planning stages, U.S. diplomatic strategists viewed the looming World War III as a war of economic systems. What side will countries choose: their own economic interest and social cohesion, or submission to local political leaders installed by U.S. meddling like the $5 billion that Assistant Secretary of State Victoria Nuland bragged of having invested in Ukraine’s neo-Nazi parties eight years ago to initiate the fighting that has erupted into today’s war?

In the face of all this political meddling and media propaganda, how long will it take the rest of the world to realize that there’s a global war underway, with World War III on the horizon? The real problem is that by the time the world understands what is going on, the global fracture will already have enabled Russia, China and Eurasia to create a real non-neoliberal New World Order that does not need NATO countries and which has lost trust and hope for mutual economic gains with them. The military battlefield will be littered with economic corpses.

https://thesaker.is/the-dollar-devours-the-euro/

Watch out, those of you living in the EU...

Russia has yet another trade route... Down to Caspian Sea Iran - India/Africa . Not yet lots of capacity but with time its gonna to be increased.
I just wonder when Russia decides to support openly North Korea?

Where we may well be headed

Duke of Qin
Twitter logo
14h • 6 tweets • 1 min read

I wrote this a few years ago but people still aren't aware of how a chaos maximization strategy serves US interests.

People like to compare US hegemony to late imperial Rome but aren't cognizant of the fact that once Rome no longer had the strength to enforce the Roman peace or Roman law, that didn't mean it no longer had the strength to create Roman disorder.

The strategic policy of the Eastern Roman empire along frontiers it could no longer govern was to make them ungovernable so no one could. Once the US can longer be the city on a golden hill, it will not fade quietly but instead seek to be king of the dung heep. What this means in practice is taking advantage of it's relatively secure and isolated geostrategic position and creating bush fires across the rest of the world for others so that it itself is viewed as an oasis of stability and security in comparison so that financial flows can be redirected to itself from the rest of the world.

Once you move from a win-win game to a lose-lose game, the strategy becomes to make sure that others lose more in relative terms than yourself.

It is why the US is undermining the international system it publicly espouses to uphold and why it's immediate satrapies are being put to the torch first.

There are of course ways to strike back at the US strategy here, but none of them are particularly pleasant and beyond the mental blocks of people who cling to Liberalism or even just basic decency.

What the Central Bank achieves with unexpected decisions, by Olga Samofalova for VZGLYAD.
April 9, 2022.

The Bank of Russia has changed its key rate for the second time at an emergency meeting. This time, he cut the rate sharply from 20% to 17%. Previously, the Central Bank, with high inflation, did not even think of taking such hasty steps. However, the situation in the economy is now largely unique, and the regulator has begun to act within the framework of the new economic logic. Where it leads?

The Russian Central Bank cut its key rate by 300 basis points from 20% to 17%. The decision was unexpected for many. On the one hand, it was clear that a sharp increase in the rate to 20% was a forced and temporary decision. On the other hand, few people expected that the reverse trend would start so soon and so sharply – with a step of 300 bp at once. Many expected a more modest rate cut not earlier than April 29, when the scheduled meeting of the regulator will take place.

What prompted the Central Bank of the Russian Federation to cut the rate unscheduled on April 8? The next meeting of the regulator is scheduled for April 29. However, he did not wait for him. Moreover, experts do not exclude that on April 29 there will be another rate cut to 14-15%.

Previously, in making decisions, the Central Bank proceeded from the main goal - keeping inflation at the target level of 4%, and depending on the indicators of real inflation, it made a decision on the rate. Now the situation with inflation looks ambiguous. Annual inflation accelerated to 16.7%, on the other hand, weekly inflation slowed down by half compared to March peaks. Previously, the Central Bank would have waited for a much longer decline in price growth than one week. However, the new economic conditions, apparently, may dictate other goals for the regulator.

It is unlikely that the Bank of Russia's goal was to weaken the ruble, which has strengthened by almost eight rubles this week, even despite the introduction of new sanctions by the US (Wednesday) and the EU (Friday). As the VZGLYAD newspaper wrote , such a strong ruble harms not only Russian exporters, but also the revenue side of the Russian budget. The budget includes a ruble exchange rate of 72.1 per dollar, and if the dollar is cheaper, then this creates a deficit. Experts agree that the economic block of the government can consider 80 rubles to the dollar a comfortable ruble exchange rate.

However, the level of the Central Bank's rate has an extremely weak effect on the ruble exchange rate, especially now, when there is a whole series of restrictions on buying and selling foreign currency. In such conditions, the rate becomes unimportant for the exchange rate. “In the context of restrictions on the movement of capital, the relationship between the exchange rates of the ruble and the size of the key rate is decreasing. This is due to the fact that there are no non-residents in the foreign exchange market, and local investors experience problems with access to foreign capital markets. Thus, capital restrictions minimize the competitive valuation of the ruble and the profitability of ruble assets,” explains Vladimir Evstifeev, head of the analytical department of Zenit Bank. If the authorities want to weaken the ruble, then relaxations in terms of currency restrictions will be much more effective measures. Apparently, they will soon follow. Maybe.

As for the Central Bank, this time it decided to lower the rate largely based on the general state of the economy. The regulator worries about a sharp decline in economic growth, so he gave the first breath of air to the economy as soon as he saw the first signs of a slowdown in inflation and changes in the banking sector.

To all appearances, the Central Bank is not afraid to drive up inflation with its drastic actions. The reason for this lies in the fact that the nature of inflation is now also different than before. Prices are rising due to a shortage of goods, due to problems with logistics and sanctions, and even due to panicked demand from the population for some types of goods. This rate cannot be affected. Of course, the devaluation of the ruble to 120 per dollar in the first weeks after February 24 contributed to inflation. But now the exchange rate can be kept in the region of 75-80 per dollar with the help of currency restrictions.

“Increasing the key rate in February was one of the anti-crisis measures, the purpose of which was to stabilize the financial system. This goal has already been achieved: the outflow of liquidity from banks has been stopped, and there is an inflow into deposits. There is no longer a need for such a high value of the key rate,” says Evstifeev. Another thing is that geopolitical risks for the deterioration of the situation in the financial system still remain. Therefore, the size of the key rate is not declining as fast as it was raised, Evstifeev notes.

“The situation in the banking sector has changed. At the peak of the financial crisis in early March, the structural liquidity deficit reached 7 trillion rubles, and now it has been replaced by a structural surplus of 1.5 trillion rubles,” says Olga Belenkaya, Head of the Macroeconomic Analysis Department at FG Finam.

This means that the high rate did its job: deposits became attractive, and people took money to banks, providing them with liquidity. At the same time, interest rates on loans rose so much that they actually killed lending, with the exception of preferential programs from the state. And loans are the engine of the economy. In a few months, they will go down following the reduction of the key rate by 1-3%. This, of course, is not much. Therefore, the Central Bank hints that it will continue to lower the rate further. Unless, of course, the remaining geopolitical risks do not work: new tough sanctions are not introduced, namely, the oil and gas embargo. So far, no one is betting on such an outcome.

“I think this is not the last key rate cut. As it decreases, rates on deposits and loans will decrease. Other things being equal, lowering the rate has a stimulating effect on the economy through the expansion of lending,” says Vladimir Bragin, Director for Financial Markets and Macroeconomics at Alfa Capital. The rate cut is possible up to 15%, which will become a catalyst for support measures, reforms and transformations initiated by the relevant ministries, Evstifeev believes.

Forecasts about the fall of Russian GDP this year reach up to 15%. However, at Zenit Bank, the baseline forecast so far assumes a 7.3% fall in Russia's GDP in 2022, but it may be changed depending on the measures taken to support the economy.

It is also difficult to make forecasts because there are no macroeconomic statistics for March and the first quarter of the year, which could be guided by. “So far, only inflation data has been released, as well as the results of a survey of companies and the population regarding the assessment of the situation and expectations for the future. And, judging by these data, something catastrophic did not happen to business activity. So there is a chance that there will be no deep drawdown at the end of the year,” says Bragin.

According to Finam analysts, in the coming months there will be a noticeable reduction in economic activity, combined with high inflation, which by the end of the year may reach the level of 20-25%. “We tentatively expect a 6-8% decline in GDP by the end of the year, much will depend on the duration of Western sanctions, the ability of businesses to replace retiring imports, the effectiveness of support measures from the state and the Central Bank,” experts believe.

The most vulnerable industries in Russia may be aviation, the automotive industry, IT, and the financial sector. Among the more protected are the oil and gas sector, the production of fertilizers, and non-ferrous metallurgy. “Our sympathies are now on the side of commodity export companies, the least affected by the sanctions. Oil and gas risks are lower compared to other sectors, and local supply failures are offset by high commodity prices. In the context of the food crisis, agricultural chemicals will also be in demand, which will protect fertilizer producers from restrictions,” Finam notes.

https://vz.ru/economy/2022/4/9/1152855.html

I just wonder when Russia decides to support openly North Korea?

Cheap energy supplies to North Korea via a gas pipeline that goes through North Korea to South Korea so that NK gets transit fees for SK purchases of cheap gas would be a good financial boost to their economy.

Cooperation in food production with Russia would also be a good thing for North Korea too... food stability is important to any country.

There are of course ways to strike back at the US strategy here, but none of them are particularly pleasant and beyond the mental blocks of people who cling to Liberalism or even just basic decency.

Actually Russia cutting ties and breaking away from the US would deny them a lot of important products and resources that they need without having to start a war or kill anyone.

Stopping using US dollars and Euros is another huge step in weakening the monster.

So much for the "Sanctions from Hell", Russia just Checkmated the entire EU and the sheeple don't even know it yet. Maybe they'll understand once they're sitting in the dark & freezing their balls off...