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    Russian Economy General News: #6

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    Austin

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    Post  Austin on Wed Mar 23, 2016 9:28 am

    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.
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    Post  Austin on Wed Mar 23, 2016 1:12 pm

    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
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    Post  sepheronx on Wed Mar 23, 2016 10:25 pm

    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.
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    Post  kvs on Wed Mar 23, 2016 11:16 pm

    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.
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    Post  higurashihougi on Thu Mar 24, 2016 10:21 am

    How about a new TPP with the leadership of Russia Cool Cool Cool

    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.”
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    Post  kvs on Fri Mar 25, 2016 1:19 pm

    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%.
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    Post  kvs on Fri Mar 25, 2016 4:03 pm

    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

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    Post  sepheronx on Sat Mar 26, 2016 3:45 pm

    Russia Adds $6 Billion to Its Gold Reserves in a Week
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    Post  kvs on Sat Mar 26, 2016 3:48 pm

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

    The end is nigh.

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    Post  sepheronx on Sat Mar 26, 2016 3:52 pm

    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.
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    Post  JohninMK on Mon Mar 28, 2016 2:14 pm

    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
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    Post  kvs on Mon Mar 28, 2016 8:37 pm

    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.

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    Post  magnumcromagnon on Tue Mar 29, 2016 5:52 am

    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?
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    Post  sepheronx on Tue Mar 29, 2016 5:56 am

    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.
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    Post  Austin on Tue Mar 29, 2016 2:48 pm

    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
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    Post  Austin on Tue Mar 29, 2016 2:54 pm

    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.
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    Post  kvs on Tue Mar 29, 2016 11:28 pm

    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.
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    Post  kvs on Tue Mar 29, 2016 11:30 pm

    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%.
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    Post  higurashihougi on Wed Mar 30, 2016 4:47 am

    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/
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    Post  higurashihougi on Fri Apr 01, 2016 3:55 pm

    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.
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    Post  Austin on Sat Apr 02, 2016 8:28 am

    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 ?
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    Post  sepheronx on Sat Apr 02, 2016 8:46 am

    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.
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    Post  Rmf on Sat Apr 02, 2016 9:14 pm

    well roshydro got credits to build few hydropower plant in far east and supply electricity to china, its big potential there.
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    Post  A Different Voice on Wed Apr 06, 2016 7:20 pm

    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
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    Post  Project Canada on Thu Apr 07, 2016 1:28 am

    China wants to move factories to Russia Shocked

    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..

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