Russian Economy General News: #6

In July, Russia’s service sector grew at the fastest pace in almost three-and-a-half years, according to the monthly Markit Economics survey. Service providers have expanded for a sixth straight month, leading to the first increase in the workforce since February 2014.

Project Canada wrote:Oil prices are starting to go below the $40 mark again, these fluctuations is not doing the Russian economy any good as long as a large chunk of it is dominated by the petroleum industry, Does anyone have an estimate how long it will take for the current "Economic Diversification" drive (if they are actually serious about it) to start affecting economic growth in Russia without reliance to energy prices?

The European Union has imposed anti-dumping import duties on cold-rolled flat products of iron or non-alloy steel produced in Russia and China.

higurashihougi wrote:https://www.rt.com/business/354619-eu-tax-russia-steel/?utm_source=browser&utm_medium=aplication_chrome&utm_campaign=chrome

The European Union has imposed anti-dumping import duties on cold-rolled flat products of iron or non-alloy steel produced in Russia and China.

magnumcromagnon wrote:

higurashihougi wrote:https://www.rt.com/business/354619-eu-tax-russia-steel/?utm_source=browser&utm_medium=aplication_chrome&utm_campaign=chrome

The European Union has imposed anti-dumping import duties on cold-rolled flat products of iron or non-alloy steel produced in Russia and China.

Yet liberals like Medvedev will swear by the WTO, and demand not to apply responsive measures.

The War of Sanctions: New Casualties for the European Union

The Russian Ministry of Economic Development has published some statistics that many in the West still prefer to ignore. Those reveal that the European Union, US, Canada, Norway, and Australia have lost an annual market worth $8.6 billion, due to the sanctions they introduced against Russia. In tonnage, Russian food imports from those countries decreased by 98.9% – from 4.331 million tons to 46,500. “You could say that a sales market has been lost within the Russian Federation that was equivalent in value to the reduction in such agricultural imports from those countries,” emphasized the Russian Ministry of Economic Development in a statement.

That office also offered a rough estimate of the financial toll on the countries of the EU – as much as 50 billion euros per year. That is equal to approximately 0.4% of the EU’s total gross domestic product.

That is a significant figure, considering that in 2015, according to Eurostat, total economic growth in the EU amounted to 2% of GDP, but only 1.7% in the eurozone nations. Even more revealing are the comparative figures for the last decade, which are able to include in their calculations not only the period of the financial and economic crisis, but also the EU’s “fatter” years.

According to Eurostat’s data, the economy of the entire European Union has grown by an average of 1% per year since 2004. But in the eurozone that growth was only 0.8%. The war of sanctions against Russia is eating up about half of the EU’s average annual economic growth.

However, this is averaged data from across the entire EU. An even clearer picture is obtained if this is extrapolated to individual countries, taking into account not only their direct but also their indirect losses. Thus, according to the analysts at the General Invest holding company, in 2014 alone – the first year of the sanctions – the toll suffered just by companies in Italy amounted to approximately 20-22 billion euros. This includes the losses incurred not only by companies that trade directly with Russia, but also by those that maintain an indirect presence on the Russian market through other European Union member states.

The Italian newspaper La Stampa has sounded the alarm: the sanctions war with Russia has touched off a “perfect storm” that has wrought havoc on Italy’s manufacturing sector. Italian exports to Russia effectively imploded last year, plunging 34% – from 10.7 billion euros in 2013 to 7.1 billion in 2015. La Stampa writes, “Machine-building, which accounted for 34% of all our exports to Russia, lost 648 million euros in 2015, while the apparel industry lost 539 million (a drop of 31%), motor vehicles – 399 (down 60%), footwear – 369, and furniture – 230.”

Long ago, Italian experts were among the first to warn of the dire effects of the sanctions war with Russia. In the next few months Italy could prove to be the “bomb” that will blow up the fragile financial (and hence political) stability in the European Union.

Federico Santi, an analyst with the Eurasia Group, a political-risk consultancy, claims that as we enter the second half of the year, the situation in Italy and its consequences for the rest of Europe may prove to be the biggest macro-political risk. The Italian banking system is weighed down under the massive ballast of non-performing loans and the aggressive policies of Germany and Deutsche Bank, which are using the crisis in the eurozone to strengthen their own positions. Government officials in Italy have reported 200 billion euros worth of “bad” loans (about 10% of their total), and independent experts would bump that up by another 160 billion euros (which is an unprecedented figure for the national banking system and comparable only to the numbers found in Greece).

In 2015 Italy’s third-largest bank – Monte dei Paschi di Siena – held 46.9 billion euros of overdue loans. Matteo Renzi’s cabinet has already launched into a fierce polemic against Berlin and Brussels, accusing them of the inability and unwillingness to effectively address the eurozone’s financial problems and demanding that national governments be given the right to take their own measures to combat the crisis, with an eye toward their particular socioeconomic situations, which would include recapitalizing debt.

But Nicholas Spiro, a consultant with Lauressa Advisory, believes that the stakes are too high in Italy for politicians not to adopt a plan to recapitalize Italian banks. At the same time, Brussels and Berlin are hesitant to take their own emergency measures to rescue the Italian banking system at European taxpayers’ expense, given the upcoming elections in Germany and France.

The results of the stress tests on EU banking institutions that were conducted by the European Central Bank and released in late July show that the Siamese triplets known as Italy, France, and Germany could soon bring down the entire financial system of the European Union. Just in the last few months Deutsche Bank shares have dropped 25%, those of the French bank Société Générale – 23%, and the Italian bank UniCredit – almost 30%. And the 47 billion euros of “bad” loans found on the balance sheet of Banca Monte dei Paschi di Siena account for more than 40% of the bank’s total credit portfolio.

Financial problems, coupled with the decline in manufacturing, make for a truly explosive mix, not only for Italy but throughout the European Union. However, Brussels is apparently still focused not on that, but on continuing the sanctions war against Russia.


The War of Sanctions: New Casualties for the European Union

- Tell us about the current state of Sino-Russian relations.

- To begin with I would say that China and Russia - are good neighbors, partners and friends. In 2015, China and the Russian trade totaled $ 68 billion, including exports -. $ 34.8 billion, however, in the first half of 2016 the volume of trade increased by 1.8% compared to the same period last year and amounted to $ 31.72 billion . Thus, Russia among China's key trading partners has moved from eleventh place in 2015 to tenth.

The main areas of investment in 2016 from China to Russia for energy, natural resources, forestry, construction materials production and trade. During 2015 the amount of contracts signed between the two countries is $ 20 billion. Sino-Russian relations are characterized by complementarity.

Besides bilateral relations, countries are actively cooperating on regional and multilateral projects, including in the framework of the SCO. There are projects to create a "Silk Road" and the EAEC, as well as - for the organization of the economic corridor between China, Russia and Mongolia. I stress that China and Russia play a leading role in regional cooperation. We are currently actively negotiating on a free trade zone within the SCO.

- As now is the development of large projects between the two countries? Is there a delay in their implementation?

- Large projects between China and Russia are developing successfully, they concern many sectors. For example, in the energy sector - is a project "Power of Siberia", which is now being actively implemented. The parties are working on a gas pipeline "Altai" and the project "Yamal LNG", as well as on the draft joint refinery in the Amur. In civil aviation, China and Russia signed an agreement on joint development of long-range wide-body passenger aircraft and helicopters. Now we study the possibility of cooperating in the development of aircraft engines.

The space industry signed an agreement on the basis of electronic components for space purposes, there are joint projects of exploration of the Moon and outer space, as well as satellites of remote sensing and satellite navigation systems.

As for the high-speed railway, the parties now agree on the terms of financing high-speed highway Moscow-Kazan. China has engaged in intelligence and design work. In the construction industry projects are being implemented to create a cross-border corridors, until the end of 2016 it is planned to begin construction of the cable car across the Amur.

Currently, preparations for the signing of the agreement on transit between China and Russia. With regard to trade in agricultural products, it has recently signed an agreement on the possibility of Russian wheat imports to China. This corresponds to a comprehensive strategic cooperative partnership between the two countries. Of course, in the process of implementation of these projects may have questions, but we are confident that we will be able to reach a compromise.

- You have mentioned that the process of coordinating the timing of funding high-speed highway Moscow-Kazan. In September it is planned Vladimir Putin's visit to China. Perhaps if the signing of the final document on financing during this visit?

- For us, this project is of great importance, but I can not say when it will be signed the final agreement. The Chinese side hopes that the parties jointly in the near future agree on financing mode to quickly begin its implementation.

- Is China Russia an attractive investment market?

- China and Russia border on each other, and our relationship, as I said, are characterized by complementarity. Of course, your country for the Chinese business is very attractive. Against the background of active development of the Sino-Russian relations in the near future, it is Russia will target overseas market for Chinese business.

Beijing is the sixth year maintains the status of the first trade partner of Moscow. For example, in 2015 the Internet business volume between China and Russia reached $ 2.7 billion, accounting for more than half of the total turnover of e-business in your country. So, Russia became the main country of import of Chinese goods through the Internet. According to statistics from 2015, 80% of the goods that Russian consumers buying over the Internet, made in China. However, a lot of Russian goods is represented, for example, in AliBaba Internet service.

With the improvement of market conditions and the investment climate in Russia, especially with the pace of the implementation of Russia's strategy to promote the development of the Far East, more and more Chinese enterprises in Russia comes to investments.

- Russia is actively developing in the Far East area of advanced development. Is China going to invest in these areas, and if so, what projects?

- Since the end of 2014 the Russian government implemented measures to develop the areas of advanced development of the Far East and the Free Port of Vladivostok. They are not the only sources of growth for the Russian economy, but also provide an opportunity to strengthen relations between China and Russia. Already established and operates the Cooperation Council between the regions of the Far East and northeast China, is an intergovernmental mechanism. As part of the Board defines the overall direction of the work. Some Chinese companies have already applied for accreditation as a free port, and priority development territories. Parties refining complex in the Amur region, as well as cement production plant will be jointly established. Ministry of Commerce of China will encourage Chinese companies to invest in the territory of priority development.

- You said that the wheat supply constraints in China, which were introduced many years ago, now partially lifted. At the same time the supply of Russian meat in China, including poultry meat, develops not very clear situation. When the restrictions are lifted?

- At the end of last year it was signed a quarantine protocol between China and Russia, and this year's supply of soybeans, corn and canola from Russia have already begun. Now we are working on the conclusion of the same protocol on oats, buckwheat, sunflower seeds and flax. We welcome the supply of agricultural products from Russia to China and at the same time, we hope to export the Chinese high quality products in the Russian relations to be more balanced. As for the meat, then 1 July relevant departments of China issued a message on the abolition of the ban on poultry due to the end of the epidemic of avian influenza - ie technical restrictions have been lifted. Now we need to wait for the order of sanitary-epidemiological service, after which the supply of meat to resume poultry. In pork and beef conditions for the lifting of restrictions is not, as in Belarus, cases of African swine infection is now fixed.

Daria Choi

Kudrin to propose new economic development plan to Putin

https://www.rt.com/business/355042-kudrin-russian-economy-reform/

Russia to lower tariffs on EU's paper, fridges after WTO ruling

Russia has violated its trade commitments by inflating tariffs on supplies of palm oil, paper and refrigerators from the European Union, a World Trade Organization (WTO) said on Friday, in its first ruling on Moscow since Russia joined in 2012.

The decision of the WTO panel comes after the EU accused Russia of levying higher-than-permitted tariffs on the products in 2014, and Brussels and Moscow failed to settle the disagreement between themselves. [reut.rs/2bnkpdL]

Russia says that since then it has already downgraded most of the tariffs at the centre of the spat and will lower the rest - on paper and refrigerators - in the near future.

"Russia has never denied that due to technical reasons the import tariffs on certain products were differing from those which were set in its tariff liabilities," Russia's Economy Ministry said in a statement on its website economy.gov.ru on Friday.

The EU contends Russia's higher duties have had a clearly negative impact on exports of products worth some 600 million euros (517 million pounds) annually.

Following the ruling, the European Commission said the WTO decision highlights Russia's failure to live up to its trade commitments.

"Despite being a WTO member since August 2012, Russia has not yet fulfilled some of its commitments made before its accession," the Commission said in a statement. "This includes one of the WTO’s most fundamental rules, according to which its members must not apply customs duties" exceeding levels to which they pledged.

The Commission did say Russia had taken steps to bring some of the challenged measures into compliance over the course of the panel's deliberations.

EU officials have said the matter is not linked to the West's conflict with Russia over its role in the Ukraine crisis.

In its decision, the WTO panel ruled in favour of the EU on 11 of 12 measures at issue, saying Russia's tariff treatment of the goods was inconsistent with its obligation not to apply tariffs exceeding those it had committed to in its WTO schedule.

http://uk.reuters.com/article/uk-wto-russia-eu-idUKKCN10N1MC

sepheronx wrote:Well worth the read:

Putin: Nyet to Neo-liberals, Da to National Development http://journal-neo.org/2016/08/02/putin-nyet-to-neo-liberals-da-to-national-development/

Leading Economists Predict Russia Will Emerge From Recession Next Quarter

Bloomberg economists believe that Russian economy is on its way to emerge from its worst recession in two decades. Rising volumes of energy consumption and cargo transportation are signals to steady recovery, experts say.

The country's GDP in the second quarter of the current year will contract the least since the beginning of 2015, when the economy slipped into recession, say experts surveyed by Bloomberg. The expected GDP drop is likely to be only 0.8 percent from a year earlier.

According to Vladimir Sklyar and Anastasia Tikhonova of Renaissance Capital, "A fundamental infrastructure sector such as electricity offers a good reference point for the economic health of a country overall."

The experts note an upsurge in orders in the sector this year, adding that significant payments take a long-term positive view on economic trends. This means that Russia's economic players are more confident than a year ago, the experts say.

Annual profit in electricity demand is rising steadily, from only 0.4 per cent growth in May to 1.8 per cent in July.

Another key point is cargo and container transportation. The analysts say that rail cargo volumes increased by 1.8 per cent since January 1st, compared to last year's numbers. Building supplies shipments, in the meantime, display a rise of 19 per cent.

Russian currency displayed a growth of 4.8 per cent against the dollar during the last quarter, with its volatility declined to its lowest in two years. The demand for ruble bonds exceeded supply at an auction on Wednesday. Interestingly, Russian ruble is best performing emerging market currency after Brazilian real.

Analysts at Uralsib believe that this moderate recovery will extend into the second half.

According to Alexey Devyatov and Olga Sterina of Uralsib, "The recovery remains fragile due to downside risks associated with the oil price, sluggish growth in the US, Brexit and the risk of economic crisis in China."

The Russian central bank is reportedly expecting the GDP to display growth by 0.4 per cent compared to last three months, without any shocks projected.

http://sputniknews.com/russia/20160814/1044245327/russia-emerge-recession-bloomberg.html