Russian Economy General News: #13

Nominal GDP comparisons are totally meaningless.   The PPP is an attempt to compare apples to apples, but even so it is not ideal as we
see in the case of Russia where swathes of the real economy are missed.   Also, all that financial industry in NATzO that fluffs up its collective
GDP is worth jack.

GarryB wrote:No reason to have an artificially strong ruble. It makes imports cheaper and it makes exporting less profitable.

When you make stuff then a strong currency is not a great idea....

If you import food and energy then a strong currency is good but when you export food and energy then a weak currency increases exports and makes it more practical and sensible to buy local produce... which is good for your economy and the economies of those you trade with.

Inflation is only a problem if wages do not correspond with it. Technically, since Russia has zero access to western markets, they could essentially force the Ruble to a valuation of something they may have large reserves of. So for instance the Yuan is tied to x amount of USD. Well, they could make Ruble x amount of Yuan (less value than Yuan) and it would still be big money for Russia. Issue is they would need to use reserves to help prop it up and keep it at the rate of Yuan and if the Yuan appreciates too much (something China doesnt want), then it can be a problem.

Other way to do it is like Iran and have two currencies. Ruble for internal use and external use is another currency of their own design. But that becomes expensive to upkeep and confusing.

Or let it just fluctuate on its own. This is cheapest method but risks high inflation. But that can be controlled with some reserves and other ways is to increase production to lower overall costs of goods.

There isn't a sure fire way to handle the situation if in case Russia ends up having inflation issues. But best economic method is what I proposed many many years ago and what was needed to shield itself from the current world economic issues and that is a form of autarky. If Russia no longer relies on imports for the domestic consumer market, produces everything it needs and be able to operate internally, then anything outside of that isn't important. But since they have easier access to China and Iran economically, they would still be able to import goods anyways and also export.

Eventually Russia cannot rely on China and India. Instead it needs to rely entirely on itself.

Russia has overcome its critical dependence on Western gas turbines, by Olga Samofalova for VZGLYAD. 05.06.2024.

Russia has overcome its dependence on high-power gas turbines from Siemens and General Electric, said Rostec head Sergei Chemezov. And Russia, unlike Iran, did this thanks to its own brains and technology. The first production turbine will be installed at a power plant on the Taman Peninsula. How did Russia end up in such critical dependence on Western turbines?

Russia has overcome its dependence on the supply of foreign-made high-power gas turbines, said the head of the Rostec state corporation Sergei Chemezov at a meeting with Prime Minister Mikhail Mishustin.

“We are installing a high-power turbine GTD-110M at the Udarnaya station, which is being built on the Taman Peninsula. This is the first production turbine. We are confident that we can be independent from Siemens and General Electric. We built three stations. This is the third one. Two stations were built in Crimea and one on the Taman Peninsula - “Udarnaya”, which we will fully launch this year,” Chemezov noted.

GTD-110M is a high-power serial gas turbine engine. Such turbines are used in modern thermal power plants and gas power plants.

Developers: Inter RAO, Rusnano (Gas Turbine Technologies Research Center) and UEC-Saturn (a subsidiary of Rostec). Produced at UEC-Saturn in Rybinsk, Yaroslavl region. Serial production from 2024 - two units per year.

“In-house high-power gas turbines are the Achilles heel of the Russian energy industry. Russia has been struggling to localize turbine production technology for more than 10 years, and in addition to Rostec, there are Power Machines projects for 65 MW and 170 MW. This will make it possible to replace failing installations from Siemens and General Electric, which are installed at new gas stations,” says Sergei Grishunin, managing director of the NRA rating service.

“A gas turbine is the size of a small house and can supply the energy needs of an entire, albeit small, city. For a long time it seemed that there was simply no alternative to companies like Siemens.

However, last year the big four gas turbine manufacturers had a combined net loss of almost five billion euros. Therefore, the release by Rostec of the first Russian serial turbine is an extremely important event. After all, we can talk not only about the replacement of Western products, but even about potential competition. This is an achievement of a qualitatively different order,” says Pavel Sevostyanov, Acting State Advisor of the Russian Federation, Associate Professor of the Department of Political Analysis and Social-Psychological Processes of the Russian Economic University. Plekhanov.

The key point here is that high-power turbines have begun to be mass-produced, notes Nikolai Pereslavsky, head of the “Support” department at CMS Group.

Russia itself has not produced such powerful gas turbines. We knew how to make small and medium-sized gas turbines, but not with a capacity of 100 MW or more. Therefore, when they began to actively build power plants in the 2000s, turbines began to be purchased from Western companies - Siemens and General Electric. Then joint ventures were created with these companies, but it is difficult to talk about deep localization of production. At the same time, foreign companies made money in Russia not only from the sale of their turbines, but also from their maintenance and repair.

HSE experts previously calculated that Russia’s dependence on the import of gas turbines in 2022 was more than 90%, and this is a critical dependence. But after 2022, their main suppliers Siemens and General Electric stopped working with Russia and left joint ventures. Therefore, the task of importing high-power gas turbines has become even more urgent. As a temporary solution, Western turbines began to be replaced at a number of facilities with turbines of lower power.

How did it happen that Russia ended up being so dependent on Western high-power gas turbines? Some technologies were lost with the collapse of the USSR. The fact is that during the Soviet era, the production of high-power gas turbines, including for Navy ships, was located on the territory of Ukraine, and the RSFSR had the production of aircraft engines. After the collapse of the Soviet Union, these competencies remained in Ukraine. At first, the neighbor supplied gas turbine engines for ships of the Russian Navy, but gradually economic ties were disrupted: the Nikolaev Zorya-Mashproekt plant did not fulfill its promises, which is why Russia was unable to continue building a number of ships for the Russian Navy.

It cannot be said that Russia did not try to create high-power gas turbines itself. The development of the GTD-110M gas turbine began back in the 1990s. And it was developed precisely on the basis of refining the previously unsuccessful model of the GTD-110 engine from the Nikolaev Zorya-Mashproekt plant.

A new turbine was developed and was even used at the Ivanovo State District Power Plant and the Ryazan State District Power Plant in the late 2000s. However, the product turned out to have many “childhood diseases”. As a result, the turbine was never completed, the project was abandoned - and it was decided to take a simpler and faster path. Since the 2000s, Russia began to buy high-power gas turbines abroad. They were installed en masse at power plants under construction in Russia.

“The difficulties in creating large gas turbines lie in the high technological requirements and complexity of engineering solutions. The development of such equipment requires in-depth knowledge of materials science, heat transfer, aerodynamics, and precise manufacturing processes. Experience in the aviation industry is certainly useful, but technology transfer between sectors takes time and effort,” says Yaroslav Kabakov, director of strategy at Finam Investment Company.

Perhaps in the past, Russia chose the path of purchasing foreign installations not so much because of a lack of competence, but because of economic feasibility and accelerating the deployment of new energy capacities, the expert believes. Now, in the context of political and economic trials, priorities have changed. “Today, the ability to independently produce key components for energy infrastructure is becoming a matter of national security and economic sustainability,” says Kabakov.

Russia has comprehensively returned to creating its own high-power gas turbine after the scandal in Crimea, when Siemens announced a ban on the use of its installations, and before that the issue was dealt with on a residual basis, says Grishunin. However, it was not possible to quickly create a turbine. In 2017, it was damaged during testing and had to be modified.

“Gas turbine units are a product of the highest engineering qualifications, both in terms of project development and technical implementation. The first GTD-110M installation in 2017 was destroyed during testing, and this is normal for such complex equipment. Similar accidents occur with prototype installations in China, where the number of engineering personnel is incomparable to ours. An increase in the weight of rotating structures inevitably leads to a sharp risk of imbalance, which at such speeds simply tears the installation into pieces, so the appearance of a working series is a huge step forward and a merit of the country’s engineers,” says Sergei Grishunin.

As a result, the Rybinsk “ODK-Saturn” coped with the task, and “childhood diseases” were cured. The turbine was modified, passed successful tests at the Ivanovo PSU - and mass production began. “The domestic turbine has lower weight and dimensions and higher fuel efficiency. It is planned to produce two turbines per year with increasing production and over time to replace all imported units with domestic ones,” says Pereslavsky.

In parallel, another Russian company, Power Machines, is developing a high-power turbine. More than 150 highly qualified engineers are taking part in the creation of the GTS-170; it is necessary to create and produce 1,600 turbine equipment units. These numbers highlight how complex and multidisciplinary this task is, says Pereslavsky. Power Machines plans to produce 12 such turbines per year. Competition in this sector within the country will not hurt.

In addition, it will be easier for the two manufacturers to cope with the expected demand for such turbines.

“There are about 310 gas turbine units in operation in Russia today. Each costs approximately 3-4 billion rubles. Accordingly, by 2035, foreigners could receive 1.5-3 billion dollars in Russia only for the supply of equipment, without taking into account spare parts and the cost of installation and repairs,” says Grishunin. However, now future orders will go to domestic manufacturers - and the money will remain in the country.

Moreover, Russia will not have to purchase such turbines from Iran, which was discussed in 2022.

The fact that Iran has long been able to produce high-power gas turbines, unlike Russia, is not surprising. Iran did not create its own, it was just that at one time it was able to get Siemens to retain a license to produce such turbines despite sanctions, by importing materials and parts. But Russia created its own high-power turbine from scratch.

Of course, there is no need to replace all gas turbines with domestic ones in the near future. Because the average service life of a turbine at a thermal power plant is 30 years, with the possibility of extension. And often Siemens or General Electric equipment at our thermal power plants was supplied in 2012–2017, that is, it is considered quite new. However, there is a market for domestic turbines. According to calculations by the Russian Union of Industrialists and Entrepreneurs (RSPP), by 2027 Russian generating companies will need 28 high-power gas turbines, notes Vladimir Chernov, an analyst at Freedom Finance Global.

Rostec estimated the market needs until 2035 at 50 such installations. However, if the development of the Far East and new regions intensifies, the need may increase by 25-30%, Grishunin believes.

“In my opinion, in a year or two, Russia will enter the top league of the world turbine industry in terms of volume and quality and will seriously compete with foreign companies that have left the domestic market,” concludes Pereslavsky.

https://vz.ru/economy/2024/5/6/1266443.html

Perhaps in the past, Russia chose the path of purchasing foreign installations not so much because of a lack of competence,
but because of economic feasibility and accelerating the deployment of new energy capacities, the expert believes.

It's not "perhaps" but exactly because of economic considerations. If there are no Russian products on the market, then you have
to shop elsewhere. The 1990s Yeltsin shock therapy makeover was intended to deindustrialize Russia and make it into a banana
republic dependent on the west.

But the key detail is that Russia did not roll over and development projects and training of highly qualified personnel kept going in spite
of the economic collapse. This applies to military and civilian sectors.

Russia is building tourism sovereignty, by Katya Zorina for VZGLYAD. 05.06.2024.

The growing popularity of domestic tourism in Russia goes beyond just recreation, entertainment and even economic development. Domestic tourism requires its own convenient transport, comfortable hotels and quality services - and ultimately turns out to be one of the conditions for the state sovereignty of Russia.

Just ten years ago, the main and most desirable type of holiday for Russians was outbound tourism - primarily to Turkey, EU countries and Southeast Asia. Now domestic tourism, traveling around Russia, is becoming the most popular. This trend was outlined even before the coronavirus pandemic and even before the SVO. The beginning of a reorientation of Russian passengers from outbound tourism to domestic tourism was noticed by Russian Railways back in 2015 . After this, this trend was reported at the All-Russian Congress of Tour Operators.

“This is an economic and even political issue”

Today, domestic tourism in Russia is not just one of the most dynamically and efficiently developing industries. In the summer of 2023, President Vladimir Putin said that domestic tourism was experiencing “explosive growth.” Interest in traveling around Russia is steadily growing, as are the financial indicators of the industry. The contribution of tourism to Russia's GDP at the end of last year was 2.8% . In 2023, Russian residents made 78 million trips within the country, which is 21% more than in 2022, and in 2022 - almost 15% more than a year earlier.

Obviously, growth will continue in 2024. According to the Government Coordination Center, 65% of Russians plan to spend their holidays traveling around Russia, and the proportion of such citizens is growing. About 53% planned to travel around the country in 2023, and 38% the year before last.

Domestic tourism is one of the most dynamically growing areas in the segment of small and medium-sized enterprises (SMEs). In the first quarter of this year alone, the volume of sales of tourism products increased by a third, the revenue of travel agencies by 40%, and hotels increased volumes by 20%.

The support measures adopted by the state, such as the abolition of VAT for hotels and tour operators operating in the field of domestic and inbound tourism, as well as the tourist cashback program on Mir cards, which operated in 2020–2022, played a role in the success of the tourism industry.

Inbound tourism is also reviving. After a sharp three-year decline primarily due to the pandemic, the industry showed growth for the first time. In 2023, according to the Border Service of the FSB of the Russian Federation, foreigners entered Russia for tourism purposes 670 thousand times. Over the year, the flow of foreign tourists to our country increased 3.5 times.

Experts expect that the recovery in tourist flows from abroad will continue this summer. And if earlier tourists from Europe flocked to Russia, now the focus has shifted towards the Middle East, China and Southeast Asia. At the same time, China is the leader in entry. At the same time, sometimes the most unexpected things become the subject of tourist attraction for foreigners. For example, many young Chinese families flock to the Murmansk region in winter to watch the aurora. According to Chinese belief, a child conceived under the northern lights will have exceptional intelligence and good fortune.

In general, the potential of the Russian tourism industry is much higher than even the results that it is showing now.

For comparison, the contribution of tourism to Turkey’s GDP in 2021 was about 7%, Italy and Spain - 8-9%, Australia, Canada, India at 5%. Russia can also achieve similar indicators. President Vladimir Putin set the corresponding task. “Already within the next decade, the contribution of domestic tourism to the country’s GDP should double – to 5%,” the head of state said at a meeting on the development of the federal year-round resort project “Five Seas and Lake Baikal,” held at the end of March. The number of trips within Russia should also increase to 140 million per year.

The head of state considers the development of transport infrastructure necessary conditions for the development of tourism: intra- and interregional, including air traffic, modernization of the supporting network of roads, inland waterways, construction of new high-speed railways and highways. A separate federal project for the production of domestic products for the tourism sector should also be implemented. In addition, the domestic tourism industry requires an increase in the quality of services, the development of the number of rooms, and an increase in the availability of tourism products themselves.

The state pays such serious attention to supporting the tourism sector not only for economic reasons (although this is an important industry for the economy, the development of which has a multiplier effect for many related areas - from public catering and the beauty industry to the production of special equipment and the creation of promising IT solutions). Domestic tourism improves the quality of life, helps to form a national identity and ensures cultural sovereignty. “This is an economic and even political issue - we need people to have the opportunity to travel around our huge, beautiful, interesting country, to know it, to understand it better, this educates a person, fosters love for the Motherland,” the president said about the importance of tourism.

Choice of holiday

Already today, tourism services for every taste are available on the Russian market: traditional beach holidays, excursion routes, sanatoriums and campsites. Trips to the sea are the most popular among Russians; they are preferred by 52% of vacationers. The traditional leaders in this area are the health resorts of the Krasnodar Territory and Crimea, but resorts on the Caspian coast are already successfully competing with them. In addition, new regions are joining the fight for beach lovers, for example the Donetsk People's Republic - they are currently developing a strategy for the development of the Azov coast. The region's leadership notes significant interest in this area from investors - both business and regions providing patronage assistance to the DPR.

With the construction of a large-scale ski infrastructure near Sochi, a real revolution occurred in the winter holidays of Russians. The resorts of Krasnaya Polyana not only turned the Krasnodar region into a year-round recreation center - they showed that a real ski boom is possible in Russia . Hundreds of Russian ski slopes have replaced previously popular foreign winter destinations such as Austria and Italy for Russians.

Water tourism, especially river tourism, is experiencing no less growth. It was reported that in 2023 the popularity of cruises in Russia increased 2.5 times. And already in February 2024, half of all river cruises for the coming summer were sold out . This is facilitated by the renewal of the Russian river fleet, including the tourist fleet. The concept of the “Great Volga Route” has been developed , which should become a driver for the development of 24 regions of Russia at once.

Another popular area of ​​tourism is visiting unique natural sites. At the beginning of this year, Lake Baikal became the most popular destination among Russian tourists. Polls also show the rapidly growing popularity of Kamchatka. Lena Pillars, the Putorana Plateau and many other natural attractions of Siberia attract tourists. Most of them are located in specially protected natural areas. It is expected that by 2030 the corresponding infrastructure will be created in all national parks of the country; now this work is just starting.

In addition to resort holidays and ecotourism, educational tourism is popular - and here the choice is even more diverse. In addition to the traditional historical attractions of large cities (Moscow, St. Petersburg, Vladivostok, Novosibirsk, Kazan) and tourist centers (cities of the Golden Ring), tourists are offered numerous museums and ethnoparks, primarily related to regional culture and historical events. Examples include the Museum of Platband, the Museum of Spoons, the Library of Jam and the Museum of Baklushi, the ethnopark of windmills in the Kursk region and the “Startup of Peter I” tourist route in Voronezh.

Industrial tourism is becoming a growing trend. This is a very developed service in the world - the Japanese Toyota plant is visited by about 300 thousand tourists annually, Volkswagen enterprises are popular in Germany, and the Ben & Jerry's ice cream factory is popular in the USA. In Russia, visiting industrial enterprises is just becoming fashionable, although in the USSR excursions to factories and factories were often practiced and were designed to help teenagers decide on their future profession. Now industrial tourism solves a similar problem - to show the attractiveness of work in a particular industry, the level of technology and quality of production. Among the sites visited are metallurgical plants, coal mines, gold mines, eco-farms and even ice cream factories.

This type of tourism has a direct connection with the economic sovereignty of the country, since it opens up opportunities for domestic industry to Russians.

“The more we show how our industry works, the more people, young people will be inspired by this area, the more they will come to work, implement new projects and give the opposite effect to the new model of economic growth,” noted presidential aide Maxim Oreshkin.

Enotourism stands apart - also, to some extent, a type of industrial tourism. Wineries in the Krasnodar Territory and Crimea, as well as cognac factories in Dagestan, are very popular. This type of vacation allows you to combine gastronomic pleasures and the educational process, immerse yourself in local culture and traditions, and learn a lot of new things not only about winemaking, but also about agriculture in general.

The state intends to pay special attention to the development of automobile tourism. At the moment, this is the most popular way to travel around Russia, preferred by 51% of travelers. Most recently, the government approved the Concept for the development of automobile tourism in Russia until 2035. It provides for the improvement of legislation and state support measures, the development of a network of autotourist routes and infrastructure facilities. “Such trips should be comfortable for people. This requires not only main highways, but also small roads to tourist sites with gas stations, mobile communications, equipped parking lots, and hotels,” said Prime Minister Mikhail Mishustin.

It is expected that the implementation of the concept will almost double the number of tourist trips by car and bus by 2030, from 27 million to 47 million. And will increase the level of satisfaction of motorists with roads and services. Although it’s not bad anyway – 3.55 points out of five possible.

Despite the large-scale development, we can say that domestic tourism in Russia is only at the beginning of its journey. “Our nature is probably the best in the world. In Russia you can find absolutely any landscape, any place,” Mishustin noted . And he emphasized that one of the goals of domestic tourism is to help Russians, especially young people, “discover their country.”

https://vz.ru/society/2024/5/6/1266523.html