Austin wrote:Russia needs a forced Catharsis to wean out of dependencies from West and re-orient to BRICS and Asia which are economies that are growing in real terms and has the potential to grow for decades.
Left to themself they wouldnt move a finger and would happily reply on Europe by selling Energy sit tight and look pretty , Putin will keep presenting his state medal like Friends of Russia or what ever they call to Exxon Chief and BP/Total chief it would be a cozy relationship living off the cream
Even the 2008-2009 crisis when the energy price fell down drastically did not make any changes in Russian Economy structure and they continued to drag on with too much of low efficiencies and dependencies on Energy with Feel Good Statements to chew on ...reason why they had low growth even when Oil price was over $100
Hopefully the EU/US keeps this sanction till the end of the decade atleast , they would need these years to wean away from Western Economies to the East and improve efficiencies and cut the flab that build since 2000 when Oil started going up.
The next sanctions would be blocking Russia from SWIFT ......Sooner the better.
2007 - 2009 was the beginning of the major pushes for technoparks and industrial parks. Half of them are finished and the other half are still ongoing. To say they did nothing is a lie. But they didn't do enough, and they didn't do it quick enough.
Actually, now the industrial and techno parks generate pretty sums. Some of them roughly 30 million rubles a year, some others are more. There was no push to sell their made products outside of the country. I think this will change as there is now being a push for more manufacturing in heavy industrial goods. Russia is growing in exports of agricultural and construction equipment as I have said countless times. Now they are opening up a plant for agricultural equipment in Egypt. Actually, funny thing is, they own Canada's largest tractor making company and sell it under a different brand. So Russia gets a lot of money on owning competitors assets outside of the country. Relying on someone else is also not a good move, to rely on BRICS is dangerous cause really, sorry to say, I don't trust India as an example. Reason why is they are constantly seeking US investments in their country and who knows who they will throw under the bus in order to get it. The I in BRICS can very well be not included in the future cause I can see India more than likely dropping out of it first than anyone, as long as it benefits them and well, with Obama's visit coming up I imagine that will be in the talks.
With Egypt possibly part of a free trade with EEU, same with Vietnam, there will be a huge market for Russian goods in these countries (already they are growing in Egypt as it seems to be the first country to get a huge portion of Russian end goods). Regardless what you or anyone else says, Energy will always be Russia's main export, and for various reasons. 1) it is easy and cheap to extract for Russia, so it is much easier profits, 2) Russian goods will never enter the western market (one of the largest markets) since their products are never popular and there is indeed unfair competition. So Russian end goods will be limited to their own country, developing countries and allied countries. 3) Over abundance and always a demand. Regardless of what is happening now, there will always be a huge demand for it, and will grow as more people are being popped into the world. Only other market that will jump up for Russia to really bring in a lot more money is agricultural sector and other energy sectors. Russian end goods, as good or bad as they may/can be, will never be really heavily exported. Only way is if some brand in Russia decided to open plants up in Bangledesh or India or China and push for their markets. Outside of that, wont ever happen (even if Russia pushed out products greater than their western counterparts).
My understanding of Chile's economic model is one of self sufficiency to gain modest growth of 1% per year in its economy. It is part of the whole self sufficiency/reliant and continuous growth in domestic consumer demand. Biggest buyers of goods are the ones with jobs (clearly) and the more manufacturing, the more jobs, and each person pays for each others products (with a small % profit margin) so that it just keeps going around. Inflation grows a little every year, then when there is more currency floating in the market due to the higher inflation, they fight inflation afterwards to lower it down so that the average person can continue to spend. That was the British system for quite some time.
Austin wrote:sepheronx wrote:Shuvalov: the economy enters into a long and deep crisis than in 2008
January 23. FINMARKET.RU - The situation in the Russian economy is "very heavy", the economy enters into a deep and protracted crisis than in 2008. This is not a reason to panic, but the problem can not be underestimated. The need for reform, said First Deputy Prime Minister Igor Shuvalov .
Economy goes to the bottom
"Russia is in a very difficult situation. When asked how we relate to what happens now, I would say that outwardly we are seeing manifestations such as if it is softer than in 2008-2009. But this is only apparent ease. In fact, the depth and complexity, it seems to me that we have a year in a state when we enter into a long and complex crisis, "- said First Deputy Prime Minister Igor Shuvalov, speaking at a forum in Davos session on the situation in Russia ..
According to him, the further development scenarios may be different - the situation could worsen, or, on the contrary, as in 2009, the price of Russian exports turn around and go up, but this does not negate the deep structural problems in the economy.
The trouble of the Russian economy - the lack of modernization
"The trouble for the Russian economy is that the modernization agenda, which appeared due to the crisis in 2008, was quickly eroded with increasing oil prices and quickly began to change in 2011-2012, many began to think that everything is fine, formally ended the crisis. But in fact there is no crisis, we have not experienced, "- said the first deputy prime minister.
"In fact, the crisis we did not come out, and then began to move to another, even before the events in Ukraine, and it became clear - here it is a structural crisis, here he comes. Then came the summons sanctions. All this, of course, very unpleasant. But I reacted to this so - maybe it's another chance not to be missed Russia. After a series of decades, we will be able to assess whether able Russia to seize it, "- he added.
The agenda of reforms can "disappear" if export prices start to rise, but it is possible that oil prices may continue to decline. "
Shuvalov said that the consolidation of Russian society around the government - good condition for reform.
"This condition (anti-Russian sanctions), which gives a very good handicap" - said Shuvalov.
"If the Ukrainian crisis was not, and we have entered the phase of the price of oil at $ 47, or if it fell below, and she may have dropped, and there would be factors of Ukraine, sanctions and everything else, it seems to me, the situation was would be much tougher, "- he said.
"Therefore, when such a high consolidation and stringent internal and external conditions necessary to carry out the agenda (reforms). If it were not for consolidation, this agenda was to spend twice as hard," - said Shuvalov.
"To carry out reforms in poor external and internal conditions and low government support of the population - it is unlikely someone will. In this case, you could just flirt and carry out populist promises of social policy", - concluded the first vice-premier.
You can create a new economy and sanctions
In order to develop the economy needs investment, but their involvement is now difficult because of geopolitical factors, Shuvalov said. According to him, the authorities should prepare for the scenario of long-term external constraints, have gone through, for example, South Africa and Chile.
"I do not think there is an opportunity for politicians to quickly resolve the Ukrainian crisis. I treat this as one who has to consider worst-case scenario. Investors will still be looking at the real benefits. We have the experience, both in South Africa sanctions developed in difficult conditions developed in Chile. Is it possible to create a modern economic system with political difficulties? The answer is - it is possible "- Shuvalov said.
Good read actually. Although, Shuvolov thinks best economic models to look at when you are sanctioned and access to foreign credit is gone, is South Africa and Chile's model. Then it occurred to me, back in the 70's during the Angolan Bush war, South Africa had to develop its own defense and other industries when they were sanctioned by US and the rest of the world pretty much. They not only managed to develop their own industry, but also managed to build even Nukes. I have to say, it was quite impressive really. US likes to think their sanctions worked against South Africa, but all it did was make the rich flee the country with their wealth and the rest of the country hold together for a very long time. But in the end, when they decided to end the apartheid, they did it very fast rather than not easing it through (much like the fall of communism) and it created chaos.
I am not familiar with sanctions against Chile in the past (dating somewhere in the 70's) but I am familiar with Iran's, and I would say their economic model is a good one to also look into as well (this is also prime opportunity to sign a free trade agreement with Iran and boost trade with them).
I dont know what model Chile and South Africa adopted but it looks like the best bet for Russia is to integrate with BRICS economies and Asian economies.
Western economies should be transactional at best like sell Oil take money and bye bye.
It better to dump 10-20 % of USD/Euro and keep Renminbi and buy more Gold.
Make Gold Reserve about 30-35 % of total Forex , Renminbi about 20-25 %.
Reduce propotianately USD and Euro mostly USD.
Like I said Russia needs a forced catharisis.
Sanctions would be that.
Ukelele or whatever his name is stated they are dumping $88B of USD treasury bonds for Rubles to act as liquidity to the local banks. That would essentially be all of their USD FOREX gone. I guess rest of it will come from current deals of its export of oil/gas. Outside of that, it is essentially the dump of USD. I think increasing amount of Renminbi is good. But Gold and other currencies may be good, like Vietnams currency, or Iran's currency.