Russian Economy General News: #4

Viktor wrote:Nice  

​Russia ratifies $100bn BRICS New Development Bank

sepheronx wrote:We will save the Chinese consumer goods

There is a flaw with the thinking in this article:

"For garment production and light industry today's crisis - almost a disaster - said the head of the center of research of the Russian University of Cooperation Andrew Arno. - In Russia now almost do not produce high-quality fabrics and accessories, in addition, all the sewing machines, with rare exceptions, imported, which means that the cost of components also increased. "

The problem people don't seem to realize is that yes, the initial investment is high, but over time, the products will become cheaper as the equipment will pay for itself over that time.  No investment is instantly a huge success.  As well, they can now source the garments from other countries like Bangladesh and India where cloth and material is much cheaper, so domestic makers of clothing in Russia will be able to still make products cheaper with cloth from the other countries where their currency are more on par with the Ruble.  They can even purchase from Iran the cloth.  There is also the development of a genetically modified cotton plant that can grow in Russia, so they can also grow cotton domestically.

sepheronx wrote:
What is Russia's option in this case?

The exchange rate concept is a total joke as the Ruble is still fluctuating a lot (same with CAD) to that of a currency from a country extremely heavily in debt.  A joke and makes me wonder much about the economy.  The Ruble should be printed by the government and handed out to the civil market and hopes to increase print while increase circulation.  Screw what its value is to USD, they need to do what they need to do in order to expand and survive.  These fiat currencies are nothing but.  A gold, Silver and Platinum currency needs to exist for Russian importing and exporting unless the country they are importing/exporting to agree to use Rubles and or their respective currency at an exchange rate between their demand.  And in this case, a proper oil barter hq needs to be setup in Russia, much like the gas one that was opened recently.  Heavy investments of Russian currency in domestic market for development specifically for the high demand products that have become too expensive.  Like electronic components and garment items.  Problem all surround both the bank, the government and the CBR.

sepheronx wrote:

ahmedfire wrote:New BRICS bank ,Russian SWIFT , trade-exhange with ruble currency with other many countries..etc, thats how you catch U.S balls.

Did EEU/Russia sign a free trade deal with Egypt yet? Cause that will be the next smartest move as Egyptian goods will do well in Russia and it seems Egypt is interested in both military and civil goods from Russia. Both countries need to work closer, same with Venezuela and the likes.

TheArmenian wrote:
By the way, some of the biggest losers are the US makers: GM (Chevrolet and Opel) and Ford
Hurting the US automakers without placing sanctions

MOSCOW—Russia sharply raised the amount it plans to draw from its reserve fund to support this year’s budget, as revenues fall along with oil prices and Western sanctions cut the country off from international financing.

In addition to tapping the fund—money the government put aside in the years when oil prices were high—spending by ministries and departments will be cut 10% to keep the deficit from growing too much, Finance Minister Anton Siluanov said Friday.

President Vladimir Putin has also cut salaries for workers in the Kremlin by 10%, Interfax news agency reported, citing presidential spokesman Dmitry Peskov.

And in another sign of how strained relations with the U.S. and Europe over Ukraine are reverberating in the economy, Russia signaled it would consider allowing Chinese investors to take majority stakes its strategic oil and natural gas fields, reversing years of opposition.

First Deputy Finance Minister Tatiana Nesterenko said that the authorization for tapping the reserve fund—the first in six years—would have to be raised to 3.2 trillion rubles ($52.3 billion), or more than half its value. The original expectation in mid-January was for 500 billion rubles.

In the worst case, she said, the fund, which stood at 5.89 trillion rubles as of Feb. 1, could fall to around 1 trillion rubles by the end of the year.

“The current year will be challenging for the Russian economy. A sharp drop in oil prices, sanctions, all these require a serious alteration in the Russian economy, an adjustment to the new external conditions,” Mr. Siluanov told a gathering of finance officials.

Western sanctions related to the Ukraine crisis have had a visible impact on Russia, sending its economy into recession and cutting it off from international capital markets. This has limited its borrowing capacity and for the first time in recent years, the budget plan doesn’t envisage any specific amount of borrowing.

The finance ministry had long been planning to balance the budget by 2015, betting initially that prices for oil, Russia’s main export, would stay around $100 a barrel.

The new estimate reflects the government’s more conservative economic forecast for this year, which forecasts an even, lower average oil price of $50 per barrel, from $60 in the previous version, and a deeper contraction in gross domestic product.

The combination of the two will cut budget revenues sharply, forcing the government to take more money from the reserve fund to meet spending commitments. This year’s revenue will be the lowest in 15 years, Ms. Nesterenko said.

Without the use of the reserve fund, the 2015 budget deficit could reach 4.7% of gross domestic product, compared with around 1% in 2014.

Dipping into the reserve fund will also further drain Russia’s international reserves, of which the fund is a component. Reserves slipped below $365 billion for the first time since 2009 this week.

The risk of a rapid depletion of Russia’s reserves was one of the key reasons behind a decision by Moody’s Investors Service Inc. to downgrade the country’s rating to junk a week ago.

Meanwhile, as the Kremlin searches for investment in needed to develop its energy reserves, Deputy Prime Minister Arkady Dvorkovich said “there are no political obstacles” for Chinese investors.

“We are on the threshold of a serious investment breakthrough,” he said.

Russia’s oil industry needs modern technology and expertise as well as investment to develop its fields, and to extend lives of the old ones. But for years the Kremlin limited foreign participation in developing large oil and gas fields to minority stakes.

However, with the Western sanctions over Ukraine affecting Russian energy companies, the Kremlin has started to push for closer relations with Asia. Energy-hungry China has long sought a bigger role in Russia’s oil and gas production

Last year Russia signed a $400 billion deal with China to supply it with 38 billion cubic meters of natural gas a year from 2019. There is no significant upstream oil production so far in projects with the Chinese companies.

flamming_python wrote:

TheArmenian wrote:
By the way, some of the biggest losers are the US makers: GM (Chevrolet and Opel) and Ford
Hurting the US automakers without placing sanctions

None of which is good news to Russia though, I'm afraid.

These US automobile makers employ thousands of Russians, including many fine engineers, specialists, etc...
Their pay is typically above the Russian-average, given that their activities are largely concentrated in the richer regions of the Russian Federation; e.g. St. Petersburg and Kaluga.
They also pay large amounts of tax roubles into the federal budget.