Russian Economy General News: #6

max steel wrote:

sepheronx wrote:Russian Ural Blend will more than likely be its own thing in the market this year due to Russias push foe the benchmark in St.pete stock exchange.  So Ural Crude will no longer be in the grips of both USD and Brent prices as this benchmark will be traded in Rubles.

Russia might as well insist upon payment in roubles. Nobody has that amount of roubles floating around the cookie jar so some sort of FX intermediary swap will have to be arranged.

In the middle of a gas war is a bad time to start insisting that you will only honour your own company's credit card. Lots of other stations will be anxious to suck up the business on whatever terms the customer finds most convenient.

Please stop copy+pasting what others have said. I seen this same comment on zerohedge.

No, they can purchase Rubles from the CBR itself, a conversion direct between currencies and not from one currency, to USD, then to Rubles.

A Different Voice wrote:
Per a an employment survey only 17% of Russian companies will index salaries for inflation in 2016. If that survey accurately reflects what will actually happen with salary indexing on a macro scale, then that is not a positive sign for the economy. I'm not sure I believe such salaries will largely remain unchanged in 2016.

survey: few employers to inflation adjust salaries

However, I had read that Putin ordered a 4% increase in the minimum wage for 2016.

The agreement was 7%, I dont know where this 4% comes from.  Minimum wage will be partially indexed but higher wages may not. That said, its a survey of 1000 buisnesses, so it really isnt the tall tale sign of anything.  Even the article goes on to say the indexing of wages may not exceed 7%.

With all this said, I wish indexing of wages happened in other countries.  Inflation is sky rocketing (coliflower as expensive as $8 cad), my wage didnt even go up 1%.  No ones did.  My dad still works for the government and his wage didnt index either.  Russians seem to have far better benefits than most.  Indexing of wages, increases in minimum wages, one of the lowest taxation in the world.  So even if there is a dip, people act as if the sky is falling.  But yet, we disnt even have half the things they do for social benefits and we act all rosey like all is good.

So the Rus gov will be slashing budget spending by 10% which is roughly 500B rubles and not sure what will be slashed.  It is predicted by Kudrin that dedense spending will be cut in 2 - 3 years time.  Theoretically, if that is the case, then the proposed SAP2025 may be remainders of what SAP2020 was supposed to be.

So in other words, stretching out SAP2020.

A Different Voice wrote:

sepheronx wrote:So the Rus gov will be slashing budget spending by 10% which is roughly 500B rubles and not sure what will be slashed.  It is predicted by Kudrin that dedense spending will be cut in 2 - 3 years time.  Theoretically, if that is the case, then the proposed SAP2025 may be remainders of what SAP2020 was supposed to be.

So in other words, stretching out SAP2020.

Looks like there will be plans made for 2016 spending cuts to be implemented IF oil prices and economic indicators do not move in a positive direction in the next couple of months. I would assume that such plans will not include 2016 defense spending cuts.

Regarding Kudrin's statement, a couple of points:

1. Despite news reports, Kudrin has publicly said he has no plans to work in the Russian government again.  If true,he will have little input on defense spending now and in the future.  
2. From reading to this TASS report, Kudrin also  qualified his statement by saying IF Russia's current situation remains as it is now then defense spending will have to be reduced in 2 or 3 years. Most believe that Russia's economy will be experiencing significant growth 3 years from now.

Kudrin's statement on defense cuts

Not sure why he came out with this statement but it might annoy proponents of  Russian defense spending for the subject to come up in the media.

Well, Kudrin's choice of words have seemed to have changed over the year.  He seems to be more calm and less aggressive than before.  As well, he isn't trying to use popular terms anymore.  I think he either realized that it does him no good and maybe by the grace of god, he changed his opinion.  His statement on defense wasn't actually wrong, as he did state that the idea behind purchasing the weapons is not due to outside factors but the idea that this is what the country needs in order to protect itself from all types of forces.  So he said it is important but doesnt mean that cuts cant happen.

But you are indeed correct sir, that he has no say in anything related to the defense or the budget or anything, it is purely his opinion.  I just think there are indeed projects that can be cut, shelved or reduced purchases and or moved to something else.  For instance, PAK FA is a great jet, but it is apparently expensive.  So why not find a middle ground? Maybe the components used in PAK FA can be used in the Su-35 and Su-30SM in the future and more purchases of those jets with modern equipment onboard will also do the job just fine and be significantly cheaper.  And thus be easier to purchase and budget.  Same with destroyers.  Instead of those, purchase more frigates to get more numbers in, and modern frigates from Russia have as much or greater firepower than most destroyers anyway.  Maybe change the outlook of all the different types of aircrafts being acquired and or maybe armored vehicles, etc etc etc.  It doesn't mean cut number of procured systems, but it means changing the types of equipment to be purchased to reduce overall costs.  Lots of factors.

Edit: and yeah, you are also correct that the 10% budget cuts will happen only if the indicators to the economy are the same in the next couple of months.

Hannibal Barca wrote:An unexpected decline in oil and other raw material prices prevent us from a possible economic crisis in 2015.
With the turbulence remaining and decrease of sales in many key sectors a major crisis might still be in the next corner despite all predictions.

Very true. If it holds out for a while, things will look grim. I was reading on zerohedge about various industries, including Auto in US are getting hit pretty hard regardless of how much money is printed.

I think this "tightening the belt" is causing more harm than anything to everyone. I saw what the consumers are doing in some graphs, and it looks like people are really not spending

Hannibal Barca wrote:Last time around, the ways Western countries found to battle the crisis out were:
-by increasing public debt
-by decreasing interest rates even to negative figures
-by using their political leverage to control their populations
-by exporting the American crisis first in Europe and later to the emerging economies
-by using the dollar as a safe heaven
Guess what. From all this tools, only the dollar as safe heaven is not yet exhausted and even this measure is seriously limited by the decrease in oil trade volume,
by the de-dollarization process and by the fact that the dollar is already quite appreciated as the recent yuan depreciation exposes.
If we were to be hit again soon, IS GONNA BE MEGA!!

That is what is going to hurt and most speculate the same. Here in Canada, Alberta, we are in a lot of trouble as it is (you probably read all the news and saw the stock market heavily fluctuate). But things on the ground is getting pretty bad when I have people of all types that worked higher up in the food chain in the oil industry asking me for a job where I am. And where I work, it isn't fun nor is it even a good paying job. But there really isn't anything anymore and most figure by late this year, early next year, people are gonna pack up and leave. Already suicide rate is drastically increasing in Alberta. And Alberta was a huge financial provider to Quebec.

x_54_u43 wrote:

sepheronx wrote:

 For instance, PAK FA is a great jet, but it is apparently expensive.  So why not find a middle ground? Maybe the components used in PAK FA can be used in the Su-35 and Su-30SM in the future and more purchases of those jets with modern equipment onboard will also do the job just fine and be significantly cheaper.  And thus be easier to purchase and budget.  Same with destroyers.  Instead of those, purchase more frigates to get more numbers in, and modern frigates from Russia have as much or greater firepower than most destroyers anyway.  Maybe change the outlook of all the different types of aircrafts being acquired and or maybe armored vehicles, etc etc etc.  It doesn't mean cut number of procured systems, but it means changing the types of equipment to be purchased to reduce overall costs.  Lots of factors.

Edit: and yeah, you are also correct that the 10% budget cuts will happen only if the indicators to the economy are the same in the next couple of months.

It might be better to phase out much of the old equipment, and buy new. Cutting down on size and decreasing conscript percentage would also be a good move. Let the young men get jobs, go into labor force etc, boosting the civilian economy, etc. Go full volunteer maybe(big maybe, I don't know the current balance).

Back in the 90s, Russia put nearly all of its money into R&D, now its paying fruit. Better to eat that fruit instead of preserved canned food.

Besides, buying Armata/Kurganets/Bumerang would do far more for the economy, imagine how many people are employed in designing, testing, creating,etc. Same for PAK-FA as well.

However, somethings still have to be cut, but not all the way. Instead of building lots of frigates to substitute for Lider, spend the money on testing for Lider, things like testing integration of its systems, radars, missiles, etc. So when there is money, Lider can start without a hitch.

There are some things that just have to be maintained.

Oh of course. I am just saying there could be an alternative, something cheaper. We will see what Mikoyan will showcase as they said they are working on a 5th gen jet under their own initiative. If it ends up cheap and using MiG-35 parts, then I see it as ideal system to obtain. I think the Frigates and Corvettes are needed as there are so many ships that needs to be decommissioned. As well, I agree, have Lider and such but dont be over ambitious. Armata, Kurganets and Boomerang I view are vital for procurement as well, due to newer tech, and the fact that long run, will be cheaper.