Russian Economy General News: #6

Good Read

Now Comes The Great Unwind—-How Evaporating Commodity Wealth Will Slam The Casino - David Stockman

Russia’s food exports continue to grow – but where are they going?


Russian agriculture exports to be $20bn this year.To put that in context, of crude oil (not refined).. Russia exports 4.7mbd. Which at current prices is $62bn a year.


Russia in 2015, collected a record harvest vegetables-16.1 million tonnes against 15.5 million tonnes in the last year, reports the magfor. This figure is also at the 12.3 % above the average level for the past five years.As emphasized by the agency, growth occurred despite the challenging macroeconomic conditions, as well as drought, floods and fires in selected regions.

http://www.interfax.ru/business/487779


Gazprom cancels its record tender for power of Siberia gas pipeline. All I can say is that this is great news. It shows the growing strength of Govt bodies in reducing and attacking corruption. Russian Post was first, then came Russian Railways... It looks like Gazprom may be next up for an efficiency reform. An alternative interpretation is that Sechin has just scored one over Gazprom. The consequences could be Rosneft's accession to being a gas exporter. One should watch the Board of Director space very carefully it will tell us all.

http://www.rbc.ru/business/29/12/2015/5682923a9a79474ba9a16609



Russia Ends 2015 With Weekly Oil Production Setting a Record Meanwhile Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure

On the subject of producers and prices. The reality today in Russia is that farmers who grow produce
have to pay bribes to "break into" the retail market. There is an established retail mafia with many owners
living outside Russia who prefer to import produce instead of using local Russian sources. Clearly this
racket needs an iron fisted government crackdown as it has nothing to do with any free markets.

Of course you won't get this story from the NATO media which tries to pin all corruption in Russia on Putin.
Putin is supposedly a Russian nationalist who also protects rackets that work in NATO's favour. NATO
propaganda is inane.

Internet based companies account for 13% of economy

"2.2% of the GDP is a very sound figure. It is over one trillion rubles ($13.5 bln), being the direct contribution of the Internet into development of the Russian economy. However, if we consider this in slightly broader terms, then it turns out even a greater range of industries depends on information technologies and the Internet. We estimate this figure as 11.6 trillion rubles ($157 bln) - about 13% [of the GDP - TASS]. The so-called ‘Internet-dependent’ industries account for nearly a sixth of the national economy," the minister said.

More:
http://tass.ru/en/economy/848082

sepheronx wrote:Internet based companies account for 13% of economy

"2.2% of the GDP is a very sound figure. It is over one trillion rubles ($13.5 bln), being the direct contribution of the Internet into development of the Russian economy. However, if we consider this in slightly broader terms, then it turns out even a greater range of industries depends on information technologies and the Internet. We estimate this figure as 11.6 trillion rubles ($157 bln) - about 13% [of the GDP - TASS]. The so-called ‘Internet-dependent’ industries account for nearly a sixth of the national economy," the minister said.

More:
http://tass.ru/en/economy/848082

Oh noes, Russia is dependent on the internet. It has to diversify itself quickly. This calls for austerity measures
and sale of assets to NATO corporations who will make everyone rich.

Sorry, couldn't resist. The oil and gas industry is actually less than 13% of the GDP today but this is the sort
of hysteria one sees about it.

kvs wrote:

sepheronx wrote:Internet based companies account for 13% of economy

"2.2% of the GDP is a very sound figure. It is over one trillion rubles ($13.5 bln), being the direct contribution of the Internet into development of the Russian economy. However, if we consider this in slightly broader terms, then it turns out even a greater range of industries depends on information technologies and the Internet. We estimate this figure as 11.6 trillion rubles ($157 bln) - about 13% [of the GDP - TASS]. The so-called ‘Internet-dependent’ industries account for nearly a sixth of the national economy," the minister said.

More:
http://tass.ru/en/economy/848082

Oh noes, Russia is dependent on the internet.  It has to diversify itself quickly.  This calls for austerity measures
and sale of assets to NATO corporations who will make everyone rich.

Sorry, couldn't resist.  The oil and gas industry is actually less than 13% of the GDP today but this is the sort
of hysteria one sees about it.

Funny but also very true.  People will eventually state Russia is too dependent on X or Y and must diversify.  And as soon as they do diversify, it will be a repeat, over and over again.

Something also caught my attention.  I was reading an article that Jamaica has the best performing market of 2015 and that they are calling to 'intensify' it.  They stated that they would sell state companies to foreign private entities, and many of these state entities were profiting already.  So the question was brought up of why would they sell profiting industries to foreigner?  Wouldn't it make more sense to keep the state run industries that are profiting, state run as the profits stay in the country rather than leaving?  Well, said person is correct.  Why fix what isn't broken?  If indeed the state companies are doing wonders in Jamaica, then why bother handing them over to a German or US company?  All it will do is move the profits outside of the country.  It could also spell disaster for a huge portion of its workers.

People don't seem to understand what the concept of privatization does.  It is only beneficial for an industry to be private, if it was not really operating or there is a demand for such industries goods but you do not have the means to do it yourself and need outside help.  Even then there is a work around for that.  Problem with private industries is that very few people actually profit off of it, a lot of that money usually disappears to offshore accounts, and or acts of trying to form a monopoly or blackmail countries that "you will pack up and leave if you do not do X or Y this other country says".  We have seen it quite a lot.

Edit: I decided to add it to the website this article. Of course with my own spice to it.

sepheronx wrote:

Funny but also very true.  People will eventually state Russia is too dependent on X or Y and must diversify.  And as soon as they do diversify, it will be a repeat, over and over again.

Something also caught my attention.  I was reading an article that Jamaica has the best performing market of 2015 and that they are calling to 'intensify' it.  They stated that they would sell state companies to foreign private entities, and many of these state entities were profiting already.  So the question was brought up of why would they sell profiting industries to foreigner?  Wouldn't it make more sense to keep the state run industries that are profiting, state run as the profits stay in the country rather than leaving?  Well, said person is correct.  Why fix what isn't broken?  If indeed the state companies are doing wonders in Jamaica, then why bother handing them over to a German or US company?  All it will do is move the profits outside of the country.  It could also spell disaster for a huge portion of its workers.

People don't seem to understand what the concept of privatization does.  It is only beneficial for an industry to be private, if it was not really operating or there is a demand for such industries goods but you do not have the means to do it yourself and need outside help.  Even then there is a work around for that.  Problem with private industries is that very few people actually profit off of it, a lot of that money usually disappears to offshore accounts, and or acts of trying to form a monopoly or blackmail countries that "you will pack up and leave if you do not do X or Y this other country says".  We have seen it quite a lot.

It is an obvious racket. The scum that screech about privatization serve the interests of the potential new owners who will milk additional cash
flows to make themselves richer. Prattle about "economic efficiency" is pure BS. The GDP could care less about the ownership structure,
it only sees money flows and diverting profits offshore reduces the GDP. So, in fact, it is economically inefficient to privatize companies
into the hands of foreign interests.

The wonderful thing about Russia today is that there is no ideology or other dogma ruling politics and economics. Once you have a dogma
(be it communism, laissez-faire capitalism, etc.) you have oppression and extortion. In the name of the ideology all sorts of excesses and crimes
are perpetrated. Russia has had seven decades of this shit and liberated itself from it. Of course the malicious, imperial NATO media mouthpieces
screech about how inadequate Russia is. Russia is freer than any NATO country. Period.

The Atlantic Integrationists are still in full control of the Russian financial and banking sector, of all the key economic ministries and government positions, they control the Russian Central Bank and they are, by far, the single biggest threat to the rule of Putin and those supporting him. Considering that roughly 90% of Russians now support Putin, that means that these Atlantic Integrationists are the single biggest threat to the Russian people and Russia as a whole.

Even in his last speech Putin had to declare that he fully supports the Central Bank and the economic Ministers of the Medvedev government. Considering that literally ALL Putin allies openly and vocally are screaming bloody murder about the way the Russian economy is mismanaged, this is clearly a coerced statement and not something he believes in. By the way, I am observing a systematic vilification campaign on the central Russian TV channels against the Central Bank and the economic Ministers and this cannot be a coincidence. I predict that Putin is preparing a purge of these circles, but that he needs to line up all his ducks in a row before taking action, especially by inflaming the public opinion against them. Right now the Russian economy is still run by IMF-stooges, by “Washington consensus” types, hence their crazy policy on interest rates, on buying US obligations, on keeping inflation low, etc. etc. etc.


remember the hyper-corrupt Minister of Defense Serdiukov? Guess what? He has still not been formally charged with anything. Even the woman he did most of his dirty dealing with still lives in her luxurious apparent in Moscow. What does this tell us? That even when Putin got the hard proof of Serdiukov’s malfeasance he had enough power to replace him by Shoigu, but not enough to power to stick such high-profile “Atlantic Integrationists” into jail.

max steel wrote:The Atlantic Integrationists are still in full control of the Russian financial and banking sector, of all the key economic ministries and government positions, they control the Russian Central Bank and they are, by far, the single biggest threat to the rule of Putin and those supporting him.  Considering that roughly 90% of Russians now support Putin, that means that these Atlantic Integrationists are the single biggest threat to the Russian people and Russia as a whole.

Even in his last speech Putin had to declare that he fully supports the Central Bank and the economic Ministers of the Medvedev government.  Considering that literally ALL Putin allies openly and vocally are screaming bloody murder about the way the Russian economy is mismanaged, this is clearly a coerced statement and not something he believes in.  By the way, I am observing a systematic vilification campaign on the central Russian TV channels against the Central Bank and the economic Ministers and this cannot be a coincidence.  I predict that Putin is preparing a purge of these circles, but that he needs to line up all his ducks in a row before taking action, especially by inflaming the public opinion against them.  Right now the Russian economy is still run by IMF-stooges, by “Washington consensus” types, hence their crazy policy on interest rates, on buying US obligations, on keeping inflation low, etc. etc. etc.


remember the hyper-corrupt Minister of Defense Serdiukov?  Guess what? He has still not been formally charged with anything.  Even the woman he did most of his dirty dealing with still lives in her luxurious apparent in Moscow.  What does this tell us?  That even when Putin got the hard proof of Serdiukov’s malfeasance he had enough power to replace him by Shoigu, but not enough to power to stick such high-profile “Atlantic Integrationists” into jail.

I agree with your assessment. Putin the "tyrant" is a figment of NATO propaganda. The Yeltsin legacy is still there on many levels in Russian society
from the poverty to the 5th column cadres in key positions. For example, the Moscow State University faculty of media brazenly filters out all students
who are not prepared to push the NATO propaganda lines on critical stories. These clowns need to be lined up against a wall and shot but instead they
do whatever they please. Clearly they have a "roof" for protection and it ain't Putin.

I really hope that Putin can purge the these 5th columnists. Russia needs this purge for its survival.

kvs wrote:

max steel wrote:The Atlantic Integrationists are still in full control of the Russian financial and banking sector, of all the key economic ministries and government positions, they control the Russian Central Bank and they are, by far, the single biggest threat to the rule of Putin and those supporting him.  Considering that roughly 90% of Russians now support Putin, that means that these Atlantic Integrationists are the single biggest threat to the Russian people and Russia as a whole.

Even in his last speech Putin had to declare that he fully supports the Central Bank and the economic Ministers of the Medvedev government.  Considering that literally ALL Putin allies openly and vocally are screaming bloody murder about the way the Russian economy is mismanaged, this is clearly a coerced statement and not something he believes in.  By the way, I am observing a systematic vilification campaign on the central Russian TV channels against the Central Bank and the economic Ministers and this cannot be a coincidence.  I predict that Putin is preparing a purge of these circles, but that he needs to line up all his ducks in a row before taking action, especially by inflaming the public opinion against them.  Right now the Russian economy is still run by IMF-stooges, by “Washington consensus” types, hence their crazy policy on interest rates, on buying US obligations, on keeping inflation low, etc. etc. etc.


remember the hyper-corrupt Minister of Defense Serdiukov?  Guess what? He has still not been formally charged with anything.  Even the woman he did most of his dirty dealing with still lives in her luxurious apparent in Moscow.  What does this tell us?  That even when Putin got the hard proof of Serdiukov’s malfeasance he had enough power to replace him by Shoigu, but not enough to power to stick such high-profile “Atlantic Integrationists” into jail.

I agree with your assessment.   Putin the "tyrant" is a figment of NATO propaganda.  The Yeltsin legacy is still there on many levels in Russian society
from the poverty to the 5th column cadres in key positions.   For example, the Moscow State University faculty of media brazenly filters out all students
who are not prepared to push the NATO propaganda lines on critical stories.   These clowns need to be lined up against a wall and shot but instead they
do whatever they please.   Clearly they have a "roof" for protection and it ain't Putin.

I really hope that Putin can purge the these 5th columnists.   Russia needs this purge for its survival.

I never heard of that about the Moscow state university.....

All I know is that there are some institutions like the higher school of economics. And yes, a huge portion of people in economics are 5th columnists. But to state that Medvedev is one of them is a joke, since he was the one that put Georgia in its place.

Putin did not really crack down on all the oligarchs as such. He only got rid of those oligarchs who, like Khodorkovsky, had tried to basically stage a coup against Putin by buying the entire Duma. The oligarchs were told “stay out of politics and I will leave you alone”. The deal is still on today.

Recently some third-rate sport journalist, Alexei Andronov, posted a viciously anti-Russian comment in Twitter he was criticized for that by Alexei Pushkov, a journalist who is also the head of the foreign-affairs committee in the State Duma on his own TV show “Postscriptum”. The TV channel which airs the show, TV Tsentr, the censored the segment criticizing Andronov. Then, the famous Russian movie director Nikita Mikhailkov recoded an entire show discussing this event, the TV channel running his show, TV Rossia, also censored the entire episode. As for the director of the TV channel where Andronov works, Tina Kandelaki, she gave Andronov her full support. Bottom line: while Putin did immensely improve the overall quality of the Russian media, the russophobes are still very influential and can spew their hateful venom in total impunity.

Russia is willing to go to war if needed, but she will do her utmost to avoid it. This is the price Russia pays for being the weaker side. The good news is that Russia is getting stronger with every passing day, while the Empire is getting weaker. And the power of the AngloZionists and their 5th column in Russia is also weakening with every passing day. But this process will take time.

The big event to watch for is a crackdown on the Central Bank and the economy ministries of the government. Everybody in Russia is waiting for this, Putin even got directly asked this question recently, but he is sill denying it all and saying that he fully supports these saboteurs. Considering Putin’s track, it is plain stupid to say that he really supports them – this is clearly a delaying tactic until the time is right.

The purpose of the freedom of the media is to allow it, not to subdue it. If they decide to subdue the news then it will cause issues internally. It isn't right that some media outlets decided to censor the criticism of some idiot, but the simple fact is that obviously it is being reported regardless that people are aware of the criticism and only some outlets are refusing to discuss it. Such stuff exists everywhere. Call the media outlets out on their decision to censor it, press them, and leave it at that. Eventually with ratings down, they will eventually have to close up. Since NGO's are getting booted out of the country left, right and center, it will become even harder for them to obtain any funding, especially from outside.

Like you said, it will take time. But regardless what one does, there will always be plenty of anti Russians in Russia pushing their agenda. Much the same in India.

The Russian State Duma ordered Russian media to report the receipt of foreign funding

Well, no need to fret anymore.  Seeing as now media agencies in Russia will have to declare their incomes and sources of income from foreign entities.

Now here is a piece of news that we should be concerned about:
Kudrin agrees on the return of the power structures - Bloomberg

In other words, apparently Kudrin wants to get back into the government and economics and has requested to be able to join in again with Putin and Putin is looking into it. In other words, Kudrin may try a second attempt to screw Russia's economy development, or he has reformed and knew that he wont have any comfy position till he plays nice. That is, if Putin agrees. Lets see.

Russia has revised the GDP accounting procedure to conform to international norms:

http://www.gks.ru/free_doc/new_site/vvp/letter_vvp.pdf

The result is that the GDP has increased. For 2014 we have:

Old accounting:
--------------------

Nominal: $1,861 billion
PPP: $3,745 billion
Nominal per capita: $12,736
PPP per capita: $25,636


New accounting:
---------------------

Nominal: $2,028 billion
PPP: $4,082 billion
Nominal per capita: $13,882
PPP per capita: $27,943


--------------------------------

But I still think that the GDP is underestimated since the inflation rate is overestimated. Structural monetization
"inflation" is not inflation. It is a transient adjustment to market prices from command economy "prices". As I have
posted here before even 25 years after the end of the USSR this there is still a transition as can be seen in the
Russian military price structure which looks nothing like the western counterpart even though supermarket prices
are basically the same.

Russia’s international reserves grew $1.3 bln over week to $370.2 bln — Central Bank

http://tass.ru/en/economy/848083

MOSCOW, December 31. /TASS/. Russia’s international reserves grow $1.3 bln over the week from December 18 to 25 and totaled $370.2 bln, the Central Bank said on Thursday. Russia’s international reserves are highly liquid foreign assets available with the Bank of Russia and the Russian Government. They comprise foreign currency, Special Drawing Rights (SDRs), a reserve position in the International Monetary Fund and monetary gold.

Pretty much a decent amount of forex to enter 2016 , I remember there were prediction of Forex going as down as $315 billion by end of 2015.

I hope Central Bank aggressively buys more gold in 2016 and crosses 2000 Ton Figure

kvs wrote:Russia has revised the GDP accounting procedure to conform to international norms:

http://www.gks.ru/free_doc/new_site/vvp/letter_vvp.pdf

The result is that the GDP has increased.  For 2014 we have:

Old accounting:
--------------------

Nominal: $1,861 billion
PPP:        $3,745 billion
Nominal per capita:  $12,736
PPP per capita: $25,636


New accounting:
---------------------

Nominal: $2,028 billion
PPP:        $4,082 billion
Nominal per capita: $13,882
PPP per capita: $27,943


--------------------------------

But I still think that the GDP is underestimated since the inflation rate is overestimated.   Structural monetization
"inflation" is not inflation.   It is a transient adjustment to market prices from command economy "prices".   As I have
posted here before even 25 years after the end of the USSR this there is still a transition as can be seen in the
Russian military price structure which looks nothing like the western counterpart even though supermarket prices
are basically the same.

Nice would be interesting to have this figure for 2015

RUSSIAN REGIONS’ ECONOMIC RATINGS

http://southfront.org/13130/

Alexander Mercouris says lower oil price is also due to interest rates hike

Why Oil Prices have fallen and how that effects the Russian Economy

http://russia-insider.com/en/business/why-oil-prices-have-fallen-and-how-effects-russian-economy/ri12053

kvs, it looks like you've been vindicated on the price of oil debate, and yes it suggests the price of oil drop is more due to lack of demand (due to the global recession/depression particularly in the EU that's dragging the world economy). The drop in oil price has been significant, but pales in comparison to the drop in price of the average global cost of a metric ton of steel (which indicates a reduced demand due to the lack of construction activity).

According to The International Spectator: Italian Journal of International Affairs (IAI), the average global cost of a metric ton of steel circa 2008 through 2015 has been reduced by 5/6th's of it's value:

Steel price. ($ per metric ton)

June, 2008: $1265
One year ago: $485

Current: $210

https://twitter.com/intlspectator/status/684396452106272769

magnumcromagnon wrote:kvs, it looks like you've been vindicated on the price of oil debate, and yes it suggests the price of oil drop is more due to lack of demand (due to the global recession/depression particularly in the EU that's dragging the world economy). The drop in oil price has been significant, but pales in comparison to the drop in price of the average global cost of a metric ton of steel (which indicates a reduced demand due to the lack of construction activity).

According to The International Spectator: Italian Journal of International Affairs (IAI), the average global cost of a metric ton of steel circa 2008 through 2015 has been reduced by 5/6th's of it's value:

Steel price. ($ per metric ton)

June, 2008: $1265
One year ago: $485

Current: $210

https://twitter.com/intlspectator/status/684396452106272769

Thanks for bringing this up. Commodities are being hammered almost across the board.

Back in 2008-9 we still had the media covering the financial crisis with some objectivity. The current crisis is being ignored. Perhaps this
is because it is not behaving in a very flashy way (i.e. no Lehman Brothers collapses to report on) and because the go-to economists
for the media are all compromised hacks who are not conveying the message that various indicators are sending.

kvs wrote:

magnumcromagnon wrote:kvs, it looks like you've been vindicated on the price of oil debate, and yes it suggests the price of oil drop is more due to lack of demand (due to the global recession/depression particularly in the EU that's dragging the world economy). The drop in oil price has been significant, but pales in comparison to the drop in price of the average global cost of a metric ton of steel (which indicates a reduced demand due to the lack of construction activity).

According to The International Spectator: Italian Journal of International Affairs (IAI), the average global cost of a metric ton of steel circa 2008 through 2015 has been reduced by 5/6th's of it's value:

Steel price. ($ per metric ton)

June, 2008: $1265
One year ago: $485

Current: $210

https://twitter.com/intlspectator/status/684396452106272769

Thanks for bringing this up.  Commodities are being hammered almost across the board.  

Back in 2008-9 we still had the media covering the financial crisis with some objectivity.  The current crisis is being ignored.   Perhaps this
is because it is not behaving in a very flashy way (i.e. no Lehman Brothers collapses to report on) and because the go-to economists
for the media are all compromised hacks who are not conveying the message that various indicators are sending.

It's actually really alarming that a metric ton of steel would lose more than half of it's value from a year ago. But the real question is will it bottom out or will the price of steel be cut in half for a second year in a row?

magnumcromagnon wrote:

Thanks for bringing this up.  Commodities are being hammered almost across the board.  

Back in 2008-9 we still had the media covering the financial crisis with some objectivity.  The current crisis is being ignored.   Perhaps this
is because it is not behaving in a very flashy way (i.e. no Lehman Brothers collapses to report on) and because the go-to economists
for the media are all compromised hacks who are not conveying the message that various indicators are sending.

It's actually really alarming that a metric ton of steel would lose more than half of it's value from a year ago. But the real question is will it bottom out or will the price of steel be cut in half for a second year in a row?[/quote]

United States is in a close to full scale economic war against Russia. Forget about Ukraine ,Syria,Middle east and oil prices and steel prices ,but also value of Gold. All those things are
under attack by American Imperialism ,and their strategy is nothing more than to bring to its knees Russia economy ,in hopes to provoke another "soviet union" collapse. Where Russia
unrest provoked them to allow territory to split from Russia.

But i really think they are underestimating the support that Russia government enjoys today is night and day difference to the one soviets union had in late 80s ,early 90. They also are miscalculating too the level of information that Russians enjoy today. No longer Neocons and zionist jews control Russia media. This means that Russians ,i will say majority of them ,understand that US is on an economic blackmail against Russia for its raise to power and independence of the "American system" and their vision of the world as something that they should lead and control only for benefit of them..

I really think regardless if Russia economy collapse or not.. i know it will stand and continue moving forward and sort it out all its economic problems by becoming a fully self sufficient country.. in technology and food ,which will be a major incentive for Russia ,something that will not have happened had Americans did not started its attack on their economy and created conflicts around them.

The Irony in all this , is that while people in the west focus exclusively in GDP and
dollar and Ruble trade value, to see who is "winning" the economic warfare. There are more powerful indicators ,by far ,and that are really alarming , and they are not happening in Russia.
But in USA. Indicators like the level of homeless people in America is alarming , and some states already had declared emergency about this. The middle class in US is about to end ,The prices of Education and Healthcare are world highest. and the the Bankrupt of several states
in USA ,is not just business as usual. And US companies buying Russian technology because don't have the money to do it themselves. This means that the indicators already exist , that contrary to what all believe to be happening .. ( US economy "so strong" on the raise ,because strong dollar). It pretty much looks like it will be a matter of time .. at any time ,another 2008
crisis could happen again. And this time Americans will not have anyone to loan them money ,
when their economic bubble explode.

So if i were to bet.. is that we will see a 180 degrees change overnight with world economy.
And that it will not be Russia the main topic ,but USA. and with potential civil wars happening
there. You already see signs of US states in total defiance of the Federal Government. not recognizing their authority. America already have many signs ,the nation will experience a
major shake on its society and economy ,that could change dramatically its future and not for the best. I will not be surprised that US economy crash ,and many states goes bankrupt and the "love" that Americans have for its government will force US to use its army against its own citizens to keep the nation as one country and not several.

Looks like the Russian government is steadily working through a long term plan to bail out Vnesheconombank (VEB). Russia's National Wealth Fund (NWF) will play a prominent role in the rescue.  VEB's immediate problem is that it lacks the funds to pay back its foreign debt due in 2016. That's reportedly 200 Billion rubles in Eurobonds. So far it appears to be a combination of "extend and pretend" and relieving VEB of the obligation to pay interest on its debt.

Part of the plan is to have the NWF reduce the interest rate VEB must pay on certain NWF's deposits/loans to effectively nothing (down to 0.25% per annum). VEB will not pay any interest on such debt for up to 3 years. Debt repayment schedule will also be extended.

plan to extend VEB's repayment of NWF deposits

It looks like the Central Bank will also aid in the rescue of VEB.

Central Bank and NWF to rescue VEB

Fin Min sends gov VEB rescue plan

I'm not 100% clear on how much VEB debt is planned to be involved or how much interest will be forgiven. It appears maximizing investment returns to support pension system is very much a secondary objective of the NWF. It's main function is to fund government political priorities, including infrastructure lending and construction projects for the Sochi Olympics.

I suppose this is just taking money and debt from one government entity and shifting it to another. However, I thought the main goal of the NWF was to fund Russia's pension system by seeking high return investments. The NWF is essentially being made to take a financial hit that will leave it worse off to benefit VEB.
VEB repayment extended 5 yrs.

It is an extension then.  So the National welfare fund wont get its repayments in the next 3 years, so returns on it will be minimum or close to non existent on its loans to VEB.  Stupid to rescue a bad bank but whatever, I guess VEB is one of those "too big to fail" banks.

Those investments were from years ago, and NWF has diversified loans meaning that they will gain returns in other areas and apparently nothing in the next 3 years from VEB.  I suppose this was to be expected but VEB for some apparent reason did quite poorly compared to other banks like Alpha and Sberbank last year.

This move wont effect the NWF anymore than not and the standing value of the NWF will more or less stay the same regarding the lack of returns from VEB, but that doesn't mean that NWF will be reduced by 1 trillion rubles. Just means that now they cant expect returns greater than .25% from the initial ~2% that was before.

sepheronx wrote:It is an extension then.  So the National welfare fund wont get its repayments in the next 3 years, so returns on it will be minimum or close to non existent on its loans to VEB.  Stupid to rescue a bad bank but whatever, I guess VEB is one of those "too big to fail" banks.

Those investments were from years ago, and NWF has diversified loans meaning that they will gain returns in other areas and apparently nothing in the next 3 years from VEB.  I suppose this was to be expected but VEB for some apparent reason did quite poorly compared to other banks like Alpha and Sberbank last year.

This move wont effect the NWF anymore than not and the standing value of the NWF will more or less stay the same regarding the lack of returns from VEB, but that doesn't mean that NWF will be reduced by 1 trillion rubles.  Just means that now they cant expect returns greater than .25% from the initial ~2% that was before.

If  the original loans were made by the NWF to VEB at 2-3% interest rate with payment multiple years in the future then they were never going to be anything but unprofitable to the NWF in the first place.  No independent Russian bank or investor today would make anything like a loan which matures multiple years in the future if were only getting a 2-3% return.  VEB is a government entity which makes bad loans in the national interest. That's fine. I just don't like the idea that the NWF is being squandered instead of wisely invested for the benefit of all Russians.

I need to dig around a bit when I get some time in the future. Is it likely the NWF's financial reports do not accurately reflect the real world value of its assets?