Russian Economy General News: #8

flamming_python wrote:
This comment only shows your utter cluelessness  about how economies actually work.  Where do ridiculous people like you get idea that comprador oligarchs and foreign corps leaching all revenue out of businesses they own is beneficial to any country. How do you come up with such stupid ideas?

And where do you get your stupid ideas from that banning companies such as Boeing, which employs hundreds of qualified engineers in Moscow and buys masses of titanium sections from Russia - would in any way shape or form serve Russian interests or its economy?
What do you think all those specialists would do? They'll be given an offer to move to another country to stay with the company - and they'll take it. And Russia will be left without them, and without the tax revenues.

How about Coca Cola? Several plants across the country, thousands of workers in total.
Pepsi Co as well.

Ford?
Assembly plant in St. Petersburg, 3000 people employed there.
An engine plant in Tatarstan.
Are you going to give them all jobs?

Kofax. IT office in St. Petersburg, 150 highly-paid IT specialists.

Disney. Lots of joint ventures with Russian animation studios, loads of events organized here.

John Deere. Manufacturing facility in Domodedovo.

It's not just fast food restaraunts, sales offices and Starbucks here, matey.

Any of those that are primary serving domestic Russian markets should be nationalised immediately are as they absolute drain on economy and can be nationalised immediately with immediate benefit for Rusian economy  as it would stop drain of surplus value out of the country without affecting market at all. This includes food industry such as McDonald, Coca Cola and so on. Even industries that are might be partly exporting shuld be nationalised if here is established domestic market that can absorb their output. This is for example nationalised John Deere facility can produce agricultural equipment for  growing Russian agriculture industry.  

Boeing is direct competitor for Rusian civil aircraft industry, should be pushed out of Russian market immediately. Boeing will continue to buy Russian aluminium if it is affordable for them to do so regardless if their asset in Russia are nationalised or not.

For whom does Ford make those cars? If it is Russian market then nationalise it now. Russian will continue to buy those cars regardless of  what company owns it, only difference is  profit for these sales will remain in Russia.

Only EU, UK or US assets that should be allowed to remain in foreign ownership are those that they built themselves from nothing, and are primary sewing export markets. All else should be nationalised without excuses or compensation.

The Russian government isn't laughing at these or laughing it off. Instead, they are rather serious about it. It's just that they sit and wait before acting. Already the market is adjusting. Some people like what klimp quoted are people who are tunnel vision, and don't realize shit. Example was how growth would be zero or negative cause of stock market or the inflation. First off, inflation is still 2.4%. second, Russian stock market is small but has already rebounded a bit. And their stock market is mostly undervalued as is and provides small amount in overall GDP.

Inflation was high when first drop. So why would they see such a high drop in 2018 if the drop in value of currency was what, 3%?

miketheterrible wrote:The Russian government isn't laughing at these or laughing it off. Instead, they are rather serious about it. It's just that they sit and wait before acting. Already the market is adjusting. Some people like what klimp quoted are people who are tunnel vision, and don't realize shit. Example was how growth would be zero or negative cause of stock market or the inflation. First off, inflation is still 2.4%. second, Russian stock market is small but has already rebounded a bit. And their stock market is mostly undervalued as is and provides small amount in overall GDP.

Inflation was high when first drop. So why would they see such a high drop in 2018 if the drop in value of currency was what, 3%?

Yeah, the daily tracking of a stock market index as if it is a proxy for the whole economy is beyond retarded. But the average "journalist"
whore is beyond retarded to start with. That is why they churn out so much intellectually insulting pap. And only truly brainless people
would whore themselves as professional liars for any regime. CNN = White House stenographers, etc. Real journalists would be loyal
to themselves and have respect for intelligence.

It was said by some Yahoo from a bank in Russia.

Last economic fall was after Ruble lost half it's value in forex, inflation was 16% and oil was about 30/bbl

It's 70bbl, Ruble is about as strong as it was in 2017, and the stock market is about what it was in September 3017.

So I think the guy is scare mongering for a reason.

The passionate discussion about capitalism vs. communism always goes polar before any substance can be discussed.
The USSR had serious problems under Gosplan which simply could not serve the stochastic optimization role of a market.
Even if the state enterprise money was not being siphoned offshore, the system was too ossified to respond to technological
and worthwhile demand trends. The USSR had all the capacity to be an innovation leader, but was always playing catch-up.
The most absurd thing is that Soviet primary research enabled a lot of western technological advancement (e.g. cell phone
power component miniturization) that came to it much later.

It is clear that modern Russia, in spite of all the privitization and oligarch pain has found a better model. It is unfair to categorize
any private company in Russia as a crooked outfit existing solely for the offshore enrichment of its owners. If that was true the
Russia would be a banana republic. It should be clear that a lot of key industrial-technological assets (e.g. Almaz-Antey, UAC, etc.)
are not privatized entities but have been turned into market players like Canadian Crown Corporations.

The monetarist voodoo really did lose out in 1998-99. Otherwise we would have had more Yeltsinism after Putin took over. That does
not mean that monetarist parasites are not trying to run the show and they have been allowed to gain control over the CBR and
the Ministry of Finance. But they are not succeeding since Russia is showing technological advancement that is basically
leading edge. Something the USSR could only do in Manhattan type projects. This include the small business production of
consumer goods such as cheese. These are not mere details of no consequence, they are directly link to the quality of life of
the population. This was where the USSR failed. Nationalization of every company will not result in a net benefit. it will
overload the government with assets it does not know how to handle and assets it would taint.

I will bring up again, the example of how the USSR treated trainloads of produce in Leningrad. They would be "lost" in marshalling
yards and their contents would rot. Then we had shortages of these goods in the produce shops. This sort of bureaucratic
waste is simply intolerable. It may not be in the category of profit offshoring, but it is by no means any better. The net result
is the same: poorer population. At least with some sort private ownership, the goods are somebody's keen interest and this
includes getting them to the stores before they rot.

If Putin was privatizing for the sake of monetarist voodoo, then he would deserve absolute scorn. But that is not the case and
Russia has found a new economic model that is clearly working for it. The mess generated during the voodoo witchdoctor years
of the 1990s is going to take a long time to deal with. But thankfully it was not as bad as in Ukraine, where it was basically terminal,
failed state rot. Ukraine is an example where the oligarchs run the show like during the golden years of Yeltsin (according to Navalny).
Obviously Russia is not in this regime and Putin played the central role in putting the parasite oligarchs in their place. The prince
of offshoring was Khodorkovsky and he served jail time and lost his assets. It is a state run company, Rosneft that now owns those
assets. Rosneft and Gazprom appear to be quite apt at adopting new technology and running their operations properly.

Why is this happening to the Ruble? The oil prices are steady, I thought that when oil prices are steady, the Ruble means steady.

Will Russia be okay? Will Russia get through this?

Thanks guys.

Russia just needs to dump the US dollar and wean itself off the US dollar.

par far wrote:Why is this happening to the Ruble? The oil prices are steady, I thought that when oil prices are steady, the Ruble means steady.

Will Russia be okay? Will Russia get through this?

Thanks guys.

Russia just needs to dump the US dollar and wean itself off the US dollar.

No it won't. Russia relies 100% on USD and it's exchange rate is what kept it alive. Russia cannot weather this like Iran has because 10% of their companies rely on export and if they collapse due to no USD, then that is it. Oh, and Russians are heavy consumers of us products.

Why do you always ask such stupid questions?

kvs wrote:The passionate discussion about capitalism vs. communism always goes polar before any substance can be discussed.
The USSR had serious problems under Gosplan which simply could not serve the stochastic optimization role of a market.
Even if the state enterprise money was not being siphoned offshore, the system was too ossified to respond to technological
and worthwhile demand trends.   The USSR had all the capacity to be an innovation leader, but was always playing catch-up.
The most absurd thing is that Soviet primary research enabled a lot of western technological advancement (e.g. cell phone
power component miniturization) that came to it much later.    

It is clear that modern Russia, in spite of all the privitization and oligarch pain has found a better model.   It is unfair to categorize
any private company in Russia as a crooked outfit existing solely for the offshore enrichment of its owners.   If that was true the
Russia would be a banana republic.    It should be clear that a lot of key industrial-technological assets (e.g. Almaz-Antey, UAC, etc.)
are not privatized entities but have been turned into market players like Canadian Crown Corporations.  

The monetarist voodoo really did lose out in 1998-99.  Otherwise we would have had more Yeltsinism after Putin took over.  That does
not mean that monetarist parasites are not trying to run the show and they have been allowed to gain control over the CBR and
the Ministry of Finance.    But they are not succeeding since Russia is showing technological advancement that is basically
leading edge.   Something the USSR could only do in Manhattan type projects.   This include the small business production of
consumer goods such as cheese.   These are not mere details of no consequence, they are directly link to the quality of life of
the population.   This was where the USSR failed.    Nationalization of every company will not result in a net benefit.   it will
overload the government with assets it does not know how to handle and assets it would taint.  

I will bring up again, the example of how the USSR treated trainloads of produce in Leningrad.   They would be "lost" in marshalling
yards and their contents would rot.   Then we had shortages of these goods in the produce shops.   This sort of bureaucratic
waste is simply intolerable.   It may not be in the category of profit offshoring, but it is by no means any better.   The net result
is the same: poorer population.    At least with some sort private ownership, the goods are somebody's keen interest and this
includes getting them to the stores before they rot.  

If Putin was privatizing for the sake of monetarist voodoo, then he would deserve absolute scorn.   But that is not the case and
Russia has found a new economic model that is clearly working for it.    The mess generated during the voodoo witchdoctor years
of the 1990s is going to take a long time to deal with.   But thankfully it was not as bad as in Ukraine, where it was basically terminal,
failed state rot.   Ukraine is an example where the oligarchs run the show like during the golden years of Yeltsin (according to Navalny).
Obviously Russia is not in this regime and Putin played the central role in putting the parasite oligarchs in their place.   The prince
of offshoring was Khodorkovsky and he served jail time and lost his assets.   It is a state run company, Rosneft that now owns those
assets.   Rosneft and Gazprom appear to be quite apt at adopting new technology and running their operations properly.  

Can't remember who said it exactly, but it was a deputy economic minister I think, said Russia has to increase private companies involvement in overall economy, but not by selling current state companies, but by increasing volume of private companies. And he said to do so is by incentives and by rewarding the SME's. As of right now, state run companies account for 50% of Russia's economy.

par far wrote:Why is this happening to the Ruble? The oil prices are steady, I thought that when oil prices are steady, the Ruble means steady.

Will Russia be okay? Will Russia get through this?

Thanks guys.

Russia just needs to dump the US dollar and wean itself off the US dollar.

As miketheterrible already pointed out, there is no reason for any kind of panic. Russia's dependency on foreign trade and stock market is overall low. Oil prices are high, budget deficit is at worst pretty much non-existent (or right now there might even be a surplus already, brent is above $70). The Russian federal budget is still based on an oil price of $40 per barrel and that with a stronger ruble than currently, IIRC. It's pretty crazy.

But it seems these recent sanctions really had an impact. People were not expecting this? However, it only "hurts" once. It's also only temporary and what will happen is Syria is going to be important. This finally means that the US-Russian relations are done.

The recent events will only push Russia and China even closer together, as well as Iran. The US will be more or less totally pushed out Eurasia at some point. Is that what the Americans really want? They don't seem to be aware of any of that. In their post-cold war hegemonial thinking they don't seem to realize that it's actually finally possible for two major powers to create an alliance against the US. It won't be called an alliance, because that's a taboo for some reason, when it's not about NATO, especially for the Chinese, but that doesn't matter.

So kvs and mike, you're correct, but the risk here is that the Russians overreach again, they get too careful, overestimate the risks -> interest rates stay high, lower economic growth and so on.

Any real pain for Russia's economy means severing of ties to NATO states. As noted above this is a one-time event. So the more
NATO sanctions Russia, the more independent Russia becomes and the more immune to sanctions. NATO is operating on Obama's
delusion that "Russia doesn't make anything", that it is a banana republic, and think that sanctions exert a powerful coercive influence.
But Russia is not a banana republic and can adapt, which, by definition, means that sanctions are not effective.

High Rouble is not really a concern , Russian Rouble is free floating and it would automatically balance up with USD/Euro .....As long as CBR can keep inflation under check it wont really affect common man if Rouble even reached 80 or 100 to USD.

On the contrary weaker rouble is good for exports and reduces the incentive to Import.

kvs wrote:Any real pain for Russia's economy means severing of ties to NATO states. As noted above this is a one-time event. So the more
NATO sanctions Russia, the more independent Russia becomes and the more immune to sanctions. NATO is operating on Obama's
delusion that "Russia doesn't make anything", that it is a banana republic, and think that sanctions exert a powerful coercive influence.
But Russia is not a banana republic and can adapt, which, by definition, means that sanctions are not effective.

Look Putin has chance since 2014 to re-think on economy they screwed up ,now its back to 2014

kvs wrote:Any real pain for Russia's economy means severing of ties to NATO states.   As noted above this is a one-time event.   So the more
NATO sanctions Russia, the more independent Russia becomes and the more immune to sanctions.    NATO is operating on Obama's
delusion that "Russia doesn't make anything", that it is a banana republic, and think that sanctions exert a powerful coercive influence.
But Russia is not a banana republic and can adapt, which, by definition, means that sanctions are not effective.

Many ways to survive. Leadership is key.

Kudrin's strategy: 7 unfulfilled desires

https://www.gazeta.ru/business/2018/04/11/11714581.shtml?updated

The only major player to be hit hard was Rusal.

Because they rely on export to the west. Out of 3M tons of aluminum, only around or less than 1M tons is sold in Russia.

So there may end up being a sell off of the various plants to third parties and Rusal may end up entirely relying on domestic consumption.

Or auctions may work.

miketheterrible wrote:

par far wrote:Why is this happening to the Ruble? The oil prices are steady, I thought that when oil prices are steady, the Ruble means steady.

Will Russia be okay? Will Russia get through this?

Thanks guys.

Russia just needs to dump the US dollar and wean itself off the US dollar.

No it won't. Russia relies 100% on USD and it's exchange rate is what kept it alive. Russia cannot weather this like Iran has because 10% of their companies rely on export and if they collapse due to no USD, then that is it. Oh, and Russians are heavy consumers of us products.

Why do you always ask such stupid questions?

Thank you for your reply Mike, I would have thought that Russia would have stopped relying so much on the IS and turned to other countries.

There is no such thing as "stupid questions", Mike, knowledge is power.

miketheterrible wrote:The only major player to be hit hard was Rusal.

Because they rely on export to the west. Out of 3M tons of aluminum, only around or less than 1M tons is sold in Russia.

So there may end up being a sell off of the various plants to third parties and Rusal may end up entirely relying on domestic consumption.

Or auctions may work.

But thanks to Trumps tarifs the aluminum prices have gone up, which is good for Rusal.

Hole wrote:

miketheterrible wrote:The only major player to be hit hard was Rusal.

Because they rely on export to the west. Out of 3M tons of aluminum, only around or less than 1M tons is sold in Russia.

So there may end up being a sell off of the various plants to third parties and Rusal may end up entirely relying on domestic consumption.

Or auctions may work.

But thanks to Trumps tarifs the aluminum prices have gone up, which is good for Rusal.

I imagine they can sell the aluminum assets that are for export to a third company so they can produce it with Rusal but in the background of things.

There is a million and one ways to bypass sanctions and what not. The problem is if they themselves know this or not. I imagine they do since these oligarches were so good at smuggling back in the 90's.

Worldwide, there is strong demand for Aluminum.
Rusal shouldn't have too much of a problem selling elsewhere.

The US tariffs and sanctions are going to be be only a temporary glitch. The worldwide Aluminum market/consumer/supplier chain will be redistributed a bit and everybody should be fine.

That´s what i meant. They sanction Daripaska and the stock of Rusal goes done, but at the same time they raise tariffs (because of China) of their main product. Unintended consequences. Or simply dumbasses at work.

I would think that they will have trouble trying to sell it cause all trade usually goes through the US. But, if shell companies are created on both sides so they can trade between domestic currencies, then they can be banned for all intense and purposes but they can be very hard to trace who owns which she'll company, etc.

Alternatively, Rusal can sell some of it's plants (not company as a whole) to other parties from countries like China, Iran, Vietnam, India, etc. In this regard, the company can partially own it, same with the other countries companies who own stake in it, and it's not like US can do squats about it.

The hubris filled idiots running NATO don't understand that Russia is actually too big of an economic and resource power to
be sidelined like they wish.   Perhaps if they tried this crap 50 years ago, then it may have worked (in some alternate reality)
since resources were cheap and the Russia (USSR) was not very developed (but neither was much of the rest of the world).
Today the world is reaching resource depletion crisis level.    Cutting off Russia from the global market ain't gonna happen.
Russia will continue to sell its aluminum and other production without any breaks.    NATO can only cut its own testicles with
the sanctions.  

It is hard for informed people to appreciate the insane level of detachment of western elites from reality.   The Atlantic had
an article about Russia in 2003 that was ridiculously out of date.   Seriously, what is the point of publishing evaluations based
on the lost past?   Why not have a current review of any country based on its state back in the 1880s.    Ludicrous.   But
it is only ludicrous to people with a clue.   Those that live in fantasy land, such as the arrogant idiots in charge of NATO,
only have ears for this sort of BS.   It is too much cognitive dissonance for them to realize that Russia did not turn into a
failed state but has recovered its 1990 levels and in many key aspects has gone well beyond them.

Ummm....

https://www.rt.com/business/423913-northern-sea-route-us/

“There is currently no pressure to conduct exercises for the freedom of navigation in the Arctic, but… the US approach is that the Northern Sea Route should be open as an international water corridor for, let’s say, a transit passage – as we see this area is being cleared of ice,” Zukunft said, adding that at the moment there’s no certain plan for conducting any exercises in the area.

Not yet....

I think it's nice to see Russia getting ahead of the curve on this ....efforts to militarize the Artic should continue non-stop. Their Navy is still a major source of concern despite the ice-breakers advantage. Otherwise you'll invite authority challenges.

Alternatively, Rusal can sell some of it's plants (not company as a whole) to other parties from countries like China, Iran, Vietnam, India, etc. In this regard, the company can partially own it, same with the other countries companies who own stake in it, and it's not like US can do squats about it.

Selling assets to foreign buyers is exactly what the US would love... makes them available on the international market so they can buy it all up and control part of it...

There is nothing the US makes that could not be made in Russia for Russians... what Russia needs to do is look at what it can make itself and then put high tarrifs on the import of those things and use the money generated by the tarrifs to set up local production... let the consumer pay for local subsidised production of what they love and then when it becomes ready for full scale production the local market can enjoy a cheaper product that is sanction proof and they can export to third countries who also like the products but don't really or can't really deal with Americans for whatever reasons...

The US can scream copyright all they want... if they are using tarrifs and sanctions then they don't have a leg to stand on.