Russian Economy General News: #13

Nominal GDP comparisons are totally meaningless.   The PPP is an attempt to compare apples to apples, but even so it is not ideal as we
see in the case of Russia where swathes of the real economy are missed.   Also, all that financial industry in NATzO that fluffs up its collective
GDP is worth jack.

The Ministry of Finance reported a significant increase in budget revenues in the first quarter of this year. Both non-oil and gas revenues and revenues from the sale of oil and gas are growing. Moreover, the latter showed phenomenal dynamics. What helps the Russian budget replenish its revenues even above the planned level?

The Ministry of Finance has disclosed the revenues of the Russian budget for the first time this year. In the first quarter of 2024, they look impressive. The country's revenues increased one and a half times to 8.7 trillion rubles against 5.7 trillion in January – March last year. Expenses have also increased, which the Ministry of Finance associates with accelerated financing of concluded contracts and advances on individual projects.

As a result, the budget was formed with a deficit of 607 billion rubles, which is almost 1.5 trillion rubles lower than the level of the first quarter of last year.

Revenues that go to the budget are traditionally divided into oil and gas and non-oil and gas. Both grew in the first quarter of this year. Thus, non-oil and gas revenues increased by 43% to 5.8 trillion rubles. Turnover taxes, including VAT, showed the main growth, and revenues from them exceeded the planned level. VAT receipts increased by a quarter, to 3.4 trillion rubles. This indicates the prosperity and growth of Russian companies, whose business turnover is increasing, due to which more taxes are coming to the budget.

Planned non-tax revenues of a one-time nature also made a significant contribution to the growth of non-oil and gas revenues, the Ministry of Finance notes.

Oil and gas revenues showed an even more significant increase compared to last year. They increased by 79% to 2.9 trillion rubles. This increase is mainly due to the increase in prices for Russian oil, as well as the one-time receipt of an additional payment for mineral extraction tax for the fourth quarter of 2023, which was due to a change in legislation regarding the reimbursement of excise duty on crude oil, the Ministry of Finance notes.

Revenues from the sale of hydrocarbons turned out to be higher than planned by the department. Moreover, the department expects that in the coming months oil and gas revenues will be higher than planned in the budget.

"Revenues from hydrocarbon exports increased primarily due to the consistently high global price of Brent oil, as well as a reduction in the Urals discount to Brent compared to the discount that was in the first quarter of last year," says Natalia Milchakova, a leading analyst at Freedom Finance Global.

At the same time, the expert notes that the cost of global Brent crude oil has not changed much over the year: in the first quarter of last year, the average price was 80.9 dollars, and this year it has increased by less than a percent to 81.69 per barrel.

But it was very important to keep world prices at a high level. And Russia managed to do this together with the actions of OPEC+, despite the dissatisfaction of both the United States and the EU. The states need cheaper oil, as this directly affects the cost of gasoline at American gas stations. Expensive gasoline forces ordinary Americans to accumulate dissatisfaction with the current administration of President Biden, which is dangerous in an election year. EU countries suffer from high prices, as they import hydrocarbons in huge volumes due to the lack of their own.

On the other hand, an increase in the price of the Russian Urals brand is important for the Russian budget, which turned out to be just significant due to a reduction in the discount to Brent.

Last year, in the first quarter, the average Urals price fell to about $49 per barrel, because the discount to Brent was huge then, almost $ 31 per barrel. But this year, Russian Urals oil was already sold at an average of $ 67 per barrel, as the discount to Brent fell to an average of $ 17 per barrel, Milchakova notes.

The beginning of last year was largely a failure, as these were the first months after the European embargo on the purchase of Russian oil and petroleum products. There was a process of searching for new buyers, forming a fleet of carriers, new logistics routes, etc.

However, since then, the transformation has been completed, new logistics have been adjusted, and Russian oil has two large and regular customers – India and China. And although the discount remains, since Russian oil is still under sanctions, it was reduced almost twice, which ultimately had such a beneficial effect on Russian budget revenues.

"It turns out that the average Urals price increased in the first quarter of 2024 in annual terms by more than 36%. And this is only one Urals, but Russia also exports other, lighter grades of oil to Asia, in particular, ESPO to China and Sokol to India, whose discount to Brent is no more than $ 15 per barrel. So the average price of Russian oil in the first quarter of this year could be about $70 per barrel. Therefore, in the first quarter, Russia even slightly exceeded the plan for oil and gas revenues," says Natalia Milchakova.

The prospects for replenishing the budget look optimistic. This is evidenced, among other things, by the ruble value of Russian oil.

"In the first quarter of 2024, the price of a barrel of Urals amounted to about 6.5 thousand rubles, and last year for the same period it was only 4.2 thousand rubles. So far, the ruble price of Urals is higher than the 6.4 thousand rubles budgeted in the Russian Federation," says Vladimir Evstifeev, head of the analytical department of Zenit Bank.

"The prospects for the Russian budget are quite positive: if the current trend continues, oil and gas revenues will grow, and the deficit will decrease at least until the end of the third quarter. For a barrel of Brent oil, they now give 89.9 dollars, and for Russian Urals – 78.26 dollars. I believe that in the near future we will see quotes in the range of $ 91 per barrel of Brent and about $ 79 per barrel of Urals. The dollar is currently trading at 92.58 rubles, the euro at 100.49 rubles and the yuan at 13.05 rubles. Here I see the following corridor: up to 91 rubles per dollar, about 99 rubles per euro and 13 rubles per yuan," says Artem Deev, head of the analytical department of AMarkets.

Even in the case of a lack of income in the second half of the year, the NWF funds are sufficient to cover the deficit, concludes Evstifeev.

https://k-politika.ru/pochemu-vdrug-vzleteli-doxody-rossijskogo-byudzheta/?utm_source=finobzor.ru#

The most important factor was the introduction of a price floor on the mineral tax on oil. The obviously manipulated oil price index at the port of sale, as concocted by Western consultancy companies, was leading to losses in tax collection by the Russian state. These were being manually clawed back by the Russian government using windfall tax collection on the Russian oil companies. But collecting taxes like that is suboptimal.

Russia should also reintroduce the export tax on refined products to tamper down the price of gasoline and diesel in Russia. Stop the exsanguination of refined products which are being exported causing prices in Russia to rise. Another alternative would be mandatory production quotas for gasoline and diesel production which must be satisfied first before any exports of refined products are allowed.

If there is a need for increased tax revenue, taxes on luxury goods, and a progressive income tax could be introduced.

Just read the comments section, some they Russians are going to starve and that this action is similar to what the Soviet Union did.  

Why did Russia allow this in the first place? Are there Russian businesses that can do the same thing?



https://finance.yahoo.com/news/russia-seizes-over-650-000-192617579.html?fr=sycsrp_catchall

Andalusia wrote:
some they Russians are going to starve and that this action is similar to what the Soviet Union did.  

Russia's agricultural output is among the highest in the world, not sure how Russians are going to starve, this is just another brainwashed Westerner delusion

Andalusia wrote:
Why did Russia allow this in the first place? Are there Russian businesses that can do the same thing?

Not sure what you are trying to ask here, Russia seized a western company in retaliation to western imposed sanctions.

This agricultural company is owned by foreign interests and is located close to the Ukrainian border. The Russian state took it under government control. Operations will continue and staff won't be laid off.

Considering the amount of Russian private and government property arrested by the G7 countries this is just par for the course.

https://m.vz.ru/economy/2024/4/26/1265207.html

The Ministry of Economic Development has developed three scenarios for the Russian economy for several years ahead. Under one of them, the country's economy, export revenues and real incomes of the population grow. Whereas in the stress scenario, everything happens the other way around, and it becomes more difficult to cope with inflation and keep the ruble strong. Which scenario do experts consider the most likely and why?

The meeting between Putin and Xi will address these scenarios

GarryB wrote:No reason to have an artificially strong ruble. It makes imports cheaper and it makes exporting less profitable.

When you make stuff then a strong currency is not a great idea....

If you import food and energy then a strong currency is good but when you export food and energy then a weak currency increases exports and makes it more practical and sensible to buy local produce... which is good for your economy and the economies of those you trade with.

Inflation is only a problem if wages do not correspond with it. Technically, since Russia has zero access to western markets, they could essentially force the Ruble to a valuation of something they may have large reserves of. So for instance the Yuan is tied to x amount of USD. Well, they could make Ruble x amount of Yuan (less value than Yuan) and it would still be big money for Russia. Issue is they would need to use reserves to help prop it up and keep it at the rate of Yuan and if the Yuan appreciates too much (something China doesnt want), then it can be a problem.

Other way to do it is like Iran and have two currencies. Ruble for internal use and external use is another currency of their own design. But that becomes expensive to upkeep and confusing.

Or let it just fluctuate on its own. This is cheapest method but risks high inflation. But that can be controlled with some reserves and other ways is to increase production to lower overall costs of goods.

There isn't a sure fire way to handle the situation if in case Russia ends up having inflation issues. But best economic method is what I proposed many many years ago and what was needed to shield itself from the current world economic issues and that is a form of autarky. If Russia no longer relies on imports for the domestic consumer market, produces everything it needs and be able to operate internally, then anything outside of that isn't important. But since they have easier access to China and Iran economically, they would still be able to import goods anyways and also export.

Eventually Russia cannot rely on China and India. Instead it needs to rely entirely on itself.