Russia and economic war by the west #3

Arrow wrote:
Why is the US not self-sufficient in enriched Uranium? They produce so little of it. They made large quantities of enriched Uranium for thermonuclear warheads during the Cold War? They have no centrifuges, poor technology?

lyle6 wrote:America spends trillions fighting useless wars, do you really think they can't brute force their way to a bajillion warheads if they really wanted to?

lancelot wrote:
You underestimate the industrial rot plaguing the US. It is quite telling that the only significant uranium enrichment facility they have is designed and operated by URENCO. A European company.

Basically, SpaceX is a privatization of this government activity.

lancelot wrote:
You underestimate the industrial rot plaguing the US. It is quite telling that the only significant uranium enrichment facility they have is designed and operated by URENCO. A European company.

lyle6 wrote:I really hope you're right and the process is irreversible. The world can no longer afford a maniac with such an arsenal - America needs to be disarmed.

 The Russian Central Bank raised the key rate to 21%.

Key statements from Elvira Nabiullina, Governor of the Central Bank of Russia:

The Central Bank does not observe signs of a slowdown in inflation in the Russian Federation.

According to the Bank of Russia's forecast, given the current monetary policy, annual inflation will decrease to 4.5–5.0% in 2025, 4.0% in 2026 and will remain on target in the future.

The problem of personnel shortage has worsened:

"In terms of opportunities to increase production of goods and services, problems have become more acute. Available capacities and labor resources are being used more intensively. Tension in the labor market remains."

Unemployment rate in August remained close to historical minimum of 2.5%, and wage growth outpaced labor productivity growth.

Inflation in 2024 will be twice as high as the target, this does not mean that the key rate is not working, without its increase, inflation would be much higher.

Russian economy 'overheating' turned out to be stronger than forecast.

3 options for increasing the key rate were considered, raising to 20%, 21% and higher than 21%, the option of maintaining the rate was not considered.

Nabiullina also stated the possibility of raising the rate by 2% points in December, which will depend on a combination of factors, including the rate of inflation.

The Central Bank expects that the inflation target in Russia will be reached in the first half of 2026.

Increasing housing and utilities tariffs and vehicle recycling fees will add about 1 percentage point to inflation in the Russian Federation.

The interaction between the Central Bank and the government is very constructive, we discuss the economic situation and forecasts, sometimes they are close, sometimes not - Nabiullina on why the forecast was inaccurate.

An important factor in curbing inflation in the Russian Federation is adherence to the budget rule.

Nabiullina said that the Central Bank will begin to lower the rate after inflation begins to steadily decline.

When the time comes, we will reduce the rate in such a way that both consumer and investment activity will increase.

Russian economy overheating, but still powering the war against Ukraine

Putin’s massive spending on the war is overheating the economy, but he has the resources to keep doing it.
8 min
By Robyn Dixon
October 27, 2024 at 3:00 a.m. EDT

In Siberia, there are not enough men to drive the buses. On Russian farms, milkmaids are commanding wages similar to those of IT workers, while hotels struggle to hire waiters, cleaners and cooks.

Instead of cratering as had been widely predicted with the Western sanctions regime after Russia’s full-scale invasion of Ukraine in 2022, the Russian economy is running hot and in danger of overheating.

Massive military spending including high payments to soldiers has fueled economic growth, as well as high wages and inflation, as companies are forced to match military salaries to attract workers.

Russia can afford to fund its war in Ukraine for several more years, according to economists, because of massive oil revenue and Western sanctions failures, particularly the oil price cap put in place by the Group of Seven nations, which has failed to squeeze Russia’s oil income.

The economy is overheating partly because of President Vladimir Putin’s need to replace the 20,000 soldiers killed or wounded monthly, according to losses reported by the Institute for the Study of War in June. Russian regional governors are paying unheard of sign-up bonuses to attract soldiers, with Belgorod recently breaking the record with a $31,200 bonus.

The result is nearly full employment in Russia and skyrocketing wages. The economy’s labor force and production capacity were “almost exhausted,” warned Central Bank governor Elvira Nabiullina, who has done more than almost anyone else in the Russian government to sustain the war through her stewardship of the economy, in July. “This is actually a scenario of stagflation that could only be stopped by way of a deep recession.”
Women cross the Moskva River near Christ the Savior Cathedral in Moscow in July. (Alexander Nemenov/AFP/Getty Images)

She announced a sustained period of high interest rates to try to slow the economy and reduce inflation — but so far, it has not worked. In a sign of the continued seriousness of the problem, the bank on Friday raised its key interest rate from 19 percent to 21 percent, the highest level in more than two decades, exceeding the 20 percent most analysts had expected.

Inflation was “significantly higher” than forecast in July, the bank said in a statement. The bank has forecast growth of 3.5 percent to 4 percent in 2024, then a drastic shrinking to between 0.5 percent and 1.5 percent in the next year.

The Central Bank’s rate rise has angered some of the nation’s top oligarchs, with one powerful figure recently warning that manufacturers would go bankrupt, in a sign of the elite tensions over containing the pressures in Putin’s war economy.

Running out of workers

Private companies can barely compete with the high military wages. A survey by the Russian Union of Industrialists and Entrepreneurs this month found that 82.8 percent of firms were having difficulties attracting workers. Unemployment sank to 2.4 percent in June, according to Rosstat, the state statistical agency.

The tone in recruitment ads for welders, farmworkers, drivers, couriers and packers on online site Avito borders on hysterical.
Worker at a market in Moscow in September. (Alexander Zemlianichenko/AP)

“Urgently required!” ran an ad for a Snickers chocolate bar packer in recent days. “Easy! No experience required! Free three meals a day and accommodation!” it said, offering more than $4,100 a month; in 2023, the average national wage was just $763. Meanwhile, a warehouse packer in Astrakhan could earn more than $3,600.

Russia’s real wages grew 12.9 percent year-on-year during the first six months of 2024, according to Rosstat, although independent analysts have questioned its figures. Incomes for the poorest workers grew fastest, spiking by 67 percent, reported the independent Russian outlet the Bell in March.

Alexander Tkachyov, a Putin ally and one of Russia’s biggest agricultural oligarchs, recently groused about the high wages of dairy farmhands, once the lowliest of workers. They were now demanding monthly wages of $1,550 — equal to a junior IT worker.

“We don’t have these funds. And probably we won’t have them in the near future,” he said earlier this month at an agroindustry exhibition in Moscow.

Anton Petrakov of Yandex Taxi (Russia’s version of Uber) said last month at an economic forum in Vladivostok that Russia faces a shortage of 130,000 taxi drivers.

In Siberia, without enough men to drive the buses, routes are being shut down and there are long queues or buses that never arrive, because drivers can earn twice as much in the military. Sergei Kuznetsov, head of the small Siberian city of Novokuznetsk, proposed setting up a “women’s battalion” of bus drivers because of the staff shortages.

In the past, Russia filled low-income jobs with Central Asian migrants, but after group of Tajiks were implicated in the March terrorist attack on the Crocus City Hall shopping mall, it deported tens of thousands of Central Asian migrant workers and denied entry to another 143,000 during the first half of the year.

Many migrant workers have also been rounded up and sent to war, according to Russian independent media, making it an increasingly unattractive destination for work.

Resources for war

Putin’s economic priorities were spelled out in Russia’s recent budget, with military and security spending set to reach $142 billion in 2025 — 40 percent of budget spending, or more than 8 percent of gross domestic product. Defense spending will remain high in 2026 and 2027, a sign of his determination to fight on. But the massive spending will further fuel inflation, and Nabiullina on Friday conceded that the bank would miss its 4 percent inflation target for 2025 and would only reach it in 2026.

Some independent analysts say real inflation is running even higher than official statistics claim. A report last month by the Stockholm Institute of Transition Economics doubted the credibility of recent official inflation figures, noting that the main economic indicators were “now part of the Russian war propaganda.”

“Inflation and economic growth are particularly important components of the propaganda narrative,” it found, but it added that a full-blown economic crisis was unlikely in the short term.

Inevitably, Putin will squeeze social spending on education, health and civilian infrastructure, according to analysts, but he will pay no political price, having built a closed, repressive autocracy where major opposition politicians are jailed, harassed or barred from running for office.

Despite the intense pressures on the economy, U.S.-based Russian economist Vladislav Inozemtsev, co-founder and senior fellow at the Center for Analysis and Strategies in Europe, said Russia could afford to wage war in the coming years.

“It can sustain this war for a time in which Ukraine and probably the West cannot afford to wage it. That’s the problem,” Inozemtsev said. “Putin seems very confident that he can go further for maybe one, two or three years. For now, the situation looks quite stable.”
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“The military-industrial complex cannot produce any modern, up-to-date weaponry,” he said. “They are producing Soviet tanks and artillery. They are producing a lot of shells and missiles, short-range missiles, which are quite primitive. But nevertheless, they can do this in huge numbers.”

But Alexandra Prokopenko, of the Carnegie Endowment for International Peace, said Russia could not ramp up military production further because of labor shortages and Western sanctions.

“While continued trade with countries such as China aids the Russian economy, sanctions have significantly restricted the Kremlin’s ability to modernize its military, squeezing access to essential components and creating bottlenecks in supply chains and financial transactions,” she said, adding that the long-term prospects were gloomy.

Sanctions failure

Russia’s capacity to continue waging war for years comes with a series of failures of Western sanctions due to backroom lobbying in Europe and a lack of political will, according to Robin Brooks, senior fellow at the Brookings Institution.

Soon after the invasion, Germany and several other major European nations including Italy, Spain, the Czech Republic, Poland and Austria began shipping huge amounts of goods via Turkey and Russia’s neighbors including Kazakhstan, Kyrgyzstan, Georgia and Armenia, clearly destined for Russia, he said.
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There was no incentive for other nations to curb trade in microchips, dual-use goods or other goods to Russia if Germany and other big European powers were shipping luxury cars and other goods via Russia’s neighbors.

“In the end, you want the war to be felt by ordinary citizens in Russia,” Brooks said. “If it’s not felt by ordinary citizens, then what are we doing? You want them to be grumbling about Putin and his decisions, but if they are able to get Western cars, no problem, we’re not being effective.”

Brooks said the West could also squeeze Russia’s oil revenue by putting sanctions on more Russian tankers, including its shadow fleet used to transport 45 percent of its oil. It could also tighten and enforce the oil cap, under which G-7 nations deny shipping services and insurance to Russian tankers whose oil is sold at more than $60 a barrel.

The failure of sanctions is closely watched by autocrats, he said.

“The big message it sends to the Kremlin and to Beijing and any other autocratic potential troublemaker is that the West isn’t serious. The West is more interested in making money in the short term than in confronting autocrats. That’s the number one message, and that is deeply harmful,” he said.