Rise of Russia(?)

[amoy]

Frankly it's a surprise to learn Russian min. salary was raised to 5554 rubles only eff. 1 Jan. 2014· It gets considerably less in $ or € terms after exchange rate dips. Inflation must be on the steep rise as Russia relies on import for consumer goods mostly. Its income disparity must be very wide.

Soviet Union once was an inspirational role model for transformation from an backward agrarian society though many mocked their products as "chunky" in old days

 

[jouni]

Great documentary about Putin system. One of the claims is that average Indian is richer than average Russian.

[video]http://m.youtube.com/watch?v=RAAMPiF_BSg[/video]

[video]http://m.youtube.com/watch?v=yKlYiBejDJs[/video]

 

[jouni]

Lesbian Teacher Fired After Russian Anti-Gay Activist Complains to School | News | The Moscow Times

The purges has started, a sad day for Russia.

 

[asianobserve]

Russia's Battered Economy
Hardly Tottering By

JUDGING by the lack of economic news in Russia's media, a crisis has arrived rofl. Just as in Soviet days, state television does not report facts, it conceals them. The official picture is dominated by the war in Ukraine (fuelled by America), Ukraine's economic collapse (ignored by America) and Russia's achievements in sport, ballet and other spheres (envied by America). But whereas television does not mention the economy, ordinary Russians have been busily changing roubles into dollars, buying anything that has not gone up in price and making contingency plans.

In the first two weeks of the year, when Russia was on holiday, the rouble fell by 17.5% against the dollar. Inflation is up into double figures. The price of oil, Russia's main export, has slid below $50 a barrel, prompting economists to revise their forecasts down. GDP is now expected to contract by between 3% and 5% this year. Russia's credit rating is moving inexorably towards junk.

Russia's battered economy: Hardly tottering by | The Economist

 

[Cadian]

https://www.youtube.com/watch?v=hWC8J93prJU

 

[DingDong]

Russia poked India in her eyes when it decided to get "friendly" with Pakistan. The Indian media has not been covering the Indian-Russian engagements as enthusiastically as it used to in past. Damage has already been done. Visit of the Sri Lankan Foreign Minister received more air time than the visit of the Russian Defence Minister.

On business front Russia put political and other barriers which prevented greater economic cooperation between the two countries (India and Russia). Russia wishes to act like the USSR but it is not even a shadow of the mighty USSR.

I am sure that the India is not comfortable with Russia's over-dependence on China.

 

[jouni]

Putin's System Is Built on Shaky Foundations
By Maxim TrudolyubovJan. 26 2015 17:29 Last edited 17:30

Maxim Zmeyev / Reuters
The political regime in Russia is a true work of art, but one that only looks good from a single vantage point — that of its creator. From every other angle and for every other viewer, both in Russia and the rest of the world, the image cast by that regime raises a number of troubling questions.

Why would any government create conditions that make existence impossible for businesspeople, scientists, artists and everyone else in whom the country would ordinarily take pride? And why at the same time create conditions that enable scoundrels and crooks to prosper?

Why punish the best members of society and encourage the worst? Why start a war with a "brotherly people"? Why deliberately show disdain for Russia's partner states? Why create new international unions with one hand and then destroy them with the other?

Of course, all of these questions come from outsiders because only outsiders would ask them. In Russia, just about everyone is an outsider, with the exception of the small handful of people who are privy to what is happening in the president's office. It is difficult to even guess at what is holding this whole thing together.

In fact, the "glue" holding Russia's political system together consists of the powerful human instincts of fear and the desire for status and wealth. Of course, societies in many other countries also rely on those baser motivations, but only a few manage to create institutions capable of extracting from them something of benefit to the public.

Unfortunately, the Russian system is not one of them. Some countries use a policy that appeals to officials' sense of vanity in order to build good roads or a first-rate university. That same approach in Russia only prompts the political elite to build personal palaces and to line their pockets with ever greater sums from government coffers.

The desire to retain power not only permits, but requires, that privilege and property become concentrated among as few "winners" as possible. According to U.S. political scientist Bruce Bueno de Mesquita, author of the books "The Logic of Political Survival" and "The Dictator's Handbook," masters of political survival — from former Soviet leader Josef Stalin to Syrian President Bashar Assad — can remain in power for many years by relying on a manageable number of chosen associates and controlling the country's resources.

If a ruler suddenly shows generosity to the population at the expense of his closest supporters, the latter will turn against him. He needs to keep those close associates well fed, but never allow them to relax. The members of his inner circle must keep in mind that the competition for their coveted positions is enormous, and that to retain their advantages, they must demonstrate unflinching loyalty to their host. This has the effect of encouraging the worst in human nature and society and punishing the best.

Russian society has been transformed into an audience for the national leader. The Kremlin uses state-controlled television channels and other media not to campaign and organize, but rather to carry out "anti-campaigns" and to disorganize listeners. The press is no longer an instrument for collective campaigning and propaganda, but a collective disorganizer.

Leaders deluge their audience with the greatest possible number of conspiracy theories, lies, horror stories and absurdities. The ruling regime works directly with people's minds, enabling it to maintain control over the population with minimal use of force — a positive side-effect of an otherwise alarming policy.

As a consequence, it eliminates the very possibility of taking independent action or publicly taking a position based on principle. All ideas and beliefs must not derive from higher values, but serve as instruments of government control.

The ability to manipulate the worst aspects of human nature produces excellent, albeit temporary, results for rulers bent on political survival. There is a certain advantage in the fact that nobody knows when his rule will end, but the problem is that the dictator also has no clue. The safest way for a dictator to exit the scene is to willingly lose re-election or to voluntarily step down.

Another limitation is the negative consequence of the government's tight control over incomes. To maintain control over the ownership of property, the ruler must have a weak and easily manipulated legal system. But because that system is kept weak, the members of the ruler's inner circle, along with the entire business community, place their considerable assets under the protection of the legal and judicial systems of other more developed countries.

That duality — a result of so-called "legal flight" and the desire for political survival — now poses a threat to the regime because the foreign assets of President Vladimir Putin's close associates are vulnerable to sanctions. An offer for amnesty if those assets are returned to Russia will not help because the ruler needs to maintain a weak, easily controlled legal system, one that, by definition, is incapable of protecting those assets at home.

Another limitation resulting from tight control is the unquenchable greed of the ruler's close associates and the ruler's inability to gauge the exact extent of their wealth. The ruler needs a non-transparent system so that he can cunningly distribute the wealth within his inner circle. And it is even better when each does not know how much the other has received. The problem with that approach is that these individuals manipulate that secrecy to their own advantage by hiding their profits so as to win even more of the taxpayers' money.

There are also limits imposed by the more independent members of society. Creative people and activists who act on their own initiative have the potential to bring the whole system to a standstill. Those who can earn a living by their own efforts — writers, computer programmers, artists and representatives of other independent professions — are relatively free.

There are other limitations as well. The desire to retain control compels such a leader to concoct a strange blend of nationalism and religion, subjugating all values and ideology to the higher purpose of ensuring his political survival.

The Kremlin has even found a way to use the Soviet victory in World War II to this end. Of course, by unleashing a war in Ukraine, the Russian leadership has forfeited its status as the moral inheritor of the victors over Nazism, but Kremlin spin doctors have managed to misrepresent the past and present so thoroughly as to convince most Russians that this regime is still battling the Nazi threat.

This system considers ideas in any form — unless they serve the needs of the regime — as mortal enemies. This even includes nationalism and fundamentalism. Leaders know that if any idea were to "break free" from its Kremlin handlers and unite the masses under its banner, it could completely obliterate the political system as it now exists.

Apparently, 80 percent of the Russian people support this system because they are willing to pretend that they are looking at it through the Kremlin's point of view, and therefore appreciate its beauty.

However, even a cursory "view from the street" shatters that illusion. The main limitation to this system is that now it is only capable of spurring ever greater negative consequences and hastening its own demise.

 

[jouni]

At the end of December, a few thousand people staged a demonstration in Moscow's central Manezh Square, partly to show support for Alexei Navalny — an anti-corruption lawyer, well-known blogger, and leader of a dwindling opposition movement — and his younger brother, Oleg.

The Navalny brothers had just been sentenced to three and a half years in prison for defrauding a cosmetics company. Alexei, an opponent of Putin on par with Khodorkovsky, received a suspended sentence; Oleg, an apolitical postal executive, will have to serve his full term in prison.

This tactic — to "forgive" one's enemies, while punishing them via their relatives — was a favorite of Stalin's. The "enemy" would quickly come to his or her senses, and the public, unfamiliar with those imprisoned, would quickly lose interest.

http://www.themoscowtimes.com/opinion/article/russians-have-the-government-they-deserve/514860.html

 

[amoy]

Russia Seeks To Populate Remote East With Free Land Offer

Trutnev's initial suggestion was to "create a mechanism for the free allocation of a 1 hectare (2.5 acres) plot of land to every resident of the Far East and to anyone who is willing to come and live in the region so that they could start a private business in farming, forestry, game hunting or some other enterprise."

He added that the agreement could be signed for five years, and then it should either enter full force if the new landlord follows the plan, or be declared void if the land is not used. He also added that corruption in the process of distribution can be prevented if the land plots are far from big cities with their well-developed infrastructure and competitive environment.

The scheme has been designed to limit the possible selling of the land plots to foreign companies and individuals, Trutnev said. "We will give it a try," he said. "I think this measure will prove to be effective."

 

[Dark Sorrow]

Crisis Finally Turns Russian Debt To Junk

Russia's government is now paying the price for its dependence on oil. The Standard & Poor's credit ratings agency cut the government's sovereign bond rating to junk, or BB+, one notch below investment grade.

Russia is now the first of the BRICs to lose investment grade since acquiring it over seven years ago.

The international credit watchdog didn't blame oil or even Western sanctions. It cited problems at the Russian Central Bank, and questioned its ability to manage monetary policy in a way conducive to growth and market expectations.

In December 2014, the bank raised interest rates twice in a 48 hour period. That's unusual for any central bank in normal times. But these are not normal times in Russia. This is a full blow crisis, made all the worse by oil prices have fallen roughly 60% below what the government budgeted for.

Moreover, sanctions due to Russia's ongoing role in supporting a separatist movement in eastern Ukraine have shut out Russian companies from long term financing by Western banks.

The Russian Central Bank recently fired its No. 2 deputy behind Elvira Nabiullina, American trained economist Ksenia Yudaeva from the Massachusetts Institute of Technology and replaced her with an economist from the old Soviet Union central bank. Dmitry Tulin is now in charge of the ruble.

In Standard & Poor's note on Monday, they appeared willing to believe that the bank has lost some of its independence. It is unclear whether Yudaeva's ousting was ordered by the Kremlin or was an independent decision made by central bank governor Nabiullina.

The bank has been in crisis mode since December. There is no end in sight.

Russian interest rates are now 17%. The hikes were designed to save the ruble, which was trading at nearly 70 to 1, an all-time low against the dollar. The ruble briefly appreciated against the dollar, but has since fallen to 66 to 1 on Monday compared to about 35 in October.

The Russian public had been converting rubles into foreign currency, fueling depreciation. Given the pass-through of more expensive imports to domestic prices generally, the S&P expects inflation will hit 10% in 2015.

"Asset quality in the financial system will deteriorate given the weaker ruble, restricted access of key areas of the economy to international capital markets due to sanctions and economic recession in 2015," the credit rating firm said in a statement today.

Standard & Poor's forecasts average annual GDP growth to be 0.5% in Russia for the next three years, far below the 2.4% growth rate of the previous four years.

Meanwhile, the Ukraine imbroglio is not helping matters.

Ukraine and Russian-backed rebels in four eastern border provinces continue beating on each other following last week's stalled peace talks. A solution might require greater autonomy for the region, at the risk of Balkanizing Ukraine. For now, the two sides are at an impasse.

Russia's government coffers are hanging on for dear life.

The government reported an account surplus in the fourth quarter of $10.5 billion, which puts the Russian current account surplus at roughly 3% of GDP. Russia is now redoing its budget based on actual oil prices of less than $50 a barrel. A weaker currency has slowed imports, but Russia's economy is too geared towards the energy sector to have the manufacturing diversification needed to make up for imported goods. Costlier imports ultimately squeeze the profits out of Russian companies.

S&P's decision crushed the Market Vectors Russia (RSX) exchange traded fund on Monday. The ETF fell by more than 7% in Monday's session and is now down 43.6% in the last 12 months.

Link

 

[Dark Sorrow]

S.&P. Cuts Russian Debt One Notch to Junk Level

As Russia deals with the heavy toll of Western sanctions and falling oil prices, a major credit ratings agency on Monday downgraded the country's sovereign debt to below investment grade, the first time it has fallen to that level in more than a decade.

With Russia's oil boom years fading and tensions rising with the West, the ratings agency, Standard & Poor's, cited narrowing possibilities for the Russian government and companies to service their debt. A looming problem, the agency's analysts highlighted, was the lack of options for the Russian central bank, which will have to decide this year between propping up the ruble or helping the teetering domestic banking sector.

"In our view, the Russian Federation's monetary policy flexibility has weakened, as have economic growth prospects," the ratings agency wrote.

Russia's economy is already heading into a deep recession. The agency said it projected average growth of 0.5 percent each year for the next three.

"Stresses could mount for Russian corporations and banks that have foreign currency debt service requirements without a concomitant foreign currency revenue stream," Standard & Poor's wrote.

The downgrade cut Russia's credit rating by only one notch. But that was enough to push the government's debt into the category of junk bonds.

Standard & Poor's, along with the other agencies, have been whittling away at Russia's credit ratings since the conflict with Ukraine began, and oil prices started to slide. The two other main ratings agencies, Fitch and Moody's, also downgraded Russia's sovereign debt this month, though not to the level of junk bonds.

Russia's government has tried to shrug off the ratings actions. The central bank does not formally recognize Western ratings for some banking transactions. Separately, Russia has tried to create a joint ratings agency with China to supplant the three big Western ratings giants.

But even the single downgrade by Standard & Poor's could ripple widely through Russia's economy. It will force many bond funds permitted to own only investment-grade securities to sell Russian debt.

The ratings downgrade had been anticipated for weeks, and yet after its publication on Monday the ruble plunged to new lows against the dollar. The currency fell about 7 percent in after-hours trading to more than 68 rubles to the dollar.

Further undermining the ruble on Monday, even before the downgrade, was a burst of fighting in eastern Ukraine over the weekend, resulting in the deaths of 30 people in a rocket attack on the city of Mariupol. The fighting raised the prospects of a new round of United States and European sanctions against Russia.

Link

 

[Dark Sorrow]

S&P Cuts Russia's Rating to Junk; Sanctions and Oil Slump Hammer Ruble

Russia's foreign-currency credit rating was cut to junk by Standard & Poor's, putting it below investment grade for the first time in a decade as policy makers struggle to keep economic growth alive amid sanctions and falling oil prices.

S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement released on Monday, the same level as countries including Bulgaria and Indonesia. The ratings firm said the outlook is "negative." Russian stocks declined and bonds fell for a second day following the announcement, which came after the close of equity trading in Moscow.

The world's biggest energy exporter is on the brink of a recession after oil prices fell to the lowest since 2009 and the U.S. and its allies imposed sanctions over President Vladimir Putin's actions in Ukraine. The penalties have locked Russian corporate borrowers out of international debt markets and curbed investor appetite for the ruble, stocks and bonds.

"Russia's monetary-policy flexibility has become more limited and its economic growth prospects have weakened," S&P said in the statement. "We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy."

Ruble, Stocks

The ruble, which has weakened 19 percent against the dollar since S&P first put Russia's rating on review on Dec. 23, gained 1.4 percent at 2:18 p.m. in Moscow, after closing Monday at a record 68.799. The dollar-denominated RTS Index of stocks fell 0.8 percent following Monday's 4.8 percent decline. The yield on five-year government debt climbed 16 basis points to 15.41 percent.

Some investors are prevented from owning debt rated speculative grade. Moody's Investors Service and Fitch Ratings still have Russia as investment grade.

"The ruble weakened only modestly as the market anticipated such a decision following an explicit warning from the rating agency at the end of December," Piotr Matys, an emerging-market strategist at Rabobank International in London, said by e-mail. "The odds that a full-scale financial crisis could unfold in the coming months has increased, given that S&P's decision will undermine the Bank of Russia's efforts to stabilize the ruble."

'Excessive Pessimism'

A selloff in local-currency bonds, known as OFZs, will be limited because they're still rated above investment grade, according to Dmitry Polevoy, an economist at ING Groep in Moscow. S&P reduced them to BBB-, one level above junk.

The rating company's move showed "excessive pessimism," Russian Finance Minister Anton Siluanov said in a statement.

"There's no reason to dramatize the situation," Siluanov said. "The decision shouldn't have a further serious impact on the capital market because market participants already priced in the risks of a downgrade to Russia's credit rating."

Policy makers are struggling to contain the country's worst currency crisis since 1998. The central bank shifted to a free-floating exchange rate ahead of schedule in November and is overseeing a 1 trillion-ruble ($15 billion) bank recapitalization plan. On Dec. 16, the central bank took its biggest step to shore up the currency, raising its key interest rate to 17 percent from 10.5 percent in a surprise announcement just before 1 a.m. in Moscow that day.


Weakening System

"We believe that Russia's financial system is weakening and therefore limiting the central bank of Russia's ability to transmit monetary policy," S&P said. "The central bank faces increasingly difficult monetary policy decisions while also trying to support sustainable GDP growth."

Russia's wealth funds are "puny" given the challenges the economy is facing, S&P's head of sovereign ratings Moritz Kraemer told Bloomberg TV Tuesday. Increased interest rates may prevent capital outflow, which reached $151.5 billion in 2014, he said. That compares with $61 billion of outflows a year earlier.

While policy makers spent $88 billion in interventions last year to prop up the currency, President Vladimir Putin last month scolded the regulator for not reacting to the crisis more quickly. The central bank replaced its head of monetary policy in January, selecting Dmitry Tulin to take on Ksenia Yudaeva's role in the biggest leadership change since Governor Elvira Nabiullina took charge in June 2013.

Fitch Ratings and Moody's Investors Service both downgraded Russia to their lowest investment grades this month.

Investors often disregard ratings companies' credit grade and outlook changes. France's 10-year yield, which was 3.08 percent when S&P removed its top rating in January 2012, tumbled to a record-low 1.339 percent on Aug. 15 this year.

"The trend of deteriorating ratings is more important than the rating cut itself," Aleksei Belkin, chief investment officer at Kapital Asset Management LLC in Moscow, said by e-mail. "The cut was rather widely expected and for all practical purposes was well telegraphed and discounted. I am afraid we will see more selling, not panic selling, but positions will be trimmed again."

Cut 'Unjustified'?

Russian officials have bristled at the prospects of rating cuts after S&P last month put the nation's debt on review for a potential downgrade. A decrease would be "unjustified," compounding the risks for the economy already brought by sanctions, Economy Minister Alexei Ulyukayev said this month. Putin's economic aide Andrey Belousov said Jan. 15 that a possible downgrade was already priced in, setting the stage for the ruble's appreciation.

Even so, the government has acknowledged that the country faces a period of adversity. Russia is in an "extremely difficult" economic situation and must prepare for a hard landing, with the looming challenges worse than the crisis in 2008-2009, First Deputy Prime Minister Igor Shuvalov said last week.


Growth Forecast

To temper the effects of the unfolding slump, Russia is preparing an anti-crisis program that's estimated to cost 1.4 trillion rubles, according to Shuvalov.

S&P predicts Russia's economy will expand about 0.5 percent a year in 2015-2018, slowing from the 2.4 percent pace of the previous four years. Gross domestic product may contract 4 percent to 5 percent this year if oil prices remain at $45 a barrel, according to the Economy Ministry.

"Although the cut was expected our main concern are Russia's possible counter-measures," Vladimir Miklashevsky, a strategist at Danske Bank A/S, said by e-mail. "Expectations of retaliation will depress all Russian assets this week."

Link

 

[asianobserve]

Ruble's Dramatic Drop Inflicts Economic Pain in Russia

Svetlana Onike, a 36-year-old mother of three, lets out a long sigh, her shoulders droop, she's near tears. Sitting In her tiny one-bedroom apartment an hour outside Moscow, Svetlana explains how her monthly mortgage costs have suddenly doubled to $2,100 US a month — more than the entire monthly salary of most Russians.

Ruble's dramatic drop inflicts economic pain in Russia - World - CBC News

Officials Suggest Russians Could Face Economic Crisis by 'Eating Less'

A lawmaker from the ruling United Russia party has offered his advice to Russians struggling to pay for food amid the country's soaring inflation: "Eat less."

Officials Suggest Russians Could Face Economic Crisis by 'Eating Less' | News | The Moscow Times

Now the last one is funny!