Economy of the Russian Federation

jouni

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Cuba, Us prevented China Russia getting any foothold

Iran, further lowering oil prices and making Israeli hawkish netanyahu tone down his ambitions

Ukraina, bad cop-good cop with merkel made Putin back down, but did not close the door for save face for him

Agfanistan, agree
 

sorcerer

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Cuba, Us prevented China Russia getting any foothold
Too early to say. They are ideologically very different. As far as I know, US- Cuba just started talking after a very long time..Too early to say US preventing China Russia manouvers.
EU Criticizes Cuba for Supporting Russia in the Ukraine Crisis | Washington Free Beacon

Well!! Ideologies at large ..
The larger equation hasnt changed at all.

Iran, further lowering oil prices and making Israeli hawkish netanyahu tone down his ambitions
Its Israel and they will strike Iran nuke deal or not, if they chose to do it. Even Saudi Arabia allows the JEWS to use its airspace to strike Iran.
US backed Saudi is pushing just for that.
Actually the condition is reallly ripe for an Iran invasion..Aint it?
The best part of humanitarian assistance (evacuation and all) is that it leaves enough time for some diplomacy to work. So far zilch! Just Saudi asking for more force from Pakistan and US providing 1 billion$ mil hardware to Pak , naturally to help assist Saudi.
:D

Ukraina, bad cop-good cop with merkel made Putin back down, but did not close the door for save face for him
Putin didnt back down.We see Russia sending quiet a percent of treasury for building weapons. This news is hardly 24 hours old.
Merkel moved away from US and publicly issued statement how the NATO clown misled them on Russia. HAve the Germans budged from there drastically? No!
Victoria Nuland too has fell silent for past 3 weeks.
 

sgarg

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Russia is making the right moves. Russia's prime exports are nuclear reactors, military goods, and space services. Russia has started selling these overseas aggressively. I like Russia's offers to Vietnam.

Overseas sales will boost Russia's economy and protect its industrial base. I also like Russia's offer to settle trade in national currency.

The same should happen in case of India too where trade needs to be settled in national currencies. This will give a boost to Russia-India trade. Indian bourses need to start Ruble trading so that exporters and importers can hedge Ruble exposure.
 

amoy

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Putting reports on Iran and Russia side by side -

UPDATE 2-Russian March oil output hits new post-Soviet high | Reuters
MOSCOW (Bloomberg) -- Russian oil production remained near the post-Soviet record reached last month, as the collapse of crude prices since June has so far failed to visibly disrupt growth, and exports jumped.

The country's output dropped less than 0.1% from December to 10.657 MMbopd, according to preliminary data emailed from the Energy Ministry's CDU-TEK group. Oil prices have fallen to the lowest since 2009 amid surging U.S. output and a November decision by OPEC to abandon its role as the global swing producer.

Russia, which depends on the oil and natural gas industry for half of its budget, is on the brink of a recession, pressured by crude's bear market and U.S. and European Union sanctions. Crude output will probably remain on par with 2014, although the current low prices present a risk, Energy Ministry Alexander Novak said last month, citing producers' plans.
A Nuclear Deal With Iran Could Increase Global Oil Glut : NPR
"Especially when you have Secretary of State John Kerry standing next to the energy secretary of the United States in on the talks," he says. "Why would you have the energy secretary in on the talks if you weren't really getting prepared for more oil on the market? The Iranians expect a deal because they're already talking to the oil companies saying, 'Come look at us.' "


There're certainly links btwn them.
 

sgarg

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@amoy, USA doing business with Iran is far-fetched. There are simply too many kinks in this armour. With the war in Syria and now Yemen (basically KSA vs Iran), any serious rapprochement between USA and Iran is far off.

I do not see any change in oil situation this year. As war heats up in middle-east, the chances are oil will inch UP, not down.

Even KSA will need money to finance its war. Doubtful if 2-3000 dead will kill Houthi/Iranian advances in Yemen.
 
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pmaitra

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Market Volatility and the Twilight of the Dollar
The chaos in world financial and commodities markets has its origins in the policy paralysis in the US and will hasten the end of the dollar’s pre-eminent position as the world’s reserve currency.

Alexander Mercouris | Russia Insider


US Federal Reserve Board - At the epicentre of the crisis

For those interested in that sort of thing, 20th August 2015 has been a fascinating day in the markets.

Oil has plunged, Kazakhstan and Vietnam have both floated their currencies, the Kazakh currency has fallen by 20% in a single day, and what are politely referred to as the currencies of the “emerging market economies” - which include the rouble - have all fallen in unison.

In Russia the rouble has tracked the fall in the price of oil, with Economics Minister Ulyukaev saying that because oil is likely to continue its fall, the rouble is likely to fall further.

In the meantime - and counterintuitively for those who continue to see the fall of the rouble as some sort of disaster for Russia - Russia’s international reserves have grown by over $4 billion in the last week - confirming incidentally that the Central Bank is not intervening in the foreign currency markets to support the rouble.

Meanwhile, though the rouble’s fall has now been underway for almost 2 months, the effect on inflation remains subdued. Rosstat - Russia’s statistical agency - reported deflation (i.e. an actual fall in prices) over the last week.

As for Russia’s overall financial position, the trade balance remains in surplus and the budget deficit has fallen from 3.7% of GDP to just 2.7% of GDP over the first 7 months of the year, despite the ongoing recession and the collapse in oil prices.

This means that Russia’s budget deficit is now no greater than that of the US - supposedly in the sixth year of recovery - and is half the size of Britain’s - on the strength of the reduction of which Britain’s governing Conservatives have just been re-elected.

As I have explained many times, the reason Russia’s budget deficit is so small and why the balance of trade remains in surplus, is because the government decided to float the Rouble last year.

Of the big emerging market economies I suspect that the one to worry about is Turkey.

Unlike Russia Turkey’s economy operates with a trade deficit. It has grown over the last decade by importing capital from the Arab world and the West at an ever increasing rate. That has led to a steep rise in foreign debt, which by some estimates now equals more than half Turkey’s GDP - more than twice Russia’s - but without the large-scale amassing of hard currency liquid assets by Turkish companies that Russia’s companies have achieved. As was the case in Greece before 2007, much of the debt has gone to fuel a construction boom, which as in Greece before 2007, has been Turkey’s main growth driver.

The steep fall in the Turkish currency will increase the cost of imports and of servicing the debt, offsetting any benefit to the country from the oil price fall. Given that the balance of trade is in deficit, it is easy to see how things could go wrong and how the economy could fall into deep recession.

What explains the extraordinary volatility in world markets?

The Western financial press is blaming China and Saudi Arabia.

China’s economy is supposedly slowing and facing a “hard landing”, supposedly forcing it to devalue its currency to regain competitiveness, thereby allegedly increasing the risk of “currency wars” i.e. of competitive devaluations by countries seeking trade advantages over each other - as happened disastrously during the Great Depression of the 1930s. Falling Chinese demand for commodities caused by the slowing of China’s economy is supposedly what is causing the price of oil and of other commodities to fall.

Saudi Arabia is being criticised for causing the oil rout, supposedly because it has miscalculated the resilience of US shale oil producers, and is foolishly ramping up production during a period of oversupply, instead of cutting it.

I do not find either of these arguments convincing.

Concerns about China do not reflect what the statistics coming out of the country are saying, and are hardly justified by what has so far been a very small devaluation, which seems to have been intended primarily to strengthen China’s demand that the IMF include its currency in the IMF’s reserve currency basket.

As is the case with Russia, one should not confuse Western wishful thinking about China with China’s economic reality, which still looks robust.

As for Saudi Arabia, wishful thinking and confusion about its intentions is, if possible, greater still.

First of all, it baffles me that the myth that Saudi Arabia refused to cut production last year in order to hurt Russia as part of some sort of US-Saudi plot refuses to die. The Saudis have made it clear that it is not Russia but the US shale oil producers that are in their sights. That is a fully sufficient explanation for Saudi Arabia’s actions, and there is no reason to look beyond it.

What of the view that the Saudis have misjudged the resilience of US shale oil producers and that they need to reverse course quickly or risk putting in jeopardy their own economy?

The Saudis are the most experienced and best informed players in the oil market, and it beggars belief that they are not well-informed about conditions in the US oil industry - including the shale oil industry.

It is difficult to believe the Saudis ever thought a few months of depressed prices would be enough to kill off an entire industry. Common sense - and basic market intelligence - would have told them that it would take a sustained period of low oil prices - and a general market expectation that oil prices would remain low for a long time - to persuade the shale oil industry’s investors and creditors that there was no point in holding on.

When the Saudis decided last year to maintain production at current levels they must have calculated that prices would remain depressed for a long time - two or even three years at least. Nothing else makes sense.

What of claims from the shale oil industry that efficiency savings will enable it to ride out the storm?

I am not an energy industry economist. What I would say however is that what we are now hearing from the shale oil industry is precisely the sort of thing one would expect to hear from the shale oil industry at this point in the oil price cycle. They have to say they have the situation under control to reassure their creditors and investors in order to keep them on side, and it is hardly surprising that that is what they are doing.

I can remember hearing exactly the same things at the crest of the dot.com boom and of the property bubble as both were starting to burst and I see no reason to think it is any different this time.

Despite claims to the contrary, Saudi Arabia’s reserves and the liquidity of its banking system means that despite heavy spending it has the wherewithal to last out a prolonged period of low prices.

That surely is the Saudis’ calculation and the reason for their actions.

Given that this is so, there is no reason to expect them to change their policy, and Ulyukaev’s comment on 20th August 2015 shows that he at least doesn’t expect them to.

In any test of endurance between a cash-rich low-cost saver and a heavily indebted high-cost debtor - such as we are now seeing between the Saudis and the US shale oil industry - most people would put their money on the saver. Nothing I have seen or heard so far would lead me to change that view.

Saudi Arabia’s actions anyway did not cause the original oil price crash, which began in the summer of 2014 - before November’s OPEC decision to maintain production at current levels. Saudi Arabia’s actions cannot therefore explain the instability in the markets, which is now affecting all commodity markets and not just oil.

For an explanation of the present instability one has to look not at Beijing or Riyadh but to the policy paralysis in Washington.

In 2014 the US Federal Reserve Board finally brought its quantitative easing programme to an end.

Everyone expected - and the Federal Reserve Board encouraged everyone to think - that this would be followed quickly by a rise in interest rates.

As I have discussed many times previously, it was this apparent tightening of monetary policy in the US that caused oil prices to collapse last year.

In the event, instead of the rise in interest rates everyone was expecting, the Federal Reserve Board, apparently evenly split between supporters and opponents of a rate increase, has held fire.

Some of the reluctance to raise interest rates may be because economic performance in the US over the last year has been consistently below expectations, with productivity growth particularly bad.

It is difficult however to avoid the feeling that behind the failure to take action is pressure from the Obama White House, worried about what an increase in interest rates would do to the Democrats’ chances of holding on to the Presidency in 2016.

It is this uncertainty about the Federal Reserve Board’s intentions which is behind the instability in world markets. Since no one is sure what the authorities in charge of the world’s main reserve currency are doing or are going to do, no-one can plan ahead, so that positions are taken quickly and are reversed as quickly, as everyone nervously waits for the Federal Reserve Board to make up its mind.

That is why when it appeared last summer that the Federal Reserve Board was going to raise interest rates the oil price collapsed; why when it put off its decision to raise interest rates in the winter the oil price rallied; and why when talk it might be about to raise rates in September began to spread again during the summer the oil price collapsed again - taking other commodity prices down with it.

It remains to be seen whether at the Federal Reserve Board’s forthcoming meeting in September a decision one way or the other is finally made. The very latest announcement suggests continued uncertainty.

In the meantime - in the absence of a clear decision - the US risks ending up with the worst of all worlds: having the costs of high interest rates without the corresponding benefits.

Talk of an imminent rise in interest rates must already be causing interest rates to US borrowers - including shale oil producers - to creep up, without however providing the benefit of higher interest rates to US savers, who have had to get by with almost zero interest rates since 2008.

At the same time speculation that US interest rates are going to rise has caused the Dollar to surge and the currencies of the US’s competitors to fall, pricing out US goods and ensuring that most of the benefit of the oil price fall goes to the US’s manufacturing competitors rather than to the US’s own manufacturers.

US dithering on this key question is having another effect.

Governments and business people around the world - or at least outside the Western world - have long been exasperated at how their plans are constantly held hostage by the chaos in decision making in Washington and by the US’s narrow minded focus on its own interests.

Once, not so long ago, US and Western economic predominance was so great this did not matter. Today that is no longer so.

The result is increasing discussions around the world to end an international trade and financial system based around an increasingly erratic and unpredictable US and its currency, the Dollar.

That ultimately is what all the discussions and agreements between Russia, China, the Eurasian states and the BRICS states, that happened this year, were all about.

It is also what the discussions between the Russians and the Saudis, which have caused so much surprise and which have attracted so much comment, are also about.

If the market instability of the last year shows the continued importance of the Dollar, that same instability explains why the Dollar is unlikely to retain that importance for very long.
 

pmaitra

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Poland Slams Second Russia-Germany Pipeline
Poland's president says the Baltic pipeline ignores Polish interests

(AFP) | Russia Insider


Did we say pipeline avoids Polish territory?

September 8 (AFP) - Poland's conservative president on Tuesday slammed a deal between Russia's Gazprom energy giant and several leading Western firms to build a second gas pipeline under the Baltic Sea, saying it ignores Polish interests.

“Considering that an agreement was concluded on building Nord Stream-2, which completely ignores Polish interests, one must seriously question unity” in the 28-member European Union, President Andrzej Duda told delegates to an economic forum in the southern Polish mountain resort of Krynica, dubbed Central Europe's “Davos”.

In June, Gazprom agreed with Anglo-Dutch Shell, Germany's E.ON and Austria's OMV to build the new gas pipeline – dubbed Nord Stream-2 – to Germany, bypassing conflict-torn Ukraine but also EU neighbour Poland.

The route under the Baltic Sea from Russia would have a capacity of 55 billion cubic metres per year and would double the flow of the existing Nord Stream pipeline currently linking the two countries.

No timeframe was given for the deal that will boost Germany as a distribution hub for Russian gas in Western Europe but undermines Poland's role as a transit state.

Polish politicians from across the political spectrum have long opposed Nord Stream, claiming it undermines Poland's energy security stemming from its role as a transit country for Russian gas via the Yamal-Europe pipeline.

The Nord Stream-2 announcement comes as Moscow seeks more gas delivery routes to the EU that bypass Ukraine, despite the EU's insistence that it wants to cut its dependence on Russia.

Russia and the West are locked in a bitter standoff over the Kremlin's role in Ukraine and a gas dispute between Kiev and Moscow has threatened energy supplies to the EU.
 

pmaitra

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German Corporate Titans Forge Ahead With Major Russia Investments
VW bets big on Russian growth, while hyper-retailer Globus secures record-breaking, gigantic plot in surburban Moscow

(The Moscow Times) (Not a Russian news source) | Russia Insider


Globus

This article originally appeared in The Moscow Times

Major German retailer Globus Group, which owns the Globus hypermarket chain in Russia, has leased a 45,000-square-meter plot at an industrial park in the Moscow region.

The company will use the warehouse space at the Kholmogory industrial park as a distribution center, according to real estate firm Jones Lang LaSalle (JLL) which advised Globus on the deal.

It is a record-setting deal for an international grocery retailer on the Russian warehousing market, Pyotr Zaritsky, head of the warehouse and industrial department at JLL, said in a statement last week.

The value of the deal remains confidential, JLL said.

Globus has operated on the Russian market since 2006 and has 10 hypermarkets in Russia. The company plans to open its largest outlet yet in the town of Pushkino in the Moscow region this year.

The Kholmogory industrial park is located 30 kilometers outside Moscow. The total area of the complex is 250,000 square meters.

According to industry analysts polled by the Vedomosti business daily, the 45,000-square-meter lease is the largest deal on the warehouse property market involving a foreign company in two years.

The absolute record belongs to Swedish furniture giant IKEA, which in 2013 leased 71,800 square meters in the Moscow region logistics park Logopark Sever, according to Vedomosti.

A year earlier, German sportswear retailer Adidas leased 65,000 square meters in warehouse complex PNK Chekhov-2 in the Moscow region, Vedomosti reported.

In the first eight months of 2015, eight out of 45 warehouse lease deals in the Moscow region involved foreign companies. In total they rented about 103,000 square meters out of the 460,000 square meters of warehouse space rented out, Vedomosti reported, citing Vyacheslav Kholopov, director for office and warehouse property at real estate consultancy Knight Frank.

This article originally appeared in The Moscow Times. Click here for the Reuters report

Volkswagen AG started production at a newly built engine plant in Russia on Friday, aiming to cement its position in a market which it sees as offering long-term potential despite its recent contraction.

Sited next to Volkswagen's vehicle plant in Russia's car-manufacturing centre Kaluga, 150km south of Moscow, the factory has the capacity to produce 150,000 engines a year. It will make engines for the Polo and Skoda Rapid models that are assembled in Kaluga and will later service the Volkswagen Jetta, Skoda Oktavia and Skoda Yeti models.


“We need to continue and strengthen our partnership (in Russia) despite the current situation,” said Volkswagen board member Thomas Schmall. “We are doing everything in our power to strengthen our market position in the long term.”

After a decade of annual sales growth in excess of 10 percent, the Russian car industry has been hit hard by an economic crisis caused by lower oil prices and Western sanctions over Moscow's actions in Ukraine.

Domestic car sales have halved from their peaks in 2012-2013, when during some months the country ranked ahead of Germany as Europe's largest car market by sales, and eighth biggest in the world. It now ranks only fifth in Europe and 12th globally.

Russia has sought commitments from foreign carmakers to boost local production and wants 60 percent of manufacturing costs spent domestically by 2020. In return, producers enjoy lower import duties on car components.

Volkswagen announced plans in 2012 to spend around 250 million euros on the engine plant, in line with Russian government targets to equip at least 30 percent of vehicles produced in Russia with locally-made engines by 2016.

Russian sales of the VW brand fell 44 percent year-on-year in the first seven months of this year and the company in March cut jobs and working hours at the Kaluga factory. But it says its investment plans are intact due to the market's longer-term prospects.

Ford Motor Co's Russian venture, Ford Sollers, also opened a $275 million engine plant in Russia this week. General Motors Co, by contrast, quit the market in March, winding up its Opel brand there and shutting its plant in St Petersburg.
 

pmaitra

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Slovakia Blasts Nord Stream 2 ‘Betrayal
They are making idiots of us says Slovakia PM Robert Fico

(EurActiv) | Russia Insider


‘This stinks!’

This article originally appeared at EurActiv

Slovak Prime Minister Robert Fico said today (10 September) that a deal between Russia's Gazprom and its European partners to expand the Nord Stream gas pipeline was a “betrayal” that would cost Ukraine and Slovakia a combined billions of euros.

Last week, Gazprom and its European partners signed a shareholders' agreement on the Nord Stream-2 gas pipeline project that will bypass Ukraine and run beneath the Baltic Sea to Europe, bringing Europe closer into Moscow's energy orbit, a move criticized by the US energy envoy.

Gazprom, E.ON, BASF/Wintershall, OMV, ENGIE and Royal Dutch Shell formed the new consortium for the project.

“For months, there have (been) talks at the European Council about the need to help Ukraine stay a gas transit country, to help it through difficult winter months,” Fico told a joint news conference with Ukrainian Prime Minister Arseny Yatseniuk.

‘They are making idiots of us’

“Suddenly an announcement came from Gazprom signing a contact with companies from western EU member states about building another branch of Nord Stream. The are making idiots of us.”

“They have betrayed an EU member state - Slovakia - and are going against political discussions with Ukraine at the European Council”, Fico said.

Slovakia provides reserve gas flows to Ukraine to help the country decrease its dependence from Gazprom. Russia has called the practice “illegal”.

Polish President Andrzej Duda too has made strong statements against the deal between Gazprom and the Western firms, to build a second gas pipeline under the Baltic Sea, saying it ignores Polish interests.

Russia provides for around a third of EU energy needs, but around half of the gas the EU imports from Gazprom is shipped via Ukraine, with which Russia is in conflict. It wants to find new ways to deliver gas to Europe bypassing its neighbour.
______________________________________________________________________
Commentary: “I shall stop you from trading with Russia, but I will proceed with trade.” That, folks, is “European Values” in a nutshell.
 

pmaitra

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Russia Sanctions to Cost EU Taxpayers Another €500 Million
EU will dish out an additional €500 million to European farmers - to compensate for falling prices in the wake of Russian food import ban

(German Economic News) | Russia Insider


Farmers' insurgency in France

This article originally appeared in German at German Economic News

Article Summary: Retaliatory Russian agricultural sanctions against the EU are killing European farmers. Thousands of farmers from across Europe are protesting. Keeping European farmers alive in the face of the cutting off of one of their biggest export markets (Russia) is costing the European Union money it can ill afford to lose.

Translation:

(Note: We know the translation is a little rough, but for lack of resources we have to use Google Translate for the bulk of the translation, tweaking here and there. We welcome volunteers who are interested in helping us translate from German to English as there is a lot of interesting material. If interested please contact David Curry at [email protected])

The vociferous protests of farmers in Brussels have paid off. The EU is giving the farmers 500 million euros. Thus, the price decline will be compensated because of the Russian sanctions.

Accompanied by violent protests of thousands of farmers, the EU countries have agreed on initial measures against the fall in prices of agricultural products. The EU Agriculture Ministers approved on Monday in Brussels a package of measures the European Commission, which provides, inter alia, emergency aid amounting to 500 million euros.

In front of the EU Council building where the ministers met, nearly 5,000 farmers from Belgium, France, the Netherlands and Germany protested with more than 1,500 tractors, according to police. They caused the traffic in and around the Belgian capital to be partially paralyzed, and some pelted police with eggs. The police used water cannons.

In addition to the 500 million euros the European Commission wants the rules on state aid to stay flexible. The EU countries must make direct payments from mid-October to up to 70 percent directly to farmers. In addition, according to the Luxembourg EU Presidency, a new program will be launched for the private storage of pork. The intervention prices, in which the state acts as purchaser and thus leading to lower supply should be temporarily increased. A sum must still be agreed, said EU Commission Vice President Jyrki Katainen.

Also barriers are to be broken down and the advertising of agricultural products is to be strengthened to increase the demand in the EU. Reducing farmers' costs must also be a priority, said the Luxembourg Agriculture Minister Fernand Etgen.

For the price decline the EU blames, among other things, the Russian embargo on agricultural products as well as the decline of competition in China, where supply has increased.
______________________________________________________________________________
Commentary: Sad to see the “wealthy” G7 nations fail to live up to their bluster.
 

pmaitra

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More Bullish News from Russian Auto Industry Thanks to Cheap Rouble
Global manufacturers have started exporting from Russia due to cost advantages

Anastasia Bazenkova | (The Moscow Times) (not a Russian source) | Russia Insider


Volvo one of many companies taking advantage of the weak Ruble

This article originally appeared at The Moscow Times

Global automakers have started to export cars and auto parts manufactured in Russia after the cost of their production dropped due to the ruble's devaluation, the Vedomosti newspaper reported Wednesday.

The development of exports could help foreign car manufacturers compensate for the losses caused by a dramatic slump in sales in Russia.

The world's second-largest producer of automotive glass, China's Fuyao Glass Industry Group, has started exporting products manufactured at a plant in Russia's Kaluga region established by the company in 2013, Vedomosti reported, citing Shi Tzyun, CEO of Fuyao Glass Rus.

Germany, Belgium, France and Spain are the first foreign markets for the locally produced auto glass, Shi said at the Autoevolution international forum that took place in Kaluga on Tuesday, according to Vedomosti.

The company announced plans to export two thirds of its products manufactured in Russia two years ago, but the ruble's devaluation and the shrinking of the Russian car market accelerated export development, Vedomosti reported.

Russia's car market is currently going through tough times. The market has witnessed a sharp slump in demand during the past year due to the country's economic downturn, triggered by sanctions imposed on Russia last year over its role in the Ukraine conflict and a steep drop in global oil prices.

In the first half of the year, sales of cars in Russia dropped by 36 percent compared to the same period in 2014. Last month, sales plunged by 19.4 percent year-on-year, according to a report by the Association of European Businesses, a Moscow-based business lobby group that monitors the car market.

German car producer Volkswagen is also actively developing the export of products manufactured in Russia.

The company sells engines produced at its plant in the Kaluga region to Europe and is also planning to start the export of locally produced vehicles, the acting governor of the Kaluga region, Anatoly Artamonov, said at a meeting with President Vladimir Putin on Tuesday, according to the Kremlin's official website.

Swedish auto manufacturer Volvo also intends to deliver vehicle cabins manufactured in Russia to its foreign plants after its cabin factory resumes production at the end of September, Peter Andersson, managing director of Volvo Group Russia, said at the Autoevolution forum, according to Vedomosti.

Volvo's automobile plant in the Kaluga region will resume work on Oct. 1, Andersson said.

Volvo temporarily suspended production in Russia in February, according to the RIA Novosti news agency. The company attributed the decision to the unfavorable situation on the market and a slump in demand.

Volvo is not the only foreign car manufacturer to have suspended or reduced production in Russia or cut exports to the country amid falling sales.

In March, the South Korean car manufacturer SsangYong suspended sales in Russia, Reuters reported. In the same month, the U.S.'s General Motors announced the suspension of sales of Opel and Chevrolet in Russia. In July, the company stopped production at its only Russian plant in St. Petersburg, the RBC newspaper reported.
 

jouni

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http://ftalphaville.ft.com/2015/09/10/2139818/unravelling-russias-offshore-financial-nexus/

Interesting article how Russia is running on recycled money: from oil to tax havens and back to Russia. Also Russia has more people working on a public sector than in Soviet hay day. The end is coming...

@Rowdy, @pmaitra

Unravelling Russia’s offshore financial nexus (updated)

Izabella Kaminska
| Sep 10 14:14 | 19 comments | Anastasia Nesvetailova has penned a fascinating paper looking at the question in the context of the country’s growing aspiration to reposition itself within the global economic balance.

The basic premise is that capital support from decades worth of oil and gas revenues heightened Russia’s ambitions to counteract US hegemony and unilateralism by reasserting its influence over world affairs, finance and geopolitics, in particular by building a Eurasian Economic Union.

But this proved economically insignificant and politically destabilising, on account of Ukraine’s hesitation about joining. Instead it galvanised the West into using economic and financial force as a submission tool. Notably, the Western response coincided with a drop in oil prices in the world.

Yet, as Nesvetailova observes, it may be Russia’s complex and increasingly financialised economy — including its connections to an offshore nexus — which may prove a greater threat for the country’s stability than just low oil prices.

According to Nesvetailova, financial channels which once underpinned the success of Putin’s Russia now work as crisis transmission mechanisms instead.

As she says:

… it is important to acknowledge that commonly used labels such as “petro-state” or the “oil needle” conceal a set of complex economic relationships, institutional linkages and sectors that make up a large, state-centred secondary economy in Russia today.

Specifically:

Today, the welfare of many people directly depends on the federal budget and regional transfers and subsidies. If in 2004 for instance, 16.4 million of people were employed in the state sector, today 20 million workers (or 28 percent of the total workforce) are employed in the state sector. This number is higher than the number of people who were employed in the government sector of the Soviet Union.Sustaining and funding this secondary economy is the tallest economic challenge facing the Russian authorities amidst the unfolding crisis.

Russia’s pattern of economic development can consequently be broken down as follows:

  1. Natural resources are exported and revenues internalised through a national redistribution system.
  2. Financialisation of the related capital acts as a booster for domestic consumption/demand.
  3. Offshore-isation helps Russian capital to be recycled and integrated into the global capital markets.
Profits from hydrocarbon exports, in short, have been used to finance regions and sectors that are not directly involved in oil and gas exploration. So, while hydrocarbons represent only a small share of Russia’s GDP, by contributing about 50 per cent to the state budget, they serve as a critical source of funding for the secondary economy and non-resource sectors, digested through the system of public finances.

Nesvetailova adds that since 2000 an important trend across this secondary economy has been the growing scope of state ownership, the public sector and state bureaucracy, with state ownership in the economy growing from 38 per cent in 2006 to 50 per cent in 2012, compared to the world average of 30 per cent. The crisis is further escalating the trend.

All of which was viewed acceptable because of an informal social contract between the state (Putin) and the Russian people based on the implicit understanding that the elites maintain power by enriching themselves but also by diverting resources in the name of Russia’s wider national interests. Meanwhile ordinary Russians get wealthier (partly by relying on corrupt mechanisms or informal networks) and share the patriotic duty by not engaging in active politics. Think of it as mutually beneficial rent-seeking.

But the crisis of 2014-2015 is compromising the social contract, says Nesvetailova, because some regions are already suffering a diminished flow of resources from the federal centre with some social programmes and financial provisions affected by spending cuts as well.

Which brings Nesvetailova to the structure of the Russian banking system, and the role it’s played in topping-up capital inflows into Russia:

Russian banks are the main providers of credit to enterprises and households, and in addition to state transfers, became a second important channel of financing domestic demand between 2000 and 2014. In addition to rising incomes generated by the oil revenues, the boom in domestic demand was financed through international channels. The years of macroeconomic and currency stability (mid- 2000s) facilitated the expansion of Russian banks internationally: they became global borrowers, actively taking loans from Western banks, enjoying access to international capital markets and even importing some practices of securitisation.

The currency stability and the expansion of the banking sector have enabled the financialisation of Russian domestic consumption and most crucially, of the households. The year 2007 marked a notable point in the financialisation of Russian growth: against the background of low interest rates in the West, international capital flows favoured emerging markets.Russia in particular benefited from this reversal: the endemic capital flight out of the country was replaced by net capital inflow, which peaked in 2007. That year, total investable resources in Russia (including financial resources and export revenues) stood at 100 billion dollars. The inflow of capital, in turn, facilitated a credit boom. Between 2000 and 2008, the real value of loans extended to enterprises and households increased more than tenfold, from 10 to 41 percent of GDP. Some areas of this financialisation trend have grown from scratch. For instance, between 2000 and 2008, loans to households increased 46 times, on average by 53 percent per year.

Critically, the period of rouble stability made loans in non-rouble currencies attractive to Russian borrowers, with foreign currency loans accounting for about 25 per cent of the total Russian loan market between 2008 and 2009.

But while dollar-denominated mortgages made up 31.9 per cent of the total mortgage market in 2006, in the run up to 2014, it was unsecured loans that drove financialisation, with the total lending of unsecured loans in 2012-13 standing at 38 per cent. This has fallen to 17 per cent following the central bank’s efforts to tighten lending conditions.

All of this in Nesvetailova’s mind suggests that by late 2013 — even though macroeconomic data suggests otherwise — the Russian economy had already become quite fragile.

She adds that this has now morphed into a full-scale banking crisis:

Between 1 March 2014 and today, more than ninety Russian banks were either liquidated or had their licenses revoked by the CBR. Additionally, around ten large banks had to be “additionally capitalised” to avoid bankruptcy. Current estimates by the CBR suggest that in the event of large stress, about 39 banks are likely to face a liquidity crisis, which in the current environment is likely to lead to bankruptcies.

With all eyes on China’s efforts to stabilise its imploding credit market, what has been weirdly overlooked by mainstream financial markets is the scale at which Russian authorities have been deploying the Federal Reserve (stabilisation) fund on a range of “anti-crisis” measures. At the current rate of utilisation Nesvetailova predicts the Federal Reserve Fund, currently valued at 5.8tn roubles, will be depleted by the end of 2015.

Indeed, with no incoming capital, sharply reduced opportunities for borrowing and the peak of debt repayments to international creditors falling between 2015 and 2016, defaults become a distinct possibility:



Which brings Nesvetailova to the third and arguably most significant structural economic weakness in the economy: its dependency on the obfuscating services of the Russian offshore nexus, which has disguised the nature of foreign investment in Russia.

Indeed, analysis of FDI flows suggests that the top foreign investors in Russia have consistently been Cyprus, the British Virgin Islands, Bermuda and the Netherlands — suspected proxies for Russian hands –suggesting the country has been largely unsuccessful at attracting true foreign investment.

The key destinations for Russian investment abroad, meanwhile, also remain Cyprus, the Netherlands, the BVI and Luxembourg.

All of which suggests a level of inter-entity lending and borrowing reminiscent of the shenanigans that went on at Enron. Nesvetailova on the Russian capital merry-go-round:

The data suggests that it is the capital of Russian-owned structures, recycled out of Russia through a chain of offshore jurisdictions that has been recycled back into Russia as FDI. According to the most recent investigations, 14 out of 20 privately owned companies on Russia’s Forbes list are owned by companies registered in offshore havens. Eight of such firms are from Cyprus, four from the Netherlands, and one each from Switzerland and the BVI.

And the circular investment flow process goes like this:

  1. A Russian company belongs to a Cyprus “mother.” The Cyprus company gives its Russian “daughter” a loan (or a right to use the brand name, licence, etc.). The Russian company sells products in the Russian market and earns revenue. Most of this revenue goes to paying off the Cyprus mother (either as interest on the loan or as a fee for the title/right/royalty). As a result, the net profit of the Russian daughter is minimal, most of the sum goes to Cyprus.
  2. A sub-type of the same model is based on exports: a Russian company sells products to a Cyprus firm at a low price. The Cyprus company in turn, sells products to the final consumer at a higher price. In reality, these are only recorded “paper” transactions; the products go directly from Russian producer to final consumer.
So what’s the purpose of all this complexity? Nesvetailova argues the intricate chains of offshore based entities are specifically constructed with the aim of hiding the ultimate ownership of assets.

_____

See note below.

______

Critically, Nesvetailova says, access to offshore ownership has enabled Russian owners to avoid international sanctions. Offshore havens have also been benefiting the City of London in the current crisis, as money flowing out of Russia is not being recycled back into Russia anymore but being invested in Western financial and property assets.

The only exception to that pattern is Crimea, which in 2014 saw an upsurge of foreign investment from Cyprus, the BVI and other offshore havens, led by inflows from Guernsey which accounted for 80 per cent of all FDI into Crimea in 2014.

In any case, the state is now trying to draw on these offshore capital reserves for the purposes of national security with Putin even launching an anti-offshorisation campaign aimed at raising state revenues. Except, according to reports, Russian businessmen are planning to become non-residents of Russia to avoid having to comply with the new law.

As a consequence:
The key question for the medium term, therefore, is whether there are enough resources in Russia’s sovereign wealth funds to sustain the popularity of the regime, and maintain the social contract while waiting for oil prices to recover. The pressure on sovereign wealth funds is prompting a search for alternative sources of funding. As shown above, Russia has mostly been attracting Russian investment, and Putin’s Russia has few friends with purchasing power.
So what happens next? Nesvetailova envisions four possible scenarios:
  1. Oil prices rebound to $70-80 per barrel and Russia’s consumption and growth stabilise at a lower level.
  2. The situation in the hydrocarbon markets continues to worsen, Russia is financially rescued by China and becomes a (resource) satellite of China. This merger starts a global realignment of powers and geopolitics.
  3. Russia returns to the Western fold and an inevitable modernisation path which includes economic openness. Theoretically, this can be the outcome of Putin remaining leader, or of a Kremlin recasting.
  4. The Kremlin attempts to distract attention from the deepening economic crisis by entering into another security conflict, either by further escalating the ongoing war in Ukraine, or by heightening the security situation domestically through pro-Kremlin militia.
_______

Update

A previous version of this post included an example from Nesvetailove citing Gunvor Group, to which Gunvor has objected and which we’ve now removed. But in case you’ve now gone and looked this up on the Way Back Machine, here’s clarification of Gunvor’s ownership from Gunvor itself:

Prior to March last year, Torbjörn Törnqvist, Gunvor’s Swedish chief executive, and Gennady Timchenko (a Russian citizen) each held 43.59 percent of Gunvor Group (with a 50/50 split of the voting rights) through their respective personal investment vehicles: Frefika Foundation and Fentex Properties, respectively. The balance of shares were held by other employees.
Timchenko sold his shares on March 19, 2014, to Törnqvist, leaving the Swede with 87.18 percent of the company and 100 percent of the voting voting rights. The rump is now held by other employees, with no outside shareholders. Currently, Törnqvist holds 86.94 percent of Gunvor and the remaining 13.06 percent is held by the Gunvor Employee Share Plan.

Timchenko has no ongoing involvement in Gunvor Group or any of its subsidiaries. Indeed, even when he was a shareholder he was never a director or employee, and there was no family involvement either.
 

Rowdy

Co ja kurwa czytam!
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http://ftalphaville.ft.com/2015/09/10/2139818/unravelling-russias-offshore-financial-nexus/

Interesting article how Russia is running on recycled money: from oil to tax havens and back to Russia. Also Russia has more people working on a public sector than in Soviet hay day. The end is coming...

@Rowdy, @pmaitra

Unravelling Russia’s offshore financial nexus (updated)

Izabella Kaminska
| Sep 10 14:14 | 19 comments | Anastasia Nesvetailova has penned a fascinating paper looking at the question in the context of the country’s growing aspiration to reposition itself within the global economic balance.

The basic premise is that capital support from decades worth of oil and gas revenues heightened Russia’s ambitions to counteract US hegemony and unilateralism by reasserting its influence over world affairs, finance and geopolitics, in particular by building a Eurasian Economic Union.

But this proved economically insignificant and politically destabilising, on account of Ukraine’s hesitation about joining. Instead it galvanised the West into using economic and financial force as a submission tool. Notably, the Western response coincided with a drop in oil prices in the world.

Yet, as Nesvetailova observes, it may be Russia’s complex and increasingly financialised economy — including its connections to an offshore nexus — which may prove a greater threat for the country’s stability than just low oil prices.

According to Nesvetailova, financial channels which once underpinned the success of Putin’s Russia now work as crisis transmission mechanisms instead.

As she says:

… it is important to acknowledge that commonly used labels such as “petro-state” or the “oil needle” conceal a set of complex economic relationships, institutional linkages and sectors that make up a large, state-centred secondary economy in Russia today.

Specifically:

Today, the welfare of many people directly depends on the federal budget and regional transfers and subsidies. If in 2004 for instance, 16.4 million of people were employed in the state sector, today 20 million workers (or 28 percent of the total workforce) are employed in the state sector. This number is higher than the number of people who were employed in the government sector of the Soviet Union.Sustaining and funding this secondary economy is the tallest economic challenge facing the Russian authorities amidst the unfolding crisis.

Russia’s pattern of economic development can consequently be broken down as follows:

  1. Natural resources are exported and revenues internalised through a national redistribution system.
  2. Financialisation of the related capital acts as a booster for domestic consumption/demand.
  3. Offshore-isation helps Russian capital to be recycled and integrated into the global capital markets.
Profits from hydrocarbon exports, in short, have been used to finance regions and sectors that are not directly involved in oil and gas exploration. So, while hydrocarbons represent only a small share of Russia’s GDP, by contributing about 50 per cent to the state budget, they serve as a critical source of funding for the secondary economy and non-resource sectors, digested through the system of public finances.

Nesvetailova adds that since 2000 an important trend across this secondary economy has been the growing scope of state ownership, the public sector and state bureaucracy, with state ownership in the economy growing from 38 per cent in 2006 to 50 per cent in 2012, compared to the world average of 30 per cent. The crisis is further escalating the trend.

All of which was viewed acceptable because of an informal social contract between the state (Putin) and the Russian people based on the implicit understanding that the elites maintain power by enriching themselves but also by diverting resources in the name of Russia’s wider national interests. Meanwhile ordinary Russians get wealthier (partly by relying on corrupt mechanisms or informal networks) and share the patriotic duty by not engaging in active politics. Think of it as mutually beneficial rent-seeking.

But the crisis of 2014-2015 is compromising the social contract, says Nesvetailova, because some regions are already suffering a diminished flow of resources from the federal centre with some social programmes and financial provisions affected by spending cuts as well.

Which brings Nesvetailova to the structure of the Russian banking system, and the role it’s played in topping-up capital inflows into Russia:

Russian banks are the main providers of credit to enterprises and households, and in addition to state transfers, became a second important channel of financing domestic demand between 2000 and 2014. In addition to rising incomes generated by the oil revenues, the boom in domestic demand was financed through international channels. The years of macroeconomic and currency stability (mid- 2000s) facilitated the expansion of Russian banks internationally: they became global borrowers, actively taking loans from Western banks, enjoying access to international capital markets and even importing some practices of securitisation.

The currency stability and the expansion of the banking sector have enabled the financialisation of Russian domestic consumption and most crucially, of the households. The year 2007 marked a notable point in the financialisation of Russian growth: against the background of low interest rates in the West, international capital flows favoured emerging markets.Russia in particular benefited from this reversal: the endemic capital flight out of the country was replaced by net capital inflow, which peaked in 2007. That year, total investable resources in Russia (including financial resources and export revenues) stood at 100 billion dollars. The inflow of capital, in turn, facilitated a credit boom. Between 2000 and 2008, the real value of loans extended to enterprises and households increased more than tenfold, from 10 to 41 percent of GDP. Some areas of this financialisation trend have grown from scratch. For instance, between 2000 and 2008, loans to households increased 46 times, on average by 53 percent per year.

Critically, the period of rouble stability made loans in non-rouble currencies attractive to Russian borrowers, with foreign currency loans accounting for about 25 per cent of the total Russian loan market between 2008 and 2009.

But while dollar-denominated mortgages made up 31.9 per cent of the total mortgage market in 2006, in the run up to 2014, it was unsecured loans that drove financialisation, with the total lending of unsecured loans in 2012-13 standing at 38 per cent. This has fallen to 17 per cent following the central bank’s efforts to tighten lending conditions.

All of this in Nesvetailova’s mind suggests that by late 2013 — even though macroeconomic data suggests otherwise — the Russian economy had already become quite fragile.

She adds that this has now morphed into a full-scale banking crisis:

Between 1 March 2014 and today, more than ninety Russian banks were either liquidated or had their licenses revoked by the CBR. Additionally, around ten large banks had to be “additionally capitalised” to avoid bankruptcy. Current estimates by the CBR suggest that in the event of large stress, about 39 banks are likely to face a liquidity crisis, which in the current environment is likely to lead to bankruptcies.

With all eyes on China’s efforts to stabilise its imploding credit market, what has been weirdly overlooked by mainstream financial markets is the scale at which Russian authorities have been deploying the Federal Reserve (stabilisation) fund on a range of “anti-crisis” measures. At the current rate of utilisation Nesvetailova predicts the Federal Reserve Fund, currently valued at 5.8tn roubles, will be depleted by the end of 2015.

Indeed, with no incoming capital, sharply reduced opportunities for borrowing and the peak of debt repayments to international creditors falling between 2015 and 2016, defaults become a distinct possibility:



Which brings Nesvetailova to the third and arguably most significant structural economic weakness in the economy: its dependency on the obfuscating services of the Russian offshore nexus, which has disguised the nature of foreign investment in Russia.

Indeed, analysis of FDI flows suggests that the top foreign investors in Russia have consistently been Cyprus, the British Virgin Islands, Bermuda and the Netherlands — suspected proxies for Russian hands –suggesting the country has been largely unsuccessful at attracting true foreign investment.

The key destinations for Russian investment abroad, meanwhile, also remain Cyprus, the Netherlands, the BVI and Luxembourg.

All of which suggests a level of inter-entity lending and borrowing reminiscent of the shenanigans that went on at Enron. Nesvetailova on the Russian capital merry-go-round:

The data suggests that it is the capital of Russian-owned structures, recycled out of Russia through a chain of offshore jurisdictions that has been recycled back into Russia as FDI. According to the most recent investigations, 14 out of 20 privately owned companies on Russia’s Forbes list are owned by companies registered in offshore havens. Eight of such firms are from Cyprus, four from the Netherlands, and one each from Switzerland and the BVI.

And the circular investment flow process goes like this:

  1. A Russian company belongs to a Cyprus “mother.” The Cyprus company gives its Russian “daughter” a loan (or a right to use the brand name, licence, etc.). The Russian company sells products in the Russian market and earns revenue. Most of this revenue goes to paying off the Cyprus mother (either as interest on the loan or as a fee for the title/right/royalty). As a result, the net profit of the Russian daughter is minimal, most of the sum goes to Cyprus.
  2. A sub-type of the same model is based on exports: a Russian company sells products to a Cyprus firm at a low price. The Cyprus company in turn, sells products to the final consumer at a higher price. In reality, these are only recorded “paper” transactions; the products go directly from Russian producer to final consumer.
So what’s the purpose of all this complexity? Nesvetailova argues the intricate chains of offshore based entities are specifically constructed with the aim of hiding the ultimate ownership of assets.

_____

See note below.

______

Critically, Nesvetailova says, access to offshore ownership has enabled Russian owners to avoid international sanctions. Offshore havens have also been benefiting the City of London in the current crisis, as money flowing out of Russia is not being recycled back into Russia anymore but being invested in Western financial and property assets.

The only exception to that pattern is Crimea, which in 2014 saw an upsurge of foreign investment from Cyprus, the BVI and other offshore havens, led by inflows from Guernsey which accounted for 80 per cent of all FDI into Crimea in 2014.

In any case, the state is now trying to draw on these offshore capital reserves for the purposes of national security with Putin even launching an anti-offshorisation campaign aimed at raising state revenues. Except, according to reports, Russian businessmen are planning to become non-residents of Russia to avoid having to comply with the new law.

As a consequence:
The key question for the medium term, therefore, is whether there are enough resources in Russia’s sovereign wealth funds to sustain the popularity of the regime, and maintain the social contract while waiting for oil prices to recover. The pressure on sovereign wealth funds is prompting a search for alternative sources of funding. As shown above, Russia has mostly been attracting Russian investment, and Putin’s Russia has few friends with purchasing power.
So what happens next? Nesvetailova envisions four possible scenarios:
  1. Oil prices rebound to $70-80 per barrel and Russia’s consumption and growth stabilise at a lower level.
  2. The situation in the hydrocarbon markets continues to worsen, Russia is financially rescued by China and becomes a (resource) satellite of China. This merger starts a global realignment of powers and geopolitics.
  3. Russia returns to the Western fold and an inevitable modernisation path which includes economic openness. Theoretically, this can be the outcome of Putin remaining leader, or of a Kremlin recasting.
  4. The Kremlin attempts to distract attention from the deepening economic crisis by entering into another security conflict, either by further escalating the ongoing war in Ukraine, or by heightening the security situation domestically through pro-Kremlin militia.
_______

Update

A previous version of this post included an example from Nesvetailove citing Gunvor Group, to which Gunvor has objected and which we’ve now removed. But in case you’ve now gone and looked this up on the Way Back Machine, here’s clarification of Gunvor’s ownership from Gunvor itself:

Prior to March last year, Torbjörn Törnqvist, Gunvor’s Swedish chief executive, and Gennady Timchenko (a Russian citizen) each held 43.59 percent of Gunvor Group (with a 50/50 split of the voting rights) through their respective personal investment vehicles: Frefika Foundation and Fentex Properties, respectively. The balance of shares were held by other employees.
Timchenko sold his shares on March 19, 2014, to Törnqvist, leaving the Swede with 87.18 percent of the company and 100 percent of the voting voting rights. The rump is now held by other employees, with no outside shareholders. Currently, Törnqvist holds 86.94 percent of Gunvor and the remaining 13.06 percent is held by the Gunvor Employee Share Plan.

Timchenko has no ongoing involvement in Gunvor Group or any of its subsidiaries. Indeed, even when he was a shareholder he was never a director or employee, and there was no family involvement either.
while sanctions have hit russia hard, the real issue is that it cant print its own currency ... in france 56% of total are govt employees...but they can print till eternity
 

jouni

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It is not PR that accompanies growth, as occurred in China in recent decades, or a story of postwar development as took place in Europe in the 1950s and 1960s. Russia's PR campaign accompanies the country's degradation, decline, inability to produce something functional and constructive, loss of both its standing in the world and a sense of direction. Nothing but self-inebriation or self-deceit can accompany such a process.

The Russian state has continued almost uninterrupted as a single political entity since its inception in 1917, and there were many episodes during that time when the authorities could not cope with their task of governance due to poverty, illiteracy or ideological parochialism.

Citizens starved and died en masse, the authorities launched major projects that hit dead ends and they constantly made serious blunders. But they also found a solution: they lied, lied and lied without ever tiring. But most importantly, whenever they found themselves unable to complete their latest great construction project, they skillfully blamed the problem on saboteurs and enemies.

In fact, this is another form of media technique: When you cannot cope with your task, find a convincing excuse for your failure. In this sense, the ruling regime has undergone an interesting transformation. However, I do not believe that leaders have forgotten about saboteurs and enemies: they always hold that tool in reserve.


http://www.themoscowtimes.com/opini...mestic-pr-campaign-is-a-sad-farce/534404.html
 

pmaitra

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It is not PR that accompanies growth, as occurred in China in recent decades, or a story of postwar development as took place in Europe in the 1950s and 1960s. Russia's PR campaign accompanies the country's degradation, decline, inability to produce something functional and constructive, loss of both its standing in the world and a sense of direction. Nothing but self-inebriation or self-deceit can accompany such a process.

The Russian state has continued almost uninterrupted as a single political entity since its inception in 1917, and there were many episodes during that time when the authorities could not cope with their task of governance due to poverty, illiteracy or ideological parochialism.

Citizens starved and died en masse, the authorities launched major projects that hit dead ends and they constantly made serious blunders. But they also found a solution: they lied, lied and lied without ever tiring. But most importantly, whenever they found themselves unable to complete their latest great construction project, they skillfully blamed the problem on saboteurs and enemies.

In fact, this is another form of media technique: When you cannot cope with your task, find a convincing excuse for your failure. In this sense, the ruling regime has undergone an interesting transformation. However, I do not believe that leaders have forgotten about saboteurs and enemies: they always hold that tool in reserve.


http://www.themoscowtimes.com/opini...mestic-pr-campaign-is-a-sad-farce/534404.html
Has it ever occurred to you that it would add far more weight if you could present data and raw numbers to let the readers draw a conclusion from? While you are welcome to continue to post opinionated rants, like the one you have posted, hard data might actually point out why Russia is much wealthier than most of the countries of Western Europe, being actually in the positive, as far as national balance sheets are concerned. You article makes no mention of trade surplus or deficit; it makes no mention of data about agricultural production; it makes no mention of purchasing power parity. It does manage to make a feeble attempt at trying to emulate Shakespeare in doling out flamboyant dialogues.

Moscow Finland Times "lied, lied and lied without ever tiring," [sic.], while hiding behind the pseudonyms "Moscow" Times and "St. Petersburg" Times, when it was through and through a Finnish tabloid, whose indirect owners were not easy to identify.
 

jouni

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Has it ever occurred to you that it would add far more weight if you could present data and raw numbers to let the readers draw a conclusion from? While you are welcome to continue to post opinionated rants, like the one you have posted, hard data might actually point out why Russia is much wealthier than most of the countries of Western Europe, being actually in the positive, as far as national balance sheets are concerned. You article makes no mention of trade surplus or deficit; it makes no mention of data about agricultural production; it makes no mention of purchasing power parity. It does manage to make a feeble attempt at trying to emulate Shakespeare in doling out flamboyant dialogues.

Moscow Finland Times "lied, lied and lied without ever tiring," [sic.], while hiding behind the pseudonyms "Moscow" Times and "St. Petersburg" Times, when it was through and through a Finnish tabloid, whose indirect owners were not easy to identify.
The article was first published in Vedomosti, does it not worry you that intelligent Russians have this bleak view of their country?
 

amoy

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Russia May Abolish Visa Requirement for BRIC Tourists as Europe Ties Cool

“Liberalizing the visa regime almost always leads to an increase in tourist inflows” and it’s worth considering an extension of visa-free travel already enjoyed by tour groups from China to other BRICS countries, Putin said. Visits from Israel doubled after visas were abolished, while those from Turkey grew 41 percent, he said.

The ruble has tumbled 45 percent against the dollar in the past 12 months, the world’s worst-performing currency among more than 150 tracked by Bloomberg, amid a slide in oil prices and the impact of sanctions over the conflict in Ukraine. Amid the worst international tensions since the Cold War, tourism numbers from the EU fell in the first quarter, while Russians hit hard by the currency’s decline also cut back foreign travel.
Ruble Effect

The ruble’s decline makes Russia more attractive as a destination, while domestic tourism grew by almost 30 percent in 2014 as Russians priced out of travel abroad took holidays at home, Putin said. The inflow of foreign visitors to the country rose 16 percent in the first quarter to 7.35 million, of which more than 255,000 were tourists, according to official statistics.

China provided the largest number of tourists in the first quarter, at 41,000, followed by Turkey and Israel. It’s important “to promote opportunities for recreation and travel in Russia, both domestically and abroad,” Putin said.
 

pmaitra

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The article was first published in Vedomosti, does it not worry you that intelligent Russians have this bleak view of their country?
intelligent
bleak

Ok.

Now, focus on what I have written.

Let's see some numbers. Let's see some statistics. Let's see some graphs.

Don't know about you, but I think that is a better way to come to an objective conclusion.

Intelligent, bleak, etc., are vague and subjective terms. Good for a stage show, not good for a meaningful debate.
 
Last edited:

jouni

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Petrostate Politics: A Tale of Oil and Aggression (Op-Ed)

Commentators have already compared President Vladimir Putin's recent address before the UN General Assembly with his speech at a security conference in Munich in 2007. Some, such as Sergei Markov, claimed the speech was "tougher than Munich, outright anti-American," while others, such as Tatyana Stanovaya, argued that it was "the opposite of Munich," an effort to return to the time in 2001-03 when Russia was not a rival of the West, but an ally.

"Munich II" or the "anti-Munich," that is the question. The answer lies in a simple comparison of the two speeches. In Munich, Putin used the words "unipolar" or "unipolar world" five times, "NATO" seven times, "confrontation" twice, "provoked" once and "so-called" two times. In his speech before the UN General Assembly, in place of the term "unipolar," Putin spoke of "bloc mentality" and "the only center of dominance." At the same time, he mentioned "egoism" twice, "ambition" four times, "confrontation" twice, "manipulate" twice, "provoked" once, "so-called" once and "hypocritical and irresponsible" once.

In 2007 Putin addressed the West, saying: "There is no need to play God and solve all of these peoples' problems." And in 2015 he asked: "Do you at least realize now what you've done?" And concluded: "But I'm afraid that this question will remain unanswered, because they have never abandoned their policy, which is based on arrogance, exceptionalism and impunity."

This simple comparison clearly shows that Putin's UN address is in no way the opposite of his Munich speech or an appeal for peace. Although the call for cooperation made his UN speech somewhat less aggressive, his words were no less stern than in Munich. The Kremlin is trying to revive cooperation with the West — frozen over the conflict in Ukraine — without making any concessions on its own position. Putin continues his hard-hitting rhetoric, and it was in this spirit that the West perceived it. And the fact that Russia began its bombing campaign in Syria shortly afterward only reinforced the aggressive impression that Putin's UN speech produced.

I wrote earlier in The Washington Post that the aggression of the Russian authorities, as well as the aggressive behavior of the governments of other oil-dependent states is directly linked to oil prices.

Research indicates that petrostates become more aggressive and start conflicts when oil prices rise sharply. In a study of 153 countries over a period of 50 years, political scientist Cullen Hendricks showed that oil exporting states become significantly more aggressive as compared to their nearest neighbors whenever oil prices soar. Hendricks found that when oil prices exceed $77 per barrel (at the purchasing power of the dollar in 2008), petrostates become 30 percent more aggressive than non-exporters.

Political scientist Jeff Colgan, using a database of inter-state conflicts involving military force from among 170 countries between 1945 and 2001, found that countries whose net income from oil exports accounts for 10 percent or more of gross domestic product are the most belligerent in the world. They tend to use military force in interstate conflicts, and since World War II, were 50 percent more likely than ordinary states to become involved in military conflicts.

Venezuela's mobilization for war with Colombia and Iran's support for Hezbollah's planned attack against Israel as oil prices climbed toward their peak in 2008 fully accords with this rule, as does Iraq's invasion of Iran in 1980 and Libya's repeated attacks on Chad during the sharp increases in oil prices in 1970 and 1980. "Petrocratic" states become aggressive because high oil revenues increase their military potential, leading to an increase in adventurism in the international arena.

In this sense, Russia is an ordinary petrostate. When oil was $25 per barrel in the early 2000s, Putin sought cooperation with the West and spoke of Russia possibly joining NATO. Hendricks shows that such behavior is normal for petrocracies, and that they are even more peace-loving than ordinary states when oil prices fall below $33 per barrel.

When a barrel of Urals crude cost approximately $20 in 2002, Putin set Russia's integration with Europe and the creation of a single economic space spanning Russia and the EU as priorities in his speech to the Federal Assembly. However, when the price of oil hit $110 per barrel in 2014, Putin sent his military into Ukraine to punish it for trying to create the same type of unified economic zone with the same European allies. Putin delivered his unprecedentedly aggressive speech in Munich in February 2007 at a time when oil was at $54 and rising and Russia was "getting up off its knees."

However, the Hendricks model does not explain why the Russian leadership continues to behave aggressively and make Munich-like public pronouncements even when oil prices are falling or volatile — ranging between $40 and $50 per barrel in August-October 2015.

Despite the fact that the price of oil has dropped by half in the past 12 months, Moscow's ruling elite is confident it will rebound within one to three years. Speaking at the Sochi 2015 forum, newly appointed LUKoil vice president Leonid Fedun even predicted that the price would return to $100 per barrel as soon as 2016. Rosneft president Igor Sechin is similarly optimistic.

In this regard, economist Vladislav Inozemtsev delivered a lecture in which he quoted Ivan Starikov as calling these Moscow dreamers the sect of "High Price Witnesses."Because of their almost fanatical belief, Kremlin officials consistently postpone implementing long overdue and vital reforms, advising citizens to simply tighten their belts and wait out the current crisis.

In that same lecture, Inozemtsev said, "Leaders realize that this crisis will last longer, but they believe the solution is the same. In 2009, it took eight months before rebounding oil prices helped Russia emerge from the crisis. Now it will take approximately three years," he said. Thus, the actions of the Russian authorities find motivation not so much in the current price of oil, but in their expectation that the price will soon rise to previous levels.

However, Russian officials and businessmen might base their unusual and seemingly unfounded expectation of higher oil prices not so much on any quasi-cultish belief as on inside knowledge of the Kremlin's long-term plans in Syria. Economist Andrei Illarionov suggested that Russian military operations might fail to defeat Islamic terrorists but succeed in destabilizing the Middle East and driving up the price of oil.

Although confidence in a rebound in oil prices is hardly justified, it is in keeping with the statements and actions of the Russian authorities — that is, as much as anything can make sense for people "living in a different world," as German Chancellor Angela Merkel once characterized Putin. According to this logic, and following the Hendricks model, Putin will issue an "anti-Munich" speech only when oil prices stabilize over the long term at $30 per barrel.
http://www.themoscowtimes.com/opini...-tale-of-oil-and-aggression-op-ed/539237.html
 

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