Economy of the Russian Federation

[jouni]

Re: Russia plans new measures to stabilise the rouble

Russian companies' and banks' external debt tops $650 billion
Kremlin Corp debt weighs in West's standoff with Russia

Russia is in trouble despite the low govt debt. It looks like Russia is the Greece of Eurasian Union

 

[asianobserve]

Re: Russia plans new measures to stabilise the rouble

Russian companies' and banks' external debt tops $650 billion
Kremlin Corp debt weighs in West's standoff with Russia

Russia is in trouble despite the low govt debt. It looks like Russia is the Greece of Eurasian Union

Here's an article from Paul Krugman, Nobel price winning economist, on Russian economic malaise. It seems that the weak link in Russia is not only oil (this is the primary cause of its current troubles), it's also Russian private companies that are saddled with foreign currency denominated debts. These companies are panic buying dollars to be able to service their debts, this in turn creates a vicious cycle that affects the Ruble and the economy.

Putin's Bubble Bursts

The proximate cause of Russia's difficulties is, of course, the global plunge in oil prices, which, in turn, reflects factors — growing production from shale, weakening demand from China and other economies — that have nothing to do with Mr. Putin. And this was bound to inflict serious damage on an economy that, as I said, doesn't have much besides oil that the rest of the world wants; the sanctions imposed on Russia over the Ukraine conflict have added to the damage.

Actually, it's not a puzzle — and this is, in fact, a movie currency-crisis aficionados like yours truly have seen many times before: Argentina 2002, Indonesia 1998, Mexico 1995, Chile 1982, the list goes on. The kind of crisis Russia now faces is what you get when bad things happen to an economy made vulnerable by large-scale borrowing from abroad — specifically, large-scale borrowing by the private sector, with the debts denominated in foreign currency, not the currency of the debtor country.

http://www.nytimes.com/2014/12/19/opinion/paul-krugman-putins-bubble-bursts.html?_r=0

 

[jouni]

Re: Russia plans new measures to stabilise the rouble

If Russia defaults, one thing to secure its recovery would be the "Germany 1945" -model. Russia would be federalized and EU would guarantee the sovereignty of parts west from Urals and Japan and the US east of Urals. To keep security and avoid civil unrest EU peacekeeping forces would be deployed. To make needed changes in the society EU officials would help to restructure the legislation and governance systems.

This model founded the basis for German recovery and quick rise to an economic giant after WWII, I am sure it would work for Russia also. After restructuring the governance massive loans would be given to Russia to build up economy. It could be named "Merkel aid". Being former socialist Merkel would act as an bridge builder, she would gain the trust of the Russian people.

 

[jouni]

Re: Russia plans new measures to stabilise the rouble

The currency has since stabilised at 60 to the dollar. But it has lost half its value in a year. Russia's $2.1"‰trillion (£1.3"‰trillion) economy has shrunk to $1.1 trillion, half the GDP of California.
The external debt of Russian banks and companies has by mathematical effect ballooned to 70pc of total output. "A Russian downgrade to junk is only a matter or time," says Tim Ash, from Standard Bank
The week the dam broke in Russia and ended Putin's dreams - Telegraph

 

[sob]

Re: Russia plans new measures to stabilise the rouble

The currency has since stabilised at 60 to the dollar. But it has lost half its value in a year. Russia's $2.1"‰trillion (£1.3"‰trillion) economy has shrunk to $1.1 trillion, half the GDP of California.
The external debt of Russian banks and companies has by mathematical effect ballooned to 70pc of total output. "A Russian downgrade to junk is only a matter or time," says Tim Ash, from Standard Bank
The week the dam broke in Russia and ended Putin's dreams - Telegraph

What is the actual cost of stabilising the Rouble against the Dollar. This is a foolish macho image of having a strong currency while your economy is in ruins.

Russia should invest in technology to reduce the cost of their crude and gas output. They based their economy on one single premise that the Crude price would remain over US$ 100 a barrel.

 

[sob]

Re: Russia plans new measures to stabilise the rouble

I see some posters seem to be upset that the americans are screwing around with the Russians with the oil prices.

What difference does it make to us. We are in a win win situation. Both the Russians and Americans are actively wooing us, we are today in a buyers market. Let us take the advantage while the time is in our favour, rather than mourn the mess in Russia, which they have nobody but themselves to blame.

 

[asianobserve]

Re: Russia plans new measures to stabilise the rouble

I see some posters seem to be upset that the americans are screwing around with the Russians with the oil prices.

What difference does it make to us. We are in a win win situation. Both the Russians and Americans are actively wooing us, we are today in a buyers market. Let us take the advantage while the time is in our favour, rather than mourn the mess in Russia, which they have nobody but themselves to blame.

Not only that, if it is true that the Americans together with the Saudis are manipulating the oil market to depress prices, which I said I seriously doubt, then the more reason that Indians should not complain! As an oil importer India is bound to reap windfalls from the collapsing global oil and gas prices. Is this not a happy development, for India it should be! (Not for us.) The Indian government should be stockpiling its strategic oil reserves now. That will save it billions of dollars, a net positive is you ask me.

 

[amoy]

Re: Russia plans new measures to stabilise the rouble

Indeed, be contrarian to expand your fleet and take advantage of this oil spree.

ASIA: China VLCC has doubled its fleet size in under two months — Lloyd's List Australia

Those petrodollar earners had their good time when the price was $120 a barrel or above. Now it's buyers' turn!

As for producers Saudi reportedly holds a reserve of $900 bln and Russia still $400 bln in balance. They may have to tighten their belts but not that desperately yet..

There may even be windfalls if Russian banks and companies r really in dire need of financing.

 

[pmaitra]

Re: Russia plans new measures to stabilise the rouble

In November "Crisis-Hit" Russia Bought Yet More Gold

Profited from low price that was result of rumors that Russia Central Bank was actually selling gold.

Tyler Durden (Zero Hedge) [SOURCE]

This article originally appeared at Zerohedge.

Yesterday, when we reported the latest rumor of Russian gold selling, this time out of SocGen, we said that "it should be noted that SocGen and its "sources" have a conflict: in an indirect way, none other than SocGen is suddenly very interested in Russia stabilizing its economy because as we wrote before:

"Russia Contagion Spreads To European Banks : French SocGen, Austrian Raiffeisen Plummet" which also sent SocGen's default risk higher in recent days.

So if all it will take to stabilize the RUB sell off, reduce fears of Russian contagion, and halt the selloff of SocGen stocks is a "source" reporting what may or may not be the case, so be it."​

Moments ago, as if to deter further speculation that Russia is indeed converting hard money earned from real resources for fiat paper, the Russian monetary authority made it quite clear, that at least in November, Russia not only did not sell any gold, but in fact bought another 600K ounces in the month of November.

• RUSSIAN MONETARY GOLD HOLDINGS RISE VS 37.6M ON NOV. 1
• RUSSIAN MONETARY GOLD HOLDINGS 38.2M TROY OZ AS OF DEC. 1

So we can now add another 600K to Russia's most recent holdings:

Which of course means that the very "Russia is selling" rumors that were so effectively used to keep the price of gold low into the recent risk-flaring episode, were capitalized on by the very same Russia, which we do however know sold some $8 billion in US Treasurys in October bringings its total holdings of US paper to the second lowest since 2008...

... and which used these same low prices not to sell, but to buy. At the lowest prices possible.

 

[sgarg]

Re: Russia plans new measures to stabilise the rouble

I think Russians will keep selling dollar assets to stabilize the ruble. This strategy makes sense.

The critical thing is to keep industrial base intact. The industrial output should grow. Agricultural output also need to grow. This is more important than the dollar reserves.

 

[sob]

Re: Russia plans new measures to stabilise the rouble

When you have nearly US $ 600 Billion loans/bonds coming up for payment and you have reserves of around 400 Billion Dollars then you are in trouble and selling dollar assets does not make any sense. Russia does not hold such large Dollar T bills/bonds that their sale will cause the Dollar to dip.

It is a fact that the largest economy is coming out of QE, GDP is up, Employment figures are looking up-- result is that the US Dollar will strengthen. Look what is happening to the Rupee.
With Dollar gaining in strength, PRC will not rock the boat as this will boost it's exports. Russia alone can only piss in the face of the wind.

 

[asianobserve]

Re: Russia plans new measures to stabilise the rouble

Russia May Burn Wealth Funds in 3 Years Without Budget Revision

Russia, poised to enter a recession, will burn through its rainy-day funds in three years if the government doesn't change the budget structure, according to Finance Minister Anton Siluanov.

Russia May Burn Wealth Funds in 3 Years Without Budget Revision - Bloomberg

 

[asianobserve]

Re: Russia plans new measures to stabilise the rouble

Pressure Is Intensifying On Russia's Banking Sector

On December 22nd the Russian Central Bank (RCB) announced that it would provide a bail-out of up to Rb30bn (US$500m) to prevent the bankruptcy of Trust Bank, a mid-sized Russian lender. Its Deposit Insurance Agency will take over interim administration of the bank.

The move underlines the growing pressures faced by the banking system as a result of the weakening rouble, international sanctions, the ailing economy and a sharp tightening of monetary policy. Bank profitability and asset quality are likely to deteriorate significantly in 2015.

With banks unable to access external financing or to roll over existing foreign debts, capital-adequacy levels are also set to fall. It is likely that the Central Bank and the Ministry of Finance will be forced to provide additional capital to support the banking sector. Further bank failures are likely, but the authorities retain substantial resources to support systemically important financial institutions.


Read more: Pressures Intensify On Russia's Banking Sector - Business Insider

Russia is more and more looking like a fly against the West... A lot of people around the World has been fooled by a false sense of Russian invincibility. This has clearly turned into an Emperor's New Clothes moment for Russia...

 

[asianobserve]

Re: Russia plans new measures to stabilise the rouble

The solution from Putin?

Putin is Trying to Save Russia's Economy With One Weird Trick

Vladimir Putin wants to have his dollars, spend them too, and invade Ukraine.

That's impossible, of course, but he's trying to make it a little less so with some financial legerdemain that covers up what's really going on. Putin, you see, is forcing Russia's companies to spend their dollars instead—but Russia's government will be on the hook if those firms get into trouble as Russia's economy implodes. So Putin, in other words, is playing a financial shell game to try to buy enough time for oil prices to rebound and bail him out.

The math is pretty brutal. Russia's government, you see, will go from surplus to deficit now that its oil revenues have dried up. And it can't borrow the money it needs, because Western sanctions over its incursion into Ukraine have cut it, along with everyone else in Russia, off from international credit markets. So it will have to start dipping into its rainy day fund to cover its bills.

Russia, in other words, is stuck in an economic catch-22. It can't afford to spend too many dollars bailing out its currency when it needs to use that money to bail out its companies. But those companies, which have a lot of dollar debts, will need even bigger bailouts—as will the banks that lent them money—if Russia doesn't bail out its currency. So either way, it's going to have to spend its dollars, but it can't really afford to do that, either. That's because $400 billion of reserves is more like $200 billion. Think about it this way. If you spend half your money bolstering your currency and your financial system, and that's still not enough, why should the other half be either? Markets will smell the blood in the water and attack until the ruble completely collapses and companies go broke.

The point of all this is to hide how many dollars Russia is actually spending to prop up the ruble. And in that, at least, it's succeeding. It's not easy to keep track of how much money Russia is committing when it's spending its reserves, forcing companies to spend theirs, and then loaning those companies the dollars they now need. Because if companies default on these dollars loans, it will turn out that the government was spending these dollars all along. That shouldn't happen, but it still could if the combination of low oil prices and a deep credit crunch make its economy shrink somewhere between 5 and 10 percent next year, like people think it could. In that case, the central bank would probably print however many rubles these companies need, which it basically already did for the big oil producer Rosneft, and then watch the ruble fall further as markets catch on to the sleight of hand.

Putin is trying to save Russia's economy with one weird trick - The Washington Post

 

[jouni]

Re: Russia plans new measures to stabilise the rouble

It seems like there is no end to Russians stupidity, declaring in the new military doctrine the whole west as an enemy. Now burning the windfall oil fund in desperation. When the money is gone, what is left of Russia? Outcast country bankrupted by its leaders stupidity.

Putins foreign policy is a joke. In secret protocol 1997 in Helsinki Jeltsin and Clinton agreed that Finland and Sweden will stay out of NATO in exchance of Baltic States NATO membership.

Now that era of understanding is over, who can make any deal with Putin on any issue.

 

[sgarg]

Re: Russia plans new measures to stabilise the rouble

In secret protocol 1997 in Helsinki Jeltsin and Clinton agreed that Finland and Sweden will stay out of NATO in exchance of Baltic States NATO membership.

Secret protocols like this cannot pass for foreign policy of either Russia or USA.

The West is fighting an economic war with Russia. This fact is indisputable.
The West is also fighting a military war with Russia through proxy in Ukraine. This fact is also indisputable.

Whether you call an enemy an enemy or not is a political decision.

 

[sgarg]

Re: Russia plans new measures to stabilise the rouble

Putin is on the correct course. Russia DOES NOT NEED to hoard dollars. Dollars must be spent.

Why Russian companies need to hoard dollars??

Russia must continue to build military as well as civilian economy as per its plan.

 

[Gabriel92]

Russia's Economy has shrunk to size almost same as Spain

Russia's Economy Has Shrunk So Much It's Now Almost The Same Size As Spain

The decline in the price of oil, Western economic sanctions against the nation following its invasion of Ukraine, and the collapse of the Russian rouble that resulted, has decimated Russia's economy.

Now Russian GDP has shrunk so much it is no longer the world's eighth largest economic power, according to The Telegraph. Instead, Putin's Russia is now carries roughly the same economic weight as ... Spain:

Russia has lost its ranking as the world's eighth biggest economy, shrinking in just nine months from a $2.1 trillion petro-giant to a mid-size player comparable with Korea or Spain.

For the past several years, Spain has been regarded as one of Europe's more feeble economies, with 1 in 4 Spaniards unemployed. Spain's GDP was about $1.4 trillion in 2013, according to the World Bank. Spain was the 13th biggest economy on the planet until Putin ordered tanks into the Crimea.

Now it is likely that Italy, India, Canada, and Australia are all more economically significant than Russia. Here was the World Bank's GDP ranking for 2013, before Russia went into its current crisis. The numbers are in billions of US dollars:

(European Union 17,350,853)
1 United States 16,800,000
2 China 9,240,270
3 Japan 4,901,530
4 Germany 3,634,823
5 France 2,734,949
6 UK 2,521,381
7 Brazil 2,245,673
8 Russia 2,096,777
9 Italy 2,071,307
10 India 1,876,797
11 Canada 1,826,769
12 Australia 1,560,597
13 Spain 1,358,263
14 S Korea 1,304,554
15 Mexico 1,260,915

It's not clear what Russia's GDP equivalent is right now because the decline of the rouble has been so swift and volatile that the calculation needs to be done anew every day. On Monday the rouble experienced its largest one-day flop since the 1998 Russian crisis.

Of course, this may all be temporary. The price of oil has sunk to just above $68 a barrell (for WTI), dragging the oil-dependent Russian economy with it. If the price perks up, Russia can expect to make its way back up the GDP charts.



Read more: Russia Economy GDP v Spain - Business Insider

 

[prohumanity]

Re: Russia's Economy Has Shrunk So Much It's Now Almost The Same Size

Russia will come back...I bet...you can not take away huge landmass, natural resources, highly educated and hardworking, patriotic Russian people...Its only a matter of time ..Russia will bounce back. Presently, low Oil prices and a sinister, coordinated G7 attack on Russian currency has the strong bear wounded and down. Its going to stand up and will be fiercely more powerful within a few years. You can party and drink for a little while.

 

[sob]

Re: Russia's Economy Has Shrunk So Much It's Now Almost The Same Size

Russia will come back...I bet...you can not take away huge landmass, natural resources, highly educated and hardworking, patriotic Russian people...Its only a matter of time ..Russia will bounce back. Presently, low Oil prices and a sinister, coordinated G7 attack on Russian currency has the strong bear wounded and down. Its going to stand up and will be fiercely more powerful within a few years. You can party and drink for a little while.

Couple of worrying points about the wounded bear. The money spent on R&D is declining very rapidly. Prime case is the FGFA where they needed us to finance their R&D. If the money was there they would not have allowed us anywhere close to the project, except as a customer.

This is a long term impact and needs to be reversed by the Russians.