Economy of the Russian Federation

sgarg

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Industrial production in Russia

Industrial production in Russia declines by 1.6 percent in February Thursday, 19 March 2015 17:27:37 (GMT+2)

Feb 2015: -1.6% year on year

The analysis of the number shows the decrease is due to decline in consumption. The output of minerals like oil and coal are flattish.

Russian trade numbers also show massive contraction in consumer demand.

I suspect the fall in the value of ruble has destroyed high value imports.

The Russian data is NOT bad at all. The economy is holding despite massive external problems.

I expected a sharp dip in the industrial production as a result of sanctions materializing with a lag (as import of engineering goods is affected). However that sharp dip has not happened so far. Which shows remarkable elasticity in Russian economy. I suspect that Russia is already substituting imports with a combination of locally produced and Chinese equipment. This is likely the reason. This shows large role China has started playing in the world economy today.
 
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sgarg

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@jouni, the answer to your predicament is that Russia will grow ahead of Ukraine. Ukraine has ALWAYS underperformed Russia in the last 20 years.

The reasons are not hard to find. Ukraine has remained far more dependent on the outdated Soviet infrastructure than Russia. Russia has been able to import technology in all sectors of the economy.

This may change in future of course; but 400 pound gorilla in the room is Asia. Asia has not sanctioned Russia. So it remains to be seen if Russia gets isolated or not.
 
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sgarg

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Don't underestimate Russian People...they are tough as nail and brave as lions...Russia is going to emerge stronger from this crisis. They have always conquered past crises.
Jouni's job is to confuse the FEW Russians that visit this discussion board. Unfortunately the ones that come here are quite smart.

BUT the sad truth is that public does get swayed by emotions and disinformation. So industrial production and agricultural production are the key. People need to be kept employed and fed.
 

pmaitra

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Putin: The best answer to sanctions is increasing business freedoms

3/20/2015
Putin: The best answer to sanctions is increasing business freedoms
Translated from Russian by J.Hawk




The President of the Russian Federation said that expanding business freedoms is the best answer to external challenges and limitations. He voiced this opinion appearing at the Week of Russian Business of the Russian Union of Entrepreneurs and Manufacturers.

"Further expansion of business freedoms is the best answer to external sanctions and challenges. Therefore we will continue to establish the most favorable conditions for those who wish to invest in domestic industry and economy, in the development of technologies and modern-era jobs."

The capital amnesty rules in Russia ought to correspond to all international legal demands, so as not to cause suspicion of money laundering, Putin said. "State and business ought to work as partners to overcome the current poor climate and to trust one another. Esteemed colleagues, we can overcome the poor unfavorable economic climate and to establish a stable trajectory of growth only through a state-business partnership, which of course is impossible without mutual trust. We need to have a shared understanding of the country's strategic tasks and keep our mutual interests in mind."

The President emphasized that capital amnesty rules ought to be consistent with the demands of Financial Action Task Force. "They should be absolutely legal and understandable from the point of view of international law, so that nobody should have any doubt that what's happening in Russia in that respect is wholly in accordance with international law and practice, including from the perspective of not allowing the laundering of money obtained through illegal activities."

Putin believes that the current Central Bank lending rate is still quite high. "Indeed, at the moment the funds rate is high. We have not yet established the additional fundamental conditions that would allow us to feel confident, therefore it is still very important to provide targeted assistance."

The President underscored that the government ought to adopt practical measures to ensure available financing reaches targeted enterprises.

The Minister of Finance Anton Siluanov said that the peak negatives which were evident in Russian economy in late 2014 and early 2015 have passed. "We have passed the peak negatives, and we are seeing certain aspects of stabilization." In his view, Russia's economy has adapted to new conditions.

J.Hawk's Comment: What does all of that mean? For starters, it means Russia is returning (or maybe has returned) not to Five-Year Plans of the Stalin era which, while extremely effective at industrializing the country, also proved extremely difficult to manage, but to Lenin's "Commanding Heights" model of the economy that was the norm during Lenin's New Economic Policy of the 1920s and which is the norm in today's China, in which the State retains close control over certain strategic branches of the economy (usually through the control of enterprises deemed to be "system-forming" and through state monopolies), while allowing other sectors of the economy to operate under free market principles. This approach is evident in Russia's import substitution strategy—targeted support for the system-forming enterprises, and maximum liberalization to allow the opportunities created by sanctions and the ruble devaluation to be exploited by private entrepreneurs more swiftly and efficiently than a Five-Year-Plan would.

This duality of approach is also reflected in the composition of the Russian government, with the "statists" clearly predominating, but the "liberals" (which include Siluanov and possibly even Medvedev) playing and indispensable supporting role. Ultimately Russia needs both of these segments of the elite for its economy to function well—the over-dominance by either of the two is liable to cause economic problems, as Russia's experience of the 1980s and the 1990s has shown.

After the collapse of the inefficient Socialist Command Economy, followed by outright money laundering and corruption that engulfed Russia as it implemented the IMF plans, Russia did a few things right. One of them is flat tax, i.e. every individual plays the exact percentage. The only thing ever that could be more equal would be equal tax, i.e. every individual pays the exact sum. Another thing that Russia did right, was the Stabilization Fund, and the credit goes to Alexei Kudrin.

I am sure Putin has to listen to various factions, and finds himself in the dilemma as to which one serves the nation best, or how to find a good balance. I am sure he has listened to some wise voice and refused to prop up the Rouble, allowing it to free float, thereby demonstrating to the world that he is not surrounded by "oligarchs," as western "intelligence" have attempted to make us believe for years, but that he is willing to take steps that spell massive financial loss for the oligarchs. The Rouble's fall has also served the purpose of weakening the oligarchs, thus giving Putin, the Siloviki, and learned economic strategists more power. This will ensure Russia policy will tend to follow a trajectory that will benefit to country. Exactly the opposite would have happened in that tax fraud Khodorkovsky would have gotten hold of power in Russia.

Overall, looks like Russia has finally got an opportunity to stop imports, and begin to build enterprises that generate jobs and make products domestically.
 

sgarg

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THE OTHER SIDE OF THE POND

SAN FRANCISCO (CBS SF) – University of California President Janet Napolitano remarked to a fellow regent that they "didn't have to listen to this crap" as underwear-clad protesters denounced potential tuition hikes during a meeting Wednesday in San Francisco.

Napolitano was sitting next UC regent Chairman Bruce Varner as a group of about two dozen protesters shouted loudly, denouncing potential tuition hikes when she made the remark, which she may not have known was being recorded.

As the protests began, the cameras stayed on the regents. There was some confusion over what to do. That's when Napolitano leans over to Varner and said, "Let's just break. Let's go, let's go. We don't have to listen to this crap." Her hot mic caught the comment.

The comment was a different tone from Napolitano at the very same meeting. "They want to be sure that their voices are being heard and I want to commit to them that their voices are being heard," she said.

http://www.zerohedge.com/news/2015-...t-napolitano-says-“we-don’t-have-listen-crap”

A new serfdom taking shape in USA where the middle-class keeps on getting poorer - deaths by thousand cut reshaped into poverty by thousand taxes.
 

sgarg

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Justice Department Rolls Out An Early Form Of Capital Controls In America

Justice Department Rolls Out An Early Form Of Capital Controls In America | Zero Hedge

The U.S. Justice Department's criminal head said banks may need to go beyond filing suspicious activity reports when they encounter a risky customer.

"The vast majority of financial institutions file suspicious activity reports when they suspect that an account is connected to nefarious activity," said assistant attorney general Leslie Caldwell in a Monday speech, according to prepared remarks. "But, in appropriate cases, we encourage those institutions to consider whether to take more action: specifically, to alert law enforcement authorities about the problem."
So what exactly constitutes 'suspicious activity'? Basically anything.

According to the handbook for the Federal Financial Institution Examination Council, banks are required to file a SAR with respect to:

"Transactions conducted or attempted by, at, or through the bank (or an affiliate) and aggregating $5,000 or more"¦"

It's utterly obscene. According to the Justice Department, going to the bank and withdrawing $5,000 should potentially prompt a banker to rat you out to the police.
 
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sgarg

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Re: Civil war in Ukraine

The only problem is - "What is the purpose of this report?"

Why is European parliament so interested in the Russian economy? European parliament should worry about issues that affects its subjects.

Russia is still trying to come out of the effects of communism and nobody expects this to be a short term fight. Any change like this takes two generations. I expect Russia to slowly and surely come in tune with average of Europe. However this take some time, and will surely not happen in the short term, as the war takes precedence over economy.
 
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jouni

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Re: Civil war in Ukraine

The only problem is - "What is the purpose of this report?"

Why is European parliament so interested in the Russian economy? European parliament should worry about issues that affects its subjects.

Russia is still trying to come out of the effects of communism and nobody expects this to be a short term fight. Any change like this takes two generations. I expect Russia to slowly and surely come in tune with average of Europe. However this take some time, and will surely not happen in the short term, as the war takes precedence over economy.
Maybe this current crisis is Russias leaders attempt to hide masdive economic problems by diverting public opinion to foreign affairs.
 

sgarg

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Re: Civil war in Ukraine

Maybe this current crisis is Russias leaders attempt to hide masdive economic problems by diverting public opinion to foreign affairs.
Maybe Finnish politicians raise the bogey of Russian threat to hide massive economic problems?

Your memory is failing @jouni. ECB just printed extra 1 trillion Euros. You think Europe is good. You are crazy.
 
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pmaitra

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Re: Civil war in Ukraine

Sorry for the late reply.

I glanced over the PDF, and I must confess I have not had the time to scrutinize it in detail. I was disappointed to see this article act as an apologist for a convicted criminal, Khodorkovsky, and use the term "alleged" even after he was convicted, but I guess this is yet another manifestation of "European values." Khodorkovsky got out lightly, because, he was not convicted for the murder of Vladimir Petukhov, the person who wanted him to pay the taxes he owed to the state.

Anyway, coming back to this bizarre question as to when Russia will catch up — catch up to what exactly?

A comment from the article entitled "Putin Calls for Currency Union between Russia and Ex-Soviet States," might serve as some food for thought:

Guesta day ago

Maybe someone more knowledgeable can help me with this.......
I was just looking at USD-Ruble and UK Pound-Ruble exchange rates and the Ruble devaluation from its 'average' of 35 Rubles to the USD April-Sept 2014 to a peak devaluated level of 67.7 Rubles to USD (Feb 2015). The Ruble has now leaned towards recovery the last month and regained about 11% from its devaluated peak (67.7/61= 1.1098) or, it had devalued from the 35 ruble/usd to the 67.7 usd 51.7% but now at 35/USD to 61/USD is devalued at 57.4% of the original 35 mark, either way, showing gain. HOWEVER, this is not my question.
While thinking about this, and internal and external currencies (and expenditures) it occurred to me.....
With the depreciated Ruble, and oil (Which Russia EXPORTS not imports) selling at 40 dollars US a barrel, that would equate to 2,440 Rubles a barrel given the current approx. 61 Ruble exchange rate.
Now... if we go back to the 35 Ruble/USD dollar exchange rate time frame, 'IF' oil was selling at 69 Dollars a barrel, that would still only be 2,440 Rubles!
So it seems to me, moist oil income would be spent for govt expenditures, military etc, all internal expenditures in Rubles.
Obviously the lower exchange rate would hurt in external expenditures but the USA/EU have shot that in the foot with their restrictions/embargo's.
It appears to me (Just a mechanic not an economist!!!) that perhaps the western aim of 'hurting' Russia with lower oil prices may not in fact be as damaging at it appears, If Russia is receiving the same amount of Rubles at 40 dollar barrels with a depreciated Ruble in March, as they would have received from 69 dollar barrels in Rubles last September.
If this is the case perhaps Russia doesn't want to 'Rush' into any Ruble strengthening undertakings, preferring to endure for the moment, allowing western economies to ultimately punish themselves in the long run?
Thoughts?
 
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sgarg

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The European exports to Russia have declined along with decline in oil income. So largely the loss is to Europe.

Russian engineering output is actually increasing, and replacement of western goods is happening.

The nervousness in USA about Russia is EXACTLY due to the fact that sanctions are NOT working. This is the reason we are seeing talk of sending weapons, talk of European army etc. as a way to blackmail Russia further.
 

sgarg

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Re: Civil war in Ukraine

If we look at Russia's non-oil exports, we shall see the clear picture. There is no appreciable decline in Russia's non-oil exports.

Russia recorded a trade surplus of 15047 USD Million in January of 2015. Balance of Trade in Russia averaged 9002.83 USD Million from 1997 until 2015, reaching an all time high of 20356 USD Million in January of 2012 and a record low of -185 USD Million in February of 1998. Balance of Trade in Russia is reported by the Central Bank of Russia.
Russia Balance of Trade | 1997-2015 | Data | Chart | Calendar | Forecast
 

jouni

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Re: Civil war in Ukraine

The only problem is - "What is the purpose of this report?"

Why is European parliament so interested in the Russian economy? European parliament should worry about issues that affects its subjects.

Russia is still trying to come out of the effects of communism and nobody expects this to be a short term fight. Any change like this takes two generations. I expect Russia to slowly and surely come in tune with average of Europe. However this take some time, and will surely not happen in the short term, as the war takes precedence over economy.
The question the report asks is "will Russia ever catch up?", meaning that will Russia one day have the standard of living of that of Western Europe? It is a good question, after all Russia has the largest natural resources in the world, also their human resources are on par with rest of the Europe. Why still Russia has never had the living quality of western ( and nowadays eastern ) Europe. The report gives good answers to those questions. Personally I would love to see Russia develop good living standards to its people, but I am pessimist, they will remain underdeveloped for the foreseeable future also.

Isn´t the politicians job to guarantee the wellbeing of country´s people? So far Russians have never had politicians good enough to long term develop their country. They always steer to wrong way... Czar who failed to liberalise economy, Communists who concentrated on military and poverished the people, Current government who made Russia resources economy and drove the country to rocks foreign policy wise....
 

Khagesh

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Czarist Russia was not any more or less liberalized than rest of Europe.

Communism was a historical necessity for Russians especially and it did benefit the rest of the world by keeping large parts of newly independent decolonized world out of the sphere of influence of US (which in 1945 was around 45% of the world output. Today its like 25%).

Current Govt. (Putin) has had to bring the Russian economy back from the 'Shock Therapy administered by US and IMF inspired people of Russia' and made Russia a force to reckon with today. Again.

Tomorrow the fate of Russia will be decided not by US and IMF. It will be decided by how Putin's Russia plays Europe, China and India.
 

sgarg

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Re: Civil war in Ukraine

The question the report asks is "will Russia ever catch up?", meaning that will Russia one day have the standard of living of that of Western Europe? It is a good question, after all Russia has the largest natural resources in the world, also their human resources are on par with rest of the Europe. Why still Russia has never had the living quality of western ( and nowadays eastern ) Europe. The report gives good answers to those questions. Personally I would love to see Russia develop good living standards to its people, but I am pessimist, they will remain underdeveloped for the foreseeable future also.

Isn´t the politicians job to guarantee the wellbeing of country´s people? So far Russians have never had politicians good enough to long term develop their country. They always steer to wrong way... Czar who failed to liberalise economy, Communists who concentrated on military and poverished the people, Current government who made Russia resources economy and drove the country to rocks foreign policy wise....
Russia's economy IS NOT European Parliament's job. It should spend its time in more critical work - like running printing presses, as it needs to print a lot of Euros.

Russia's economy is a concern of Russian citizens and Russian government - not a job of a Finnish citizen.

You should question your own government. Your criticism of Russian government is misdirected, as it is NOT your concern.

It is like I start criticizing Finnish government - who will take me seriously?

Whether Russia "catches up" with Western Europe or not is an invalid question. This is wartime and I doubt economy is the top concern right now in Russian mind.
 

pmaitra

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@sgarg, nothing wrong with @jouni critiquing the Russian economy, but I agree, the European Parliament should try to fix its own problems first, instead of doing this "dunyadaari."

It is like, their own house if on fire, but they are trying to douse the fire in a neighbour's house.
 
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sgarg

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Unemployment rate in Russia:

Unemployment Rate in Russia increased to 5.80 percent in February of 2015 from 5.50 percent in January of 2015. Unemployment Rate in Russia averaged 7.95 percent from 1993 until 2015, reaching an all time high of 14.10 percent in February of 1999 and a record low of 4.80 percent in August of 2014. Unemployment Rate in Russia is reported by the Federal State Statistics Service.
Russia Unemployment Rate | 1993-2015 | Data | Chart | Calendar | Forecast

The latest rate is 5.8% which is much lower than long period average of 7.95%.

The bottom line is that there is no shoot-up in unemployment rate.

The important figures, as I said earlier, are industrial output, agricultural output, and unemployment rate. If Putin can keep people employed, then he can keep his army supplied.
 

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