Russian Economy

Discussion in 'Business & Economics' started by joepistole, Oct 31, 2014.

  1. CptBork Valued Senior Member

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    joepistole likes this.
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  3. joepistole Deacon Blues Valued Senior Member

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  5. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Thanks for the link. I agree with the last part of it, which was:
    “The rebels’ target seems to be Debaltseve rather than Mariupol,” Balazs Jarabik, a visiting scholar at the Carnegie Endowment for International Peace, and Andras Racz said in a report. “They probably could take and hold Mariupol, but only with more Russian support and heavy casualties.* By seizing Debaltseve, the rebels would inflict heavy losses on the encircled Ukrainian troops.” Debaltseve is the last remaining Ukrainian-held “pocket” inside territory controlled by separatists, according to the report."

    * It would be street to street fighting with the advantage, as always, to the defenders, who know their city. Better plan than that is to lay siege to Mariupol - let lack of electricity, water & and food force its surrender.

    I tend to think that Mariupol, is a diversion / a misleading distraction, bought at the cost of a few grad missiles, at least for now {perhaps a real target later in 2015.}
    If Debaltseve falls to the rebels, not only will it significantly "straight out" the line they must defend against Kiev's forces attacking them, but also give several hundred (more than 1000?) prisoners to the rebel as "bargaining chips" plus all the garrison weapons they did not destroy before being captured.
     
    Last edited by a moderator: Jan 27, 2015
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  7. joepistole Deacon Blues Valued Senior Member

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  8. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    That may be true, or perhaps only that the average Russian will suffer lot with high inflation. Russia is still buying gold at a fast rate and has offered to help Greece financially. China is also interested in picking up some bargains in Greece too. More details here:
    http://www.sciforums.com/threads/wi...-thread-now-a-poll.113641/page-3#post-3270505
     
  9. joepistole Deacon Blues Valued Senior Member

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    Well it is true, and it isn't difficult to verify. Russians are already suffering from high inflation and it is about to get worse. Russia is adding inconsistent monetary policy to its list of economic woes. Just a few weeks ago it raise interest rates to 17% and a few weeks later it has reversed course by reducing interest rates. It sends a bad message to investors.

    Further gold isn't a magical elixir, nor is central bank purchases of the metal a good sign for Mother Russia. Sanctions have made it difficult for Russia to sell its gold overseas. So the Russian central bank is buying gold to keep gold miners employed and for possible currency exchanges to supplement its failing foreign currency reserves. Russian central bank gold purchases is a sign of weakness.


    http://www.forbes.com/sites/timwors...-buying-gold-isnt-quite-what-you-think-it-is/
     
  10. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I doubt that, if you mean to include world's largest two buyers of gold - China and India. They do as they see their best interest to be. If Russia is not selling gold to them, that has nothing to do with sanctions.
     
  11. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Capture of 8,000 troops and their weapons would be major victory for the rebels. The rebels control the only supply line the garrision has.
    How long can they hold out with no water or electric power and food running low?
     
    Last edited by a moderator: Jan 31, 2015
  12. joepistole Deacon Blues Valued Senior Member

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    Except, the Indian and Chinese governments aren’t involved here. Individual banks within those countries are, and per the previously referenced material, they and other banks around the globe aren't buying Russian gold because of Western sanctions. The penalty the West can impose for violating sanctions can be very severe and banks are reluctant to incur that ire. Doing business with Russia has become very risky, not only because of the sanctions, but because of the increasingly irrational behavior of the state. The risk of being caught on the wrong side of a Russian trade has become too great, and that is why the Russian gold market has dried up. It's not like snuggling up with your Russian gold is going to keep you warm through the winter.

    It isn’t a matter of Russia not selling gold. Their customers are not buying gold. So the Russian central bank has become the buyer of last resort out of necessity. As Russia’s foreign cash reserves become depleted the Russian central bank will be forced to begin selling (i.e. dumping) its gold reserves. Now that isn’t something gold bugs want to hear. But it is the truth of the matter…not that gold bugs are keen on the truth.

    PS: Russian gold reserves are about 3% less than the gold held by the SPDR Gold Trust.
     
    Last edited: Jan 31, 2015
  13. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Make up you mind. which is it?
    The Russians can't sell gold (as their customers are not buying- scared to go against the sanctions -"be caught on the wrong side of a Russian trade")
    OR
    "Russian central bank will be forced to begin selling"
     
  14. joepistole Deacon Blues Valued Senior Member

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    It should have been obvious BillyT, especially if you read the referenced material. There is a difference between commercial banks and central banks. Commercial banks, normal purchasers of Russian gold, are not buying per the previously referenced material. So the Russian central bank is purchasing the Russian produced gold output in order to prop up its economy. As of now, and again per previously referenced material, there are no sanctions on Russian gold, so the Russian central bank can sell gold abroad and do it much easier (e.g. to other central banks). Commercial banks face the previously stated risks. Central banks do not face those risks nor do they suffer default risk to the degree commercial banks do, because central banks can make money. So unfortunately for you BillyT, there is no inconsistency in my post.
     
  15. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I think that is mainly true, except for the last sentence, but you said:
    "The Russians can't sell gold (as their customers are not buying- scared to go against the sanctions -"be caught on the wrong side of a Russian trade")"

    Did you mean Russians with gold, and especially newly mined gold, can only sell to the Russain central bank? I doubt that is true. One Russian can surely sell some gold coins he has to another and use the Ruble proceeds to by food, etc. I bet a lot of gold is working its way out of back yards and into the hands of Putin's well paid friends.
     
    Last edited by a moderator: Feb 1, 2015
  16. joepistole Deacon Blues Valued Senior Member

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    Europe has extended its sanctions on Russia for another 6 months and the US has promised to tighten its sanctions. That isn't good for Mother Russia. Mother Putin still thinks this will all go away in a few years. I'd say that is a very overly optimistic assessment, especially given Putin's retrenchment. The fighting continues as Russia is more than doubling her vacationing Russian Army forces in Ukraine.

    http://www.haaretz.com/news/world/1.640247

    "The Damoclean sword hanging over the economy is whether $385 billion in government reserves will run dry before oil prices rise. Mr. Rogoff, a former chief economist for the International Monetary Fund, noted that governments habitually underestimate how fast they will go through their financial reserves when they race to bail out banks, save major state corporations and douse flames throughout an ailing economy."

    http://www.nytimes.com/2015/02/03/w...lster-its-economy-but-experts-scoff.html?_r=0

    I think my shorts on the Russian economy are safe.

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  17. joepistole Deacon Blues Valued Senior Member

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    And the banking crisis resulting from Western sanctions grows.

    (Bloomberg) -- The news broke in a terse announcement on the web: another Russian bank was in trouble.
    The Jan. 26 statement from SB Bank, a midsize Russian lender, underscored the pressures building inside the nation’s financial system. SB froze cash withdrawals, initially for three days and then through at least Feb. 5.
    Staggered by the collapse in oil and plunge in the ruble, Russia is now confronting a potential banking crisis.
    So far, the damage has been mostly limited to smaller banks like SB, but across the industry more clients are taking out cash and struggling to repay their loans. U.S. and European sanctions are choking off financing abroad, while high interest rates are throttling growth at home.
    Russian authorities are already helping lenders with accounting fixes and providing funds to some of the biggest state-owned banks. Analysts predict more rescues this year as losses balloon. Alfa Bank estimates the red ink could reach 2 trillion rubles ($30 billion), or a quarter of banks’ equity.
    “It’s a kind of cancer and we know the symptoms are caused by Ukraine, sanctions, sinking oil prices and the economic slowdown” said Oleg Kouzmin, the chief economist at Renaissance Capital in Moscow and an adviser to the central bank from 2009 to 2013. “What we don’t yet know is if it’s a treatable form.”
    Bailout List
    Russia is no stranger to crises. In 1998, it defaulted on $40 billion of domestic debt and devalued the ruble after oil prices dropped below $10 a barrel. The state spent more than 4 trillion rubles to bail out lenders during the global credit squeeze that began in 2008. So far, President Vladimir Putin’s government has committed 1 trillion rubles to prop up the banks this time around, and can spend more to avoid defaults.
    The banks are coming off a bad year and heading into a worse one. National Bank Trust, the nation’s 28th largest by assets, was bailed out in December after what amounted to a run. Three major state-owned banks, VTB Group, OAO Gazprombank and Russian Agricultural Bank, applied for government funding to replenish their depleted capital.
    The pain isn’t letting up. Last month, Russia’s Agency for Deposit Insurance approved a list of 27 banks that would be eligible for state rescues. As a matter of policy, the agency doesn’t identify such banks to avoid panicking depositors. OAO Sberbank, Russia’s biggest bank, has said it will tighten restrictions on withdrawals by debit card starting in March.
    With so much at stake, the government is also leaning on private investors to provide capital to banks. Two midsize banks, UralSib Bank and Credit Bank of Moscow, said last month they had boosted capital through loans from their main shareholders.
    Russian banks are in “capital-preservation mode” this year, with no profits and no growth for many, according to a report e-mailed by Renaissance Capital.
    Saving Banks
    “If top banks from Russia’s top 30 fall into trouble in this window, the government will save them,” analyst David Nangle wrote. “It would be very painful for such a bank to go under, as it could spark a crisis of confidence in the wider banking system, leading the population to withdraw deposits and interbank lending rates to spike.”
    The central bank is trying to ease the pressure on banks, but some new policies may only mask the risks. Over the past six weeks, the central bank has relaxed accounting rules and said it would use credit ratings of lenders pre-dating Russia’s incursion into Crimea for the purposes of regulation -- a decision that effectively means banks will be judged as if the economy and industry were in better shape than they really are.
    Reversing Course
    “All banks suffered from the much weaker ruble and had to revalue fixed assets at the new rates,” said Natalia Berezina, a banking analyst at UralSib. “These measures were meant to be for the first half of the year but could be prolonged if the situation remains bad.”
    Policy makers have struggled to bolster the ruble and curb inflation without crushing the economy. The central bank unexpectedly reversed course and reduced its key interest rate to 15 percent from 17 percent on Jan. 30, a move VTB, for one, called “a step in the right direction.”
    Yet the central bank is powerless to address economic problems rooted in the international outcry over the conflict in Ukraine, said Arturo Bris, a professor of finance at the IMD business school in Lausanne, Switzerland. Policy makers can either raise rates to help the currency and preserve Russians’ purchasing power, or lower them to help the banks. Neither seems to be working, he said.
    “The solution to this financial crisis is political,” Bris said. “There is no monetary policy that can resolve the situation. The only solution is to restore the geopolitical equilibrium.” http://www.bloomberg.com/news/artic...w-challenge-propping-up-russia-s-ailing-banks
     
  18. joepistole Deacon Blues Valued Senior Member

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    Merkel and Hollande are headed to Russia for peace talks on Friday. The EU has agreed upon further sanctions. And the US has agreed on further sanctions as well and is looking at providing lethal aid to Ukraine. Sanctions have yet to dissuade Putin. So maybe lethal aid will, as more and more of his vacationing troops come home in body bags and with physical disabilities. It will be interesting to see what happens tomorrow, if anything. I am not optimistic. Even if there is a deal, Putin has a habit of not living up to his agreements.
     
  19. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Europeans oppose giving lethal aid, as know Putin can more than match it. = The net gain for Kiev is negative. Having had two world wars fought in Europe and none in the US does give a more realistic POV about escalating the destructive and killing power of weapons.
     
  20. joepistole Deacon Blues Valued Senior Member

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    Well Merkel opposes giving lethal aid, but Europe is more than just Merkel. I am sure Poland and the Baltic states have a very different opinion. The net gain for Kiev is negative no matter what happens. Giving defensive weapons to Ukraine is a gamble. But everything is a gamble. Putin could, as Merkel believes, escalate the violence by sending more of his "vacationing" Russian troops into the fray. But he could do that anyway. In fact, he has repeatedly done that. So do they have to lose? Nothing, absolutely nothing...defensive weapons would increase the cost of his land grabs which is the whole point behind the sanctions. When more and more of those vacationing Russian troops operating in Ukraine begin to come home in body bags, it becomes increasingly difficult for Putin to explain their deaths to his people - especially considering he has told his people Russian troops are not in Ukraine. Putin's control of domestic media goes along way, but explaining away thousands of Russian deaths in a land Russian troops are not supposed to be in becomes increasingly difficult for even Putin. Right now Putin can fairly easily explain away the deaths of a few hundred vacationing Russian troops as training accidents as he had done. But when the numbers begin to total into the thousands, it becomes much more difficult even with absolute control of state media.
     
  21. orcot Valued Senior Member

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    Merkel and others oppose openly giving aid
     
  22. joepistole Deacon Blues Valued Senior Member

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    And who is questioning that? But Merkel doesn't speak for the EU nor does she speak for any EU member state other than Germany, nor does she speak for the US. Her opinion isn't shared by all. And I think the US will end up supplying defensive weapons. I don't see any other way out. Sanctions haven't stopped Putin's aggression. Putin has no qualms letting his people suffer economic deprivation. It's time to step up the cost of Putin's land grab.

    What Merkel's reluctance to step up Putin's costs by providing Ukraine with defensive weaponry is essentially appeasement. It's time to increase Putin's costs for the previously posted reasons.
     
    Last edited: Feb 10, 2015
  23. orcot Valued Senior Member

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    especialy poland and the baltic.

    Theirs a case for publicly picking sides but it could escalate the situation. Nobody wants a open war where putin publicly invades
    On the other hand 4 Russian generals killed themselfs in the last year (officialy because of cancer) I imagen theirs room for backdoor diplomacy and probably theirs a lot of russians who would rather not kill what they still percieve as their brothers. http://www.newsweek.com/fourth-russian-general-commits-suicide-less-year-297055
     

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