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	Create New Topic   My Posts   My forum buddies   Invite friends   Private messages Russian brides > Main Forum > Economic Consequences of the War Author Post MartinPC Member send PM   block PM add to buddies Send: 12/26/2014 1:19:32 AM   Russia economic crisis: Putin cancels ministers' holidays Russian President Vladimir Putin has cancelled New Year holidays for government ministers because of the unfolding economic crisis. In a televised government session, Mr Putin told ministers that they could not take their usual two-week break in January. While the rouble has recovered somewhat, many Russians are concerned by the rise in the cost of living. MartinPC Member send PM   block PM add to buddies Send: 12/27/2014 1:04:13 AM   :) Just when Russians thought it could not get any worse with the ruble tumbling as fast as the oil prices on which their economy depends, the people of St Petersburg are waking up to rationing. But in President Vladimir Putin's hometown, the martyr city that survived a nearly 900-day siege in which thousands starved to death in World War II, it is not food and drink that is being rationed, but metro tokens. In one of the most bizarre episodes of panic buying in a nation notorious for its hoarding instincts in times of trouble, people have been buying up to 85,000 extra metro tokens a day so they can save three rubles (five cents) when the price goes up on January 1. durak Member send PM   block PM add to buddies Send: 1/10/2015 2:12:41 PM   UPDATE ON RUSSIA'S SITUATION After the ruble collapse in the 3rd week of December, Putin's government took two actions to stabilize the ruble: (1) The central bank key interest rate was hiked to 17 percent. This stabilizes currency in two ways: it makes rubles more attractive (because they can be loaned out at high interest); and it makes "shorting" more expensive (short selling is the technique traders use to make money when they expect a currency, instrument or commodity to lose value). (2) Russia commanded businesses with large foreign exchange (international sales) to exchange most of their dollars and euros for rubles. This increases the demand for rubles, propping up their value, and also increases the amount of foreign currency circulating in Russia; both sides of the supply-demand changes help the ruble exchange rate. In the sense of stopping a head-long collapse, these measures have been a success. However, the ruble has stabilized around 60 +- 2 / USD, which is pretty rotten. 12 months ago, it was 33 / USD. A few days ago, it almost touched 64 / USD. In my judgment, they stopped the panic (which they had to do), but didn't really solve anything. ________________________ So what was the price tag, for arresting the ruble panic? According to the rules of central bank policy, interest rates are like a sort of upside-down thermostat: turn interest rates down, and the economy heats up. If an economy grows too fast, causing inflation, the central bank can turn interest rates up to cool the economy. 17% (remember, this the key rate, normal borrowers will pay higher rates than that!) is the equivalent of deep freeze: normally, it would only make sense in an overheated economy. But in 2014, Russia's economy was practically stalled; its GDP grew by 1 percent at most, compared with an average of roughly 5 percent during most of the Putin years. In such an economy, jacking up rates is harmful. Combining the effect of low crude oil prices, international sanctions, and the high interest rates, Russia's GDP is likely to SHRINK between 5 and 7 percent in 2015. But there will be another cost associated with the order to trade-in foreign currencies mentioned above: these are really capital controls, which are generally a Bad Thing. In fact, they are so bad that Russia didn't do conventional capital controls (direct rules limiting what can come into or go out of the country). However, the trade-in order is a way of imposing a degree of capital control without calling it that ... a sort of window dressing. But "capital controls light" won't fool anybody. The problem with such controls is that they increase the risk for businesses, especially from a foreign investment standpoint. Russia was already having big problems attracting the foreign investment it needs. Now, on top of all the other risks of investing in Russia, any Russian firm is forced to sell most of its foreign currency holdings for the weak and unstable ruble. So the trade-in order will further damage Russia's growth prospects. You might wonder, can't Russia now drop the interest rate and unlock the capital controls, to help the 2015 growth rate? Well, Russia can, but the minute it did so, the ruble would plummet again. They're stuck. ________________________ By now, everybody knows that oil has fallen a lot in price. We can be sure that this is temporary; the price will recover over time. However, Urals crude is now trading for something like USD 48 / bbl, and the price may fall further in the next few months. More important in the big picture is the average price for 2015, which many expect to be less than USD 60 / bbl, and might be as low as $50. 2015 is looking to be a tough year for Russia's economy. RodanTsunami Member send PM   block PM add to buddies Send: 1/10/2015 4:33:21 PM   Regardless of what action is taken in Russia, it is the Russian government taking control of the property rights of someone. The problems in Russia are on an international level. It will be difficult to get outside interests to invest in a rogue state or even to get internals interests to bring back their assets into a chaotic economy. Putin's government has shown no regard for the rule of law or international treaty...Russia's only hope for recovery is a change in the world market and a faltering coalition. The rules of engagement were written so that "weak sisters" cannot bailout on their own. Under that possibility, secondary boycotts are a real possibility to keep those without heart and backbone in line. Assuming there is a descent and informed populous to hold their own governments feet to the fire. Rick4girl Member send PM   block PM add to buddies Send: 1/10/2015 7:42:23 PM   Durak wrote: "2015 is looking to be a tough year for Russia's economy." Its probably still gonna be a few months before they really feel it. Internally,in the ruble economy, oil sales in dollars is helping keep plenty of rubles to pay salaries, pensions, and the military because despite low oil prices, the ruble at 64 to 1USD @ $50/bbl is the same as 32 to 1USD at $100/bbl. Its going to be a couple 2 or 3 months more in the economic cycle for inflation to erase purchasing power for everyday items such as locally sourced meat, bread and vegetables which are not produced in volumes enough to meet demand. Even South American and Indian sources of replacement products and foodstuffs are exchanged in Dollars on the open market. The military-industrial-complex in Russia will take even longer to experience enough pain to re-think Putin's foray into Ukraine as all military products and equipment are produced in Russia with locally sourced raw materials and components and the military budget was doubled for 2015 despite the predicted budget shortfall. It will take an extended drop in oil prices and a continuation of sanctions for several more months before the military is affected, if at all by then. In short, the ONLY way this war reaches a conclusion that benefits Ukraine is for the US and UK to keep its commitment of protecting Ukrainian sovereignty by providing the weapons and equipment we need to defend ourselves and making it economically impossible for Putin to continue his aggression but its not going to be anytime soon. kaiserdag Member send PM   block PM add to buddies Send: 1/10/2015 7:49:45 PM   Got mixed feeling about this news U.S. to cut (15)European military bases as budgets shrink. "These ... adjustments do not diminish our ability to meet our commitments to allies and partners," Chollet told a Pentagon briefing. "In fact, these decisions will produce savings that will enable us to maintain a robust force presence in Europe." The net loss of U.S. troops in Britain would be about 2,000. The Pentagon, under orders to reduce projected spending by nearly $1 trillion over a decade, has repeatedly asked Congress to close some facilities in the United States, where excess capacity is thought to be around 20 percent. Lawmakers have resisted closures, with some telling defense officials to cut excess facilities in Europe first. The United States has more than 64,000 troops stationed in Europe, most in Germany, Italy and Britain. http://news.yahoo.com/facing-shrinking-budgets-pentagon-moves- cut-european-bases-131430270.html Since the 'end of the Cold War" the US armed Forces have been reduced greatly fallowing the rest of the NATO countries shrinking budgets. Regardless of Russia's current economic collapsing, it's Military budget and threat are set on target. Well, I hope that might change but we have been desapointed before. from 2014 and beyond: A type of (oil/sanctions) war, that without a single shot fired, is bringing economic consequences this sucks for Europe but a win to the USA tax payers RodanTsunami Member send PM   block PM add to buddies Send: 1/10/2015 8:15:21 PM   64/50 compared with 32/100 in math, is not the same when compared in mining and distribution of oil. ragingbull Member send PM   block PM add to buddies Send: 1/11/2015 12:56:03 AM   "By now, everybody knows that oil has fallen a lot in price. We can be sure that this is temporary; the price will recover over time. However, Urals crude is now trading for something like USD 48 / bbl, and the price may fall further in the next few months. More important in the big picture is the average price for 2015, which many expect to be less than USD 60 / bbl, and might be as low as $50." I do not believe the price of oil will rise significantly anytime soon. I am talking several years. The oil producers in the US, Venezuela, Mexico, Canada, OPEC, Russia and so forth are hurting economically because of oversupply. The only way to make money in this market is to sell more oil. More supply means less price. The oil producers are screwed. durak Member send PM   block PM add to buddies Send: 1/12/2015 1:46:16 AM   @ragingbull: The logic you describe is sound, in that those who are "addicted" to oil revenues will need to pump as much as they can at these low prices. According to what I am reading, Saudi Arabia is an exception, in part because their cost of production is so low, and perhaps also because of they way they manage state finances. Arabia doesn't seem to need to turn up production, but they don't need to turn it down (in order to prop up crude prices) either. Today, Goldman Sachs reportedly slashed their 3-month crude price projection almost by half! Previously, they had projected Brent at USD 80 / bbl, but now see Brent at USD 42 / bbl 90 days out. This would correspond to Urals crude at USD 40 / bbl. More cause to be bearish on crude prices (that is, to expect further declines): Wood Mackenzie, an investment analysis organization, has estimated that only 1.6% of world crude production is uneconomic with Brent crude at USD 40 / bbl. In other words, oil at $40 would cause very little reduction in supply due to costs exceeding the price. The true picture in the short term is even worse than that: the 1.6% of production that would run at a loss would not all shut down right away, because of the cost and complexity of stopping production, and the need for cash flow to repay loans. In other words, even an extended period of crude at USD 40 / bbl need not "bounce" the market due to supply getting cut back. Probably, only a recovery of Europe and China from their present economic slowdowns will push oil back up again, and this might take a year or two. Even after that, oil might come into balance at prices much lower than the $100+ seen in recent years. Russia's average crude price for 2015 might be USD 45 / bbl, or even lower... lonelyranger1701 Member send PM   block PM add to buddies Send: 1/12/2015 2:15:19 AM   With about 1,400gal storage capacity,,, and occasionally using more than 250gal per day,,, the prices are just starting to look nice from here. Rick4girl Member send PM   block PM add to buddies Send: 1/12/2015 11:23:35 AM   Between its global currency reserves and sovereign wealth fund, Saudi Arabia sits on nearly 2 trillion worth of "cushion" in real terms. Foreign reserves alone are nearly a trillion. US producers are not really a driving factor for Saudi Arabia's current actions. They are more focused on breaking Russia's back over Assad in Syria and support for Iran. Saud doesnt give a damn about Ukraine ragingbull Member send PM   block PM add to buddies Send: 1/12/2015 7:12:46 PM   I don't believe Saudi Arabia is most concerned with Saudi Arabia rather than other countries. They elected to maintain their current production levels to maintain their market share. When they cut production in the past, they lost their market share. dcguy Member send PM   block PM add to buddies Send: 1/13/2015 1:27:35 AM   In a USA Today interview, Saudi Prince Alwaleed bin Talal said that the drop in oil prices has nothing to do with Russia or Iran. He called reports of that "baloney" and "rubbish" because Saudi Arabia is in the "same boat" as Russia with the oil glut and dropping prices situation. He said the main two forces driving prices down are the oil production rates (with no one willing to reduce production) and a slowing global economy. He called the $100 price/ barrel earlier this year as "incorrect" and artificially elevated. He agreed with the Saudi policy not to reduce production because other OPEC members and non-OPEC countries will just pick the production slack if they lessened their production. Many countries cheated before and they will do it again. The Saudis are willing to let the price slide down further to help eliminate other producers and smaller businesses. According to him, we will never see $100/barrel price again. durak Member send PM   block PM add to buddies Send: 1/13/2015 5:01:43 AM   My estimate for Urals crude is now about USD 47 / bbl. The ruble has spiked again to about 65 / USD, the worst it has been since the 2-day panic roughly 30 days ago ... probably on the oil price news. MartinPC Member send PM   block PM add to buddies Send: 1/13/2015 5:21:24 AM   My generator's getting cheaper and cheaper to run during recent power outages :) durak Member send PM   block PM add to buddies Send: 1/13/2015 5:51:50 AM   OOPS... Fitch (a rating agency) downgraded Russia's sovereign debt to BBB-, with a negative outlook. On the rating scale used both by Fitch and Standard & Poor, BBB- is nine steps down from AAA, the highest rating (the long-standing rating for US sovereign debt). If Russia's debt drops one more notch, it will be what traders call "junk" -- that is, non-investment grade: bonds with high risk and high yield, suitable for gambling but not investing. _________________________ Meanwhile, more and more "wags" are weighing in on the crude oil decline. There seems to be a growing consensus that this is not just a market over-reaction (these happen all the time, and usually bounce back pretty quickly); instead, the analysts say it is a sort of structural situation likely to remain steady for some time. One forecaster has predicted two to three years, before oil prices recover. If this is true, it is hopeful news, in my opinion. Putin can weather a few months of storm, but it would be tough for him to hang on till 2017. If you look at the vox.com article kindly linked by dcguy on the "Putin Khuilo" thread, it predicts that end might look like this: "...a bunch of men in gray suits are going to file into his office and say 'Vladimir Vladimirovich, it's time for you to do your last service to the state, and that's to retire.' Or he may be off at his dacha and see on the television that he's just stepped down for reasons of ill health. And he'll pick up his red phone, and find that the people answering it will no longer take orders from him." ragingbull Member send PM   block PM add to buddies Send: 1/13/2015 9:29:11 AM   "...a bunch of men in gray suits are going to file into his office and say 'Vladimir Vladimirovich, it's time for you to do your last service to the state, and that's to retire.' Or he may be off at his dacha and see on the television that he's just stepped down for reasons of ill health. And he'll pick up his red phone, and find that the people answering it will no longer take orders from him." Isn't that just one of the scenarios, durak? Putin has been successful in blaming the US and the west. The Russian people have believed him. Why and how will they unbelieve him? As far as the shortages and the economic downfall, he told the people to weather the storm, which will last two years. So far, they seem to be. I see very little outcry, if any. Rick4girl Member send PM   block PM add to buddies Send: 1/13/2015 12:04:00 PM   "In a USA Today interview, Saudi Prince Alwaleed bin Talal said that the drop in oil prices has nothing to do with Russia or Iran. He called reports of that "baloney" and "rubbish" because Saudi Arabia is in the "same boat" as Russia with the oil glut and dropping prices situation. " He is an investor and not policy maker. Saudi Arabia is NOT in the same boat as Russia. Saudi Arabia can weather low prices indefinitely. They have nearly a Trillion USD in reserves and a nearly 2 trillion sovereign wealth fund. Saudi oil "break even" is only $13/bbl and they were generating surplus budget revenues on even 70/bbl. Publicly, Saudi Arabia says this isnt against Russia but it is. SA wants Russia to be unable to assist Assad and hurting Iran (a bitter enemy) is simply a bonus dcguy Member send PM   block PM add to buddies Send: 1/14/2015 12:59:43 AM   Saudi Oil Minister, Ali al-Naimi, said that $100/barrel oil also may never happen again. He said the Saudis are willing to wait it out, so new oil exploration projects will find it cost prohibitive to continue. He said their cost is about $4 to $5 per barrel. He said with their reserves, they can hold out for a long period of time. He brushed aside the plight of Russia and Iran saying they were suffering from low prices as well as from their "political behavior". He said that prices will eventually rise, but that will depend on the producers and consumption. Based on crude oil price history in the USA, the price during the Civil war shot up to near $120/barrel. There was a big spike in 1980 up to over $104. And another large spike in the 2012-2013 period close to $110. durak Member send PM   block PM add to buddies Send: 1/17/2015 2:23:49 PM   OOPS PART 2 Yesterday, Moody's (another investment rating company) has downgraded Russia's sovereign debt rating to Baa3, and is reviewing Russia's creditworthiness for a further downgrade. In the scale used by Moody's, Baa3 exactly matches the BBB- assigned by Fitch a few days before (see above). The next downgrade will put Russia's sovereign debt in the category of junk bonds (yes, "junk" is a technical term in the world of finance). Urals benchmark crude is trading just over USD 45 / bbl. Your Reply: Your name:   New Registration Password:   Forgot password?   refresh Code:   Russian brides > Main Forum > Economic Consequences of the War
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