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The Russian Economy Is Cracking, "Social Unrest" Coming In "A Few Months", Official Warns
As you might have noticed over the past several days, the Russian ruble is in a veritable tailspin. The inexorable decline in crude has pressured the currency as have expectations of an uptick in year-end budget spending.
The ruble fell to a record low against the dollar on Monday and depending on crude’s trajectory, could well fall further in the new year. 2015 will likely mark the third annual decline for the currency which is under pressure not only from low oil prices, but from biting economic sanctions tied to Moscow’s alleged role in Ukraine.
“The wish to hedge potential risks from geopolitics and commodities may well push the ruble to 75,” Evgeny Koshelev, an analyst at Rosbank PJSC in Moscow, told Bloomberg by e-mail this week. “It will be interesting to see if there’s a reaction from the central bank, government and households to this weakening.”
Yes, it will be “interesting”, especially if crude slides even further. Here are Goldman’s projections based on three different prices for oil:
- At an oil price of US$35/bbl, we think the Ruble will be around Rub72 or close to current levels. Under that scenario we think inflation could be around 6% at end 2016.
- At an oil price of US$30/bbl, we think the Ruble will depreciate to about Rub77 or 10% below current levels and end-year inflation in 2016 could be up to 6.7%.
- At an oil price of US$25/bbl, the Ruble is likely to depreciate to the mid-80s and inflation is more likely to be up to 8% in December 2016.
While Goldman is fairly optimistic about what the future holds for the Russian economy - which, you're reminded, is in the midst of its deepest recession since 2009 - the Central Bank of Russia isn't so sure. In fact, according to the bank's "risk scenario," oil prices could hover around US$35/bbl in 2016 while GDP could contract by 5% or more and inflation might be stuck at 7-9%.
Russia's 2016 budget assumes oil prices at $50/bbl. If that proves correct, Moscow will run a deficit of about 3%. However, as Citi noted earlier this month, "a $10bbl decline in oil prices worsens the fiscal position by about 0.7% of GDP."
As Citi goes on to point out, the deterioration in the fiscal position "already incorporates the secondary positive effect of the weaker currency." In other words, the widening budget deficit associated with falling crude prices takes into account the effect a concomitantly weaker ruble has on RUB-denominated oil revenues.
So, combining this with the CRB's risk scenario as outlined above, we're to understand that with oil at $35/bbl, Russia's projected deficit jumps 23% to 3.7% of GDP which will itself decline 5% from a year earlier while inflation runs at between 7-9%.
If, however, oil were to fall to $30/bbl, the situation worsens materially. Here's Citi again:
A fall of the oil prices to $30bbl will thus widen the fiscal deficit to 4.4% of GDP. Given that the 2016 budget is based on an oil price of $50bbl, this implies that the fiscal position may deteriorate to -4.4% (-3.0% -2 times 0.7%) of GDP at oil of $30bbl.This is a significant fiscal gap that would be the second largest over the last 20 years (largest deficit of 6.0% of GDP was recorded in 2009).
The fiscal outlook is further darkened by the trials and travails of Vnesheconombank (VEB), the troubled state bank that's been crippled by economic sanctions and is laboring under more than $15 billion in foreign currency debt (which is of course a disaster given the ruble's slide). As Bloomberg reports, VEB may need a massive state bailout that could end up costing upwards of $18 billion. Here's more:
VEB got its start under Soviet founder Vladimir Lenin as a bank to finance foreign trade. Putin overhauled it in 2007. Flush with cash from high oil prices, he pumped 180 billion rubles (worth about $7.3 billion at the time) in to boost capital and took over at chairman of the board a year later.
When the global financial crisis struck in 2008, VEB became Putin’s main tool for managing the shock. It got 1.25 trillion rubles (worth about $50 billion at the time) from the government and central bank to shore up the plunging stock market, help failing banks and bail out tycoons who were facing the loss of their companies to foreign creditors.
By the end of 2009, its balance sheet had more than tripled from before Putin’s overhaul began.
Behind the facade of western-style accounting and international credit ratings, the bank’s decisions were often driven more by politics than business, officials now admit.
“The bank, because of its status, took on certain tasks that can at times hurt its balance sheet,” VEB chief Vladimir Dmitriev said Dec. 22. “We’re talking about the so-called special projects.” Neither VEB nor a Kremlin spokesman responded to requests for comment for this article.
Starting in 2009, VEB spent $8 billion to finance deals allowing unnamed Russian investors to buy up steel plants in eastern Ukraine and keep them running
The legacy of the 2014 Sochi Winter Olympics, which at about $50 billion were the most expensive such games ever, is another big burden on VEB [which ended up] taking control of more than 200 billion rubles of money-losing hotels, ski resorts and other projects.
The takeaway here is that much like the Novo Banco and Banif bailouts are set to add several percentage points to Portugal's deficit, Moscow may be forced to foot the bill for VEB. "Losses on the bank’s huge catalog of Kremlin-mandated projects could reach 1.2 trillion rubles, according to the Finance Ministry, or nearly half the expected budget deficit for next year. VEB faces $7.3 billion in debt repayments over the next few years and effectively has only one source of significant funding -- the state," Bloomberg continues, citing government officials.
Speaking of the Finance Ministry, former FinMin Alexei Kudrin - who unceremoniously quit in 2011 after a famous spat with then President Dmitry Medvedev - warns that the situation in the economy "isn’t very good." According to comments Kudrin made to Interfax, inflation in 2016 will be ~150bps above the official 6.4% forecast and with oil prices below budgeted level of $50/bbl, Russia may witness significant reduction of government expenses in several industries, or tax increases. What would Kudrin do to ameliorate the situation you ask? Well, we may be about to find out because now, he looks set to return to the government to assist in pulling Russia out of recession.
"Former Russian Finance Minister and investor favorite Alexei Kudrin is in talks with Vladimir Putin and other top officials about returning to a senior post to help deal with worsening economic troubles," Bloomberg reported earlier today, citing unnamed officials. "Kudrin has met privately with the Russian president and Prime Minister Dmitry Medvedev as recently as last week to discuss the plans, though no formal offer has yet been made."
“Markets will like Kudrin’s return to government as they will assume this means serious fiscal consolidation and some significant and much-needed structural reform -- if Putin lets him take on the ‘power vertical,'" Tim Ash, head of emerging-market strategy at Nomura in London said.
As is the case in a number of emerging markets, the worry is that eventually, the public will become fed up with rapidly deteriorating economic circumstances even if, as is the case with Russia, part of the blame can be placed with outside antagonistic forces. On that note, we'll close with one last quote from Bloomberg:
Speaking on condition of anonymity, one senior government official warned earlier this month that the government has only a few months before worsening economic conditions begin to fuel social unrest.
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Have we enough invested for a reborn Maidan on the Red Square.
Talking heads, NWO dipshit assfucks have been predicting and hoping for "russian revolution" ever since they finally figured out that Putin and Russians aren't going to be sock puppets!
They were claiming that when that idiot got klled over some mob debt that he was "opposition leader" and Putin assassinated him...like a city council member that nobody liked died and nobody cared...Soros foundation coudn't even PAY more than a few hundred protestors to show up.
Putin has 87% approval...the other 13% think he's not nationalistic enough....good luck with creating chaos....they will NOT go towards imbecilic, neutered, mentally challenged western slavery....good Odin....who the fuck are these "analysts"??? And since when is ZH a globalist mouthpiece?
USD chart looks the same in RUB and CAD.
The ZH chart is in a similar decline. Very poor article.
So the CIA NSA has infiltrated ZH. Yawn. BS article. Im visiting here less often I noticed
They're here, they're there, they're everywhere. Who cares anymore. They are just looking to identify the moles that permeate their orgs. Where do you think ZH gets it's info from anyhow?
ZH has always been behind the curve, a bit late, but I didnt mind, since it used to be more discerning. With so much going on ZH needs to cull some contributors and invite some better ones in
Secret government source = Hipster barista it low level GS 11 employee
Nightwitches.
Bitches.
A fiscal deficit of 3.7% of GDP is not the end of the world. China has 3.7 trillion in US dollars that they will use to shore up the Russian economy. Saudi Arabia will be long gone before Russia ever will.
so a few weeks ago, when ZH ran a story about russian oil production, I said it was a bad sign. a lot of ZHers down voted me and told me how AWESOME Russia was and now we have this story proving the previous ZH story to be completely WRONG. which I and a few others knew from simple analysis.
You know when a "Jew" Kike Zionist motherfucker has his "hoof print" in the middle of the smelliest pile of shit!
George Soros die you evilest of motherfuckers!!!!
P.S.
You "goy" pieces of smelliest shit... Stop taking from "the hand that rocks the fucking cradle" and think outside the fucking box for a change!
WHORE!!!
I think this is the perfect time for Putin to arrest the Head of the Central Bank (aka Federal Reserve franchise) and charge with treason, close the Rothchild’s Central Bank and start the new one, run by the state. I think the ruble will go up immediately several folds. I would do it on New Year’s eve and 2016 will start as it supposed to, without banksters-gangsters.
double post
sorrie...
Better kick Kudrin and his ilk out
I doubt you know who is Head of Central Bank
V. V. Putin.
What did I win for guessing right?
Funny how this concept crops up every time the rubble looks shaky. To suppose that Putin does not control his central bank when he keeps an iron grip on everything else seems rather far-fetched and/or naive.
But if the minion needs to be tossed overboard to throw dust into the eyes of the rubes chained to the oars, then so be it. A new minion will take a chair, and the old one will be quietly rehabilitated later on. Kind of like what they're doing with that ex-Finance Minister dude, dontcha think?
all the jews are lining up for the spoils, but they shall be disappointed.
Or vaporized by Plutonium fission.
the BRICS golden bond is the ace, it is not yet time for the reveal
Putin, a chess player, has many games of chess on the go...
I KNEW there would be a Grandmother Putin reference in here somewhere.
Somewhat disappointed to only see one, however.
Curious to see what the new characterization will be since this one is obviously no longer in vogue.
Russia não vai cair assim tão fácil.
Esse é o hino dos controladores de Mísseis Balísticos.
https://www.youtube.com/watch?v=HbDzc3oGXMw
No Saker há um artigo interessante que Tyler deixou passar despercebido.
hehe.
This weakening of the ruble does not affect the average Russian. The price of all Russian produce is still the same. Russia is self-sufficient.
Because destabilizing a nuclear power with 8000 + ICBM's is such an excellent policy. Worked so well in Libya, Iraq, Ukraine and Syria.
Go ahead and name a nation with 8000+ ICBMs.
I'll wait right here.
The US is trying to provoke another World War with its currency policies. Putin is way too smart for that.
Something is not right. Russia’s economic problems pale in comparison to those of US/EU/Japan, whose economies have been stagnating /declining since the 2008 financial implosion (Japan’s economy has contracted for > 2 decades). The US has circa $18 trillion debt (constantly rising). This begs the obvious question- is Janet Yellen’s policy of exploding deficits (read QE/ZIRP policy), using ultra-cheap money from taxpayers, the secret to economic stability/prosperity? Doubtful- see: davidstockmanscontracorner.com
The Keiser report & Greg Hunter have the answers you need. This piece above is baby stuff
This article is United States government propaganda based on Sunni Muslim President Barrack Hussein Obama's wishful thinking. The economy of the United States of America is in far, far worse shape than that of the Russian Federation. The Wall Street, Banking & Financial, Crony Capitalist and Oligarch criminals succeeded in destroying the American state in the decades culminating in the Global Financial Crisis. The criminals got richer, the banks got bigger and the American People got screwed because the American political class were bribed to not prosecute any of the many egregious examples of rampant criminality. The United States of America is the most corrupt nation on Planet Earth.
Total & Utter Bullshit story ! Ha Ha Ha
By arming NATO at Russian borders and direct attack on Russia in Ukraine and Syria US guarantied Putin popularity and another election for president in few years.
The ruble purposefully follows the oil price down in relation to petrodollar as to maintain stability of the budget and limiting the deficit since most of the Russia’s cost are in Roubles. In the process the unemployment decreased substantially since most of western imports are under sanctions or are to expensive, including food and hence must be manufactured in Russia or imported from elsewhere cheaper.
What is interesting that Rouble versus other non-euro currencies is stable since everyone devaluates to protect their exports.
More on Putin strategy and the Syrian War can be found here:
https://syrianwarupdate.wordpress.com/2015/12/21/deconstructing-putin/
An interesting take on economic and political reasons for oil price collapse:
COMMODITIES IN THE DEFLATIONARY COLLAPSE: NOT EXACTLY.
https://contrarianopinion.wordpress.com/economy-update/
I dont understand, with so much land & so few ppl they should be able to grow all the food they want, besides they have all the minerals & hydrocarbons
Russia should have been the richest nation
puzzled
You are clearly a geography/history expert - you so succinctly described the natural resource prowess of Russia.
On the other hand, maybe your analysis is rather thin and stupid.
It is indeed a tragedy that an otherwise fine nation should be kept in perpetual bondage to tyrants of one stripe or another. And the saga continues...
No need to be puzzled. Russians have some of the best living conditions. You should go there to realize the facts.
Western news media never tells the truth.
Do you know North Korea and Singaproe are very much alike?
But guess which country gets the media treatment?
News about America too is totally different in MSM and independent media in Internet.
So what is the truth?
I say, Kudrin wants to get back to be Finance minister. He chooses to instill fear of collapse. Bloomberg and Goldman Sach are also announcing this.
That to me makes it all clear.
Nothing much to see here. All bullshit fear mongering.
Being a Russiaphile I should plan a holiday there
but get intimidated by the thought of all ppl there being 6 ft tall hulks
& lasses
But, but, the country is being run by the ever popular (by ZHers) and diminutive (5 feet 5 but 5 feet 7 inches in lifts) Putin. The little Napoleon looks so great firing those guns and riding those horses. There’s only one slight problem… his country is falling apart.
"But, but ..."
The nation my dad fought for in WW2, and the same I wore a uniform for, has turned into a two-bit piece of shit neocon-nightmare fascist system.
Murica?
(down the tubes)
That does not imply there is a "safe place".
(no where on planet Earth is there a "safe place" from what is coming)
(all will be equally fucked)
Tyranny, like hell, is not easily conquered.
The world hates us for our debt.
The US economy is collapsing - but we are constantly being lied to, and are too stupid to know the truth.
The Russians have a history of their government lying to them, but in general being smart enough to recognize the lie.
I think the Russians have better odds of getting through the coming maelstrom than the USA.
Are you including yourself in that "we"?
1. I live in Indianapolis, IN (USA)
2. My father served a once free republic, called the United States of America, in WW2.
3. I also served, as a chump, a once free republic - called, you know, the USA.
4. "WE" means ME and if you live in the states? - you too.
5. But by all means - keep pretending ...
(that's a good look for you)
(delusion)
1) I do not live in Indianapolis.
2) My father served the republic in WWII, and so on back all the way to the Ancient and Honorable Company of Artillery.
3) I'm sorry that you allowed yourself to be used in that way by the evil men who wish to destroy the republic and make it into a subdivision of the great one world thingy they crave so much. I do not believe that you would ever choose to voluntarily subvert the great republic.
4) Surely you can see the humor in using "we" and then talking about what a bunch of idiots they are.
5) I do not pretend. I believe. In the cause of my fathers and forefathers. I will not desert it, nor do I equate it to serving the false ones who now claim to rule over it.
If staying faithful to the ones who passed the torch into my hands makes me delusional, then I rejoice in the fact that outward reality has no hold upon me.
Peace.
And Freedom.
More rich Russians are coming here (Singapore) to live, following their PRC and Americano counterparts. This is a clear sign as to which countries are about to tank!
Gosh, was this a fun thread to read. Always great to see the all-hands-on-deck effort when something reflects badly on Grandmother Putin. The frantic avalanche of downvotes to silence the suddenly-vindicated ones who have been saying "told ya" all along, and the slobbery saliva love fest where the troll brigade congratulates each other on being, well, just wonderful and really, really smart.
But, pleasure at witnessing this absurd, flimsy Potemkin-ite farce aside, let's look at some of the interesting things this article revealed....
First off, did anybody do the math about what the ruble was worth back when Putin was head of that bank and ordering the loan department to fund various "special" projects? Which, from a financial perspective, not-so-surprisingly turned out to be special olympics projects picked by the Slavic Chuck Norris hisself..
It was 25 rubles to the dollar, more or less. Now it is pushing towards 75. What does that mean to the Ivan in the street? It means that somebody stole 2/3rds of his life savings in about 7 years of "special" projects. And is sharpening up their fangs to take another bite.
Next, it was very interesting to hear that a lot of the money flushed down the old "special" projects drain was used to keep Ukrainian steel mills operating. Now why on earth do you suppose that mighty Mother Russia needs to keep Ukrainian steel mills in operation, hmmm?
Of course, it is always interesting to listen to various prognostications about GDP shortfalls and inflation, which we all know come with a Godzilla-sized thumb on the scale when times are bad.
As for the heartwarming sense of panic exhibited by the full roster of Putinoids, I think I can sum up the central point of their comments with this:
Et tu, Tyler?
You are assuming too much from western economic education.
Exchange rate drop makes an iPhone more expensive to Russians but the price of bread and butter remains same.
Same as in India, it is problem for iPhone not to be able to sell its products in India or Russia. It is not life threatening for Russians not to own an iPhone.
Russians sell oil and gas for dollars. And exchange them to rubles. Thus they actually get twice the amount in wealth,
With sanctions in place Russian buy less western products. Russian themselves have chosen not to buy meat, and food sold by American and European markets. Think dear. World is not based on western economic hocus pokus. I told you so? Really? The support of Russian Government is increasing everyday. The likes of Kudrin are actually scared that Russia may survive and western economic bullshit will be exposed soon.
We'll see, Senor Coyote. The idea that catastrophic devaluation externally coupled with their own admissions of fast-rising domestic inflation does not sound like a recipe for financial happiness to me.
Do not underestimate the ability of the Russian people to endure suffering for the sake of their nation.
The real question is why do they have to and what's in it for them?
National sovereignty is a pre-condition of freedom now ...
Why?
BECAUSE THE NWO/UN/US IS EXCEPTIONAL CROWD demands that we all join their club - and their club is "no guns, no speaking, just be quiet and obey".
So no - I'm not a huge fan of Russia, but I also think that because of their isolation they are in a unique position to escape this neocon-bankster-fascist bullshit.
"they are in a unique position to escape this neocon-bankster-fascist bullshit."
lol whenever there is a bank there will be bankster bullshit its only a matter of time
I believe in Russia. Mainly because I know that Russia is very much more democratic than many other countries including USA.
Under Putin, the nationalist, capitalist, communist, and several other characters are allowed to speak their mind freely. Putin makes the final decision making his case for the decision. It is like a judicial system.
This allows the best decision to be made under every situation,
My information in China is also the same. The top minds sit together to discuss and come to best decisions,
In USA today, decisions have been hijacked by special interest.
They do everything to make banks survive.
China has demonstrated that they are willing to let bad banks go bankrupt.
Russia will make the right decision about VEB.
Fear mongering is not going to hijack decision making as it easily happens in USA.
From a libertarian perspective, you are one scary dude.
out of all people here tarabel likes russia and putin the most
Secret admirers always deny it, Dash.
The truth is that I have nothing but the best of wishes to offer Russia. A life under the boot of a rigid Kantian philosopher-king is not what I would wish on anyone. Fortunately for us, America is only one Christmas away from being rid of ours. Sadly for Russia, the drama will continue. That Putin may appear to be an improvement over his predecessors does not speak well of him but badly of the men whose corpses he crawled over.
you must have been working as a journalist for a newspaper agency
I love reading the comments in ZH as much as the articles. I always end up better informed. Thanks to all.
The Rouble was at 3100 back in 1990 - Russia has nothing to worry about - Russsia has more resources than any other country on the planet - largest quantities of clean,pure water as well - These days Russia manages it's resources intelligently - Saudis are virtually bankrupt - they will not make this known to the world anytime soon though !
Eat onions sparingly, they contain a sulf-oxide that acts like DMSO that lowers the cell wall gradient. TTP and many US trade policies act in a likewise manner. When the 'gate-keepers' and regulators do not do the job to protect the public at large, the result is the society, country, that they are to protect enriches those that are most opportunistic. This then becomes a cancer that spreads and enables other cancers to grow and disable society. The US is in this stage. Russia is familiar with this, as it was attacked from outside through IMF loans and the dismantling of the communist system in to rapid a manner. Russia has remedied the matter in a hybrid manner and is in full implementation of its total recovery. The dumping of oil is by design. The inflation is a choke hold on companies that still have capitalistic control from beyond its borders.. These companies now must refinance from within or go bankrupt. The 'coup d'ete' to foreign interest controlling Russian interests, a toxic remedy that kills the 'cancer'. The reader is also reminded that Russia has one major proxy war on its border another in foreign oil fields that is causing oil to flow almost totally untapped. Gold has been hammered and Russian banks inexplicably still by US debt instruments. Those T-bills are still like cash and most likely is being used to retire Russian industrial borrowing from abroad. Gold is the nemesis of US debt, so it must go down, by hook or crook.
The Bear rules: Better to inflate first than last in a global meltdown.
What a piece of crap article. The person knows nothing about the Russia people. They know if they don't stand together, the west will rape them like they did after the fall of the Soviet Union. The Russian people are not that stupid. Sounds like a wishful thinking neocon!
Dream on, Russia-bashing wankers.
Ever heard of the Siege of Leningrad, the Siege of Stalingrad, the Battle of Kirsk and the Holy Orthodox Church? Ever contemplated the inner strength of a truly homogenous society?
In the meantime, be grateful for Putin, the devil you know, for what follows him might be the devil you don't want to know, when S might really HTF.
Lol. No.
My secretary is returning to Moscow in 2 weeks to renew a contract and we talk to our contacts on skype nearly daily. The economy is becoming tighter and inflation is present. They do notice the loss of western luxury goods, but in general they are doing ok, and do not appear to have civil unrest thoughts among the people we know.