Russia, re-emerging super power or economic basket case?

#1
It's beginning to look like all that throwing its weight around recently is returning to bite them in the arrse. Foreign investors are running for the hills because of a lack of trust, theres no significant domestic capital to step in and the oil industry is not all it was hyped to be.

On Friday, the cost of insuring Russian governments bonds against defaults rocketed. Perhaps even more worrying was credit rating agency Standard & Poor’s issuing a downgrade notice on those bonds, warning that $200bn of state rescue packages designed to ease the crisis could begin to erode the country’s finances.

Unsurprisingly, perhaps, the Russian economy looks to be in somewhat of a precarious situation. The entire Russian oil industry is now worth less than Brazilian oil giant Petrobras, and some banks are now trading at less than half book value.

“The biggest problem in the Russian economy is a general lack of trust. People are too much afraid to lend money,” says Rybnikov.
Full article in the Telegraph.
 
#3
Ord_Sgt said:
It's beginning to look like all that throwing its weight around recently is returning to bite them in the arrse. Foreign investors are running for the hills because of a lack of trust, theres no significant domestic capital to step in and the oil industry is not all it was hyped to be.
Hmmmm!

I suspect recent events in Georgia have almost nothing to do with Russia's current financial and economic woes. Europe will still be buying oil and gas from Russia, but at a lower price and a slightly lower output due to the economy. Georgia hasn't changed a thing!

Indian Finance minister was on the World Service a week back explaining how there had been a massive flight of finance OUT of India even though it is still a booming economy and rich pickings were to be made. The reason given made a huge amount of sense, the global credit crunch has caused people to grab back whatever cash they can to improve their liquidity. I have no doubt the very same is occuring in Russia.

Then add to the pot the falling gas and oil prices, and a major slow down in the world economy, and Russia is in for some stormy weather.
 
#4
whitecity said:
Then add to the pot the falling gas and oil prices, and a major slow down in the world economy, and Russia is in for some stormy weather.
Undoubtedly. But all this "basket case" predictions remind me of wistful thinking and an attempt to lift up one's spirits with a thought "Oh, look, our neighbour lost his dog! Ha-ha!"
 
#5
Domovoy said:
whitecity said:
Then add to the pot the falling gas and oil prices, and a major slow down in the world economy, and Russia is in for some stormy weather.
Undoubtedly. But all this "basket case" predictions remind me of wistful thinking and an attempt to lift up one's spirits with a thought "Oh, look, our neighbour lost his dog! Ha-ha!"
It depends on what the phrase "basket case" means. Zimbabwe is a 'true' basket case and that level of degeneration is not going to hit Russia.

Nevertheless, the Russian public are really going to feel the squeeze in the coming months far more than the rest of Europe and that is mainly due to the recent past policies of the government and state run companies such as Gazprom. Like the banks, Russia has pursued a short-term, maximum profit strategy over recent years. Now they're going to hurt. The big boys won't suffer, but the poor proles will.
 
#6
No non-Russian is going to invest long-term in Russia after what happened to BP's investments there. All Russia has is 'hot-money' short-term investment, which (as they've just found out) can be pulled out very quickly indeed.
 
#7
So that’s economic problems on top of their declining population, low birth rate and rampant ill health.

Quite a super power you got there Putin old boy.
 
#8
whitecity said:
Nevertheless, the Russian public are really going to feel the squeeze in the coming months far more than the rest of Europe and that is mainly due to the recent past policies of the government and state run companies such as Gazprom. Like the banks, Russia has pursued a short-term, maximum profit strategy over recent years. Now they're going to hurt. The big boys won't suffer, but the poor proles will.
No one will come out of this crisis smelling of roses, but when a bus crushed Russia had its seat-belt on: "The Stabilization fund of the Russian Federation ("the Fund") was established on January 1, 2004 as a part of the federal budget to balance the federal budget at the time of when oil price falls below a cut-off price, currently set up at $27 per barrel.1

Furthermore the Fund is to serve as an important tool for absorbing excessive liquidity, reducing inflationary pressure and insulating the economy from volatility of raw material export earnings." Much of this fund consists of money made by sell of oil and gas.

"The Fund assets are currently invested in the following currency composition:

US dollars - 45 %;
Euro - 45 %;
GB pounds - 10 %." http://www1.minfin.ru/en/stabfund/about/
 
#9
Gust.Avrakotos said:
So that’s economic problems on top of their declining population, low birth rate and rampant ill health.

Quite a super power you got there Putin old boy.

Yep, as I said: "Our neighbour lost his dog! Ha-ha!" which made Gust.Avrakotos feel much better about demographic problems of Europe where indigenous population is on decrease and newcomers from Asia and Africa are having a much higher birth rate...

http://www.usatoday.com/news/world/2008-04-05-russia-baby-boom_N.htm
 
#10
AndyPipkin said:
No non-Russian is going to invest long-term in Russia after what happened to BP's investments there. All Russia has is 'hot-money' short-term investment, which (as they've just found out) can be pulled out very quickly indeed.
Sadly that is nothing but Anglo-American wishful thinking - on both accounts.
 
#11
Domovoy said:
No one will come out of this crisis smelling of roses, but when a bus crushed Russia had its seat-belt on: "The Stabilization fund of the Russian Federation ("the Fund") was established on January 1, 2004 as a part of the federal budget to balance the federal budget at the time of when oil price falls below a cut-off price, currently set up at $27 per barrel.1

Furthermore the Fund is to serve as an important tool for absorbing excessive liquidity, reducing inflationary pressure and insulating the economy from volatility of raw material export earnings." Much of this fund consists of money made by sell of oil and gas.

"The Fund assets are currently invested in the following currency composition:

US dollars - 45 %;
Euro - 45 %;
GB pounds - 10 %." http://www1.minfin.ru/en/stabfund/about/
So?
 
#12
whitecity said:
AndyPipkin said:
No non-Russian is going to invest long-term in Russia after what happened to BP's investments there. All Russia has is 'hot-money' short-term investment, which (as they've just found out) can be pulled out very quickly indeed.
Sadly that is nothing but Anglo-American wishful thinking - on both accounts.
Sorry I didn't mean Georgia, rather as AndyPipkin alluded to, the bullying of companies to get more out of previously agreed contracts has seen foreign investment scoot.

The fall in price and revenue of oil, combined with the 'hot money' legging it all made a whole lot worse by the 'credit crunch' has rather put the brakes on Russia's recent expansionist plans though.
 
#13
Domovoy said:
Gust.Avrakotos said:
So that’s economic problems on top of their declining population, low birth rate and rampant ill health.

Quite a super power you got there Putin old boy.

Yep, as I said: "Our neighbour lost his dog! Ha-ha!" which made Gust.Avrakotos feel much better about demographic problems of Europe where indigenous population is on decrease and newcomers from Asia and Africa are having a much higher birth rate...

http://www.usatoday.com/news/world/2008-04-05-russia-baby-boom_N.htm
So? Immigrants always have more children for a few generations when it is second or third world peoples coming to a first world nation, this is very different to Russia's problem.

This 'baby boom' mentioned is a fallacy. Russia’s population has been declining for decades, and will continue to do so unless the general population starts to see some benefit from all this oil and gas money.

The only reason you can even suggest a 'boom' is the current crop reaching child bearing age are the last children born in the 'good times'. They will create a spike in the birth rate for 5 or so years, but this will not change the downward trend in Russia's population.

Behind the Bluster, Russia Is Collapsing
 
#14
Thats quite a sobering report Gust.Avrakotos. I found this line shocking According to U.N. figures, the average life expectancy for a Russian man is 59 years -- putting the country at about 166th place in the world longevity sweepstakes, one notch above Gambia.
 
#15
Ord_Sgt said:
Thats quite a sobering report Gust.Avrakotos. I found this line shocking According to U.N. figures, the average life expectancy for a Russian man is 59 years -- putting the country at about 166th place in the world longevity sweepstakes, one notch above Gambia.
Tell me about it.

I don’t want people to think I dislike Russia, I am just well aware the country has massive social problems and I fear they are not far from another downfall of some kind.

Regarding the birth rate:
On the other end of the lifeline, the news isn't much better. Russia's birth rate has been declining for more than a decade, and even a recent increase in births will be limited by the fact that the number of women age 20 to 29 (those responsible for two-thirds of all babies) will drop markedly in the next four or five years to mirror the 50 percent drop in the birth rate in the late 1980s and the 1990s. And, sadly, the health of Russia's newborns is quite poor, with about 70 percent of them experiencing complications at birth.
..sucks to be them!
 
#16
Correct me if I'm wrong, but both BP and Shell had similar problems in Nigeria and the US.

"Shell and BP’s troubles are neither unique nor surprising, but are exacerbated by these groups being some of the biggest fish in a shrinking pond. The simple fact is that they are substantially excluded from OPEC countries, which control 75% of the world’s proved reserves. And their plight is worsening as resource nationalism takes hold from Russia, where Gazprom has just wrested control of both Shell’s Sakhalin-2 project and BP’s Kovykta field, to Venezuela, where international oil company interests have simply been expropriated." http://www.davidstrahan.com/blog/?p=30 -- isn't it something called "capitalism" -- might is right, etc. ?

This hue and cry is not so much about "shattered confidence in Russia's integrity" ( :roll: Bush family was cooperating with Hitler even at the time America was at war with Germany! Partners of US "Steel" corporation were using slave labour from Polish concentration camps! http://www.guardian.co.uk/world/2004/sep/25/usa.secondworldwar; the US oil companies took half the world to war for the opportunity to rob other countries natural resources -------------- so much for "integrity"!) it's more to do with an alarm over Russia's growing investment abroad: "Trying to erect an Iron Curtain around Russian funds and businesses will prove counterproductive. Indeed, a large-scale "invasion" of Russian business would be a positive development, because it would foster economic interdependence. This is true even if the economic expansion is led by state-owned companies and by Russian wealth funds. By investing in U.S. and European assets, Russia's government and business elites are buying a stake in the global economy. This should bring better mutual understanding and a more rational and accountable foreign policy.

Paradoxically, despite recent hits to the country's stock market, Russia remains awash in cash. The government just rolled out a $130 billion bailout plan for the country's ailing banking system. As a percentage of gross domestic product, this would be equivalent to about $1.3 trillion in the United States -- almost double the plan designed by U.S. Treasury Secretary Henry Paulson. Yet, even this package has not significantly eaten into Russia's wealth funds and the world's third-largest currency reserves.

The government's Reserve Fund, created to cushion the economy from a fall in oil prices, stands at $140 billion, and the National Welfare Fund, intended to invest in high-return vehicles, holds another $30 billion. Although the National Welfare Fund is not officially a "sovereign wealth fund," it is already among the 10 largest such funds, rivaling the Brunei Investment Agency.

The Reserve Fund and the National Welfare Fund combined rival Singapore's Temasek Holdings, currently sixth in the world, and lag just behind the China Investment Corporation. By design, this money is intended to be invested outside Russia. As today's financial crisis has made many Western assets cheap, they are now within reach of the country's government and leading companies." http://www.themoscowtimes.com/article/1016/42/371612.htm

And in this sense all "Doomsday" cries are wistful thinking.
 
#17
No one denies Russia has problems and would suffer from the crisis, but the tendency of Russian economy is upward (even though it will slow down due to recent events) unlike the downward spiral of Western economies.

Russia is more resilient, flexible (it looks not only Westward, but expands into Asia and Africa (and not by means of war)) and self-reliant.
 
#18
Domovoy said:
And in this sense all "Doomsday" cries are wistful thinking.

Yes and no.

Russia has cash, but almost all of this has come from a few years of high gas and oil prices. In the new economic climate they will have far less to play around with in a coming years, and Russia doesn’t seem to have much of a plan on how to deal with this.

Even if their economic plan works, it still leaves the fact Russia is ignoring major health and social problems and it is these problems that are a threat to any nation.
 
#19
Domovoy said:
No one denies Russia has problems and would suffer from the crisis, but the tendency of Russian economy is upward (even though it will slow down due to recent events) unlike the downward spiral of Western economies.

Russia is more resilient, flexible (it looks not only Westward, but expands into Asia and Africa (and not by means of war)) and self-reliant.
Nothing wrong with thinking positively but you really haven't read any of those articles have you.
 
#20
The population of Russia is expected to be reduced by 20 percent in 43 years

Interesting little article there, it covers a lot of points but I think the projection of a population drop of 20% in 40 years is rather scary!

I thought Russian had cold winters! Stop playing chess and start knocking out the babies!

As for Russia doing well in the current economic crysis, if that is the case why has Russia been closing the RTS and MITEX? (thats their stock markets btw)
 

Similar threads


New Posts

Latest Threads

Top