Economy & random Russia posts.

[TsarSamuil]

National Russian card payment system established.

RT.com
May 05, 2014 20:22

Russian President Vladimir Putin signed into law the establishment of a national Russian card payment system on Monday. The NSPK (National Card Payment) system will ensure the smooth operation of electronic payments across Russia.

Both Visa and MasterCard blocked specific US-sanctioned Russian banks from using their payment systems in March amid the crisis in Ukraine, prompting sharp criticism for blocking bank operations.

On April 28, the US imposed sanctions against seven further Russian individuals and 17 different Russian companies, among them SMP Bank, Sobinbank, and InvestCapitalBank.

The NSPK law was passed in response to the cessation of some functions of Visa and MasterCard systems which happened under the US sanctions. Bank Rossiya was one of the first hit (considered by the US Treasury to essentially be a private bank for Russian officials). It, along with SMP Bank, predictably responded to the limitations by supporting the establishment of the new system.

Both banks were hit by a drop in consumer confidence which occurred after the sanctions kicked in.

The law requires foreign payment systems to make interim quarterly contributions to a special account in the Central Bank of Russia from July 1, equal to 25 percent of the average daily turnover.

The Russian parliament approved the bill last month. According to Central Bank estimates, creating the infrastructure for the launch of a national payment system could take as long as half a year. However, administering the cards to the general public could take as long as two years, with 100 million cards needing to be issued.

The new act stipulates that payment system operators and service operators, in addition to participants of the payment system, are not entitled to unilaterally abandon the provision of services necessary for the successful execution of any transfers.

Russian authorities also intend to seek to establish a national payment card which not only works within the country, but also abroad.

Last Thursday, Visa and MasterCard expressed concern over the potential impact. “I can see it will make it a more complicated situation for anybody that has a payment network in Russia,” MasterCard chief financial officer Martina Hund-Majean told the Financial Times.

Both companies said they are now considering possible risks to their business given the new legislation.

[TsarSamuil]

Most Russians want their country to dominate the globe - poll.

RT.com
May 29, 2014 13:36

The majority of Russians think their country should return to superpower status or at least become a regional leader, a new public opinion poll has shown.

According to research conducted by VTSIOM, the All-Russian Center for Public Opinion, 42 percent of the population want Russia to become “a great power, like the USSR was once.” Another 41 percent said that the country must become one of the 10 or 15 most developed and influential countries in the world. 10 percent wanted Russia to become the leader of post-Soviet nations and only 4 percent answered that Russia should not pursue goals of global or regional leadership.

The poll was conducted in mid-April 2014.

The number of those wanting superpower status for Russia was the highest among all the categories for the first time since VTSIOM began polling on this subject in 2003. Last year most people (44 percent) favored Russia “entering the club of developed and influential nations” and 37 percent supported the pursuit of superpower status. 7 percent of last year’s respondents lacked any ambitions whatsoever.

Answering the question what factors are influencing the nation’s status, 52 percent of Russians named the modern developed economy, and 42 percent strong military forces.

As many as 82 percent of Russians consider their country to have a large or very large influence on international affairs, the VTSIOM research shows.

The head of VTSIOM’s political research directorate, Stepan Lvov told the business daily Kommersant that the change of preferences was most likely caused by the recent political events demonstrating the growth of Russia’s influence on the international arena – mainly the accession of the Crimean Republic to the Russian Federation.

A professor of the renowned Russian diplomatic university MGIMO, Valery Solovey, agreed with this, adding that the current events in Ukraine also give Russian citizens “a vague feeling of strength.” The political scientist said that this might be caused by the efforts of the Russian mass media that provide a “Russo-centric” picture of the world, as for most Russians personal experience of international relations was still scarce.

The accession of Crimea and Russia’s attempts to mediate the Ukrainian crisis in order to avoid casualties and ensure the protection of civilians were also named as primary reasons of the recent boost of President Vladimir Putin’s popularity rating.

According to the Levada polling center, Putin’s approval rating hit an all-time high this May reaching 83 percent, compared to 72 percent in early March and about 65 percent in the beginning of the year.

[Deleted]

Most Russians want their country to dominate the globe - poll.

The strange thing is, at the same time many Russians seem to agree with Putin's restrained politics of the last weeks. I have talked to quite nationalist ones, who said they (Russia) have no obligation to help the secessionists. My impression is that Russians want Russia to become a superpower, but without any efford, let alone risk.

[TsarSamuil]

Maybe it's they don't want to admit that Putin n Russia are backing down..as that would be shameful..

[TsarSamuil]

A recovery the West has never forgiven Russia.

John Wight is a writer and commentator specializing in geopolitics, UK domestic politics, culture and sport.

RT.com
August 15, 2014 14:31

Though the demise of the Soviet Union in 1991 may have been regarded as a positive event by Western historians and ideologues, a victory for and validation of liberal democracy, its impact on the lives of Russian people was devastating.

In her superb book – The Shock Doctrine (2007) – Canadian writer and journalist, Naomi Klein, sets out in forensic detail the way in which the Russia that emerged from the dissolution of the Soviet Union in the early 1990s was used as a laboratory by American free market think-tanks, gurus, and economists. They descended on the country while it was still reeling from the shock of the implosion with the objective of setting up a pure market economy shorn of any and all state intervention, wherein the market would decide who worked and who did not, who could heat themselves and who could not, who ate and who starved – ultimately who lived and who died.

The record shows that many did starve, did go cold, and did indeed die.

The beating heart of the shock doctrine methodology and ideology applied to Russia in 1991-92 was from the economics department of Chicago University, commonly referred to as the Chicago School. The major influence within the Chicago School was the late Milton Friedman, the man credited with devising the architecture of neoliberal economics based on monetarism. This is an economic model which places a focus on controlling the money supply as a way to anchor inflation, which he and his co-thinkers viewed, and still view, as the enemy of economic growth.

The human factor was relegated in order of importance by comparison, which meant ending any pretension of an economic system serving the interests of society. Now, under Milton Friedman’s theory, society existed to serve the economic system. The challenge, given the severe impact such an extreme economic model would have on the lives of millions, was how to implement it successfully with minimal resistance from the people it was harming. The solution was encapsulated in his statement: “Only a crisis - actual or perceived - produces real change.”

In her book, Klein places the economic and social shock therapy administered in Russia at the behest of this group of Chicago School luminaries in historical context alongside previous examples where it was applied. She explores the chaos to beset Chile in 1973, after the democratic socialist government of Salvador Allende was brought down by a brutal right wing coup led by General Augusto Pinochet: South Africa after the end of apartheid: Poland post the collapse of the Eastern Bloc: and Iraq after the US/UK war on the country in 2003.

What all of these countries had in common, along with the others that were prey to the imposition of this extreme free market economic model, was that at the time they were in a state of crisis, which had the effect of rendering their political institutions, economies, and people vulnerable to the kind of shock therapy diagnosed by disciples of the Chicago School.

When it came to Russia, the primary aim of these economic “hit men” was the destruction of any last vestige of state involvement in the nation’s economy or economic life. Rather than the arbiter of social justice and guarantor of economic stability, the government would be reduced to the role of facilitating and protecting the interests of international investors, shareholders, speculators, and corporations. This involved the deregulation of the economy and banking system, the removal of social programs and safety nets, the lifting of price controls and the privatization of all state owned sectors of the economy, which were sold off at a fraction of their true value to speculators.

These were the conditions laid out by the IMF after newly installed Russian President Boris Yeltsin had applied to join, heavily influenced by Yegor Gaidar, one of his deputy prime ministers and an eager convert to free market orthodoxy.

Russia’s economy was near bankrupt, lumbered with an external debt of some $66 billion upon the dissolution of the Soviet Union, and the creditor nations of the G7, exploiting Russia’s vulnerable state, made a condition of their cooperation in rescheduling the debt that the IMF should play a central role as a policy advisor, lender, and coordinator of assistance.

In truth, as with every nation that has fallen prey to the IMF’s strictures of economic reform and structural adjustment, Russia was being purified by pain. Rather than view the end of the Soviet Union as an opportunity to forge a relationship of mutual respect and cooperation with Russia as it moved from a socialist command economy to a market economy, Western ideologues viewed themselves as victors in the Cold War and Russia as a defeated foe that needed to pay a heavy price for that defeat. As the Harvard academic and passionate Russophobe, Daniel Pipes, wrote at the time: “It is desirable for Russia to keep on disintegrating until nothing remains of its institutional structures.”

The impact of this economic medicine on Russian society was devastating. Most Russians consumed 40 percent less in 1992, after a year of shock therapy, than they did in 1991, while a third of the population had fallen below the poverty line. By 1994 the suicide rate had doubled, drug use had risen to record levels, and violent crime had increased by four times its previous rate during the Soviet era. Russia was on the precipice of disaster with the State Duma and President Boris Yeltsin, in full blown civil war against one another as a consequence of the chaos that had beset the country.

Two decades on and Russia is no longer an economic basket case. Its recovery from those dark years of economic shock therapy has been remarkable, contingent upon the re-establishment of national sovereignty and its liberty from the economic vandalism of international speculators and the oligarchs who exploited the crisis of the early nineties to plunder the country’s wealth.

It is a recovery the West has never forgiven.

[TsarSamuil]

Russia seeks safe haven in gold, away from dollar and euro.

RT.com
August 15, 2014 17:15

Russia is taking steps to ensure that it protects itself from any future dollar or euro sanctions. Moscow boasts the world’s 5th biggest foreign exchange reserves and the 6th largest gold reserves. In total, the assets amount to over $1.5 trillion.

While the West is continuing to try and punish Russia via economic sanctions, the response of the Russian Central Bank has been to diversify away from the euro and dollar – and to buy up more gold.

As the geopolitical situation in Ukraine deteriorates, Russia is moving to protect itself from currency risks associated with the euro and the greenback.

In the first half of 2014, Russia’s Central Bank reduced its foreign currency reserves by 2.5 percent.

“Due to the worsening geopolitical situation, the Central Bank actively redistributed foreign exchange reserves, replacing US Treasury bonds with gold,” Alfa Bank’s chief economist, Natalya Orlova, told Kommersant.

Instead of buying euros and dollars, Russia’s Central Bank is eyeing the Chinese yuan and the Japanese yen.

Boosting currency swaps and bilateral payments with China and other strategic trade partners will continue to bypass the US dollar. Last week, Russia’s and China’s central banks have agreed to increase currency swaps.

Holding more of these currencies is a logical move for Russia, which has high trade volumes with both China and Japan. In 2013, trade turnover with China was close to $90 billion and over $33 billion with Japan.

Russia is fast increasing its gold stockpile and at the end of July, the total volume was worth more than $45 billion.

According to Yaroslav Lissovolik, chief economist for Deutsche Bank in Moscow, this is the best way for Russia to provide stability to its foreign exchange reserves.

“The fact that Russia has intensified its diversification process reflects the fact that a fairly high proportion of reserves were held in dollars and euros, while the share of gold was low,” Lissovolik told Kommersant.

Over the summer, reserves were added at the highest rate since the end of 2009. In June, Russia’s Central Bank added 54 tons of gold, which catapulted Russia ahead of China in terms of total gold, according to IMF data.

In the last decade, Russia has become the world’s top gold buyer, adding more than 600 tons to its vaults.

Other countries are also actively adding gold. In the last six months, Kazakhstan’s Central Bank increased its gold investment from 12 tons to 155.8 tons.

Conversely, developed countries such as the US, Germany, Italy, France, and Spain are keeping gold reserves at a stasis. Germany sold 2.9 tons of gold reserves from the Bundesbank but still remains the world’s # 2 holder of gold, after the USA.

[TsarSamuil]

Russian ruble plunges as Central Bank announces limit to intervention.

RT.com
November 05, 2014 16:23

The ruble hit historic lows against the dollar and euro after the Russian Central Bank announced it will essentially cap the amount it spends to defend the currency.

The Russian Central Bank’s switch to a more proactive currency regime will allow the bank to “surprise” markets by making the ruble interventions more sporadic and less predictable. This caused the ruble to plunge in opening trading hours.

At market close in Moscow, the ruble settled at 44.91 against the dollar, and 56.10 against the euro. The ruble has lost more than 25 percent against the US dollar this year as a result of lower oil prices, the Ukraine crisis and the sanctions, along with the US winding down its stimulus program.

“I think it’s highly likely that the ruble will fall to a so-called ‘psychological’ level of 50 against the US dollar by the end of the year. But it shouldn’t fall below this threshold, as it can cause some serious social consequences,” Aleksandr Pasechnik, chief analyst at Russia’s National Energy Security Fund, told RT.

The bank, which has already spent $68 billion defending the turbulent ruble this year, will no longer automatically intervene once the ruble pushes above its trading band. Support for the ruble will be limited to $350 million per day.

“In cases when the value of the bi-currency basket stays at the operational band’s boundaries or beyond it during the entire trading session, the volume of the Bank of Russia’s intervention will not exceed $350 million on that day,” the regulator said in a statement Wednesday.

Before, the amount the bank could intervene was unlimited. The move to limit is yet another step towards pushing the currency to a free float status by 2015, a goal initially set out by chairwoman Elvira Nabiullina when she assumed the helm of the bank a year and half ago.

"The move is an effective move to a free float from now on," Vladimir Osakovsky, chief Russia economist at Bank of America Merrill Lynch, told Reuters.

Last Friday, the bank raised its key interest rate to 9.5 percent, and like Wednesday’s decision, named extenuating economic circumstances as a trigger.

Another tool the Central Bank has enacted is the currency repo, which allows it to balance the Russian ruble, but will not use reserve currencies.

[Deleted]

The US-Saudi tactics with lower oil prices bear fruits, unfortunately.

[TsarSamuil]

Blacklisted Bank Rossiya issues new cards using domestic payment system.

RT.com
November 06, 2014 16:31

The Bank Rossiya, which came under US sanctions in March, has started issuing bank cards using Russia’s domestic “universal electronic card (PRO100)" payment system.

Cards will be sent out to clients this month. It is all part of Russia’s plan for more financial independence from international credit card firms.

It became a key goal for Russian financial authorities after Visa and MasterCard, which control about 90 percent of the Russian market, temporarily blocked operations at some banks in the country.

Earlier in the month the Central Bank of Russia (CBR) recognized PRO100 as a nationally important payment system. This makes it unnecessary to pay a “security deposit” equal to 25 percent of the average daily turnover to the Central Bank which was introduced as part of new rules earlier in the year.

Morgan Stanley has calculated that if Visa and MasterCard don’t fall under the category of an important payment system, would need to deposit an estimated $3 billion to stay in Russia.

Today around 500,000 shops in Russia accept PRO100 cards, and in the near future card holders will be able to withdraw money from 100,000 terminals with no fee. The card owners will also be able to control their accounts via the internet or a mobile app.

The service infrastructure for PRO100 bank cards is constantly expanding. Operations with the PRO100 system account for more than a half of all banking transactions with credit cards in Russia. More than 1.2 million PRO100 cards have been issued.

[Deleted]

The ruble is in free fall. God be with Russia.

[TsarSamuil]

Putin is a useless piece of garbage!

[TsarSamuil]

Putin: Ruble’s ‘speculative jumps’ to stop in near future.

RT.com
November 10, 2014 08:20

The sharp depreciation of the Russian currency is purely speculative and has nothing to do with fundamental economic factors, Russian President Vladimir Putin said at the APEC summit in Beijing.

“We are now seeing speculative jumps of the ruble, but I think that it should stop in the near future, given the actions that the Central Bank is currently taking in reply to the actions of speculators,” said Putin to the Business summit at APEC Forum.

“The events we are seeing now in Russia have absolutely nothing to do with the fundamental economic reasons and factors,” he added.

The ruble was quick to reflect Putin’s comment, with the currency rising against both the dollar and euro at the Moscow Exchange. It gained 1 ruble against the USD to trade at 45.7 and settled at 57 against the euro at 11am Moscow time.

Putin also confirmed that Russia will not introduce capital controls, as the authorities can manage the situation with the reserves they have.

“It’s important that our basic parameters on foreign exchange reserves and the balance of payments remain at a good level. It allows us to control the situation without additional extraordinary measures,” Putin said.

The Central Bank of Russia (CBR) tactics are reasonable and should bring results soon, the president said, adding that it will stick to a policy of inflation targeting. He also said that the country’s monetary authorities were ready to add more currency to the market to balance the ruble.

At the end of October the Central Bank of Russia raised its key interest rate by 150 basis points to 9.5 percent. That was seen as an attempt to support the ruble that was dramatically falling due to lower oil prices, the crisis over Ukraine, and sanctions.

Going away from the policy of regular currency interventions and moving the ruble closer to a free-float is another big factor. Experts say it’ll help the ruble settle at a fair market value and save Russia’s reserves. In October alone Russia spent about $30 billion of its reserves to balance the currency.

The bank has also enacted a new market tool, a currency repo or repurchase agreement that will provide up to $50 billion by the end of 2016. It allows for balancing of the ruble without using reserves.

[TsarSamuil]

Russian ruble continues recovery, as oil back to $80.

RT.com
November 21, 2014 13:06

The Russian ruble continued its fight back on Friday to move above 46 against the US dollar, as the price of Brent crude slid over the $80 per barrel threshold.

The US dollar has fallen to 45.62 rubles Friday at 3PM Moscow time on the Moscow Exchange. The euro has fallen to 56.69 rubles. The official rate set by the Central Bank of Russia (CBR) for November 22 stands at 45.79 rubles against the US dollar and 57.43 against the euro.

The recovery comes as the price for benchmark Brent crude has bounced back to $80 per barrel for the first time since November 13.

The OPEC meeting next week is expected to be crucial, as member states will decide whether to cut production to support oil prices.

Another factor supporting the currency is the CBR decision to let the ruble float, Sergei Kozlovsky, head of analytics at Grand Capital, wrote in an e-mail. It significantly reduced speculative activity in the domestic market and contributed to strengthening of the ruble against the dollar and euro.

The regulator also said it would be ready to intervene at any moment, should it feel there’s a threat to financial stability, which gives market players much less room for speculation.

The increase in demand for rubles in the new tax period has also caused positive changes in the exchange rate. Analysts say that the currency market is maintaining growth rates that reflect the increased demand for domestic currency and the current tax period should support the ruble after a long break.

[TsarSamuil]

Russia loses $140bn with sanctions and falling oil prices – Finance Minister.

RT.com
November 24, 2014 12:47

Russia is losing around $40 billion a year due to Western sanctions, but they are not as critical to the economy as lower oil prices, which add $90-100 billion in losses, says Russian Finance Minister Anton Siluanov.

"We lose about $40 billion a year because of the political sanctions and around $90-100 billion a year due to the 30 percent reduction in oil prices," RIA quotes Siluanov speaking Monday at the International Financial and Economic Forum.

Lower investment and foreign loans along with capital outflow, estimated at $130 billion this year, are the key components of the loss, Siluanov explained.

Siluanov believes the decline in oil prices has a more significant impact on the Russian economy than the international sanctions.

"If we talk about the consequences of geopolitics, of course, they are important for us," he said. However, he added that "it is not as critical for the course, and even for the budget, as the prices of goods exported by us."

Talking about the ruble’s depreciation, Siluanov said that fluctuating oil prices should serve as a principal indicator of the ruble’s exchange rate amid a period of high volatility.

"The price of oil has fallen by 30 percent since the beginning of the year. Incidentally, the ruble has weakened by the same 30 percent. When people ask me - listen, you're the Minister of Finance, what’s the ruble rate going to be? It is impossible to answer because there are a lot of factors. I say, look at oil prices. The behavior of the ruble will depend on them," said Siluanov.

The price of Brent crude, which is used to calculate the price for Russian Urals blend, has fallen by 30 percent to about $80 a barrel since the end of June; its lowest price for four years.

According to the International Energy Agency, the total supply of oil on the world market in October increased by 35 thousand barrels to 94.2 million (2.7 million barrels more than in October 2013). In the same period, the average daily volume of oil supplies by OPEC countries in the world market amounted to 30.6 million barrels.

OPEC countries are also adding to the oversupply as they’ve been exceeding their quota of 30 million barrels per day for the last six months.

According to IEA experts, the decline in oil demand from China, world’s second largest oil consumer, and rising oil production in the US will lead to a sharper decline in prices in early 2015.

On November 27, OPEC leaders will meet in Vienna to decide whether to shore up oil prices by cutting output.

[Deleted]

Today RUB has reached another historical low - 54.3 RUB per USD.

A classical demonstration of the so-called "Dutch disease", if I ever saw one, when the national currency exchange rate is directly correlated with oil prices for oil-based economies.