Russian Economy Stumbles as Stocks and Oil Prices Fall

[GennGreymane]

http://www.nytimes.com/2016/01/22/bu...a-economy.html

The turmoil in global stock markets and the plunge in oil prices are shaking Russia’s economy, already wobbly from being cut off from Western finance by sanctions.

Russia’s currency, the ruble, fell briefly on Thursday to 85 to the dollar, a record low, before creeping back to 82.5 by the close of trading.

With alarm rising among policy makers, the chairwoman of Russia’s central bank, Elvira Nabiullina, canceled a trip to the World Economic Forum in Davos, Switzerland, where she was scheduled to appear on Friday.

The central bank announced the cancellation without elaborating. Interfax, a nongovernment news agency, reported that the central bank held an emergency meeting Thursday evening with Russian bankers.

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A main stock market index, the dollar-denominated RTS, recovered from an early decline to close up by 0.6 percent for the day. But it is still just above its post-2008-crisis low, and not much higher than in the late 1990s, indicating the severity of the retreat of Russia’s market.

Another benchmark index, the Micex — which is denominated in rubles — was up 2.9 percent for the day.

Aleksei L. Kudrin, a former finance minister, said at the World Economic Forum on Thursday that Russia should brace for oil’s bottoming out at $16 to $18 a barrel for a short period this year.

“The price will, of course, correct and rise,” he said. “Certainly, there is a shock. But in a year or two the economy will pull through to positive growth.”

Oil prices are nearing a level that could be catastrophic for Russia’s budget, analysts say, given that the government cannot tax oil companies more than the cost of producing oil in Siberia.

The production cost in Russia is estimated to average about $15 a barrel. With roughly half of Russia’s budget derived from taxes on oil and natural gas, a sustained drop in oil prices to the levels Mr. Kudrin predicted would compel tax increases or a budget reduction known as a sequester, forcing salary cuts for teachers, soldiers and police officers, and lower pensions.

Futures contracts for Brent crude, the international oil benchmark, traded below $28 on Wednesday, but were back in the $30 range on Thursday.

In another reflection of the severity of the oil-price shock for Russia, the government is considering canceling a five-year-old social security program. It had deducted contributions from wages to build up funds for future retirees. The government plan would shift to financing pensions from current taxes, the daily newspaper Kommersant reported, even though demographic changes mean more workers will retire in future years.

Also on Thursday, the Russian central bank revoked the banking licenses of three lenders — Vneshprombank, Miraf-Bank and Turbobank — that had become insolvent.

[Independent voter]

On a news show they said the Russian bombing in Syria wasn't so much about saving Assad or Syria for Assad as much as it was about selling Russian military gear to third world countries. The Russian bombing of Sunnis is a big TV commercial.

You can make a lot of money by selling weapons.

Turkey shooting down a Russian bomber with a thirty year old plane was problematic.

[Cybran]

American radio stations seem to be full of shit.

[GennGreymane]

American radio stations seem to be full of shit.

I dunno. Oil is down, and its a big part of Russia's economy and bad economic news has been very common from there.

[Cybran]

bad economic news has been very common from there.

Reporting bias, because your media is full of shit.

[GennGreymane]

Reporting bias, because your media is full of shit.

So instead of posting constructively and providing sources stating another point, you will just insult the sources?

[Shalcker]

I dunno. Oil is down, and its a big part of Russia's economy and bad economic news has been very common from there.

If you would read ZeroHedge you would believe that American "bad economic news" are much more common. :P

The way it usually works is that rouble falls in Winter and strengthens around Spring due to internal Russian business and government cycles.

[DaytwoulD]

How many threads about Russia will you create ? I swear I've already seen thread with almost same name before here, something about their economic. Like, how many times we saw "Russian Economy Stumbles, Hits rock bottom etc" thread on a mmo-champ? Every time I want to see something about WoW there's a thread about Russians in the forumticker. And 90% it's a thread by you. Wtf?

[GennGreymane]

If you would read ZeroHedge you would believe that American "bad economic news" are much more common. :P

The way it usually works is that rouble falls in Winter and strengthens around Spring due to internal Russian business and government cycles.

There is plenty of bad American economy news. I dont understand the point you are trying to make.

[Shibito]

There is plenty of bad American economy news. I dont understand the point you are trying to make.

Its important to mention the USA in every post.

[GennGreymane]

Its important to mention the USA in every post.

You are correct... I have failed my duty as an American.

[sarahtasher]

Any news slightly negative on Russia : KONSPIRACY ! Gay-Jew-Nazi-Muslim-Vatican plot to demean STRONK Roossiah

Completely hysterical RT ''news'' calling for total economy collapse (the daily one) of the USA, with interviews of Alex Jones or the LARPers in Oregon : TRUTH.

- - - Updated - - -

If you would read ZeroHedge you would believe that American "bad economic news" are much more common. :P

The way it usually works is that rouble falls in Winter and strengthens around Spring due to internal Russian business and government cycles.

I never never never never never heard something that....out there...

For the record, if there was a seasonal connection with rubles, it would go higher in the winter, because of higher demand.

[Shalcker]

For the record, if there was a seasonal connection with rubles, it would go higher in the winter, because of higher demand.

Higher demand for what? Rouble rout means less imports, which means less dollars needed in turn.

[sarahtasher]

Oil...the staple of Russian economy.

And wow, just wow : less value of rubles means ''less dollar needed''. No, dude, that mean more roubles for the same value of imported goods

[Deleted]

Reporting bias, because your media is full of shit.

cybran must be russian/eastern european.
he/they wouldnt know the truth if it bit him/them on the arse.

[Shalcker]

Oil...the staple of Russian economy.

"Oil costs less, Russia sells same amount of oil, Russia get less dollars, less dollars get sold on exchange, rouble strengthens"? Is this what you mean?

Wait, wouldn't this mean that rouble should strengthen each time oil drops? Rather then opposite we're seeing year after year?

And wow, just wow : less value of rubles means ''less dollar needed''. No, dude, that mean more roubles for the same value of imported goods

Noone "imports at all costs". As costs rise many prefer to not import at all and go with local (or other non-dollar-based) substitutions.

Our trade balance remains positive to this day because our imports drop faster with rouble depreciation then our exports.

[sarahtasher]

Dude, Russia was not self sufficient under the Czars, it was never self sufficient-like any country in the world, in fact.

[PACOX]

Thanks Obama.

[sarahtasher]

Well, I don't know if this sincere, but if Obama make Russian ecconomy crash, that would be a very impressive achievement for a POTUS, no ?

[wikinger]

Well, I don't know if this sincere, but if Obama make Russian ecconomy crash, that would be a very impressive achievement for a POTUS, no ?

what's a POTUS?