Russia's Economic Decline Is Accelerating

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Fuel Fix/Bloomberg: How much more economic pain can Vladimir Putin take?

It’s been a little more than six months since the full brunt of Western sanctions took force against Russia. The punishment, while slow in coming, has proven devastatingly effective—especially when paired with the crash in oil prices.

Last summer, of course, U.S. and European Union officials had no way of knowing an epic oil selloff was right around the corner. But in hindsight the coordination seems uncanny. Oil prices peaked less than a month before the sanctions were announced. By November, the combination of cheap oil and tighter sanctions was bleeding Russia of billions in budget revenue and had cut it off from the world’s largest capital markets.

WNU Editor: Russians hate inflation .... it brings back all the bad memories of the 1990s when the currency collapsed and the country defaulted on its debts. And while the economy has not completely collapsed .... No, Obama, Russia's Economy Isn't 'in Tatters' (Leonid Bershidsky) .... the crisis in Ukraine and the decline in the Russian economy is now on the top of Putin's priority list .... but it is the economy that in the medium term can damage his ability to govern. For the moment .... the Russian public is giving Putin a pass, blaming sanctions and the drop in the price of oil as the main reasons for the tough times .... but this is only going to last so long .... if this continues into next year  the blame will shift to his Presidency, a fact that I am sure he is aware of.

The Russian Economy Is Not Going To Collapse

A man reads a newspaper under signs with currency exchange rates in Moscow, November 28, 2013. Credit: Reuters/Maxim Shemetov

Leonid Bershidsky, Bloomberg: No, Obama, Russia's Economy Isn't 'in Tatters

Western politicians and pundits should be more careful with their predictions for the Russian economy: Reports of its demise may prove to be premature.

Bashing the Russian economy has lately become a popular pastime. In his state of the nation address last month, U.S. President Barack Obama said it was "in tatters." And yesterday, Anders Aslund of the Peterson Institute for International Economics published an article predicting a 10 percent drop in gross domestic product this year -- more or less in line with the apocalyptic predictions that prevailed when the oil price reached its nadir late last year and the ruble was in free fall.

WNU Editor: I have been saying the same thing for the past two months .... the Russian economy will take a hit and living standards will decline .... but everyone that I know in Russia has prepared themselves for this .... and some of my own relatives are now remarking to me that they are surprised that the "hit" has not been as severe as they had expected.

Russia Faces Grim Economic Outlook In 2015

Fred Weir, CSM: Bear's bad year? Russia faces grim economic outlook in 2015

Their two-week holiday at an end, Russians are once again confronted with low oil prices, a weakening ruble, and rocketing interest rates. And the Kremlin has yet to follow through on promised remedies.

WNU Editor: If the rich are hurting .... everyone else is hurting .... and for Russia this story sums it up .... With Ruble in Freefall, Russians Scramble to Dump Trophy Homes and Break Contracts (New York Observer)

More News On The Russian Economy

World Bank Expects Russian Economy to Contract by 2.9% in 2015 -- Sputnik
Russian economy in crisis mode -- UPI
Ruble’s slump affects 48% of Russians — central bank poll -- ITAR-TASS
Russian Banks Plead for Interest Rate Cut as Borrowing Costs Spiral -- Moscow Times
Russia faces wave of bankruptcies if interest rates don't fall -- CNN
Ruble Drops to Month Low on Oil Slide as Russia Pulls Bond Sale -- Bloomberg
Russia reveals huge cost of supporting the rouble -- BBC
Oil Drop Further Rocks Putin’s Economy -- Fiscal Times
Oil price plunge hardly a disaster for Russia — expert -- ITAR-TASS

Russia's Credit Rating Cut Again

A reflection of a yearly chart of U.S. dollars and Russian roubles are seen on rouble notes in this photo illustration taken in Warsaw November 7, 2014. Credit: Reuters/Kacper Pempel

The Telegraph: Russia 'has deteriorated significantly' as Fitch cuts credit rating

WNU Editor: Fitch gives a very grim assessment on Russia's finances. What's my take .... I am painting an even grimmer picture. As to what is the situation back in Russia .... people are starting to grumble about inflation, but the full impact of falling oil prices, collapse of the ruble, and budgetary problems has yet to hit home.

Is Russia Two Years Away From An Economic Meltdown?

A man reads a newspaper under signs with currency exchange rates in Moscow, November 28, 2013. Credit: Reuters/Maxim Shemetov

Russia ‘Two Years From Meltdown’ As Economic Distress Grows -- The Australian/The Times

RUSSIA’S mounting economic crisis is likely to pose an existential threat to President Vladimir Putin’s leadership within two years, one of the country’s most respected economists said ­yesterday.

The economic distress signals are becoming clearer and ­although western sanctions are not the only cause of Russia’s problems, they make escape from the downturn far more difficult.

Ordinary Russians, who have overwhelmingly supported Mr Putin’s annexation of Crimea in March and his refusal to buckle in the face of sanctions imposed as a result, are feeling a growing impact in their daily lives, and the plummeting price of oil has squeezed government receipts.

Read more ....

My Comment: Russia has seen far worse .... it will survive.

Global Oil Prices Collapsing. Russian Ruble Hits New Low

Oil tankers in a Russian railway siding. The sharp fall in crude prices has added downward pressure on the Russian ruble on currency markets. Reuters

Russian Ruble Falls To New Lows As Oil Prices Slide -- Wall Street Journal

Ruble Down to 49.90 Against the Dollar

MOSCOW—The Russian ruble weakened to new lows in early trading on Friday, hit by a drop in oil prices after OPEC members rejected calls for drastic action to cut their oil output.

OPEC members’ decision to keep their production ceiling unchanged sent Brent crude prices below $72 per barrel for the first time since mid-2010, threatening to put more of a brake on Russia’s economic growth. The country receives around 50% of its revenue from exporting oil and gas.

The ruble touched an all-time low of 49.90 versus the dollar in the first minutes of trading on Moscow exchange, before recovering slightly to 49.57. This takes the ruble’s year-to-date depreciation versus the greenback to 34%.

Read more ....

More News On Collapsing Oil Prices And It's Impact On The Russian Economy

Russian markets & ruble hit new lows, as OPEC oil decision weighs -- RT
Russia's Ruble Crashes to Historic Lows as OPEC Lets Oil Price Fall -- Moscow Times
Ruble Drops to Record in Worst Month in Five Years as Bonds Fall -- Bloomberg Businessweek
Russian ruble hits historic lows on OPEC decision -- AFP
Russia's Ruble Tumbles After OPEC Refuses to Cut Oil Output -- Moscow Times/Reuters
Russian Ruble Hits Historic Lows Against Dollar, Euro On OPEC Decision -- Radio Free Europe
OPEC Decision ‘A Watershed for the Oil Market’ — Street Reacts -- WSJ

My Comment: For Russia .... oil prices may have dropped, but this has been offset by the decline in the Russian ruble. Pensions and salaries are still going to be paid .... but this is not a trend that Moscow and its business elite are looking at fondly.

Russian Economy Facing Hard Times As Sanctions And The Drop In Oil Prices Start To Bite

Russia Sees Recession Next Year If Oil Price Falls to $60 -- Bloomberg

Russia’s economy will sink into a recession next year if the price of oil slumps to $60 a barrel and the U.S. and its allies tighten sanctions over the conflict in Ukraine, Finance Minister Anton Siluanov said.

The economy of the world’s largest energy exporter won’t grow faster than 1 percent in 2015 even if oil prices hold steady and the severity of sanctions remains unchanged, Siluanov said in an interview in Singapore yesterday. The price of Brent has slumped by almost a third this year to below $80 a barrel.

Read more ....

More News On The Russian Economy

Russian economy to sink into recession at $60 oil price — finance minister -- ITAR-TASS
Russia's economy minister sees inflation rising above 9 percent -- Reuters
Russia Sees Higher Capital Outflows With Ruble Near Record Level -- Bloomberg
Russia Will Lose $130 Billion As Capital Flees The Country -- Yahoo News/Business Insider
Putin Readies Aid as Rosneft’s $21 Billion of Debt Looms -- Bloomberg
10 Kremlin Moves That Hurt Russia's Economy -- Alexey Eremenko, Moscow Times

My Comment: Putin believes that there are some pluses for Russia to have these sanctions in place .... PUTIN: There's A Plus Side To The Economic Sanctions Making Russians Miserable (Business Insider). I know both supporters and opponents to Putin in Russia .... but it is moments like this that even those who strongly support Putin shake their heads.

Update: The above Chinese video news report provides a good summary on the changing mood of Russians towards Putin, the economy, and towards the West.

Moscow Stockpiles Gold As Russia Prepares For Economic War

An employee holds an ingot of gold at the precious metals safe vault of the Central Bank in Moscow January 24, 2011. Credit: Reuters/Sergei Karpukhin

Putin Stockpiles Gold As Russia Prepares For Economic War -- The Telegraph

Russia's central bank added to its reserves of bullion in the third quarter, according to the latest report from the World Gold Council

Russia has taken advantage of lower gold prices to pack the vaults of its central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.

The latest research from the World Gold Council reveals that the Kremlin snapped up 55 tonnes of the precious metal - far more than any other nation - in the three months to the end of September as prices began to weaken.

Vladimir Putin's government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the rouble.

Read more ....

More News On Russia Stockpiling Of Gold

Putin "Prepares For Economic War", Buys Whopping 55 Tonnes Of Gold In Q3 -- Zero Hedge
Russia stockpiles gold to prop up Central Bank -- UPI
Exclusive: Russian central bank buys up domestic gold output as sanctions bite -- Reuters
Russia Invests In Gold, Buys 55 Metric Tons To Brace Central Bank -- IBTimes
Russia's Gold Rush: Putin Orders Gold Reserve Buying Spree To Beat Western Sanctions -- IBTimes
Russia Buys Most Gold for Reserves Since Financial Crisis of ’98 -- Bloomberg
What’s Driving Russia’s Gold Buying Spree (Video) -- Epoch Times
Putin Is the Biggest Gold Bug -- Bloomberg

Russia's Economy Is Starting To Stagnate

Russia Seen “In Denial” As Economy Stagnates -- Rob Garver, The Fiscal Times

Hobbled by international sanctions, low energy prices and a currency that has lost much of its value in the past year, the Russian economy will likely see virtually no economic growth through 2017, according to the country’s central bank.

The country’s faltering economy raises questions about how long Russian President Vladimir Putin can maintain his current sky-high favorability rating with the Russian people in the face of increased economic privation.

The Russian leader is currently in a double bind: the very thing that is insulating him from negative public opinion about the economy is contributing to making the economy worse. - See more at:

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My Comment: Thee economy has always been Putin's Achilles Heel .... and the economy is now facing a recession. If the economy is still in the doldrums this time next year .... political opposition to Putin will start to grow (if not sooner).

Is The West About To Use The Oil Weapon Against Russia?

Cheap Oil Will Win New Cold War With Putin - Just Ask Reagan -- Yahoo News/The Telegraph

The son of President Ronald Reagan says the world should learn from his father's secret deal with Saudi Arabia to drive down oil to end the Cold War and stop Vladimir Putin in his tracks.

Mikhail Gorbachev believes the world is on the brink of a new Cold War. If so, this new clash between East and West will be settled in the same way as the last one, which ended with the collapse of the Berlin Wall 25 years ago.

However, it wasn’t political ideology, the failure of Mr Gorbachev’s so called “Perestroika” reforms, or the desire of most people behind the iron curtain to own a pair of Levi’s jeans and listen to pop music that saw the Kremlin’s power crumble.

It was the collapse in oil prices engineered by Saudi Arabia, which literally bankrupted the old Soviet Union and ripped up the post-war map of Eastern Europe that had been brutally created in the aftermath of Adolf Hitler’s downfall by the equally ruthless Joseoption.ph Stalin.

Read more ....

My Comment: Being dependent on a resource economy is always a nightmare when commodity prices collapse.  For Russia .... this dependency is now coming home with a vengeance .... and for Russia's "adversaries", the urge to put the Russian economy into a recession as well as humiliating Putin is becoming a very tempting option.

Russian Central Bank Sees Sanctions Until 2017

An exterior view shows the headquarters of the Central Bank in Moscow, September 13, 2013. Credit: Reuters/Maxim Shemetov

Russian Central Bank Cuts Growth Forecasts, Sees Sanctions Until 2017 -- Reuters

(Reuters) - Russia faces the prospect of three years of economic stagnation, the central bank predicted on Monday, underscoring the heavy costs of President Vladimir Putin's Ukraine policies and of Russia's dependence on fragile oil prices.

In an annual monetary policy strategy document, the bank slashed its economic growth forecasts in 2014-16 to almost zero, anticipating that Western sanctions imposed over Russia's actions in Ukraine would last at least until the end of 2017.

It also raised its forecasts for net capital outflows to $128 billion in 2014 and $99 billion in 2015.

Read more ....

My Comment: A sobering analysis on the Russian economy and the impact of sanctions .... but their prediction of three more years of sanctions is revealing. It tells me that they are expecting the Ukraine conflict to continue to fester for the next few years.

Russian President Putin: Global Economy Will Collapse If Oil Prices Remain At $80 Per Barrel

Russian President Putin. © RIA Novosti. Mikhail Klimentiev

Putin: Global Economy Will Collapse If Oil Prices Remain at $80 per Barrel -- RIA Novosti

MILAN, October 17 (RIA Novosti) – Russian President Vladimir Putin said Friday that world economy will collapse if oil prices remain at $80 per barrel.

Shale oil production in the United States is profitable at a price of $80 per barrel, according to Putin.

“If oil prices remain at $80 per barrel, it will lead to production collapse. Budgets of all major oil-producing countries are based on the price of little more than $80, close to $90 per barrel…” the Russia leader told reporters after the Asia-Europe Meeting (ASEM) summit in Milan.

Read more ....

My Comment: Maybe for countries that are oil dependent (like Russia) are the ones who will be severely impacted by lower oil prices .... but for everyone else .... not. But in the case of Russia .... sanctions hurt but it will be lower oil prices that will severely impact the economy .... and .... not surprising .... the rating agencies are now taking note ..... Moody’s Downgrades Russia’s Credit Rating to Baa2 From Baa1 (RIA Novsoti).

Russia's Ruble Collapsed When News On Russia's Invasion Of Ukraine Hit The Wires

Charts: Bloomberg

Russian Ruble Tumbles To Record Low Against Dollar -- Zero Hedge

The Russian Ruble has collapsed this morning to its weakest against the USDollar on record. The drop - similar in size to the drop when US and Europe unleashed Sanctions 3.0 - has sent USDRUB to 36.89. Russian stocks are down 2.2% this morning - biggest drop in 3 weeks - and Russian bonds are weaker (10Y +20bps back above 5%). We can't help but think somewhere Shinzo Abe is getting ideas about how to really devalue his nation's currency to competitiveness...

Read more ....

My Comment: This is the market saying .... get ready for more Russian sanctions.