Russia’s economic decline deepens https://www.cnbc.com/2022/11/03/rus...oscow-could-pull-out-of-grain-deal-again.html
Russia will lose the energy war Putin started It’s no exaggeration to say that things look dire for the country’s energy sector. https://www.politico.eu/article/russia-will-lose-the-energy-war-putin-started/
Another Nail In The Coffin Of The Russian Economy https://www.forbes.com/sites/christ...offin-of-the-russian-economy/?sh=6a27b60e4a2c The U.S. Department of Commerce decided today that Russia should be reclassified as a “nonmarket economy.” This is yet another nail in the coffin for the Russian economy. The Biden Administration is signaling that President Putin’s kleptocracy no longer bears any resemblance to a market economy, and Russia will be subject to much higher import duties in U.S. trade remedy cases, namely antidumping duty cases. The antidumping duties on Russia to date have been concentrated in sectors that represent a big chunk of their (non-energy) shipments to the United States — metals and minerals, iron and steel, and chemicals. In an antidumping case, Commerce determines the dumping margin, or the extent to which the product is being sold at less than fair value. To determine this, it uses prices in the exporting country as a benchmark, if that country has a market economy. But if prices in that exporting country are not set by market forces, then Commerce has free reign to use prices from another country. This usually results in a very high dumping margin, and very high duty. For instance, if widgets sell for $10 in Russia, but Russian exporters sell or “dump” those widgets for $5 in the United States, the Commerce Department uses that information to estimate the dumping margin. But if Russia were considered a nonmarket economy, then Commerce could use the prices from, say Germany or France, where those widgets are sold for $20. As a result, U.S. widget imports from Russia would be subject to a 400% duty instead of 100%. (For more detail: “Understanding Antidumping & Countervailing Duty Investigations” by the USITC; Gary Horlick and Shannon Shuman’s article on measuring fair value.) In March, President Biden called for revoking Russia’s Most Favored Nation status, which Congress promptly passed overwhelmingly. Under WTO rules, imports from a country with MFN status must be treated the same as every other MFN country’s goods (with an exception for the preferential treatment of free trade agreement partners). MFN is a key principle of world trading rules. Stripping Russia of MFN made imports from Russia subject to higher tariffs and trade barriers. Sanctions imposed by a united front of most of the world’s wealthy nations in response to the invasion of Ukraine have slowly strangled the Russian economy. Energy is the big exception as Russia is pulling in more than $300 billion this year from oil and gas exports. That figure is likely to dampen over time, with Europe trying to cut back purchases from Russia. But high energy prices have been a boon to Moscow. Russia’s energy export earnings are reportedly up 38% this year, at least part of which continues to bankroll war in Ukraine. Further nails could be coming. Last month, when ministers and central bank governors descended on Washington for annual International Monetary Fund-World Bank meetings, Canadian Deputy Prime Minister Chrystia Freeland called for Russia to be kicked out of the IMF and Group of 20 (G20): “Arsonists have no place in meetings of firefighters.” Apparently in an effort to avoid confrontation with the United States and its allies, Russia recently announced that Putin will not attend the upcoming G20 summit in Bali (a “high-level official” will attend in his stead). More and more of the Russian economy’s resources — labor, capital, talent, even government and policy efforts — are going toward the war. That leaves the Russian economy fewer resources to use and invest in productively. What is left over for commercial purposes is becoming increasingly isolated from the global economy. The brain drain of Russians fleeing the country represents a decrease in human capital, and 300,000 newly mobilized working-age males have been pulled from the labor force into war efforts. Those 300,000 draftees are only a small share of the economy’s 75 million workers, but Russia’s workforce has already been shrinking for years. The IMF expects Russia’s GDP to fall 7.6% this year. The economic reach of the war is global, and the OECD estimates the war will cost the global economy $2.8 trillion. Additional economic sanctions by the United States over the Kremlin’s illegal annexation of four regions of Ukraine, and by the UK over Moscow's "sham" referendums in those four occupied regions show that the West is not planning to back down anytime soon. The new nonmarket economy status for Russia announced today is one more move by a major power that further isolates Russian firms and workers from the world economy.
The movement is afoot to give Russia the boot from the G-20. Canada Wants ‘Arsonist’ Russia to Be Barred From IMF and G-20 https://www.yahoo.com/now/canada-wants-arsonist-russia-barred-183506651.html
Two quarters of dismal economic performance equals an official recession. Great job, Pootie Poots. Russia's economy has finally fallen into recession, 8 months after it invaded Ukraine https://www.businessinsider.com/rus...8-months-after-ukraine-invasion-putin-2022-11
With the new EU sanctions coming into place which will basically freeze out companies & countries which take in oil from Russia outside a price cap mechanism --- China and India are backing away from purchasing Russian oil This, over time, will be the final nail in the Russian economic casket. Indian refiners becoming wary of buying Russian oil as EU sanctions loom - sources https://www.reuters.com/business/en...ian-oil-eu-sanctions-loom-sources-2022-11-16/ Indian refiners are wary of buying Russia crude oil loading after Dec. 5 when European Union sanctions take effect, pending clarity on the proposed G7 price cap mechanism, according to sources familiar with the refiners' crude purchase plans. Chinese refiners have already begun slowing down Russian oil imports from next month. The Asian giants, who are two of the world's top three importers, had become Russia's biggest customers after the West shunned Russian oil after the outbreak of war in Ukraine. Reduced buying by both of them would leave Russia chasing alternative customers, potentially depressing prices even if those new buyers are unlikely to join a plan by rich nations in the Group of Seven (G7) to cap Russian oil prices. Reliance Industries Ltd (RELI.NS), operator of the world's biggest refining complex and a major customer for Russia, has not placed orders yet for Russian cargoes loading after Dec. 5, two sources familiar the refiner's purchase plans told Reuters. Neither has state-run Bharat Petroleum Corp (BPCL.NS), they said. The Indian companies did not respond to Reuters email seeking comments. According to the sources, Reliance is cautious about reactions from foreign banks given its exposure to the western financial system and overseas sales of refined products. "There are too many uncertainties attached to the cap mechanism. We don't know what the payment mechanism could be and what could be the cap level," said a source at one of the state refiners. Still, Indian Oil Corp (IOC.NS), the country's top refiner, has placed orders for Russian cargoes, including for loading some parcels beyond Dec. 5, under term and spot deals, said one of the sources. "IOC wants to secure barrels," the source said, adding that Indian refiners have the option of raising purchases under their term deals with the suppliers, mainly in the Middle East, to meet their contractual commitments if they face problems in getting Russian supplies. IOC did not respond to Reuters email requesting comment. In contrast, private refiner Nayara Energy, majority owned by Russian entities, plans to continue Russian oil imports, sources aware of its crude purchases said. After western sanctions were imposed on Russia and Rosneft, which owns about 49% of Nayara, most foreign banks stopped dealing with Nayara, leaving the refiner dealing through Indian banks. PAYMENT, INSURANCE While refiners are cautious about sanctions, India and Russia have set up alternatives to western insurance, finance and maritime services in order to conduct their trade. Indian refiners buy Russian oil on a delivered basis with insurance - cargo, P&I and hull and machinery - arranged by Russian entities. India accepts Russian insurance. Also, India has recently devised a mechanism to settle trade with foreign nations in rupee terms through vostro accounts of foreign banks in India. A commerce ministry official on Tuesday said Russia's Gazprombank had opened a vostro account with UCO Bank (UCBK.NS), and VTB Bank (VTBR.MM) and SberBank (SBER.MM) have opened accounts with their own India-based branch offices. read more India's central bank in July this year introduced a new mechanism for international trade settlements in rupees. read more
The other thing there is the simple fact that it is harder for India and China and Russia to arrive at a fair price and also give a discount that compensates for all the grief that the buyers take from the west. China and India bought into long term contracts with 30 dollar a barrel discounts when oil was over a hundred. Not a bad deal for them then. But oil is now 20 dollars down from then even without the contracts. So how can Russia still offer 30 dollar discounts (probably varied a bit from country to country and exchange rates, blah, blah) from the current price. It pushes Russia into a non-profitable range. Thus, as one would expect, they are simply pumping less. Not just to punish the west but because it is not profitable for them. And swing states like India are not seeing the benefit in taking the grief from the west.
The renewal of the grain deal has a broader global impact -- especially in Africa. The deal does not really help Russia economically, but enhances their political reputation with "allied" African countries which need grain and may vote with Russia in the U.N., etc. Russia and Ukraine renew a grain export deal to help the hungry and keep prices down NPR - https://tinyurl.com/37yxv4x6 Even remote corners of Africa are feeling the costly impacts of war in Ukraine NPR - https://tinyurl.com/2678ywnd
Yeh. There is a lot going on there with the grain shipment issue. Some countries-notably Senegal are shitholes where the people are starving- but at the same time they are sitting on massive, massive undeveloped natural gas fields. Before the war, Russia was well on its way to get the big contracts with them and they have their people doing pre-development stuff. Now Senegal has suddenly discovered that everyone loves them- especially Germany so Russia has lost some ground while being spread so thin and not being able to hand out goodies and maintain troops in Africa. So they are trying to use their own grain and steal Ukraine's too to feed them and keep them happy and in their good graces rather than go over to the west. Germany showing them lots of love though.