LOL - Chinese companies know they can f*ck the Russians continuously and the Russkies have no recourse. Welcome to Putin's new economy.
https://finance.yahoo.com/news/russia-lost-another-banking-partner-023219437.html Russia has lost another banking partner as more lenders turn their back on Moscow over fear of sanctions
The Russian War Economy’s Days Are Numbered With Vladimir Putin’s war of aggression in Ukraine approaching its third anniversary, the financial, technological, and demographic hurdles facing the Russian economy are more severe than is commonly understood. Contrary to what the Kremlin would like others to believe, time is not on Russia’s side. https://www.project-syndicate.org/c...ning-under-sanctions-by-anders-aslund-2024-10
Looks like Saudi Arabia is on the verge of dropping oil prices to $50 while flooding the market with supply due to disagreements within OPEC. How Saudi Arabia could create a crisis for Russia's economy https://www.businessinsider.com/russia-economy-saudi-arabia-oil-price-war-supply-opec-cuts-2024-10
Could create a military crisis for Iran too. Everyone- including the Iranian- know that the Biden Administration will not and has not enforced real oil sanctions against Russia out of fear that it will drive up gas prices before the election. Similarly Biden is soft on Iran and bangs on Bibi and Israel everyday about even thinking about taking out Iran's oil production because they do not want to drive the spot price up if it goes off the market. Resulting in increased gas prices before the election. But if the Saudis agree to backfill with more production then then Biden will become less protective of Russia's and Iran's oil production and start thinking like an American rather than a democrat.
Flush. Swirling down the toilet. Russia’s Ruble Is Imploding Despite Russia’s claims that its economy is doing great, economic data coming out of Russia would indicate that the economy is not only overheating, but may be beginning to implode. https://www.kyivpost.com/post/40513 Russian officials claim that the national economy is flourishing, with a GDP growth rate of 4.6% in the first half of 2024. But a closer look at the numbers indicate that there might be trouble on Russia’s horizon as the ruble faces both inflation and devaluation. Professor Steve Hanke, an economist at John Hopkins University, calculated earlier this year that real inflation in Russia is 27% – a stark contrast to the 9.1% claimed by the Russian Central Bank. Something that puts Russia’s plans, to increase 2025 military spending by 24% into perspective: It is actually less spending than in 2024 while representing a higher percent of the overall budget. Secondary signs support Hanke’s calculation: The unemployment rate in July 2024 was 2.4%, something that is a worrying sign according to an economic model called the Phillips curve, which suggests that as the unemployment rate decreases, the inflation rate increases, and vice versa. For a normal, healthy economy, according to MoneyChimp, a target unemployment rate should be in the range of 4-6%, with percentages lower than that indicating that inflation may be teeming under the surface of the economy. Russia’s route to high inflation can be largely traced to Vladimir Putin, who, following the full-scale invasion of Ukraine, launched efforts to help Russia survive the massive sanctions saddled on Russia by using a Keynesian model seeking to boost aggregate demand – that is, the demand for services and goods within the Russian national economy – which provided significant, short-term relief to Russia. However, after two-and-a-half years of what amounts to printing money to stimulate the economy, Russia has created an economic bubble that may soon burst. Aside from inflation, there is another monster looking to wreak havoc on Russia’s economy: ruble devaluation. The Russian national budget is built around the precept that oil prices will maintain a price of around $72 dollars per barrel. Every cent below that value represents future deficits for the Russian Government. Saudi Arabia’s recent decision to ignore the OPEC+ target of $100 per barrel, a power move by Riyadh to shake-up smaller oil producers who were selling their oil too cheaply, may drive oil prices to as low as $50 per barrel – something that would represent a disaster for the Russian budget, supported by what Mikhail Mishustin, the current prime minister, recently said: The Russian government should anticipate deficits during the 2025-27 fiscal years. To patch these deficits, Russia would have few available options aside from devaluating the ruble. The ruble, which traded at around 84 against the greenback, in early August 2024, recently passed 97 to the dollar, up from 96 the day before, for the first time since October 2023. However, if oil prices were to fall as low as some predictions, of $50 per barrel, economists have projected that the ruble would need to be devalued to 122 to the dollar, or as low as 135, according to Russian economist Igor Lipsits. In real terms, how does this change the situation on the ground for Russians? This would mean that if the ruble were to lose another 30% of value, coupled with the already existent inflation, Russians could see half of their income disappear within just a few months, something that would be disastrous for normal Russians. According to recent data, Russians typically spend nearly 50% of their income on food, in contrast to a European average of about 15%, thus buying food could become a challenge for many citizens, especially for pensioners whose pensions are indexed, but not at a rate representing real economic conditions. So, what’s next? According to a recent Intelligencer interview with Michael Kofman, a Russia specialist at the Carnegie Endowment for International Peace, current economic data indicates a “fairly problematic picture in terms of the rate of inflation in Russia’s overheating economy, the deficit of skilled labor – because the state is pulling workers into the defense industry and contracting them to fight in the war – the steady depletion of Russia’s liquid reserves, and the fact that much of the budget is tied to the current oil price.” He notes that attempts “to juggle several different parts of this equation may not be sustainable” and goes as far as asserting that the situation will “at some point weigh on the Russian leadership.” As Russian Telegram reaches a feverish pitch and experts clash over what is to be done to salvage Russia’s economy, there is one thing that everyone seems to agree on: Russia’s war in Ukraine is a quagmire, causing problems that seem to worsen by the day.
Russian Officials ‘Resigned’ to Letting Ruble Fall Past 100 vs Dollar – Bloomberg https://www.themoscowtimes.com/2024...uble-fall-past-100-vs-dollar-bloomberg-a86692 Russian authorities will no longer try to prevent the ruble from falling past 100 against the U.S. dollar as they expect the low exchange rate will benefit Russia’s state budget amid plans for more wartime spending, Bloomberg reported Tuesday, citing two anonymous sources familiar with the situation. Shortly after the full-scale invasion of Ukraine, Russia’s Central Bank introduced capital controls to limit the impact of Western sanctions, surging energy prices and a collapse in imports. The move helped the ruble to become the world’s best-performing currency for much of 2022 after it plunged past the psychological threshold of 100 against the dollar amid the outbreak of war. But the ruble began trading with more volatility in 2023 as Europe halted Russian oil and gas imports and the G7 imposed a price cap on Russian seaborne crude oil and petroleum products. Since then, Russia’s Central Bank has hiked interest rates several times, and President Vladimir Putin ordered 43 key companies to sell part of their foreign currency earnings on the domestic market. “In the current situation, 100 rubles per dollar isn’t so scary, although it does have a certain inflationary effect,” Bloomberg quoted former top Bank of Russia official Oleg Vyugin as saying. The ruble fell by 9% against the dollar and 11% against the Chinese yuan — which Russia used increasingly over the past two years — after U.S. sanctions against the Moscow Exchange prompted it to halt dollar and euro trading in June. Russia’s Economic Development Ministry forecasts the ruble to average 96.5 per dollar in 2025 compared to 91.2 this year. Meanwhile, Russia’s Central Bank may raise its key rate to 20% next week to cool Russia’s overheating war economy and slow inflation, Bloomberg said. The Central Bank last raised rates to that level as an emergency measure soon after the full-scale invasion.
https://oilprice.com/Energy/Crude-Oil/How-Saudi-Oil-Policies-Could-Cripple-Russias-War-Effort.html How Saudi Oil Policies Could Cripple Russia’s War Effort By Tsvetana Paraskova - Oct 15, 2024, 7:00 PM CDT The OPEC+ group, led by Saudi Arabia, plans to begin adding oil supply to the market as early as December. Low oil prices could be an even bigger drag on Russian budget revenues than the Western sanctions. If oil prices were to drop materially amid ample supply, the revenue hit on Russia could be big. The OPEC+ group, led by Saudi Arabia, plans to begin adding oil supply to the market as early as December despite evidence that oil demand growth this year would be lower than OPEC had initially expected. OPEC has now revised down its estimates of global oil demand growth for the third consecutive month, expecting Chinese consumption to continue to underperform earlier projections. Yet, OPEC+ now plans to add in December 180,000 barrels per day (bpd) to the market and to continue reversing throughout 2025 the current production cuts of about 2.2 million bpd. There have been reports that OPEC’s top producer and the leader of the OPEC+ alliance, Saudi Arabia, has ditched its unofficial goal of bringing oil prices to the $100 per barrel mark and could be looking to “discipline” non-OPEC+ producers by returning to fight for market share. This Saudi approach, should the Kingdom pursue it, could sink oil prices and, consequently, the oil revenues for the Russian budget. Considering that oil and gas revenues account for around 30% of Russia’s budget proceeds, low oil prices could significantly dent Moscow’s revenues and its ability to continue pouring huge resources into the war in Ukraine, some analysts say. Russian Oil Revenues Low oil prices could be an even bigger drag on Russian budget revenues than the Western sanctions, which Russia is working hard to evade. Moscow continues to find ways to circumvent the sanctions and is defying one of the latest measures, the blacklisting of dozens of oil tankers for carrying Russian oil, by putting around one-third of these back to work to deliver its oil. The U.S., the EU, and the UK have so far explicitly designated 72 tankers for carrying Russian oil in violation of the sanctions or price cap. Of these 72 tankers, at least 21 vessels have loaded Russian oil cargoes since they were blacklisted, according to tanker-tracking data compiled by Bloomberg. Related: India Plans $109 Billion of Grid Investments to Boost Renewables However, if oil prices were to drop materially amid ample supply, the revenue hit on Russia could be big. “With Russia already selling its oil at discounted rates and with higher production costs, a low-price environment in oil markets may impact its ability to finance its aggression in Ukraine,” Luke Cooper, an Associate Professorial Research Fellow in International Relations at the London School of Economics and Political Science, wrote in IPS journal. As oil revenues are very important for Russian state revenues, “oil is therefore both a source of power that has funded its war of aggression and a potential vulnerability, due to its sensitivity to movements in the global market price,” Cooper notes. Saudi Oil Policy The vulnerability could deepen should Saudi Arabia, a key ally of Russia in the OPEC+ pact, pursue a policy of taking back the market share it had lost over the past two years. The Financial Times reported last month that the Kingdom could be willing to endure short-term oil price and revenue pain as it is making a U-turn in policy, going for regaining market share and ditching its unofficial $100 oil price target. The last time Saudi Arabia waged a price war was in the early months of the pandemic in 2020, when the Kingdom and Russia battled for market share amid collapsing demand. The Kingdom has been going above and beyond to restrict supply to the market for more than a year. Apart from its share of the OPEC+ cuts in force since last summer, Saudi Arabia is also voluntarily keeping another 1 million bpd off the market. It has been strictly sticking to its plan to produce “around 9 million bpd”—it has been consistently in line with its targeted oil output over the past year. So, the Saudi frustration with losing market share while prices are stuck below $80 per barrel, even in the face of heightened geopolitical tensions, is no surprise. If OPEC+ returns more supply to the market while demand has been undershooting initial expectations, by OPEC’s own admission, revenues for all petrostates – including Russia – will fall along with oil prices. Is Russia Prepared for Low Oil Prices? Russia, unlike the United States, has an oil-dependent economy, which benefits from the cartel power of OPEC+, Cooper wrote. “Yet, unlike Saudi Arabia, its oil is not cheap to extract, making it poorly equipped to deal with low-price conditions,” the expert added. Russia boasted 3.6% economic growth last year—well above the global average. However, the number hides a gloomy reality, according to Stefan Hedlund, director of research at the Centre for Russian and Eurasian Studies at Uppsala University. The explanation behind these rosy GDP indicators is simple: Russia’s current war economy, Hedlund writes in Geopolitical Intelligence Services. “Large amounts of money are being funneled to contracting Russian soldiers, many of whom will be killed in Ukraine, and to the production of military hardware, much of which will be destroyed on the battlefield,” Hedlund said. “Neither of these outputs can be justified in the long term.” Russia itself is signaling it would be seeking to reduce its dependence on oil to minimize the impact of volatile oil and gas prices on its budget revenues. A few years ago, oil and gas revenues made up 35-40% of Russia’s budget revenues, Russian Finance Minister Anton Siluanov said earlier this month, adding that this share is set to drop to 27% next year and to 23% in 2027. Proceeds from oil and gas sales are the most important cash stream for Russia’s federal budget. The Russian economy will bear the brunt of a potential oil price collapse due to a new war for market share.