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[loganair] 31/12/2014 14:33

I posted over a year ago that I believed it for the best that the UK looked towards the East particularly Asia and for both the UK and Germany to leave the EU and to join an alliance with the BRICs countries.

This grouping would have around 40% of the worlds population and whose combined GDP would be higher than the current GDP of the EU with Germany and the UK in it and higher than the current GDP of NAFTA (Canada, USA & Mexico).

[loganair] 31/12/2014 14:22

Apart from the two monster, US$725 billion gas deals - Power of Siberia and Altai pipeline - and a recent New Silk Road-related offensive in Eastern Europe, virtually no one in the West remembers that in September Chinese Prime Minister Li Keiqiang signed no fewer than 38 trade deals with the Russians, including a swap deal and a fiscal deal, which imply total economic interplay.

A case can be made that the geopolitical shift towards Russia-China integration is arguably the greatest strategic maneuver of the last 100 years. Xi's ultimate master plan is unambiguous: a Russia-China-Germany trade/commerce alliance. German business/industry wants it badly, although German politicians still haven't got the message. Xi - and Putin - are building a new economic reality on the Eurasian ground, crammed with crucial political, economic and strategic ramifications.

[loganair] 29/12/2014 16:58

By Selin Bucak - Capital Economics - Calls for 2015:

Russian GDP will shrink

'Russian GDP to shink by as much as 5% in 2015. Consensus forecasts for Russian growth are still too optimistic and inflation is likely to rise much further than most expect too. Indeed, the economy is likely to struggle even if oil prices stabilise and the conflict in Ukraine eases, allowing sanctions to be lifted. Structural constraints mean that without a new wave of reform, growth is likely to be stuck below 2% over the longer term as well.'

[loganair] 27/12/2014 15:59

Rumors last week that Russia was on the verge of selling its gold reserves were quashed with the news on Friday that it has continued to add to its holdings. However, John Butler, chief investment officer at Atom Capital, and Alasdair MacLeod, the head of research at online bullion exchange GoldMoney Foundation, believe that Russian President Vladimir Putin could bring the country onto some sort of "gold standard."

"It was (and still is) in Russia's power to adopt a gold standard," said MacLeod.

"There is no doubt that Russia and China, plus the other Eurasian states in their sphere of influence are all accumulating gold and the indications are they see it as central to replacing the U.S. dollar for cross border trade."

Whether Russia would actually decide to do it was another matter, said MacLeod, and expected the country's central bank to the lack the courage to act. However, he said that if Putin is "provoked sufficiently" he may judge it to be in Russia's best interests and could overpower any reluctant officials at the bank.

[loganair] 27/12/2014 12:16

Trade between the United States and Russia is up by 7% despite the economic sanctions levied by the US on the country.

[loganair] 27/12/2014 12:10

firtashia - my understanding is this is coal from Russia itself rather than from the Donbass region. Without this coal, the coal deficit in Ukraine is expected to reach 10-12 million tonnes by April 2015.

Supplies of coal will come at Russian domestic prices. Russia will also supply electricity to Ukraine, without giving supply volumes.

[firtashia] 27/12/2014 11:43

Thanks for the info Loganair - this is probably coal that is currently held up in the Russian run peoples republics of Donbabwe and Luganda. It may also be linked to Ukraine's decision to suspend electricity supplies to occupied Crimea.

[loganair] 27/12/2014 00:19

firtashia - Putin has made a decision to arrange for the supplies of Russian electricity and coal without prepayment starting from December 26 in an amount of 50,000 tonnes a day, the Ukrainian Regional Development Ministry said.

[loganair] 27/12/2014 00:09

flashheart - At the moment the dollar being the worlds reserve currency the good old USofA are able to just print money and pay for things as the rest of the world needs dollars to trade, especially oil and gas. Over time, slowly less and less oil, gas and natural resources are being transacted in dollars, while trade amongst the BRICs countries is being carried out more and more in their local currencies therefore, but not over night the dollar will lose it's sole reserve currency status.

What will replace the dollar, I have two thoughts...

1). Another currency which realistically can only really be the Chinese yuan, however I believe the Chinese would not like the responsibility of having the yuan as the worlds sole reserve currency.

2). A basket of currencies such as the SDR which currently is made up of the dollar, sterling, euro and yen and possibly next year also the Chinese Yuan.

[firtashia] 26/12/2014 18:58

Loganair - Thumbs up for your post. Unfortunately I have to agree entirely about your description of Ukraine. Given the discussions on this thread about the "Russian psyche", I believe that unlike Russians, Ukrainians possess a spirit of rebellion and justice(epitomised by my wife!) and this gives me hope that eventually Ukrainians will build a country that they will become proud of. This psyche and this desire is exactly what scum like Putin cannot understand. The continuing "crisis in Ukraine" is not a crisis in Ukraine, it is a crisis of Russia. Hence not a pound of my cash is going anywhere near that place.

[flashheart] 26/12/2014 18:24

Loganair, apologies for perhaps misinterpreting/misreading your post as it would appear we have certain things in common. My wife is also Russian as are most of my friends and of course family so it would appear we both have a common insight here. I hope I have not offended in a hasty reply. Focusing on currency issues, I am particularly interested in the consensus that the US dollars days as the reserve currency are arguably numbered. There has to be of course, a viable alternative. What would be your opinion on that role being fulfilled by the yuan in the fullness of time? There are very few alternatives sadly which may explain the dollar strength for so long.

[loganair] 26/12/2014 11:22

flashheart - "I am afraid loganair you are totally delusioned in your 'theories', probably never been to Russia, never been to the Ukraine and don't know any of the people themselves, their culture, their tenacity or indeed their resilience."

I first visited Russia in 1988 (the Soviet Union as it was then), my wife is Russian and my son goes to school in Russia which gives me a good insight of the Russian education system and why the average Russian thinks and acts the way they do.

If you had read all my posts I've often mentioned how resilient the Russian people are, however for information purposes I've also put the other side of the story so others are able to make a well informed decision on weather to invest or not in JRS or Russia in general.

For a few years now I've felt it would be better for the UK to look East towards Russia, China and even India.

As for the Rouble, the most important thing for the Russian Government is to maintain 3,600 roubles/bbl for Urals oil in order to balance the budget as most of its costs are in roubles. As oil is priced in dollars, as the price of oil in dollars fall the rouble needs to equally fall against the dollar to maintain at least 3,600 roubles/bbl of Urals oil. Just due to panic and the speculators the fall rather overshot on the down side. Currently Urals oil is over 4,000 roubles/bbl which means the state budget is well in surplus.

I posted how over 30 countries now have the Chinese Yuan has part of their countries reserves and next year 2015 the Yuan may become the 5th currency to make up the SDR (Special Drawing Rights) and there is talk about the Russian rouble in 2020 or 2025 possibly becoming the 6th currency making up the SDR.

firtashia - If one goes back 1,000 years the first capital of Russia was Kiev and Russia was born from the Ukraine and slowly moved North to Moscow and St Petersburg, then a couple of hundred years ago moved East.

Sadly since independence, over the past 20 years or so the Ukraine has been run very badly by its various governments, bankrupting the country and bringing it to it's knees.

[firtashia] 25/12/2014 17:01

Flashheart- re post 244- you are wrong. Very wrong. As a Ukrainian, Russia has sought to deny my people's right to exist as a nation for over 400 years, banning its language and slaughtering its people with regularity. My presence here in the UK is a direct consequence of the twin policies of exile and extermination that Russia has offered to its "brotherly nation" during its miserable existence.

For those of you seeking to invest your hard earned cash in Russia, I offer you this quote:

"In Russia, whatever be the appearance of things, violence and arbitrary rule is at the bottom of them all. Tyranny rendered calm by the influence of terror is the only kind of happiness which this government is able to afford its people".
Spoken by the Marquis de Custine, in 1839.

I challenge readers here to tell me that things have changed there since, and also to tell me why you think they ever will.

[flashheart] 25/12/2014 14:05

Lol and to you envirovision and all. Apologies,I wasn't meaning to sound aggressive in any way although re-reading my post it possibly could be regarded as such. I just have strong ties as far as Russia goes and feel very strongly as a result. Yes the currency has performed well in recent days. Will be interesting to see if it re-tests its lows or whether a recovery is sustained. A lot hinges on the oil price as well naturally.

[envirovision] 25/12/2014 13:55

Yea happy christmas to you too flasheart!

I think we should turn our attentions to the currency, it clearly has bounced back in a big way and does look unlikely to see another day of panic previously seen imo:

After losing around 50% of its value against the dollar last week, the ruble has somewhat recovered as oil prices stabilized and the government ordered major state companies to sell foreign currency to stabilize the market.

The order, which applies to big exporters including Gazprom and Rosneft, is part of a package of stabilization measures that the government and central bank have imposed to pull the ruble back from the record lows set during last week's currency crisis. Now, the ruble is down around 37% versus the dollar so far this year.

The central bank data showed Thursday that neither the bank nor the finance ministry intervened in the market in the first two days of this week in an attempt to ease pressure on the ruble.

[loganair] 24/12/2014 17:32

The RTS index lost 2% yesterday in spite of a strengthening rouble. As liquidity in the Western markets continues to fade, Russia will likely continue to be viewed as a "basket-case" investment for the remainder of the year.

[loganair] 21/12/2014 20:47

By Mike Shedlock:

Russia Not Selling Gold, It's Buying; Reflections on Extremely Sloppy Reporting

On December 17, ZeroHedge asked Will Putin's Next Step Be To Sell Gold?

On December 18, ZeroHedge answered his own question wrongly with Russia Has Begun Selling Its Gold, According To SocGen.

I did not believe that when I saw it yesterday, and I sure don't today after viewing a few charts from Nick at Gold Charts.

In US dollar terms, Russia's gold reserves are worth about $0.4 billion less.

Gold Chat Debunks Russia Selling Gold Rumor:

Please consider this snip from the December 19 Gold Chat article Zero Hedge fail on Soc Gen fail on Russia selling its gold.

As is common in internet land, people pick up stuff by others without doing basic drilling down to the source. The reason you have to do this is because people often misinterpret the source. Other times the source is wrong.

Zro Hedge quote the following from Soc Gen: "It appears possible that the Central Bank of Russia has started to sell off some of its gold reserves in December, with some sources reporting that official gold reserves dropped by $4.3 billion in the first week of the month."

Now that is a very specific figure, $4.3b. It seems that Soc Gen got it from this Business Insider republication of a Vesti Finance article which said "On Thursday, the Central Bank of Russia announced that gold reserves dropped by $US4.3 billion in just one week, reports Vesti Finance."

However, if we check the [Vesti] source link [using Google Translate] we get the following:

"Russia's international reserves for the week from November 28 to December 5, decreased from $ 420.5 billion to $ 416.2 billion, the central bank said on Thursday. ... For the previous week, from 21 to 28 November, gold reserves increased from $ 420.4 billion to $ 420.5 billion. On November 14th the size of gold reserves stood at $ 420.6 billion, on November 7 - $421,400,000,000 rubles."

Now the decrease they are talking about is $4.3b in total reserves but the headline mistakenly assumes it is all gold. The gold specific figures they mention show completely different numbers.

Link Sloppiness:

This is precisely what happens when you are sloppy with links.

My major criticism is not that ZeroHedge posted something inaccurately, but that he frequently fails to link to stories.

On many occasions ZeroHedge states things like "Bloomberg says" and I spend 15 minutes looking and cannot find anywhere Bloomberg said anything remotely close to what was being attributed.

I realize sometimes there is no link. On such occasions, I will say something like via email, no link available.

In this case it appears the source of this misrepresentation was Business Insider who also got the story amazingly wrong.

On December 12, Business Insider reported Russia Is Fighting Its Financial Problems By Selling The Gold They Have Been Hoarding.

Russia is finally using all that gold they have been hoarding.

On Thursday, the Central Bank of Russia announced that gold reserves dropped by $US4.3 billion in just one week, reports Vesti Finance.

Which isn’t all that surprising. ....

In the third quarter alone, Russia added more gold to its reserves than any other nation, according to the Telegraph. And over the last decade, Russia has tripled its gold stocks, according to data from the World Gold Council.

Until recently, Russia hasn’t dipped into these enormous reserves.

But now that the ruble is getting pummelled following the decline in oil prices and sanctions imposed on Russia’s economy by the West, Russia’s central bank is apparently selling off some of its gold reserves to fight inflation and the ruble’s decline.

Business Insider Sloppy Reporting:

Russia is not selling gold, rather the US$ value of its international reserves fell by $4.3. Billion. Here is the opening sentence "Russia's international reserves for the week from November 28 to December 5, decreased from $ 420.5 billion to $ 416.2 billion, the central bank said on Thursday."

Gold Chat ended with ...

"Editor's Note: Earlier it was reported that the Central Bank's gold reserves decreased by $4.3 billion, quoting Vesti Finance. However, in actuality, it is international reserves assets that have decreased — not gold. Appropriate changes have been made."

Now how hard was that fact checking Soc Gen and ZH?

ZeroHedge messed up another gold story as well. Please consider the December 17 Gold Chat article Zero Hedge fail on undocumented gold supply story

This kind of nonsense is precisely why I am meticulous with links. I ask others to carry the same standard.

Bloomberg is also terrible. In fact, mainstream media is horrendous in general.

Many mainstream media news outlets only link to themselves. And when that happens there is no way to check the facts. Then nonsense like this happens. I rest my case.

[loganair] 21/12/2014 20:40

Russia Expanded Gold Reserves for 8th Month Amid Ruble Rout - By Anna Andrianova and Laura Clarke.

Russia, the world’s fifth-biggest gold holder, added to its hoard for an eighth month even after having to use its international reserves on defending the ruble.

The gold stockpile rose to 38.2 million ounces as of Dec. 1 from 37.6 million ounces a month earlier, the central bank said today on its website. Its value in dollar terms fell by $85 million. Total reserves shrank by $9.7 billion in November to $418.9 billion, the lowest level since 2009.

“Physical volumes are increasing but their dollar value is not changing that much because the gold price has fallen,” Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow, said before the release. “Many central banks are buying gold since the price for gold has fallen.”

The central bank took advantage of lower prices to pad its gold holdings after tapping its reserves to stem the ruble’s decline before the currency crisis escalated this month. An emergency interest-rate increase this week failed to reverse the ruble plunge, stoking speculation that the monetary authority may sell gold to secure the hard currency it needs in the face of sanctions imposed over the conflict in Ukraine.

Gold declined 0.5 percent last month, reaching a four-year low on Nov. 7. The precious metal accounts for about 10 percent of Russia’s total reserves, according to the London-based World Gold Council. That compares with about 66 percent for Germany.

Ruble Decline:

President Vladimir Putin has criticized the central bank for not acting faster to support the ruble, which has plunged since June as oil slid to a five-year low and sanctions hit the economy.

Russia’s November purchase of almost 19 metric tons follows an addition of a similar amount in October, according to data from the International Monetary Fund. The country has tripled its gold reserves since 2005 and now holds about 1,188 tons, the most since at least 1993. Data due to be released in January will show any changes in holdings for this month.

“I cannot imagine at all that Russia has sold gold or would sell gold, unless its foreign-exchange reserve are depleted,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by phone. “Gold is the final bullet, because gold is a store of value and outside of the dollar system and not subject to sanctions.”

[loganair] 21/12/2014 20:09

President Vladimir Putin tried to put a brave face on the crisis at his annual year-end press conference, saying that recovery is “inevitable,” although he acknowledged it could take up to two years to materialize.

He did not announce any economic reforms or specific solutions to the crisis.

“The trend of the economy in the next six months is certainly going to be much worse” after this past week, said Chris Weafer, an analyst with Macro Advisory consultancy.

“Confidence is shaken — in the central bank, in the currency, in the direction of the economy.”

“Consumption and investment are going to take a hit because of higher (interest) rates, inflation will be higher because of the weaker currency... the banks are going to turn to the government and shelves will be empty after the New Year.”

In a sign of the challenges ahead, several suppliers have halted deliveries in a bid to raise prices.

Some stores decided to close their shutters — Apple stopped sales via its Russian online store, while Ikea suspended sales of kitchens and home appliances and warned that prices on the website “may differ from prices in stores.”

Opel and Chevrolet are no longer delivering to dealerships.

Russian media said that stores selling imported alcohol or clothing including Zara, Topshop and Calvin Klein are also trying to avoid selling at a loss while observers predict that many Western brands will soon disappear from Russia.

That trend has begun and inflation — already close to ten percent — threatens to reach 15 percent in the coming months.

This will hit the purchasing power of Russians, whose real incomes already declined in the first 11 months of the year compared with 2013.

With the ruble having now lost nearly 50 percent of its value against the dollar in the past year imported food and consumer goods are quickly becoming luxuries.

Even the central bank estimates the economy could suffer a sharp contraction of nearly 5 percent next year if oil prices stay at current levels.

'Crisis spreading'

“Events have moved quickly and there are now growing signs that the currency crisis is spreading to the banking sector,” wrote emerging markets economist at Capital Economics William Jackson.

Russia's financial sector is particularly vulnerable, as its state-controlled banking behemoths and a multitude of smaller institutions have been unable to raise funds in the West due to sanctions over Russia's annexing Crimea and support for separatists in Ukraine.

The central bank announced measures Tuesday aimed at ensuring their survival by improving access to liquidity and easing accounting standards.

On Friday, Russian lawmakers approved a bill on the recapitalization of banks worth one trillion rubles (US$16 billion). The finance ministry is also hoping to increase capital in the banking sector by 13 percent and the volume of loans issued by 15 percent.

For many Russians, the downward spiral of the ruble brought back memories of the crisis in 1998, when Russia defaulted on its debt.

“People are behaving like it's 1998 but there is no reason for it: Russia was a bankrupt country then and now it's actually financially in a pretty good shape,” Weafer said.

High oil prices over the past decade have allowed Moscow to pile up substantial hard currency reserves. Even after having spent heavily to support the ruble, the central bank's reserves still stand at around US$400 billion.

Public debt is just over 10 percent of GDP. The budget remains balanced and the government has a big rainy day fund to draw upon to sustain social spending.

[loganair] 21/12/2014 20:09

Russia's woes will hit US recovery - Monday, December 22, 2014 (Report from China)

Russia became the focus of global financial markets last week due to the ruble's sharp plunge.

The country's central bank raised interest rates sharply and sold foreign reserves to defend the exchange rate and then the US dollar against the ruble fell back to 59.

In the past month, the ruble has fallen more than 20 percent against the greenback, with the total drop hitting 82 percent this year.

Will Russia repeat the financial turmoil of 1998? It is believed that in the next six months, no big scale crisis will happen in Russia. The worst situation might have already occurred, but there are still chances the situation will worsen after six months.

The main reason is the problem of Russia's politics. The United States plays a very important role in this. The sharp fall in oil prices has caused some hedge fund investors to lose money, and the tumbling ruble has destabilized emerging markets, affecting the US financial market.

This will negatively affect the recovery of the American economy.

Andrew Wong Wai-hong is an independent market commentator.

[loganair] 20/12/2014 14:58

The big story this week was Russia, and the way the oil price crash has hammered the country.

At one point the rouble weakened to the point where you’d get 80 to the US dollar. It’s since rebounded to hover around the 60 level – but that’s still a near-50% slide in value since the start of 2014.

But I think the most important thing to understand about this is that it’s not just about Russia – or even just about the oil price crash.

The reality is that there’s a massive shift going on in the financial system right now, and it threatens to affect markets right across the board. Indeed, you can make an argument that the oil crash is a symptom rather than a cause of this shift.

The US dollar is getting stronger as the Federal Reserve turns off the monetary taps. That is incredibly disruptive for anyone who has been relying on the dollar remaining cheap. Unfortunately, a lot of people – emerging markets in particular, but not only them – had been betting on the dollar going one way.

That’s no longer the case, and the fall-out could be very messy indeed.

[he who does venture] 19/12/2014 11:31

Votiem - Your descriptions of "Poor Old Russia" could quite easily be
made to some degree of most, if not all countries on the planet.