Russia’s Economic Slowdown In One Chart
RECOMMENDED: The US and Russia: allies or adversaries? Russian economists, looking at what many insist is a very different situation currently unfolding in the US, argue that nobody ought to wish such a financial death spiral upon themselves. Having said that, most admit that their 1998 crisis set the stage for an economic rebound in Russia by purging unsustainable government debt, slashing the overvalued ruble to make Russian business more competitive, and clearing away obsolete industry and infrastructure. “I think the 1998 default was a lesson, that’s the best you can say about it,” says Sergei Dubinin , who was head of Russia’s Central Bank at the time.”Both elites and business, as well as the population, can draw conclusions from it. They are that you cannot go on accumulating debts, the budget has to be balanced and taxes have to be paid. Yes, it was a good lesson, but the price was too high. Even today we suffer from a lack of trust in investing in Russia…. We have not overcome the negative impact to this day,” says Mr. Dubinin, who is today chairman of the supervisory council of Russia’s state-owned VTB bank. Russia’s troubles in the late 1990s stemmed from an incomplete transition from the Soviet economy, a financially ruinous war in Chechnya that cost the Russian government around $6 billion, a culture of tax evasion, and the rising costs of state borrowing. By mid-1998, the Russian government was forced to pay 150 percent interest on new government bonds , known as GKOs. According to Dubinin, Russia’s crisis also featured political gridlock between President Boris Yeltsin and his opposition-dominated legislature, the State Duma, which he blames for bringing the country to the verge of default.
Russia Corporate Scandals ‘Striking,’ Prosperity CEO Says
There have been structural improvements, but the specific corporate governance scandals this year have been striking, Westman, whose firm manages about $4 billion and is the worlds largest Russia-focused money manager, said today by phone from London . Its the worst year since after the crisis in 2009. Prosperity and investors including Templeton Emerging Markets Group and Allianz Investments are contesting a move by OAO Rosneft (ROSN) , the worlds biggest publicly traded oil producer, not to buy out minority shareholders in oil producer TNK-BP. President Vladimir Putins government is struggling to lure foreign investors to counter capital outflows due to corporate governance disputes this year at TNK-BP, OAO Pharmstandard, Russias biggest drugmaker, and OAO Uralkali, the worlds largest potash producer. Russias benchmark Micex Index (MOSBIRZ) trades at the cheapest levels of all major emerging-market indexes. 27 after Rosneft CEO Igor Sechin said his company may buy back minority shareholders at a premium. Until then, Sechin had resisted minority investors demands, saying at Rosnefts annual general meeting in April that Rosneft was not a charity fund. Disappointing Offer Rosneft has approved a buyout at 67 rubles a common share and 55 rubles for preferred shares in RN Holding. Sberbank CIB analysts said the offer was disappointing for investors as they estimated Rosneft paid about $3.70 a share, or about 120 rubles a share, to London-based BP Plc (BP/) and a group of Russian billionaires in a $55 billion cash-and-share deal. Westman said Prosperity hasnt received the offer. We will want to see a buyout offer that is higher, but some investors had given up and didnt think we get anything, he said. Alexander Branis, chief investment officer at Moscow-based Prosperity, advises the Kremlin on corporate governance and will shortly submit proposals on mandatory offers for minority shareholders, according to Westman. As part of our work trying to make Moscow into an international finance center, we are coming up with proposals to strengthen the hand of minority shareholders, he said, without going into specific details.
Russia’s Oscar Entry ‘Stalingrad’ Breaks Box-Office Record in Debut
But industrial production is not dependent on world demand for energy, and is not automatically boosted by growth in other countries. It is also much more difficult for the state to simply increase by fiat. While the government can boost government wages or increase pensions (as it has done repeatedly over the past several years), its just a lot more difficult for it to increase the total output of the industrial sector. Worryingly, via the always useful FRED , the total production of Russian industry has been essentially flat since the beginning of 2012. Does this mean that the whole house of cards is going to collapse? No. Virtually all of Eastern Europe is going through a period of severe economic weakness. Poland, everyones favorite post-communist wunderkind, grew by 1.9% in 2012 and is forecast to grow by as little as 1.1% in 2013. Slovakia, which was also lauded for its determined economic reforms and its export-led growth model, had a similarly poor performance. It grew by 1.8% in 2012 and is forecast to grow by about 1% in 2013. So, even in its currently weakened state, Russias economy is actually performing better than those of many other countries in the region. Nonetheless, continued stagnation of industrial production will eventually become a pretty serious problem. Oil prices arent going to increase forever, and even if Russia never become an export powerhouse if it wants to play an important international role it cannot have an industrial sector that is permanently frozen in early 2012. The Russian government has actually been following a very prudent and inflation-adverse monetary policy, but it has shown almost no interest in the sort of supply-side reforms that would spur investment and, eventually, improvements in productivity and production.
1 there and in the Ukraine this weekend, and brought in a total of $15.5 million. Stalingrad is the first Russian movie made completely in 3D and the first non-American film in the IMAX format. The German- and Russian-language film was produced by Art Pictures Studio for an estimated $30 million. Also read: Gravity Leaves Tom Hanks Captain Phillips In Box-Office Wake With Huge 2nd Week Written by Ilya Tilkin and Sergey Snezhkin and directed by Fedor Bondarchuk, Stalingrad is set in 1942, when invading German troops were in control of the Volga River. A group of Soviet soldiers finds a young woman trapped behind enemy lines and works to protect her. Thomas Kretschmann and Yanina Studilina star. Russia is becoming an increasingly important market for Hollywood films. In 2012, total box office in the country hit a record $1.33 billion, an 18.8 percent jump from the previous year. Elsewhere internationally, Warner Bros. Gravity was by far the biggest earner, taking in $28 million from 39 foreign markets. Its foreign total is up to $68 million and it will cross $200 million worldwide Monday. Also read: Tom Hanks Gets Box-Office Groove Back With Captain Phillips Universals Despicable Me 2 is still ticking and added another $10.1 million from 41 foreign countries. That raises its foreign total to $522 million and its worldwide gross to $885 million. Sonys Cloudy With a Chance of Meatballs 2 was the No.