By Chris Weafer of Macro-Advisory
Since the start of this year the Russian rouble has collapsed by 20 per cent against a basket of dollars and euros, by far the worst performing of the major emerging market currencies except for the Argentine peso. But Argentina defaulted on debt obligations, while Russia has less than 11 per cent sovereign debt to GDP and is running a triple budget, trade and current account surplus. It is therefore tempting to link the rouble’s demise with the country’s actions in Ukraine and the resulting sanctions imposed by western countries. A prevalent theme in many western political commentaries is that the rouble slide, in tandem with the steep oil price fall, will lead to a collapse in the economy which, in turn, will undermine public support for President Vladimir Putin and force the Kremlin into a more accommodating geo-political stance. Both of those assumptions are very wide of the mark. The reasons for the decline in the rouble are more serious than just sanctions and, at the same time, the central bank’s response and the oil price slide offer cause for some optimism that some positives may yet emerge from this crisis. Continue reading »
As the rouble continues its decline – hitting a new low against the dollar and euro this week – it is Russian consumers who will feel the sharpest pain, says Capital Economics, thanks to increasing inflation, which had already risen in September to its fastest pace in three years. Continue reading »
By Taras Kuzio of the University of Alberta
Friday’s abduction on Estonian soil of Eston Kohver, an officer in Estonia’s Internal Security Service, by “green men” – Russian special forces in uniforms without identification – was the latest instance of a tactic first used during Russia’s annexation of the Crimea in March. The timing of this act of international piracy was no coincidence, coming a day after US President Barack Obama’s visit to the country, when he promised Nato would defend the three Baltic states. Continue reading »
By Ben Aris of bne
The chances of a lasting ceasefire in the conflict in eastern Ukraine are looking better.
But the cessation of military hostilities will only mark the outbreak of a new fight: the gas war between Russia and Ukraine is about to restart and will probably come to a head in January, when Ukraine risks running out of gas. Continue reading »
By Taras Kuzio of the University of Alberta
Following Russia’s invasion of Ukraine the tide on the battlefield has turned against Kiev, with its armed forces and volunteer National Guard on the retreat. Russia’s next move could be to push towards Mariupol to create a land corridor from Russia through the Donbas to occupied Crimea.
Whatever steps Vladimir Putin, Russia’s president, takes next it is beyond doubt that two of Europe’s biggest countries are at war. Continue reading »
As European leaders threatened yet tougher sanctions to punish Russia for its aggressive policies in Ukraine on Monday, Vladimir Putin was thousands of miles away in oil rich east Siberia making friendly with a visiting Chinese official.
“On the whole we are very careful about allowing our foreign partners in, but of course for our Chinese friends there are no limits,” Russia’s president said.
China is emerging as the winner in the Ukraine crisis even as Russia’s relations with the US and the European Union go from bad to worse. It has secured a huge gas deal with Gazprom and is making strides towards greater involvement in the Russian oil and gas production. Continue reading »
It has been a shocking day in the progress of the crisis in Ukraine. As evidence mounts of yet more direct and duplicitous Russian military activity on Ukrainian soil, Russian assets have taken a hammering. The rouble fell 1.5 per cent against the dollar even after paring earlier losses and the RTS index of Russian stocks was down 3.3 per cent on the day, also after staging a recovery.
President Vladimir Putin denies Russia is involved in Ukraine at all, even as the Russian people hail him as a conquering hero with popularity ratings to match. But the chances that his adventure will be to their benefit are looking increasingly slim. As Neil Shearing of Capital Economics argued in a note on Thursday, “Russia is likely to be the major loser from any further escalation in the conflict.” Continue reading »
By Timothy Ash of Standard Bank
The crisis in Ukraine continues to go from one worst case scenario to the next with little sign of any near term prospect of compromise or resolution.
High hopes were set on Wednesday’s Minsk summit but little was achieved in effect – beyond a photo op for Vladimir Putin, Russia’s president, who spun a yarn that he is really, truly interested in peace, and in any event that Russia is in fact not a party to the current conflict. Continue reading »
On Friday, as Russian trucks carrying humanitarian aid entered eastern Ukraine, another, less remarked on convoy was on its way to the Donbas. Dozens of vehicles carrying food, personal hygiene products and medicines entered the region from the west, provided by businesses controlled by Rinat Akhmetov, the Ukrainian billionaire whose industrial assets are concentrated in this part of Ukraine. Continue reading »
By Ben Aris of bne
Presidents Petro Poroshenko of Ukraine and Vladimir Putin of Russia are to meet in Minsk today for the first time since fighting broke out in eastern Ukraine. Expectations for a peace deal are low. But what can each side put on the table to try to end a conflict that is killing thousands and smashing to pieces the most productive part of the country? Continue reading »
France was one of the most reluctant European Union countries to agree to impose sanctions on Russia for grabbing Crimea off Ukraine. So it’s perhaps not altogether surprising to see a French investor hobnobbing with Vladimir Putin on the Black Sea peninsular this week and offering to build a tourist attraction in the region.
France’s Puy du Fou International has agreed to build a historical theme amusement park in Crimea that will celebrate the history of Russia and the Black Sea peninsular, the government of Crimea said on Friday. Continue reading »
Pity any Russians wanting to sit down to their regular Sunday lunch of kangaroo steak, medium-rare. Thanks to the trade restrictions Vladimir Putin announced last week, Australia – along with the EU, US, Norway and Canada – found its food exports to Russia blocked forthwith.
As it happens, uninterrupted access to the Russian market is not something any food producer can take for granted. Russia, Australia’s largest market for kangaroo meat, also suspended trade (on bogus health grounds) between 2009 and 2013. And while Australian kangaroo exporters may bound off happily into other markets, Moscow’s consumers will struggle to source their marsupials from Russia’s remaining trading partners. Continue reading »
By Andrew Foxall of the Henry Jackson Society
The “stage three” sanctions announced by the US and the European Union against Russia last week are designed to bring about change in President Vladimir Putin’s behaviour by targeting Russia where it is most vulnerable – its economy.
Earlier rounds of sanctions – which primarily targeted government officials and businesses owned by those officials – were not taken seriously by their targets. Being sanctioned was seen a “badge of honour” by senior Russians. Continue reading »
First western sanctions stopped billionaire Gennady Timchenko from flying around in his luxury jet, now they’re hurting budget Russian air travelers as well. Aeroflot grounded Dobrolet, its fledgling low coster airline, after companies in the European Union suspended co-operation agreements.
Owing to “unprecedented pressure” the low cost carrier had no option but to suspend flights and ticket sales, Aeroflot said. However, analysts said that Russia’s national airline, having already spent about $20m of the $100m budget allocated for Dobrolet, was unlikely to allow the sanctions to force it to give up on the low coster altogether.
“The company has the option of signing new leasing and technical servicing agreements with Asian counter parties, including Chinese ones, according to experts, wrote Sberbank Investment Research in a note on Monday, adding that “this will probably take months and incur additional costs.” Continue reading »
By Dalibor Rohac of the Cato Institute
One can only hope that Vladimir Putin’s war against Ukraine, which has claimed, among others, the lives of the passengers of flight MH17, will come to an early end. But is it possible that the conflict, for all the suffering and senseless destruction it has brought, could have a silver lining?
The past 20 years, during which many Ukrainians thought of their country as a bridge between the West and the East, without any obvious enemies, were years of complacency and failed economic policies, which ultimately resulted in the capture of the government by special interests. Continue reading »