Russia question?

[c1ue]

Re: Russia question?

The real weak point is computer-networking chips/hardwares for military equipment. That is the area where USSR completely lost. So it might be hard to "hack" S-300 if there is nothing to "hack". (ECM is different)

The relative weakness of Russia in semiconductor-based electronics is something which the US military also worries about.

That the majority of semiconductors are now fabricated in Asia is not lost on military planners.

How do you protect your expensive battlefield ELINT and C & C equipment when there is very little capacity in the US for manufacturing of this equipment anymore? And fabs in Asia are staffed with literally tens of thousands of people being paid $500 a month?

A modern fab costs $5B dollars, but the expertise to run it (including modeling and design support), as well as the experience and knowledge necessary to design new equipment, increases the total cost by 10x or more.

Even the US military has - so far as I can tell - been unable to fund an in-house fab due to cost issues, so it is unsurprising that Russia (and China too) have difficulties.

Europe, on the other hand, does have at least a few fabs.

Another example of long term planning vs. short term profit incentive.

[D-Mack]

Re: Russia question?

Some rumors

Rumors of financial war: Russia vs. US
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Fabius Maximus | Sep 23, 2008

Summary: Did the United States conduct a successful financial “raid” on Russia? These rumors might not be true — probably are not true – but then so many stories that start wars are false. Remember the Maine! More seriously, these rumors signal that the possibility of financial warfare is on the minds of key people. Probably for good reason.

“Russian Rescue Package Expands to $120 Billion“, Wall Street Journal, 19 September 2008 — Subscription required. Excerpt:

As Russia’s stock market went into free fall this week, conspiracy theories circulated that Washington was egging on American financiers to punish Moscow for its incursion into Georgia last month. The theories gained enough credence that Russia’s finance minister, Alexei Kudrin, spoke with U.S. Treasury Secretary Henry Paulson late Wednesday and sought assurances that the U.S. wasn’t playing politics with Russia in the financial crisis, the Russian Finance Ministry said. Mr. Paulson told Mr. Kudrin that the U.S. wasn’t, according to the Russian side. A U.S. account of the call wasn’t available.

… In recent weeks, Mr. Medvedev has blamed the crisis primarily on the U.S., which has been the target of Kremlin wrath on all fronts since the U.S. sharply criticized Russia’s war in Georgia.

A top State Department official, meanwhile, this week cited the financial problems as the “price” Moscow was paying for the war. On Thursday, Secretary of State Condoleezza Rice said Moscow’s moves in Georgia and elsewhere “are putting Russia on a one-way path to self-imposed isolation and international irrelevance.”


...


More controversially late last week at least two of the top local Moscow brokers were warning clients that major US banks were being encouraged/pressured to sell their Russian assets. Although certain bulgebracket US institutions were clearly dumping Russian paper last week, it remains possible that they were doing so largely – or entirely – of their own accord.

We have been unable to get confirmation of the alleged political pressure; a very senior person at JPMorgan denied it flat out, whereas contacts at the sole remaining solvent major US investment bank confirmed that they had indeed gotten the call. Our friends on the sovereign debt desks inform us that only US accounts have been selling Russian Federation bonds, but these have all found a new home a couple of percent below last weeks prices. CDS spreads have widened out, but this was primarily hedging activity as cash volumes have dried up.

...

http://www.rgemonitor.com/euro-monit...r_russia_vs_us

[c1ue]

Re: Russia question?

Russia's stock market fell, but it is not the only one either in this specific month or this year.

So far at least, though, collapse hasn't happened and the last several months of ruble weakening has been significantly set back.

Within Russia 'people' were talking about the ruble hitting 26 vs. the dollar starting in June, but it never quite got to that point.

As of today, the ruble has gone from 25.58 to 24.98 in 3 trading days, with a peak of 25.78 on 9/12.

Contrast with the ruble in 5/24/08: 23.6 and 4/24/08: 23.3

[phirang]

Re: Russia question?

Russia's stock market fell, but it is not the only one either in this specific month or this year.

So far at least, though, collapse hasn't happened and the last several months of ruble weakening has been significantly set back.

Within Russia 'people' were talking about the ruble hitting 26 vs. the dollar starting in June, but it never quite got to that point.

As of today, the ruble has gone from 25.58 to 24.98 in 3 trading days, with a peak of 25.78 on 9/12.

Contrast with the ruble in 5/24/08: 23.6 and 4/24/08: 23.3

BRIC's will crash if the US lands hard.

[Supercilious]

Re: Russia question?

BRIC's will crash if the US lands hard.

BRIC's will crash even if the US has a soft landing... the game is becoming obvious...

[phirang]

Re: Russia question?

BRIC's will crash even if the US has a soft landing... the game is becoming obvious...

One sec:

infrastructure-developing nations have been getting KILLED on material costs. Despite the slowdown, my friends in the banking side of the natural resources have no shortage of capital for new copper and iron ore mines. Just follow the RIO-BHP saga and china's involvement there.

If there's huge deflation(that's what we're talking about here), then the chinese benefit immensely: their reserves can now be put to work building up infrastructure on the cheap, rather than competing with themselves to supply chotchkis to indebted americans. The GCC would likewise do the same, altho we all know the GCC does what America demands.

China will have riots, but hell, they've garrisons in every city. They can declare an emergency and make it another "long-march", marshalling resources to develop value-added industries and infrastructure to make the nation less energy-intensive per unit gdp.

[c1ue]

Re: Russia question?

The GCC would likewise do the same, altho we all know the GCC does what America demands.

Phirang,

I'm not sure I agree with that. I think the GCCs will continue to sell oil in dollars - so much as the dollars per barrel are of sufficient purchasing power net. If the GCC's were truly American stooges, we wouldn't be looking at the massive prices increases we've seen.

The only thing they're doing which America wants is keeping the petro-dollar standard, but that's a quid pro quo - not a forced requirement. After all, the ones who REALLY suffer from the petro-dollar standard is the rest of the world - in supporting more than its fair share of American bad habits.

[touchring]

Re: Russia question?

One sec:

infrastructure-developing nations have been getting KILLED on material costs. Despite the slowdown, my friends in the banking side of the natural resources have no shortage of capital for new copper and iron ore mines. Just follow the RIO-BHP saga and china's involvement there.

If there's huge deflation(that's what we're talking about here), then the chinese benefit immensely: their reserves can now be put to work building up infrastructure on the cheap, rather than competing with themselves to supply chotchkis to indebted americans. The GCC would likewise do the same, altho we all know the GCC does what America demands.

China will have riots, but hell, they've garrisons in every city. They can declare an emergency and make it another "long-march", marshalling resources to develop value-added industries and infrastructure to make the nation less energy-intensive per unit gdp.

The Sichuan earthquake where maybe 50,000 children (only child) died due to illegal government buildings proves this impossible. The chinese are no less sheeple than the middleclass american tax payers.

A global deflation though will benefit all developing nations by making resources less expensive.

[c1ue]

Re: Russia question?

The Sichuan earthquake where maybe 50,000 children (only child) died due to illegal government buildings proves this impossible. The chinese are no less sheeple than the middleclass american tax payers.

A global deflation though will benefit all developing nations by making resources less expensive.

Well, was it because the regulations were bad, enforcement was bad, government was corrupt, or some combination? Or something else?

Historically this type of thing is always due to poor regulatory oversight, but you never know.

As for global deflation: we'll get a chance to see in action whether falling prices outpace falling income. After all, one begat the other on the rise.

[Supercilious]

Re: Russia question?

Interesting piece in FT:
http://www.ft.com/cms/s/0/b2115c90-9...077b07658.html

Globex on Wednesday banned depositors from withdrawing their money as confidence in the Russian banking system began to show signs of evaporating.

Globex, a mid-sized retail bank with assets of $4bn (€2.95bn, £2.32bn), is the first Russian bank to experience a run on deposits during the crisis. It lost 13 per cent of its deposits last month, according to Maxim Raskosnov, an analyst at Renaissance capital, and a further 15 per cent this month according to Emilya Alieva, Globex’s vice-president.

At least a dozen other Russian banks have reported a sharp rise in withdrawals and account closures.


An economist with a leading western bank in Moscow said Globex was probably the first in what could be a number of bank panics, if the government did not take concerted action soon. “I think there are a large number of small and medium sized banks that are in the same situation,” she said.


Despite a Kremlin promise of $200bn in relief funds – $87bn this week – the fall-out of a stock market plunge and the global credit crunch appears to be worse than anticipated, analysts say.

Since the Georgia folly the top Russian oligarchs have lost about $240 bil.

Here is an interesting piece providing some background:
http://www.atimes.com/atimes/Central_Asia/JJ17Ag02.html

[phirang]

Re: Russia question?

Interesting piece in FT:
http://www.ft.com/cms/s/0/b2115c90-9...077b07658.html


Since the Georgia folly the top Russian oligarchs have lost about $240 bil.

Here is an interesting piece providing some background:
http://www.atimes.com/atimes/Central_Asia/JJ17Ag02.html

Cruel kleptocracies prove rather brittle in straitened times.

[VIT]

Re: Russia question?

I am really interested how it will be played: future of the oil companies in Russia.
The tax rate for oil today is 50USD/bbl. Add to this ~8-12USD OPEX + corporate tax and etc. So all the companies started to ask money from the government. I can imagine the severity of cash flow problem they have today. So Kremlin could put all the companies on the hook by lending them money or just reduce the tax rate for all. Obviously these options have different outcomes :cool:

[phirang]

Re: Russia question?

I am really interested how it will be played: future of the oil companies in Russia.
The tax rate for oil today is 50USD/bbl. Add to this ~8-12USD OPEX + corporate tax and etc. So all the companies started to ask money from the government. I can imagine the severity of cash flow problem they have today. So Kremlin could put all the companies on the hook by lending them money or just reduce the tax rate for all. Obviously these options have different outcomes :cool:

In any case, the kleptocrats in Russia are sweating bullets... lol.

[Supercilious]

Re: Russia question?

I am really interested how it will be played: future of the oil companies in Russia.
The tax rate for oil today is 50USD/bbl. Add to this ~8-12USD OPEX + corporate tax and etc. So all the companies started to ask money from the government. I can imagine the severity of cash flow problem they have today. So Kremlin could put all the companies on the hook by lending them money or just reduce the tax rate for all. Obviously these options have different outcomes :cool:

I believe they cannot reduce the oil tax because they are already squeezed, If they offer loans they throw good money after good.
Right now the siloviki kleptocracy is just too expensive for Russia. One or another has to fall.

[c1ue]

Re: Russia question?

Once again, only the biggest public companies are being affected.

Only 10% of corporate finance in Russia is via bank loans.

There will certainly be some ripple effect - I'm watching to see what that is.