The Russian economic downturn

Two years ago, the Russian government introduced a moratorium on companies going bankrupt. This has now ended, and bankruptcies are soaring:

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How do you put a moratorium on going bankrupt? I wonder if the companies went bankrupt but just couldn’t officially declare bankruptcy.

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They managed it:

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Instead of an adjudicated sharing out of a corporate corpse, including a possible resurrection under new ownership by the debt holders, Russia simply forced a “choke it down” solution that favored those with power and connections.

Costly in the long run. But the entirety of the Russian economy above the peasant level has now reverted to tribal piracy.

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Saw a story a couple nights ago saying that the Russian economy will still grow around 3% this year, and that Western sanctions have been largely ineffective.

Amazing what you can do in a command war economy, especially when you have lots of oil to sell.

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A significant part of that 3% is ramping up their armaments sector, but their downside is that while their own need for their proprietary armaments has skyrocketed for use in war with Ukraine, the long term market for them has collapsed as India and others watch Russian tanks, planes, and even artillery underperform in the grind of war.

And yes, petroleum is a powerful prop. But that path, currently most clearly shown by once prosperous now poor and bedeviled Venezuela, leads to destruction by the “devil’s excrement”.

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Ukraine is apparently drone attacking Russia oil refineries.

Here’s an example.

And:

Several other sources have reported such attacks over the last month, with Russian oil production being decreased by 7%.

https://www.reuters.com/business/energy/oil-prices-edge-down-russia-lifts-supplies-jet-fuel-demand-stirs-caution-2024-03-19/

Reuters article repeats rumors that Russia has slowed and/or shut off some oil wells, due to “full storage tanks” for crude oil.

YouTubers are saying that Russia no longer has the repair materials or the WESTERN EXPERTISE to repair these damaged facilities.

If the rumors of shut down oil wells are true, Russia supposedly will have trouble bringing them back on-line due to lack of equipment and especially expertise.

In addition. Russia has stopped oil exports, at least for some products.

This Feb2024 article:

Russia to ban gasoline exports for six months from March 1 | S&P Global Commodity Insights.

If the sanctions are useless, then why is Russia putting the brakes on oil refining and export?

Slava :ukraine:
ralph

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Nice write-up. So…the drones are knocking out the refineries which take time and expertise to rebuild, and forces Russia to export crude oil which bumps into the price cap. It looks like Ukraine is still outmanned but hanging on by winning the chess match. If only the u.s. would do its part to aid Ukraine in their defense…

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The US has done plenty, and is doing plenty, and will continue to do plenty. But there is still the question of why the US has to become a primary actor in nearly every European war. Why can’t Germany and France and the rest of Europe do more to help police their continent?

The US seems to always land on policies that will keep conflicts going for as long as possible. Many cynics have said that this is because “it’s good for business” as defense contractors make more money. But that’s obvious nonsense as it is simply an extension of the broken windows theory (which is clearly fallacious). If Ukraine were allowed, for example, to sink a bunch of major Russian ships in the Black Sea, and to shoot down Russian fighter jets at will, the war would be over rather quickly (because those are things that Russia can’t replace quickly and really don’t want to lose). And I’d guess that covertly, the US isn’t allowing dissident groups to kill Putin due to the fear of a power vacuum after that occurs. Again, a policy that ensures that the conflict continues for as long as possible.

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Putin is highly educated in economics. He upped the interest rates from the central bank to 16%. This brought down inflation imposed by the west. This meant he could print to pay the military bills. This meant some growth as a result.

Going forward it gets harder for the Russian economy. The 16% interest rates have to be maintained to stop inflation but they also will now plunge the economy into slow growth. Depending on how much is printed towards the war effort.

There is evidence of over 7% inflation in Russia. The economy has shifted to a war industrial power. The problem is the average Russian feels the pain.

As the EU applies money in Ukraine Russia will waste military resources.

The trajectory of Russian inflation is upwards.

Of note, we are in budget talks right now. There are US deadlines in a few interesting places. The news cycle has been such the focus has been missing.

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