US Wants to Ban Russian Import Substitution

Translated by Ollie Richardson for Fort Russ

8th June, 2016

Pravda

A letter from the US Committee on the investment measures of the WTO with questions about 13 Russian documents governing the import substitution in the field of automotive industry, engineering, and information technology (at the disposal of Life.Ru) said that the proposal of the Russian government may be contrary to "the Agreement on investment measures relating to the trade regime" (TRIMs). Compliance with this document is binding for all countries participating in the World Trade Organization.

In the complaint to the WTO, the US asked to confirm or dispel these fears. As a reminder, on January 28th, 2015, the government of the Russian Federation approved "the plan of priority measures for the sustainable economic development and social stability in the country". An important part of the document was to support import substitution and the export of a wide range of manufactured goods, including high-tech.

According to the Americans, "Article 2 of the document, "National treatment and quantitative restrictions" indicates that the participating countries can apply measures aimed at granting preferential treatment to local goods in relation to goods imported, to introduce restrictions on the purchase of imports associated with the volume and value of exported goods and goods of local origin".

Therefore, the partner of the "Zamoskvorechye" legal office, Dmitry Shevchenko, announced possible claims made by the US. In fact, Americans believe "that many of the provisions of the Russian government's anti-crisis plan is related to state procurement and goes beyond the scope of TRIMs".

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Nord Stream-2 Will Lead to the Bankruptcy of the Current Regime in Kiev

Translated by Ollie Richardson for Fort Russ

7th June, 2016

Nstarikov

Geopolitics is politics + economics + geography. In the struggle for control over territories and resources, the geographical position explains the steps of competitors and what is happening. A good example is the “geopolitics of gas pipe”. That is, the battle between the US and Russia for influence in Europe and Ukraine. South stream, Nord stream. Turkish stream. Where do they flow and what are all these “streams”?

I commented on the meaning of the struggle by phone to the online resource Nakanune.

The transfer of equipment for the Nord stream-2" from the "South" began. In the framework of the "Nord stream 2" project, a geophysical survey of the offshore section of the pipeline was completed, and a geotechnical investigation is ongoing. The cost of the project of the "Nord stream - 2" pipeline is estimated at €8 billion, reported the financial Director of "Nord Stream - 2" Paul Corcoran at the meeting of the International Business Congress in Saint-Petersburg.

Nikolay Starikov: “Let's start with the obvious question: why does Russia want to build Nord stream, and why do the US and EU strongly oppose it? It is pure geopolitics, and nothing more, and there is no economy present at all. The task of the US is to do everything to force Russia to use the Ukrainian gas pipe as the primary means of delivering gas to Europe.

This makes it possible, firstly, to finance the regime in Kiev – about $5 billion a year. Secondly, it enables the US to arm Kiev to blackmail Russia and Europe via an interruption in the supply. To guess whether geopolitics prevails here over the economy, it is easy enough to ask yourself the question – are  European countries interested if the instability in Ukraine had no impact on the stability of gas supplies? At first glance it would seem so. But, on the contrary, European institutions should welcome the construction of additional capacities of the "Nord stream" gas pipeline, as instability in Ukraine in no way affected the situation in Europe. However, we see all sorts of obstacles, not only by individual states, which may remain without money, but also from the European Union. The US applies pressure for geopolitical reasons.

Why is "Nord stream-2" now a focused geopolitical confrontation? Russia had two options for the construction of alternative ways to deliver gas to Europe – the "South" and "North". As for the "South", we know that it was blocked at first by Bulgaria and then by organizing a color revolution in Macedonia. "Turkish stream", which was some version of the "South stream", was eliminated by the attack of the Turkish air force on our Russian aircraft. All of this can clearly be seen as being in the geopolitical interests of the United States, so now the fight is for the construction of the "Nord stream-2". And here Russia is doing everything to ensure that it flows, but the West, in this case it is the European structures and the US, is doing everything to make sure it is never built.

In this context, we should understand the statement made by the head of Gazprom, Alexsey Miller, and the approximate cost of constructing the pipeline. The less it will cost, the more attractive it will look in the eyes of Europeans. The second thing we should understand is that money has no role at all. If Nord stream is actually built, and Russia is able to supply gas to Europe, bypassing Ukraine, it will eventually lead to the bankruptcy of the current regime in Kiev and political changes in Ukraine. First and foremost, this will lead to the end of the war in Donbass. That is, in fact, the geopolitics of gas pipes is a struggle for today's Ukraine and for the cessation of the armed conflict in the territory of that state.

The US has already used their entire arsenal, starting with environmentalists who were trying to torpedo the "Nord stream", to change the rules in the gas sector. To cite one example that highlights the absurdity of the situation – due to the change in rules in the European Union, today the existing  "Nord stream" pipe can be loaded only to 50%, and the remaining 50% must be free for the sake of the hypothetical, but rather mythical, emergence of an alternative supplier. “Competition” in this case leads to the fact that sending a volume of gas equal to 100% needs not 1 tube of the appropriate diameter, but two pipes of the same diameter. In fact, you can't build "Nord stream - 2", but just fill 100% of the existing capacity of “Nord stream”.

In order to understand who is interested in this geo-economic project, you just need to see who supports it. If this project would be generally not interesting to anyone, there would be no opportunity at all to speak about it early on. No one would have created a consortium, no one would have talked about the possibility of lending to this project, the leaders of Germany would harshly say that we do not need it. This would end the discussion. But please note — at the time, the leaders of the Balkan states said that they are interested in the “South stream”project – then they changed their position. 

Erdogan said that "Turkish stream" is very important, took the first steps, and then its not that he changed his mind, but he took an extremely hostile position against Russia. We see that some international forces, with some “unknown ways”, changed the position of entire nations or the opinions of the leaders of these states, trying to derail projects that are initiated by Russia. I think that we will see such actions in relation to the "Nord stream-2". The gas contract, under which Gazprom transports gas through Ukrainian territory, ends after 2019. We must understand that today Ukraine, due to a coup d'etat, is a government that is not able to support itself, for many reasons. So the loss of gas transit is an additional 5 billion euros that someone should give Ukraine. Europe does not want to do this. But if the United States blocks the construction of the "Nord stream-2", it means that Europeans will have to fork out to contain the collapsing Ukrainian economy in an ever-increasing scale.

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Analyst: Sanctions Against Russia Caused a Global Weakening of the Dollar

Translated by Ollie Richardson for Fort Russ

6th June, 2016

Tvzvezda

The reality of the market requires the easing of sanctions, as the restrictive measures against Russia caused a global weakening of the dollar. This was stated by financial analyst Todd Wood, 20 years of experience as a bond trader on Wall Street, in an interview to Tvzvezda.

According to Wood, the EU is now facing many problems, starting with the migrants situation and economic issues, and ending in the unstable situation of the Euro and a possible British exit from the EU. Like the analyst, so many questions arise in connection with the way the EU will look like in the future.

"Of course, if you take such a big market like Russia from the EU, especially in Greece and Eastern Europe, lost trade becomes another factor of pressure. There are political parties that use this problem and are trying to receive the votes of those who have suffered the most from this state of affairs. Now there is a very difficult situation. We will look further, but everything will depend on what will happen next year," he said.

The analyst acknowledged that the impact of sanctions on Western Europe had a negative impact, but could not give an exact number, explaining that it all depends on the particular state. But, Wood said, it is obvious that the first to suffer was Greece and other Mediterranean countries – more than, for example, Germany or the UK.

"Although the UK is very lost in the financial sector due to the outflow of Russian capital. From an economic point of view, the sanctions against Moscow were ineffective," stated the former trader.

Wood explained that in the long term, this prompted Russia to strengthen cooperation with China, and other eastern markets of hydrocarbons, as ties between Moscow and Beijing improved many times. In particular, there are many new joint ventures in the far east.

"To some extent, the sanctions have opened the eyes of Russia and China to the opportunity to build their own trading relationship, should they want a way to remove the dollar from their transactions, such as oil and any other commodities that have historically been traded in dollars. I know both Russia and China seek to strengthen their national currencies by direct trade, without the dollar," he says.

It will have an impact on the Dollar in the long run, says the analyst. Especially if the US does not solve the issue of public debt.

"Regarding the fact that the dollar is losing its reserve currency status, Yes, it is slowly happening all around the world," concluded Wood.

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G7 - The Race For Titanic

May 29, 2015

Zavtra

Translated from Russian by Kristina Kharlova


A three-day G7 summit took place in Japan, attended by Britain, Germany, Italy, Canada, USA, France and Japan. The guests of G7 summit at ISE-Shima are prime ministers of Vietnam, Laos, Bangladesh and Papua New Guinea, as well as presidents of Indonesia, Sri Lanka and Chad.

During the summit the leaders of G7 countries adopted a joint declaration that touched upon the issues of sanctions against Russia, Ukrainian reforms, the Syrian crisis and international terrorism and corruption. In the end, the G7 decided to continue sanctions against Russia, have underscored the need for the settlement of crisis in Ukraine by diplomatic means with respect for international law, and also supported the current reforms in Ukraine, in particular related to the energy sector and called for "further ambitious reforms." The paper also highlights the call to all parties to the conflict in Eastern Ukraine to cease fire in order to "as soon as possible hold local elections in certain districts of Donetsk and Lugansk regions," - reports RT.

In addition the participants of the summit adopted a new action plan on combating terrorism, in which they agreed to strengthen the cooperation on data exchange and to strengthen border control.

Summing up the summit, Japanese Prime Minister Shinzo Abe has said that thanks to consolidated efforts the international community managed to prevent the global collapse of the economy.

Note also that US President Barack Obama has completed his program at G7 summit and visited Hiroshima, where he laid flowers at the memorial to the victims of American atomic bombing of Hiroshima in 1945, and also hugged three survivors and shook their hands.


Expert commentary


Sergei Mikheyev, political analyst:


We live in the age of G7. The "big seven" runs the order, which was created in the last two decades. It is not in their interest to change anything. So when we expect some breakthroughs from them, we don't want to understand a simple thing: they already did everything as they wanted, and now are moving along this path. Their goal is to hold on to global leadership, by all possible means to stretch it to the most remote corners of the earth and not to allow any alternative views. They don't need to solve the problems of planet Earth. Yes, the G7 presents itself as if it cares, but you have to be complete fools to believe it. 

G7 expressed the need for the global economy to grow – the whole issue is approach. I think, humanity has long been lost in these concepts, which it has itself invented. What is economic growth, why you need it, why is it the meaning of life? Western leaders follow a discourse in a paradigm which they are used to. It is important for them to protect the global flows of money and profits from financial flows. They focus on this mission, while others are busy producing. And they try to impose their discourse on the world as the only true one.

Regarding Obama's Hiroshima story. The United States are now at the peak of power. The moment when they tumble from the peak is inevitable, the only question is when and how. The Americans are stressing the simple things - we do and say what we think is right, not what you think is morally justified. Suppose that, from this point of view, their claim to be the moral leaders of the world is untenable, but to be honest, no one seriously thinks about it. Maybe there are some people who are willing to assign them moral priorities, but in reality nobody believes that it is important to the United States. They confirmed one simple thing. If something has happened many years ago, we will not reject our actions and believe that everything that we have done is the right thing. In addition, Americans understand that if a precedent is created, tomorrow someone else will ask to apologize for something. And that's how the myth of American righteousness will fall apart . Therefore, they don't do it absolutely consciously. 

Regarding Crimea, G7 de facto accepted Russian sovereignty over the peninsula. Their humility is reflected in the fact that they are not taking any active steps, can't, don't want to, are afraid and so on. On the other hand, their position has not changed, they confirmed at the summit what has been said previously. No miracles happened, but they were not expected. Maybe some people from the liberal financial bloc want to convince us that there is a prospect. But obviously it is wishful thinking. 


Andrei Fursov, economist:

The last G7 summit showed a complete intellectual impotence of its participants, the complete absence of a future project from that part of global elite which stands behind the people we saw at the meeting. The fact that they have no vision of the future is absolutely clear, it is to turn on the printing press, print dollars and go forward up mount Sisyphus. And I think individually each of them understands this, they are not total idiots, they realize that this is a race to the abyss or a race for a ticket to Titanic. But they represent the interests of a certain class which can't stop and is following its course.

The global elite reminds me of a shark from the BBC movie "Violence". There is a scene: a net is cast, a bunch of fish is caught, including a shark. The shark's belly is ripped, but it continues to eat other fish, which immediately fall out from its belly. It reminds me of the North Atlantic clan which has no agenda. I wonder why they did not make, for example, sanctions against Russia or something like that a global problem. Complete standstill. So let them run, the most important thing is that we don't run with them to this dead end. 

You need to understand what really supports the so-called post-industrial economy. It is prompted by the gross domestic product, which is created by India and China. In 2010, economists calculated that if you subtract China and India from the global gross domestic product, it will be at the level of 1980. And how is the gross domestic product of India and China created? The Chinese report that 50-60% is manual labor, about 70% in India. That is, super-exploitation of manual labor of hundreds of millions of Indians and Chinese keeps the parasitic economy afloat, whose representatives gathered in a not so great "7".

And we do not want to tumble into the abyss with the "seven". Therefore we can not solve the issues of our system as prescribed by some Kudrin. What needs to be done is a different conversation. Again, the main thing - it is clear, what not to do: not to run together with these gentlemen for a ticket to Titanic. Let them buy up the tickets and float.


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Speculation - Key Factor in Oil Prices. Russia Seeking to Freeze Production at Capacity in Doha (Analysis)

April 12, 2016

"Real Time" on Tsargrad TV with host Yury Pranko


Translated by Kristina Kharlova

 

Video transcript (10:30 - 25:00)


Guests: 

Sergey Chizhov, President of Russian Gas Union

Konstantin Simonov, General director of National Energy Security fund


Konstantin Simonov: Second half of the year might turn out more comfortable for the oil market. January prices were too low. We have to take into account not only our (Russia's) wishes, but also the US factor. We must understand that most shale projects are now below break even point, and these are not just our estimates. I have not seen any Western analysis were it was below $45. Our estimates are higher: $53-55. 

You cannot produce a product below break even for a long time.

They are thinking about what will happen to their own [oil] industry. Their production has grown by more than 200 million tons in the last few years. I don't think they want to increase it by that much in order to shrink it.

None of the major oil producers like the current situation. The Saudis don't like it. Although we are told they have huge reserves, but they are shrinking. It's a warring country. Iran doesn't like it. Therefore the price should get closer to $45-50.

Last year Russia produced 534 million tons. The US produced more. In the last few years US production grew from 300 to 500+ million tons. If you follow the American system, we produce 11+ million barrels a day, and about the same in America. In 5 years the increase is 1.5 times.

Sergey Chizhov: Everyone used to talk about the gas revolution, forgetting about the shale oil revolution in the US.

The new volume of oil production was an unpleasant surprise for us and others. We expected the prices and oil supplies to remain comfortable for us. After the January events, I think we are now observing a positive dynamic.

We can expect $45 in the first quarter, $50 - in the second quarter. Not sure about $55, this will depend on any surprises in financial markets.

Host: This is an important point. When we are talking about oil futures - it is a financial instrument and not a physical volume. The market is in the expectation mode before Doha meeting. Is the price rise purely speculative? 

Konstantin Simonov: Oil prices always depend on two factors. There are two expert camps, who argue with each other. The first camp says oil is a regular product and it depends on supply and demand. The second one says oil is not a regular product, as all the commodity products. Since 95% of transactions is in oil futures, we have to take into account the speculative factor. 

I always belonged to the second camp, but the pressure from the first camp was so strong that I am used to explaining it from their paradigm. What I said earlier was an attempt to analyze it from their perspective, from which we can see that cheap oil at $30 is not profitable for the US. Why the US? Why do people tend to frown when we are talking about the speculative factor? Because everyone understands that most of the money comes from American investment funds. When we talk about speculators we are talking about the US. So people tend to get up in arms: "Now you are getting into conspiracy theories! Rothschilds! Rockefellers...!" But this is a real factor, because we know the volume of money circulating on the futures market vs the real oil market.

Host: Does it mean we will be shedding tears on April 17th?

Konstantin Simonov: What matters is not what the participants of the conference do, but what they say... Even if they don't sign or freeze anything significant, what matters is that they say the same thing. We need to send a counselor there who will instruct them what to say. All they need to say is we agreed and we will get together again. The main thing is how they present it so that the market speculators will have an adequate reaction. 

If a Saudi prince will come out later and say "we want solar panels", or the new Iranian president says "we don't agree", then it will go back to the old craziness. However, there have been many conflicting statements so far, but the market is still growing because there is an expectation that something will happen. The main task is to continue the trend of searching for compromise. The worst scenario is to say we didn't agree on anything.

Host: Are there any real, not financial or psychological reasons for optimism, like demand in China or the US, or stimulating domestic demand?

Sergey Chizhov: We are in a balancing state. On one hand Chinese index started growing for the first time in recent days... I don't think anything dramatic will happen in this time frame, and if there will be no 'counselor' there, we may be disappointed... 

Host: So there are no real reasons?

Sergey Chizhov: In my opinion, no.

Konstantin Simonov: Look, we are dealing with a product for which demand is growing. It has even increased last year, may be not as fast as in the 90's or the 2000's. Psychologically people think oil is an outdated product, for which demand is falling every year. This is not true. 

Many experts say China's demand is falling. They say China grew by 9% before and now by 6%, therefore it's falling.  What do you mean - falling? It is growing by 6%.  As far as supply, the situation is difficult. US ministry of energy forecasts the loss of 800 thousand barrels a day.

Iraqi production grew in March, in February there was a terrorist attack, and oil fell. Iraq is hard to predict. 

As far as the number of 540 million tons a year... We [Russia], Qatar, Venezuela and Saudi Arabia as you know made an agreement in February to freeze production at January 11, 2016 level. This number is not random. On that day we reached our daily national record. If you annualize this record, you will discover that we can still increase production by 2%. If we used to extract 534 million tons, 2% is 10 million tons.  We can easily extract 545 million without breaking this agreement. Our ceiling is 545. In March we grew by 3.1%. 

Host: Does it mean we continue increasing capacity?

Konstantin Simonov: It means we were lucky. We hit capacity at the moment when we were supposed to decrease it and freeze it. If our production is not growing, lets make a nice gesture and say its not growing 'due to international agreements'. 

Host: Will there be a drop in production below 540?

Konstantin Simonov: Yes, under any circumstances. The limit has been reached. We cannot increase capacity even if we change our investment policy and tax law. The national record of USSR was reached in 1987 and dropped since due to withdrawal of investments from the industry prior to the fall of USSR, not related to the 90's factor. Communist party bureaucrats said: "You are breaking records, what are you talking about?" Today's ministry of finance bureaucrats have the same mentality - "You are breaking records!" They are not thinking 5 years ahead. 

Host: This is a dangerous trend.

Konstantin Simonov: Of course!

***

Part 2: Russian Gas. Coming soon!

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France 24: Russian Farmers Are Prospering Amidst Lack of Competition

Translated by Inessa Sinchougova

13th April, 2016

Baltnews

The embargo on produce has had a considerable effect on the development of Russia’s agricultural markets, reports France 24. 

Even though many European and American technologies are still being utilized in this sector, experts assert that they have had no difficulty in replacing that which was formerly imported. 

As the Russian embargo on food items from the EU, US, and Australia continues, European farmers have been the hardest hit - reports French TV channel France 24. As well as the embargo, Russian farmers are also receiving financial help from the government and are currently living their best days to date. 

When the embargo came into force in 2014 - dairy, meat, fish, vegetables, and fruit quickly disappeared off Russian supermarket shelves. However, the situation quickly reversed with new names and new companies on offer. For the years 2015 and 2016, the government has allocated 5 billion dollars to stimulate the agricultural sector. 

In this way, just outside of Moscow we can spot huge territories with glasshouses for tomatoes, cucumbers and other greens – this project receives various benefits, including tax breaks and subsidies. However, the factory is being run by Dutch specialists. The technologies which allow for produce to be grown in Russia at any time of year are also Dutch. They have no equivalents in Russia – yet.  

Russia shows less protectionism to technologies required to stimulate its agricultural sector. In this way, Israeli technology is being utilized at a fish farm we visited, for the production of caviar. “The main reason why we do not work with a Russian factory, is because it does not produce to the same standard as in America or Europe” – says General Director Irma Gevondyan.  She reiterated that the embargo emposed by Russian authorities on fish imports has grown her business, to the point that “clients are basically queuing at the door.” 

This industry also receives financial help from the government, if not always on time. While authorities pass off fault onto one another, the Ministry for Agriculture asserts that it is only a matter of learning to streamline and working together properly. “The crisis is an opportunity” – says the Ministry of Agriculture and that there is no problem with financing of the import-replacement programme.

Sectors where things aren’t looking as bright are butter and cheesemaking – with blue cheese and parmesan being severely missed. The hope is that Russians wanting to fill this niche market will be headed to gaining qualifications in this area shortly. 

The embargo has shown to be a very positive development for Russian farmers, and competition is rapidly growing in order to get a slice of the action – “Everybody understands that one day sanctions will be lifted” – states France 24. 

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Rosneft is Bigger at London, Gazprom - at Moscow Stock Exchange

April 12, 2016

Tsargrad

Translated by Kristina Kharlova


Rosneft capitalization has surpassed the capitalization of the largest Russian gas monopoly at London stock exchange on Monday. Rosneft cost $51,083 million while Gazprom - $50,898 million. 

Gazprom is holding on to its leading position in ruble equivalent at the Moscow stock market  at 3,449 billion rubles, Rosneft - 3,419 billion rubles.  In the last 12 months Gazprom depreciated by 1.5%, while Rosneft appreciated by 26%. 

The gas monopoly lost the title of the most expensive Russian company. 




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