Voices from Russia

Monday, 10 August 2015

European Dairy Industry in Crisis Due to Russian Food Embargo

00 cows in european dairy farm 100815


European dairy farmers are facing their most serious economic crisis in decades, largely because of the continuing sanctions war between the EU and Russia. In a recent report on the subject, Radio Sweden explained that most expect the current Russian embargo of European agricultural products to lead to a new wave of lowering milk prices in the near future. It noted, “The current crisis is [already] regarded as one of the most serious in the last 40 years”, noting that with global milk prices already falling to a 30 year low, the current price of 2.65 krona (20 Roubles. 2 Renminbi. 20 INR. 0.30 USD. 0.41 AUD. 0.40 CAD. 0.28 Euro. 0.20 UK Pound) is well-below the 3.60 krona (27 Roubles. 2.50 Renminbi. 27 INR. 0.41 USD. 0.56 AUD. 0.54 CAD. 0.38 Euro. 0.27 UK Pound) minimum necessary for Swedish dairy farmers to make ends meet. Meanwhile, subsidies to Scandinavian dairy giant Arla Foods have fallen by 1.09 krona (8 Roubles. 0.75 Renminbi. 8 INR. 0.12 USD. 0.17 AUD. 0.16 CAD. 0.11 Euro. 0.08 UK Pound) over the past year. Färanäs-area dairy farmer Tore Engström told Radio Sweden, “We can’t remember when we last experienced such a deep crisis, and no one knows when it will end”.

The Association of Swedish Farmers thinks that if someone doesn’t deal with the situation in the next six months, many of Sweden’s 4,200 private dairy farmers may simply begin go bankrupt, with 4 out of 5 already suffering serious economic difficulties. Association chairman Jonas Carlsberg told Radio Sweden that according to the data of his colleagues from Denmark, “86 percent of Danish milk producers face a critical situation. I can add that a similar situation exists in Sweden as well”. Radio Sweden noted that much of the hit to producer prices has been the result of the continuing sanctions war between Europe and Russia over the Ukrainian crisis. Carlsberg complained, “The idea that farmers must pay for political decisions is fundamentally wrong. We’re waiting for decisive actions by policymakers”.  For its part, the Swedish government promised to look into the matter later this month, with EU agriculture ministers promising to do the same in early September.

Czechs, Germans, and Balts Feeling the Pinch Too

Like their Swedish counterparts, Czech dairy farmers too felt the pinch of the embargo, forced to look for new places to dump the 500 tonnes of butter and 1,500 tonnes of powdered milk that once went to the Russian market. German dairy farmers are also struggling, losing a market for 126,000 tons of cheese, according to Thorsten Sehm, the head of the Federal Union of German Milk Producers. Sehm told RIA Novosti that whilst only 1.26 million tons of Germany’s 29 million tons worth of milk went to Russia prior to the embargo, “In any market, once the supply exceeds demand, it leads to drastic changes”. So far, in Germany, Sehm noted that this led to a drop in prices to rates lower than “the crisis years of 2012 and 2009”. German Farmers’ Union spokesman Michael Lohse Lohse complained about commercial effects of political decisions, noting that for his organisation’s part, “we call on the authorities of our country to find opportunities for deepening [trade relations] with Russia”.

The Baltic States seem to be hit worst of all, with their close economic ties with Russia prior to the embargo and difficulties in finding alternative markets leading to a situation where their entire dairy industry is now on the verge of collapse. In Estonia, the sanctions war resulted in a decline in a 30 percent decline in producer prices, with Estonian milk exports falling by 17 percent in the first quarter of 2015 alone. Latvia’s dairy industry suffered a similar decline, with Agriculture Minister Janis Duklavs noting that he’d appeal to the EU for additional funds to save the dairy industry from total paralysis, warning that farmers are on the verge of destroying their livestock and liquidating their farms. Latvian Association of Milk Producers Chairperson Ieva Alpa Eisenberg noted that Latvian farmers “have plunged into despair, because we don’t know when the situation will improve. One doesn’t know whether one can climb a little bit further into debt, and whether one will be able to pay it back”. He noted that the present crisis is the worst the country faced in over 15 years. In Lithuania, dairy farmers join the rest of the agricultural sector, which has faced a 30 percent decline in exports in mid-2015, compared with a year earlier. Agriculture Minister Virginija Baltraitiene noted that she’d ask EU Commissioner for Agriculture for 32 million Euros (2.25 billion Roubles. 217.6 million Renminbi. 2.24 billion INR. 35 million USD. 47.6 million AUD. 46 million CAD. 22.6 million UK Pounds) to help save the industry. Local experts warn that Lithuania may have to reduce dairy production by 50 percent in the near future.

Global Factors

This spring, the EU lifted national quotas on milk production, with each country now able to increase dairy production at will, resulting in growing production and a glut in the market. This exacerbated the crisis in the loss of exports to Russia. Furthermore, China significantly reduced its purchase of powdered milk from EU sources, which only deepens the crisis. German Farmers’ Union spokesman Lohse explained, “Of the 10 cent drop in milk prices, 2-3 cents are the result of the Russian embargo, with the rest resulting from other factors. These include the decline in exports to China… as well as general overproduction of milk in the EU”. Federal Union of German Milk Producers chairman Sehm complained that local politicians “aren’t undertaking any efforts to create an appropriate regulatory environment for the milk market”, adding that the same problem exists in France, Spain, and Italy, and in other EU countries.

In August 2014, Russia introduced an embargo on several categories of food products from the EU, the USA, Canada, Australia, and Norway, in response to the anti-Russian sanctions introduced earlier by these countries over the Ukrainian Civil War. This June, the Russian government decided to extend the embargo until August 2016, responding to the EU’s extension of sanctions.

10 August 2015

Sputnik International


Sunday, 9 August 2015

KSA Determined to Crash Oil Prices Until American Shale Oil Breathes Its Last



American-German economic researcher and historian F William Engdahl observed that never in its wildest dreams did the Obama administration expect that it’d face a financial disaster after it conspired with Riyadh to drop oil prices and flood the market with cheap petroleum, trying to rerun the highly successful American-Saudi deal of 1986 that weakened the USSR. Although it wasn’t  not made public, on 11 September 2014 US Secretary of State John Kerry and King Abdullah concluded a secret deal to use Saudi “oil muscle” to bring Russia and the Kremlin to its knees. Remarkably, on the very next day, the US Treasury’s aptly-named Office of Terrorism and Financial Intelligence, headed by Treasury Under-Secretary David Cohen imposed new sanctions on Russia’s energy companies Gazprom, Gazprom Neft, Lukoil, Surgutneftgas, and Rosneft and prohibited American oil corporations from participating in Russian offshore oil projects in the Arctic. Engdahl said, with a touch of irony, “Then, just as the rouble was rapidly falling and Russian major corporations were scrambling for dollars for their year-end settlements, a collapse of world oil prices would end Putin’s reign. Clearly, that was the thinking of the hollowed-out souls who pass for statesmen in Washington today. Victoria Nuland was jubilant, praising the precision new financial warfare weapon at David Cohen’s Treasury financial terrorism unit”.

Meanwhile, nothing hinted at any trouble in July 2014… West Texas Intermediate traded at 101 USD (6,460 Roubles. 627 Renminbi. 6,440 INR. 133 CAD. 136 AUD. 92 Euros. 65 UK Pounds) a barrel, and Engdahl noted, “The shale oil bonanza was booming, making the USA into a major oil player for the first time since the 1970’s”. However, when WTI slid to 46 USD (2,940 Roubles. 286 Renminbi. 2,930 INR. 60 CAD. 62 AUD. 42 Euros. 30 UK Pounds) per barrel in January 2015, American strategists suddenly realised that they’d cut their own throat. Indeed, “the over-indebted US shale oil industry” was about to breathe its last because of the plummeting oil price. Although Washington and Wall Street made every effort to artificially stabilise the dire situation (resulting in a slowly rising oil price since February to May, when it hit 62 USD (3,970 Roubles. 385 Renminbi. 3,950 INR. 82 CAD. 84 AUD. 57 Euros. 40 UK Pounds) per barrel), the American political and financial élite underestimated the Saudi factor’s importance.

Engdahl said, “Reportedly, al-Naimi [the Saudi Oil Minister] saw a golden opportunity in the Kerry proposal to use the chance to, at the same time, kill off the growing market challenge from the rising output of the unconventional American shale oil industry. Often, al-Naimi said that he’s determined to eliminate the American shale oil ‘disturbance’ to Saudi domination of world oil market”. Alas, the Saudis are very unhappy with Washington’s shale oil advance and the Iranian nuclear deal negotiated by the Obama administration with Tehran. Engdahl emphasised, “In fact, the Saudis are beside themselves with rage against Washington. This has all added up to an iron Saudi determination, aided by close Gulf Arab allies, to further crash oil prices until the expected wave of shale oil company bankruptcies. On 29 July 2015, WTI fell to 49 USD (3,140 Roubles. 305 Renminbi. 3,130 INR. 65 CAD. 66 AUD. 45 Euros. 32 UK Pounds)”.

Morgan Stanley, the Wall Street bank, reported in panic, “We anticipated that OPEC wouldn’t cut, but we didn’t foresee such a sharp increase. This downturn would be more severe than that in 1986. As there was no sharp downturn in the 15 years before that, the current downturn could be the worst of the last 45+ years. If this were to be the case, there would be nothing in our experience that would be a guide to the next phases of this cycle… in fact, there may be nothing in analysable history”. What makes matters even worse for Washington, is that Saudi Arabia, its longstanding and subservient ally, has begun to play its own geopolitical games. On 18 June 2015 Muhammad bin Salman, the Saudi Deputy Crown Prince and Defence Minister and son of King Salman visited Russia and met with  President V V Putin. The parties discussed up to 10 billion USD (640 billion Roubles. 62.07 billion Renminbi. 637.48 billion INR. 13.14 billion CAD. 13.48 billion AUD. 9.12 billion Euros. 6.46 billion UK Pounds) trade deals.

Engdahl remarked, “Today, Saudi Arabia is the world’s largest oil producer and Russia a close second. A Saudi-Russian alliance on whatever level was hardly in the strategy book of Washington State Department planners”. Engdahl went on to say, “October 2015 is the next key point for American shale oil companies… banks will decide whether to keep funding fading American shale oil production or rollover their loans. At the same time, if the Federal Reserve raises American interest rates in September, highly indebted American shale oil manufacturers would face “disaster of a new scale”. Unfortunately, such a “doomsday” scenario may be accompanied with further unintended consequences for American and global financial system. Indeed, as a proverb says, “Curses, like chickens, come home to roost.”

8 August 2015

Sputnik International


Saturday, 11 October 2014

China Surpasses USA as World’s Largest Economy Based On GDP/PPP

00 Vitaly Podvitsky. Championship Title Race for the Biggest Economy in the World. 2014


International Monetary Fund estimates show that China surpassed the USA in terms of GDP based on purchasing power parity (PPP), becoming the largest in the world by this measure. FT reported citing IMF data that in 2014, China had 17.6 trillion USD (711 trillion Roubles. 108 trillion Renminbi. 1.08 quadrillion INR. 19.72 trillion CAD. 20.27 trillion AUD. 13.94 trillion Euros. 10.95 trillion UK Pounds) or 16.48 percent of the world’s PPP-adjusted GDP, while the USA had slightly less, 16.28 percent or $17.4 trillion USD (703 trillion Roubles. 107 trillion Renminbi. 1.07 quadrillion INR. 19.49 trillion CAD. 20.04 trillion AUD. 13.79 trillion Euros. 10.83 trillion UK Pounds). PPP is the best way to compare the size of economies and not using volatile exchange rates, which rarely reflect the true cost of goods and services. Thus, a trillion US dollars (40.4 trillion Roubles. 6.13 trillion Renminbi. 61.3 trillion INR. 1.12 trillion CAD. 1.15 trillion AUD. 792 billion Euros. 622 billion UK Pounds) are worth a lot more in China than in the USA. The IMF forecast stated that, on a PPP-basis, China is overtaking the USA right about now, becoming the world’s biggest economy. The USA has been the global leader since overtaking the UK in 1872. Previously, most economists thought China would pull ahead in 2019. According to IMF estimates, in 2015 the gap between China and the USA will increase to almost a trillion USD… Chinese GDP/PPP will amount to 19.23 trillion USD (777 trillion Roubles. 118 trillion Renminbi. 1.18 quadrillion INR. 21.54 trillion CAD. 22.14 trillion AUD. 15.23 trillion Euros. 11.96 trillion UK Pounds) against 18.286 trillion USD (739 trillion Roubles. 112 trillion Renminbi. 1.12 quadrillion INR. 20.49 trillion CAD. 21.05 trillion AUD. 14.49 trillion Euros. 11.38 trillion UK Pounds) in the USA. However, in terms of nominal GDP, the USA remains the undisputed world leader with 16.8 trillion USD (679 trillion Roubles. 103 trillion Renminbi. 1.03 quadrillion INR. 18.82 trillion CAD. 19.35 trillion AUD. 13.31 trillion Euros. 10.46 trillion UK Pounds) in output, significantly outpacing China with 10.4 trillion USD (421 trillion Roubles. 63.8 trillion Renminbi. 638 trillion INR. 11.65 trillion CAD. 11.98 trillion AUD. 8.24 trillion Euros. 6.47 trillion UK Pounds).

 8 October 2014



Friday, 29 August 2014

Ukrainian Economy Unravelling

00 ukrainian grynia. 23.03.14


The Ukraine is going through a perfect economic storm. Ravaged by civil war, left with no parliament, and led by a self-styled “kamikaze government”, the country is on the verge of a full-fledged economic disaster. Obviously, the Ukrainian economic crisis is self-inflicted, despite the government’s attempts to blame Russia’s allegedly hostile actions and the lack of Western help. According to estimates made by Ukrainian “Prime Minister” Yatsenyuk in April, the Ukraine needs at least 35 billion USD (1.29 trillion Roubles. 216 billion Renminbi. 2.12 trillion INR. 38 billion CAD. 37.4 billion AUD. 26.6 billion Euros. 21.1 billion UK Pounds) to keep the economy afloat until the end of 2014. The total sum of credit obtained so far from the IMF, the EU, and the World Bank is less than five billion USD (184 billion Roubles. 31 billion Renminbi. 303 billion INR. 5.43 billion CAD. 5.35 billion AUD. 3.8 billion Euros. 3 billion UK Pounds). It hasn’t yet received the IMF’s second tranche of a promised 17 billion USD (625 billion Roubles. 105 billion Renminbi. 1.03 trillion INR. 18.5 billion CAD. 18.2 trillion AUD. 12.9 billion Euros. 10.3 billion UK Pounds) loan, despite the fact that it was due in June. Given that the IMF made subsequent tranches contingent upon Kiev’s ability to regain control of Novorossiya, it’s likely that the Ukraine won’t get some or all the remaining tranches.

“President” Poroshenko worsened the situation with his decision to sign an EU Association Treaty, which resulted in a flurry of Russian measures enacted to protect the Russian market from the re-export of European goods through the Ukraine. This locked Ukrainian business out of the Russian market, which was its top export destination; yet, at the same time, it’s unable to penetrate the oversaturated European market in a meaningful way. Kiev received repeated warnings about this scenario, but Poroshenko made the stunningly unwise choice of ignoring Russian concerns and warnings. Now, the economy is suffocating, and faces a serious currency crisis. The Grivna is trading at around 13.89 Grivna/1 USD (having traded at about 8 Grivna/1 USD in the years following the 2008 economic crisis), causing investors to flee. On 22 August, Fitch Ratings downgraded local-currency-denominated Ukrainian debt to its lowest possible level (CCC). According to finance.ua, Yatsenyuk recently stated, “The Ukrainian economy can’t handle an exchange rate higher than 12 Grivna per dollar”. The exchange rate is 15 percent higher than its critical level and shows no signs of returning to previous levels. The central bank can’t use market interventions to prop up the Grivna because it has almost no hard currency left; a significant part of its currency reserves are in illiquid government bonds. The currency is collapsing and this is visible to everyone. Political analyst Mark Sleboda put it best in a scathing tweet:

#Ukraine currency, economy collapsing fast, nothing at all it can do to stop it (apart from begging #Russia)


On top of the currency crisis, there’s an energy crisis brewing. Last week, the government announced its intention to import coal, once considered a staple of the Ukrainian industrial economy, from Australia because its mines in Novorossiya are unusable. It depends on Russian gas and coal from its former eastern regions; now, it has neither. A week ago, the Cabinet outlined a procedure for declaring a state of emergency in the energy sector, so, blackouts are becoming more and more likely. It’ll be a long, cold, and probably dark autumn and winter for Kiev. Judging by its previous actions, the West won’t come to rescue the Ukraine from its economic misery.

28 August 2014

Stanislav Fisher

Rossiya Segodnya


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