Russia 110811 Basic Political Developments

Volatile Futures

Analysts See Oil Behind Russia’s Recent Market Drop, but the Country Is Better Prepared to Face a Crisis Than Three Years Ago

By Andrew Roth Russia Profile 08/10/2011

Russian stock markets this week saw as a ripple effect from the United State’s rating devaluation, causing multi-day selloffs on both the RTS and MICEX indices. While sudden drops in the markets evoke memories of plunging oil prices and a severe devaluation of the ruble that Russia saw in 2008, a panic scenario seems to have been averted for the time being, experts from Russia’s leading investment banks note. Nonetheless, they said, the sudden scare refocused attention on Russia’s dependence on oil, which leaves the country highly vulnerable as international growth slows.

The Russian stock market indices RTS and MICEX lost 7.9 percent and five percent respectively in the day and a half of heavy losses that raised the specter of a repeat of the 2008 global recession. Russian Prime Minister Vladimir Putin, who had outspokenly (and perhaps presciently) mocked the U. S. credit rating and called the United States itself a “parasite” on the world economy, tried to slow the hemorrhaging in Russian markets on Tuesday by promising that the government would inject cash into the markets. “We in Russia believe that we must keep careful track of liquidity,” Putin announced yesterday while the market was still falling, reported AFP. “The Finance Ministry and the Central Bank are monitoring the situation, and if necessary will use various channels to add liquidity to the market.”

Whether due to Putin’s speech or investors’ appetites, the markets have largely stabilized; Russian markets rallied Tuesday afternoon, assuaging fears of a possible panic, and on Wednesday they have continued to rise as a similar return to stability has taken place in the United States and other global markets. The ruble, which dropped a considerable ten percent against the dollar over the last two days, nonetheless bounced back slightly today.

Sluggish global growth and a corresponding decrease in demand for oil was a leading factor behind the volatility, said Peter Szopo, the head of research at Alfa Bank, adding that a confluence of international factors, including fear of a double-dip recession in the United States, played off each other to hit the Russian markets. “Russia did not do anything wrong here, and not much here is specific to Russia, except for the country’s continuing dependency on oil,” said Szopo.

Russia, had already begun responding to sluggish global growth on Monday, when it announced that the country was planning to triple the state debt by 2014 to help plug the country’s budget deficit. Yet with plans for heavy spending coming up, including funding multiple world-class events such as the Sochi Olympics in 2014 and the World Cup 2018, as well as widely popular social programs and pre-election promises to increase spending, the country’s dependence on high oil prices meant that a severe drop could spell disaster.

As stocks fell in Moscow, fears in particular returned to a possible repeat of the 2008 global recession, which saw oil prices drop from an inflated $150 to $50 and devalued the ruble by more than 35 percent. For Russia to have a balanced state budget, its Urals crude should be selling at a price of $120 per barrel, above the current cost of oil.

Despite its heavy reliance on oil, however, Russia is placed in a far better position to deal with a sudden drop in the price of crude than three years ago, said Citibank’s Russia analyst Kingsmill Bond, noting that “the degree of leverage in Russian companies is much lower [than it was in 2008], which is very good.” “The Russian government has also allowed the ruble to float [as opposed to 2008], which means that it could likely absorb more of the pressure from a significant change in world oil prices,” said Bond.

The key question for the stability of the Russian market will be how the volatility in oil prices plays out in the coming days. If the price for WTI Crude, the industry standard, slips below $80 a barrel, it will provoke “serious problems on the Russian market and may force a reconsideration of economic policy,” said Szopo. Bond similarly named $80 as the price below which we may start to see “serious concern” in Moscow. But despite the spate of bad financial news that Russia has seen recently, it may have caught a break today, as oil prices started to crawl upward on news that suppliers will decrease production in response to weak global demand.

Russian Buckwheat Price Falls 26% on Prospect of Doubled Harvest

http://www.bloomberg.com/news/2011-08-11/russian-buckwheat-price-falls-26-on-prospect-of-doubled-harvest.html
Q

By Ilya Khrennikov - Aug 11, 2011 7:22 AM GMT+0200

The retail price of buckwheat in Russia has fallen 26 percent in the past month, to 62 rubles ($2.1) per kilogram, as the harvest is expected to double this year, Rossiyskaya Gazeta, the official government newspaper, reported.

The buckwheat harvest is likely to be between 650,000 and 750,000 metric tons, up from 340,000 tons last year, the newspaper said, citing agricultural forecasts.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

Business, Energy or Environmental regulations or discussions

Russian court to hear consumers’ suit on SMS leak vs MegaFon Sep 5

http://www.prime-tass.com/news/0/%7B974E4156-D5BD-4A31-83C5-D03D579F311D%7D.uif
MOSCOW, Aug 11 (PRIME) -- Moscow’s Zamoskvoretsky Court has scheduled for September 5 the main hearings of a lawsuit filed by a consumer union against major mobile operator MegaFon for a leak of SMS text messages sent from the operator’s Web site, the court’s representative said, RIA Novosti’s agency for legal and court information RAPSI reported Thursday.

The consumer union filed the lawsuit against MegaFon after major search engine Yandex displayed SMS text messages sent from MegaFon’s Web site in its search results due to a failure on the operator’s Web site in mid-July.

In the lawsuit, the consumer union claimed that MegaFon had violated consumers’ privacy rights by failing to prevent a public leak of SMS messages.

Yandex’ press office said on July 18 that the search engine displayed the messages because the site did not contain a special file preventing the search engine from indexing certain Web pages. However, MegaFon’s Deputy CEO Valery Yermakov said later that the company was not ruling out that Yandex was at fault for the leak, as MegaFon cooperates with all Web search engines, but that the SMS messages were only displayed by Yandex. In total, 2,500 messages were displayed in Yandex’ search results, Yermakov said.

End

11.08.2011 12:21

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