Russia will survive the current oil crisis. Will not repeat, as this was the last period of the Soviet Union, when the price of oil to $ 10 per barrel destroyed the Soviet system.
Modern Russia is connected to the capital markets. She has dollars. A lot of dollars. To be precise, its foreign exchange reserves is approximately 563 billion dollars, and among the shit with developing economies, Russia’s Central Bank reserves is second only to China. Forgive me, haters of Putin. But Russia has these funds.
Russia today is a more careful and spend money just to protect a class of workers from the current pandemic coronavirus, which came from China. Russia, like most countries, some time will be forced to spend money from their savings for a rainy day, and the state Treasury will be considerably less, and it will receive a deficit of 5.5% in the current account.
Forecasts for the current year will be significantly revised and will differ from the forecasted surplus at 0.8%, however, Luis Peixoto (Luiz Peixoto), economist of the financial group BNP Paribas, believes that it will negatively affect Russia’s ability to service their debts. The ratio of debt to GDP there is less than 35% of GDP.
“No downgrade,” says Peixoto. “Apparently, Russia does not threaten any downgrade, despite the propagating shock. Our credit modeling program indicates a rating upgrade,” he adds.
Investors who invest their money in shares, like Russia, because the prices there are even lower.
“We bought the shares of Gazprom, Norilsk Nickel, and X5, and still going to buy the shares of “Yandex”, says Thijs arent (Arent Thijsen), head of the investment Fund of the Dutch company Blauwtulp Wealth Management. Many Russian stocks are currently very cheap and unexpected way they show growth.”
The deal OPEC+ reduction of oil production, has been a shock to oil revenues in Russia, and local investors have turned away from major Russian oil and gas companies, brought before a significant income.
But, on the other hand, favourable conditions for the new grain harvest and steady demand in the world food can provide the Russian government with a certain safety cushion, and it will not have financial problems even if the withdrawal will cause more harm than expected.
Given the magnitude and multilateralism the impact of the current mode of isolation on the economy, in the worst case, Russia’s GDP will shrink by about 10%.
In other words, the depreciation of the stock is a real risk. However, the difference between modern Russia and the Soviet Union is that today, Moscow is more concerned with Western capital markets, and it is not a closed country. And the currency is freely traded.
The head of Sberbank German Gref called the current crisis “a walk in the Park” (walk in the park) or “a cakewalk” in comparison with the previous crises in Russia. Nevertheless, Russia’s dependence on oil and natural gas still remains a huge problem many years after the collapse of the Soviet Union, and today it is felt in many areas, while political pressure has a greater value than before.
Analysts at Lombard TS led by Chris Grenville (Chris Granville) believe that today Russia deeper into recession than it was in 2014, when oil prices were in free fall and the Central Bank changed its policy to support the ruble.
This time Russia will face a larger budget deficit and called into question will be the one of fiscal conservatism, which, in fact, like foreign investors, especially if they are the owners of the bonds.
Russia after the pandemic coronavirus, possibly, will face much larger debt. But she has room to maneuver.
“On the one hand, the entire burden of adjustment after a shock of 2014 was assigned to households, the real income has decreased then more than 10%, — said Grenville. Now this picture will be inverted. As expected, household consumption will decline this year, only about 2.6%. The Barca reserves of the Central Russia will decrease by about $ 70 billion, which will be used to support the demand of households”.
It can protect Putin’s ruling class, the party “United Russia”, which will fight for the result in the parliamentary elections (elections to the State Duma) in September of 2021. If the financial situation of the Russians to that time will not improve, it will be bad news for the party, to lead the country since the collapse of the Soviet Union. Perhaps it is dependence on oil, has swept the ruling class for the first time. The current rulers do not want to now this dependence swept them.