Russia cuts spending as recession looms: Report

[uhnope]

Source: Reuters

Russia is cutting state spending by ten percent, as government revenue is sharply reduced due to the slide in the price of oil, Moscow business daily Vedomosti reported on Monday.

The spending cut was discussed in a meeting attended by Russian Prime Minister Dmitry Medvedev, the newspaper reported, citing government sources. Russian ministries will receive 90 percent of their budgeted funds, with certain exceptions for public regulatory functions.

The cuts would impact transportation programs as well as spending on space, aviation and the development of the Far East, the newspaper said. Russia's 2015 budget is balanced on the assumption of selling oil at $95 per barrel - a price well above the current level hovering around $60. The Russian government receives more than half of its total income from taxes on oil revenues.

Russia's Finance Mnistry in December forecast that the Russian economy would fall into recession in 2015. On Oct.14, President Vladimir Putin had said that his country may cut budget spending if oil prices continue to fall.

Read more: http://www.worldbulletin.net/news/150833/russia-cuts-spending-as-recession-looms-report

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Putin's presiding over a disaster that's sad and dangerous

[riversedge]

1. umm. Austerity moves. da da!!

[louis-t]

2. Hmmm, he's doing it the republican way!

Pootie should read American history, specifically from the period around, say, 1930.

[geek tragedy]

3. 10% cut is really harsh. Tough times ahead. nt

[Bosonic]

5. Russia raises key rate to 17%, effective Tuesday (from 10.5%)

Russia raises key rate to 17%, effective Tuesday

Russia on Monday announced that it would hike its key interest rate to 17 percent, effective Tuesday, citing rising devaluation and inflation risks.

The bank had raised the rate by 100 basis points to 10.5 percent last week in an effort to stem a run on its currency.

Earlier on Monday, the Russian ruble saw its biggest drop since 1998, but strengthened after the decision. It was last trading at 62.50 versus 65.50 before the announcement.

"This decision is aimed at limiting substantially increased rouble depreciation risks and inflation risks,'' the central bank said in a statement. The decision is effective from Dec 16.

http://www.cnbc.com/id/102264517#.

[CJCRANE]

6. The PTB want another global crash

and another war.

They can't allow the 99% to make any gsins.

[roamer65]

7. The real collapse is just beginning.

The OPEC Arab oil sheiks literally threw a financial bomb into the markets by not cutting production to support prices. The contagion is now spreading into the high yield bond and forex markets. Its going to be a very rough ride, so hang on.

The energy house of cards was built on the price supports that OPEC provided. Now they are gone.

[littlemissmartypants]

10. Yep. nt

[GliderGuider]

13. The oil price could be maintained as long as American import demand stayed high.

65% of US demand has been removed from the international market in the last 8 years. As a result, OPEC's ability to maintain $100 is gone with the wind.

American fracking is one of the things that is killing Russia

[quadrature]

8. Russian Rupee... new reserve currency for the world...

maybe not.

[pampango]

9. From Krugman: Putin on the Fritz

It’s impressive just how quickly and convincingly the wheels have been coming off the Russian economy. Obviously the plunge in oil prices is the big driver, but the ruble has actually fallen more than Brent — oil is down 40 percent since the start of the year, but the ruble is down by half.

What’s going on? Well, it turns out that Putin managed to get himself into a confrontation with the West over Ukraine just as the bottom dropped out of his country’s main export, so that a financing shock was added to the terms of trade shock. But it’s also true that drastic effects of terms of trade shocks are a fairly common phenomenon in developing countries where the private sector has substantial foreign-currency debt: the initial effect of a drop in export prices is a fall in the currency, this creates balance sheet problems for private debtors whose debts suddenly grow in domestic value, this further weakens the economy and undermines confidence, and so on.

The central bank may (or may not, as seems to be true in Russia right now) be able to limit the currency plunge by raising interest rates (now above 13 percent on Russian 10-years), but only at the cost of deepening the recession. Eichengreen et al (pdf), in a good discussion of all this in the Latin American context, give the example of Chile, which was hit very hard by falling copper prices at the end of the 1990s despite a much more favorable institutional setup than Russia right now — and, of course, without having de facto invaded a neighboring country.

I have no idea what this implies for either Russian politics or geopolitics. But talk of a new cold war, comparisons between Putin’s Russia and the USSR, look a bit silly now, don’t they?

http://krugman.blogs.nytimes.com/2014/12/15/putin-on-the-fritz/?_r=0

[freshwest]

11. It seemed some time back, that Russia held all the cards in Ukraine and Europe with their LPG.

Amazing that they banked so heavily on it. Diversification is one of the keys to economic stabilty and empires cost too much to maintain.

The fossil fuel business was an economic bubble that many nations sold their souls to keep going. It's a damned bad idea, when other sources of energy are better and more egalitarian. The oligarchs in this country, Russia, the Middle East and elsewhere are not helping mankind move in the direction it needs to go.

Like the sun, that huge glowing orb, sending free energy to us all the time. It's telling us a thing or two and we've been blinded. The world must move beyond this stupid paradigm or billions will die along with too much of the ecosystem.

We are busy destroying the life carrying capacity of this planet, the best one within our reach. It is a crime to destroy that which gave us life. We will fulfill our destiny no matter what that is, and that's something we must do and stop living in the dead past or lose the future.

I feel bad for the people of Russia and hope they and all their competitors can make this work for everyone. As far as the Koch brothers, they need to be shut down in perpetuity.

[GliderGuider]

12. The result of the US increasing their oil production and the Saudis maintaining theirs

Those converging factors are partly behind the plummeting price that's crushing the international oil market. Other oil exporters are suffering similar pain, even Canada is feeling pinched.