Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20
Gold Gann Angle Update - 10th Jan 20
Gold In Rally Mode Suggests Commitment of Traders (COT) Data - 10th Jan 20
Disney Could Mount Its Biggest Rally in 2020 - 10th Jan 20
How on Earth Can Gold Decline During the U.S. – Iran Crisis? - 10th Jan 20
Getting Your HR Budget in Line - 10th Jan 20
The Fed Protects Gamblers at the Expense of the Economy - 9th Jan 20
Last Chance to Get Microsoft Windows 10 for FREE! - 9th Jan 20
The Stock Market is the Opiate of the Masses - 9th Jan 20
Is The Energy Sector Setting Up Another Great Entry? - 9th Jan 20
The Fed Is Creating a Monster Bubble - 9th Jan 20
If History Repeats, Video Game Stocks Could Soar 600%+ - 9th Jan 20
What to Know Before Buying a Land Rover Discovery Sport in 2020 - 8th Jan 20
Stock Market Forecast 2020 Trend Analysis - 8th Jan 20
Gold Price at Resistance - 8th Jan 20
The Fed Has Quietly Started QE4 - 8th Jan 20
NASDAQ Set to Fall 1000pts Early 2020, and What it Means for Gold Price - 8th Jan 20
Gold 2020 - Financial Analysts and Major Financial Institutions Outlook - 8th Jan 20
Stock Market Trend Review - 8th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Low Oil Prices Will Make Russia More Aggressive in 2017

Politics / Russia Jan 04, 2017 - 03:57 PM GMT

By: John_Mauldin

Politics

BY GEORGE FRIEDMAN : Russia has had a hard time since the collapse of global oil prices which began in August 2014. This will continue in 2017. The Russian people are starting to feel the effects of prolonged low oil prices. This was bound to happen. And this will shape Moscow's foreign policy in the year to come.

Russia’s money problems start with the economy’s structure. The country’s budget depends on income from oil exports. Low oil prices have had huge effects. And the country hasn’t even recovered from the 2008 decline.


Little to no investment was made in industrial alternatives. And almost no money was used to increase efficiency or to add new technology.

Low oil prices hurt

Signs of bad times started being seen in late 2012. Russia’s 2016 budget had planned for oil prices at $50 per barrel, and the deficit target was set at 3 percent. The drop in oil prices means less income. And that means the budget will not be met.

Russia can’t control the price of oil. So, it needs to find other ways to manage its budget. So far, this includes cuts in government spending (except in defense and social services). And there are plans to privatize some state-owned companies.

Prolonged low oil prices have had an impact on Russia's economy. GDP per capita in Russia is down from an all-time high of $11,615 in 2013 to $11,038 in 2015. Wages fell by 9 percent in 2015. And more than 2 million people fell into poverty.

In the first three months of 2016, inflation fell from 12.9 percent to 7.4 percent. That is the factor that worries Russia the most. Still, the central bank refused to cut the interest rate. At the same time, wages rose more than 5 percent. This is the first time since 2014 they have surpassed the rate of inflation.

And the people are suffering

The big danger for Russia, though, is how the oil price problem is affecting people. Wages over the last two years have had no real growth. The poverty level has increased. Now there are reports of food costing 50 percent or more of a person's income. People are starting to grow some of their own food so they can still eat some of what they can’t afford to buy in stores.

As a result, Russians’ despair has grown. A rising number of small, local protests have occurred. These often relate to specific economic issues, particularly pensions. The number of protests in big cities has declined, but protests in small cities have increased by 40 percent in the last year—according to the FNPR, the country’s largest workers’ association.

Making things worse are reports of wage arrears in different regions. These reports are becoming more common. Wage arrears in Russia totaled 3.8 billion rubles ($62 million) as of July 1, 2016. About a quarter of these delayed payments were the past month's pay for workers. About 30 percent, though, dated back to 2014 or 2013.

Reports of bankruptcies are also on the rise. One of the most troubling cases thus far deals with UralVagonZavod (UVZ). This is a corporation that consists of 40 entities and is among the world’s top 100 largest military-industrial companies. Three entities—Alfa-Bank, Barnaul Forge and Press Plant, and Central Boiler and Turbine Institution—have filed bankruptcy petitions in court against UVZ in the last few months due to unpaid debts.

So Putin will strut like a peacock

In response to these growing domestic pressures, President Putin has spent 2016 trying to further consolidate his power. He created the Council for Strategic Development and Priority Projects. This council aims to change things in the economy and the social sphere and to increase economic growth rates.

In an effort to show strength, Putin also revamped some of the branches of security bodies. Russia will continue to legitimize the regime in Moscow to those who suffer economically. They will do this by showing Russian power worldwide without really doing anything.

The worse the Russian economy gets, the bigger these shows of power will have to be. Moscow will engage in strategic regions of the world in 2017 with warlike talk and potential military posturing.

All of these moves will appear to be Russian aggression. But they will really be signs of Russian weakness. This is explained in detail in Geopolitical Futures’s 2017 forecast.

Grab This Free Report from George Friedman to See What Lies Ahead in 2017

Now, for a limited time, you can download this free report from George Friedman detailing the rocky roads that lie ahead for three globally important countries in 2017—and how the economic fallout from their coming crises could affect you. Top 3 Economic Surprises for 2017 is required reading for investors and concerned citizens alike. Get your free copy now.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules