G7: Anti-russian rhetoric continues

    On the 26th of May 2016 the two-day annual G7 summit has taken place in Japan. Among the attendants there were the leaders of Germany, France, Italy, UK, USA, Canada and Japan. All these countries imposed economic sanctions in 2014 when the Crimea had been annexed. Russia was suspended from the then G8 in March 2014 over the annexation of Crimea.

      Some political analysts critisized G7 for their stance in terms of Russia. They emphasised that the dialogue needs to be continued in order to maintain the partnership in political, economic spheres. And this has happened: after 2 years the G7 leaders admit the importance of cooperation with Russia, but they aslo agreed to keep the sanctions until the Minsk peace agreement will be fully implemented. What does this joint statement means in the long-run?

Russia-Japan

          Let's first look at the Russia-Japan relations. Japan started to normalise the relationship with Russia. But what's the reason? The reason is the China's influence on Russian political and economical views can hurt Japan. Being one the major economical partners for Russia, China has taken advantage of bad relationship of  Russia and Japan. Now, Japan wants to take back what it's lost. Shinzo Abe has visited Russia and now waiting for Putin to come in near future. The main goal for Japan is to solve the Kuril islands dispute. A bargain for Russia will be the perspective of lifting the sanctions. The possibility of giving the russian islands to Japan is very high now.

Russia-Germany

Ties between the leading country of Europe and Russia has worsened much since the 2014. Being one of the major partners in 2012, Germany experienced the severe decline in trade with Russia:

"Compared with the record year in 2012, German exports to Russia have fallen by nearly half in the past three years from 38 billion euros ($42 billion) to 21 billion euros"

    But Angela Merkel is convinced that imposed sanction should be kept until the Moscow will implement the Minsk Peace Agreement. On the other hand, a new interview with  Germany's foreing minister Frank-Walter Steinmeier was in April 2016 named "Time to talk". This is the most interesting exerpt:

Don’t we have to get Russia involved again on the international stage?

We couldn’t ignore their flagrant infringement of international law and just proceed with business as usual. But for me the question of getting Russia involved and entering into dialogue is a matter of principle – not situational. I am absolutely convinced that, especially in difficult situations, you cannot play the isolationist card. Recent history does not provide many examples of isolationism and exclusion helping to bring about a political solution.

 We can see, that something will change soon. Germany is tired of isolation of Russia.

Sanctions will be prolonged in June

No matter what happens between Russian and other countries, G7 stays united in the question of sanctions. This is the joint G7 statement:

“We recognize the importance of maintaining dialogue with Russia in order to ensure it abides by the commitments it has made as well as international law and to reach a comprehensive, sustainable and peaceful solution to the crisis,” the declaration said. “ However, we also stand ready to take further restrictive measures in order to increase cost on Russia should its actions so require.”

As we see, G7 warns Russia to impose new restrictive measures  in order to achieve the success of Minsk agreements. But this will not happen, I guess. Within the EU some countries like Hungary, Italy, Greece are against, but their voices will not be heard until the majority of EU countries will stand against sanctions.

Russia is not discouraged

         Today, on 27 of May, Russian PM Medvedev gives orders to prepare to extend food embargo to end-2017. This will help the russian agrarians to plan their investments in a long-term perspective, he says.  Does that mean that even inspite of lifting sanctions by EU countries, Russia will not dismiss its food embargo? If so, we can expect sanctions to be in place until the 2017. At the same time, I guess the G8 will be revived soon, because the willingness to have a dialogue with Russia is a common stance for all countries within G7, except UK and Canada.

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Automobile industry crisis in Russia: the brands we have lost

What's happened to car sales in Russia?

     It's an open secret that Russia's economy has been passing through the tough times since the sanctions were imposed and oil prices dropped. The overall decline of economy in 2015 is 3,6% (acc. to official stats). Russian currency devalued more than twice since the December, 2014. Weakened rouble affected the whole country: an inflation has risen above 10%, import of goods and services dropped dramatically. But what business suffered most? - Automobile industry.

       Car market in Russia was one of the most dynamic emerging markets in the world being in one row with markets of Brasil, China, India. But world economic crisis (2008) has changed the trend: in 2009 Russia experienced the harsh downturn of car sales. To support government automobile manufacturers, as well as international ones, ministry of economic development introduced subsidized loans for buying a new car. Interest rates became low - from 4 to 7% (the average interest rate for bank loans in Russia in 2010 exceeded 20%). This helped a lot: car sales started slightly to improve

        December, 2014 had been watershed moment: before the devaluation rouble which influenced on prices of automobiles, consumers caused booming demand making a purchase that they wouldn't do if russian currency was stable. The result was amazing: sales of automobiles in December, 2014 was the record reaching 280 000 cars per month. Among leaders of sales in 2014 were:

         After such increase, car market experienced its worst downturn since 2009. According to statistics, in 2015 sales in Russian Federation fell by 43% from previous year. But devil is in detail. Lada admitted drop of sales in 2015 (-46%), but at the same time Kia (having a budget car model - Rio) had a smaller decline (-9%), as well as Hyundai (-8%). Moreover, premium brands rose: Cadillac (+15%), Porsche (+2%). This dynamics show that wealthy people have no problems with buying a car: their income in still high enough to afford a luxury automobile, even despite of fact that the prices have doubled since the 2014. But middle-class moved straight to a poverty line, that's why the demand for budget vehicles fell down. The consequences were disappointing: some brands decided to halt sales and to wait until the situation improves.

Brands that we have lost

         Opel and Chevrolet. GM announced they would leave in March, 2015. Many experts consider this act as a sign of deepest crisis, if such a giant company leaves. Many car makers in Russia were ready for losses, but no one expected GM to be one of the first sacrifices. This has affected on job market: factories closed in St.Petersburg and Kaliningrad. Opel and Chevrolet now sell out their stocks and then will dispose of its headquarters in Russia. In 2014, market share of GM was above 7,6%. This means GM has reached significant presence in Russia and can afford itself to have two or more years without profits. There were some thoughts that this decision has a political background: some experts suggested that USA government has forced GM to cut economic ties with Russia. Nobody knows exact reason, but many agreed that it's cheaper for GM to stop sales of Opel and Chevrolet rather than to continue to work in Russia.

    Another brand which struggled from devaluation of rouble is Seat (the branch of Volkswagen Group). Spanish car manufacturer abandoned Russia even earlier than GM, in October, 2014. It can be curious that Seat left russian market for the 4th time. Hope they will return back soon.

   While Kia and Hyundai are doing well, another korean brand SsangYong claimed they will leave right away after GM announcement. This decision was hard to accept for company, which biggest market in 2014 was Russia.

       Nonetheless, there're plenty of others we'll be missing: american Chrysler and Dodge, taiwanese Luxgen, chinese Geely, Great Wall and JAC. 

      Those who stayed are desperately trying to optimize its expenses in order to save profitability. Only in 2015, 47 car models are no longer available for sale. Amongst them are Subaru Impreza, Skoda Roomster, Hyundai Genesis, Kia Cerato, Honda Accord, Pegeout 107, Mazda 5, Audi TT. 

The next outsiders are expected: Pegeuot and Renault sales dropper more than average in 2015.

Growth inspite of the overall decline

       As a consequence of high Gini coefficient (41.6) in Russia, luxury brands have note experienced any hardships. Moreover, their sales grew rapidly in 2015. Luxury cars (above 2 mln. rur.) sales risen by 95%. . The leaders are Mercedes-Maybach, Rolls-Royce (+40%), Lamborghini (+9%), Cadillac. Most of such cars were sold in Moscow and St.Petersburg. In January, 2016 Ford grew by 25%, as well Lifan (+63%) and Suzuki (+25%). But situation hasn't improved yet: crisis is still here.

Prospects for car industry in Russia

      After a collapse in car sales in 2015, 2016 is expected to have a slight recover. Experts claims by the end of this year, automobile market will rise by 3-4%. Because of volatility, this forecast is considered to be approximate. Some dealers of cars has not reflected on new decline of russian currency in the end of 2015. This means that prices will rise further and sales can drop. There are several scenarios:

• Neutral. Prices will rise by 20-30%. Sales will fall more by 5%. 
• Pessimistic. Prices will rise by 35-40%. Sales will drop by 10%. New brands are expected to leave. Among them are Peugeot, Renault, Subaru.

      As you can see, there's no optimistic scenario because no one believes that sales will grow.
Russian authorities promise to spend more than 50 billion roubles of transfers in order to support the market (it should be used as subsidiaries for bank loans and direct support for russian car
manufacturer "Lada"). 
                                                  Since sales of new cars has been insufficient for growth, market of used cars felt only by 20% in 2015 (new cars sales felt by 43%). It's a sign that consumers demand moved towards used cars. In 2016, market of used cars will rise by 10%. Customers are intended to save their money and their choice became more rational. All the statistics shows that russian automobile market will recover only in 2017.

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Hot chart of new disciminative and restrictive laws in 2015 Russia

Hi everybody. I'm back to express my thoughts about legislative process being made by a bunch of people in government.

But first, I want you to enjoy your winter holidays :) Hope you'll have a great with your family, friends. This is truly magic time for all the dreams to come true. Make photos, walk, forget about social media and enjoy real life.
Also I declare that now and then this blog will be updated weekly :)

So, this was a tough year for Russia and myself is not exeption as well. There are many problems in Russia people faced this year in Russia. Among them are russian laws that are toughten gradually.
Lets observe the last changes.

Meduza.io have announced that in December 2015 a new non-government structure will be created - Community Council for analyzing the restrictive laws.

            This means that situation is really bad. Russian State Duma pass the laws that are even oppressive. This became real because no liberal power is being represented in State Duma. All of the member are either pro-Kremlin or fake liberals (like party LDPR). No real opposition at all. 

             In order to change this a new opposition coalition was established - Joint Democratic Coalition consisting mainly of two parties:     the Progress Party heading by Alexey Navalny and People's Freedom Party (PARNAS) heading by Mikhail Kasyanov. Unfortunately such popular politicians can't reach sucess even in regional elections. They experienced a setback in election in Kostroma in 2015 reaching only 2% of votes. Coalition described this results as a fraud of main russian party - "United Russia" (currently has a majority in State Duma).

           The main goal of Democratic coalition is to challenge the ruling party "United Russia" to loose the majority in State Duma in upcoming election in September 2016. This will change the order of passing laws, because as a fact "United Russia" party represent Putin in State Duma and by the way is ruled by Putin inspite of the fact that the leader of the United Russia in russian prime minister Dmitry Medvedev (the same situation in Turkey is between Erdoğan and Davutoğlu). 

         

But now before the elections Duma is trying to pass as much oppressive laws as they can.

Some of them:

1) Sanctions on Turkey (because of them the inflation goes up after the prices of vegetables grew up)

2) "Freezing" pension system's money to cover the deficit of budget (this means that all payments made by employed people to pension system are taken away from Pension Fund)

3) Allowing FSB employees to shoot down even in overcrowded places (this means that every meeting can end up with police shooting in crowd; and law also allows to shoot even in women and children)

4) Now Russia can ignore the decicion made by European Court of Justice and other international law structures and State Duma set a priority of desicions of Russian Courts over the decisions of other international court (this means that every oppressive act cannot be appealed against Russian Courts and Russia ignores the treaties made early in order to become a member of Parliamentary Assembly of the Council of Europe)

5) Payments for Russian government being taken from truck drivers for road's repairment (an additional tax for heavy trucks' drivers)

6) New 2016 budget of Russia (only military expenses increased. all social duties (medicine, education, etc..) are under cut by 10%.

7) Compulsoty registration of bloggers and other mass-media with the audience of 100 000 people montly (this means that government can regulate even popular blogger's activity and impose tough laws reffering to mass-media)

8) Eternal ban of any site in Internet across the Russian Federation (this law was used by blocking opposition parties sites and preventing news aggregators from publishing critics materials reffering to government)

9) Death penalty for terrorists (currently is being discussed. not passed)

All of that laws are overwhelmingly increased tension within the russian borders. Once in 1993 Russia have chosen Democracy as a central conception of country. But then in 2015 we see that there's a way back to dictatorship.

What will be next? Only elections in 2016 can change something. If the Democracy Coalition will loose the election, the new wave of oppressive laws can be approved.

All the materials are copyright of Victor Sadovsky. 2015 Free to share by posting a link on my blog

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Russian Paradox 2014

Hello. I've come back and got some thoughts about current situation in Russia. BIG BIG BIG BIG TROUBLE. That's how the title should be.
First of all, in a addition to all the problems that might really hurt me, Russia has got in trouble with its economy. President of Russia Putin now break all rules of economics trying to expand his influence on everyone and raise his rating.
If you haven't heart before more that a half of population of Russia appreciate Putin's politics regarding Crimea, sanctions, Donetsk SR and Lugansk SR. What we really see now is a kind of blindness and madness. People in Russia don't care about stagnation, inflation, annexation of Crimea, intolerance which is now supported by laws "against propaganda", poverty, devaluation of ruble, BAD medical care system, corruption and many other problems. All they want is to spend their vacations on the Crimea peninsula. The main problems for them is USA's (and of course NATO) military expenditure and threat.
Goverment TV channels broadcasting only pro Putin's propaganda. Do you remember the time when the Crimea had just been annexed? The day after the main TV channels prepaired the weather forecast for Sevastopol and other Crimea cities like it used to be a Russian territory. And when some people were confused, the other people started to think that everything is ok.
What is going on now? Central bank of Russia is increasing interest rates trying to handle the raise of inflation (expected 9% at the end of 2014) and stop the devaluation of ruble. But it will help only for a short period of time. In nearly future real wages are going down and poverty would increased. Unemployment rate will raise too. And meanwhile people are going to live worse, Putin's raiting will be high enough to win the next election in 2018. That's what I call the Russian Paradox.

I'm going to quit. I want to live here and now in a prosperous country with smart people. And it's not Russia

As a P.S. A meaningfull pic for you

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