Wanhua Chemical Group, the largest Chinese producer of MDI chemical raw material – vital for the Russian economy – they announced a ban on shipping to this country. Russian media reports that local companies from many industries are facing serious financial problems or even bankruptcy.
This is due to the latest sanctions from the US, which will affect, among others, Chinese, Turkish and Hungarian companies supporting Russia’s war against Ukraine. “Hit where it hurts” sanctions – Aaron Forsberg of the US State Department said last week. That’s mostly it China and India rescued Russia after an unsuccessful start to the war, which instead of being quick, was permanent. They import the goods that Russia has and provide those that she needs.
Let’s look at how the economy of the aggressor reacts to war.
The exchange rate of GDP rose to tala
If you look at the gross domestic product, you can even say that the war is good for the Russian economy. It has been growing at a rate of 4-5% year after year for more than a year, although the latest data showed a slight disappointment – an increase of 4%. y / y, which is clearly lower than forecasts (+4.2% y / y). However, we must understand that this disappointment is as great as our success – Poland’s GDP also increased by 4% in the second quarter. year to year.
In addition, last year in Russia there was an increase of 4.9% in the second quarter. y/y (in Poland a decrease of 0.7%), so it cannot be blamed on making up for last year’s losses. The growth of the Russian economy is important. This growth is a bit overwhelming as it is the slowest in a year.
Russia’s GDP dynamics in 2Q24 (percent yoy)
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Investing.com
Reserves at a high level
The level of international reserves at the Central Bank of Russia could prove that there is no shortage of money for the war. As of August 16, they were close to USD 610 billion. The reserves are not declining at all, which shows that the government does not need to tap into them.
Reservoirs are largely concentrated in gold that has become more expensive recently and is breaking historical records. Russia has 2,300 in its treasury. tons of gold currently worth $191 billion, which accounted for nearly 30% in August. the country’s foreign exchange reserves – according to data from the World Gold Council.
This year, he bought another 3.1 tons, ie less than Poland (18.7 tons)but he collected the largest amounts in the years 2014-2019 – a total of 1.24 thousand. tone Let’s remember that 2014 was the beginning of the unofficial attack against Ukraine, like “little green men”, when to live in Crimea and the eastern edge of Ukraine.
Russia depends on China and India
However, the ability to export to China and India, as well as the ability to import goods important to the war from these countries, is vital to the Russian economy. Thanks to this, Putin’s country maintains a high surplus in foreign trade, which allows them to maintain high reserves and a stable ruble. In June, exports were 11.5 trillion rubles higher than imports.
Russia’s trade balance to June 24
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Investing.com
Since Rosstat data is delayed by country, let’s look at Chinese and Indian.
Therefore, Russian imports from China, counted in millions of dollars, fell between January and July this year. changed so far by 1.1 percent to USD 61 billion, but exports increased by 3.9%. up to 75 billion dollars Russia is already a bigger trading partner for China than Germany, and although imports from Germany to China are falling rapidly (11.7% year on year since January to July), imports from Russia are growing.
Read also: Zelensky has a plan to end the war. There are four points
As far as India is concerned, imports from Russia are estimated from April to June this year. changed so far +19.7% compared to yesterday. to USD 18.3 billion, and exports to Russia by 35.8 percent. up to 1.3 billion USD As can be seen from export values to Russia, the main supplier of war equipment is probably China, not India. With both countries, Russia records a high surplus of exports over imports.
Business at war speed
Despite the sanctions so far, the lack of components and semi-finished products does not seem to affect the Russian industry. In the first half of this year industrial production increased by 4.4% in the largest country in the world. year to year. But in June itself the dynamics was only +1.9%. y/y, and compared to May there was a decrease of 1.9%. – Rosstat reported.
Russian business representation June 24
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Rosstat
Production in Russian mines decreased by 0.3%. y/y in the first half of the year and by 3.1 percent y/y in June, but the industry grew by 8 and 4.6%, respectively. etc. The automotive industry has experienced a major shift, where the increase was as much as 27.4%. y/y in the first half of the year and by 21.7 percent in June. 330,000 passenger cars were produced in Russia, ie up to 62 percent. another year. The production of vehicles and other equipment, including war equipment, increased by 26.5%. y/y in the first half of the year, and by 19.7 percent in June. Production of computers, electronic and optical products increased by 36.1%. year on year in the six months of the year, and by 30.9 percent y/y in June. Metallurgical production and coke production were poor.
292 billion cubic meters of gas were extracted from gas fields in Russia, which is 9.4 percent. more year to year, and from oil fields – 54 billion cubic meters. (+3% y/y). Russia has made data on oil production secret. Gasoline production in the middle of the year was up 29.1%. less year on year (4.2 million tons), and diesel oil 3.1%. less (42.7 million tons).
Employment and salaries
Workers in Russia cannot complain about higher wages either. In June they were 16.3 percent higher. higher year after year. With inflation of 8.6 per cent year on year, this means an increase in real wages of 7.2%, which is about the amount more the national average can buy than a year ago.
People seem to have no economic reasons to take to the streets. In June of this year 74.4 million people had jobs, ie 855 thousand plus more from year to year. During the year, 470,000 more women work and 385 thousand men. The unemployment rate in June was just 2.4 percent. After more than 14 percent are employed in trade and industry.
Unemployment rate of Russia June 24
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Investing.com
High inflation
The only thing that the Putin administration did not control was the inflation. During the war, money printing machines work more intensively, and each subsequent invasion of Russia is always similar to the economy. Inflation climbed above 10 percent during the attack against Georgia in 2008, then during the first attack against Ukraine in 2014, and the same is true now.
Russian Inflation July 24
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Investing.com
At the same time, as we mentioned above, inflation does not bother the Russians and does not make them rebel against the authorities, because wages are growing faster than inflation, so the standard of living improves.
What makes Putin?
What can change Russia’s position enough to make it abandon the war and peace talks? The transfer of military operations to its territory by Ukrainian troops, ie the so-called Kursk operation is definitely one way. However, it may be essential to cut Russia off from parts of China and new sanctions affecting Chinese producers could make a big difference. The US is still a much more attractive market for the Chinese and they will be willing to give up exports to Russia just to be present on the thriving US market.
Falling oil prices are also creating problems for Russia. On Tuesday, the price of Brent crude oil decreased by 0.8%. less than $80 per barrel. The price of Russian Urals crude oil is around 7 USD. low
Unfortunately, European gas prices have also increased since February, from EUR 24 to EUR 38 per MWh currently. Unfortunately, money is still flowing to Putin and although it is flowing in abundance, the conflict is far from over.
Author: Jacek Frączyk, editor of Business Insider Polska
2024-08-27 13:23:12
#Russia #deals #war #Putins #economy #tables
