Reports from Russia - 01/06/2015

Very dangerous and challenging times head for Russia (and the rest of the world) - but Russia and its people are robust.

Today is Christmas in Russia

Igor Strelkov : War Awaits Russia

Host: Aleksander Nikolaevich Krutov, Chief Editor of the periodical "Russian House"

Russian Default Risk Surges To New 6-Year Highs As Ruble Rubble Returns

Zero Hedge,

7 January, 2015

Just when you thought it was all over... Having bounced post-CBR intervention and somewhat stabilized, the re-collapse in crude oil prices and continued weakness in Russian macro data provided just the impetus for a re-plunge in the Ruble (back above 63.5/USD) and surge in Russian bond yields (back to 14%). While Russian stocks are also retesting towards recent lows, it is Russian CDS that is the most telling as it closed to day at 595bps - the widest since March 2009. While these violent gyrations are new for recent history, they are not a new phenomenon, but are quite characteristic of the country’s financial history.

The Ruble and stocks are not quite back to recent lows...

But Russian credit risk has hit new highs...

However, as RT explains, this is nothing new for Russia...

The dramatic fall of the Russian ruble made headlines in December. The violent gyrations in the ruble are not a new phenomenon, but are quite characteristic of the country’s financial history.

On December 15 and 16, the ruble took a 22 percent dive, which prompted a run on the Russian national currency.

The ruble’s spectacular 22 percent plunge on December 15 and December 16 has prompted investors to liken the crisis to 1998, when the ruble lost 27 percent on August 17. Reaching a 16-year low, the ruble fell to 80 against the USD. By the time of publication, it had recovered to 62.7, compared to 32.9 at the beginning of 2014.

800 years of history

One of Europe’s oldest currencies, the ruble has been in use since the 13th century. First made of silver, the currency derives its namesake from the Russian word ‘rubit’ which means to chop or hack, and originally was made from fragmented pieces of the Ukrainian hryvnia.

The ruble has been chopped, hacked, collapsed, and re-denominated several times throughout its nearly 800-year history. The most volatile years came along with regime change and revolution.

After the 1917 Bolshevik revolution, the ruble lost one third of its value, and in the following years while the country was gripped by civil war, the ruble dropped from 31 against the dollar to nearly 1,400. The ruble hit its historic low of 2.4 million per USD after the civil war and the year the revolution’s leader Vladimir Lenin died. It was re-denominated to 2.22.

Throughout the Soviet Union, the ruble was little used outside state borders, so the government kept the official rate close to the dollar, a massive overvaluation.

In the last years of the Soviet Union, the economic crisis caused panic among the population who were ‘stuck’ with their increasingly worthless rubles. A black market naturally developed, and while the official rate for the ruble was 0.56 per dollar, a single greenback actually sold for 30-33 rubles on the street.

From Soviet to Shock Therapy

The ruble collapsed along with the Soviet state, and different currencies were set up in the 15 different republics. The Central Bank of Russia replaced the State Bank of the USSR (Gosbank) on January 1, 1992 and the Russian ruble replaced the Soviet ruble.

The new Russian Central Bank set the official exchange rate at the Moscow Interbank Currency Exchange (MICEX) at 125 rubles to the US dollar. By December 1992, the ruble had already lost about two third's of its value.

Russia’s post-Soviet economy was dominated by ‘shock therapy’, and as President Boris Yeltsin’s reforms spurred rapid inflation, millions of Russians lost their savings.

Boris Yelstin’s political infighting with the Communists in 1993 caused the ruble to slide more, down to 1,247 per 1 USD. Yeltsin won the political coup, and a constitution was signed on December 12, 1993.

Shortly after the political victory, in January 1994, the authorities banned the use of the US dollar and other foreign currencies in circulation in an attempt to stymie the ruble’s decline.

Black Tuesday and Black Thursday

On October 11, 1994, an event known as ‘Black Tuesday’ hit the Russian financial market, and the ruble collapsed 27 percent in one day, which on top of a decline in GDP and massive inflation, catapulted Russia into an economic recession.

By the end of 1995, chronic inflation had reached 200 percent.

In 1996 the currency closed at 5,560 rubles per US dollar. 1997 was the first year of relative stability, but the ruble still fell to 5960 rubles per dollar. An era of stability prompted the government to devalue the currency and slash 3 decimal places, and on January 1, 1998, the ruble was set to 5.96 against the US dollar.

The bottom was ready to fall out of the economy. On August 17, 1998, Russia announced a technical default on its $40 billion in domestic debt and ceased to support the ruble on the same day. At the time, the bank only had $24 billion in reserves. The stock market and ruble both lost more than 70 percent, and nearly a third of the country’s population fell below the poverty line.

Along with the default came another mass devaluation of the ruble. In six months the value of the ruble fell from 6 to the dollar to 21 to the dollar.

“There was a desire to escape from the ruble from any direction,” Sergey Aleksashenko, deputy finance minister under Boris Yeltsin, has observed. Aleksashenko says today’s ruble crisis reminds him of 1998.

On May 27, 1998, the Central Bank increased the main lending rate to 150 percent, which brought loans to a near halt. By the end of 1998, inflation was 84 percent and the Russia GDP lost 4.9 percent.

Both currency crises in the 90s forced the governors of the Central Bank to resign.

The 1998 ruble crisis, like today, was driven by falling oil prices, which went as low as $18 in August 1998. However, today's crisis is much less of a risk, as Russia has more than 10x the amount of currency reserves as it did in 1998.

The ruble met the new millennium with a rate of 28 to the dollar, and after hitting a low of 31 in 2003, started to slowly strengthen.

Recession: in, out, and in again?

In 2008, Russia along with the much of the rest of the world fell into recession, losing 7.8 percent of GDP in 2009. The Russian economy fared the crisis rather well, and the economy was back on track with 4.5 percent growth in 2010.

Russia is facing its biggest currency crisis since 1998. The ruble has mostly been tumbling in tandem with weak oil prices, which have nearly halved since June, when Brent crude went for $115 a barrel. In January, pricesplummeted below $50 a barrel. The ruble has lost more than half its value since the beginning of the year. Investors worry that the devaluation, along with falling oil and political tensions, will send Russia into recession this year.

The Central Bank forecast a 4.7 percent decline in GDP if oil prices stay at $60 per barrel.

On December 15 the ruble plunged 11 percent, and to counter the plummet, the Central Bank increased the key lending interest rate to 17 percent, in the middle of the night. The next morning after slight gains in the early morning hours, panic against ensued, and the ruble shot up 22 percent, the biggest single day loss since 1998.

Russians called it ‘Black Tuesday’ in reference to the 1998 currency devaluation when the ruble jumped from 6 to the US dollar to 21 in less than 24 hours.

During his annual end of the year press conference, Russian President Putin didn’t place blame on any particular government department, but said the Central Bank’s response had been appropriate, but possibly too late. So far, Putin continues to describe the Central Bank’s policy as “adequate.”

The government has already made many swift moves to salvage the ruble since mid-December. It hiked the key interest rate to 17 percent to control ruble flows, has lent money to the company’s biggest oil producer, Rosneft, and bailed out the country’s 29th largest lender, Trust Bank.

Russia’s biggest oil producers, including Gazprom and Rosneft, have been ordered to sell a fraction of their foreign exchange revenues over the next couple of months in order to support the ruble, adding an estimated $1 billion to the daily market.

Why Putin Will Not Dump Novorossia: Moscow's and Kiev's Models of "United Ukraine" are Mutually Exclusive

Fort Russ,

2 January, 2015

Anatoly Wasserman - Antifashist.com

Translated from Russian by Kristina Rus

The much talked about "dumping" of Novorossiya, which is notoriously promoted by Ukrainian, Western and partially the Russian press [tr. and State Dep. social media warriors], in reality is unlikely, said in an interview with the news agency News Front a prominent intellectual and political analyst Anatoly Wasserman. The rhetoric about "united Ukraine", which is really voiced by the Kremlin officials, is fundamentally different from what is meant by the official Kyiv.

And Moscow's conditions are unacceptable to Kiev, as much as the Kiev regime's model of "united Ukraine" is absolutely unacceptable to Moscow. Wasserman believes such nuances are too significant to leave them out of discussion.

"A few words about "united Ukraine". Yes, this slogan sounds from the mouth of Putin and Lavrov almost as often as from the mouth of Poroshenko and Yatsenyuk. But, you know, the medieval scholastics used to say that if two people say the same thing, it does not necessarily mean the same thing. In this case, it is important for me that every statement of Putin and Lavrov about "united Ukraine" is accompanied by a description of the conditions under which Ukraine can in principle be united. A list of these conditions shows that the current Kiev usurpers cannot fulfill a single demand from this list. That is, in the words of Putin and Lavrov's the phrase "united Ukraine" actually means a radical change, constructing a completely new government, capable of ensuring equal rights, bilingualism and much more of what is really needed. Anything similar to what Kiev usurpers consider "united Ukraine" Russia will not accept," - said Wasserman.

According to the analyst, despite the diversity of opinions in respect to Donbass, which, of course, exists in Russian elites, overall there are no opponents of Novorossia there. Moreover, even pro-Western non-systemic opposition is promoting pro-Ukrainian rhetoric only because it is removed from power. In other circumstances, their screams would have exactly the opposite angle, says Wasserman.

"I'm talking about Russia, as a whole, although in my domestic publications I repeatedly emphasise that the Russian government is divided into two parts, as, indeed, the authorities in most countries of the world. One of these parts represents the interests of manufacturers and is grouped around the security block of the government and is headed directly by the President. Another part protects the interests of the merchants and is grouped around the economic block of the government and is headed respectively by the Prime Minister. The balance of these two parts explains and defines many of the oddities in the behaviour of the Russian Federation. But in relation to Ukraine, as far as I can tell, the positions of both parts of the Russian government are practically identical simply because in case of victory of the U.S. and its puppets in Kiev, not only the manufacturers in the Russian Federation will be destroyed, but a significant proportion of the merchants will pushed aside and they already understand this.

Given all the contradictions in Russian domestic affairs, I am quite convinced that neither Putin nor Medvedev can dump Novorossia. Moreover, even if by some miracle the dreams of, what in Russia is called non-systemic opposition, but, in fact, are mostly ordinary agents of American propaganda, - will come true, even they will be forced to defend the interests of Novorossia and not Kiev", - said the expert.

Translators Note:

At a Ukraine debate in USA a prominent Russian opposition member was asked a question: "How can Putin's high approval rating be lowered?" His answer was: "By making Putin look weak". Ironically the Western information machine has changed it's tune from blaming Putin for supporting Novorossia to blaiming Putin for not supporting Novorossia enough. This battle is raging on Russian internet pages, and is spilling over onto the pages of Western Novorossia supporters. Every event in Ukraine and Novorossia is evaluated by its utility to "Putin is a traitor" claim. Since the West had failed in its mission of nurturing any semblance of Russian opposition, and Putin's rating took off after Crimea, the West headed by Russia's main nemesis - the USA, has correctly refocused its attention on the untapped power of Russian patriotism. As a result the US has gotten Putin between a rock and a hard place. He is damned if he helps Novorossia, and he is damned if he doesn't. Russian patriots have been successfully divided into a pro-Putin and anti-Putin camp. The anti-Putin camp is outraged by negotiations, the halting of hostilities, calling for a march to Kiev, Russian boots on the ground yesterday, condones any deals with Kiev and says Putin caved to Russian elites, which caved to the West. The pro-Putin camp trusts in the "PSP" (Putin's Secret Plan, even if evolving), Lavrov's charm, measured steps, the building of a vertical of power and unified command, invisible aid, Russian resolve, consolidation of elites around the center and the ultimate goal of turning the entire Ukraine Russia-friendly, which would not be achieved by its invasion. The debate rages on, but ironically, Putin's replacement would be faced with the same tasks as Putin, if he was to hold on to power, according to Vasserman. The question is - would he be more successful?

America Lost in Ukraine

January 2, 2015

Rostislav Ishchenko for Prensa Latina

(Posted in Russian on R.I. VK page)

Translated from Russian by Kristina Rus

In 2014 the attention of the Russian society, and to a significant extent the international community was focused on Ukraine. This is understandable from the point of view of the dramatic events unfolding on this territory, but not correct, from the point of view of global processes, only a pale reflection of which were the events in Ukraine.

The Ukrainian crisis has become a logical continuation of the Syrian and Libyan crises, which began in 2011 and continued until now, and the Georgian crisis of 2008. All of these crises were stages of coordinated U.S. attack on Russia.

Actually the last six years, we are dealing with a global confrontation between Moscow and Washington, which entered an open phase in 2008 on the initiative of the USA and since then, developing incrementally. In these sequence the year 2014 became pivotal. Having suffered defeat in Georgia, stalled in the Middle East and North Africa, the USA attempted with one blow to turn the tide in their favor in Ukraine. With this goal an armed coup was organized in Kiev in an attempt to build a Nazi Russophobic state that would become the springboard for anti-Russian actions, and, ultimately lead to the destabilization of Russia and the destruction of its statehood.

As a result of complex military, political, diplomatic, economic and financial measures taken by the Russian leadership, the plan of Washington could not be fully implemented. However, the US did not back off and did not replace the point of the main focus, as it happened previously, when Georgia's central place in American plans was replaced by Libya, then Syria, and finally Ukraine. Washington took the path of building up efforts, mobilizing by the end of 2014 all their resources and allies.

However, Russia managed to hold on, and the U.S. got bogged down in Ukraine and provoked by their actions internal destabilization of the EU. Thus, in essence, 2014 was a year of struggle for the initiative, during which Washington has continued to raise the stakes and mobilize new resources, and Moscow accepted each new offered level of confrontation. At the same time, conducted by Russia in the summer exercises involving a half-million troops from all military districts and practicing defense from a nuclear attack on Russia and executing a counter-nuclear strike were originally supposed to show the opponents that Russia is ready for any developments, including the highest level of confrontation.

It can be stated that by the end of 2014 all available U.S. resources were activated and thrown into battle. At the same time, Russia has retained the ability to attract new resources of its own and of its allies. As a result, a defeat of the US in the medium term became inevitable. Therefore, Washington currently tries with maximum economic pressure, as well as enabling technologies of internal destabilization of Russia, to tactically win a strategically lost war.

Such a high voltage, the US and its allies (primarily the EU, which has already begun the process of decomposition) is not capable of withstanding much longer. However, the next few months, most likely the entire first half of 2015 will be critical. At the same time there is an extremely high risk of accidental plunge into a full-scale military conflict between nuclear powers. If Russia will be able to withstand the pressure in the spring or summer, then by the fall (and possibly earlier) the United States should move towards a strategic retreat and will be unable to regain the initiative in the future.

As for Ukraine, thanks to the complete inadequacy of the post-coup leadership of the country and its inability to control and stabilize the internal political and economic situation, Kiev completely lost its function of a subject and became exclusively an object of application of outside (primarily American) efforts. The country turned into consumable material working for foreign geopolitical interests and as such, will be used in 2015.

Since, as mentioned, the US is in a rush to actively use all available resources to destabilize Russia, to most efficiently use the remnants of the Ukrainian statehood, they only can through the intensification of the civil war in Ukraine and its spilling to new territories. Therefore, we should expect that during 2015 the entire territory of Ukraine will be one way or another engulfed in the flames of civil war. Since there are no more internal forces for its (war) termination and restoring some semblance of normal life in Ukraine left, then only external armed intervention and the introduction of external management over whatever is left of Ukraine will stop this conflict.

Russia should definitely take part in the military-political settlement in Ukraine, because, first, it is already involved, and second, because it cannot allow someone else to take over its own backyard in the condition of a global conflict.

In general, the end of the current geopolitical conflict lays beyond 2015 and should lead to the elimination of today's civilization, built on the principle of military-political and financial-economic dominance of the United States (which already do not live up to this role) and replacing it with a different, more equitable polycentric civilization of a multipolar world, in which the Anglo-Saxon countries, as the initiators of the current world conflict and the defeated party will be able to play the same role as the current Germany and Japan - important economically, but politically secondary. To build a new fair world de-americanization is needed not less than denazification after the World War II.

Rostislav Ishchenko, President of the Center of System Analysis and Forecasting

MH-17

Not a Buk-M1 missile - full report and analysis of fake evidence

Dear friends,

I have recently informed you that the Dutch blogger Max Vanderwerff had posted a very interesting analysis debunking the Buk-M1 "missile plume" theory.  Today I am posting his full research online which I encourage you to download from the following to locations:
http://www.mediafire.com/view/t5o16c6qz3nl8be/Not_A_Buk_-_final_copy.pdf
http://www.docdroid.net/oj8s/not-a-buk-final-copy.pdf.html

Both of these services offers to read the PDF file online.

I think that it is absolutely crucial that we not allow the truth about MH17 to be buried under an avalanche of lies or be 'forgotten'.  By now, there is a lot of research which has been done, some of it excellent, some of it less so, but we absolutely must continue to keep this topic alive.

Please read this report and do your best to circulate it amongst your friends.

Kind regards and many thanks,

The Saker

Finally it is Christmas (Рождество Христово) in Russia

Today Orthodox Christians like myself celebrate the Eve of the Nativity (aka "Christmas") and tomorrow will be a major feast day for us (Orthodox feasts always begin on the previous evening).

---the Saker