4-year low in oil prices "is hurting Russian economy more than US & EU sanctions"
Russia is set to lose about $40 billion (32 billion euros) per year due to Western sanctions over the Ukraine conflict, Finance Minister Anton Siluanov said Monday.
"We are losing around $40 billion per year due to geopolitical sanctions and we are losing some $90 to $100 billion per year due to oil prices falling 30 percent," Siluanov said in a speech at an economic forum in Moscow, quoted by RIA Novosti news agency.
Sanctions imposed by the European Union and the US on Russia's economy, which is largely dependent on exports of raw materials, block its access to international capital markets and also to technology.
Russia's Foreign Minister Sergei Lavrov on Saturday accused the West of attempting to achieve "regime change" in Russia through sanctions that aim to destroy the economy and rouse public protests.
President Vladimir Putin suggested Sunday Nov 23. that Russia could experience "catastrophic consequences" from sanctions, the falling oil price and the plunging ruble, while arguing that these would have knock-on effects for other countries.
"The modern world is interdependent. It's far from guaranteed that sanctions, the steep fall in oil prices, and the loss of value of the national currency will lead to negative results or catastrophic consequences only for us," Putin warned in an interview with TASS news agency.
Putin denied he had financial links to the Russian officials and businessmen from his inner circle who were targeted by Western sanctions blacklists.
He said to impose sanctions on those individuals in an attempt to get to him was an approach based on a "false premise."
Putin suggested that falling oil prices were due to "targeted steps by our partners on the world energy market."
Energy minister Alexander Novak said Friday that Russia was considering cutting its oil production in a bid to revive prices, as the falling price of crude along with sanctions over Ukraine have led to the ruble plunging in value.
A major producer of crude oil, Russia is not a member of the OPEC oil producers cartel, which is to discuss later in the week whether to cut output.
Russia gets about half of its revenues from oil profits. Its budget for next year, passed by the lower house of parliament on Friday, is based on an oil price of $96 per barrel.
Bloomberg Businessweek: 24. November 2014
Moscow rentals sink on sanctions, ruble fall
By Natasha Doff
A Russian ruble coin is pictured in front of the Kremlin in in central Moscow, on Nov. 6.
Timur Pankov was effectively living rent-free in Paris nine months ago, because the cost of his apartment was covered by the income from his Moscow property.
Russia’s incursion into Ukraine has made the arrangement a lot less attractive.
The ruble has slumped by 12 percent against the euro since March 1, when President Vladimir Putin asked parliament for the right to send Russian forces abroad after troops took control of administration buildings in Crimea. Since then, the rent Pankov can charge for his Moscow place has tumbled about 20 percent. He now receives the equivalent of 970 euros ($1,200) a month from the property while paying 1,400 euros for his two-bedroom apartment in the Parisian suburb of Boulogne-Billancourt.
“I’m losing money,” said Pankov. “Previously, I was able to cover my expenses with the money that I got from Moscow. Now it isn’t possible.”
A struggling property market is one more sign of Russia’s economic pain as the U.S. and the European Union punish individuals and businesses connected to President Vladimir Putin with sanctions and asset freezes. The world’s largest energy exporter has also had to contend with a 30 percent slide in the price of crude oil since June, leaving it on the brink of recession.
Demand for apartments to rent in the Russian capital has dwindled because European and U.S. companies have pulled workers out of the country in response to sanctions, according to George Sheremsky, an independent real estate broker in Moscow. Property agents are renting about a third as many flats per month as they were last year, he said.
Leaving town
The U.K.’s New Look Retail Group Ltd. and Finnish department store Stockmann Oyj Apb (STCBV) have reduced operations in Russia this year, while law firm Allen & Overy LLP, which has offices in 32 countries, scaled back its Moscow practice this month.
Foreigners account for 66 percent of high-end property in Moscow, where demand has dropped 10 percent in the first nine months of this year, according to Intermark Savills, the Russian partner of property brokerage Savills Plc. (SVS) Rents will fall by about the same amount by the end of the year, the brokerage said in a report.
Moscow is the world’s eighth-most expensive city to rent an apartment after London, Monaco, New York, Hong Kong, Bermuda, Tokyo and Paris, according to Global Property Guide. It costs an average $5,158 per month for a 120 square-meter flat (1,300 square feet) in Russia’s capital, compared with $5,317 in France’s first city and $11,089 in the U.K.’s.
Soviet collapse
The government gave most of the nation’s state-owned apartments to their residents after the collapse of the Soviet Union in 1991. A mortgage law came into force in 1998, helping more Russians become owners of their apartments. About 85 percent of the country’s 62 million registered flats were in private hands by the end of 2012, the most recent data available at the Mortgage Agency.
Rent gains have been moderated by increases in supply as builders completed projects in recent years, said Elena Kogteva, a spokeswoman for real estate broker Miel Group.
“The economic downturn is a recent thing and people don’t feel the impact of it yet,” she said by phone from Moscow. “There have been many completed construction projects so new flats have entered the rental market, which has caused prices to fall.”
Russians’ real wages fell in August and September, the first declines since November 2009, according to the Federal Statistics Service.
‘Absurd situation’
Russia’s economy will sink into a recession next year if the price of oil slumps to $60 a barrel and the U.S. and its allies tighten sanctions, Finance Minister Anton Siluanov said Nov. 18. Brent crude traded at $80.04 last week.
Ukraine, the European Union and the U.S. accuse Russian President Vladimir Putin of supporting the separatists. Russia denies involvement.
“Many European companies which had projects in Moscow have been cutting jobs because of the sanctions,” Sheremsky said by phone on Nov. 19. “It’s an absurd situation where politics has affected the Russian rental market. Companies and individuals are losing money because they are bearing the brunt of the standoff.”
Back in Paris, the ruble’s decline has forced Pankov to reconsider his investment options. His plan to acquire French real estate has been put on hold for now.
No comments:
Post a Comment