The big news coming out of Moscow this week is the continuing slide in the value of the rouble. On Monday, the rouble lost 8% against the Dollar. Over the last year, the rouble has lost 60% to the Dollar and 45% to the euro.
Why has the Russian currency fallen so fast and by so much? Does the devaluation jeopardise Russia’s financial stability and increase the risk of a debt default? How much further can the rouble fall? Or is this an attractive investment opportunity that comes around cyclically, every seven years in Russia?
These are the four key questions which a most authoritative commentator on the Russian economy posed and answered this week. Over the last 20 years, Mullingar’s Chris Weafer has proved to be the best-informed investment analyst in Moscow stockbroking and banking circles.
Although events are complex and fast-moving in Moscow, this week he put down some clear markers for investors and traders in Russia.
Writing this week in “Business New Europe” (BNE), Weafer notes the following in particular:
Russia’s total private sector Foreign Debt is only 33% of GDP, and is falling. (Germany’s is 82% of GDP; The UK’s is 90%; France’s is 90%; America’s is 107% and Japan’s 238%).Russia’s trade surplus exceeded $150bn for the three quarters to end of September. That was up 10% on the same three quarters for 2013.Russia’s current account surplus at end of September 2014 was just short of $60bn. That’s double what it was a year ago.Based on these and other key economic indices, Weafer remains generally positive about current and future investment opportunities in Russia. Most importantly, he concludes that, considering the health and wealth of Russia’s positive balance sheet and cashflows, “there is no reason for a Russian currency crisis”.
It should also be noted that Russia has some very valuable intrinsic human resources assets not measurable by economists. Specifically, Russians are the most resilient, the most tolerant, and the most patriotic of people.
Furthermore, they have seen and survived all this hardship – and worse – many times before. These are very exceptional personal qualities not measured by economic graphs, showing trends in GDP, interest rates, currency exchange rates, and inflation, etc.
Threats and opportunities
But Russia does have more pressing problems than a Rouble devaluation crisis. Specifically, Russian bread/cereal wheat prices have increased by 70% over the last two months. This is pushing up the prices of bread and pasta in Russian shops and supermarkets.
ROSSTAT, the Russian central statistics service, reports that retail food prices increased by 27.5% during November.
Russia’s food and agricultural production problems are deep-seated and long-standing. There are now fewer cattle on Russian farms than there were 70 years ago. Russian crop, milk and meat yields and production efficiency standards are all abysmally low.
Furthermore, 106m acres of prime agricultural land have been abandoned in Russia since 1994. That’s an agricultural land bank more than five times the size of the whole island of Ireland.
Bismarck’s secret
Currently, Russia is gearing up to apply Irish farm management systems and technologies to these abandoned farms. Russia could achieve this objective within the next 10 to 15 years. Then she will be able to comfortably feed her total population of 143m people with some to spare for exports. But this small agricultural land bank is less than 3% of Russia’s total agricultural land area. Now the full enormous potential of Russia as a global food and agricultural producer becomes clearer.
Brendan Dunleavy has over 20 years’ agricultural project management experience in Russia and Ukraine.
The big news coming out of Moscow this week is the continuing slide in the value of the rouble. On Monday, the rouble lost 8% against the Dollar. Over the last year, the rouble has lost 60% to the Dollar and 45% to the euro.
Why has the Russian currency fallen so fast and by so much? Does the devaluation jeopardise Russia’s financial stability and increase the risk of a debt default? How much further can the rouble fall? Or is this an attractive investment opportunity that comes around cyclically, every seven years in Russia?
These are the four key questions which a most authoritative commentator on the Russian economy posed and answered this week. Over the last 20 years, Mullingar’s Chris Weafer has proved to be the best-informed investment analyst in Moscow stockbroking and banking circles.
Although events are complex and fast-moving in Moscow, this week he put down some clear markers for investors and traders in Russia.
Writing this week in “Business New Europe” (BNE), Weafer notes the following in particular:
Russia’s total private sector Foreign Debt is only 33% of GDP, and is falling. (Germany’s is 82% of GDP; The UK’s is 90%; France’s is 90%; America’s is 107% and Japan’s 238%).Russia’s trade surplus exceeded $150bn for the three quarters to end of September. That was up 10% on the same three quarters for 2013.Russia’s current account surplus at end of September 2014 was just short of $60bn. That’s double what it was a year ago.Based on these and other key economic indices, Weafer remains generally positive about current and future investment opportunities in Russia. Most importantly, he concludes that, considering the health and wealth of Russia’s positive balance sheet and cashflows, “there is no reason for a Russian currency crisis”.
It should also be noted that Russia has some very valuable intrinsic human resources assets not measurable by economists. Specifically, Russians are the most resilient, the most tolerant, and the most patriotic of people.
Furthermore, they have seen and survived all this hardship – and worse – many times before. These are very exceptional personal qualities not measured by economic graphs, showing trends in GDP, interest rates, currency exchange rates, and inflation, etc.
Threats and opportunities
But Russia does have more pressing problems than a Rouble devaluation crisis. Specifically, Russian bread/cereal wheat prices have increased by 70% over the last two months. This is pushing up the prices of bread and pasta in Russian shops and supermarkets.
ROSSTAT, the Russian central statistics service, reports that retail food prices increased by 27.5% during November.
Russia’s food and agricultural production problems are deep-seated and long-standing. There are now fewer cattle on Russian farms than there were 70 years ago. Russian crop, milk and meat yields and production efficiency standards are all abysmally low.
Furthermore, 106m acres of prime agricultural land have been abandoned in Russia since 1994. That’s an agricultural land bank more than five times the size of the whole island of Ireland.
Bismarck’s secret
Currently, Russia is gearing up to apply Irish farm management systems and technologies to these abandoned farms. Russia could achieve this objective within the next 10 to 15 years. Then she will be able to comfortably feed her total population of 143m people with some to spare for exports. But this small agricultural land bank is less than 3% of Russia’s total agricultural land area. Now the full enormous potential of Russia as a global food and agricultural producer becomes clearer.
Brendan Dunleavy has over 20 years’ agricultural project management experience in Russia and Ukraine. 
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