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18 hours ago, The Dog said:

Wanted to last night but was on mobile. Here you go (soft paywall):

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Five months into the Russian invasion of Ukraine, there remains a startling lack of understanding by many Western policymakers and commentators of the economic dimensions of President Vladimir Putin’s invasion and what it has meant for Russia’s economic positioning both domestically and globally.

Far from being ineffective or disappointing, as many have argued, international sanctions and voluntary business retreats have exerted a devastating effect over Russia’s economy. The deteriorating economy has served as a powerful if underappreciated complement to the deteriorating political landscape facing Putin.

That these misunderstandings persist is not entirely surprising given the lack of available economic data. In fact, many of the excessively sanguine Russian economic analyses, forecasts, and projections that have proliferated in recent months share a crucial methodological flaw: These analyses draw most, if not all, of their underlying evidence from periodic economic releases by the Russian government itself. Numbers released by the Kremlin have long been held to be largely if not always credible, but there are certain problems.

First, the Kremlin’s economic releases are becoming increasingly cherry-picked—partial and incomplete, selectively tossing out unfavorable metrics. The Russian government has progressively withheld an increasing number of key statistics that, prior to the war, were updated on a monthly basis, including all foreign trade data. Among these are statistics relating to exports and imports, particularly with Europe; oil and gas monthly output data; commodity export quantities; capital inflows and outflows; financial statements of major companies, which used to be released on a mandatory basis by companies themselves; central bank monetary base data; foreign direct investment data; lending and loan origination data; and other data related to the availability of credit. Even Rosaviatsiya, the federal air transport agency, abruptly ceased publishing data on airline and airport passenger volumes.

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Since the Kremlin stopped releasing updated numbers, constraining the availability of economic data for researchers to draw upon, many excessively rosy economic forecasts have irrationally extrapolated economic releases from the early days of the invasion, when sanctions and the business retreat had not taken full effect. Even those favorable statistics that have been released are dubious, given the political pressure the Kremlin has exerted to corrupt statistical integrity.

Mindful of the dangers of accepting Kremlin statistics at face value, our team of experts, using private Russian-language and direct data sources including high-frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data, have released one of the first comprehensive economic analyses measuring Russian current economic activity five months into the invasion, with contributions from Franek Sokolowski, Michal Wyrebkowski, Mateusz Kasprowicz, Michal Boron, Yash Bhansali, and Ryan Vakil. From our analysis, it becomes clear: Business retreats and sanctions are crushing the Russian economy in the short term and the long term. Based on our research, we are able to challenge nine widely held but misleading myths about Russia’s supposed economic resilience.

[Further reading: Fiona Hill, a top Russia advisor to three U.S. presidents, explains why the world shouldn’t fall for Moscow’s narrative that it can wait out the West in Ukraine.]

Myth 1: Russia can redirect its gas exports and sell to Asia in lieu of Europe.

This is one of Putin’s favorite and most misleading talking points, doubling down on a much-hyped pivot to the east. But natural gas is not a fungible export for Russia. Less than 10 percent of Russia’s gas capacity is liquefied natural gas, so Russian gas exports remain reliant on a system of fixed pipelines carrying piped gas. The vast majority of Russia’s pipelines flow toward Europe; those pipelines, which originate in western Russia, are not connectable to a separate nascent network of pipelines that link Eastern Siberia to Asia, which contains only 10 percent of the capacity of the European pipeline network. Indeed, the 16.5 billion cubic meters of gas exported by Russia to China last year represented less than 10 percent of the 170 billion cubic meters of natural gas sent by Russia to Europe.

Long-planned Asian pipeline projects currently under construction are still years away from becoming operational, much less hastily initiated new projects, and financing of these costly gas pipeline projects also now puts Russia at a significant disadvantage.

READ MORE

A currency exchange office in Moscow

Why Russia’s Economy Is Holding On

With oil exports strong in April, Putin avoids economic ruin while hammering Ukraine.

ANALYSIS | 

MICHAEL HIRSH

A woman walks past a currency exchange office in central Moscow.

The Fall and Rise of the Russian Ruble

Western sanctions ravaged the ruble after Putin’s invasion of Ukraine. How did the currency bounce back?

Q&A | 

CAMERON ABADI

Overall, Russia needs world markets far more than the world needs Russian supplies; Europe received 83 percent of Russian gas exports but drew only 46 percent of its own supply from Russia in 2021. With limited pipeline connectivity to Asia, more Russian gas stays in the ground; indeed, the Russian state energy company Gazprom’s published data shows production is already down more than 35 percent year-on-year this month. For all Putin’s energy blackmail of Europe, he is doing so at significant financial cost to his own coffers.

Myth 2: Since oil is more fungible than gas, Putin can just sell more to Asia.  

Russian oil exports now also reflect Putin’s diminished economic and geopolitical clout. Recognizing that Russia has nowhere else to turn, and mindful that they have more purchasing options than Russia has buyers, China and India are driving an unprecedented approximately $35 discount on Russian Urals oil purchases, even though the historical spread has never ranged beyond $5—not even during the 2014 Crimean crisis—and at times Russian oil has actually sold at a premium to Brent and WTI oil. Furthermore, it takes Russian oil tankers an average of 35 days to reach East Asia, versus two to seven days to reach Europe, which is why historically only 39 percent of Russian oil has gone to Asia versus the 53 percent destined for Europe.

This margin pressure is felt keenly by Russia, as it remains a relatively high-cost producer relative to the other major oil producers, with some of the highest break-evens of any producing country. The Russian upstream industry has also long been reliant on Western technology, which combined with the loss of both Russia’s erstwhile primary market and Russia’s diminished economic clout leads to even the Russian energy ministry revising its projections of long-term oil output downward. There is no doubt that, as many energy experts predicted, Russia is losing its status as an energy superpower, with an irrevocable deterioration in its strategic economic positioning as an erstwhile reliable supplier of commodities.

Myth 3: Russia is making up for lost Western businesses and imports by replacing them with imports from Asia.

Imports play an important role within Russia’s domestic economy, consisting of about 20 percent of Russian GDP, and, despite Putin’s bellicose delusions of total self-sufficiency, the country needs crucial inputs, parts, and technology from hesitant trade partners. Despite some lingering supply chain leakiness, Russian imports have collapsed by over 50 percent in recent months.

China has not moved into the Russian market to the extent that many feared; in fact, according to the most recent monthly releases from the Chinese General Administration of Customs, Chinese exports to Russia plummeted by more than 50 percent from the start of the year to April, falling from over $8.1 billion monthly to $3.8 billion. Considering China exports seven times as much to the United States than Russia, it appears that even Chinese companies are more concerned about running afoul of U.S. sanctions than of losing marginal positions in the Russian market, reflecting Russia’s weak economic hand with its global trade partners.

Myth 4: Russian domestic consumption and consumer health remain strong.

Some of the sectors most dependent on international supply chains have been hit with debilitating inflation around 40-60 percent—on extremely low sales volumes. For example, foreign car sales in Russia fell by an average of 95 percent across major car companies, with sales ground to a complete halt.

Amid supply shortages, soaring prices, and fading consumer sentiment, it is hardly surprising that Russian Purchasing Managers’ Index readings—which capture how purchasing managers are viewing the economy—have plunged, particularly for new orders, alongside plunges in consumer spending and retail sales data by around 20 percent year-over-year. Other readings of high-frequency data such as e-commerce sales within Yandex and same-store traffic at retail sites across Moscow reinforce steep declines in consumer spending and sales, no matter what the Kremlin says.

Myth 5: Global businesses have not really pulled out of Russia, and business, capital, and talent flight from Russia are overstated.

Global businesses represent around 12 percent of Russia’s workforce (5 million workers), and, as a result of the business retreat, over 1,000 companies representing around 40 percent of Russia’s GDP have curtailed operations in the country, reversing three decades’ worth of foreign investment and buttressing unprecedented simultaneous capital and talent flight in a mass exodus of 500,000 individuals, many of whom are exactly the highly educated, technically skilled workers Russia cannot afford to lose. Even the mayor of Moscow has acknowledged an expected massive loss of jobs as businesses go through the process of fully exiting.

Myth 6: Putin is running a budget surplus thanks to high energy prices.

Russia is actually on pace to run a budget deficit this year equivalent to 2 percent of GDP, according to its own finance minister—one of the only times the budget has been in deficit in years, despite high energy prices—thanks to Putin’s unsustainable spending spree; on top of dramatic increases in military spending, Putin is resorting to patently unsustainable, dramatic fiscal and monetary intervention, including a laundry list of Kremlin pet projects, all of which have contributed to the money supply nearly doubling in Russia since the invasion began. Putin’s reckless spending is clearly putting Kremlin finances under strain.

Myth 7: Putin has hundreds of billions of dollars in rainy day funds, so the Kremlin’s finances are unlikely to be strained anytime soon.

The most obvious challenge facing Putin’s rainy day funds is the fact that of his around $600 billion in foreign exchange reserves, accumulated from years’ worth of oil and gas revenues, $300 billion is frozen and out of reach with allied countries across the United States, Europe, and Japan restricting access. There have been some calls to seize this $300 billion to finance the reconstruction of Ukraine.

Putin’s remaining foreign exchange reserves are decreasing at an alarming rate, by around $75 billion since the start of the war. Critics point out that official foreign exchange reserves of the central bank technically can only decrease due to international sanctions placed on the central bank, and they suggest that nonsanctioned financial institutions such as Gazprombank could still accumulate such reserves in place of the central bank. While this may be technically true, there is simultaneously no evidence to suggest that Gazprombank is actually accumulating any reserves given sizable strain on its own loan book.

Furthermore, although the finance ministry had planned to reinstate a long-standing Russian budgetary rule that surplus revenue from oil and gas sales should be channeled into the sovereign wealth fund, Putin axed this proposal as well as accompanying guidelines directing how and where the National Wealth Fund can be spent—as Finance Minister Anton Siluanov floated the idea of withdrawing funds from the National Wealth Fund equivalent to a third of the entire fund to pay for this deficit this year. If Russia is running a budget deficit requiring the drawdown of a third of its sovereign wealth fund when oil and gas revenues are still relatively strong, all signs indicate a Kremlin that may be running out of money much faster than conventionally appreciated.

Myth 8: The ruble is the world’s strongest-performing currency this year.  

One of Putin’s favorite propaganda talking points, the appreciation of the ruble is an artificial reflection of unprecedented, draconian capital control—which rank among the most restrictive of any in the world. The restrictions make it effectively impossible for any Russian to legally purchase dollars or even access a majority of their dollar deposits, while artificially inflating demand through forced purchases by major exporters—all of which remain largely in place today.

The official exchange rate is misleading, anyhow, as the ruble is, unsurprisingly, trading at dramatically diminished volumes compared to before the invasion on low liquidity. By many reports, much of this erstwhile trading has migrated to unofficial ruble black markets. Even the Bank of Russia has admitted that the exchange rate is a reflection more of government policies and a blunt expression of the country’s trade balance rather than freely tradeable liquid foreign exchange markets.

Myth 9: The implementation of sanctions and business retreats are now largely done, and no more economic pressure is needed.  

Russia’s economy has been severely damaged, but the business retreats and sanctions applied against Russia are incomplete. Even with the deterioration in Russia’s exports positioning, it continues to draw too much oil and gas revenue from the sanctions carveout, which sustains Putin’s extravagant domestic spending and obfuscates structural economic weaknesses. The Kyiv School of Economics and Yermak-McFaul International Working Group have led the way in proposing additional sanctions measures across individual sanctions, energy sanctions, and financial sanctions, led by former U.S. Ambassador to Russia Michael McFaul and the experts Tymofiy Mylovanov, Nataliia Shapoval, and Andriy Boytsun. Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia.

Defeatist headlines arguing that Russia’s economy has bounced back are simply not factual—the facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.

See Also: Is It Time for the U.S. to Issue a Digital Dollar?

 

This is a great article and it kind of goes to the paradox that we face in confronting Russia.  Europe and the collective West are objectively much better positioned to face off in an economic war of wills against Russia.  Politically, however, Putin’s rigid authoritarian system is better positioned to absorb the short-term pressures that arise as a result of the stand-off; the Russian state does not face accountability to citizens that bear the brunt of the war.

In a larger view, you can see this with military spending and defense budgets.  Objectively, Russia should cower in fear of the half-billion citizen economic and technical behemoth to the West called the EU.  But EU leaders are accountable, they cannot simply choose to spend more on defense, and have to provide more to their citizens than just a diet of propaganda and artificial national pride. 
 

The numbers are all on our side, the unfortunate bit is that this is a long game that requires principle over pandering. Which is in short supply these days. 

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8 hours ago, atomheartbevo said:

 

This type of shit is meant to piss people off from the West and the changing goal posts within Russia are designed to keep people talking about the benefits.   Everyone knew this was about conquest and restoring the old USSR.  It will fail for the same reasons the USSR failed and Putin is not as strong as Stalin to mobilize the country and get them going.  

 

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25 minutes ago, Nivek said:

This type of shit is meant to piss people off from the West and the changing goal posts within Russia are designed to keep people talking about the benefits.   Everyone knew this was about conquest and restoring the old USSR.  It will fail for the same reasons the USSR failed and Putin is not as strong as Stalin to mobilize the country and get them going.  

 

Putin pumps iron to show Russians his healthy side

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13 hours ago, Viper said:

That's great and all but I'm not sure I buy that liberal journalist Glenn Greenwald is a Russian disinformation agent

Are you serious? It's hard to tell. Did you mean this Glenn Greenwald, liberal journalist?

https://boingboing.net/2022/07/26/this-video-of-glenn-greenwald-fawning-over-alex-jones-is-a-stronger-emetic-than-syrup-of-ipecac.html

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7 hours ago, InkaUtexas said:

Reports are it is still standing. Hit the fucker again. Wait until they are repairing it. 

 

It may be standing, but it ain't happy. And I sure as hell wouldn't want to cross it with anything heavier than a Camry or even maybe even a bicycle. 

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1 minute ago, Dahobbs said:

It may be standing, but it ain't happy. And I sure as hell wouldn't want to cross it with anything heavier than a Camry or even maybe even a bicycle. 

The objective is to disable it so Ivan can't use it. They are taking back their territory with the intent to rebuild so the more stuff they blow up the more they have to fix. 

in other news:

 

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So they have hit the ammo dumps and supply bases. Then the command structure, then now the bridges…

This is textbook for an offensive and if I was a Russian commander I would find any reason I could not to be in the their HQ the next few days because that is the other textbook thing to hit once as the offensive becomes underway…

Edited by Laxtonto
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17 minutes ago, Laxtonto said:

So they have hit the ammo dumps and supply bases. Then the command structure, then now the bridges…

This is textbook for an offensive and if I was a Russian commander I would find any reason I could not to be in the their HQ the next few days because that is the other textbook thing to hit once as the offensive becomes underway…

Add in some hits on AA/Radar sites as well.

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6 hours ago, 956 Worldwide said:

 

The numbers are all on our side, the unfortunate bit is that this is a long game that requires principle over pandering. Which is in short supply these days. 

I miss Shady's commentary/analysis of what he's seeing on the ground in Germany.  I'm guessing the majority support for Ukraine we saw in the weeks after the invasion is waning as fall/winter get closer.

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4 minutes ago, Fico said:

Add in some hits on AA/Radar sites as well.

What I find so weird is that I wrote the SOP out like a week or so ago on here of what was going to be the target list with the extended range of the HIMARS MLRS and the Ukrainian military bloggers have pretty much documented each stage for the world to see.

So either this is one of the biggest head fakes in the world and they are going to make a push elsewhere or they want everyone to know what is coming and are giving those troops every possible option to retreat/give up/ return home to make the offensive both move a bit quicker and to also limit casualties to both sides.  Regardless of how much disarray the RU command structure is in or how low on ammo and supplies the troops are, the offensive will be bloody being that it is going to be urban warfare...

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2 minutes ago, Laxtonto said:

What I find so weird is that I wrote the SOP out like a week or so ago on here of what was going to be the target list with the extended range of the HIMARS MLRS and the Ukrainian military bloggers have pretty much documented each stage for the world to see.

So either this is one of the biggest head fakes in the world and they are going to make a push elsewhere or they want everyone to know what is coming and are giving those troops every possible option to retreat/give up/ return home to make the offensive both move a bit quicker and to also limit casualties to both sides.  Regardless of how much disarray the RU command structure is in or how low on ammo and supplies the troops are, the offensive will be bloody being that it is going to be urban warfare...

One wonders how much info about the looming and obvious offensive is trickling down to the average Ivan in the field.  

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7 minutes ago, Chad Fuck said:

One wonders how much info about the looming and obvious offensive is trickling down to the average Ivan in the field.  

Well, I am pretty sure that they can't really hide that all of the sudden ammo and supplies are running short and for some reason who is in charge keeps changing.

 

The reason why might not be something that is directly talked about, but I bet each squad on the front has somebody that is tech-savvy enough to be getting outside of the RU internet/news.  That is the nature of that age group. They are dying for news from the other side just to have validation of what the scuttlebutt going around is. The real question is not are they young guys hearing about it, but are the older conscripts going to go along with the idea of of retreating/giving up/ returning home or are they going to be the glue that helps hold the troops together.

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Not too bad of a job on the bridge, it still allows for foot traffic which probably isn't a bad thing since it's a fairly long bridge. The Russians can technically escape on foot, but will be exposed, while also being forced to leave their heavy equipment behind for the Ukrainians to repurpose.

I would assume that the Russians would boobytrap that stuff and blow the bridge behind them themselves though. 

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16 minutes ago, Laxtonto said:

Well, I am pretty sure that they can't really hide that all of the sudden ammo and supplies are running short and for some reason who is in charge keeps changing.

 

The reason why might not be something that is directly talked about, but I bet each squad on the front has somebody that is tech-savvy enough to be getting outside of the RU internet/news.  That is the nature of that age group. They are dying for news from the other side just to have validation of what the scuttlebutt going around is. The real question is not are they young guys hearing about it, but are the older conscripts going to go along with the idea of of retreating/giving up/ returning home or are they going to be the glue that helps hold the troops together.

You say this, and I'd be inclined to agree with you if it weren't for the video upthread of RU soldiers being astounded at individualized indoor plumbing and heating. And also that the Russians have pretty much sucked at tech this entire war on myriad levels.  And further that the ruskies appear to be drawing a large fraction of their troops from outlier ethnic minorities who apparently are significantly disenfranchised in a number of ways not least of which being education and technology.

I'm skeptical. 

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3 minutes ago, MillerEP said:

Not too bad of a job on the bridge, it still allows for foot traffic which probably isn't a bad thing since it's a fairly long bridge. The Russians can technically escape on foot, but will be exposed, while also being forced to leave their heavy equipment behind for the Ukrainians to repurpose.

I would assume that the Russians would boobytrap that stuff and blow the bridge behind them themselves though. 

 

I go back and forth about how willing the RU is of blowing bridges. On one hand, they want to do everything in their power to make sure that the Ukrainian advance stops at the Dnipro river. To this effect, I would be willing to be the RU already has secondary positions dug on the other side of the river to help limit any potential fording or bridging attempt in the coming weeks.

The other argument is that after the disastrous fording/pontoon bridging attempts made in this campaign it is blatantly obvious that the RU engineers cannot meet the task of getting a large force over the river now with the Ukrainians having much more precision-guided artillery (and MLRS but that is probably overkill for what needs to be done) with continual drone surveillance means that the only way to potential counter-attack and retake Kherson is over the bridges. So if they ever want to retake the city after this (which is a vital lynchpin in their initial advance) they need the bridges (and can just like the Ukrainians just set it up with charges and zero it in with artillery as a backup) and as such make it obvious that they will blow the bridges later if the Ukrainian arms tries to rush over it.

Bridges are crazy assets in a wartime scenario that most people just gloss over. Getting a massively heavy armored vehicle over a body of water is incredibly difficult and so if you just just highlight the deep water rivers on the western Ukraine map you can essentially see the front...

 

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4 minutes ago, Chad Fuck said:

You say this, and I'd be inclined to agree with you if it weren't for the video upthread of RU soldiers being astounded at individualized indoor plumbing and heating. And also that the Russians have pretty much sucked at tech this entire war on myriad levels.  And further that the ruskies appear to be drawing a large fraction of their troops from outlier ethnic minorities who apparently are significantly disenfranchised in a number of ways not least of which being education and technology.

I'm skeptical. 

Maybe the play is to let them stay in Ukraine if they surrender now and wait out the war as a pow.  Will be plenty of construction work for years, need some labor for the rebuild. They can maybe for the first time live somewhere with hot water and a bathroom. 

Edited by Pato del Muerto
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1 minute ago, Pato del Muerto said:

Maybe the play is to let them stay in Ukraine if they surrender now and wait out the war as a pow.  Will be plenty of construction work for years, need some labor for the rebuild. They can maybe for the first time love somewhere with hot water and a bathroom. 

It isn't a terrible play.  But it would require a lot of trust on the part of the Ukrainians.  

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