Until February 2020 The government of the Russian Federation and the Central Bank confidently stated that the national currency was practically able to be decoupled from fluctuations in oil prices. The lack of dependence of the ruble on the dollar and a budget surplus will create, in the opinion of the Ministry of Finance and the Central Bank, predictable conditions for the development of the economy and the financial market, which will entail an increase in non-oil revenues of economic sectors and the population's refusal to save in dollars.
The “fiscal rule” should ensure the stability of the exchange rate, according to it, at a price above $ 42.4 per barrel, tax revenues from oil exporters from the difference between the actual and threshold prices are used to purchase currency, replenishing the National Welfare Fund (NWF). Thus, with high oil prices, the Central Bank provides additional demand for the currency and does not allow the ruble to strengthen too much. When the oil price drops, the accumulated currency is exchanged for rubles to cover the budget deficit. Before the accumulation of 7% of GDP in the fund, all funds of the NWF are placed on deposits and accounts of the Central Bank, which invests them only in highly liquid foreign assets, and above this level, placement in other financial assets is allowed. On 2020-01-03 the volume of the NWF amounted to 8.2 trillion rubles. or 123.14 billion US dollars, which is 7.3% of GDP,and taking into account the transit account of accumulated additional oil and gas revenues - 10.1 trillion rubles. or 9.2% of GDP.
The question was vigorously discussed: how to spend excess profits?
The Central Bank offered to refrain from spending, fearing that the use of the liquid part of the NWF would lead to a change in the inflation rate. The IMF experts advised to continue to invest funds of the NWF in high quality liquid assets. The Ministry of Finance also intended not to spend funds domestically, but to support buyers of Russian non-primary products abroad, but then began to consider the option of investing in national projects. It was also assumed that Sberbank shares could be bought with the money of the NWF in early 2020.
The “budget rule” is the main point of the macroeconomic structure that makes the population of the country and the Russian economy live as if oil always costs $ 40 since 2017, taking into account an annual indexation of 2%, regardless of its real value on world markets. Those. any price for 1 barrel of oil should not lead Russians to the idea of changing the conditions for the existence and development of the country's economy.
However, the reason for the close to linear dependence of the ruble exchange rate on the oil price is related to another circumstance. Hydrocarbons provide over two thirds of Russian exports and foreign exchange. So, in 2019, Russian exports amounted to 422.8 billion US dollars, exports of mineral products, including fuel and energy products - 267.8 billion US dollars, or 63.33% of total exports. There are no other types of raw materials that are significant in terms of volume in the export. At the same time, Russian imports are fairly well diversified, and the share of raw materials in its composition is insignificant.
Knowing the peculiarities of the Russian economy and its oil dependence, March 6, 2020. geopolitical rationality triumphs over the economic and social interests of the development of society. The breakdown of the OPEC + agreement is completely revising the planned policy of spending excess profits to cover lost income due to the decline in the price of quotations for Urals and other brands. The news of the loss of USD 100 million per day for Russia (the difference in price between USD 60 and USD 40 and total Russian exports of 5 million barrels per day) shocked professional participants in the oil market.
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However, according to the statement of the Ministry of Finance and the Central Bank of Russia, the funds accumulated in the NWF are sufficient for 6-10 years to fulfill social obligations even with the oil price at the level of USD 25-30 per barrel. Thus, the accumulated reserves not only will not flow into the development of the real sector of the Russian economy, but will disappear without a trace when covering the budget deficit. The country's budget approved for 2020 was based on the values of the oil price of USD 57.7 per barrel and the ruble exchange rate of 63.9.
To fulfill the budget with the given parameters, the “fair” dollar exchange rate as of March 18, 2020 was: 3,687 (57.7 * 63.9) / 28.66 = 129 rubles.
The struggle for an ambitious leadership position in the world oil market (giving a compliment to the Turkish leader, supporting China with cheap oil to restore the economy, demonstrating influence on the world economy in front of the Arab world, trying to prove the insolvency of shale deposits in the United States) provided the country with:
- Devaluation of social obligations in real terms with a depreciation of the national currency.
- Impossibility to stimulate consumer demand.
- Mass impoverishment of the population.
- Lack of GDP growth.
- The risk of not receiving oil and gas revenues in the amount of RUB 3 trillion.
- Change in the key rate of the Central Bank.
The announced coronavirus pandemic and the fall in oil prices will exhaust the reserves of not only the federal, but also the Russian regional budgets, the main sources of which are VAT and income tax. A decrease in the purchasing power of the population, a decrease in the average check, and a rise in prices are driving the country's economy into a deep recession.
The first measures taken by the Central Bank to stabilize the exchange rate: suspension of foreign currency purchases within the framework of the “budget rule”; sale of the accumulated currency from the NWF, with the oil price at the end of the month below USD 42.4 per barrel. Also, the Central Bank provides for some relief for loans to drug manufacturers, transport and travel companies.
All the efforts of the Government will be directed at the possibility of fulfilling budgetary obligations and at maintaining the share of the oil market, but at the expense of savings that would be used to develop the economy and improve the living standards of the Russian population. Society is on the brink of survival and degradation. Low-quality products, cheap Chinese clothes, an iPhone or other gadget purchased on credit, an overwhelming mortgage, a lack of desire for live communication and fear of starting a family and raising children are a long-term result of the stresses and shocks of the existing economy, subordinated only to political interests and saturation of the ruling elite of modern Russia rather than the public interest.
The instilled patriotism and self-sacrifice do not in any way apply to people who do not associate themselves with Russia and don’t sacrifice anything for its well-being. Most officials have assets abroad, directly or indirectly, and prefer to educate their children in the West.
The system of functioning of the economy built over the years is aimed at emptying the budget and withdrawing reserves abroad. Bank lending rates lead to the destruction of small and medium-sized businesses, despite all the loud statements about state support. What kind of support if the weighted average loan rate is 15% per annum? This is support for Gref and Kostin, the top leaders of the Central Bank, but not for the housing market, small and medium-sized businesses.
Russia is a country where the approval of any investment program goes a long way, from regional leaders to a decisive assessment of the deputy prime ministers. Let me give you an example: in 2017, I proposed a business development plan that was not related to either hydrocarbons or rare metals, the investment program was $ 100 million, and the revenues were $ 30-40 million per year. At the initial stage, the investment plan was approved, the parties signed a protocol to support this project. Further, from the regional level, the documents rose higher, approval had to be obtained from the Ministry of Finance and the Ministry of Industry and Trade. Both ministries recognized the project as promising and signed a protocol. Then it was handed over to the first deputy prime minister for final approval. For ten months he did not even find time to meet to discuss my proposals. Only from his office came a short answer signed by an ordinary official: "Russia is not interested in this." I invest 100 million dollars, create 300-400 new jobs, but Russia is not interested …
In 2018, I offered a business with an investment package of US $ 25-30 million related to maritime logistics and the development of the port of Sochi. Today the port of Sochi is empty, there is almost no navigation. The Customs and Border Guard Service of the Russian Federation approved the project, the Sochi Port Authority dreams of its implementation. But the administration of the Krasnodar Territory and the mayor of the city of Sochi opposed the project without any explanation or comment. They did not respond to inquiries in writing. Apparently, because they do not see their participation in such profitable projects. And this type, the mayor of Sochi believes that he cares about the townspeople - this regular business would create 50-70 jobs with an average salary of at least 70-90 thousand rubles (at the exchange rate to the dollar
2018). Will you, residents of Sochi, support such a mayor?
Already in January of this year, I applied for the development of an interregional business, with an investment package of $ 50 million. There was no answer - officials prefer to ignore business projects. And there are thousands of such examples. In no country in the world do projects reach such a high level for discussion and approval, if they are not related to the state budget. The entrepreneur implements private projects independently, he has more initiative, more freedom of action, which means more opportunities to participate in the development of the economy of his country.
The growth of the tax burden, tariffs and fees, as well as foreign policy complications do not allow foreign investments to join the Russian Federation and create profitable production. What future awaits Russia? … It still exists, but too radical … Does the world, Russia need radical measures?
Alexander Potemkin