Russia and the West

Ananda

The Bunker Group

This is already many times, market (western market players) warn western Politicians to not playing politics too much with market mechanism. So far Western Politicians meddling with market mechanism during this trade war, hurt Western population (and some argue) relative more than the effect toward Russian population.

This in sense because Russian economy already prepared themselves for large hit. While Western publics are not being prepared on the consequences, because when Western politicians launch this trade war, they are so sure the effect to Russia will be devastating while to West only minimum.

When I talk toward Energy traders, how G7 can cap Russian oil prices. What they say the effect can be other way around. Russia can sell cheaper toward the 'friendly' market (as they do right now) and price up the margin to cover it toward 'unfriendly' market. Just like JP Morgan warn, the actual happen will bite more the West energy market.
 

Twain

Active Member
OK, and Robin Brooks is one of the foremost experts in the world on the subject and I have a degree in economics from a top 30 University in the US. I'm old and haven't used that knowledge at work in years so everything isn't as fresh in my mind as it used to be but the basic parameters are set.

Some of those data points include:

Imports are obviously dropping drastically, that's well documented. Russia needs imports, it's an extraction based economy and needs imports just to meet basic demand for finished goods.



Take a look at the link above this, what russia exports, almost all of it is extraction. they suck at manufacturing.

I'd like to see some data about non-military railyard activity as that and imports/exports are 2 key (among others) indicators of economic activity. Those are two of the factors banks use to estimate GDP and GDP growth rates since so many countries lie about those two statistics. I suspect that commercial railyard activity is way down, linking closely with import activity.

I have to go for now but I will try to expand more on this later when I have more time. There's a whole list of things that need to be covered in particular the export ban on integrated circuits, this may end up hurting russia more than any other sanction.

I am going to try to get back to this as time permits, I'm pretty busy right now is all. What we need to start with is the effect of the sanctions on microchip sales to russia as this will probably have one of the biggest effects on the russian economy. Russia is roughly 20 years behind the major chip manufacturing and designing countries right now. (apologies if any of this has been posted)

"The country’s leading chipmaker, the Mikron Group, is similarly dependent on foreign components and manufacturers. To illustrate the level of Russia’s technological backwardness in this area: Mikron has mastered the local production of semiconductors with 180-nanometer circuitries and 90-nanometer circuitries, but not for mass production, while Taiwan’s TSMC is embarking on the production of semiconductors of 2 nanometers. "


"Russia is building up plans to revive its ailing local manufacturing of semiconductors, since it cannot get chips from the usual suppliers. The country's new chip plan involves a rather massive investment over the next eight years, the goals don't exactly sound ambitious. For example, while TSMC plans to hit 2nm by 2026, Russia wants 28nm local chip manufacturing by 2030."

"A longer-term goal is to establish manufacturing using a 28nm node by 2030, something TSMC did in 2011."





To get modern chips russia is entirely dependent on foreign imports and those are being stopped in a rather effective way.


"This week, Taiwan's Ministry of Economic Affairs (MOEA) published a list of strategic high-tech goods that are barred from export to Russia and Belarus, reported DigiTimes. The ministry stated exports of these high-tech commodities are also banned from Belarus because it could help Russia bypass the sanctions."

"Firms from these two countries are now banned from purchasing Taiwan-made microprocessors or microcircuits which have any of the following specifications: performance speeds of 5 gigaflops or above, clock frequency rates in excess of 25 MHz, an external interconnection with a data transfer rate of 2.5 MB/s or greater, more than 144 pins, or a basic propagation delay time of less than 0.4 nanoseconds."



"Baikal Electronics may freeze the project for the release of Baikal-S server processors presented at the end of 2021 due to problems with placing orders for production in Taiwan, market participants told Kommersant. According to them, a number of large structures, including Sberbank, counted on significant batches of servers on Baikal-S in order to fulfill the requirements for import substitution. Now Russian companies will have to look for ways to parallel import servers on foreign processors, since there will be no alternative."



So what does this mean? A number of things for many different industries. Obviously russian production of precision weapons systems is going to be heavily constrained.


Cars:

"The buzz about AvtoVAZ's Lada Granta Classic -- priced to sell at 678,300 rubles ($12,500) -- is about what it doesn't have: No airbags. No antilock brakes. No electronic stability system. No pretensioners to make the seat belts work properly. No GPS. An engine that complies with emissions standards from 26 years ago."


"Longtime Russia analysts said the economy is not on the verge of outright collapse, like what happened after the 1991 Soviet breakup.

"But we're talking about a return to the Brezhnev era, where modernization stops and it's this stasis-type of situation with lifestyles [and] people have few choices," said Chris Weafer, founder of the consultancy group Macro-Advisory, referring to the period under Soviet leader Leonid Brezhnev in the 1970s when the Soviet economy stagnated.

"The economy's now going into a twilight zone," he said."


Civilian Aviation

Russia is going to struggle to make new aircraft in the near future and may struggle to even keep their current aircraft in the air.



"According to the paper, Aeroflot was looking to purchase the Irkut MS-21 medium-range aircraft, also known as the MC-21, which can carry more than 200 passengers and is due to enter service this year.

Without access to spare parts, it is unclear how long Aeroflot’s current fleet can stay in the air."

Russia is getting some key components through "parallel imports" The problem is most countries won't certify aircraft using these parts so they will be largely limited to flights within russia.



Every industry that uses modern chips is going to be affected. Some sooner than others, passenger jets are going to be a problem by probably september. Others than had large stockpiles of chips will last longer.

Here's something indicating the current effects to date:

Russia May 2022 industrial production year on year


passenger cars -96.7%
tv sets etc -49.7%
AC motors -49.9%
fiber optic cables -80.8%
fridges -58.1%
washing machines -59.2%
trucks -39.3%
diesel locomotives -63.2%
freight cars -51.8%


This will have carryover effects into other industries over time. Russia is only keeping the unemployment rate low by doing two things
Coercing companies to keep people employed
Subsidizing payrolls for companies

other things I will try to cover as time permits

Industrial machinery
supply issues in general-containerized shipping
value of the ruble
 
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Feanor

Super Moderator
Staff member
I am going to try to get back to this as time permits, I'm pretty busy right now is all. What we need to start with is the effect of the sanctions on microchip sales to russia as this will probably have one of the biggest effects on the russian economy. Russia is roughly 20 years behind the major chip manufacturing and designing countries right now. (apologies if any of this has been posted)

"The country’s leading chipmaker, the Mikron Group, is similarly dependent on foreign components and manufacturers. To illustrate the level of Russia’s technological backwardness in this area: Mikron has mastered the local production of semiconductors with 180-nanometer circuitries and 90-nanometer circuitries, but not for mass production, while Taiwan’s TSMC is embarking on the production of semiconductors of 2 nanometers. "
It's worse then that I'm afraid. Russia doesn't have a robust 20 year old micro-electronics industry. Russia has bits and pieces of a microelectronics industry in various states of dysfunction with technology that ranges from 20 years old to somewhat newer to completely nonexistent.
 

Ananda

The Bunker Group

The key for Modern Tech is semiconductor, and both China and Russia knows well that area still their achiless heals. The article above basically talk before how MCST (which is subsidiary of Rostec) being design to support Russian strategic industries. Their taiwan production line build there to take advantage of semiconductors ecosystem there. However by relocating back to Russia, it will going to reduce MCST own semiconductors progress, unless Russia wiling pouring the money in.

Already put in Chinese Thread how China already havs their own 90nm Litography Machine on their own. I don't know how the progress of Russian Litography. China and Russia need to work more together, but they do have still suspicious nature to each other especially on high tech sector.

Lets see if Western sanctions can drive them more closely working with each other, and more importantly their trust bonding.
 

Twain

Active Member

The key for Modern Tech is semiconductor, and both China and Russia knows well that area still their achiless heals. The article above basically talk before how MCST (which is subsidiary of Rostec) being design to support Russian strategic industries. Their taiwan production line build there to take advantage of semiconductors ecosystem there. However by relocating back to Russia, it will going to reduce MCST own semiconductors progress, unless Russia wiling pouring the money in.

Already put in Chinese Thread how China already havs their own 90nm Litography Machine on their own. I don't know how the progress of Russian Litography. China and Russia need to work more together, but they do have still suspicious nature to each other especially on high tech sector.

Lets see if Western sanctions can drive them more closely working with each other, and more importantly their trust bonding.
So far no, that isn't happening.

Chip exports to Russia plunged by 90% after curbs-U.S. official


90 nm processes put china on a par with russia, roughly 20 years behind, TSMC may be at 2 nm in roughly 3 yrs. TSMC made 90 nm chips at scale in 2004-05.

So far china isn't willing to take too many risks in this sector as the result could be being cut off from modern chips. Just look at the rollercoaster Huawei has been on if you want to see the result of losing access to western designed chips.
 

Ananda

The Bunker Group

Even US must provide huge financial incentives toward enticing Chip foundries relocating to US mainland for Biden initiatives on domestic sourcing. Thus if Russia did not provide enough Investment toward semi conductor, their own effort will be at least a decade behind on electronics. However does not mean they can not build their own avionics, sensors, or advance equipment for their military and aerospace. It will be bulkier then Western equivalent though, but they already done this since the 60's.

Since USSR era, they always lag behind from west in microelectronics. However does not mean their designers can not find way to circumstance and bring about closing performance with bulkier equipment.

far china isn't willing to take too many risks in this sector as the result could be being cut off from modern chips.

Huawei is the thing that push China more drive to be independent on semiconductor. They are practically already in tech embargoes from West. Perhaps equivalent with what Russia got in 2014. I already stated in Chinese thread that don't underestimate Chinese drive if they are pouring money on that.

Unlike Russia, China have much bigger resources thus chances to catch up with West on microelectronics. Those that Chinese drop from sending to Russia are from foundries that work on Western design chips. However according to Chinese forums and media, they are still supply Russia their own design Chips.

Afterall it is West that drove China and Russia closer to each other, despite their mutual base distrust. West that make them closer because they have no other choices. Like I said many times in this forum, US and Collective West that actually drive Globalisation toward multipolar interactions, from US unipolar domination ones.

Note:
Chinese foundries already produce for 28nm and now working toward 14nm. However they are still using mostly ASML Litography machines. Their own Litography machines still in 90nm that already in the market. So far they are claiming to work on 28nm Litography machines. However this is still their own claim.

While Russian foundries still work on 90nm, with no information so far on their own litography machines. So there's different between Foundries capabilities and Litograhy machines development.
 
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Feanor

Super Moderator
Staff member

Even US must provide huge financial incentives toward enticing Chip foundries relocating to US mainland for Biden initiatives on domestic sourcing. Thus if Russia did not provide enough Investment toward semi conductor, their own effort will be at least a decade behind on electronics. However does not mean they can not build their own avionics, sensors, or advance equipment for their military and aerospace. It will be bulkier then Western equivalent though, but they already done this since the 60's.

Since USSR era, they always lag behind from west in microelectronics. However does not mean their designers can not find way to circumstance and bring about closing performance with bulkier equipment.
There's a big difference between can and will. The USSR had a fully functioning micro-electronics industry and computer industry as well as decades of autarky to rely on. They also had control of a much larger territory and population, and a large number of satellite states. Finally technology requirements were lower and it was easier to compensate for absence of the most advanced electronics. Russia may be able to source some alternatives from China or RoK, or other sources. But overall it's a bad situation with no obvious and easy solution in sight.
 

Ananda

The Bunker Group
Russia may be able to source some alternatives from China or RoK, or other sources. But overall it's a bad situation with no obvious and easy solution in sight.
Agree on that, if Russia can not find alternatives suppliers that'll be equivalent with Western ones. That's why I said Russia and China need each other. However on microelectronics, Russia need China more.

Russia need to face the fact China on many part are superior then them now days. If Russia do not changes their technological superiority attitudes, then they will be in deep problem on catching up tech without China co-op. Alone, there's no chance Russia cam catch up in tech. With China it will be up hill battle, but still doable.

Note:
My Previous post does not mean Russia is in USSR possition. It is only in head of Russian dreamers. However since USSR times Russia always behind in microelectronics.

Despite Rostec claim, Russia will never able to catch up on microelectronics alone. That's why they need China. While China knows well also they need to be independent on Western Microelectronics tech. This is where they need to work it out their differences to be able to catch up the West and independent from Western embargoes.
 
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ngatimozart

Super Moderator
Staff member
Verified Defense Pro
Mad Vlad and his fellow criminals along with Xi and the CCP developing mutual trust…..not an easy or likely outcome IMO.
I wouldn't entirely discount it. My enemy's enemy is my friend. They do have a fair bit in common and that is increasing daily. They don't have to shag each other, just work together and form enough trust to know that they won't knife each other that often.
 

swerve

Super Moderator
It's worse then that I'm afraid. Russia doesn't have a robust 20 year old micro-electronics industry. Russia has bits and pieces of a microelectronics industry in various states of dysfunction with technology that ranges from 20 years old to somewhat newer to completely nonexistent.
One of Russia's problems is that to make the latest & best chips (or even a generation or two behind) requires lithography machines that it couldn't buy even before sanctions. One company dominates the market, & it's based in the Netherlands (ASML). There are three other significant producers: one in the USA & two in Japan. They work with the big chip makers, not just sell to them.
 

Feanor

Super Moderator
Staff member
One of Russia's problems is that to make the latest & best chips (or even a generation or two behind) requires lithography machines that it couldn't buy even before sanctions. One company dominates the market, & it's based in the Netherlands (ASML). There are three other significant producers: one in the USA & two in Japan. They work with the big chip makers, not just sell to them.
And this isn't just a Russian problem. China faces this issue as well. Developing your own lithographics takes stupendous amounts of time and money, and Russia doesn't have the internal market for it anyways. Today's technology is more complex and requires nearly global economics of scale to be cost-efficient. It's what makes today's supply chains to much more fragile and integration into the global economy so much more important. In the 20's and 30's the USSR was mostly fine being under sanctions. It limited them somewhat but had minimal impact on the average factory worker or peasant. And the USSR building cities from scratch and producing basic heavy industry didn't require much foreign expertise (though they still got some and it helped).

It's different now. At the geo-strategic level it's what makes this war such a blunder in my opinion. Russia needed to mend fences with the west post 2014, not blow up their relationship completely. There was a space for competition with the US while continuing to be part of the global economy and developing domestically. Now it's about surviving the sanctions and partial isolation.
 

Ananda

The Bunker Group

Another assesment from Market that shown how this talk from G7 is good in paper only, but very hard to implement and probably will hit West more then Russia.

One thing that I want to point in here, market see that when dealing with current energy crisis, everybody going to cover themselves. Outside Collective West and its closest allies, everyone else will not going to bother with what G7 leaders want. Especially relating to Russia on energy procurement.
 

Big_Zucchini

Well-Known Member
Israel and Russia relations are again facing a crisis. Russia is cracking down on the Jewish Agency offices in Russia, and Israel doesn't understand why. Israeli media assumes it is related to Israel's relations with Ukraine, or another possibility being raised frequently is Russia's attempts to prevent brain drain.

The ambiguity stems from the sudden move which was done directly between the Russian government and the Jewish Agency, instead of in an official Russia-Israel diplomatic channel. Also contributing to the ambiguity is the Jewish Agency's staff deciding to handle the situation with their own legal teams and not involving the embassy, until now.

It is worth noting at this point that although Israel maintains diplomatic channels and understandings with Russia, for example on topics like Syria and Iran, both are naturally maintaining policies that are in conflict with one another. On Russia's part, it's the activities in the middle east in a broad sense. On Israel's part, what's of particular importance is the aid to Ukraine which is largely covert. It being covert means that it's kept hidden from the public eyes, but not necessarily from governments like Russia. The logic is simple - mere political embarrassment has significant value.

For example, an expose by US gov't officials on the Israel-Iran naval war led Iran to intensify attacks to save face.

Logically, this dispute can either lead to Israel reducing aid to Ukraine, or it could lead to an increase. It's not particularly clear, and in short the Israeli PM (Lapid) and president (Herzog) are said to try and solve the matter privately, away from the public eye to avoid embarrassing Russia, and thus avoid forced responses from Russia.

Sources:
 
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Big_Zucchini

Well-Known Member
Likely in the context of the Jewish Agency spat, Israel's defense minister reveals the S-300 launch against Israeli aircraft back in May this year, was done by Russia troops. That is, the Syrian S-300 are manned by Russians.

He also revealed it was a "one-off" incident and that the aircraft were no longer present when the missile was launched.


Such moves are atypical for Israel, with or without fast-changing governments.

This could potentially signal a warning that Israel might make its Ukraine aid more overt if Russia does not back down and ultimately bans Jewish migration.
 
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Twain

Active Member
I'm just going to post this for now, largely (but not entirely) without comment. It's an economic analysis of the current situation in Russia. It is somewhat lengthy, 118 pages. The first 70 are text followed by a "summary" mainly consisting of bullet points etc. essentially a power point presentation. I've had time to get through about half the text.

so far

Don't trust russian economic numbers, the topline results don't make sense when you look at the underlying data.
Russia is withholding a lot of economic data that used to be published regularly.
Things are quite a bit worse than Moscow wants to admit.

I'll just say that after reading and digesting half of study, I think they are exactly right about a few things and they are way wrong on others. A few things they claim, like the number of people fleeing russia since the start of the war seem somewhat inflated. People are fleeing russia, particularly STEM workers, but I don't think they are at the rate the authors claim. One thing I think they got right is that inflation is much higher than russia is willing to admit. Short version, lots of rubles out there but a significant shortage of consumer goods points to higher inflation that russia admits.

I went on much longer than I planned, but I blame the study, there's a lot of data there.

I tried uploading the pdf here but the system won't let me, file is too large so here's a link to both the abstract and a link to downlead the pdf (link at upper left)

 

ngatimozart

Super Moderator
Staff member
Verified Defense Pro
I'm just going to post this for now, largely (but not entirely) without comment. It's an economic analysis of the current situation in Russia. It is somewhat lengthy, 118 pages. The first 70 are text followed by a "summary" mainly consisting of bullet points etc. essentially a power point presentation. I've had time to get through about half the text.

so far

Don't trust russian economic numbers, the topline results don't make sense when you look at the underlying data.
Russia is withholding a lot of economic data that used to be published regularly.
Things are quite a bit worse than Moscow wants to admit.

I'll just say that after reading and digesting half of study, I think they are exactly right about a few things and they are way wrong on others. A few things they claim, like the number of people fleeing russia since the start of the war seem somewhat inflated. People are fleeing russia, particularly STEM workers, but I don't think they are at the rate the authors claim. One thing I think they got right is that inflation is much higher than russia is willing to admit. Short version, lots of rubles out there but a significant shortage of consumer goods points to higher inflation that russia admits.

I went on much longer than I planned, but I blame the study, there's a lot of data there.

I tried uploading the pdf here but the system won't let me, file is too large so here's a link to both the abstract and a link to downlead the pdf (link at upper left)

@Ananda would be the one on here to go over this. It's his field of expertise and the Moderators regard his as the go to SME.
 

Twain

Active Member
@Ananda would be the one on here to go over this. It's his field of expertise and the Moderators regard his as the go to SME.

You know, I think I am done here. I have a degree in economics from a top 30 university in the US and top 100 in the world. This whole "he's been around forever so he must know more" is just dumb. Seniority is one of the worst ways possible to establish knowledge and expertise. I have been posting very occasionally for years but reading regularly and I have to say the quality of posts on here is getting much worse year by year, There are multiple links nearly every day that are just crap. time to find another forum among the thousands on the internet.

I'll check posts and messages for a few days in case anyone has any questions about the paper I posted.

Adios
 

Ananda

The Bunker Group
I have a degree in economics from a top 30 university in the US and top 100 in the world. This whole "he's been around forever so he must know more" is just dumb. Seniority is one of the worst ways possible to establish knowledge and expertise
What degree that you have and where it came from mostly only get you through the door for your first employment. After that everything depends on your track record. After your first employment (at least in my industry) most recruiters only look on your track record and not care much what Uni you are coming from.

As for Russian economics condition, Take a look in this thread, I believe most of us (including my self) believe that Russia will not come out good economically. However collective west will also pay the price. So far the price that Collective West has to pay on this trade war is not small. Definetely not what many Western Politicians try to picture on the begining of this trade war. Especially the price the Euro Zone has to pay.

Russia will pay hefty price economically due to the war in the ground and trade war with Collective West. However the data that shown (even every one in market knows Russian playing with some market mechanism to augmented their data), still shown that what Collective West hope for total collapse of Russian economy so far toward second semester this year has not shown that.

Seems this is not being accepted well by many in the West that hoping more cost being paid by Russian. I suspect from your post, you are part of that segment. Well we are in the middle of this year, IMF predict Russia pay -7% to -8% contraction this year. My self tend to go with most market analyst (especially from commodities market) prediction it will be less then -5% contraction. It is still possible they can only got less then -2% contraction (eventough it is having less probabilities). All base on how far Russian commodities performance in export market. Cause under current situation, that's where Russian hope to build their reserve.

However collective west will still have to pay with only averaging 1% to 2% growth, even some will be less then 1% growth. Big question is whose that will be bounce back sooner after next two years. This is what market predict that collective west and Russia both will have to suffer 2022 and 23 economically, before can make enough adjustment for 2024.

So Russia will likely got recession but not be enough to depression level that many in West hope. While many in west will have stagnation eventough not necessary in Reccesion range. As I have said in this thread some time ago, market already predict both side will have to pay price on this trade war, and it will be costly prices. Seems so far what many in market (even in West) predict on the cost of war both collective west and Russia has to pay, still on track.
 
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Karl Franz

New Member
As for Russian economics condition, Take a look in this thread, I believe most of us (including my self) believe that Russia will not come out good economically. However collective west will also pay the price. So far the price that Collective West has to pay on this trade war is not small. Definetely not what many Western Politicians try to picture on the begining of this trade war. Especially the price the Euro Zone has to pay.

Russia will pay hefty price economically due to the war in the ground and trade war with Collective West. However the data that shown (even every one in market knows Russian playing with some market mechanism to augmented their data), still shown that what Collective West hope for total collapse of Russian economy so far toward second semester this year has not shown that.

Seems this is not being accepted well by many in the West that hoping more cost being paid by Russian. I suspect from your post, you are part of that segment. Well we are in the middle of this year, IMF predict Russia pay -7% to -8% contraction this year. My self tend to go with most market analyst (especially from commodities market) prediction it will be less then -5% contraction. It is still possible they can only got less then -2% contraction (eventough it is having less probabilities). All base on how far Russian commodities performance in export market. Cause under current situation, that's where Russian hope to build their reserve.

However collective west will still have to pay with only averaging 1% to 2% growth, even some will be less then 1% growth. Big question is whose that will be bounce back sooner after next two years. This is what market predict that collective west and Russia both will have to suffer 2022 and 23 economically, before can make enough adjustment for 2024.

So Russia will likely got recession but not be enough to depression level that many in West hope. While many in west will have stagnation eventough not necessary in Reccesion range. As I have said in this thread some time ago, market already predict both side will have to pay price on this trade war, and it will be costly prices. Seems so far what many in market (even in West) predict on the cost of war both collective west and Russia has to pay, still on track.
Indeed, there is no doubt Russia is going to go through a period of economic pain, however its length and magnitude, or lack there of, is what surprised many and why we are still seeing discrepancies in what IMF and some analysts still predict and what is actually apparently happening.

I believe, and correct me if I am wrong, that the crash in Russian imports has led many analysts astray. This is usually an indicator of a rapid decline in economic activity which leads to GDP contraction, and as such was often cited as evidence of rapid decline of Russian economy. However this may not be the case (or at least all of the case), introduction of sanctions and restrictions have made it very difficult for Russian enterprises to import not only western but commodities from the rest of the world, this has also led many to conclude that there will be major goods shortages which would drive inflation.

Russians to their credit have been successfully replacing foreign everyday goods with domestic alternatives and finding new avenues for trade and import thus avoiding major shortages and keeping economic activity (mostly domestic spending) viable. How long they can keep this up and how long will it take for them to adjust to different markets and paying schemes is an open question, considering that whole worlds economy is (according to some) tethering on the edge of a major economic crisis, who knows when will we be able to talk about sustainable growth in Russia or anywhere else.
 
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