Vi, I noticed the RTS tanked last week. It started as profit taking and then the "retargeting missiles" comment from Yeltsin made Friday another 5% drop. That comment proved to be false. Over the weekend Primakov gave a sort of "state of the union" address and said that since he had been in office he had stopped the ruble's freefall, inflation had dropped to 2.5% from 11% per month, Russia had created political stability, Russia paid all federal wage arrears and Russia had paid almost half of pension arrears. He pointed out that every dire prediction about Russia's "long hard winter" proved false. He also reiterated that Yeltsin should serve his full term (a year or so left in it).
The fact of the matter is that IMF money is coming in a matter of days now. The amount may be known as soon as 7 days from now (from Voice of Russia). Also, oil prices bounced back big on Friday on an IEA report that says the "glut" is now being drawn down at 450,000 barrels a day. On the oil price thing, there was an article by an industry expert (not a wall street analyst) named Simmons. In his speech he said oil prices below $20 do not yeild the return on investment necessary to invest in production. He said that not only is $10 oil unsustainable, it damages investment in the industry and that can lead to shortages. The depression in the oil industry in 1998 is almost certain to lead to much higher oil prices for years to come. An average price of $30 is not unreasonable for years to come.
I have been following the Russian budget closely. The first quarter had very low Brent oil prices of around $11.33, yet there was only a $200 million deficit. March had the highest average oil prices ($12.5) and yielded 33.5 billion rubles in budget revenue. April is looking to have average oil prices of around $14.5 which will probably mean that budget revenues come in at around 40 billion rubles which is OVER the average monthly budget revenues in the 1999 budget. If Brent just got back to around $18 Russia would really be in good shape, if it got well over $20 like Simmons is predicting, there are no economic problems in Russia anymore. But in the short term, the current level of oil prices plus $4-5 billion from the IMF and the $3 billion from the World Bank and Japan will solve the foreign debt problem. Longer term, Russia will have the benefit of the higher oil prices and the foreign debt restructuring at the Paris and London clubs.
As far as Kosovo goes, yes this is hurting Russian stock prices, but Russia said this weekend it will not get involved. I am sure some of the "red" factions in Russia are now energized. However, when Russia went into crisis last year, and one took media reports seriously, one would have thought that Russia transformed into the Soviet Union overnight. So, I do not believe there is a huge "red reversion" in the offing. As far as Ledbed is concerned, I do not see how he has a chance. Year 2000 will be either Primakov or Luschkov (Moscow Mayor) in my mind. Primakov says he won't run, so the odds are Luschkov, especially if Primakov endorses him. I question some of Luschkov's rhetoric, but there is one thing I do know about him, he is for capitalism and the profit motive. That is all Russia needs. Russia does not need "reformers" that are puppets of the IMF.
Speaking of the IMF, the loan that Russia gets this time around will probably be the last one (at least that is my prediction). |
