Hooked

Stuck on the needle: oil and gas account for 98% of Russian corporate profits
Pavel Miledin
September 24, 2015
rbc.ru

RBC’s rating of the 500 largest Russian companies shows the real value of the oil and gas industry to the domestic economy. The contribution of all other companies to total gains—46 billion rubles in 2014—amounted to less than two percent

Andrei Molodkin, Hope, 2009. Acrylic block filled with Russian crude oil, edition of eight, 56 x 20 x 11 cm. Image courtesy of priskapasquer.com

According to Rosstat, Russia exported almost 500 billion dollars’ worth of goods in 2014; oil and natural gas accounted for 42% of this sum. In 2014, oil and gas revenues accounted for 7.4 trillion rubles or 51.3% of the country’s budget. If you look inside the corporate sector, the dependence on the oil and gas sector is even more impressive.

According to data from the RBC 500, a rating of the largest Russian companies, released on Wednesday, the total revenue of oil companies in 2014 amounted to 19.8 trillion rubles or 35.3% of the total revenue of all the companies in the rating, but 97.7% of all net profit, or 1.98 trillion rubles. All other sectors accounted for a mere 46 billion rubles of net profit. If only net profit is taken into account as the outcome of domestic business activity, there are, essentially, no other industries in Russia.

Our Everything
According to Oleg Buklemishev, director of the Economic Policy Research Center at the Moscow State University economics department, the date once again reveal the key story of the interaction between the Russian economy and the state, the agent that redistributes oil revenues.

“The whole history of attempts to diversify the economy has come precisely to this,” says Buklemishev.

This once again confirms that talk of diversifying the economy has just been talk, he adds.

Andrei Movchan, director of the Economic Policy Program at the Carnegie Moscow Center, thinks there is nothing unusual about all this.

“Russia is an exporting country, and all other sectors of industry dwell in the shadows of the oil industry,” he says.

According to Movchan, this is particularly noticeable during a crisis, when currency prices for commodities continue to allow the oil sector to profit.

The oil and gas sector’s net profit in 2013 was also huge, but not to the same extent. Then it amounted to 79.2% of the overall net profit of companies listed in the RBC 500.

“The devaluation of the ruble is having an impact,” explains Natalya Orlova, chief economist at Alfa Bank.

Oil and gas companies, which sell their products for hard currency, have weathered the collapse of the national currency better.

Buklemishev draws attention to the fact that the beginning of 2014 was generally good for the economy, and the effect of the sanctions and falling oil prices began to impact Russian business in the second part of the year. As late as June 2014, Brent crude oil cost $114 a barrel, which helped the oil sector show good results.

It is all a matter of revalued hard currency, argues Oleg Vyugin, board chairman of MDM Bank.

“Oil companies are chockablock with hard currency,” he says by way of explaining their brilliant 2014 results.

It is no wonder the most profitable company was Surgutneftegaz. Due in large part to its revalued hard currency savings, it made 885 billion rubles of net profit, 43% of all profits among the RBC 500.

Crisis More Noticeable
Falling corporate profits among the RBC 500 companies reveal the crisis more vividly than official data. Profits fell by nearly half (45%) from 2013 to 2014: from 3.7 trillion rubles to 2 trillion rubles. However, according to Rosstat’s data, in 2014, profits of Russian companies fell by a mere 10%, from 6.5 to 5.9 trillion rubles. Moreover, according to official statistics, 72% of companies were profitable, while 28% made a loss. Among the RBC companies, the split was slightly different: 81% were profitable, while 19% were loss making.

Movchan argues the difference in the numbers may be due to several factors. There is a “sector bias” in the rating of the largest companies. By the end of 2014, the crisis had not yet reached several sectors, for example, the service sector, which is not represented in the rating due to the absence of large companies there. Buklemishev says the more noticeable drop in profits among RBC 500 companies speaks to the fact that business has been going through difficult times.

“Profit is still a controllable variable, and in a bad situation corporations might try and show less profit in order to pay fewer taxes,” he argues.

But a revenue growth of 14%—the RBC 500 companies earned 56 trillion rubles in 2014—is merely the outcome of high inflation.

“It is practically zero in terms of tangible results,” says Movchan.

Oleg Vyugin agrees with him. According to Rosstat, inflation in 2014 was 11.4% and GDP grew by 0.6%.

“The RBC 500 data, which show a slight real growth in revenue and a fall in profits, correspond broadly to the situation in the economy,” he argues.

Small Improvements
There are a few other things worth remarking on in the RCB 500 rating. In terms of revenue (or rather its equivalent, operating income), the financial sector came in second place after oil and gas. Banks and financial companies earned 6 trillion rubles in 2014, outpacing metals and mining. It would seem that a good result for the financial sector testifies to the diversification of the oil economy.

Movchan and Buklemishev note, though, that the financial system is a function of cash flows from the oil industry, just like, however, transport and retail trade. According to Buklemishev, in 2015, the performance of banks will not be so impressive, and the sector itself will make a loss. (In 2014, the banks and financial companies in the RBC 500 showed a profit of 13.1 billion rubles.)

Another trend economists are watching is the strong growth and high net profit margins (the ratio of net income to revenue) in the Internet and online retail sector (e.g., Yandex, Yulmart, Mail.Ru Group, and Wildberries). Here, net profit is more than 50% of revenue. The telecommunication sector has also performed well in terms of profitability (11%). With a profit margin of 10%, the oil and gas industry is only in third place.

The growth of e-commerce is, apparently, one of the few trends showing that a market economy can develop normally in Russia. Oleg Kuzmin, chief economist at Renaissance Capital, argues that growth in this sector is quite understandable: cash flows from the ordinary goods and services sector are being redirected to the Internet. Another reason is that the public has been attempting to reduce its expenditures by buying cheaper goods on the web. It is no wonder that economists have pointed out the low profit margin in the retail segment—3.5% in 2014.

It is interesting to see what yields more profit to foreign companies operating in Russia. Last year, they received 7.2 trillion rubles in revenue here and earned 211 billion rubles in profit. Despite the low margins, most of their profits came from retail trade (17%), the production and sale of alcohol and tobacco (17%), and finance (10.8%). How is that not a diversified economy within Russia’s oil economy?

Translated by the Russian Reader

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Russia rejects criticism of greenhouse gas plan, will not amend – top Putin adviser
Andrey Kuzmin
September 23, 2015
Reuters

MOSCOW, Sept 23 (Reuters) – Russia has rebuffed calls for a more ambitious plan to cut its carbon dioxide emissions after environmentalists branded its current pledge inadequate and backward looking.

The world’s fourth largest emitter of greenhouse gases, Russia pledged in March to keep its emissions at 25–30 percent below the level it generated in 1990, the year before the Soviet Union and its vast industrial complex collapsed.

Green groups say the pledge, made ahead of a global warming summit in Paris in December, is far too easy for Moscow to fulfill because 1990 was a time when Soviet industry was a notoriously prolific polluter whereas Russia’s industrial base today is much smaller.

A group of four global climate research groups, known collectively as Climate Action Tracker, have rated Russia’s pledge as ‘inadequate’, worse than the ‘medium’ assessment they have handed out to other big polluters such as China, the United States and the European Union.

But President Vladimir Putin’s top adviser on global warming dismissed such criticism during an interview on the sidelines of a Moscow meeting of the United Nations’ International Panel on Climate Change this week.

“It is their opinion, it does not reflect anything and is not objective,” Alexander Bedritsky told Reuters, saying Russia would stick to its current plan.

“They can say whatever they want, but our commitments are based on around 70 scenarios of how the climate system will be developing.”

It is unfair to compare the Kremlin’s commitments to those of developed economies such as the United States or European Union member states because Russia is still an economy in transition, he added.

Russia’s pledge stresses the importance of increasing energy efficiency and boosting the use of renewables.

“If the contribution of Russian forests is fully taken into account, limiting greenhouse gas emissions to 70-75 percent of 1990 levels by 2030 does not create any obstacles for social and economic development,” it says.

“TRAGIC PLEDGE”
With its gigantic reserves of oil, gas and coal, Russia emits 2 gigatonnes of CO2 equivalent a year, making it the fourth largest producer of greenhouse gases after the United States, China and India.

According to Greenpeace, 85 percent of CO2 equivalent emissions in Russia come from its energy industry.

They and other green groups say Russia’s current programme is far too unambitious because the Soviet Union was on the brink of collapse in 1990—the year the programme is pegged to—and its greenhouse gas emissions therefore fell sharply as the country’s industrial base shrank.

“This pledge is a tragedy, a catastrophe,” said Vladimir Chuprov, head of Greenpeace’s energy programme.

“With this 25–30 percent commitment they are basically saying: ‘Guys, we’re staying in the 20th century with our carbon-centered technology’.”

Chuprov and fellow environmentalists want Russia, the world’s biggest country by territory, to do much more, noting that its richest company—state-owned Gazprom—is the world’s leading corporate emitter of greenhouse gases.

ANDREI-MOLODKIN-artfair-superJumbo
Andrei Molodkin, Gazprom, 2012. Image courtesy of Orel Art, via Art Paris Art Fair

Specifically, Chuprov says Russia needs to expand its use of renewable energy and try to develop new power generating technologies or risk missing out on another technological revolution.

Currently, Russia gets 90 percent of its energy from carbon fuels such as oil, gas and coal, Chuprov said. Green groups estimate that only around 1 percent of the country’s energy needs comes from renewable sources.

Green groups such as Greenpeace or the World Wildlife Fund complain that central government in Russia does not consult them enough when it comes to formulating climate change policies.

Under its existing plan, Russia would fail to meet the goal set out by the United Nations’ International Panel on Climate Change to cut emissions to 50–80 percent below 1990 levels by 2050, he said.

Bedritsky said Russia was already making good progress and that its greenhouse gas emissions would peak at 25 percent below 1990 levels by 2020. They will then fall or stay flat until 2030, he added.

“Our preparations for the (Paris) summit are not just good, we have achieved excellent results, announced our commitments on time up until the year 2020, and until 2025 and 2030,” said Bedritsky. “We will definitely fulfill our promise.”

(Editing by Andrew Osborn and Gareth Jones)

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Lecture at the Sorbonne

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A Lecture at the Sorbonne

You should study philosophy, at best,
After fifty. Build a model
Of society, all the more so. First you should
Learn to make soup, fry (if not catch)
Fish, make decent coffee.
Otherwise, moral laws
Smack of dad’s belt or a translation
From the German. You first should
Learn how to lose rather than gain,
Loathe yourself more than the tyrant,
Shell out half your measly paycheck on rent
For years on end before holding forth
On the triumph of justice. Which always comes
At least twenty-five years too late.

You should study a philosopher’s work through the prism
Of experience or wearing glasses (which nearly amounts to the same thing),
As when the letters run together and
The naked dame on the rumpled sheets is once again
A photograph for you or a reproduction
Of an artist’s painting. Genuine love of
Wisdom does not insist on reciprocity
And ends not in marriage
To a hefty tome published in Göttingen
But in indifference to oneself,
In the blush of shame; sometimes, in an elegy.
(Somewhere, a streetcar clangs, eyelids droop,
Soldiers return from a brothel, singing;
Only the rain is reminiscent of Hegel.)

The truth is there is no
Truth. This doesn’t exempt us
From responsibility. On the contrary:
Ethics is the selfsame vacuum, filled by human
Behavior almost continuously;
The selfsame universe, if you like.
And the gods love the Good not for its eyes,
But because they wouldn’t exist were it not for the Good.
And they in turn fill the vacuum,
Perhaps even more systematically
Than we do, for we are
Unreliable. Although there are more of us
Than ever before, this is no Greece:
We are undone by low cloud cover and, as mentioned above, rain.

You should study philosophy when
You have no need of philosophy. When you have a hunch
The chairs in your living room and the Milky Way
Are interconnected, and more closely than causes and effects, than you
And your relatives. And that what constellations
And chairs have in common is insensibility, inhumanity.
This a bond stronger than copulation
Or blood! Naturally, you shouldn’t try
To resemble things. On the other hand, when
You’re ill, you don’t necessarily have to convalesce
Or worry how you look. This is what
People over fifty know. Hence, when they
Look into a mirror, they sometimes confuse aesthetics with metaphysics.

Original

__________

A Russian emigrant student in France yelled at Russia’s top investigator Alexander Bastrykin this week during a panel at the Sorbonne, calling him a murderer and accusing him of launching politically motivated criminal probes.

An unidentified male student was apparently angered with Bastrykin’s evasive replies to questions about the prosecution of Greenpeace activists from the Arctic Sunrise and participants at the opposition rally on Bolotnaya Ploshchad in May 2012, French media and eyewitnesses reported on the Internet.

An eyewitness of the incident, Lolita Gruzdeva, posted a video on her Instagram account late Wednesday in one of which an unidentified male student yells at Bastrykin in French.

In another video posted by Gruzdeva, the same young man yells at Bastrykin in Russian, “You are a criminal!”

The student’s outburst happened after Bastrykin, replying to questions from participants of the meeting, said that the fate of Greenpeace activists would be decided by the court system and that the denial of medical assistance to a hunger-striking suspect in the Bolotnaya trial, Sergei Krivov, was not his business, Gruzdeva wrote on her Twitter account Wednesday.

Source:  Moscow Times 

We Have a Saying in Russia

In the queue outside the centre, there is little sympathy for Greenpeace among relatives of other detainees, as they wait to deliver packages. “We have a saying in Russia: you shouldn’t go into someone else’s house and try to live by your own rules,” said one middle-aged woman who had bought a parcel of food for her 33-year-old daughter, who had been inside for five months on charges she did not want to reveal. She had been waiting in freezing temperatures since 4am to ensure she was among the lucky few who got to deliver her package.

Another man, waiting to deliver a package to his brother, suggested the Greenpeace activists were paid by western oil corporations to undermine Russia and should be “shot, or at least sent to a camp”. The opinions reflect surveys which show that the majority of Russians support the piracy charges.

Shaun Walker, “Greenpeace activists await trial among harsh winds, tears and no sympathy,” The Guardian, 18 October 2013

telefon

For some reason, as the country sinks deeper into the Putinist fascist night, this “saying” becomes more and more popular. I’ve personally heard and read it something like six hundred thousand times over the past few years, but it’s hard to remember anyone ever saying such a thing in the nineties. It’s just remarkable how people participate so willingly in their own enslavement and extinction, and with the help of such “sayings.” Yes, “folk wisdom” really does consist in repeating over and over again what some fat cats with soccer teams in England, kids in Swiss schools, and mansions on the Riviera want you to think.

On the other hand, reporters like Shaun Walker wouldn’t have to look that hard for Russians who don’t think this way, even in Murmansk. And it’s pointless, as he does here, and as avid Russian watchers both inside and outside the country love to do, to cite a “public opinion” poll that, allegedly, shows the majority of Russians don’t support the arrested Greenpeace activists. Aside from any other number of methodological and philosophical issues with such polls more generally, not only in Russia, “public opinion” is a nearly meaningless concept in a country lacking all the things that make it a somewhat more meaningful concept in other countries, things like free elections, broadly based political parties, non-astroturfed grassroots groups, much stronger and more militant independent trade unions and, most important, freedom from constant terrorization and brainwashing, in the not-so-distant past and now again, over the past fourteen years, by officialdom, whether in the form of bureaucrats, police or state media.

Why does “the majority” not support the arrested Greenpeace activists? Because they (or, rather, a good number of the people who answered this dubious poll) thought that this was the response expected from them. Why did they think that? Because state and loyalist media have portrayed Greenpeace as the second coming of Al Qaeda, willing dupes of the CIA, and any other baleful thing you can think of. You don’t even have to believe this stuff. You just know that if some “polling organization” calls you up out of the blue, there are strong cues out there in the big media world to which you have access telling you how to respond to such questions. So what’s the point of thinking something different out loud? But then Shaun Walker, hundreds of other reporters, “political analysts,” “sociologists” and so on cite this “public opinion” as if it weren’t obtained under duress. It’s a vicious circle.

The Continuation War

-1Yuri Melnichuk: “If Finland declares war on Putin, I’ll volunteer.”

Things don’t look good on that front, Yuri:

Finnish President Greets Russian President in Russian
Jun 26, 2013

The presidents of Finland and Russia, Sauli Niinistö and Vladimir Putin, met at the residence of the Finnish leader in Turku, RIA Novosti reports. “Very beautiful and pleasant weather. That is a good signal for Moscow,” Niinistö said in Russian when greeting Putin.

“We recently recalled out previous meeting and it became clear that certain results and progress is apparent in the achievement of what we agreed upon then,” the Finnish president continued. Vladimir Putin in turn admitted that since childhood he has known a handful of Finnish words, albeit not enough for conversation. He also pointed out the St. Petersburg and Turku have been closely connected for many years.

Vladimir Putin participated in events honoring the 60th anniversary of the sister city relationship between St Petersburg and Turku, the Kremlin press service reports. In addition, a ceremony was held at one of Turku’s central squares, where a plate with. Mr Putin’s name was laid in recognition of his efforts to protect the Baltic Sea environment.

The President of Russia was also presented with a Turku city medal. The medal is given to political and public figures for their services to the city, as well as the heads of foreign nations who make a major input into developing relations between their nation and Finland on arrival to Turku.

Russkiy Mir Foundation Information Service

Source

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The Lentua Nature Reserve is part of the Friendship Park, which consists of five separate nature reserves. The Friendship Park is the Finnish part of the Finno-Russian Friendship Nature Reserve. The emblem of the Friendship Nature Reserve features two wild forest reindeer, reflecting the friendship between the two countries and their cooperation for the benefit of nature conservation. One of the fundamental goals of the Friendship Nature Reserve is to protect the wild forest reindeer (Rangifer tarandus fennicus) and its habitats, which makes this animal a natural choice for the emblem.

Source

Thanks to Sergey for the whole thing (or most of it).