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Buzz Barometer: Russian Economy, Defense Sectors in Spotlight
February 22, 2015 16:09

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Russia-IC has put together some of the most interesting takes on Russia from the world media.
PBS runs a story on Moscow’s military might and saber-rattling tactics. “In the face of a moribund economy and growing tensions with the west, Moscow will move ahead with a planned decade-long upgrade of the Russian military, raising 2015 defense spending to 3.3 trillion rubles ($50 billion), a 30 percent nominal increase over last year,” says Daniel Costa-Roberts.
“The plans include upgraded communications and missile systems as well as new tanks, aircraft and nuclear-powered submarines. The spending increase is part of Putin’s State Armaments Plan for 2011-2020. The goal of the 20.7 trillion-ruble plan is to replace 70 percent of the Russian military’s outmoded equipment with modern technology by 2020,” he adds.
Jeremy Bender from Reuters speculates on the Kremlin’s thrust to defend its borders in the north, west and south.
“The three geopolitical front lines that Russia seeks to reinforce are the Arctic region, the Russian exclave of Kaliningrad which neighbours Poland on the Baltic Sea, and the recently annexed Crimean peninsula. Moscow views each of these regions as critical for checking the expansion of NATO power while also serving as forward bases for Russian military and economic expansion,” says Bender.
“The site of the most concerted Russian militarization effort so far has been the Polar Arctic region, which the US estimates contains upwards of 15% of the earth’s remaining oil, 30% of its natural gas, and 20% of its liquefied natural gas,” adds Reuters.
“In the Arctic Russia has undertaken a construction blitz which includes the construction of 16 deepwater ports, 13 airfields, and ten air-defence radar stations along the coast. Moscow has also created the Joint Strategic Command North, which the Polish Institute of International Affairs notes will include a naval infantry brigade, an air defence division, an Arctic mechanised brigade, and missile defence systems,” runs the article.
“In Kaliningrad, the AP reports, Russia briefly deployed high precision mobile Iskander ballistic missiles. Simultaneously, Russia now has a major naval base, air defence missiles, and long-range bombers based in the Crimean peninsula,” according to Bender’s data.
The Deal Pipeline has focused on Russia’s M&A market, with deep insight by Paul Whitfield.
“Since March 6, the ruble has tumbled 45% against the dollar, oil prices have fallen about 50% and cross-border investment, including both inward and outward Russian M&A, has fallen off a cliff,” begins the uncompromising report.
“The Russian economy is hurting. Gross domestic product is likely to shrink 3% in 2015 and by 2% in 2016, the International Monetary Fund predicted in late January. Standard & Poor's Financial Services LLC downgraded Russian sovereign debt to junk in late December, and questioned whether its largest companies would be able to withstand a sovereign default,” writes Whitfield.
“In December, OAO Rosneft, Russia's largest oil company, pulled out of an agreement to buy Morgan Stanley's oil trading unit. The Russian company blamed regulators' failure to approve the deal, though an inability to tap Western capital markets for the billions of credit needed to operate the trading business had already made the takeover impossible. In the same month Exxon Mobil Corp. mothballed a joint venture with Rosneft to drill for oil in the Arctic, bowing to an order from Washington barring U.S. companies from cooperating with Russian offshore drilling,” he adds.
“Russia needs oil prices of about $100 per barrel to balance its budget, according to the IMF. The longer the price remains substantially below that level the more likely that the fault lines in Russia's economy will begin to rumble,” according to the Deal Pipeline.

“One of those key weaknesses is corporate debt. Russian companies have about $548 billion of foreign debt on their books, according to Russian central bank data released on Jan. 1. Of that, about $90 billion of dollar-denominated debt that is due to mature over the next three-and-a-half years, according to estimates based on Moody's Investors Service Inc. figures. Much of those repayments will fall within the current year, according to the rating agency,” says the author. 

Author: Mikhail Vesely


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