Petrodollars rushed to Russia

Increased raw materials allowed the Russian Federation in January-November to earn a third more than the same period in 2016.
Origin source
The rise in prices for oil and gas increased the inflow of foreign exchange earnings to Russia from the export of raw materials and returned the economy to the previous consumption levels due to hydrocarbon rent.

In January-November 2017, the influx of revenues from the sale of oil rose 29%, the Federal Customs Service reported on Friday: for 11 months, the country received 85.68 billion dollars.

The physical volume of supplies practically did not change (235 million tons against 232), but each barrel was sold much more expensive: the average selling price of Russian urals was 52.17 dollars per barrel against 41.02 dollars a year ago.

At 21.3% more it was possible to earn on gas exports, despite the fact that after more than four years of dispute, Gazprom agreed to radically revise the pricing policy for European buyers, refusing to bind prices to oil quotes and giving discounts to customers against the threat of competition with the American LNG.

For January-November, gas exports brought in the country 33.83 billion dollars - nearly 6 billion more than a year ago. The physical volume of supplies increased by 6.1% to 188.8 billion cubic meters, of which 158.3 billion went to non-CIS countries, primarily the European Union.

The share of non-primary exports fell again: if in 2016 the sale of oil, gas, oil products and metals gave the economy 72.3% of foreign exchange earnings, then by December 2017, 74.6%.

Against the background of the influx of gas and petrodollars, the volume of imports has increased significantly. Purchases abroad of transport and electrical equipment jumped by 36.3%, trucks - by 60%, chemical products - by 19.2%.

Contrary to the declarations on import substitution, food was imported by 11.4%: oil purchases increased by 33.1%, fish - by 17.2%, cheeses and cottage cheese - by 12.4%. Imports of clothing jumped by 25.2%, footwear - by 16.2%.

It was the rise in oil prices and the influx of currencies that led the economy out of the longest recession since the 1990s - in fact, the country is returning to the old consumption model through oil and gas rents, says Yakov Mirkin, head of international capital markets at IMEMO RAS: raw materials are changing for technology, equipment and consumer goods , and on the path of development grows a wall of expensive loans, heavy taxes and excessive regulatory press.

The trouble, however, is that fewer and fewer people can enjoy consumption at the expense of petrodollars, says VEB's chief economist Andrei Klepach: Russia has reached the Latin American level in terms of inequality.

"10% of our society get somewhere 47% of income, which is more than twice as much as in the 80s under the USSR, and higher than in the US and Europe," he said. The real incomes of the population on average in the country fell by 1.3% in January-November, and the growth of wages was offset by a reduction in the number of employees, said Natalia Akindinova, director of the Center for Development of the Higher School of Economics.

With such introductions, at least 2% of the growth predicted by the Ministry of Economic Development is unrealistic, says Evgeny Gavrilenkov, chief economist at Matrix Capital.

"We can hardly expect any acceleration and, most likely, judging by the dynamics that we see, there will be obvious inhibition, economic growth will be less than one percent," he warns.