Chinese devaluation hits Russian exports

Russia’s “Pivot to the East” may have been ill-timed, with the Shanghai Composite Index suffering its worst decline in many years and a small but significant devaluation in the yuan means that Russian exports to China have lost part of their value. Russia’s economy has contracted 4.6% YoY, and China’s status as Russia’s largest trade partner does not portend well for the supposed recovery.

The balance of trade for 2015 stands at some $30.6 bn worth of imports and exports, which is a 28.7% decrease from 2014 first two quarters. However, Russia’s trade with China is the only country’s to have increased throughout both of their respective economic downturns, but that has not stopped Western analysts from trumpeting gloom and doom due to the recent announcement of the Power of Siberia pipeline between Gazprom and CNPC. However, the largely symbolic agreement has left the Russian gas company with no protection against prolonged periods of lower hydrocarbons prices – and with current benchmarks at below $50 a barrel (for Brent), the project will be unprofitable and will likely lead to delays in construction.

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News Briefs:

  • Kazakhstan’s oil revenues have been declining since the precipitous decline in benchmark crude oil prices last year, and the government has taken its first step to alleviate pressures on state coffers – by laying off workers in the state energy sector. Sino-Kazakh drilling company Velikaya Stena (Great Wall) announced layoffs and others are expected to do so as well. Part of the blame for the situation can be laid at the feet of the Central Bank, which has not devalued the tenge alongside other local currencies and causing labor prices to remain exorbitantly high next to falling revenues. Unions are powerful in Kazakhstan – and according to Stratfor, their displeasure at the current state of affairs is the strongest sign of coming unrest, combined with the likelihood that Nazarbayev will need to announce a successor.
  • Tajikistan’s government has asked Russia to extradite opposition members of a network known as Group 24, which calls itself an opposition movement after its leader called for a public protest in Dushanbe using slogans like “Tajikistan without Rahmon.” The leader is called Umarali Quvatov, a businessman in Moscow, whose movement fizzled out due to lack of popular support. Quvatov was killed in Turkey in March.
  • Tian Shan mountain glaciers in Central Asia have lost 25% of their ice mass in last few decades, according to a new study in the scientific journal Nature Geoscience, which has tracked changes in amounts of glacial ice from 1961-2012. The glacial and snow melt is one of the most significant sources of water for the entire population of Central Asia, which is a semi-arid climate. The reduction will certainly push water supplies much lower and cause even more deprivations as the melting continues to accelerate. The snow falls are hardly replenished during the winter, due to little precipitation.
  • Artillery shelling has begun again in Eastern Ukraine, derailing the tenuous Minsk II Accords, with Ukrainian separatists attacking government positions, according to reports by Kiev and the NY Times. The artillery barrage killed two civilians and wounded more in Sartana near the Sea of Azov and is marked by being a significant escalation since the signing of the Minsk Accords in February.
  • Putin supporter and confidante Vladimir Yakunin, who was until yesterday the director of Russia’s national railway company, has been ousted. Yakunin “accepted” a ceremonial position in the upper house of Russia’s Parliament on the Federal Council. It is speculated that his ousting has to do with the recent effort to spin off regional commuter train lines leading to a total breakdown in service in many cities and angering commuters, embarrassing the President. The national railway company is frequently embroiled in scandals and accused of mismanagement.
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