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By John Helmer, Moscow

There is nothing like facing the gun muzzles of the Germans, British and Americans to teach Russians what to do to correct their past mistakes.  The International Monetary Fund (IMF) would be the last US bank in the world to admit as much.

Nor would the IMF concede that everything it bribed the Kremlin to accept, when Boris Yeltsin was president and Anatoly Chubais and Alexei Kudrin were his economic ministers,  is now being reversed – at a speed unmatched since Joseph Stalin directed the relocation of heavy industry out of reach of German guns between August and December of 1941.  

This time round, the IMF is reporting that after Russia recorded a 2.2% drop in real Gross Domestic Product (GDP) measurement in 2022 – 35% less than the IMF had been forecasting – by 2024, the second and third years of the war, the Russian growth rate will be more than double the US, British and Japanese rates; 33% better than Germany’s; 24% better than France; 29% better than Canada.    

This is the first official acknowledgement by the US and international banks that the long war against Russia is being lost.

They follow the evidence of last week and this in the stock markets of Frankfurt  and New York that institutional investors are cutting the share prices and market capitalizations of the major German and American weapons companies. This reflects the market expectation these arms makers will be defeated in the short war to  follow the deployment on the Ukrainian battlefield of the Abrams and Leopard tanks, together with more HIMARS and M777 artillery weapons.

Long distance is the race the Soviets dominated when Vladimir Kuts (lead image) was world champion over 5,000 and 10,000 metres. Watching him run in the 1956 Olympics in Melbourne, Australia,  despite the anti-Soviet, pro-Hungarian, pro-British demonstrations in the stadium, was a lesson in marshalling strength, conserving it  over time, and exhausting the adversary. This lesson is now being taught in war.

The IMF report also confirms that the economic sanctions war pursued by the US and the European Union (EU) and their global allies is not only failing at the macro-economic level. The sanctions are  also causing the reorientation of Russian trade flows eastward towards China and southward towards India. These flows, as revealed in a new report published in Vzglyad in Moscow this week, are forcing the replacement of more than twenty-five years of oligarch-dominated Kremlin economic decision-making by state planning.

This quiet revolution is also Stalin-sized. It would have been impossible without the US and NATO adoption of war for the destruction of Russia.

The IMF report was authored by Pierre-Olivier Gourinchas. Born in Montpellier, France,  he has been trained and employed in US universities until he became the IMF’s chief economist.

This is the IMF’s tabulation of economic results and projections.  

Source: https://www.imf.org/en/-- page 6.  The reported numbers represent real GDP  calculated on the base of “world GDP measured at purchasing-power-parity weights”  and according to the IMF they “account for approximately 90 percent (80 percent) of annual world (emerging market and developing economies') output at purchasing-power-parity weights.”

Russia is mentioned in passing a dozen times, with this one conclusion about the tabulated growth results and projections. “This reflects a smaller economic contraction in Russia in 2022 (estimated at –2.2 percent compared with a predicted –3.4 percent) followed by modestly positive growth in 2023. At the current oil price cap level of the Group of Seven, Russian crude oil export volumes are not expected to be significantly affected, with Russian trade continuing to be redirected from sanctioning to non-sanctioning countries.”

The IMF failed to report the significantly higher growth rate it is projecting for Russia by 2024, nor explain what the IMF and its economic staff believe to be the reason for Russia’s superiority compared to the US and the NATO alliance states. All the IMF has to say in the new report about the military and economic war is that it is one of the causes of economic contraction in the NATO states, and as the war continues it threatens worse for the latter—not for Russia, nor China, nor India.

“The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. The rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening has paved the way  for a faster-than-expected recovery…The balance of risks remains tilted to the downside, but adverse risks have moderated since the October 2022. On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible. On the downside, severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress. Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress.”

In the IMF report “geopolitical fragmentation” is a euphemism for what US and EU sanctions against Russia have caused already. It is the opposite of “multilateral cooperation” – another IMF euphemism for the global dominance of US-dollar denominated trade and investment, and the confiscation of Russian Central Bank reserves. “The war in Ukraine and the related international sanctions aimed at pressuring Russia to end hostilities are splitting the world economy into blocs and reinforcing earlier geopolitical tensions, such as those associated with the US-China trade dispute. Fragmentation could intensify—with more restrictions on cross-border movements of capital, workers, and international payments—and could hamper multilateral cooperation on providing global public goods. The costs of such fragmentation are especially high in the short term, as replacing disrupted cross-border flows takes time.”

In the following translation, Olga Samofalova, the energy reporter for Vzglyad, the leading national security publication in Moscow, reports a case study of how Russia’s coal and oil producers – two of the most oligarch-dominated sectors in the export economy – are having to subordinate themselves to central state planning in order to reach their new markets.

Read the original here.   Maps and pictures have been added.

January 31, 2023
How will the battle of coal miners and oilmen for BAM and Transsib end

By Olga Samofalova

A serious struggle has unfolded for the opportunity to send cargo by rail to the East. Last year, Russian coal miners received the priority right to transport. However, now oil companies want to replace them because they are faced with the problem of transporting their petroleum products against the background of the embargo. Who will win the fight for the railway?

The problems of rail transportation of petroleum products in the eastern direction have existed  for three to four months, as TASS reported in quoting the head of the Russian Fuel Union, Yevgeny Arkusha. ‘There is a problem, and for a long time,’ Arkusha said. According to him, the decision on the rail transportation  priority for different export goods has now reached the senior government level.

Source: https://www.mapsofworld.com/

Until now, the Kommersant newspaper, citing its sources in the oil industry, has reported that the oil companies have been facing refusals of transportation in the eastern direction by Russian Railways. The oil companies fear that these difficulties with export may affect their production program.

After February 5, when the embargo on Russian oil and the price ceiling come into force in the EU, the problem may worsen even more. Coal miners have already faced a similar problem in 2022. As a result, the situation may lead to internal competition between Russian coal and Russian petroleum products for the transportation of goods by rail to the East.


Left to right: coal -- Andrei Melnichenko (SUEK), Iskander Makhmudov, Andrei Bokarev (KRU); oil – Igor Sechin (Rosneft), Vladimir Bogdanov (Surgutneftegas). For more on each of the oligarchs and their companies, open the website search box for each name. According to the Office for Foreign Assets Control in Washington, Melnichenko, Sechin and Bogdanov are sanctioned; Makhmudov and Bokarev are not.  

‘Right now there is a competition of everyone against everyone, because the capacity of the railways in Siberia and the Far East is limited by the capabilities of the BAM [Baikal-Amur Mainline] and the Transsib [Trans-Siberian Railway]  In 2022, the coal miners complained that the capacity was low. Everyone else complained that the coal miners had clogged all the railways with their coal and nothing else could be transported,’ says Igor Yushkov, an expert at the Financial University of the Government of the Russian Federation and the National Energy Security Fund.

The closure of the European market has led to the reorientation of Russian exports, primarily hydrocarbons to the East. The trade turnover with China in 2022 increased by a third and almost reached $200 billion – a target which at best had been expected in 2024. Finally, sanctions restrictions have played a role, complicating the transportation of our hydrocarbons by sea. All this has put the railway route in great demand from all sides.

‘The BAM and Transsib have transported 158 million tonnes of cargo this year, while according to the [state] plan, a capacity of at least 200 million tonnes per year is required. But this level, provided that the rail tracks are modernized in a timely manner, can only be reached in a few years’ time. The BAM and Transsib are complex transport systems, with bridges, tunnels, sometimes no electricity, so it’s impossible for electric locomotives to make the crossing. There are not enough railway interchanges and rollingstock for the cargoes,’ says Artem Deev, head of the analytical department of AMarkets.

‘For decades, Russia has been building infrastructure for the priority supply of resources to Europe, and not to Asia. Also,  such volumes of coal that we used to supply to Europe were not previously transported through BAM and Transsib. Therefore, coal miners have had problems in the summer – their cargoes were also delayed, then they became a priority and they were moved into the first place,” Deev points out. ‘In August, as you know, the European embargo on the purchase of Russian coal came into force, and the Kuzbass [coal-mining region] urgently redirected its volumes to China.’

Now the problem with oil products, which will be banned in the EU from February 5, has been added to all of this. Yushkov explains that from a commercial point of view, it is also more profitable for our oil companies to deliver oil products by rail to the Far East, and then by sea to the sales markets which are nearby. The rail right-of-way is small, and tankers can quickly carry oil products back and forth. And most of the way is a safe route by land, taking into account the new sanctions against transportation by sea.’


Source: https://www.fesco.ru/

‘It is much more expensive to carry fuel to the western ports of the Leningrad region or Novorossiysk than to send oil products to the East. Plus, in the western ports, you need to find tankers, sort out insurance, and there will be the issue of meeting the price ceiling. I think it will be more difficult to find dedicated tankers for petroleum products than tankers for oil. And in general, the world tanker fleet that transports petroleum products is smaller than the fleet that transports oil,’ Yushkov says.

In his opinion, companies are not telling the truth when they say that they need to transport petroleum products by rail exclusively for the domestic needs of the Far Eastern regions. They just want to get their cargo priority in transportation. They need this route to export the overwhelming volume of petroleum products.

Unfortunately, the capacity is not enough to transport increased volumes of coal, petroleum products, and everything else. Therefore, the authorities will have to choose. Who will win in this battle between oil products and coal?

The experts believe that coal will have to adjust,  since Russia earns more on oil products than on coal.

‘Oil products are more expensive,  the taxes from their sales go to the budget in large volumes, but at the same time the state should not lose export volumes of coal supplies either. Priority should be given to petroleum products, but it is necessary to strike a balance so that the largest coal companies do not go bankrupt,’ says Vladimir Chernov, an analyst at Freedom Finance Global.

“The authorities will try to find this balance and indeed they can adjust coal a little. But it is necessary to reduce its volumes carefully so as not to jeopardize the work of the coal mines and processors.  This is because we have mostly coal-fired single-industry towns, where the whole city works at the mine. And if the question arises that some mine will have to be closed and people will be left without work, then economic considerations will fade into the background. Social stability will be more important, even
though the economic feasibility is on the side of petroleum products,’ says Yushkov (right).

This problem cannot be solved quickly. Therefore, in his opinion, it is most likely that the oil industry will be required to take a step back and reduce oil refining in favour of the growth of crude oil exports. This will keep production at a decent level. ‘This is a temporary and forced measure that will allow Russia to form a dedicated fleet for the transportation of petroleum products by sea. This will take about six months,’ Yushkov believes.

Russia processes 250-270 million tonnes of oil per year, and consumes only 90-100 million tonnes of petroleum products inside the country: 30 million tonnes of diesel, 30 million tonnes of gasoline, and about the same amount of everything else. And Russia exports much more, mainly fuel oil, diesel, gas oil, naphtha and a little gasoline and kerosene.

In addition, Yushkov highlights the problem with fuel oil, which is produced during oil refining, but which, practically speaking, is not consumed in the domestic Russian market, but is exported for the most part. ‘If there is nowhere to place fuel oil, then oil refining for the domestic market may be reduced. As a result, there may be a shortage in the domestic market for diesel and gasoline. I doubt that this will be allowed, but such possibilities must be taken into account,’
– says Yushkov. Either new markets for fuel oil will be found, or the authorities will allow cancellation of fines for burning fuel oil at power plants. This means that we will start heating with fuel oil instead of gas and coal. Lukoil made such an offer in the spring of 2022.

It will not be possible to make a quick fix for the under-developed oil and gas and transport infrastructure in the Asian direction. The problem can be solved within a few years, but this will require very substantial state investments, measured in trillions of rubles, says Deev.

In fact, they have been talking about the need to build a second BAM and Transsib for a long time, and there are plans to expand the narrow track system. ‘The government has already formulated a package of actions to expand the capacity of the Eastern Polygon [Eastern Section of the Transsib], so now this process simply needs to be accelerated. Among other options is an increase in the volume of cargo transportation through the Northern Sea Route, which is also being accelerated at the current time,’ says Chernov.

Source: https://splash247.com/

‘I think that the problem will be solved in this way: they will recruit a sufficient number of tankers that will transport petroleum products. And the volume of transit through BAM and Transsib will return to its usual norm. Because it will be possible to export petroleum products by sea. But this will take about six months,’ says Yushkov.

Big-volume deliveries of petroleum products from the Leningrad Region via the Northern Sea Route, according to him, remain for development in the future, because, for the time being, it is easier and more commercially profitable to export through the Suez Canal to Asia. ‘I doubt that some exotic route like the Northern Sea Route will save the current situation. Other routes by land, for example, in the south [Caspian Sea], are also long–term projects which require a lot of money and time. It is easier to build new BAM and Transsib lines. This is a more universal and a shorter way,’ Yushkov concludes.

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