Summary
Highlights
Russia is experiencing economic chaos, with 64 out of 84 provinces limiting fuel sales and 42 governors admitting to fuel shortages. In annexed Crimea, car fuel sales have stopped completely, and staple foods are rationed. The speaker, Constantine, an analyst, will present data to illustrate this 'economic tsunami'.
Russian crude oil export revenue in May declined by 177 billion rubles, with crude oil output dropping by 5% year-on-year, 10% below target. This decline is largely attributed to Ukrainian strikes on oil infrastructure. Oil and gas revenues for the first five months of the year were nearly 3 trillion rubles, about 30% lower than the previous year. This forces the state to increase taxes and cut non-military expenses like social services and healthcare, indicating a shift from an oil-rich to a tax-hungry budget.
The central bank cut the key interest rate by a smaller-than-expected 25 basis points to 14.25%, revealing a political struggle. 'War hawks' advocate for lower rates and increased military spending, while economists, led by Elvira Nabiullina, seek to control inflation and reduce military expenditure. Bloomberg reports a potential increase of 5 trillion rubles in war spending, deepening the fiscal imbalance and illustrating that the war hawks are winning the political fight, which could lead to further escalation and mobilization.
Residential construction in Russia fell by 28% year-on-year in the first quarter, with 75% of developers missing sales targets. The largest developer, Samalot, is in technical default. This crisis is significant because construction is a major economic multiplier, and the housing boom was built on cheap state-backed money. With subsidies gone due to war funding, the illusion of normal life is disappearing, and the industry is struggling.
Inflation rates are accelerating, with price growth jumping from 0.15% to 0.25% in one week, a 60% increase. The speaker suspects these numbers are 'sugarcoated.' Corporate overdue debt rose by 4% in April to 3.1 trillion rubles, with almost 27% of companies having overdue debt. This 'quiet part of the crisis' shows declining balance sheets and warns of potential widespread bankruptcies and banking busts, indicating a slow but steady collapse.
A detailed account of the fuel crisis, which began in Crimea with gas station lines and fuel tickets, swiftly spread to 64 Russian provinces. Crimea has now banned the sale of fuel entirely, with only emergency services receiving it. Shortages, lines, and emergency supply measures are reported across central, southern, northern, and eastern Russia. The speaker highlights that this is not just a price issue but a logistical and refinery capacity problem, showing the war economy's direct impact on ordinary citizens.
Gas prices have surged, with average prices rising 1.5% in one week and 6.6% year-to-date. In some areas like Rustov, prices have almost doubled. The central bank has noted declining motor fuel production as a pro-inflationary risk, as fuel prices impact all sectors. Additionally, Russian authorities have allowed the production of lower-quality fuel, leading to vehicle breakdowns. This situation is forcing public transportation to limit services and exacerbating economic hardship.
A farmer details how diesel fuel prices have skyrocketed from 57 rubles per liter in April to 118-125 rubles per liter in June. This drastic increase means that the cost of agricultural products will follow suit, leading to widespread inflation. The fuel crisis directly impacts farmers' ability to harvest, with many facing the loss of their crops and businesses. This is now manifesting as food shortages, with Crimea already rationing staple foods to 1 kilogram per person, indicating a distribution problem rather than a lack of food quantity. The speaker warns this could be a 'black swan event' for Russia.