Russia's economy proved resilient last year. Now the pain is setting in – the collapsing ruble says so | Canada News Media
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Russia’s economy proved resilient last year. Now the pain is setting in – the collapsing ruble says so

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A board shows currency exchange rates of the U.S. dollar and euro against the Russian ruble, in Moscow, on Aug. 7.EVGENIA NOVOZHENINA/Reuters

In the dreams of Ukraine and the West, Russia would be a failed state by now. The sanctions imposed for the war in Ukraine, ranging from the price cap on Russian oil exports to cutting the country’s banks out of the SWIFT global messaging network, plus the horrific cost of the war itself, were designed to cripple the Russian economy, forcing Vladimir Putin to sue for peace.

Shortly after the start of the invasion 18 months ago, it looked like the West’s fantasy would be fulfilled. The Russian ruble plunged against the dollar, and the stock market cratered. The West froze more than US$300-billion of Russian financial assets held outside the country. Sanctions piled up, and the budget deficit soared as it became apparent that Moscow, denied a quick victory, would have to finance a long, ugly war that it had chosen to launch.

But the Russian economy, and the ruble, would prove remarkably resilient. The ruble would recover, then soar, as capital controls worked their magic. Climbing prices for oil and natural gas helped double the 2022 current account surplus (the surplus of exports over imports). Lost oil sales to Europe were somewhat recouped by sales to China and India, though at a substantial discount to world prices. Gross domestic product fell 2.1 per cent last year, but that was far less than the early forecasts from the World Bank and other institutions. Russia’s Ministry of Economic Development is calling for 1.2-per-cent growth this year.

Mr. Putin, who had turned the ruble’s recovery last year into an anti-Western propaganda weapon, a symbol of defiance as NATO countries flooded Ukraine with weapons, is not smiling today. Russia is under more pressure than the headline GDP figures suggest. It has taken a while, but the Kremlin must be in a low-grade panic as revenue shrinks and the bills pile up for what may turn into an unwinnable war.

Early this week, the currency fell off a cliff again, hitting 100 rubles to the U.S. dollar; a year ago, 60 rubles bought a buck. One ruble is now worth a mere cent – a level that must embarrass Mr. Putin, all the more so since, earlier this week, Maxim Oreshkin, his economic adviser, wrote an article carried by TASS that said “a weak ruble complicates the economy’s structural transformation and negatively influences real household earnings. A strong ruble is in the interests of the Russian economy.”

In a rare example of public infighting, he blamed the Russian central bank for the currency’s fall, not the Kremlin for starting a war with the potential to wreck the Russian economy. The bank tried to rescue the sinking ruble by jacking up interest rates to 12 per cent from 8.5 per cent. The currency rose a bit, not much. The weak ruble doesn’t just suggest that the Russian economy is in trouble – it shouts it.

The economy has, so far, managed to survive the West’s ever-tightening sanctions, to the point that, bolstered by a surge in military spending, it is overheating as capacity constraints intensify. Inflation is now running at about 7 per cent, well ahead of the central bank’s 4-per-cent official target.

At the same time, the oil price cap imposed by the European Union and G7 countries seems to be working, depriving the Kremlin of the revenues it needs to finance the war. In other words, Russia is running the economy hot with money it doesn’t have. It is running a budget deficit of about 2 per cent of GDP; declining hydrocarbon sales could see that shortfall rise.

Oil and gas revenues are Russia’s life blood, and it is here that the time bomb is hidden, under the floorboards of the Finance Ministry. The cap, in place since early this year, means buyers of Russian seaborne oil can pay no more than US$60 a barrel (Brent crude, the effective international benchmark, currently sells for about US$83). Vessels that carry Russian oil above the price cap are prohibited from buying insurance from European companies, which dominate the seaborne liability coverage industry.

Combine the price cap with the lost energy sales to the EU – only small amounts of Russian oil and gas are finding their way into that market, which Moscow dominated before the war – and the Kremlin is staring at an ever-widening hole in its finances. According to the Centre for Research on Energy and Clean Air, Russian fossil fuel exports were about €500-million a day in early August, down from a peak of €1.2-billion shortly after the war began (the EU continues to buy large amounts of Russian liquefied natural gas, which is not on the sanctions list). The Kremlin’s hydrocarbon revenues were down by almost half year-over-year in the first six months of 2023, according to the Finance Ministry.

The Russian central bank is reportedly considering capital controls to prop up the ruble. But this would amount to window dressing. The economic pain has set in, and rising interest rates and inflation will hurt Russian families as the Kremlin spends heavily to keep its war machine alive. The question is whether the Russian people will turn angry and demand an end to the war. There is no sign of that happening now, but the scenario cannot be ruled out. Long wars are typically ruinous to economies.

 

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

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FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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Canadian Coast Guard crew member lost at sea off Newfoundland

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ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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