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Tuesday, October 25, 2016

The results of the British referendum threaten the price of Russian gas

Sensational result of the British referendum on leaving the EU has stirred the global financial markets. The consequences of this decision for the global economy as a whole is clear – but what impact a British exit from the EU on Russian economic interests and the pockets of ordinary Russians?

To predict the influence of the British referendum on the Russian economy so far is very difficult. Especially when you consider that no one has ever left the EU, and how it will happen and how long – so far only theoretical arguments.

“Britain is likely to choose one of the options of cooperation with the EU, which is now practiced in Norway, Sweden, Switzerland, or even Turkey”

Article 50 of the Lisbon Treaty provides for the negotiation and separation of the country from the EU, the period of two years. In practice, the term may be different. In any case, the output will not start without a formation of the new government of Britain, and this will happen not earlier than autumn.

A rating decision of the British to Russia

“Apparently, now will follow some formal procedures related to the decision of the British about leaving the EU. We will closely follow up on this analyze, we will strive to minimize any negative effects of this decision for our economy,” said President Vladimir Putin, speaking after a summit of the SCO. The President will have only a temporary subsidence of the markets.

Russia is interested that the EU remained a major economic force, said the press Secretary of the President Dmitry Peskov. In the Kremlin also hoped to improve relations with London after a Brexit.

The mayor of Moscow, Sergei Sobyanin, waiting for the weakening of anti-Russian sanctions. “Without the UK in the EU has no one so eager to defend sanctions against us,” he said. Britain is one of the most rigid positions on sanctions policy of Europe.

However, in the Kremlin at the expense of yet more reserved: Putin expects no change in the sanctions policy of the EU of the UK. EU countries are locked in discussion about the sanctions against Russia, but this process is regardless of Brexit, says Sands.

In the Russian government as a whole is not inclined to dramatize the situation regarding the impact of Brexit on the Russian economy, but will be ready for any situation. Prime Minister Dmitry Medvedev said that the referendum in Britain is only relevant for Britain. The Russian Finance Ministry and Central Bank see limited impact of Brexit on the economy of the Russian Federation.

“For Russia, this means a drop of oil, the weakening of the ruble, rising volatility in the financial markets in the first place,” said Finance Minister Anton Siluanov. On the other hand, according to him, this volatility will be much less than the one that had held the Russian economy.

The Finance Minister worried that “the world does not go confidently forward with globalization and development of world trade – key drivers of economic growth of the last decades”, which showed a positive vote in the UK. Therefore, he does not exclude that “one “black Swan” (unexpected adverse event) in the current fragile situation can pull themselves and others.”

What scenarios are considered by economists?

A bad scenario

Experts were divided between those who believe in the sad consequences of the referendum Britain for the British, and overall European economy, and those who sees this as a great benefit for the UK and does not expect a collapse of the EU. Depending on this split and their evaluation of the impact of these events on the Russian economy.

So, the senior analyst of Corporation “URALSIB” Olga Sterol believes that the main negative consequence for the Russian economy can lead to reduced raw materials prices in the backdrop of withdrawal of investors from risky assets. In addition, the deterioration of the macroeconomic situation in Europe (the main consumer of Russian gas) can lead to a drop in gas prices and even volumes of exports of raw materials.

And in General crisis in Europe may affect the drop in trade with Russia, which in the last two years leaves much to be desired. If Brexit would cause economic problems in the EU, the expected improvement of the economic situation in Russia in the second half of the year in the form of GDP growth and lower inflation may not follow.

The second scenario

However, many still do not see reasons for panic. “The disaster will not happen, although Finance will be short-term instability,” – said the Chairperson CSR, former Minister of Finance Alexei Kudrin. “Russia Brexit is not significantly affected. We have our own problems, more sensitive, ” wrote Kudrin in Twitter. – I think the EU will come to himself, but both the EU and the UK will become economically weaker.

Meanwhile, the world markets reeling and oil prices came down. Russian companies in the markets are getting cheaper, the ruble is under pressure. However, the volatility of the markets will soon subside, economists say.

“The fall in oil prices is solely due to the very short-term Brexit – after some time the situation will recover, – says the newspaper VIEW the economist Nikita Krichevsky. And if Brexit will affect the oil, not tomorrow or in a week, and, say, a month or two. Short-term oil declined as the dollar strengthened. Of oil as an asset leaving just the American currency, so the dollar strengthened. The ruble against the dollar decreased, even significantly, but against the Euro even stronger. In other words, some semblance of the status quo still persists.”

“Oil prices and the ruble will soon be back around yesterday’s values. At the end of the year, we see Brent crude at 60-65 dollars per barrel, and the dollar – at 57-59 rubles”, – predicts the Director of analytical Department of “Alpari” Alexander Razuvaev. Of course, the single European currency has now received a new fundamental risks. I would recommend the Russians don’t use euros for long-term savings.”

The influence of European economy on Russian

In the long term for Russia, whether in Europe due to the recession and Brexit are there fears of a global crisis.

The process of “divorce” with the UK will have a negative impact on the process of recovery in the European economy, said the head of VTB Andrey Kostin.

If the recession in the EU will not, and demand for Russian energy resources will remain stable. “Gas prices on the European formula follow the oil price with a lag of six to nine months. Oil turned, so that the export revenue of Gazprom should be all right. Brexit should not cause a drop in demand for Russian gas,” – says Razuvaev.

Considering the release of London course Europe to diversify gas supplies could slow because Britain is one of the main catalysts of this process, says the head of analytical Department of Bank “Zenith” Vladimir Evstifeev.

Accordingly, in General, the trade turnover between Russia and Europe, these events should not affect. Here the situation is more dependent on the regime of sanctions and counter-sanctions, the political situation in the East of Ukraine than from the British referendum, says Razuvaev.

Krichevsky believes that the consequences for Britain and the EU will not be disastrous. “Britain is likely to choose one of the options of cooperation with the EU, which is now practiced in Norway, Sweden, Switzerland or even Turkey. Britain, of course, will not be a financial stronghold of Europe, but before that it was not. The free trade area between Britain and the EU have been, and will remain so. Because they are connected to billions of connections, and no one will cut the branch on which they sit,” says Nikita Krichevsky.

The relations between Russia and the EU will depend on how to change the internal situation in the European Union. “Now even more in the EU all will depend on Germany. Early Britain was a kind of counterbalance of Germany in the EU, today, the counterbalance to the left. France is no longer a counterweight, it’s approximately 30 years ago lost its status as an economic power comparable to Germany,” – said Krichevsky.

And yet if the UK is extremely unusual, and it will be relayed to the EU and the world economy, depends not only on the actions of the new British government, which has yet to be formed, but also from other players. That is why now it is feared and not provoke any Brexit new crises.

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