European commission: Brexit will cost USD 62 BLN to the UK

The European Commission plans to bill Westminster with 50 billion pounds Sterling (some USD 62 billion), and the UK will be able to leave the EU once the account is settled, the EC President Jean-Claude Juncker affirms.

«We will sum up all the UK contributions to arrive to the final figure,» he is quoted saying by BBC. Asked whether the amount is close to 50 billion pounds, he responded positively.

British Prime Minister Teresa May officially launched the Brexit talks this spring, and the issue of amount to be settled by the British to cover any agreed obligations will be one of the key questions during the talks. This amount includes obligations such as the pensions to EU officials, the financing of infrastructure facilities, etc.

On March 14, the British Parliament approved the bill to launch Brexit by March 31, without any amendments. The bill was approved with no amendments by both chambers of the British Parliament, the House of Commons and the House of Lords, following debates that lasted for 70 hours. One day later, Queen Elizabeth II confirmed it with her signature. The law, thus, came into force, and the PM Teresa May received the right to trigger off Brexit in accordance with the Article 50 of the Lisbon Treaty. Two years of negotiations will follow.

A referendum on the withdrawal of the United Kingdom from the EU took place on June 23, 2016. According to the official count, 51.9% of the voters pronounced themselves in favour of Brexit.

Russia: the abyss between rich and poor is growing

The Russian government’s Analytical Centre issued a report revealing information on the incomes of Russian citizens «as the economy recovers from recession.» The stats show that in 2016, as the officials started reporting on the gradual recovery, the gap between the well-off groups of population and the ones in need kept growing. As a result, the income of the poorest 10% of Russians appeared to be 14 times lower than that of the wealthiest 10% of their compatriots.

According to the experts, this social inequality is explained by the fact that the wealth of the rich is based on their investments in such assets as stocks, bonds and real estate, while the sources of the poor are limited to their salary. On the whole, the Analytical Centre’s report is rather optimistically tuned. In 2016, according to the third trimester data, the nominal growth of wages in Russia accelerated from 5.1% to 7.8%, resulting in an average salary level across the country at 36,700 Roubles (an equivalent of some EUR 582). Social benefits grew by almost 1%, while the share of the poor in the population decreased from 14.1% to 13.9%.

However, at the same time, the volume of private savings has significantly decreased. The share of those who keep any savings at all fell by one third, from 55% to 40% of the population. Whereas the share of those with income under the subsistence level increased from 13.3% to 13.9%. This resulted in one third of Russians estimating their financial standing as ’bad’ or plainly ’very bad.’

The earnings of the richest 10% exceed those of the poorest by more than 14 times. As the experts believe, in the future the gap between the rich and the poor in Russia will certainly continue to grow. The hardest blow will come upon those who still count themselves with the middle class. Over the past two years, their numbers dropped by 14 million people, from 61% to 51% of the population.

Russian economic growth starts showing

The head of the Russian Ministry of Economic Development, Maxim Oreshkin, affirmed that the country’s economy is on a steady growth: «Our economy is now adjusted to the new reality, with the start of the year showing growth. We expect an annual growth in 2017 at about 2%.»

The growth picked up and, most importantly, this happened not just in specific economic segments such as industry and agriculture, as it was last year. «This year we observe a wider growth accompanied by an increase in consumer demand», Orechkin reported at a meeting with the Association of French businesses. As the Minister pointed out, the GDP dynamics improved at the beginning of this year compared to December last year.

Economic slowdown is the highest risk for China

The President of the State Council of China says, maintaining China’s medium-high growth rates would be the country’s contribution to global stability.

The highest risk for China is an economic slowdown. The President of the Chinese State Council Li Keqiang announced at a press conference.

«We are seeing an increased uncertainty on the international political and economic landscape, we must deal with these problems through our foreign policy,» he claims. «As for China, its biggest risk is that the growth stops,» Li Keqiang affirmed. «We plan to sustain medium-high growth rates: this is our contribution to the global stability,» he concluded.

China saw a gradual slowdown of the national economy. Thus, in 2010 this indicator was at 10.4%, in 2011 at 9.2%, and in 2012 at 7.8%. According to the 2013 results, the growth rate in China dropped to 7.7%, it was 6.9% in 2015, and 6.7% last year.

The government’s target growth rate for 2017 is 6.5%. It is the lowest figure since 1990. As the PRC official pointed out, the Chinese economy grew by 6.7% in 2016 as the global marketplace recovers slowly.

With this rate China has, once again, surpassed all main global economies. According to the latest IMF stats, in 2016, the US economy grew by 1.6%, the Eurozone by 1.7%, Japan by 0.9%, India by 6.6% and South Africa by 0.3%.

Top profitability: did Russian Sberbank discover a golden mine?

At the end of 2016, Russia’s Sberbank became the most profitable bank in the world, increasing its return on equity to 20%. This is a record that exceeds the performance data of all major US banks, including Goldman Sachs and JP Morgan, according to Bloomberg estimates.

During the first two months of this year, the profits of Sberbank, the largest bank in Russia, kept growing and increased by 1.7 times to 104.6 billion Roubles. Sberbank continues to increase its profits, due to a sharp decrease in the interest rates on both private and corporate deposits, as it follows from the bank’s latest monthly report. By the end of 2016, Sberbank’s profits amounted to 517 billion Roubles.

In January-February, the bank’s net interest income increased by an additional 7.5% compared to the same period last year and amounted to 182.2 billion Roubles.

Sberbank official also noted that profit on ordinary shares at the end of last year was 25 Roubles per share, a 141.3% increase compared to 2015.

The bank’s strategy anticipates payment of the annual dividends to shareholders at the level of 20% of total net profit.

Sberbank only grew stronger after going through the crisis: a record net profit and 140% profit increase on a share were achieved through a significant growth of efficiency and radical changes in all business processes of the bank," claims the head of Sberbank G. Gref.

The Sberbank group also reported cost optimisation with the job cuts in 2016 of 5,600 people. In its RAS financial audit report Sberbank indicated that in 2016 it closed 1,327 public branches in the Russian Federation reducing their number to 15,073 from 16,400 offices at the beginning of last year.

In 2017 Sberbank plans to reduce the number of branch employees and middle management by about 8%. The head of Sberbank German Gref voiced longer-term forecasts last January. According to him, the development of remote banking services will lead to a reduction in the workforce by 50% compared to the current level.

Mao’s grandchildren invest in Crimea

Chinese gear up for building 16 marinas in Crimea, worth EUR 20 billion.

This seems to be a wonderful idea with a solid financial backup. There is, however, a slight problem: there are simply not quite as many coastal locations suitable for a full-size marina on the peninsula. So, the natural question is, what do the Chinese really want?

Under the Ukrainian administration, Chinese businesses started an active policy towards the Crimean market. Today this process continues with a new force under the new Russian administration.

In March this year, Mao Zedong’s grandson, Tsao Yun-shan, came to the peninsular with a private visit. One might perceive this as a regular trip of a Chinese tourist. Crowds of smiley and colourfully dressed young Chinese recently flooded Saint-Petersburg and Moscow, medieval towns of Suzdal and Yaroslavl, and other tourist destinations in Russia.

Comrade Tsao took a long walk at the main Crimean sites. He took pictures of the famous Swallow’s Nest, visited the Khan’s Palace in Bakhchysarai, the Mangup mountain plateau, the Vorontsov, the Yusupov and Livadiya palaces. He also met with local businessmen: this meeting was held under the auspices of the Sevastopol Business Club, with investments at the top of the agenda.

The unexplainable decision on the construction of sea marinas for EUR 20 billion was presented by the Chinese entrepreneurs during the Yalta International Economic Forum, held in Crimea last April. Beijing has already sent the top specialists to Kerch in Crimea. The Shanghai Foundation Engineering Group Co. Ltd, a shipowner and operator, specialises in construction of bridges, tunnels and railways. It is, in fact, a branch of one of the largest Chinese construction firms, the Shanghai Urban Construction Corporation (SCG).

Everyone who visits Shanghai is impressed by this Chinese super-megalopolis. It is indeed a new world wonder on the banks of Yangtze River. At the same time, practically all the world-famous structures in this 24-million city were constructed by SCG. The corporation is a leader in the construction of major facilities, highways and bridges of large extent, municipal engineering and the road paving industry.

SCG came to Crimea along with the Taman energy supply project. Experts believe that the installation of power cables across the Kerch Strait became a test drive for the larger-scale Chinese participation in the Crimean projects. Although, so far, no presence of Shanghai-based firms was announced in the currently implemented projects of construction of the gas pipeline and the bridge across the Kerch Strait.

Number of dollar millionairs in Russia up by 10% in 2016

At the same time, over 40% of Russians have not enough to live.

The number of dollar millionaires in Russia increased in 2016 up to 132,000 people, or by 10% compared to 2015. At the same time, Europe-wide their numbers fell by 4%. Over the same period, the increase in number of millionaires around the globe was on average even lower, while their numbers went down in Europe.

The rate of growth of dollar millionaires in Russia over the past 10 years is not the highest world-wide, but exceeds the European average. "Over the past 10 years, the number of people with a fortune in excess of USD 1 mln increased in Russia by 31%. Over the same period Australia and Oceania saw a growth of dollar millionaires by 86%, the Asia-Pacific region by 84%, Latin and North America by 41% and 31% respectively and Europe by 13% only.

40% of Russians perceive themselves as poor

Over 40% of Russians reckon they have not enough money to live, affirms the Russian Academy of Sciences monitoring report. «In February 2017, the share of subjectively poor respondents with just enough, or not even enough money for food was 40%. At the same time, some 8% of the respondents estimated the financial standing of their families as well-off, indicating, they had enough money to purchase a car», the report explains.

Earlier, the Deputy Prime Minister Olga Golodetz labelled the phenomenon of the ’working poor’ as unique with Russians feeling poor while employed. She insisted on the Russian government having to engage in a serious debate on raising the minimum wage.

According to the monitoring data, the social makeup of the population subjectively assessing their personal family financial status did not evolve much in February 2017 compared to the same period last year. Back in February 2016, 13% of respondents admitted that they do not have enough money to buy food, while 28% claimed they do not have enough to buy clothes.

Russia eliminates debt of the USSR

Before May 5, 2017 Russia will pay off the last debt of the Soviet Union to its creditors. Today the only creditor-state of the USSR is Bosnia and Herzegovina. On March 21, Deputy Finance Minister Sergei Storchak announced that after a recalculation, the amount of Russian liabilities to Bosnia and Herzegovina is USD 125.2 million and would be a subject to settlement by a once-off cash payment within 45 calendar days from the date of the signed agreement’s entry into force.

Where did the Soviet debts originate?

Debt obligations of any state is, in fact, a regular affair. Even big countries with relatively strong economies have their liabilities to other states. So, for instance, Germany’s external debt in September 2016 exceeded USD 5.01 trillion, that of Japan USD 3.24 trillion. The external debt of the United States has become a widely discussed item: as of 1 February 2017 it stands at USD 19.976 trillion. At the same moment, Russia’s external debt showed modest USD 52 billion (or USD 0.052 trillion).

In 1985, the foreign debt of the USSR was USD 31 billion. During this period, the authorities actively attracted the intergovernmental loans and commercial loans to finance purchases of the imported equipment, food, medicines and other goods vital for the country’s population, as well as funds covering the budgetary running costs — in the form of loans and external bonds. As a result, by the end of 1991 the country was drowning in debt.

On top of the intergovernmental debts, the Soviet Union held liabilities to the commercial organisations, i. e. banks of the so-called London Club of creditors.

Why did the debt burden fall on Russia? There were 15 republics in the USSR, that are all independent states today. So, why not divide the obligations?

Back in October 1991, the first debt settlement plan had the 12 former Soviet republics (all except for the Baltic states) sign a Memorandum of understanding, declaring their joint responsibility for the debt of the USSR. The debt was spread out proportionally to the economic strength of the Republics at the moment of the collapse of the Soviet Union: Russia, as the successor to the RSFSR, got a share of 61.34%, while Kyrgyzstan, for instance, only 0.95%, and Tajikistan even less, 0.82%. The assets of the former country were to be divided in the same proportion, both home and abroad.

However, on April 2, 1993, the Russian government announced its responsibility for all debt settlement obligations of the former Soviet republics in exchange for their dropping claims for any existing foreign assets of the USSR. This plan was labelled a ’zero option’ deal. Thus, Russia assumed the total foreign debt in the amount of USD 96.6 billion. This amount included both state loans, commercial obligations to the creditors of the London club, bonds issued by the Soviet state-owned development bank Vnesheconombank and the domestic foreign currency bonds (OVGVZ).

How did Russia settle the intergovernmental debts of the USSR?

These liabilities were divided into three parts:

The debts to the Paris Club were settled by Russia ahead of schedule, in 2006. Due to this early repayment, the Russian Federation saved USD 7.7 million on interest.

Did no one really owe anything to the Soviet Union?

The USSR certainly had its debtors. However, the vast majority of these countries are the relatively poor African and Latin American states. As part of assistance to the developing countries, their debts were written off. On top of this, Russia remitted part of the obligations to its political and economic partners: in certain cases, in exchange for the debt written off, a country would sign a major trade deal with Russia.

There were, of course, a few ’charity cases’, although Russia is certainly not the only patron of this kind: in 1999, for example, the members of the Paris Club, including Russia (both the Club’s debtor and creditor), signed an agreement to write off more than half of the debt of the poorest African countries. Thus, Russia dropped any claims on the assets of Tanzania, Benin, Mali, Guinea-Bissau, Madagascar, Guinea, Chad, Yemen, Mozambique, Burkina Faso and Sierra Leone. In fact, it would be pointless to claim debts from these countries since they simply have no capacity to meet the obligations as they lack cash.