• 4 minutes Ten Years of Plunging Solar Prices
  • 7 minutes Hydrogen Capable Natural Gas Turbines
  • 10 minutes World looks on in horror as Trump flails over pandemic despite claims US leads way
  • 13 minutes Large gas belt discovered in China
  • 3 mins Would bashing China solve all the problems of the United States
  • 7 hours Yale University Epidemiologist Publishes Paper on Major Benefits of Hydroxchloroquine for High-risk Outpatients. Quacksalvers like Fauci should put lives ahead of Politics
  • 2 hours Model 3 cheaper to buy than BMW 3 series.
  • 55 mins Thugs in Trumpistan
  • 47 mins Pompeo's Hong Kong
  • 7 mins China To Boost Oil & Gas Exploration, As EU Prepares To Commit Suicide
  • 1 day China to Impose Dictatorship on Hong Kong
  • 21 hours COVID 19 May Be Less Deadly Than Flu Study Finds
  • 15 hours China’s Oil Thirst Draws an Armada of Tankers
  • 10 hours Income report showing potential future spending and economic growth
  • 3 hours Coronavirus hype biggest political hoax in history
  • 11 hours US-China tech competition accelerates: on Friday 05/15 new sanctions on Huawei, on Monday 05/18 Samsung chief visits China
  • 12 hours The CDC confirms remarkably low coronavirus death rate. Where is the media?
  • 2 days 60 mph electric mopeds
Is Dieselgate Finally Over?

Is Dieselgate Finally Over?

Five years after Volkswagen’s dieselgate…

Driving Season Won’t Save Gas Demand

Driving Season Won’t Save Gas Demand

Memorial day weekend usually marks…

Solar Stocks Are Leading The Energy Market Recovery

Solar Stocks Are Leading The Energy Market Recovery

Renewables stocks have outperformed the…

Al Fin

Al Fin

Al Fin runs a number of very successful blogs that cover, energy, technology, news and politics.

More Info

Premium Content

Russia's Dysfunctional Economy Fails to Attract Investment Vital for Energy

Russia is a difficult country to analyse. It is the largest nation on Earth, rich in natural resources and human resources. And yet it is burdened with dysfunctional government, a dysfunctional economic and legal system, and an atmosphere of vague despair that lingers despite multiple changes in leadership over the decades.

The Russian market this spring fell faster than other so-called BRIC countries of Brazil, Russia, India and China and since mid-March is down 18.8 percent. Global oil prices have slumped, reducing expected earnings.

But even taking earnings into account, investors take a dim view of Russian equities. The Russian stock exchange now trades at an average price to estimated earnings ratio of 4.28, compared with the MSCI Emerging-Markets Index average.

It is a glum statistic for Russia, particularly as President Vladimir V. Putin is planning a wide-ranging sale of state assets to raise money for increased military and social spending promised during his campaign. The price-to-earnings ratio comparison means that, statistically, a company that mines gold or pumps oil in Russia is worth less than half as much as a company that extracts the same amount of gold or oil just as efficiently in Brazil or Indonesia.

For all the value in the Russian economy, this wealthy industrial superpower cannot convince investors that it is safe place to put money — even an oil company is a hard sell. _NYT

No wonder. When wealthy Russia cannot convince insurance companies to insure joint projects inside Russia, of course it will not be able to convince most investors to take the huge risks of exposing valuable assets to the kleptocratic Russian bear. The Russian government treats all assets -- public or private -- as its own little treasure chest of goodies.

Sergei Aleksashenko, a former deputy finance minister, said in an interview that Russian energy companies are routinely subjected to this “system of unofficial requests,” from the Kremlin — for financing everything from presidential palaces to ski resorts to military installations.

“It doesn’t really matter what it is for,” Mr. Aleksashenko said. “You receive a request and you cannot refuse.” _NYT

Mr. Putin and his friends have their fingers in all the concentrations of wealth and power inside the country. The corruption takes place overtly and covertly, legally and quasi-illegally. It is organised crime on a massive scale, and shows no sign of being curtailed -- particularly as long as weak and inept clowns such as US President Obama are in charge of the western bloc.

Based in the Siberian city of the same name, Surgut is a private company but managed by a Soviet-era director who is close to Mr. Putin. It sells much of its oil, about $127 million a day based on average prices for Russia’s export blend oil, Ural Crude, last year, to a similarly opaque commodities firm called Gunvor based in the Netherlands and co-owned by Gennady Timchenko, another long-time acquaintance of Mr. Putin.

The company has emphasized other measures of success than stock price, including high salaries for employees and a favoured statistic of Soviet oil ministers but not modern petroleum analysts: the number of meters of well bore drilled. Surgut has yet to publish its 2011 annual financial report on its Web site but, in a press statement, made public that it had drilled 4.75 million meters last year.

The owners of 70 percent of the company remain a mystery. In conference calls with analysts, the company has said its own executives own a majority of the shares... _NYT

More at link above.

Russia is undergoing a demographic collapse of its core population. The country is a public health disaster. Its military and military-industrial infrastructures are rusting and crumbling under the weight of corruption, neglect, and nepotistic incompetence. And Russia's energy infrastructure -- desperately in need of foreign capital and expertise -- is going the same way of slow motion collapse. Unless something of significance changes.

Stay tuned.

By. Al Fin


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Philip Andrews on May 31 2012 said:
    I thought Mr Copely's article on Iran was misinformed.

    Compared to this tabloid nonsense it was a rational well considered article.
    Al Fin would do much better writing for British tabloids like the Sun or News of the World, where his sensationalist nonsense would at least be considered entertaining by the hoi poloi, than assaulting the intelligent and informed membership of this website with it.

    I consider any further commentary on my part superfluous.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News