Russia-Europe Energy Thread

[roberto]

But 27% of gas consumption - the figure that matters. And it is only in the gas sector the fraction is that high.

The rest is conjecture.

How is that conjecture? Russia went for exactly same reason to Libya/Algera just like CA gas as u have to deal with One Russia not with 10 gas exporting countries.

http://www.thenational.ae/article/20080726/BUSINESS/926884913/1137
In June, Gazprom opened an office in Algeria — its first in Africa — to forge closer ties with Sonatrach.
Sonatrach supplies about 13 per cent of Europe’s gas consumption, compared with 25 per cent supplied by Gazprom

http://www.ruvr.ru/main.php?lng=eng&q=29941&cid=61&p=21.07.2008
The Russian Corporation TVEL has beaten the American Westinghouse in a tender for the supply of nuclear fuel to Mohovze and Bogunitse nuclear power plants in Slovakia
TVEL, which accounts for 17 percent of global nuclear fuel production, is going on to develop the production of fuel for Pressurized Water Reactors, which are cooled by a mixture of water and steam. Mikhail Rimarev has this to say:

 

[kato]

Plus around 20-30% of Russian gas production companies are EU-owned anyway, primarily German; often in intercontinental mutual joint ventures.

Uranium? Two-thirds the uranium on the market currently (!) stems from Australia, Kasachstan, Canada and South Africa. The other third is Niger, Russia, Namibia and a number of other "small" producers. Actually, Germany gets rid of its unwanted nuclear items such as UF6 in Russia to some extent.

TVEL and a number other companies primarily act as resellers. Same thing for Arewa in France really, or Urenco in Germany.

 

[roberto]

Plus around 20-30% of Russian gas production companies are EU-owned anyway, primarily German; often in intercontinental mutual joint ventures.

Uranium? Two-thirds the uranium on the market currently (!) stems from Australia, Kasachstan, Canada and South Africa. The other third is Niger, Russia, Namibia and a number of other "small" producers. Actually, Germany gets rid of its unwanted nuclear items such as UF6 in Russia to some extent.

TVEL and a number other companies primarily act as resellers. Same thing for Arewa in France really, or Urenco in Germany.

Uranium mines in Kazakistan is now Russian project. First strategy of Russia is to control natural resources in near board. Than go to Africa and than Latin America.
Australlia will mostly deal with rising demand in China/India/East Asia. EU has to deal with Russia. there is no other way around. There are several fundamental factors behind them.

http://www.africaintelligence.com/C...ce=art&comment=&context=his&doc_i_id=40135182
AFRICA MINING INTELLIGENCE - 09/04/2008
NAMIBIA
Russia Advances on Uranium Deal
A year after the plan for a Russian joint venture to explore for uranium and extract it in Namibia was first sketched out (AMI N°151), Moscow has confirmed and reworked the conditions for its intervention in the country.

http://www.mineweb.com/mineweb/view/mineweb/en/page38?oid=58238&sn=Detail
Russia's ARMZ has new uranium reach
Russian state uranium miner now no.2 in control of world uranium resources.

 

[Grand Danois]

Uranium mines in Kazakistan is now Russian project. First strategy of Russia is to control natural resources in near board. Than go to Africa and than Latin America.
Australlia will mostly deal with rising demand in China/India/East Asia. EU has to deal with Russia. there is no other way around. There are several fundamental factors behind them.

Fundamental factors?

roberto thinks it is too costly to ship Uranium from Australia (or Canada/Africa/etc.).

He also thinks that Chinese contracts with Aust is the same as excluding other contracts.

 

[ASFC]

No your Nuclear Fuel Argument dos not stand up roberto. TVEL exports to Czech Republic, Slovakia, Bulgaria, Hungary, Ukraine, Armenia, Lithuania, Finland and China which accounts for 17% of world Nuclear Fuel production.

But does not export to either France, Britain, Germany, USA or Japan*, and US is the worlds largest producer of Nuclear Energy, France the largest user (as a percentage of national demand), and the US, France and Japan combined provide over 50% of Nuclear power produced (see here). Given that only roughly 6% of the worlds energy comes from Nuke Power (see the same IEA report I have linked), the idea that Russia can control Nuclear powered energy when TVEL supplies less than 20% of the Nuclear Output is laughable.

And it is not as if TVEL are winning these contracts you keep linking because they are the only supplier and can therefore dictate terms and use these contracts for political leverage, are they?

Anyway this is getting miles off topic away from Georgia.

*which suggests if Russia did play energy hardball and cut of Uranium supplies those countries (the largest producers of Nuke Power) will shrug and keep going to their existing (non-Russian) suppliers.

 

[roberto]

No your Nuclear Fuel Argument dos not stand up roberto. TVEL exports to Czech Republic, Slovakia, Bulgaria, Hungary, Ukraine, Armenia, Lithuania, Finland and China which accounts for 17% of world Nuclear Fuel production.

But does not export to either France, Britain, Germany, USA or Japan*, and US is the worlds largest producer of Nuclear Energy, France the largest user (as a percentage of national demand), and the US, France and Japan combined provide over 50% of Nuclear power produced (see here). Given that only roughly 6% of the worlds energy comes from Nuke Power (see the same IEA report I have linked), the idea that Russia can control Nuclear powered energy when TVEL supplies less than 20% of the Nuclear Output is laughable.

And it is not as if TVEL are winning these contracts you keep linking because they are the only supplier and can therefore dictate terms and use these contracts for political leverage, are they?

Anyway this is getting miles off topic away from Georgia.

*which suggests if Russia did play energy hardball and cut of Uranium supplies those countries (the largest producers of Nuke Power) will shrug and keep going to their existing (non-Russian) suppliers.

why forget India/Iran from the mix. The point is China alone is making so many reactors that there will be no other way around of Russia nuclear fuel cycle.
they just sold $1b of large scale uranium technology to China. This same thing happened to Oil/Gas sector. Russia economic strategy is to create monoply over Globalization. In Globalization only the highest cash bidder can take the stuff.(read foreign currency assets)

http://eng.globalaffairs.ru/news/31.html
The state-owned Tvel group and the Nuclear Power Corporation of India have signed a contract worth USD 400 million for fuel deliveries to the planned facility in Kudankulam in southern India. Under this deal Russia is to deliver nuclear fuel to India by 2010. It also includes the development and management of the two nuclear reactors

 

[ASFC]

why forget India/Iran from the mix. The point is China alone is making so many reactors that there will be no other way around of Russia nuclear fuel cycle.
they just sold $1b of large scale uranium technology to China. This same thing happened to Oil/Gas sector. Russia economic strategy is to create monoply over Globalization. In Globalization only the highest cash bidder can take the stuff.(read foreign currency assets)

I think you are missing the point-Russia has no control over Nuclear Fuel, because only 6% of the Worlds Energy demands is met by Nuclear Fuel of which only 17% of that 6% is supplied by Russia. Even then that is to none of the big three in Nuclear Power producers (US, France, Japan) and to none of the western European countries. You have missed the fact that Western Countries (the traditional West, not Eastern Europe) doesn't need Russian Uranium at all to continue Nuclear Power production. And who cares if Russia does control the Chinese market? China uses all its power for domestic use and still has more coal fired power stations than it will have nuclear ones.

And again Nuclear Power has absolutely nothing to do with the South Ossetian War, unlike Oil and Gas Russia does not have a market share in Major Western Countries with Nuclear Fuel.

 

[roberto]

I think you are missing the point-Russia has no control over Nuclear Fuel, because only 6% of the Worlds Energy demands is met by Nuclear Fuel of which only 17% of that 6% is supplied by Russia. Even then that is to none of the big three in Nuclear Power producers (US, France, Japan) and to none of the western European countries. You have missed the fact that Western Countries (the traditional West, not Eastern Europe) doesn't need Russian Uranium at all to continue Nuclear Power production. And who cares if Russia does control the Chinese market? China uses all its power for domestic use and still has more coal fired power stations than it will have nuclear ones.

And again Nuclear Power has absolutely nothing to do with the South Ossetian War, unlike Oil and Gas Russia does not have a market share in Major Western Countries with Nuclear Fuel.

China has $2T in hard cash. They are going to built over 100 reactors and compelete with transfer of technology from Areva/Westinghouse/rosatom etc
This will increase Russia leverage with EU countries in Nuclear fuel cycle. as those China suck up fuel from other sources. the same happened to Semiconductors as EU fabs close down and equipment shipped to Russia. U r not fully comprehending the effect of globalization where every one is taking from same pot. Easter EU is importan as new industries shift from West to East for proximity. they will need for supply of energy not to mention rising incomes use more energy by definition. Globlization is not in West interest and Russia fully knows it to exploit it. EU weak economic and diplomatic postion is obvious from Kosvo issue as only 43 countries recognize it. . just look at how many countries in world out of 200 came out practically against Russia on Georgia. It is that bankrupt economic system that is based on public bluster but nothing for practice.
The more u wait the more Russia becomes powerful and less leverage EU had.

http://www.iht.com/articles/2008/08/17/europe/nato.php
On Sunday, Merkel said she held to her view that it is too early to implement the Membership Action Plan for Georgia and Ukraine, even though Washington would like to accelerate it for both of them.
Her foreign minister, Frank-Walter Steinmeyer, a Social Democrat and close aide to Schröder, is considered very friendly toward Moscow. In an interview published Sunday, he urged the West against "knee-jerk reaction" like suspending EU-Russia talks on strategic cooperation or banning Russia from the World Trade Organization

 

[Grand Danois]

Two quick references on what it means to be a primary sector economy.

Russian Oil Output May Fall for First Time in Decade in 2008

By Greg Walters

March 27 (Bloomberg) -- Russian oil output may fall this year for the first time in a decade as the world's second-biggest supplier struggles with rising costs and harder-to-reach fields, Natural Resources Minister Yuri Trutnev said.

``Two years ago, we said the growth rate was falling, and we said this was bad for Russia, remember?'' Trutnev said in televised remarks after a government meeting in Moscow today. ``Now we're saying the production rate is falling this year. This is not a bogeyman, unfortunately, this is real,'' Trutnev said, without giving a specific forecast.

A decline would end a 10-year, 58 percent surge in production, which fell to 6.2 million barrels a day in 1998, when prices dipped below $10 a barrel and Russia defaulted on about $40 billion of domestic debt and devalued the ruble.

Trutnev's outlook contradicts that of the Energy Ministry, which expects an increase of 1.8 percent to 10 million barrels a day of crude and gas condensate, or about 11 percent of world consumption. The International Energy Agency, an adviser to 27 industrialized nations, expects demand to rise 2 percent this year to 87.54 million barrels a day.

Investment bank Credit Suisse Group today joined Moscow- based UralSib Financial Corp. in forecasting an annual decline in Russian production after output slid in January and February.

`Difficult Start'

``The difficult start to the year indicated that the situation in the Russian oil sector is perhaps much more challenging than major integrated oil companies believed at the end of last year,'' Credit Suisse analysts Vadim Mitroshin and Lev Snykov wrote in a note to clients today.

Output fell 0.7 percent in January and 0.9 percent in February, to 9.79 million barrels a day, compared with the same months last year, according to Energy Ministry data. Saudi Arabia is the world's biggest producer of crude oil.

Zurich-based Credit Suisse said it now expects output to fall 0.5 percent, after earlier predicting a 0.7 percent rise.

``National production has reached a plateau and onshore production appears to be in decline,'' said Ronald Smith, chief strategist at Alfa Bank, by phone in Moscow today.

Smith and UralSib's Chris Weafer are among analysts predicting the government will be forced to cut taxes on the industry, its biggest source of income, to revive production. Finance Minister Alexei Kudrin this week proposed cutting extraction taxes by 100 billion rubles ($4.2 billion) a year to help finance exploration and development.

``We consider it very likely that the government will introduce a series of tax breaks this year to boost upstream spending,'' Weafer said in a report on Feb. 6. ``The state will not want to see production go into a declining phase.''

Rosneft Chief Executive Officer Sergei Bogdanchikov called the current tax system ``too harsh'' in August. Export, extraction and other taxes must be cut or companies won't have any incentive to develop new fields, including in the Arctic, OAO Gazprom Neft CEO Alexander Dyukov said on Feb. 4.

To contact the reporter on this story: Greg Walters in Moscow [email protected]
Last Updated: March 27, 2008 09:29 EDT
http://www.bloomberg.com/apps/news?pid=20601072&sid=arXTpOY4omL4&refer=energy

In short, the West is unwilling to invest their technology to increase Russian oil production.

Next on what it means when export income is injected into an economy which cannot absorb it; inflation is not followed by an increase in productivity and competitiveness falls.

Analysis: Russian budget suffers corrosive effects of inflation

By Matt Smith

11 August 2008

Soaring oil prices have enriched Russia and seemingly allowed the Kremlin to raise defence spending to a post-Cold War high, with official expenditure on course to break RUR1 trillion (USD42 billion) in 2009.

But dig below the surface of the official figures and it quickly becomes apparent that this spending bonanza is far from the full story. In fact, Russia's inability to control its oil and credit-fuelled inflationary problems has seen defence spending growth falter in real terms.

Comparing Russia's inflation-adjusted defence budget growth to nominal figures demonstrates the problem. From the accession of Vladimir Putin as president in 2000, the budget increased substantially in real terms from RUR201 billion to RUR322 billion in 2006, marking a rise of 60 per cent, but since then growth has slowed. 2006 was in fact the peak year and real-terms budgets are not programmed to exceed it again until 2010 at the earliest.

This is primarily because high levels of inflation in the Russian economy have eroded the real-terms buying power of the Ministry of Defence (MoD). According to GDP inflation data published by the International Monetary Fund (IMF), the Russian government has been consistently unable to control price rises in recent years.

Although 2004 and 2005 saw the highest inflation with rates of 20 per cent annually, since 2004 energy prices have soared even further, enriching Russia, but at the same time further feeding inflationary pressures. This resulted in annual GDP inflation of 17.5 per cent in 2006 and 13.5 per cent in 2007. By the end of 2008, the IMF estimates inflation will have risen again to more than 16.5 per cent. This is substantially higher than CPI inflation reported by the OECD, which peaked in 2001 and currently sits at about 10 per cent.

http://www.janes.com/news/defence/triservice/jdi/jdi080811_1_n.shtml

 

[roberto]

Two quick references on what it means to be a primary sector economy.



In short, the West is unwilling to invest their technology to increase Russian oil production.

Again ur miss interpreting the actual situation. Russian gov simply does not want to increase production too fast so there is heavy taxation and discourgement of foreign investment which will lead to lower prices. its better to have natural resources in ground for future higher prices as Rest of World gets richer than charge much higher prices.

Next on what it means when export income is injected into an economy which cannot absorb it; inflation is not followed by an increase in productivity and competitiveness falls.

Russian inflation is accompanied by Wage growth which translate into high standard of living. Inflation measurement is differeent as in West they strip out non-core inflation and all kind of statistics manipulation.
It is real gdp growth of 8%. so with inflation. Nominal GDP growth is some where in 25% region. and Oil and Gas has no bearing on GDP growth.

http://www.rbcnews.com/free/20080721165149.shtml
RBC, 21.07.2008, Moscow 16:51:49.Russia's GDP growth amounted to 8 percent in the first half of 2008 compared to the same period of the previous year, Deputy Economy Minister Andrei Klepach said today,

 

[Grand Danois]

Again ur miss interpreting the actual situation. Russian gov simply does not want to increase production too fast so there is heavy taxation and discourgement of foreign investment which will lead to lower prices. its better to have natural resources in ground for future higher prices as Rest of World gets richer than charge much higher prices.

Errr it's shrinking not "growing at a slower pace". Fact is that few new fields are being developed and existing fields cannot fully be exploited due to old technology (and when a well is is pumped using old tech, it is very hard to imeplement the new afterwards - a high percentage of the oil stays in the reservoir rock.

Could you present some credible source that Russia does not want to modernise its oil sector in order to keep prices high? Particularly that it does not want to get as much oil as possible from the existing wells?

Russian inflation is accompanied by Wage growth which translate into high standard of living. Inflation measurement is differeent as in West they strip out non-core inflation and all kind of statistics manipulation.
It is real gdp growth of 8%. so with inflation. Nominal GDP growth is some where in 25% region. and Oil and Gas has no bearing on GDP growth.

I wasn't adressing Russian standard of living or growth. You missed the point. The increase in Russian GDP is primarily from the primary sector (increase in oil price) and is not followed by a similar increased productivity in the other sectors. It's the structure of the Russian economy.

 

[kato]

Quite a number of these undeveloped fields are owned by European companies in fact - BP and Shell in particular.
Gazprom and other Russian companies basically buy into these and shift them around to certain levels in order to develop them; however, often, such undertakings, both for development of the fields themselves and for the necessary infrastructure including pipelines or port facilities, only "take off" after considerable (20-40%) contribution from outside energy or oil-consuming companies such as E.On, BASF, Mitsubishi, ***.

Old technology is more the case in a number of countries for which Russia is essentially the transiter/reseller, such as Kazakhstan or Azerbaijan.

 

[Grand Danois]

Quite a number of these undeveloped fields are owned by European companies in fact - BP and Shell in particular.
Gazprom and other Russian companies basically buy into these and shift them around to certain levels in order to develop them; however, often, such undertakings, both for development of the fields themselves and for the necessary infrastructure including pipelines or port facilities, only "take off" after considerable (20-40%) contribution from outside energy or oil-consuming companies such as E.On, BASF, Mitsubishi, ***.

Old technology is more the case in a number of countries for which Russia is essentially the transiter/reseller, such as Kazakhstan or Azerbaijan.

But nonetheless output is falling. The issue is that many of the Russian oil fields are not being used efficiently, e.g. too much of the potential reserves get stuck permantly underground, meaning that effectively their reserves are smaller than they would have been if drilled and pumped like it is done in the West.

 

[roberto]

Errr it's shrinking not "growing at a slower pace". Fact is that few new fields are being developed and existing fields cannot fully be exploited due to old technology (and when a well is is pumped using old tech, it is very hard to imeplement the new afterwards - a high percentage of the oil stays in the reservoir rock.

Could you present some credible source that Russia does not want to modernise its oil sector in order to keep prices high? Particularly that it does not want to get as much oil as possible from the existing wells?

Why u need credible sources for stating the obvious. for every dollar of Oil price above $27. 90% goes to Taxes. nothing left for profits that Oil companies can reinvest for increasing production. it seems Russian gov does not believe in production. thats why Russian Oil/Gas companies evaluation is so low compared to Exon Mobile or Sinopec of China. Russian companies have more licenses to develop oil and gas in Libya/Venzuela/Iran/UAE/Saudi than all the Western/Chinese/Japanese companies combined. But they have limited manpower to do every thing. they dont even need to develop there own fields.

I wasn't adressing Russian standard of living or growth. You missed the point. The increase in Russian GDP is primarily from the primary sector (increase in oil price) and is not followed by a similar increased productivity in the other sectors. It's the structure of the Russian economy.

ur missing the point there is no particular investment in Oil and Gas sector so hardly GDP is growing due that. it is growing because of increasineg trade and full autmoation of industries with with China/SK/Japan\Taiwanese. All Central Asia/Middleast etc. those days of dependency on forign investment are over. They can pick and chose now. Western analyst mostly missed that point.

 

[Grand Danois]

Why u need credible sources for stating the obvious. for every dollar of Oil price above $27. 90% goes to Taxes. nothing left for profits that Oil companies can reinvest for increasing production. it seems Russian gov does not believe in production. thats why Russian Oil/Gas companies evaluation is so low compared to Exon Mobile or Sinopec of China. Russian companies have more licenses to develop oil and gas in Libya/Venzuela/Iran/UAE/Saudi than all the Western/Chinese/Japanese companies combined. But they have limited manpower to do every thing. they dont even need to develop there own fields.

Extraordinary claims need extraordinary evidence. Currently Russian output is falling and prices are going down. If such conditions prevail, Russia loses money. In order to implement such a strategy a vast array of nations need to agree on it. They don't. Oil nations put out as much as they can in order to cash in.

As such, it is very improbable that such a strategy is pursued.

ur missing the point there is no particular investment in Oil and Gas sector so hardly GDP is growing due that. it is growing because of increasineg trade and full autmoation of industries with with China/SK/JapanTaiwanese. All Central Asia/Middleast etc. those days of dependency on forign investment are over. They can pick and chose now. Western analyst mostly missed that point.

GDP is growing because of the value of exports. Competitiveness is lost due to internal inflation. If, say a SU-30 for export costs 30 mn USD today, it will cost 40 mn USD for the importing nation in three years time - if going by the lower OECD internal inflation number.

 

[roberto]

Extraordinary claims need extraordinary evidence. Currently Russian output is falling and prices are going down. If such conditions prevail, Russia loses money. In order to implement such a strategy a vast array of nations need to agree on it. They don't. Oil nations put out as much as they can in order to cash in.

As such, it is very improbable that such a strategy is pursued.

Production fall one percent but price of Oil/Gas jumps 50% in one year. i am not even going into profits in foreign contracts. this simply math. it is good to have 10% cut in production for 50% more jump in price as 50% is bigger base of the previous bigger price increase. Russian already know West is in economic depression no need to over supply them with cheap energy.

GDP is growing because of the value of exports. Competitiveness is lost. If, say a SU-30 for export costs 30 mn USD today, it will cost 40 mn USD for the importing nation in three years time - if going by the lower OECD internal inflation number.

Look at this statement. In 90s. Almost 100% of conventional military production went to Exports but now exports hardly matters more than 20 to 25%. and still they are making record in value. It is due increase in automation with less labor force.

Moscow (RIA Novosti) Aug 13, 2008

Russia's military exports will exceed $8.5 billion in 2008, a senior government official said on Tuesday. Russia has doubled annual arms exports since 2000 to $7 billion last year, becoming the world's second-largest exporter of conventional arms after the United States.
Military exports "are planned at $8.5 billion this year [2008], and I think we will fully meet the plan, and even exceed it," Mikhail Dmitriyev, head of the Federal Service for Military-Technical Cooperation, told a RIA Novosti news conference.

Russia exports weapons to about 80 countries. Among key buyers of Russian-made weaponry are China, India, Algeria, Venezuela, Iran, Malaysia and Serbia.

"Our foreign customers are queuing up for new Russian-made weaponry," Dmitriyev said. "Among our main 10-15 customers are China, India, almost all Middle East countries, Algeria, Morocco and Venezuela."

The most popular types of weaponry bought from Russia are Sukhoi and MiG fighters, air defense systems, helicopters, main battle tanks, armored personnel carriers and infantry fighting vehicles.

Russia also maintains traditionally strong positions in sales of small arms, and anti-tank and air-defense missile systems.

Dmitriyev said Russia's defense companies were overloaded with orders and urgently needed to increase capacity to meet existing orders and ensure future growth in national arms exports.

"I think our defense industry can handle this situation," he said.

 

[Grand Danois]

Production fall one percent but price of Oil/Gas jumps 50% in one year. i am not even going into profits in foreign contracts. this simply math. it is good to have 10% cut in production for 50% more jump in price as 50% is bigger base of the previous bigger price increase. Russian already know West is in economic depression no need to over supply them with cheap energy.

Nice as a lab experiment but not applicable to the real world. Russian output is diminishing as percentage of world production. On top of that, the reserves get locked in the ground - even less money.

Look at this statement. In 90s. Almost 100% of conventional military production went to Exports but now exports hardly matters more than 20 to 25%. and still they are making record in value. It is due increase in automation with less labor force.

And if you read the jane's piece, inflation is hollowing the defence budget out, and it is in PPP terms falling. The Russian defence budget is affected the same way as export customers. Will those customer continue to place orders when prices double? And the same goes for the rest of the export economy.

 

[roberto]

Nice as a lab experiment but not applicable to the real world. Russian output is diminishing as percentage of world production. On top of that, the reserves get locked in the ground - even less money.

Energy is not semi conductors that if u produce more u will get more money. the lesser the better is for higher price. 1 to 2% hardly matters in year time. What matter is average price of energy per year and that is 50% higher in 2008 than 2007 and u cannot challenge that fact. It is better to produce in sands of north Africa or Central Asia that have low expoloration cost for low price environment.

And if you read the jane's piece, inflation is hollowing the defence budget out, and it is in PPP terms falling. The Russian defence budget is affected the same way as export customers. Will those customer continue to place orders when prices double? And the same goes for the rest of the export economy.

Increasing automation is making them to produce far sophisitcated weapons at lower pirce. Su-30MK is still produced at lower price in Russia than in India despite very high labor cost in Russia. (remember they use Siemens work colloboration system at Irkut)
Same is true for Tanks etc. West cannot stop automation of Russian defence firms.
And inflation is eating also the competitors more than Russian defence firms as it can get materials at below market price from state controlled monopolies. u can see all this new Mitsubishi industrial machinery from 2008. So EU is not source of technology when there are others selling every thing to get out of there own economic depression.
http://www.npo-saturn.ru/!new/?pid=78

 

[Grand Danois]

Energy is not semi conductors that if u produce more u will get more money. the lesser the better is for higher price. 1 to 2% hardly matters in year time. What matter is average price of energy per year and that is 50% higher in 2008 than 2007 and u cannot challenge that fact. It is better to produce in sands of north Africa or Central Asia that have low expoloration cost for low price environment.

I'm talking about oil not semiconductors.

Increasing automation is making them to produce far sophisitcated weapons at lower pirce. Su-30MK is still produced at lower price in Russia than in India despite very high labor cost in Russia. (remember they use Siemens work colloboration system at Irkut)
Same is true for Tanks etc. West cannot stop automation of Russian defence firms.

Except that in the real world the inflationary pressure did carve out the Russian defence budget, so that it was in fact smaller than last year.

And inflation is eating also the competitors more than Russian defence firms as it can get materials at below market price from state controlled monopolies. u can see all this new Mitsubishi industrial machinery from 2008. So EU is not source of technology when there are others selling every thing to get out of there own economic depression.
http://www.npo-saturn.ru/!new/?pid=78

Ahhhh. So getting materials below market price means that you will producing and selling at a loss - losing the value of the materials if sold on an open market - in effect the produced item costs the same, you just subsidize from govt coffers or the SWFs.

 

[roberto]

I'm talking about oil not semiconductors.

Oil is different. 1% production fluction per year does not matter when u have 50% price increase.

Except that in the real world the inflationary pressure did carve out the Russian defence budget, so that it was in fact smaller than last year.

Russia had inflation of over 12% since 90s. Does it mean that defence budget of 90s is bigger than 2008. this the flawed logic of JDW. since they simply cant understand Russian economic sytem. West had low inflationary period in 90s all of sudden they wake up to higher prices and than start believing that Russia had the same problem just now which infact is old thing.

Ahhhh. So getting materials below market price means that you will producing and selling at a loss - losing the value of the materials if sold on an open market - in effect the produced item costs the same, you just subsidize from govt coffers or the SWFs.

Again the same mistake with natural resources. the rest natural resources u produce the more market price u get. It is the same like Wheat/Corn etc. It is better to get cheaper supply chain to defence firms rather than exposing them to open market manipulation.