Research & Insights #33

Russia aims to become a major player in the global copper market

On 11 September, the country’s largest undeveloped copper deposit – Udokan – went into production. Located in Eastern Siberia, between Lake Baikal and the Pacific Ocean, it was inaugurated by Vladimir Putin during a video link-up. The mining and refining complex will produce 150,000 tonnes of copper per year. The aim is to triple its production capacity within five years and could represent an increase of almost 50% on current Russian production. The project’s economic viability is based on global demand, which is set to rise sharply in the coming years as a result of the energy transition, and on its geographical proximity to the Asian market, particularly China, the world’s leading consumer of copper. Russian billionaire Alisher Usmanov bought the right to develop Udokan for US$500 million from the government just before the 2008 financial crisis. It took 10 years to resolve the technical challenges of the project, create a new geological model and start construction.

Post-Cold War world order is over, Blinken admits

The United States’ growing geopolitical competition with Russia and China marks the end of the post-Cold War world order, argues US Secretary of State Antony Blinken. “What we are experiencing now is more than a test of the post-Cold War order. It’s the end of it,” he noted. According to him, the relative geopolitical stability that has lasted for several decades is beginning to give way to a situation where world powers are competing with each other. He added that the world is currently at a turning point: one era ends and another one begins. Blinken opined that decisions made now will shape the future for decades. The Secretary of State claimed that the war in Ukraine is “the most immediate, the most acute threat to the international order”. But according to him, “the People’s Republic of China poses the most significant long-term challenge, because it not only aspires to reshape the international order, it increasingly has the economic, the diplomatic, the military, the technological power to do just that”.

Russian central bank hikes key interest rate to 13%
On 15 September, the Central Bank of Russia raised its key rate by 100 basis points to 13%, citing high inflationary pressure in the economy. “Significant proinflationary risks have crystallized, namely the domestic demand growth outpacing the output expansion capacity and the depreciation of the ruble in the summer months” the bank said in a statement. The CBR also signaled the possibility of furtherrate hikes and increased its inflation forecast for Russia at the end of 2023 from 5-6.5% to 6-7%, maintaining its 4% forecast for 2024 and beyond. Additionally, the Bank of Russia has raised its forecast for the average cost of Russian Urals crude oil for 2023 from US$55 to US$60. It maintained its stance on the undesirability of tightening capital controls to influence the ruble exchange rate, calling to rely instead upon natural correction factors and already implemented monetary tightening. The Bank of Russia Board of Directors will hold its next rate review meeting on 27 October. On 18 September, the rouble was trading at 96.6338 to the US dollar.

Russian money goes home

Wealthy Russians have taken US$50 billion worth of assets back to their homeland and “friendly” countries since February 2022, Bloomberg reported. According to the agency, last month the shareholders of United Medical Group and MD Medical Group Investments Plc approved the re-registration of companies from Cyprus to Russia. “That transfer will help push the total value of assets that have been re-domiciled by the wealthiest Russians since February 2022 to at least US$50 billion,” Bloomberg wrote. This shift is breaking with a decades-old practice by Russian billionaires to hold their assets in Europe, taking advantage of investor-friendly legal systems, the chance to get dividends in foreign currencies and low taxes. Bloomberg recalls that the transfer of assets back to Russia started with the launch of the special operation in Ukraine due to the fact that Russian businessmen increasingly began to fall under sanctions of Western countries.

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