0715GMT//Russian banks see unpaid loan crisis; interest rates likely to be cut; oligarchs choose to cruise in the Arctic
UNPAID LOANS: Three of Russia's largest banks have started talks with the Central Bank on taking emergency cash to cover unpaid consumer loans, Bloomberg News reported on Thursday. Bloomberg quoted Russian banking insiders as saying that the Central Bank had asked commercial banks to "restructure" loans to mask the scale of the potential crisis. (COMMENT: Banking sources have been warning for the past few months that Russia's sky-high interest rates have forced up the rate of unpaid loans. The Russian Central Bank has recently classified some financial data, making the scale of the crisis more difficult to gauge.)
INTEREST RATE CUT: Most economists expect Russia's Central Bank to cut its core interest rate to 18% from 20% at its next meeting on July 25, Russian financial newspapers have reported. (COMMENT: The economists said that Russia's economy was clearly slowing and inflation was also dropping, giving the Central Bank the room to cut its core interest rate. It cut its core interest rate to 20% from last month, after jacking it up to 21% in November to protect the value of the rouble.)
STEEL PRODUCTION DROP: The Magnitogorsk Steel Plant reported on Thursday an 18% drop in output for the second quarter of the year compared to the same period in 2024. (COMMENT: This sharp drop in steel output at Magnitogorsk reflects Russia's economic downturn. It is also an embarrassment for the Kremlin as the data comes in the same week that Vladimir Putin visited the plant for the first time since 2019 to deliver a pep talk.)
CEMENT PRODUCTION DROP: Cement production in Russia fell by 10% in the first half of the year compared to 2024, the Kommersant newspaper has reported. (COMMENT: The construction industry has been hit hard by the sky-high interest rates and has reported a marked slowdown.)
YACHT CRUISES IN THE ARCTIC: Russian oligarchs have swapped summer cruises in their superyachts around the Caribbean for the Arctic. Telegram channels have reported that the billionaire owner of Severstal, Alexey Mordashov, will spend the summer on his superyacht 'Nord' cruising around the Russian Arctic. (COMMENT: Nord is reportedly the 12th largest superyacht in the world, costing $500m. Russian superyacht trips around the Caribbean and Europe largely stopped in 2022 after the Kremlin's invasion of Ukraine. After that, they switched to more friendly waters in the Indian Ocean and the Pacific. Cruising around Russia's Arctic Ocean is a more radical concept and a form of showy patriotism that the Kremlin now expects from its elite. The arrest this month of Konstantin Strukov, owner of Russia's fourth-largest gold mine, shocked the Russian elite. He had been considered loyal, but Kremlin insiders told media that he had irritated Putin with his showy foreign holidays and repatriating cash out of Russia.)
RETURNING FOREIGN COMPANIES: Putin will have the final say on whether foreign companies are allowed back into Russia, Russian officials told the Interfax news agency. (COMMENT: These officials said that a bill on returning foreign companies had been tweaked to allow Putin to impose "extra conditions" on returning foreign companies.)
PUTIN'S "INCREDIBLE" HISTORICAL KNOWLEDGE: In an interview with Russia's Komsomolskaya Pravda newspaper, Vladimir Medinsky, Russia's chief negotiator with Ukraine, fawned over Putin's "amazing historical knowledge". He was giving the interview about a new series of school textbooks ordered by the Kremlin, which have been described as "rewritten propaganda". (COMMENT: Medinsky is a top Putin aide, but even so, his comments around Putin's knowledge of Russian and Soviet history are instructive and show just how entrenched propaganda systems are in Russia. Medinsky said: "The President understands history better than many of us. In some respects, better than many narrow specialists. This, I admit, has amazed me more than once. That is why his speeches on historical topics are so interesting.")
EU SANCTIONS: The EU on Friday imposed another round of sanctions targeting Russia that will target its energy and financial services after Kremlin ally Robert Fico, Slovakia's PM, lifted his veto. (COMMENT: The new sanctions will ban transactions with 22 Russian banks; any future plans to use the Nord Stream gas pipelines between Russia and Europe; and introduce a 15% "dynamic price cap" on Russian energy products. It's unclear if or how these new sanctions will impact Russia, which has been under hardcore Western sanctions since 2022.)
A DEAD CONSCRIPT: Investigators have opened a case against the Russian army over the death of a 19-year-old man just four days after he was conscripted into the army. Soldiers have said that the conscript, Danil Minyailo, died of heat stroke, asphyxiation and dehydration after he was pushed through physical training without a break in temperatures of 35 degrees. (COMMENT: Although reports of abuse in the Russian army are common, this case has picked up coverage in opposition Telegram channels. Commentators have said that it shows the cruelty of the Russian army.)
NEWS MATRIX:
With all the negative economic data coming out of Russia, it is not surprising that cement and steel output have dropped or that economists see the Central Bank lowering its core interest rate at its next meeting next week. These are both important stories, though, as the economy has become a real headache for the Kremlin.
It's more surprising and, possibly, more important that Russian commercial banks have started talking to the Central Bank for emergency cash to cover unpaid loans. This is according to Bloomberg. The Central Bank denies that there is a banking crisis brewing in Russia. This sort of readout suggests a different reality.
On new EU sanctions, it's unclear how impactful the 18th round of sanctions will be. Perhaps the main impact is symbolic?