Russian companies halt food shipments as economic collapse accelerates

(NaturalNews) As ugly as the current collapsing economy in Russia is already, it might be about to get a whole lot uglier -- and much more dangerous, both for average Russians and the world.

Up to this point, most of the world's and media's focus has been on the economics of the Russian currency collapse, which has been fed largely by a rapid decline in oil prices (fully half of Russia's GDP is dependent upon energy sales) and Western-led sanctions for Moscow's military aggression in Crimea and Ukraine. Also, many geopolitical analysts have been keeping an eye on Russian President Vladimir Putin, and have tried to predict what he might do.

But, as Zero Hedge -- a financial news website -- has noted, most of the economic fallout has impacted the country's wealthy and elite, as there is virtually no middle class there.

But that may be about ready to change:

[A]s Russia's Vedomosti reports, citing vegetable producer Belaya Dacha, juice maker Sady Pridoniya and others, Russian suppliers are suspending food shipments to stores because of unpredictable FX movements.

The Vedomosti website further notes that food retailers are at the mercy of suppliers because of the dramatic volatility of the country's currency, the ruble, whose worth is tumbling as devaluation continues daily. As such, suppliers simply cannot "plan their activities in the current environment," according to a Google Translate version of the story.

Halting food shipments is liable to worsen an already volatile situation

Vedomosti further reported (according to Google Translate):

The largest domestic producer of juices "Gardens of the Don" has suspended shipment of products at the old prices a number of trading companies due to the sharp depreciation of the ruble, the company said. At the cost of its products for more than 70% of foreign exchange component manufacturer said.

The supplier went on to say that the delivery of foodstuffs and other goods will go "first of all to all network companies who understand the situation and [will accept] the new prices." From December 16 to 21, the company suspended all shipments to those who did not provide a definitive answer regarding the absorption of higher prices for goods, the juice producers such as "Gardens of the Don," "Golden Russia," "My," and "Juicy World" explained.

In addition, some alcohol shipments were halted by a major distributor and importer, Simple. One employee confirmed that the Simple warehouse was to be shuttered for a "two-day pause."

"We, as a company that depends on the value of currencies, can do nothing in this situation. We are putting prices in rubles, prices in Uslovniye Yedintsy (UY) or 'conditional units' are not acceptable under the current laws," said a representative for Simple CEO Maxim Kashirin. "Buying the currency now or taking out a bank loan, is impossible: banks will not finance receivables."

By Christmas Day, Russian officials said the ruble had stabilized, while Putin told finance ministry officials to work through the holidays to continue to manage the crisis.

As reported by The Wall Street Journal, the Russian Finance minister on Dec. 25 declared the currency crisis over as the country's currency rose to a three-week high, following a major push by the government and the Russian Central Bank (RCB) to stabilize markets. The efforts seem to be paying off, at least in the short-term, as the crisis appears less spiraling.

Is the currency crisis abating?

But the efforts to stem the ruble's bloodletting have led others to question how stable the currency will be and for how long. One of the RCB's tactics was to dramatically increase interest rates around the country, but that led to less borrowing and fewer rubles in circulation.

The steep rate increase, "along with widening problems in the banking sector, has darkened the outlook for Russia's economy dramatically," the paper reported.

WSJ further reported:

Just weeks after dismissing forecasts of a mild recession next year as "too gloomy," the finance ministry revised its outlook to envision a drop of as much as 4% in gross domestic product next year if oil prices stay around current levels of $60 a barrel, sapping Russia's economy along with Western sanctions.

On Christmas Day, according to oil-price-tracking website Oil-Price.Net, West Texas Intermediate crude prices had slipped to $55.84, or down $1.28 from the previous day.

Sources:

http://www.zerohedge.com

http://www.vedomosti.ru

http://www.oil-price.net

http://www.wsj.com