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Russia’s agriculture sector continues to BOOM in face of Western sanctions

A major economic shift unremarked by the West, while multiple production dimensions come on line.

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Much is written about the vast strides Russia has made in matters agricultural. The many different Cheese types that were previously imported are now largely produced in Russia. The gains are across the edible board, from poultry, fish and pork through to fruits, vegetable and grains. Grains specifically have shown strong and steady growth due to increased investment as well as using the latest management and production technologies.

For example, wheat harvests in Russia are now not only satisfying Russia’s national demand, but also form a significant and steadily increasing part of the country’s global exports. In Soviet times, world traders and specs eagerly awaited the announcement of the wheat harvest or its forecast potential. To those punters on the world’s futures exchanges it usually signaled how much the USSR will BUY over the coming year to meet its internal needs, as they didn’t ever SELL. That has radically changed, much like the country, its direction, politics, beliefs, abilities and its people.

One small but glaring opportunity gap in this growth curve has only recently come to active investor attention, and is finding real support from the financial institutions in Russia. This gap is in the range of products and ingredients derived through the deeper processing of raw materials, in this case grains. These little known, not off-the-shelf products are an essential part of the processing and manufacture of almost all foods and beverages, and a number of pharmaceutical products, even textiles.

These ingredients are exclusively obtained through deep processing and treatment of wheat and other grains. They include dry wheat gluten, modified starches, glucose-fructose syrup, molasses, and feed mixtures (as a by-product of the technological process).

These products are widely used for not only food production, but also pulp/paper manufacturing, in low-alcohol and beverage industries, pharmaceuticals, cosmetics, animal husbandry and in several other industrial sectors. The demand for these products both domestically and in the global markets is strong and continually growing.

In general, only 10-12% of such ingredients are produced in Russia while 88-90% must still be imported. The irony of the situation is that one of the major raw materials used to produce these products is wheat, which has been steadily growing to large surpluses these past several years. Today several multinational firms involved in agricultural processing like Cargill, Archer Daniels, L. Dreyfus and several Asian groups have already started either through M&A or through investing in their own processing to begin filling this void inside Russia.

Russian agricultural companies have been quite active too, as deep processing of grain results in products with far higher economic benefit than simply selling raw material or milled flour/starch. Establishing such deep processing projects also addresses the challenge of partial or even complete import substitution. These valuable and increasingly demanded ingredients can easily use even extremely low grades of wheat as perfectly suitable raw materials, which without deep processing are close to valueless.

One example is a start-up in the Kursk region, which is part of the famously fertile “black earth” area of Russia. The company, a 100% Russian start-up called OOO “InnPromBioTec” is a group of young and experienced professionals in the food processing industry. Their expertise has ranged from implementing and successfully commercializing production of food ranging from low-fat mayonnaise to fermented “kvass” (a traditional Russian grain based beverage), as well as oil from various grains. Today they are in the process of establishing a technologically cutting-edge deep wheat processing facility in the middle of this grain rich region.

With sanctions in place, while they officially do not impinge of food production or foodstuffs, they do and have affected the attitudes of traditional investors in the USA and the EU, not to mention the non-Russian banks. There is a palpable fear among the potential and logical investment partners in both the EU and US not to bend, therefore dismissing profit, rather than risk forging ahead and perhaps facing politically unstable censure from their own countries.

This Kursk based company therefore shifted its focus to the Far East, specifically China, Japan, Thailand, Korea and possibly India. This, while the most cost effective points of export realization and ready markets demanding such deep processed products are next door in Europe, who also import, albeit to a lesser degree, to meet their production requirements.

From an economic perspective, projects such as InnPromBioTec’s are attractive, especially in today’s markets. The capital required for such technologically intensive production is about 150 million Euro equivalent to process 250,000 tons per annum. Russian banks are willing and prepared to lend fully 80% of the needed capital as project financing, and the government affords a number of easements and incentives to make such projects as riskless and transparent as possible as they are considered a national priority, and are therefore quite secure and problem free.

Projects like this are not immediately operational, they must be planned as well as built from scratch, and this has been the bane of long term investing in Russia. Local investors want huge returns on their money and they want it almost immediately, therefore Greenfield projects have tended to suffer neglect.

Projects like deep wheat processing have a very long productive lifecycle, measured sustainably for decades with their products in perpetual and growing demand. Typically, the discounted payback period is from 6 – 7.5 years, with an internal rate of return of approximately 40%, profit margin realistically near 50%.

It looks like Russia’s steady economic evolution away from simply exporting raw materials, but opportunities to deepen the dimensions of production will be financed by visionary, practical and pragmatic Asia. The products of which inescapably will be demanded and consumed by Europe one-way or another, if only because of the secure price of proximity.

At a deeper level, this one project example is indicative of many similar projects coming into being throughout the length and breadth of Russia. The vast soybean farms in the southern parts of the Russian Far East have historically simply sold and shipped the harvests unprocessed across the border into Asia. Today, projects are starting up to add value to these crops by processing some of the myriad products obtained from soybeans both for internal consumption as well as for ready export markets literally next door.

The list goes on, with one of the longest coastlines on the planet (23,000+ Miles), the opportunities for fish, mollusk and crustacean farming is vast. The relatively low cost of energy in Russia and no shortage of fresh water also allows for controlled environment farming regardless of climate, be it hydroponics, greenhouses or commercial scale urban agriculture year round. All of these opportunities afford similar value added dimensions through processing and producing market ready finished goods.

On reviewing Russia’s economic path it is worth noting that it has managed to rebalance its exports from 70 percent energy in 2013 to 59 percent in 2017, according to the World Bank. As of this writing, the budget is again in surplus, and government debt stands at a notable 33% of GDP, the lowest among all of the G20 nations. Inflation is now running at a record low of 2.4% year-over-year, well below the CBR’s target of 4% and food inflation despite sanctions is close to 0%. Simply to contrast, and yes, sizes and volumes do make a difference, so just to cherry-pick: The S&P 500 Index is up just a tad over 13% for the past year, while at the same time the MOEX Russia Index has shown 21+% growth with an attractive 6.46% dividend yield, compared to 1.94% for U.S. stocks.

A major economic shift is occurring as secondary, tertiary production, manufacturing and the support and services infrastructure businesses establish and develop inside Russia. Some projections indicate that in these new business areas Russia will show a sustainable 5-6% year on year growth from 2018 – 2020, and perhaps greater. Incredibly, it is woefully under-reported even by the international financial press.

These secondary and tertiary industries have been historically left to the outside world to import into Russia. Be it in agriculture, textiles, machinery or oil patch technologies, Russia is now steadily filling these internal niches, and the opportunities for investors today have vastly expanded into many previously ignored dimensions. It only requires the business will and clarity of “blinders-free” vision to investigate, get involved and step up to the table.

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WalterWayne BlowfoxenburgGano1William Reston Recent comment authors
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Walter
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Walter

Sanctions against Russia are a big laugh. Sanctions are a big loss to EU countries who want them ended. Maybe the Putin-Trump meeting next month will correct this problem.

Walter
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Walter

Why are my comments not published??

Walter
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Walter

Why are my comments not published ???

Wayne Blow
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Wayne Blow

Go Russia, beats gas pipes and bomb making eh ??

foxenburg
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foxenburg

You say Russia is short of, inter alia…..dry wheat gluten, modified starches, glucose-fructose syrup, molasses.

The Russians would be wise to steer clear of this obesity-inducing Western crap.

Gano1
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Gano1

Farm machinery is selling well too, they build some very good machinery and it is cheaper than Western junk.

William Reston
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William Reston

As usual, excellent insights Mr. Goncharoff. Your opinion articles are a breath of fresh air and a wonderful truth window into Russia for all of us “out here” in the States. Thank you!

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Major Syrian Army Assault On Southeast Idlib As Sochi Deal Unravels

Though the Syrian war has grown cold in terms of international spotlight and media interest since September, it is likely again going to ramp up dramatically over the next few months. 

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Via Zerohedge


The Syrian Army unleashed a major assault across the southeastern part of Idlib province on Saturday, a military source told Middle East news site Al-Masdar in a breaking report. According to the source, government forces pounded jihadist defenses across the southeast Idlib axis with a plethora of artillery shells and surface-to-surface missiles.

This latest exchange between the Syrian military and jihadist rebels comes as the Sochi Agreement falls apart in northwestern Syria, and in response to a Friday attack by jihadists which killed 22 Syrian soldiers near a planned buffer zone around the country’s last major anti-Assad and al-Qaeda held region. The jihadist strikes resulted in the highest number of casualties for the army since the Sochi Agreement was established on September 17th.

Though the Syrian war has grown cold in terms of international spotlight and media interest since September, it is likely again going to ramp up dramatically over the next few months.

The Al-Masdar source said the primary targets for the Syrian Army were the trenches and military posts for Hay’at Tahrir Al-Sham in the towns of Al-Taman’ah, Khuwayn, Babulin, Haish, Jarjanaz, Um Jalal, and Mashirfah Shmaliyah. In retaliation for the Syrian Army assault, the jihadist rebels began shelling the government towns of Ma’an, Um Hariteen, and ‘Atshan.

Damascus has been critical of the Sochi deal from the start as it’s criticized Turkey’s role in the Russian-brokered ceasefire plan, especially as a proposed ‘de-militarized’ zone has failed due to jihadist insurgents still holding around 70% of the planned buffer area which they were supposed to withdraw from by mid-October. Sporadic clashes have rocked the “buffer zone” since.

Russia itself recently acknowledged the on the ground failure of the Sochi agreement even as parties officially cling to it. During a Thursday press briefing by Russian Foreign Ministry Spokesperson Maria Zakharova admitted the following:

We have to state that the real disengagement in Idlib has not been achieved despite Turkey’s continuing efforts to live up to its commitments under the Russian-Turkish Memorandum of September 17.

This followed Russia also recently condemning  “sporadic clashes” and “provocations” by the jihadist group HTS (the main al-Qaeda presence) in Idlib.

Likely due to Moscow seeing the writing on the wall that all-out fighting and a full assault by government forces on Idlib will soon resume, Russian naval forces continued a show of force in the Mediterranean this week.

Russian military and naval officials announced Friday that its warships held extensive anti-submarine warfare drills in the Mediterranean. Specifically the Russian Black Sea Fleet’s frigates Admiral Makarov and Admiral Essen conducted the exercise in tandem with deck-based helicopters near Syrian coastal waters.

Notably, according to TASS, the warships central to the drill are “armed with eight launchers of Kalibr-NK cruise missiles that are capable of striking surface, coastal and underwater targets at a distance of up to 2,600 km.”

Since September when what was gearing up to be a major Syrian-Russian assault on Idlib was called off through the Russian-Turkish ceasefire agreement, possibly in avoidance of the stated threat that American forces would intervene in defense of the al-Qaeda insurgent held province (also claiming to have intelligence of an impending government “chemical attack”), the war has largely taken a back-burner in the media and public consciousness.

But as sporadic fighting between jihadists and Syrian government forces is reignited and fast turning into major offensive operations by government forces, the war could once again be thrust back into the media spotlight as ground zero for a great power confrontation between Moscow and Washington.

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Trump Quietly Orders Elimination of Assange

The destruction of Assange has clearly been arranged for, at the highest levels of the U.S. Government, just as the destruction of Jamal Khashoggi was by Saudi Arabia’s Government.

Eric Zuesse

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On June 28th, the Washington Examiner headlined “Pence pressed Ecuadorian president on country’s protection of Julian Assange” and reported that “Vice President Mike Pence discussed the asylum status of Julian Assange during a meeting with Ecuador’s leader on Thursday, following pressure from Senate Democrats who have voiced concerns over the country’s protection of the WikiLeaks founder.” Pence had been given this assignment by U.S. President Donald Trump. The following day, the Examiner bannered “Mike Pence raises Julian Assange case with Ecuadorean president, White House confirms” and reported that the White House had told the newspaper, “They agreed to remain in close coordination on potential next steps going forward.”

On August 24th, a court-filing by Kellen S. Dwyer, Assistant U.S. Attorney for the Alexandria Division of the Eastern District of Virginia, stated: “Due to the sophistication of the defendant and the publicity surrounding the case, no other procedure [than sealing the case, hiding it from the public] is likely to keep confidential the fact that Assange has been charged. … This motion and the proposed order would need to remain sealed until Assange is arrested in connection with the charges in the criminal complaint and can therefore no longer evade or avoid arrest and extradition in this matter.” That filing was discovered by Seamus Hughes, a terrorism expert at the Program on Extremism at George Washington University. On November 15th, he posted an excerpt of it on Twitter, just hours after the Wall Street Journal had reported on the same day that the Justice Department was preparing to prosecute Assange. However, now that we know “the fact that Assange has been charged” and that the U.S. Government is simply waiting “until Assange is arrested in connection with the charges in the criminal complaint and can therefore no longer evade or avoid arrest and extradition in this matter,” it is clear and public that the arrangements which were secretly made between Trump’s agent Pence and the current President of Ecuador are expected to deliver Assange into U.S. custody for criminal prosecution, if Assange doesn’t die at the Ecuadorean Embassy first.

On November 3rd (which, of course, preceded the disclosures on November 15th), Julian Assange’s mother, Christine Ann Hawkins, described in detail what has happened to her son since the time of Pence’s meeting with Ecuador’s President. She said:

He is, right now, alone, sick, in pain, silenced in solitary confinement, cut off from all contact, and being tortured in the heart of London. … He has been detained nearly eight years, without trial, without charge. For the past six years, the UK Government has refused his requests to exit for basic health needs, … [even for] vitamin D. … As a result, his health has seriously deteriorated. … A slow and cruel assassination is taking place before our very eyes. … They will stop at nothing. … When U.S. Vice President Mike Pence recently visited Ecuador, a deal was done to hand Julian over to the U.S. He said that because the political cost of expelling Julian from the Embassy was too high, the plan was to break him down mentally…   to such a point that he will break and be forced to leave. … The extradition warrant is held in secret, four prosecutors but no defense, and no judge, … without a prima-facie case. [Under the U.S. system, the result nonetheless can be] indefinite detention without trial. Julian could be held in Guantanamo Bay and tortured, sentenced to 45 years in a maximum security prison, or face the death penalty,” for “espionage,” in such secret proceedings.

Her phrase, “because the political cost of expelling Julian from the Embassy was too high” refers to the worry that this new President of Ecuador has, of his cooperating with the U.S. regime’s demands and thereby basically ceding sovereignty to those foreigners (the rulers of the U.S.), regarding the Ecuadorian citizen, Assange.

This conservative new President of Ecuador, who has replaced the progressive President who had granted Assange protection, is obviously doing all that he can to comply with U.S. President Trump and the U.S. Congress’s demand for Assange either to die soon inside the Embassy or else be transferred to the U.S. and basically just disappear, at Guantanamo or elsewhere. Ecuador’s President wants to do this in such a way that Ecuador’s voters won’t blame him for it, and that he’ll thus be able to be re-elected. This is the type of deal he apparently has reached with Trump’s agent, Pence. It’s all secret, but the evidence on this much of what was secretly agreed-to seems clear. There are likely other details of the agreement that cannot, as yet, be conclusively inferred from the subsequent events, but this much can.

Basically, Trump has arranged for Assange to be eliminated either by illness that’s imposed by his Ecuadorean agent, or else by Assange’s own suicide resulting from that “torture,” or else by America’s own criminal-justice system. If this elimination happens inside the Ecuadorean Embassy in London, then that would be optimal for America’s President and Congress; but, if it instead happens on U.S. soil, then that would be optimal for Ecuador’s President. Apparently, America’s President thinks that his subjects, the American people, will become sufficiently hostile toward Assange so that even if Assange disappears or is executed inside the United States, this President will be able to retain his supporters. Trump, of course, needs his supporters, but this is a gamble that he has now clearly taken. This much is clear, even though the rest of the secret agreement that was reached between Pence and Ecuador’s President is not.

Scooter Libby, who had arranged for the smearing of Valerie Plame who had tried to prevent the illegal and deceit-based 2003 invasion of Iraq, was sentenced to 30 months but never spent even a day in prison, and U.S. President Trump finally went so far as to grant him a complete pardon, on 13 April 2018. (The carefully researched docudrama “Fair Game” covered well the Plame-incident.) Libby had overseen the career-destruction of a courageous CIA agent, Plame, who had done the right thing and gotten fired for it; and Trump pardoned Libby, thus retroactively endorsing the lie-based invasion of Iraq in 2003. By contrast, Trump is determined to get Julian Assange killed or otherwise eliminated, and even Democrats in Congress are pushing for him to get that done. The new President of Ecuador is doing their bidding. Without pressure from the U.S. Government, Assange would already be a free man. Thus, either Assange will die (be murdered) soon inside the Embassy, or else he will disappear and be smeared in the press under U.S. control. And, of course, this is being done in such a way that no one will be prosecuted for the murder or false-imprisonment. Trump had promised to “clean the swamp,” but as soon as he was elected, he abandoned that pretense; and, as President, he has been bipartisan on that matter, to hide the crimes of the bipartisan U.S. Government, and he is remarkably similar in policy to his immediate predecessors, whom he had severely criticized while he was running for the Presidency.

In any event, the destruction of Assange has clearly been arranged for, at the highest levels of the U.S. Government, just as the destruction of Jamal Khashoggi was by Saudi Arabia’s Government; and, just like in Khashoggi’s case, the nation’s ruler controls the prosecutors and can therefore do whatever he chooses to do that the rest of the nation’s aristocracy consider to be acceptable.

The assault against truth isn’t only against Assange, but it is instead also closing down many of the best, most courageous, independent news sites, such as washingtonsblog. However, in Assange’s case, the penalty for having a firm commitment to truth has been especially excruciating and will almost certainly end in his premature death. This is simply the reality. Because of the system under which we live, a 100% commitment to truth is now a clear pathway to oblivion. Assange is experiencing this reality to the fullest. That’s what’s happening here.

—————

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

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Libya’s Peace Process Dies in Palermo

The best the Palermo negotiators could come up with at the end was a bland statement declaring their hope that sometime in the future all the Libyan forces will meet to sort out their differences.

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Authored by Richard Galustian for the Ron Paul Institute for Peace and Prosperity:


“Resounding flop” was the verdict of Italy’s former prime minister Matteo Renzi on this week’s Libya peace conference held in Palermo. He’s not wrong. The conference hosted by Italy’s new government achieved the remarkable feat of making Libya’s tensions worse, not better. Acrimony broke out between the parties, and Turkey’s delegation walked out, its vice president Fuat Oktay accusing unnamed States of trying to “hijack the process.”

Some sources in Palermo suggested, yet to be verified, that the US thought the Conference was not too bad: a joke if true.

Moreover the mystery we might ask is what “process” is there to hijack? Because the truth is, the peace plan the conference was supporting is already dead.

That plan was the brainchild of the United Nations, launched more than a year ago with the aim of ending Libya’s split between warring Eastern and Western governments with elections in December.

Even before the first delegates set foot in the pleasant Sicilian city of Palermo this week, the UN admitted the election date of December 10 they had decided to scrap.

The eastern government, led by the parliament in Tobruk, had made moves in the summer to organize a referendum on a new constitution which would govern the elections. But no referendum was held, and most Libyans agree it would be pointless because Tripoli, home to a third of the country’s population, is under the iron grip of multiple warring militias who have the firepower to defy any new elected government. Hours after the delegates left Palermo, those militias began a new bout of fighting in the Tripoli suburbs.

The best the Palermo negotiators could come up with at the end of the talks was a bland statement declaring their hope that sometime in the future all the Libyan forces will meet in a grand conference to sort out their differences – and this after four years of civil war. To say that chances of this are slim is an understatement.

Dominating the Palermo talks, and indeed Libya’s political landscape, was and is Field Marshall Khalifa Haftar, the commander of the Libyan National Army, the country’s most powerful formation. In four years, the LNA has secured Libya’s key oil fields and Benghazi, its second city, ridding most of the east Libya of Islamist militias.

Haftar met reluctantly negotiators in Palermo, but insisted he was not part of the talks process. The Italian government press office said Haftar was not having dinner with the other participants nor joining them for talks. Haftar specifically opposed the presence of the Muslim Brotherhood champion, Qatar, at the event along with Turkey.

Haftar clearly only attended because he had a few days before visiting Moscow – which sent to Sicily Russia’s Prime Minister Dmitry Medvedev – and because also of Egyptian President Sisi’s presence along with his allies.

Possibly Haftar was simply fed up. Twice in the past two years he has attended previous peace talks, hosted each time in Paris, giving the nod to declarations that Libya’s militias would dissolve. Yet the militias remain as strong as ever in Tripoli.

Haftar is detested by the militias and the Muslim Brotherhood (MB) but supported by a large segment of the population – 68 percent, according to an opinion poll by America’s USAID. His popularity is based on a single policy – his demand that security be in the hands of regular police and military, not the militias.

Not everyone is happy, certainly not Turkey, which is backing Islamist, MB and Misratan forces in western Libya who detest Haftar. Yet Turkey’s greatest statesman, the great Kamal Ataturk, was a champion of secularism: After the collapse of the Ottoman Empire following World War One Turkey faced the prospect of utter disintegration, and it was Attaturk who rose to the challenge, defending the country’s borders, while ordering that the mullahs, while responsible for spiritual welfare, have no political power.

Political Islam is not popular in Libya either. Libya is a Muslim country, its people know their faith, and most want government to be decided through the ballot box.

The problem for Libya is what happens next with the peace process broken. Haftar has in the past threatened to move on Tripoli and rid the militias by force if they refuse to dissolve, and it may come to that – a fierce escalation of the civil war.

The second possibility is that Libya will split. The east is, thanks to the LNA, militarily secure. It also controls two thirds of the country’s oil and operates as a separate entity, down to it banknotes, which are printed in Russia while the Tripoli government’s are printed in Britain. A formal split would be an economic boon for the lightly populated east, but a disaster for Tripolitania, its population losing most of the oil, its only source of export income.

Yet with the failure of peace talks, and no sign of Tripoli militias dissolving, military escalation or breakup seem more likely than ever.

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