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#60 by MP99 on 21 Dec, 2014 13:33
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O.K. I will try to stick to the OP's wishes and limit this strictly to economic theory.
I am surprised that no one has mentioned that when your own currency decreases in value, foreign currency proportionately increases in value. It then becomes costly to import items, but more profitable to export items. This means that the Russians will have a harder time paying for their own scientific and military launches, but at the same time every engine and launch service sold to someone else is worth more and more as the ruble drops. This means they will likely be reticent to restrict sales of RD-180s and seats on Soyuz.
think you need to do a reverse on that thinking. If product xyz is contracted in us dollars for 1$, and it buys 60% more for that same dollar. The buyer could buy 60% more stuff for the same (1$) amount of money spent.
No, the opposite. If the product is contracted in dollars, spending $1 will get you the same as the day the contract was signed. The company selling it to you gets a windfall (much higher profits).
For it to work the way you said, it would have to be contracted in Roubles. Then the buyer gets any advantage of a fall in the rouble (but loses when the rouble goes up).
cheers, Martin -
#61 by baldusi on 21 Dec, 2014 15:06
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BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles, thus, they ended up having to sell significantly under cost. And the relative weakness of the USD during the 2005 onwards has not helped them either. Now they might have a good year.O.K. I will try to stick to the OP's wishes and limit this strictly to economic theory.
I am surprised that no one has mentioned that when your own currency decreases in value, foreign currency proportionately increases in value. It then becomes costly to import items, but more profitable to export items. This means that the Russians will have a harder time paying for their own scientific and military launches, but at the same time every engine and launch service sold to someone else is worth more and more as the ruble drops. This means they will likely be reticent to restrict sales of RD-180s and seats on Soyuz.
think you need to do a reverse on that thinking. If product xyz is contracted in us dollars for 1$, and it buys 60% more for that same dollar. The buyer could buy 60% more stuff for the same (1$) amount of money spent.
No, the opposite. If the product is contracted in dollars, spending $1 will get you the same as the day the contract was signed. The company selling it to you gets a windfall (much higher profits).
For it to work the way you said, it would have to be contracted in Roubles. Then the buyer gets any advantage of a fall in the rouble (but loses when the rouble goes up).
cheers, Martin -
#62 by Phosphorus on 21 Dec, 2014 15:09
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BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles
Currency name is https://en.wikipedia.org/wiki/Ukrainian_hryvnia -
#63 by baldusi on 21 Dec, 2014 21:50
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Now that I've read it, it would seem that the contract might be previous to the introduction of the hryvnia, and had been denominated in karbovanets.BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles
Currency name is https://en.wikipedia.org/wiki/Ukrainian_hryvnia -
#64 by hrissan on 21 Dec, 2014 22:13
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Any sane large business expecting income and expense in different currencies will buy insurance against exchange rates going up/down in the form of appropriate market instruments (fx options).
BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles, thus, they ended up having to sell significantly under cost. And the relative weakness of the USD during the 2005 onwards has not helped them either. Now they might have a good year.O.K. I will try to stick to the OP's wishes and limit this strictly to economic theory.
I am surprised that no one has mentioned that when your own currency decreases in value, foreign currency proportionately increases in value. It then becomes costly to import items, but more profitable to export items. This means that the Russians will have a harder time paying for their own scientific and military launches, but at the same time every engine and launch service sold to someone else is worth more and more as the ruble drops. This means they will likely be reticent to restrict sales of RD-180s and seats on Soyuz.
think you need to do a reverse on that thinking. If product xyz is contracted in us dollars for 1$, and it buys 60% more for that same dollar. The buyer could buy 60% more stuff for the same (1$) amount of money spent.
No, the opposite. If the product is contracted in dollars, spending $1 will get you the same as the day the contract was signed. The company selling it to you gets a windfall (much higher profits).
For it to work the way you said, it would have to be contracted in Roubles. Then the buyer gets any advantage of a fall in the rouble (but loses when the rouble goes up).
cheers, Martin
So they sold significantly under cost but compensated that by executing their fx options.
Anyway, with all that sanctions the russian industry will substitute imported technologies with domestic ones, becoming less dependent on fx rates. Russian aerospace will do just fine, at least under "authoritative" rule.
Now some political text, moderators are free to delete after this line.
Russian foreign "partners" would prefer "free and democratic" rulers like gorbatchev and eltsin. It would be so cool if research centers got zero money again, factories turned into shopping centers with modern equipment sold as a scrap, scientist moved to usa and europe or had to sell chinese clothes at local markets, army got no new weapons or fuel for training for decade, nuclear submarines cut to pieces, stockpiles of strategic metals just disappear, parts of country declare independence and leave, civil airplane industry bought and killed... Just several examples that came to my mind.
Not that now everything is so rosy
but this thread made me laugh several times. After the industry survived what it survived after ussr collapse, an fx rate jump is not going to kill it. Only together with the rest of Russia that is.
BTW Seeing people on aerospace forum seriously using words like "authoritative" is just fun. Anyone smart enough to discuss aerospace should understand what those terms mean in context of USA foreign (and increasingly domestic) policy. Will not elaborate for risk of being freely and democratically banned.
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#65 by sdsds on 21 Dec, 2014 23:29
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Any sane large business expecting income and expense in different currencies will buy insurance against exchange rates going up/down in the form of appropriate market instruments (fx options).
Yes, that's a sensible approach for them to have taken.Quotethe russian industry will substitute imported technologies with domestic ones
Can you expand on this a bit? What are the currently imported technologies?QuoteAfter the industry survived what it survived after ussr collapse, an fx rate jump is not going to kill it.
I hope you are right! -
#66 by baldusi on 22 Dec, 2014 10:42
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Is this an actual data or are you making an assumption? AIUI, they didn't cover for the RD-180 contract because they never expected the ruble to be stronger than the USD (which happened during 2002 to 2013). Regarding the RD-171M contract I'm only writing from what I've read from mainstream Russian media (like RIA Novosti).BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles, thus, they ended up having to sell significantly under cost. And the relative weakness of the USD during the 2005 onwards has not helped them either. Now they might have a good year.
Any sane large business expecting income and expense in different currencies will buy insurance against exchange rates going up/down in the form of appropriate market instruments (fx options).
So they sold significantly under cost but compensated that by executing their fx options. -
#67 by TakeOff on 22 Dec, 2014 12:10
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Big oil producers generally sell most of their oil according to bilateral contracts with big consumers, at a price fixed for several years into the future. Not according to daily price changes on the much smaller oil spot market exchanges. And much of the rest has been sold on the public oil futures market for at least a year. So Russia's actual income from oil delivered will likely not be significantly affected until over a year from the drop in oil prices started. The cheap oil would have to continue throughout 2015 to substantially decrease Russian oil cash flow to its space program.
What has happened is that the financial markets, currency and interest rates, have instantly foreseen and reacted in anticipation of what the future conditions of Russian economy will be if this continues. That shakes things up. But the actual dollar flow in trade for oil to Russia will not be immediately halved, as some news stories might give the impression of. So they should be able to go on as usual this far, but will soon be forced to do severe cutbacks.
Russia has always been dependant on oil prices. That's what started their industrialization before the communists took over a hundred years ago. That's what made Stalin able to doctor the Molotov-Ribbentrop alliance in 1939. That's what made Soviet powerful during the oil crises of the 1970's. That's what destroyed Gorbatjov in the 1980's and Yeltsin following him. And oil price is what made Putin powerful. The Russian economy is a simple function of oil prices, it just has a lag of a year or two. -
#68 by fregate on 24 Dec, 2014 02:59
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RD-180 sale almost bankrupted Energomash - the lion share of profits went to a third party who actually fixed prices on US market. With floating prices of currencies at certain stage manufacturer have been forced to sell engines BELOW production cost (!) Orbital tried to obtain them, hit a wall with exclusive deal between middle man and ULA, try to challenge them in US court and finally ordered a custom version of engines directly from manufacturer. Without hostile takeover by RSC ENERGIA Energomash would be in difficult financial situation. In ironic twist of fate current president of Energia V.Solntsev is a former head of Energomash. He followed footsteps of Valentin Glushko - a founder of Energomash who became a head of Energia in 1974.
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#69 by Prober on 24 Dec, 2014 04:21
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RD-180 sale almost bankrupted Energomash - the lion share of profits went to a third party who actually fixed prices on US market. With floating prices of currencies at certain stage manufacturer have been forced to sell engines BELOW production cost (!) Orbital tried to obtain them, hit a wall with exclusive deal between middle man and ULA, try to challenge them in US court and finally ordered a custom version of engines directly from manufacturer. Without hostile takeover by RSC ENERGIA Energomash would be in difficult financial situation. In ironic twist of fate current president of Energia V.Solntsev is a former head of Energomash. He fooled footsteps of Valentin Glushko - a founder of Energomash who became a head of Energia in 1974.
Labor costs were cheap in Russia and manufacturing costs are not an issue. Only contracts and where the monies flow would cause problems. I don't dispute the possible bankruptcy. A poor contract is not the means to blame currencies. -
#70 by Prober on 24 Dec, 2014 04:34
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BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles, thus, they ended up having to sell significantly under cost. And the relative weakness of the USD during the 2005 onwards has not helped them either. Now they might have a good year.O.K. I will try to stick to the OP's wishes and limit this strictly to economic theory.
I am surprised that no one has mentioned that when your own currency decreases in value, foreign currency proportionately increases in value. It then becomes costly to import items, but more profitable to export items. This means that the Russians will have a harder time paying for their own scientific and military launches, but at the same time every engine and launch service sold to someone else is worth more and more as the ruble drops. This means they will likely be reticent to restrict sales of RD-180s and seats on Soyuz.
think you need to do a reverse on that thinking. If product xyz is contracted in us dollars for 1$, and it buys 60% more for that same dollar. The buyer could buy 60% more stuff for the same (1$) amount of money spent.
No, the opposite. If the product is contracted in dollars, spending $1 will get you the same as the day the contract was signed. The company selling it to you gets a windfall (much higher profits).
For it to work the way you said, it would have to be contracted in Roubles. Then the buyer gets any advantage of a fall in the rouble (but loses when the rouble goes up).
cheers, Martin
With Ukraine entering NATO now, and getting closer ties to the EU and maybe Euro. Just don't see new business in the partnership with Russia even if it means money. Russia just cut the natural gas supplies to Ukraine. How do you manufacture with no energy source? Further Both Russia and Ukraine interests owe almost a billon US dollars to Boeing. We might have seen the last launch of SeaLaunch as it is.
SeaLaunch stick a fork in her
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#71 by Lars-J on 24 Dec, 2014 06:10
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Now some political text, moderators are free to delete after this line.
Russian foreign "partners" would prefer "free and democratic" rulers like gorbatchev and eltsin. It would be so cool if research centers got zero money again, factories turned into shopping centers with modern equipment sold as a scrap, scientist moved to usa and europe or had to sell chinese clothes at local markets, army got no new weapons or fuel for training for decade, nuclear submarines cut to pieces, stockpiles of strategic metals just disappear, parts of country declare independence and leave, civil airplane industry bought and killed... Just several examples that came to my mind.
What you describe may indeed be an accurate description of what happened, but they are not necessarily linked - "free and democratic" does not have to mean that "research centers got zero money again, factories turned into shopping centers with modern equipment sold as a scrap, scientist moved to usa and europe...". It happened, it's unfortunate, but not inevitable.
Also, setting it up as "gorbatchev/yeltsin" vs "putin" is coming close to describing a False Dilemma fallacy ( http://en.wikipedia.org/wiki/False_dilemma ) - There are other choices, other ways of doing things. -
#72 by MP99 on 24 Dec, 2014 09:05
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Quote from: Prober
With Ukraine entering NATO now...
News sources here describe this as a very long-term goal.
Cheers, Martin
Sent from my GT-N5120 using Forum Fiend v1.2.14. -
#73 by Rocket Science on 24 Dec, 2014 12:07
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Any sane large business expecting income and expense in different currencies will buy insurance against exchange rates going up/down in the form of appropriate market instruments (fx options).
BTW, the Sea Launch contract with NPO Energomash was done in Ukrainian Rubles, thus, they ended up having to sell significantly under cost. And the relative weakness of the USD during the 2005 onwards has not helped them either. Now they might have a good year.O.K. I will try to stick to the OP's wishes and limit this strictly to economic theory.
I am surprised that no one has mentioned that when your own currency decreases in value, foreign currency proportionately increases in value. It then becomes costly to import items, but more profitable to export items. This means that the Russians will have a harder time paying for their own scientific and military launches, but at the same time every engine and launch service sold to someone else is worth more and more as the ruble drops. This means they will likely be reticent to restrict sales of RD-180s and seats on Soyuz.
think you need to do a reverse on that thinking. If product xyz is contracted in us dollars for 1$, and it buys 60% more for that same dollar. The buyer could buy 60% more stuff for the same (1$) amount of money spent.
No, the opposite. If the product is contracted in dollars, spending $1 will get you the same as the day the contract was signed. The company selling it to you gets a windfall (much higher profits).
For it to work the way you said, it would have to be contracted in Roubles. Then the buyer gets any advantage of a fall in the rouble (but loses when the rouble goes up).
cheers, Martin
So they sold significantly under cost but compensated that by executing their fx options.
Anyway, with all that sanctions the russian industry will substitute imported technologies with domestic ones, becoming less dependent on fx rates. Russian aerospace will do just fine, at least under "authoritative" rule.
Now some political text, moderators are free to delete after this line.
Russian foreign "partners" would prefer "free and democratic" rulers like gorbatchev and eltsin. It would be so cool if research centers got zero money again, factories turned into shopping centers with modern equipment sold as a scrap, scientist moved to usa and europe or had to sell chinese clothes at local markets, army got no new weapons or fuel for training for decade, nuclear submarines cut to pieces, stockpiles of strategic metals just disappear, parts of country declare independence and leave, civil airplane industry bought and killed... Just several examples that came to my mind.
Not that now everything is so rosy but this thread made me laugh several times. After the industry survived what it survived after ussr collapse, an fx rate jump is not going to kill it. Only together with the rest of Russia that is.
BTW Seeing people on aerospace forum seriously using words like "authoritative" is just fun. Anyone smart enough to discuss aerospace should understand what those terms mean in context of USA foreign (and increasingly domestic) policy. Will not elaborate for risk of being freely and democratically banned.
What you are describing is what the west had to go through post “Space Race” and “Cold War”. My family was part of those times and had all the overtime work they wanted and were subject to layoffs and career changes or starting new businesses. Why should it be any different for Russians? The nation has many bright people and is more than capable of doing great things like innovation and producing new consumer products that the world wants to buy at the right price. You need to begin to produce quality automobiles and aircraft for export just like rockets are in demand for commercial launches and not just weapon systems and expect a job for life... -
#74 by kevin-rf on 24 Dec, 2014 15:05
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What you are describing is what the west had to go through post “Space Race” and “Cold War”. My family was part of those times and had all the overtime work they wanted and were subject to layoffs and career changes or starting new businesses. Why should it be any different for Russians? The nation has many bright people and is more than capable of doing great things like innovation and producing new consumer products that the world wants to buy at the right price. You need to begin to produce quality automobiles and aircraft for export just like rockets are in demand for commercial launches and not just weapon systems and expect a job for life...
That is a little harsh, Russia is making those changes, just look at the Sukhoi Super Jet SS-100, this new Russian jet by all accounts is an excellent plane that since entry into service has had an excellent dispatch reliability (unlike say another new Boeing Jet), and speaking of Boeing they have a design center in Moscow and several critical titanium parts on the 787 are currently sourced from Russia. People are buying, and with energy Russia has much to offer. -
#75 by asmi on 24 Dec, 2014 15:22
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That is a little harsh, Russia is making those changes, just look at the Sukhoi Super Jet SS-100, this new Russian jet by all accounts is an excellent plane that since entry into service has had an excellent dispatch reliability (unlike say another new Boeing Jet), and speaking of Boeing they have a design center in Moscow and several critical titanium parts on the 787 are currently sourced from Russia. People are buying, and with energy Russia has much to offer.
These things are not shown inBSMSNBC's et. al. as they don't fit into official propaganda... -
#76 by Rocket Science on 24 Dec, 2014 15:48
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It might be a little harsh Kevin but that’s the real world of globalism. The nation has a rich history of aerospace designers many stayed and some found success overseas... My point Russia has a lot to offer but the people need to step up as individuals and take risks in order reap the rewards. Change is difficult and it takes time, I wish them good luck and continued success...What you are describing is what the west had to go through post “Space Race” and “Cold War”. My family was part of those times and had all the overtime work they wanted and were subject to layoffs and career changes or starting new businesses. Why should it be any different for Russians? The nation has many bright people and is more than capable of doing great things like innovation and producing new consumer products that the world wants to buy at the right price. You need to begin to produce quality automobiles and aircraft for export just like rockets are in demand for commercial launches and not just weapon systems and expect a job for life...
That is a little harsh, Russia is making those changes, just look at the Sukhoi Super Jet SS-100, this new Russian jet by all accounts is an excellent plane that since entry into service has had an excellent dispatch reliability (unlike say another new Boeing Jet), and speaking of Boeing they have a design center in Moscow and several critical titanium parts on the 787 are currently sourced from Russia. People are buying, and with energy Russia has much to offer. -
#77 by Danderman on 25 Dec, 2014 03:07
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I should say that this new Cold War business is annoying and not necessary, and should be resolved by the professionals as soon as possible. Having said that, we need to recognize that one aspect of the political breakdown is the ruble crisis, which will have profound impacts on Russian aerospace.
This thread is about those impacts.
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#78 by Prober on 26 Dec, 2014 04:37
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Have a long drawn out line of thinking but I'm reluctant to post it.
A something new has been added to events. Russia is planning/doing movement of Russian launchers (missiles) equipped with nuke payloads into Ukraine. This IMHO becomes a Arch Duke event (WWI). Talk about the 10,000 Russian "volunteers" located in Domblass Ukraine ends. This event scraps many agreements. UK & USA automatically ACT, NATO is called upon.
Stakes can be much higher depending on the answer to this question.....
A splinter group out of the KGB (I've forgotten the Russian name). In western terms they are Rouge KGB fanatical. Was Mr. Putin part of this group?
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#79 by fregate on 26 Dec, 2014 07:18
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Have a long drawn out line of thinking but I'm reluctant to post it.
is it your hypothetical event (regards from Tom Clancy) or is it a recent gossip from mass media?
A something new has been added to events. Russia is planning/doing movement of Russian launchers (missiles) equipped with nuke payloads into Ukraine. This IMHO becomes a Arch Duke event (WWI). Talk about the 10,000 Russian "volunteers" located in Domblass Ukraine ends. This event scraps many agreements. UK & USA automatically ACT, NATO is called upon.
Stakes can be much higher depending on the answer to this question.....
A splinter group out of the KGB (I've forgotten the Russian name). In western terms they are Rouge KGB fanatical. Was Mr. Putin part of this group?
but this thread made me laugh several times. After the industry survived what it survived after ussr collapse, an fx rate jump is not going to kill it. Only together with the rest of Russia that is.