Moody’s Cuts Russia Debt to Baa3 – Russia pays government interest on debt at 11% of GDP – NOT BAD


Is there really a worry the government of Russia is going to go bankrupt when as of 2013 Government debt took up 7.9% of GDP as found at CIA Factbook: Russia .  Most statistics are taken from CIA Factbook unless are opinions.

My central view is that Russian government debt is a steal (good buy) if you can get it.

This was mostly a political move to crush Russia, Moodys is a government licensed rating agency, essentially a monopoly with just 2 other agencies.

Unemployment in the country as of 2013 was 5.8% and incomes were $18,000 US a year when just in 2000 incomes were as low as $4,000 US a year, a huge improvement.

The government has a small government deficit as of 2013 and this year may have a significantly higher one at $30 billion to $100 billion.  But they have reserves of $400 billion and gross national savings of 28% which is good.

Russia also has 80 billion barrels of oil which is an estimate and is probably in the range of 500 billion to 2 trillion barrels because they most likely have oil sands or shale oil like the US and Canada, Russia is a country that is mostly unexplored and very sparse with only a population of 142 million with a land area of 17 million sq kilometers.   The amount of land is mind blasting and should be taken as a significant advantage.   Putin really did not need the warm water port and should just focus on the Arctic and making money not cold war mentalities of defeating the evil America, its just not that important.  Russia is a corporation now, it is not a dictatorship.

If they have 80 billion barrels of oil it means they have $3 trillion dollars of wealth, if they have 2 trillion which I believe they do, they have roughly $90 trillion in value there, thats trillion with a T.  All in US dollars.

Also as a note because of the corruption in Russian companies trade at PEs (Price to Earnings Ratios) at less than 5, Gazprom is trading at a PE of 3 which is 3 years earnings.   When the war in Ukraine is over and everything goes back to normal for a reasonable period and corruption is wiped clean, you could see Gazprom trading at a PE of 10 or higher meaning Gazprom is undervalued by 300% right now.

Also as a note Gazprom is probably a great investment with a 6.67% dividend which I will look at (Gazprom the stock) in a later article.  Remember it is 50.01% owned and controlled by the government, meaning it wont be going bankrupt anytime soon.

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