Western Banks Cut Off Liquidity To Russian Entities

Tyler Durden's picture

As Zero Hedge first reported today, shortly before noon one (and subsequently more) FX brokers advised clients that any existing Ruble positions would be forcibly closed out because "western banks have stopped pricing USDRUB", over concerns of Russian capital controls. Ironically, it was this forced liquidation of mostly short RUB positions that pushed the RUB higher, which in turn had a briefly favorably impact on energy commodities and risk assets, as the market had by then perceived the Ruble selloff as excessive. Of course, since nothing had actually changed aside from a temporary market technical, the selloff promptly resumed into the close of trading once the market finally understood what we had explained hours previously.

And unfortunately for the bulls, various falling knife-catchers, and those who hope the Russian situation will stabilize imminently with or without capital controls, it appears things in Russia are about to get a whole lot worse because as the WSJ reports, the next driver of the Russian crisis is likely to come from within the banking system itself because "global banks are curtailing the flow of cash to Russian entities, a response to the ruble’s sharpest selloff since the 1998 financial crisis."

Presenting Russia's banks: now cut off from the outside world as the second cold war goes nuclear, at least when it comes to the financial system: 

Such banks as Goldman Sachs Group Inc. this week started rejecting requests from institutional clients to engage in certain ruble-denominated repurchase agreements and other transactions designed to raise cash, according to people familiar with the matter.

 

Bankers and traders say the moves to restrict some ruble transactions have become increasingly widespread among major Western financial institutions this week, even as the same institutions continue to try to profit from the ruble’s wild swings. The moves, which the banks are deploying to protect themselves against further swings in the currency, have the potential to add to the strain on Russia’s financial system.

 

Goldman in recent days largely stopped doing longer-term ruble-denominated repurchase agreements, or repos, in which securities or other assets are swapped in exchange for cash, said a person familiar with the matter. The Wall Street bank is still doing short-duration ruble repos, those that mature in less than a year, this person said.

And where Goldman goes, everyone else follows, even though according to the WSJ this has not happened, yet:

Other banks, including Bank of America Corp. and Citigroup Inc., haven’t changed their trading with Russia or in rubles, according to people familiar with those banks.

They will, it is only a matter of time. Meanwhile, the entire Russian capital market, and not just its currency, is becoming isolated from the rest of the Western world:

In one sign of the banking industry’s hasty retreat, the London-based manager of an emerging-markets hedge fund said Tuesday that he couldn’t get any banks to trade Russian government bonds with him.

Of course, anyone who read our article in early November explaining "How The Petrodollar Quietly Died, And Nobody Noticed", predicting the crunch in global intermarket liquidity as a result of the collapse in crude, would know this is coming. As for the death of the Petrodollar we warned about, a death which has resulted in the disintegration of market volume just as warned, suddenly everyone is noticing.

Regardless, what all of the above means is that Russia now has at best a few weeks in which to find an alternative source of short-term funding. One coming from the East.

The question is will Putin swallow his pride and proceed with the next logical step as the Eurasian axis realizes the time to abandon the dollar has long past, that now only actions matter and not words, and joins forces with China in a new monetary union, one which combines the Ruble and the Yuan, and is backed by China's gold and Russia's natural resources, as cheap as they may be for the time being... until one or more of the largest middle-east oil exporters experiences a major and "unexpected" geopoolitical incident, one which sends the price of oil soaring right back up.

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7.62x54r's picture

He's made his move.

Russia has enough USD to cover its soveriegn debt.

The corporate debt, that might not be paid, is owned by Euro and US banks:

http://www.bloomberg.com/video/fed-will-implement-qe4-in-early-2016-rick...

 

Buy Rubles and Russian stock while the blood is flowing in the streets.

Pooper Popper's picture

The Bald headed killer Bear of Clair county!

TeamDepends's picture

Let's get ready to RUBLE!!!!

Manthong's picture

“becoming isolated from the rest of the Western world”

Well, there is always the eastern world.

And I think this will end more badly for us than them.

Way to go, D.C. jerkoffs..

McMolotov's picture

The Eastern world — what's that? Remember the famous New Yorker cover with the "map?"

http://editorial.designtaxi.com/news-newyorkercover0310/1.jpg

That's kind of how the Western world views everybody else. It's a dangerous combination of arrogance and ignorance.

johngaltfla's picture

Putin will act but God help the USA when he does as we are ill prepared to defend the Urkaine, Taiwan, and South Korea at the same time. Meanwhile, quite a few intelligent Russians are probably making out quite well, even with the price of gold topping 83,000 Ru to the oz.:

Russia’s Collapse Demonstrates Why One Should Own Gold in One Simple Chart
Publicus's picture

The only thing that can be expected from the next US president is more war, more murder, and more oppression of the gullible American people. People as uninformed and as gullible as Americans have no future. Americans are a dead people that history is about to run over.

Paul Craig Roberts

Publicus's picture

BTW, for those still not paying attention, Russia/China mutual defense treaty is up next.

DoChenRollingBearing's picture

 

 

I am really, really glad that I do not have any money invested in Russia.

Based on everything I read, including here at ZH, it looks like my money would not be welcome anyway.

Peru I can recommend, Russia I cannot.

MacGruber's picture

Interesting the sudden lack of snarky comments aimed at obummer and how strong Putin is from just a few months ago. Seems the U.S. really does know how to deal a shit sandwich to Russia if it wants. I don't like the house of Saud at all, but having them as a reciprical puppet sometimes has its advantages... Even if you don't like Obummer, which personally I don't, it does feel good to have some shameful level of American exceptionalism from time to time, even if it might be fleeting.

Pinto Currency's picture

 

 

Putin is spoiling Goldman's paper rig of the gold market.

The City of London is not amused.

The LBMA's roof is on fire.

Keyser's picture

Your move Vlad

Targeting the Goldman and JPM headquarters in NYC would be a start... We've seen what the gnome from NK has done to Sony... I wouldn't rule out a full-fledged cyber war on western financial institutions... 

mjcOH1's picture

"Interesting the sudden lack of snarky comments aimed at obummer and how strong Putin is from just a few months ago."

Oil production per day: (http://en.wikipedia.org/wiki/List_of_countries_by_oil_production)
US: 11.1M bbl/day
Russia: 10.3M bbl/day

Total exports: (http://en.wikipedia.org/wiki/List_of_countries_by_exports)
US: $1 575B/yr (diversified, transportation equipment is largest category)
Russia: $515B/yr (80% from raw materials, primarily energy)

GDP: (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29)
US: $16 244B/yr
Russia: $2 029B/yr

The Russians made the mistake of believing their own bullshit, and were called on it.

cnmcdee's picture

The real dirty secret is if the Western Banks can stop pricing the Ruble - it can halt Russian oil exports (how do you buy oil from Russia if the ruble is not accepted..) - Since Russia is less and less prone to accept US dollars for oil..

But this will force them back onto a US Dollar standard for the interim - a sort of temporary counter-check mate.  Russia may take the economic nuclear option and shut off the pipelines to Europe (freeze bitchez..)

So maybe one or two more rounds of economic monkey hammering then the tanks in the Ukraine are gonna be the main play I figure.

mjcOH1's picture

"Russia may take the economic nuclear option and shut off the pipelines to Europe (freeze bitchez..)"

I do believe that threat is why they're now selling oil at $55/bbl rather than $100/bbl, and their currency is down 40% in a few short weeks.  

They can sell it or not.   The EU had concerns.   BTUs are on a 40% off sale.   Might be worth burning a little more oil this winter if it's cold in Germany.   Or enjoy the gasoline savings if your excess generating capacity doesn't break that way and call it good.

 

Gaius Frakkin' Baltar's picture

The EU couldn't orchestrate a circle-jerk.

mjcOH1's picture

True.   But the US and Saudi Arabia can orchestrate a 40% drop in energy prices.   And did.

Tough, that coming on the 'profit' season for Russian energy exports.  

Gaius Frakkin' Baltar's picture

If Saudi Arabia is playing along they gave them something big... like nukes.

Keyser's picture

The Americans made the mistake of believing their own bullshit, and were called on it.

Fixed that for you... 

Stackers's picture

but fiat currencies are stable and safe "because they are backed by their government" ............

Okienomics's picture

Wonder no more my friends, we now get to the real reason.... Traders Betting Russia Will Sell Gold....

 

http://www.bloomberg.com/news/2014-12-16/traders-betting-russia-s-next-m...

Chad_the_short_seller's picture

No, the us gave saudi the nod to bankrupt the shale companies.

Lanka's picture

They are not green energy companies, so bankrupcy is great!

willwork4food's picture

This seems almost planned to force the hand of Russia and China to formally declare an end to the petro dollar system. Something stinks.

Miketheterrible's picture

There is a difference between export and domestic consumption, and the amount it accounts to its GDP: http://www.awarablogs.com/putin-midterm-interim-results/ - Oil and Gas account for 18% of its GDP.  It accounts for a lot of its export, around 70% and pretty much majority of it forex reserves and a huge portion of its budget is derived from oil sales.  This year, Rosneft sold around $117B worth of oil and $75B worth of it is from domestic consumption, compared to $60B from the previous year.

A big one that Russia has not pulled out of its pocket yet is a sales of metals (titanium which is used for majority of US aircraft manufacturing) and forcing payments of oil and gas in their respective currency.  Why are they not doing this?  Don't know.  But there is enough liquidity to hold out, as well there is 66% of the world left they can work/trade with.

jeff montanye's picture

or they could buy the january silver and gold contracts and ask for delivery.

Volkodav's picture

Compare debt per country

http://www.economist.com/content/global_debt_clock/

 

compare oil consumption per country

 

exports?  US comsumes more than it produces

 

GDP.....and how much is wasted?

 

Wait What's picture

the only thing exceptional about america right now is how intertwined every economy on the globe is with its currency. pulling some strings here resonates on the other side of the globe, but  the rest of the world has figured that out, and is taking measures to remedy the situation. The next check move from the East will be to drop dollar ties alltogether, of which the cessation of USDRUB trading is an example.

Wait What thinks the West's "check" move right now is not only early and foolish, but quixotic in thinking the East doesn't see the 1/2 dozen moves it has available to it.

McCormick No. 9's picture

Dual citizens use their secret weapon.

But what happens when it doesn't work?

WW fucking three.

Spanky's picture

...[P]ulling some strings here resonates on the other side of the globe, but  the rest of the world has figured that out, and is taking measures to remedy the situation. -- Wait What

And Russia is openly discussing and leading those measures, including pricing oil outside the petro-dollar, working with the BRICS to create an alternative international development bank, and establishing an alternative to SWIFT for international payments. That and their oil and gas deals with China are a direct threat to the petro-dollar hegemony and the USA's strategic ambitions for, literally, world domination.

This attack on Russia is neither early, nor a sure bet (altho the financial cards appear stacked in the USA's favor at the present moment in time). But it's also early in the race -- can the USA and its allied minions financially and economically destroy Russia and force either Putin's conciliation or a favorable regime change leading to political dominance? Or will this attack fail and the backlash destroy the USA's financial and economic stranglehold on the rest of the world via the petro-dollar? In other words, it's war and there is no certain outcome...

The questions at present are simple: Whom among the BRICS will side openly with Russia? What form will those alliances take? And will those alliances buy enough time for the Russians such that the USA's fragile (relatively) economic and financial systems fail from it's imperial overreach?

Once these questions are answered, and they must be answered one way or the other, as Russia is being flogged as an example of what happens to those whom challenge the USA's imperial ambition, the next question is simple: How far will the USA go if other nations rise in effective support of mother Russia? (And will its "allies" follow it down that rabbit hole?)

Almost Solvent's picture

Time for the popcorn - the coming attractions are over and the matinee is about to start.

Berspankme's picture

Kind of like Zim was once an exceptional country in Africa

McCormick No. 9's picture

Obama- mighty Russian pawn-slaughterer. Tactics terminally confused with strategy

Gaius Frakkin' Baltar's picture

Here's some 'Merican 'ceptionalism for you. Sixty-Fucking-Five percent of children are in families which use at least one of the following:
Temporary Assistance for Needy Families (TANF)
Supplemental Nutrition Assistance Program (SNAP)
Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
Medicaid
The National School Lunch Program

http://www.cnsnews.com/commentary/terence-p-jeffrey/65-percent-children-...

Bet you didn't hear about that on the evening joo-news.
'MERICA

mjcOH1's picture

"Here's some 'Merican 'ceptionalism for you. Sixty-Fucking-Five percent of children are in families which use at least one of the following:
Temporary Assistance for Needy Families (TANF)"

Paid to breed.   What gets rewarded gets done.

Gaius Frakkin' Baltar's picture

If 65% of your population can't afford to breed you have serious fucking problems.

mjcOH1's picture

It's more a case of collecting the breeding pay to live the idle lifestyle they desire.   There's good money in breeding. 

It's a virtuous circle.   Elect those who promise them breeding pay.   Breed.   Wait.....and more voters demanding breeding pay.   What could go wrong.

Gaius Frakkin' Baltar's picture

That's the right mantra of the false left-right paradigm anyway.

It's a little more complicated than that. Yeah, some do milk it, but others are trying to be productive and need it to reproduce. So the latter should just forget about having offspring and count themselves out of the next generation? That's how revolutions are born.

So no... it's more about pacifying people and giving them a little hope in a bleak world. When you have a child, you have a stake in the future and are more agreeable to the status quo.

jeff montanye's picture

wonder how many days oh1 didn't know where the rent was going to come from.

not many would be my guess.

STP's picture

The problem is, it ain't the best and the brightest that are being paid to reproduce, it's the low IQ, unmotivated and uneducated that are sucking on the tit of the entitlement programs.  I pulled up an Los Angeles County Auditor Report on Welfare Fraud in LA County a few years back and kept it, just for giggles.  They outlined the mission of the DPSS or Department of Public Social Services.  Mind you, this is from 2003!

Background

DPSS is the largest locally operated social welfare department in the country, with a workforce of approximately 13,000 employees (! Imagine their generous pay and retirement benefits!).  ...In calendar year 2002, the Department issued average monthly benefits of $172 Million (A MONTH!  EVERY FRIGGING MONTH, a $172,000,000.  That's over $2 Billion Dollars a year and what does it create?  What does it do?  Nothing.  Absolutely Nothing!).

Imagine what it is now!

DaveyJones's picture

"it does feel good to have some shameful level of American exceptionalism" ...except when everyone grows to hate you

jeff montanye's picture

and he doesn't like obummer because the bum isn't sufficiently zionistic.

just a guess.

Volkodav's picture

Yes ...... exceptionally shameful

willwork4food's picture

@MacGruber

Dont know why you were downvoted so much, kudos for telling us the way you believe but the snarky Obama comments are getting old....like 'he doesn't know what he's doing", "they don't have a clue"...etc. Bullshit. They know EXACTLY what they are doing, they have the brightest most highly paid minds in the CIA and the NEO-CON NWO think tanks that money can print..i mean buy.

My question is this: How many people here feel that this is real? Is Putin the real deal? Is China the real deal or just the rising star?

Manipuflation's picture

I just want to say something that you know.  DoChen has never fucked me over.  I know who I don't like.  DoChen is a first class guy.  Unless I missed something in the last three years on ZH then I am sure of what I am saying.  As far as I am concerned DoChen is solid and he is my friend.  I do not let my friends take stab wounds in the back without saying somthing. 

delacroix's picture

what's exceptional about being used like a two dollar whore?

ebear's picture

"Interesting the sudden lack of snarky comments..."

One should avoid the trap of immediacy - a defining feature of life online.   In the real world, events take time to unfold, and we are closer to the beginning than the end of this play, I'd say.


Augustus's picture

Obama has been Putin's poodle for 6 years.

It is the Saudis who are making Putin collateral damage in the effort to dominate oil prices.