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More To Ruble's Collapse Than Meets The Eye?
Submitted by Colin Chilcoat via OilPrice.com,
The ruble is dying, and fast. In what is now being dubbed ‘Black Monday’ the ruble’s value to the dollar dropped nearly 15 percent. Tuesday brought no respite and the ruble fell another 10 percent. The ruble’s collapse follows a similar – though by no means as extreme – slump in oil prices. Still, the Russian economy’s troubles are deeper than that and President Vladimir Putin will be hard-pressed to find an easy out. With a recession looming, state energy companies are struggling to stay afloat, if not directly contributing to the country’s woes.
On the year, the ruble has lost more than 55 percent of its value against the dollar, breaking psychological barrier after psychological barrier. Tuesday’s low of 80 marks a new record and harkens back to the period of hyperinflation that characterized post-Soviet Russia. Then, as now, citizens are seeing their material wealth disintegrate amid rising costs domestically.
Source: QZ
For its part, the Russian central bank has been unable to stop the slide. Neither periodic use of the dwindling foreign exchanges reserves nor interest rate hikes have proved effective. The latest interest rate increase – enacted under the cover of night Monday – brought the key rate to 17 percent, up from 10.5, in an effort to end investor speculation. Tuesday’s trading demonstrated the speculation is far from over and the central bank is far from in control. The higher rates will further squeeze growth as the economy heads for a 4.5 percent retraction next year. Ill prepared to wait it out, the central bank is clearly a step behind the game and perhaps even out of its league. Black Monday suggested other powers might be at play.
Monday was incidentally the day of an interesting 700 billion ruble liquidity auction. Prior to the auction, Rosneft raised 625 billion rubles (almost $11 billion) in a bond issue backed by the central bank. The central bank then quickly cleared the lower-yield bonds to serve as collateral for banks seeking liquidity in the auction. It’s unclear who purchased the bonds, but Rosneft explicitly stated the proceeds will finance internal projects and will not touch the foreign exchange markets. Nevertheless, speculation has persisted and theories abound.
It is within reason that Rosneft’s subsidiaries and their respective banks were prepared – or financed by Rosneft that is – for the bond issue, after which they could refinance the bonds at the central bank for a 5 to 10 percent profit. A similar theory has been suggested for the bigger state banks like VTB and Sberbank, who would not comment on their involvement. The idea goes that they purchased the bonds, flipped them for foreign currency at the central bank, and then passed cash along to Rosneft through a currency swap. While complicit, the central bank has little control and, in either scenario, the money hitting the market from such a deal is certainly of the scale to inflict the damage we saw Monday.
The move highlights dire straits for Rosneft who must answer to $10.2 billion of debt in the fourth quarter, which includes a $6.88 billion loan from foreign banks due Dec. 21. The company – whose market value has tumbled 40 percent this year – has approximately $55 billion in net debt and has thus far been unsuccessful in its attempts to garner bailout money from the government. In its recently defined strategic development goals, the company stressed efficiency, gas production growth, and the localization of advanced technologies and equipment. In the meantime, all eyes at Rosneft are on the price of oil, which appears to be undercutting their expectations.
For Russia, the uncertainty is just as great. The Russian stock market has collapsed in tandem with the ruble and traders in the US anticipate stricter government controls as early as this week. While flows of money have thus far been unimpeded, capital controls such as limits on foreign exchange transactions appear ever more likely as the ruble continues to sink.
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a lot like obamacare. mostly BS.
of course RU is just waiting for the NGO's to come in.
has anyone been keeping track of the legislation passed in the duma re: ngos? of course not.
weren't the likes of RFE broadcasting licenses revoked etc recently?
didn't RU modify their internet regulations recently?
this is more ussa BS
instead of solving in-the-usa problems congress is busy f**king around in areas of total incompetence.
typically exceptional
A deputy warned of a high risk of a colored revolution in Russia, but don't worry the average Russian is not that dumb, he will identify the 5th column rapidly and will kick their asses.
Without saying that all foreign financed NGO's and activist must register to the authority.
$55 billion - about 20 days QE.
Big deal.
it is a big deal when you can not print $$$
So
The very mirror image of the American stock market and the dollar and their upward flutter.
The DJIA is 10,000 points higher today than it was at the end of the recession of 2007. Or should I say at the end of the first dip of our meaningless polydip recessions.
We've had at least 3 dips and 2 recoveries. To tell the truth, I think the Fed is keeping stuff from us.
And what else can you say about the dollar except we owe $18 trillion of them to other folks. Mustn't forget since the end of 2008 the Fed has put another $5, $10, $15 trillion of them right into M1 with just a brief layover in M2.
And with all the QE and the additional $6 trillion in National Debt, the buck is worth more today than it was in 2008 when there were fewer of them. God Bless.
Nobody knows how many were printed, but 'ignorance (when it come to the behavior of the Fed) is bliss."
This is tuesday's story 3 days late.
anything a little more current than this babble?
putin the grand master?
http://www.bbc.co.uk/news/magazine-30539355
Putin will demand a chunk of Rosneft stocks in exchange for $10 bln to cover their asses ;)
Dear Russia,
Get the fuck out of Ukraine. If you do not, well, this week you have seen the preview of what awaits you. You have had to put your currency on life support, your economy is a zombie, you are effectively excluded from the global financial system, your state-owned companies owe more than your reserves and have no chance to refinance, oil (50 percent of your export revenue) is falling, and your gas buyers are looking for less insane sellers. Well, you get the idea. You can, however, start turning this around for yourself by getting the fuck out of Ukraine.
Sincerely,
The West
P.S. Just to avoid any mis-interpretation, Crimea IS Ukraine
Keep dreaming...
Read his Bio. Tells you everything you need to know. Just another brainwashed Ukie flaming Putin while ignoring the Kiev criminal oligarchs selling his 'people' into slavery
Shh don t spoil the surprise they all think they're moving to EuroDisney to become Mercedes employees @$70/hour, not live in a 3rd world Muslim slave ghetto owned by Jews.
They think they're getting lifetime paid union employment with free healthcare, not life unemployment with high taxes to pay for their own invasion.
sounds like you better 'man up' and head over there soon, Braveheart
Currency fluctuations only hurt shitizens as Corps and Governments work together
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