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Russian Oligarchs Are Moving Assets Out Of Russia, Converting Rubles Into Hard Assets
We noticed a very interesting development late last week when there was a very late after-hours press release announcing what would generally be considered a normal transaction of shares in a thinly traded micro-cap mining company called Atico Mining. This tiny company is producing gold and copper from an underground mine in Colombia at a relatively low cost.
Fast forward to the press release (which can be read in its entirety here) stating that Frontdeal is acquiring the 10.9M shares and 4.45M warrants Aterra Investments was holding in Atico Mining at a fixed price of 57 Canadian dollar cents. This sounds like just another boring announcement, but we dug a bit deeper into this story and discovered some remarkable things.
First of all, the owner of both Frontdeal and Aterra is the same person as both companies seem to be controlled by Alexei Mordashov. Does that name sound familiar? It should, as he’s the CEO of Severstal and has recently done some interesting deals in the gold space with NordGold (which is a spinoff from Severstal). On top of that, he’s an economist so his knowledge of the financial sector and situation should be at a sophisticated level. So why would someone move his shares in a mining company from company A (which he controls) to company B (which he controls as well)?
Alexei Mordashov, CEO of Severstal. Source
It might be very helpful to know that Frontdeal (the acquirer) is registered in Cyprus, which, as you know, is the favorite offshore spot for Russians to store a large chunk of their net worth. Aterra Investments however, is still registered in Russia (but operates through a subsidiary on the British Virgin Islands). This leads to a remarkable conclusion as it sure looks like Mordashov is starting to move his hard assets out of Russia by putting them in an offshore company. What’s even more remarkable is that the transaction won’t happen in Canadian Dollars, nor US Dollars and not even in Euro’s, but in Russian Rubles. The agreement calls for a payment in Russian Rubles equivalent to the value of C$0.57 at the time of closing (so the volatility of the Russian Ruble has been dealt with).
The central point in this press release isn’t a change of ownership in shares of Atico Mining, but Mordashov being effectively moving his Rubles from an offshore account in Cyprus and converting those Rubles into liquid hard assets. This could be the first step with many more to follow as Aterra also owns a sizeable stake in Silver Bear Resources which (for now) owns a large silver project in Russia and some smaller investments in non-precious metals deals.
The capital flight out of Russia is still ongoing and according to the data of the Russian Central Bank, the total amount of capital outflow is expected to be $128B in 2014 (well that was the estimate in November, and the final number will very likely be higher than 128 billion dollar) and probably $50-75B in 2015. It won’t just the oil price which will hurt Russia, but the increased perceived risk of doing business in the country. The Russian Ruble had crashed earlier this winter but seems to have stabilized now at an USD/RUB exchange rate of 50-55 and an EUR/RUB rate of 60-65 (see next image), and the sudden depreciation of the Ruble might very well have been caused by several high net worth individuals and company’s withdrawing their cash from the country by converting the Russian Rubles into other currencies (probably the Swiss Franc as there was a sudden boost in the CHF index when the Ruble was crashing).
The EUR/RUB exchange rate. Source
The pieces of the puzzle are starting to fall into place and this Frontdeal-Aterra deal could definitely be seen as just one of the pieces of evidence of an ongoing capital flight out of Russia whereby a rich Russian oligarch (who’s an economist!) prefers to keep his hard assets abroad in Cyprus instead of at a subsidiary of a Moscow-registered investment fund. The capital flight will be centering around investing in 'safer' currencies and in hard assets with gold still being one of the most appealing asset classes.
Just to give you an idea how horrible the crash of the Ruble was; in just 7 weeks time (!!), the gold price in Ruble increased by a stunning 70%. That's right, 70%. Who owns gold, safeguards his purchasing power whilst the average Russian citizen will have to adapt its consumption rate to 'the new normal'.
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I don't see Alexei Mordashov on any Empire sanction list
And now I see he was the only Russian to attend Bilderberg 2011.
Obviously a zio-tool of new world Empire.
This particular oligarch is an ethnic Russian.
Now, I'm sure money comes first, but this bloke is unlikely to find a safe haven from prosecution in Israel.
he looks young for an oligarch. which has nothing to do with the discussion but just thought i would point that out. guess there is no age requirement to be an oligarch
http://cont.ws/post/71171/
Read Russian and you will understand was the advice here from a ZH commenter, Silvermail. Hmm. The translation to English is still a little murky, but it appears that if Russia and China both sell $100's of billions of US Treasuries, the US bubble might burst? Is this what the article is saying?
Good heavens, there's oligarchs in Russia!?!?! Who knew?
Next we'll find oligarchs spewing propaganda through the state controlled media or sumpin ;-)
Well American news and entertainment media are truly in diverse hands, with each major outlet marching to the beat of their own drummer. Why, take a spin through Fox and CNN and the NYT and marvel at the diversity of opinion and management.
Some of them went to Dartmouth, not Harvard or Yale!
As for CIA minders... probably just an urban legend, like that girl who got the frozen hot dog stuck in her twat.
Oligarchs does not equal one oligarch.
I believe it's oligarch when there's one of them, and oligarchi when you're talking about several...
Sprout talking his book; as usual. IMHO; which is worth nothing.
Sprout is sounding like that puppet Harper.
A law amending Russian Tax Code came into effect on January 1st, regulating ownership and taxation of Russian tax residents's offshore companies and income.
So far, the only solution not to be taxed is to move your place of residence (according to Tax Code, if you live more than 183 days in a year outside Russia, then you're not resident of Russia for purposes of income taxation).
The law only applies to those countries which did not sign bilateral agreements with Russia regulating taxation and avoiding "double taxation" (in the country of income origin and Russia). Known offshore tax havens probably haven't signed such agreements.
If you're Russian you don't use legal and clever ways avoid paying Mother Russia your taxes.
If you hire smart accountants and lawyers and legally avoid paying taxes the Kremlin is going to find a way to get you. Share your profits with the Kremlin on the other hand and get help to make still more.
Rubles deposited in an offshore bank?
Interesting ...
Transaction without dollars involved?
Interesting ...
Vanishing Russian capital?
Interesting ...
Kkkkkkkkkkkkkkkkkkkkkkkkkkk!
The guys are giving a Gordian knot in the dollar and few are realizing the height of the gallows.
hehe.
Is the author working for the CIA? This is bullshit.
Sprout does this a lot; he's just talking his book; there's still ten silver buyers somewhere in the western hemishpere that he hasn't screwed with the crazy premiums on his "real silver" thingy.
There is Sprout and there is Sprott.
Has the definition of "oligarch" changed recently?
I believe that the term has traditionally been used loosely for any member of government who has made his fortune through the government?
That's not my definition of an oligarch. I line up with the wiki definition, seen here.
Oligarchy (from Greek ????????? (oligarkhía); from ?????? (olígos), meaning "few", and ???? (arkho), meaning "to rule or to command")[1][2][3] is a form of power structure in which power effectively rests with a small number of people. These people could be distinguished by royalty, wealth, family ties, education, corporate, religious or military control. Such states are often controlled by a few prominent families who typically pass their influence from one generation to the next, but inheritance is not a necessary conditionfor the application of this term.
Throughout history, oligarchies have often been tyrannical (relying on public obedience and/or oppression to exist). Aristotlepioneered the use of the term as a synonym for rule by the rich,[4] for which the exact term is plutocracy. However, oligarchy is not always rule by the wealthy, as oligarchs can simply be a privileged group, and do not have to be connected by either wealth or by bloodlines – as in a monarchy.
Warren Buffett would be a perfect example of an American oligarch.
George Soros is sort of a US citizen and an Oligarch.
So, alien then.
Reptilian, perhaps?
Lets make a list.
Oh, a reality TV pilot.
What government post does this man hold?
I didn't see it in the article.
Formerly holding a post in government has nothing to do with the definition of an oligarch.
Buying precious metals miners?
Coulda' fooled me.
The are multiple interpreatations of this event, 1. He was shy on funding for ongoing mine operations and used money from home to open a new mine. There are other interpretations just as possible, much to do about nothing,
So the ruble crashes against the dollar. So a few loans don't get paid back in dollar terms. Do you really see an EU or US Banks taking control of a Russian company, asset etc. The Russians are finding themselves in a greater need to trade in their own currency at a time when we need exports. Silly us. Much of what we export can be replaced just takes time and effort. Same with the EU. So Russia become more self sufficient while we continue our downward spiral.
At any time, Putin could refuse to pay for the debts of Russia. This $ 600 billion, which the West has invested in Russia. Putin may already tomorrow morning tell: We have default from to Western sanctions against Russia.
And he just will announce the nationalization of the property of all foreign companies in Russia. After that, the banking system in Europe will start falling apart with a domino effect.
In addition, Putin may at any time to raise the price of gas for the West twice. The West will be have a choice - or to buy gas at twice the price, or die.
And what can the West do? Washington will be able to spray water on Putin?
wow, he's an economist
double wow a real economist.
that's guarantee that he knows nothing.
sprout spouts BS
If Ruble turn to Rubble expect trouble in many bubble.
Neoconfucious
....fuck Sprout Money
The picture emerging of Putin's decisions and actions indicates a man not entirely right in the head. Nothing else seems to adequately explain the screw up he's made of the Russian national position. So much for Jim Willie's so-called Eurasian trade zone prediction.
I suppose it served his purposes, to sell more gold against a generally falling gold price, so all is not lost, eh Jim? (unless you're in Rubles ... lol)
Might be time for a new narative though.
Really what choice did he have? The west(US) was hell bent on destabilizing Russia. I really don't see what else he could have done other than become subserviant to the west. Game is only in the 3rd inning, long way to go
Are you kidding?! Jesus man! Putin had the game won, he could have removed the US from European foreign policy, he could have split NATO and bound the EU to Russian resource trade. His gross mishandling and support for aggression snatched defeat out of the jaws of victory, then he doubled down and threw a can of gas on himself and lit a match! The guy could have set Russia up for a fantastic economic future, but completely blew it.
The US couldn't have done almost anything if Putin were not silly enough to make it easy for them! Putin could have simply completely changed his policy to Ukraine, in mid to late 2013, and the US and IMF never would have had a chance in Kiev!
What did he think? That after September 2013 the US would do nothing to undermine the Black Sea Fleet as a result of keeping them out of Syria and embarrassing them like that? If he was a strategic 'chess player', he would have and should have known the next moves well in advance, and negated them - diplomatically.
He blew it.
You speak as if Putin has already lost and Obama has already won. But first, the game continues. Second, Putin won all rounds and episodes that were previously. And thirdly, no one knows what the next move by Putin. But everyone knows that in the end he will win again.
---
Putin has never yet did not attack. He has only defended. But if Putin will begin to attack, the US economy has burst like a bubble, - faster than you can spit.
If you could read Russian, you would understand what I'm saying.
Here's a link http://cont.ws/post/71171/
Putin blew it by not using his foreign reserves to puchase gold. He could then have hinted at Ruble-gold convertibility to drive the Ruble back up without losing anything in the meantime. Playing with paper is a fools game.
Russia's gold reserves have increased in tons.
Value has decreased with the price of gold.
If he had bought dollars there would not have been the loss in gold value.
Gold is dead a non issue stop dragging it around it lost it's "luster" in 72 that is why the fed dumped it the jews couldn't wrangle any more leverage out of it gold hit a wall for further asset plundering thats why we have fiat, fiat is the next logical step in the jews plan for "wealth" confiscation via debt and interest. the gold backed currency hit a brick fucking wall it's use is dead. need I say it again? The world grew larger than what a gold system could handle, no conspiracy theory needed it just is logical.
Blew it? I doubt it. had Putin done nothing in Ukraine, we would liklely have already invaded and conquered Syria, possibly moved in on bombing iran , and Ukraine would have nukes on Russia's borders after a fast track move to join NATO. Putin did the only thing he could do.
The US would not conquer Syria.
It would have freed Syria from control of Iranian mullahs and stopped the interferience in Lebanon.
You mean to fail catastrophically? ... that's called losing bud. Your comment is really quite awful, you appear to have no capacity for lateral thinking, creativity, or innovative response, so you can't even see what could have been done. Like I said yesterday, even a totally shit-faced Boris Yeltsin could have played this better than Putin did.
Element - you're wrong on this assessment.
putin obeys.
Element. Stop playing checkers. Please
Eat yer popcorn and watch kid.
I don't buy this Crimea blackmail rationale.
Selling electricity and coal on credit (we all know it is really free, debts will never be repaid) to Kiev makes absolutely no sense and puts Russia in a worse situation UNLESS ...
Unless it is a means to stall for time because something huge and unexpected is in the pipeline.
Therefore, I deduce/predict, that some huge and unexpected Russian initiative is about to happen.
The Achilles Heel of the Putin Construct.
When Oligarchs fall out...
The Ruble's rebound is nothing more than the oligarchs using Russia's foreign reserves in a ploy to buy time. When the reserves are burned up and the oligarchs have converted all of their assets into overseas account/currencies, a currency crisis will strike the Russian Ruble.
Oligarchs and their money (influence) gone?
Hey, it's a start.