Azerbaijan Currency Crashes 50% As Crude Contagion Spreads

Tyler Durden's picture

OPEC blowback continues to ripple around the world. With Russia's Ruble pushing back towards record lows against the USD, and Kazakhstan's Tenge having tumbled to record lows, the writing was on the wall for Azerbaijan. As Bloomberg reports, the third-biggest oil producer in the former Soviet Union moved to a free float on Monday and the manat crashed almost 50% instantly to its weakest on record with the second devaluation this year.

 

First the Russian Ruble...

 

Then Kazakhstan's Tenge...

 

While Azerbaijan’s former Soviet allies Russia and Kazakhstan have moved to floating currency regimes in the past year, the Azeri central bank has questioned whether the country was prepared for a similar shift. Governor Elman Rustamov said there was no need for another devaluation of the manat, according to a televised interview broadcast on Sept. 25.

And now Azerbaijan's Manat crashes 50%...

 

As Bloomberg reports, “It looks like Azerbaijan’s authorities are following Kazakhstan’s devaluation path,” said Oleg Kouzmin, a former Russian central bank adviser who works as an economist at Renaissance Capital in Moscow. “After devaluing the currency once, some time ago, they concluded that the first move was not enough to tackle all the challenges of a weaker oil price environment.”

Azerbaijan relies on hydrocarbons for more than 90 percent of its exports and the manat has lost almost half its value against the dollar this year, the worst performance of currencies globally.

 

The Azeri central bank’s reserves were at $6.2 billion at the end of November, down from more than $15 billion a year earlier.

 

The Russian ruble’s collapse and a 70 percent plunge in the crude price since June last year have ushered in a new era of volatility for Azerbaijan, which is also beset by challenges ranging from declining oil output to a festering conflict with neighboring Armenia.

“The only real surprise is that they waited so long, blew scarce FX reserves in the process, and thereby undermined the sovereign balance sheet and credibility and confidence in the process,” Timothy Ash, head of emerging-market strategy at Nomura International Plc. in London, said by e-mail.

 

Charts: Bloomberg

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NoDebt's picture

Contagion.

I just like the sound of that word.

highandwired's picture

Let the deval games begin!

BaBaBouy's picture

""Azerbaijan Currency Crashes 50% As Crude Contagion Spreads""
ALL paper Fiats Are "Priced" against each other...
Sooo... The Grandest Of Them All Currently, The uSD, Is at the top of the Pile...
For How Long???
Its A function of Time.

Got GOLD???

Arnold's picture

I like Fractal Consequences myself, ND, But my creativity is crushed by the fact that someone else has copyrighted it.

Caught_Fish's picture

Could it have something to do with this?

http://www.reuters.com/article/us-azerbaijan-oil-fire-idUSKBN0TP0CL20151206

About 60 percent of SOCAR's oil production passes through this platform, meaning the state company's output will be temporarily hit.

KnuckleDragger-X's picture

The (hunger) games have started.....

Neil Patrick Harris's picture

Et tu, Manat?

Good riddance petrodollar.

---------'s picture
--------- (not verified) Dec 21, 2015 11:41 AM

manat   what an idiotic name for a currency

motorollin's picture

Manuts are less valuable today.

DetectiveStern's picture

Beats calling it Dollar. Too many fucking currencies out there called Dollar. Vietnam's is best... Dong.

That said it's rare I call a currency anything other than it's ISO code.

The Wizard's picture

How long will countries continue to peg their currencies to the petrodollar? It appears the world wide financial crash of the petrodollar will center around the decline of oil prices. Create the crisis, come back in as a savior. This MO has worked for thousands of years.

Arnold's picture

Peg to the Dollah, it should be OK for a couple of months.

I have some Diesel to sell you.

(fricken Armenians, although 1% Kurd)

https://www.cia.gov/library/publications/the-world-factbook/geos/am.html

youngman's picture

But But But ..the Argentina peso is up a little today.....

mayhem_korner's picture

 

 

Manat profile looks like a Wile E. Coyote storyboard.

Lorca's Novena's picture

*rubbing hands feverishly* "all your shekels are belong to me, goy"

 

Will Putin just stand by and watch his former states crumble because "muh petrodollar"?

Dark Daze's picture
Dark Daze (not verified) Lorca's Novena Dec 21, 2015 12:04 PM

As they move to destroy one currency after another, it will drive all the 'Stans right into the waiting arms of the Russians and Chinese, who will welcome them with open arms into the further expansion of the new Eurasia trade block, while the US withers on the vine and Israel? Well, there is a special place in hell reserved for Netanyahu.

Tinky's picture

Yet another missing chapter in the "it's stupid to own gold" narrative.

ZangotheMagnificent1's picture

Gold competes with US Treasuries as a "safe" investment. How they have historically traded. So, I am holding off on buying precious metals when treasury rates are increasing, which according to the latest Fed charts, 2016 and 2017, Fed rates will be increasing. We will see if they can pull this off. I try not to invest based on ideology, negative or positive "ism" schisms. Ideological trades = loose money

ZangotheMagnificent1's picture

Petro-state sovereign defaults ... next crises?

Dark Daze's picture
Dark Daze (not verified) Dec 21, 2015 12:16 PM

Gold in CAD is going up more than 10 cents/gram/minute. It looks like chaos has finally arrived.

missingtrillions's picture

They can rot in hell along with their turkish cousins

Iam Yue2's picture

That's the summer holidays sorted then.

tarabel's picture

 

 

Devaluation of a currency is instant inflation inflicted on the non-insider bulk of the population and, of course, theft.

COSMOS's picture

Well maybe they should start making stuff in their own country, should of used those oil profits in the good years to build up local production.

tarabel's picture

 

 

What kind of a crazy American idea is that? If everybody is an employee of the national oil company, they are effectively serfs for life.

chumbawamba's picture

Naw, that's facile and idiotic, much like yourself.  Here's how it really breaks down:

Issue #3 - ZH Weekly

I am Chumbawamba.

NoWayJose's picture

The headline should be "Price of gold doubles in Azerbaijan"!

Johnny_is_already_taken's picture

Its not my fault !

Im southern european and since the PIGS crisis started I managed to cut my petrol spending by 20%

YES twenty percent ! And Im living just fine !

Johnny_is_already_taken's picture

oh and since its been a very very warm fall, I have not spent one single gram of buthane to warm up the house

ZERO BUTHANE so far

ZangotheMagnificent1's picture

Intelligent decisions ... solar panels, backup diesel generator, independent battery system, reliable well in good aquifer, septic for sewage, improve soil for crops ... no debt! What other investments are better in a NIRP world?

kaboomnomic's picture

Well.. First? Big deal. Have experience 350% devaluation of my own country currency. <100%? Peanuts..

Second? You NOTICED these countries, FREE FLOATS their currencies? From FIXED PEG to the dollar?

Well.. IF you wants to do THIS:
https://www.rt.com/business/319938-putin-dollar-oil-trade/

Don't you think, you have to FREE FLOATS your currencies FIRST??

- - -

Remember CIS block now start to use Russian rubel for their trades. And SCO last meeting? China's SCO & Russian CIS wants to creates a superblock trades area, that also includes ASEAN nations.

https://www.rt.com/business/325944-russia-eeu-osc-asean-partnership/

With China's yuan already secures an SDR status? What do you think this block preferred currency swaps would be??

Remember, Israel, Iran, Pakistan, India? Already asked to joins EEU block as a FULL member status. Not just as an observer.

Well...?? Still can't see these countries future direction??

- - -

Btw. I mostly imported goods from china (for online shop purchase). They are STILL CHEAP, because of currency SWAPS arrangement china (bypassing the dollar). It is the BEST decision that our both country had done!

Anything imported from US becomes prohibitively expensive tough. But, what china can't made to substitute US products?? Which can be purchase freely online??

What you see now is the birth of something new and really big. A refocus of world trade away from the dollar base..

Glass Seagull's picture

 

 

Bakuuuuuuuu

The

Friggin

Dip!