On the one hand, oil prices are falling and the ruble depreciates. On the other hand, increases dramatically bond yields and increasing inflation. Moscow is clearly disturbed, but how terrible clouds are gathering over Putin? About this newspaper writes The Guardian .
December 1, Russian President Vladimir Putin announced during his visit to Turkey that Russia rejects the project “South Stream”, within which under the Black Sea planned to build a gas pipeline to supply gas to southeast Europe, bypassing Ukraine.
As the official reason for not building were named regulations of the EU, which prohibit companies control the entire cycle of production, transportation and sale energy resources. Simply put, the same company can not own and gas, and pipeline, which pumps it.
In fact, the main reason for the refusal of Russia from the project, along with pressure from the EU to countries that supported him is money. The basis of this project worth $ 40 billion more lay political logic, rather than commercial interests. Pressure, which can be provided through the pipe, it is more important than the supplied gas on it.
In this month the Ministry of Economy, Russia announced that he predicted, the country in the coming year may enter into recession. The Ministry has also lowered its forecast for oil prices in 2015 to $ 80 per barrel. Just a month ago, Moscow predicted the price of $ 100, while the growth rate for the coming year to 1,2%.
The outflow of capital from Russia this year could exceed $ 100 billion, which is almost 65% more than last year. Because of these forecasts, again there was talk of interim measures of capital controls.
On Thursday, the Russian central bank raised its key interest rate by 1% to 10,5%.
Moscow clearly alarmed but how terrible clouds are gathering over Russia?
On Wednesday, the price of oil brand Vrent first time in five years has fallen below $ 65 per barrel. The fall in prices due to lower demand (mainly in China and in Europe), and the omission of OPEC production increase. The United States today is produced 65% more oil than it was five years ago due to increased production by fracturing, and after a period of turmoil and unrest increased production rates in Iraq and Libya.
Recent calculations show that in order to balance the budget Russia needs an oil price of $ 105 per barrel. At the moment, far from it, although the ruble weakened slightly lowered the break-even.
According to various studies, at every price drop $ 10 per barrel the country would lose 12-14 billion a year. Since oil and gas account for about half of government revenue, as well as more than 60% of Russian exports, the impact will be significant for the country.
Among Russia’s attempts to somehow compensate for the decline in oil prices and the impact of sanctions can be called the increase in energy exports in Asia, the plan of gas transportation through Turkey, which is called unrealistic, and actively buying gold. But by and large, these measures in the near future will have a poor outcome, and at best they can be called speculative.
The decline in oil prices led to the fall of the ruble, which this year lost nearly 50% of its value against the dollar. Today it is on the record low for the last five years.
The ruble falls, but bond yields move in the opposite direction. Course is a falling currency negatively affects the calculation of external debt.
The public debt is quite insignificant, accounting for 13% of GDP. Debt of private companies – is another matter, especially given the flexibility of the private sector in Russia.
In June, Russia’s foreign debt amounted to 731 billion dollars. 74% of this amount is denominated in foreign currency, which means that due to the weakening of the ruble will be harder to repay debts. Only in December will have to pay $ 35 billion.
The largest debt from banks and other non-governmental organizations, which together have foreign creditors $ 650 billion. 17% of this short-term loans, and a significant portion (46%) – it is the duty of state banks and enterprises.
The sanctions are beginning to bite, too
The share of companies that have come under the direct effect of the sanctions account for about 60% of the total debt payments to be carried out at the end of the year.
Most of these companies have not (yet) sufficiently large cash reserves, but because of the sanctions, many face difficulties in financing and simply can not roll over their debts through external borrowing, but instead have to buy dollars in the market. Apart from these, there are growing signs that Western banks and financial institutions refuse to finance Russian companies, even those that do not fall into the black list.
It should be borne in mind that although private companies and are not controlled by the state In Russia they are often independent of purely nominal, and the ownership structure they have very fickle and can change rapidly. Therefore, on public finances can go to the debt burden of not only those companies that are controlled by the state.
Find alternative sources of funding will not be easy
After the imposition of sanctions, Russian companies and banks, traditionally dependent on the syndicated bank loans in dollars, began to stare at China, looking for escape routes there is financial. During the summer trade in the currency pair ruble-yuan reached a record high. Russian companies are not new to the market of the Chinese currency, and they know that bonds denominated in Renminbi and issued by companies in China and Hong Kong, previously represented a cheaper source of financing. However, interest income on Russian corporate bonds denominated in yuan, has recently increased with the expansion of the sanctions list.
One of the parallels with the 1998 default is that the worst of the weakening of the currency in Russia is being protected bank sector. According to the estimates Capital Economics, only the banks foreign debt of 192 billion dollars (about 10% of GDP), which is considerably higher than in 2008 and 170 billion in 1998 to $ 18 billion.
The key point here is that Russian banks have little dollar-denominated assets, which they can put up against the dollar debt. All this has a direct impact on public finances at least three ways.
1. Russian Central Bank must support the ruble. From the beginning, he had spent for this purpose more than 70 billion dollars. Russia’s foreign exchange reserves amount to 420 billion dollars, and a large part of them are denominated in dollars, too. But over the last 12 months has been spent almost $ 100 billion.
2. Direct support for debt payments companies. Companies such as “Rosneft” and VTB may well need a lot more money than those $ 90 billion, which is stored in the National Welfare Fund, which is a sovereign wealth fund and is intended to support the company in a difficult moment. Rosneft just trying to get out from under debt, incurred in connection with the purchase of TNK-BP has requested $ 48 billion.
3. Due to the introduction of the US and EU sanctions Russia are increasingly turning their attention to the east, but in its relations with some countries, especially China, it is not the strongest partner.
Despite all this, if you look at available figures, Russia next year will be able to cope with the difficulties in their present context, although it will be very difficult. But if today’s scenario will remain unchanged for two years or more, even the Russian reserves could dry up. Speaking of the external debt, the rating agency Moody’s assesses its 112 billion dollars over the next four years.
The fall in oil prices leaves a hole not only in the Russian budget
The Russian welfare disproportionately dependent on natural resources . According to World Bank estimates, the money value of natural resources is 43% of the total wealth of Russia. In Australia, Canada, Norway and New Zealand the ratio is 8-13%.
In November, Russia predicted for next year inflation at 5%. But by the end of this year, it has exceeded 9%, and many analysts predict that in the first quarter of 2015, inflation will be measured in double digits. Of course, this is far from the default level of 1998, when the country was unable to pay its debts, but this is enough to cause unrest in the streets of Moscow.
According to a recent opinion poll by the Levada Center, 71% of Russians concerned about the level of inflation, and this concern by 30 points ahead of the next two issues, which are poverty and inequality.
Inflationary pressures on many foods even more. Rising prices of meat and fish is calculated double-digit. During the first week of October, the price of cucumbers grown by 7.6%, and tomatoes next week at 5,7%.
Inflation affects all spheres of society. Brothels in arctic Murmansk raised their prices by 30-40%, and in the future may even tie them to the dollar.
Public sector workers in Russia is 25% of the total labor force, and this – the main electorate Putin. When the Russian president returned to his post in 2012, he promised to increase the salaries of generous public sector workers (in some cases twice). Now the government is trying to reverse and cause these increases in line with inflation.
Despite the rather stringent austerity, Russia provided 20 per cent increase in military spending, which, together with the cost of law enforcement and the machine national security will be about a third of the federal budget.
President Putin maintains a high level of popularity and is very much in the hands
At the end of 1985, the Soviet Union began to lose about $ 20 billion a year due for increasing production in Saudi Arabia and a sharp drop in oil prices. In today’s money is about 44 billion. If you look purely at the numbers, until the collapse of the Soviet type Russia so far away.
The political context and markets today are so different from the time that direct comparisons impossible. But history is important for another reason.
When the Soviet Union collapsed, Putin was a KGB agent and worked in East Germany. He felt first hand what the collapse of the Soviet Union and the change of power, which followed later.
Repeats the story he does not want
I think, 1991 or 1998 for Russia will not happen again, but today’s financial troubles indicate that some of Putin’s instruments of economic control and influence can be blunt. And if this situation continues, its political consequences could find no less important. Despite harsh statements against the West in the last presidential address to the nation, there have been signs of growing caution and prudence. And can, and concerns.
Alberto Nardelli, Sylvia Merler
Comments
2
No comments:
Post a Comment