Russian central bank chooses banks over rouble 30 Jan 2015 A surprise interest rate cut suggests the central bank is more concerned about the economy than the value of the currency. Worries about the banking sector’s solvency could explain the move. The downside: Russia could end up with both high inflation and a deep recession.
Rouble remains without a floor 27 Jan 2015 S&P junked the Russian currency while the EU’s talk of looser sanctions reversed course, prompting another big rouble decline. With inflation rates rising to double digits, capital fleeing and the politics more belligerent, it will be hard to stop the downward spiral.
Rouble defence is losing battle for central bank 15 Jan 2015 The December rouble crisis now has a January victim: the Central Bank of Russia’s deputy head is being relieved of her monetary policy portfolio. Markets may get better guidance. But the problem is not the person. The CBR cannot beat a sinking oil price and Western sanctions.
Expect more Russian bank rescues this year 12 Jan 2015 A $17 bln government bailout and other crisis measures saved some of the largest lenders from disaster in December. But the industry as a whole isn’t well capitalised. The end of temporary props and a probable recession in 2015 suggest more state support before year-end.
Sberbank battles to keep global ambitions alive 23 Dec 2014 Russia’s biggest bank has built strong returns and international credentials. While turmoil at home hits hard, it can just about stick to its investment story for now. But if the economy really tanks, Sberbank may struggle to avoid capital remedies that make it look more Russian.
Stick with BRIC 22 Dec 2014 It’s easy to mock the idea that the four biggest emerging markets – Brazil, Russia, India and China – will reshape the world economy. But the balance is still moving their way, even with slowdowns and Russian turmoil. Markets say otherwise because they were too keen at first.
BP’s Rosneft stake exposed for what it is 22 Dec 2014 Turmoil in Russia will hurt BP’s accounts via its 20 percent stake in Rosneft, at least on paper. But in cash terms, the impact looks manageable. This is a financial holding which provides BP with limited dividend income. Any strategic value looks very long term at best.
China-U.S. shift will end Cold War peace dividend 22 Dec 2014 The PRC’s military outlays may match Uncle Sam’s in 15 years, while U.S. policy paired with Russian aggression could force up EU spending. Western defense firms face more competition, but added demand. Governments may have to choose between just rearming and an all-out arms race.
Putin takes up residence in alternate reality 18 Dec 2014 The Russian president insists that prosperity is around the corner if his countrymen can only endure another two bad years. But as sanctions and weak oil prices push Russia towards recession, no serious reform is in sight. Putin’s optimism should be a cause for serious pessimism.
Moscow’s bank largesse has risky quid pro quo 18 Dec 2014 Russia is mobilising state resources and tweaking prudential rules so that banks can avoid capital hits from the current turmoil. Similar measures helped Western banks in 2008. The risk is that the Kremlin will demand credit growth and forgo prudent borrowing.
Russia’s foreign banks have varying pain barriers 17 Dec 2014 With the Russian banking system hobbled by sanctions, Raiffeisen, UniCredit and SocGen are well placed to grab market share in commercial lending. The vital factor will be how insulated they are against the current turmoil. Some look better placed to tough it out than others.
Rosneft and Russia stuck in zero-sum game 16 Dec 2014 The state-owned oil group is hurt by sanctions and weak oil prices. It’s struggling with big debts taken on to buy TNK-BP. So it was very helpful that the central bank fast-tracked Rosneft’s recent rouble bond sale. But that just shifted risk to Russian lenders and the sovereign.
Rouble free fall throws Russia into ugly spiral 16 Dec 2014 The Russian currency kept falling after the central bank hiked its key rate from 10.5 pct to 17 pct, leaving policymakers with few sensible short-term options. Further out, only higher oil prices and an end to the Ukrainian stand-off can soothe markets. That’s unlikely to happen soon.
Sinking rouble puts debt squeeze on Russia Inc 3 Dec 2014 Most of Russia’s external debt is owed by the country’s banks and corporates. About $138 bln comes due in the next eighteen months. With the currency down 40 percent against the dollar this year, that will put a major strain on enterprises’ cashflows. Expect the state to step in.
Putin’s Russia can’t easily escape rouble debacle 1 Dec 2014 The Russian currency is sinking along with the oil price. A central bank interest rate hike would hurt the struggling economy. Reforms reducing the country’s dependence on oil might increase confidence, but Western sanctions are squeezing the government and the financial system.
Russia tries Chinese path out of European impasse 11 Nov 2014 Moscow has signed another mega gas deal with its southern neighbour. Vladimir Putin may have to accept bad terms, but the point is to show Europe that he can turn to China if the standoff over Ukraine persists. And that in the short term, Russia can bear the economic pressure.
Only Putin can stop rouble’s fall 7 Nov 2014 Russia’s currency is sinking. The central bank is blameless. Neither intervention nor higher rates can support the rouble. The economy is deteriorating and reform hopes are fading as Moscow retreats into isolation. The situation will persist until the president changes policy.
APEC summit shows value of calm and platitudes 31 Oct 2014 Obama, Xi, Putin and Abe will have much to disagree about when they meet with other national leaders in Beijing next week. The host city’s odd theatrics add to the awkwardness. But the fact that top people from around the Pacific want to show a united front helps keep the peace.
Total’s Margerie may need two successors 21 Oct 2014 The death of the French oil group’s chairman and CEO in a plane crash deprives the company and the industry of a flamboyant leader. It poses a challenge for succession planning at Total at a critical time. A solution could be to separate the jobs of corporate figurehead and CEO.
Russian central bank intervention is a dead end 8 Oct 2014 The central bank of Russia is buying roubles on the market, but the exchange rate keeps sinking. The economy has deep structural flaws, worsened by Putin’s aggressive foreign policy. There are many reasons to take capital out of Russia. For the currency, the only way is down.