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Russia - The Dark Horse At Risk Of Default?

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http://www.telegraph.co.uk/finance/financialcrisis/8782663/Debt-crisis-live.html

A new country to worry about - and quite a big one - Russia.

The country has had to cancel a government bond auction after its borrowing costs jumped in the wake of the news that respected finance minister Alexei Kudrin was forced to resign and Vladimir Putin said he would run for president again.

The yields on ruble-denominated bonds maturing in 2015 jumped to 8.45pc. Russia also had to cancel a bond auction last week.

The ruble has slumped 12pc this quarter, as the price of Russian oil, its biggest export, declined along with global growth forecasts.

Doesn't Russia need oil at over $80 or $90 otherwise it can't meet it's spending commitments?

Still debt is wealth.

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http://www.telegraph.co.uk/finance/financialcrisis/8782663/Debt-crisis-live.html

Doesn't Russia need oil at over $80 or $90 otherwise it can't meet it's spending commitments?

Still debt is wealth.

Last thing I read, it needs oil to be at $120 to balance the budget.

The resignation of Alexei Kudrin is a major blow; I always thought he was one of the world's better finance ministers. Unlike Gordon Brown, he saved for a rainy day and Russia came out of the 2008 crisis relatively unscathed.

Parliamentary elections in December and presidential elections in March = lots of government expenditure to create a "feel-good" factor.

But I think Russia is generally like the UK - tons of potential problems, but there are other countries even worse off.

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Unless China somehow manages to make a move into Siberia, and the Russians can't stop them.

They'll simply bomb them. Russians don't care (i.e. care even less than the Chinese).

Completely up to China if they want to go down that path.

Believe me, as much as it pains me to say this due to all the corruption and everything else in Russia that needs to be sorted out, Russia has nothing to worry about for decades due to the unbelieveably vast amounts of natural resources it has.

Countries have 3 sources of competitive advantage:

1. low costs (labour),

2. high quality (goods, services, laws, infrastructure etc.),

3. natural resources.

Another interesting country to keep an eye on is Mongolia...

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Unless China somehow manages to make a move into Siberia, and the Russians can't stop them.

But the Russians can - http://en.wikipedia.org/wiki/Russia_and_weapons_of_mass_destruction

Russia possesses the largest stockpiles of weapons of mass destruction in the world.[1] The country declared an arsenal of 39,967 tons of chemical weapons in 1997,[2] of which 48% have been destroyed.[3] The Federation of American Scientists, a renowned organization for assessing nuclear weapon stockpiles, claims that Russia has 4,650 active nuclear warheads, while the U.S. has 2,468.[4]

They built a lot of stuff during the cold war, and didn't entirely stop at the end of that either.

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But the Russians can - http://en.wikipedia.org/wiki/Russia_and_weapons_of_mass_destruction

They built a lot of stuff during the cold war, and didn't entirely stop at the end of that either.

I recently found a book called 'The Dead Hand' about the Soviet weapons buildup, and the aftermath of the breakup of the Soviet Union. Not best to read before beadtime.

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Unless China somehow manages to make a move into Siberia, and the Russians can't stop them.

Siberia already de facto belongs to China - at least the Far East (i.e. Eastern Siberia).

Russia defaulted back in 1998 and I do not think the country would want to go through that again - and probably would not, because it is seen now as a typical example of "Yeltsin disorder" of the 1990s, in contrast to the new "Putin order" of the 2000s. Of course, as we have seen over and over again, the default was the signal for about ten years of uninterrupted growth - though, in Russia's case, really the result of high oil prices, so we are seeing the Dutch disease all over again. Russia is too dependent on raw materials, but at least she has all these resources - gold, minerals, gas, oal, forests...

The problem with Russia is the rouble is not internationally convertible - so see Russia rocked when we start seeing this crisis really unfold and the flight to dollars, etc.

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The resignation of Alexei Kudrin is a major blow; I always thought he was one of the world's better finance ministers. Unlike Gordon Brown, he saved for a rainy day and Russia came out of the 2008 crisis relatively unscathed.

If you call additional 2 million living below official poverty line since 2008, then yes.

Though Kudrin vocally opposed 20 Trillion RUB defense spending which is Russian president's "top priority" but of course he was fired for formal "disrespect for subordination".

But I think Russia is generally like the UK - tons of potential problems, but there are other countries even worse off.

Unlike UK, one problem Russia does _not_ have is uncontrolled population growth. Russia is losing population due to low life expectancy and immigration could only substitute for ~50% of that loss.

And unlike UK, Russia has vast foreign currency and gold reserves, not mentioning fossil fuel deposits which have yet to be discovered and extracted.

What is common between UK and Russia is that they both can print own currency.

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The problem with Russia is the rouble is not internationally convertible - so see Russia rocked when we start seeing this crisis really unfold and the flight to dollars, etc.

The ruble has been fully convertible for over 5 years and has done rather well against the dollar, euro and pound.

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If you call additional 2 million living below official poverty line since 2008, then yes.

Though Kudrin vocally opposed 20 Trillion RUB defense spending which is Russian president's "top priority" but of course he was fired for formal "disrespect for subordination".

Unlike UK, one problem Russia does _not_ have is uncontrolled population growth. Russia is losing population due to low life expectancy and immigration could only substitute for ~50% of that loss.

And unlike UK, Russia has vast foreign currency and gold reserves, not mentioning fossil fuel deposits which have yet to be discovered and extracted.

What is common between UK and Russia is that they both can print own currency.

The country will be fine. The majority of the people are ******ed.

No change really.

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The ruble has been fully convertible for over 5 years and has done rather well against the dollar, euro and pound.

Really?

28 Sept 2006:

1 USD = 26.776 RUB

1 EUR = 33.991 RUB

1 GBP = 50.189 RUB

Source : http://www.xe.com/ict/?basecur=RUB&historical=true&month=9&day=28&year=2006&sort_by=name&image.x=54&image.y=14

28 Sept 2011:

1 USD = 31.79 RUB

1 EUR = 43.12 RUB

1 GBP = 49.60 RUB

Source : http://www.xe.com/?c=RUB

Sorry, rouble has "done well" only against pound in last 5 years :(

Your score is 1 out of 3

FAIL

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I know nothing about this.

The impression I got from the newspapers was that the finance minister is a creature of Kung Fu Putin, and will play a part when Putin and Medvedev exchange offices next year.

Interesting to see HPC's Russian posters come out of the woodwork.

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Really?

It would help if you had some perspective... I meant that the ruble has been a viable store of value compared with those mainstream currencies.

Look at the chart of the ruble against the dollar since the 1998 default and you'll see that movements have been pretty bounded.

http://moneycentral.msn.com/investor/charts/chartdl.aspx?PT=11&showchartbt=Redraw+chart&compsyms=&D4=1&DD=1&D5=0&DCS=2&MA0=0&MA1=0&CP=1&C5=9&C5D=10&C6=1991&C7=9&C7D=10&C8=2011&C9=-1&CF=0&D7=&D6=&symbol=%2FRUBUSD&nocookie=1&SZ=0

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It would help if you had some perspective... I meant that the ruble has been a viable store of value compared with those mainstream currencies.

Do you call a currency losing (31-26)/26 * 100% = 19% against USD in 5 years "a store of value"?

With 8-12% annual inflation to boot?

RUB has lost even more against EUR.

RUB is at par with GBP, would you call GBP "a store of value", seriously?

Too small dataset to be convincing

Do you expect these "movements" to stay bounded in the future? Russia needs oil at USD 120/bbl to avoid budget deficit/sequestration in 2011-2012 election years, do you see such oil price in the near future?

It is true that Russia has small external debt nominated in foreign currencies but Russian companies and banks' debt nominated in foreign currencies is huge. I fully expect Russian govt to use currency reserves to bail out friendly oligarchs' empires once again (as they did in 2008-2009), once what's left of reserves is spent, the RUB will be in freefall.

In fact, bailout has already started

http://www.rbcnews.com/free/20110927173240.shtml

The regulator is not currently considering resuming the practice of unsecured loans to banks used in 2009.

Never believe something until it is officially denied :P:)

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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