Wolf
Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
The Russian entanglements surrounding Ukraine,
the annexation of the Crimea, the buildup of Russian troupes near the
Ukrainian border, the dreaded implications for other former members
of the Soviet Union with large ethnic Russian populations – the
“Putin Doctrine” is what they’re worried about – have started
to trigger reactions in Europe and the US, and these reactions have
started to leave their marks.
The
first barrage of sanctions in Europe and the US didn’t alter
Russian behavior one bit, though it triggered Russia’s counter
sanctions. There were warnings by various US government entities from
the White House to the SEC, not to invest in Russia. Then the US
officially attacked the price of oil with the release of 5 million
barrels from the Strategic Petroleum Reserve. Oil, the main source of
revenue for the Russian government and the daily bread of Russia’s
largest companies, tanked. Certain Russian oligarchs, officials, and
banks were hit with their own sanctions [read.... The
“Sanction Spiral” Elegantly Spirals Out of Control].
These are among the pinpricks that
economically important parts of the world are inflicting on Russia
and the Russian economy. They might be brushed off by the Russian
leadership. But it already has had one big consequence: the foreign
money is pulling out.
And it shows in the financial markets. For the
year so far, Russian stocks are down, bonds are down (and interest
rates have shot up), and the ruble is down – all of which
accelerated since the Crimea debacle erupted. Credit for business
investment is getting more expensive, and consumers too will be hit
by higher rates, putting a further crimp on the economy that has
already been languishing.
These data points are as of Friday. Today, the
currency recovered a smidgen to 36.08 rubles to the dollar. It has
been stabilized, at a price! To stop the ruble rout a couple of
weeks ago, the Central Bank had jacked up interest rates (which will
slow down the economy further) and sold dollars. The MICEX Index lost
more ground today and closed at 1,299. And this appears to be just
the beginning as sanctions spiral higher in ever tighter turns, while
many sanctions – as far as they’ve been decided – haven’t
even been implemented yet.
These innumerable pinpricks all put together
could end up being seriously painful for the Russian economy – and
any foreign money invested in it, which would convert the warnings
from the White House and the SEC into self-fulfilling prophecies.
But
it doesn’t take long for Russian humor to tear into the
pronouncements of American lawmakers. Read…. Putin
Playing Chess (Hilarious Picture, Russian Point of View)
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