Russia sees reserves tumble during September

[D-Mack]

MOSCOW, September 30 (RIA Novosti) - The Russian Central Bank's international reserves, which saw strong growth for most of this year, have lost $40 billion in the past few weeks, an analyst at a leading brokerage said on Tuesday.

The international reserves, comprising foreign currency, gold, and a range of other assets, started the year at $478 bln, making strong gains each month to reach $596 bln on August 1, before slipping to $582 bln as of September 1 as the global financial crisis worsened.

"In the past few weeks, with the bankruptcy of Lehman Brothers and other financial institutions, we have seen across-the-board selling of all possible assets, including in Russia... Russia has lost almost $40 billion in gold and currency reserves," Yevgeny Gavrilenkov, chief economist at Troika Dialog, told a RIA Novosti news conference.

He said the loss had largely resulted from a revaluation of the euro- and pound-denominated part of the reserves.

...

http://en.rian.ru/business/20080930/117342596.html

Instead of investing in the dollar, they bought € & £ ?

[c1ue]

Re: Russia sees reserves tumble during September

Russia is more concerned with their trading partner, the EU, than anything else.

The ruble has been quite steady w/ relation to the euro during the entire latest episode of dollar devaluation.

As for reserves going down:

Ouch! Russia's reserves are up only 22% in 9 months? :rolleyes:

And what are the US, EU, and UK reserves doing in this same span?

[Supercilious]

Re: Russia sees reserves tumble during September

Instead of investing in the dollar, they bought € & £ ?

Russia has part of it's reserve in € & £ . They had that for quite a while. Things are pretty bad for them now. For those who don't keep an eye on things, they are also launching a bail package of about $100 bil with the first tranche of about $50 to allow for shot term refinancing of Russian companies.

They also had the first individual bailout of the Russian equivalent of an investment bank (Svyaz Bank had 60-70% of assets in Russian equities.

About 2 weeks ago they set up a special $20 bil Stachanovist Plunge Protection Team in order to stabilize the markets and since them their markets are runing great ... like a Jiguli on the autobahn to Sverdlovsk

BNP Paribas said that between between Aug. 8 and Sept. 19 , $56.7 bil in foreign capital fled Russia. Those are all white money not loot taken abroad and reinvested in Russia as "foreign capital".

Ouch! Russia's reserves are up only 22% in 9 months? :rolleyes:

And what are the US, EU, and UK reserves doing in this same span?

Yes c1ue we all know Russia is doing great, the markets are buoyant, foreign capital is rushing into Russia by the tens of billions a week, and. as President Medvedv said. they are making billions form their FRM&FNM holdings and shares.

Slava Putin! Slava Putin! Slava Putin!

Are you happy now, comrade?

[VIT]

Re: Russia sees reserves tumble during September

I did some reading of Russian CB deputy head he gave a radio station. He explained that this sum party includes reevaluation of assets due to currencies exchange changes and since the reserves are denominated in dollars. The another part is that sometimes they buy sometimes they sell so it influences the end-month reserves (it is not clear if it means they have some money off balance sheet). And the last part is money outflow.

I see a lot of contradictory things flying around. But as I can understand they (CB and ministries) can not touch reserves, money they use is the economic ministry money (this year current budget money + budget surplus).

It is completely different problem then in US. Banks played with currency exchanges and borrowing in western banks so they have short term liquidity crisis as suddenly this stream has been closed.

What about stock market support I do not see any reason to do this, only probably as for government image to show they have "sound economic"
Their idea was to buyback state companies shares saying it has economic sense (I guess CEOs of these companies started to cry how bed the things are keeping in mind more market share will be good perk as well) .
Somebody pointed out on SurgutNeftegaz oil company which had more cash !!! on the current account then their market cap

[Tulpen]

Re: Russia sees reserves tumble during September

Looks like they made the wrong bets.

[Supercilious]

Re: Russia sees reserves tumble during September

Somebody pointed out on SurgutNeftegaz oil company which had more cash !!! on the current account then their market cap

You are right VIT. There are enough sane people let in Russia... not everything is Pravda/RussiaToday

But as I can understand they (CB and ministries) can not touch reserves, ....

Now that is a big question. If that is true things won't be so bad. If the siloviki foxes got the key to the henhouse.... we will find about it only when it's too late.

[c1ue]

Re: Russia sees reserves tumble during September

As I've said many times before, the largest public companies in Russia absolutely were playing the borrow big, bet big game.

It is not that surprising that the government is trying to stabilize, but then again, I've also pointed out that portfolio investments are a mere drop in the bucket compared to the rest of the economy - especially in contrast to 1997.

Furthermore Russia isn't like the US: the economy isn't mostly based on giant chains like Safeway, Wal Mart, and Home Depot.

There will be an effect, but it is far from clear how severely the overall economy is going to be affected.

Of course, the usual $#* statements based on conjecture don't understand that there aren't too many Zhigulies on the road to Sverdlovsk anymore.

Perhaps he and McCain should 'leap forward' up to this decade.

As VIT noted, many Russian companies - if not the majority - are cash flow positive and have lots of actual cash.

Its hard to pay money under the table when everything is electronic.

[phirang]

Re: Russia sees reserves tumble during September

As I've said many times before, the largest public companies in Russia absolutely were playing the borrow big, bet big game.

It is not that surprising that the government is trying to stabilize, but then again, I've also pointed out that portfolio investments are a mere drop in the bucket compared to the rest of the economy - especially in contrast to 1997.

Furthermore Russia isn't like the US: the economy isn't mostly based on giant chains like Safeway, Wal Mart, and Home Depot.

There will be an effect, but it is far from clear how severely the overall economy is going to be affected.

Of course, the usual $#* statements based on conjecture don't understand that there aren't too many Zhigulies on the road to Sverdlovsk anymore.

Perhaps he and McCain should 'leap forward' up to this decade.

As VIT noted, many Russian companies - if not the majority - are cash flow positive and have lots of actual cash.

Its hard to pay money under the table when everything is electronic.

Not really when you've a complicit bureaucracy and legal system.

[c1ue]

Re: Russia sees reserves tumble during September

Not really when you've a complicit bureaucracy and legal system

Which nation are you talking about? :eek:

And is this your recent experience or again just anecdotal?

Russia definitely has a lot of corruption; it is understandable when there was a combination of wildly contradictory laws coupled with extremely underpaid government officials.

But from my personal experience, it is getting better.

In contrast to some other places.

[Supercilious]

Re: Russia sees reserves tumble during September

Of course, the usual $#* statements based on conjecture don't understand that there aren't too many Zhigulies on the road to Sverdlovsk anymore.

Well I've just got something interesting, fresh from Brad Stetser's blog (in the comments section):

1. October 1st, 2008 at 1:37 pm
   bsetser Says:
   Jboss —
   Russia is getting hit by a perfect storm:
   rising political risk
   falling oil
   a global liquidity squeeze that cuts into risk appetite when russian risk is perceived to have increased
   and russia’s private sector/ esp. the banks were borrowing very heavily from the international banking system over the past few years.

And look at this:

http://www.itulip.com/forums/showpos...31&postcount=3

And please tell me: where do you see McCain?

[VIT]

Re: Russia sees reserves tumble during September

Its hard to pay money under the table when everything is electronic.

Russians do not afraid difficulties especially in this

Seriously it is still a lot of cash in circulation. Corruption spreads not only on government officials but on private business as well so there are payments under the table. It is interesting that last years there was no problem of laundering money, but the opposite - to turn "white" money into "grey" to pay other companies and bribes.

[VIT]

Re: Russia sees reserves tumble during September

MOSCOW, Oct 1 (Reuters) - Russia's central bank will be able to start lending money to credit-rated banks without collateral by the end of the year in another liquidity-boosting measure, its first deputy head was quoted as saying on Wednesday.
................
Another message announced this week by Putin features state-owned Vneshekonombank (VEB) which will receive up to $50 billion from the central bank to lend to companies which need to pay back foreign debt taken out before Sept.25. Ulyukayev said VEB will provide the money until the end of next year and estimated Russian companies need to pay back $40 billion of foreign debt this year, and $80 billion in 2009. "So we are not talking about 100 percent refinancing of this debt through VEB," he said. There will be a minimal rate at which VEB can lend to the companies, but not a maximum one, and it will be able to decide on criteria by which it will select borrowers. For its part, the central bank will charge VEB a modest rate, perhaps around LIBOR plus one percent.Ulyukayev also gave some more details on plans to enable the central bank to compensate commercial institutions for losses sustained as a reslut of lending on the inter-bank market. State-run Sberbank and VTB, plus Gazprombank, the banking arm of gas export monopoly Gazprom , will qualify for compensation for some of the losses. These banks "have taken on the obligation to be present in this market, to give credit to banks in a significant volumes," Ulyukayev said. "Part of that risk the central bank will take on itself

http://www.cnbc.com/id/26968719

Hmm, where these money coming from ??? :confused:

[Supercilious]

Re: Russia sees reserves tumble during September

Another message announced this week by Putin features state-owned Vneshekonombank (VEB) which will receive up to $50 billion from the central bank to lend to companies which need to pay back foreign debt taken out before Sept.25.

VIT please read again the post #3 in this thread... Reuters is slow, these are 2 weeks old news

Hmm, where these money coming from ??? :confused:

From those reserves the siloviki were not supposed to touch, and this bailout (the talk was of $100 bil two weeks ago) will do nothing for the Russian economy, because most of it will trickle in the foreign bank accounts of select siloviki. They've learned well their lesson from Yeltsin's oligarchs. I have to give them that...

[c1ue]

Re: Russia sees reserves tumble during September

Let's see: You predict Russia will experience a massive depression soon.

What's the time frame? 6 months? 1 year? 3 years?

And what's the scale of the depression? Negative growth? Zero growth? 5% growth?

If oil prices drop to below $60 and stay there, a recession might happen. But the economy is so overheated that a recession is necessary - apartments that were selling for $80K - 3 years ago were going for $200K.

My favorite berry pies went from 22 rubles to 45 rubles in 5 years.

But while a recession can happen, I simply don't see how a depression is going to occur when the economy is still primarily resource extraction oriented. In this case only a massive debt overload - like 1998 - would cause a problem and overall debts are significant but not gigantic.

Time will tell.

EJ has stated he believes there will be a currency crash, but has not responded to my question concerning the relative state of debt + portfolio investment in Russia now compared to 1998.

Of course the way things are going, there might be a number of currency crashes going on simultaneously...

If anything, I'd expect Brazil to hit the wall first as they are much more in debt.

[Supercilious]

Re: Russia sees reserves tumble during September

Let's see: You predict Russia will experience a massive depression soon.

What's the time frame? 6 months? 1 year? 3 years?

And what's the scale of the depression? Negative growth? Zero growth? 5% growth?

I'm not going to provide accurate actionable information on a public forum. There is no free lunch, plus It would be awkward to provide complete full detail investment analysis on the free section of the iTulip forum considering that on the subscription only section EJ does the same thing.

For obtaining detailed investment guidance and high quality actionable information available only by subscription (annual subscription starting as low as 9999.95 dollars) you can contact me through email : hank_bernanke@bailout.con

Even if you have the money to pas for a subscription for my investment newsletter, for you c1lue that may not be enough, because it would contravene my business ethic standards... I don't want to have any connections with arrogant siloviki:

As for $#*, [...]. As they say in Russia, we don't punch your passport, we punch your face.

(PS . Just to make things clear. The subscription to my newsletter is priced in Zimbabwe dollars)