The Russian economy (catch all)

[Firn]

At the end of the week the FT run a good story about Russian companies bringing their capital back home:

Russian companies are pulling billions out of western banks, fearful that any US sanctions over the Crimean crisis could lead to an asset freeze, according to bankers in Moscow.

Sberbank and VTB, Russia’s giant partly state-owned banks, as well as industrial companies, such as energy group Lukoil, are among those repatriating cash from western lenders with operations in the US. VTB has also cancelled a planned US investor summit next month, according to bankers.

This mirrors the very likely pull of a $ 100bn by the Bank Rossii out of the US. The article rightly talks about the fear of asset freezes, but there is in my opion more to it and this refers to the balance sheet of the Bank Rossii, the state control/influence over big Russian companies and the fall of the Ruble.

A flow out of assets in the West to Russia does increase demand of the Ruble and help the Bank Rossii to get strenghten it's balance sheet with western currencies. So it is supported it's currency policy in two ways. Personally I think the key issue here is how much the Ruble did fall, despite the rate rise, despite the $ 21+ bn thrown into the market and despite that large capital pull by partly state-owned companies.

Traders and bankers said US banks had been particularly heavy sellers of Russian bonds. According to data from the Bank for International Settlements, US banks and asset managers between them have about $75bn of exposure to Russia.

Joseph Dayan, head of markets at BCS, one of Russia’s largest brokers said: “It’s been quite an ugly picture in Russian bonds the last few days and some of it has to do with international banks reducing exposure.”

Indeed it wasn't pretty:



I think there is still a lot of room left for bond yields to increase if the situation just stays the same. Generally the longer the crisis last the harder it will be for the Russian economy. There are of course some Western companies who already built plants and bought much property, but there is still a great deal of capital which can rather easily flow out.

It is interesting to take a look at the last 14 years:




@Outlaw 09: I asked the same poster twice for sources and arguments to make his case but he didn't deliver. So I wasn't surprised to see much of the same happening to you...