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Thread: Russian stock exchanges take a tumble over Crimea conflict

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    Russian stock exchanges take a tumble over Crimea conflict

    Russian stock exchanges take a tumble over Crimea conflict | Business | DW.DE | 03.03.2014

    Russian stock exchanges take a tumble over Crimea conflict
    The political escalation surrounding Crimea has not left the Russian stock exchanges unfazed. The two major bourses in Moscow took a dive in early trading, with the ruble also losing more value as the week started.
    The ruble lost more value, trading at 50 to the euro and 36.85 to the US dollar, both levels never seen before.
    Investors chucked out Russian shares from their portfolios in large numbers, with natural gas supplier Gazprom being among the prime stocks hit hardest. The company's shares dropped by up to 12 percent after trading started to hit a seven-and-a-half-month low at 122.57 rubles (2.4 euros, $3.3).
    On Monday, Russia's central bank sold up to $10 billion, or 2 percent of its gold and foreign exchange reserves, to stem the fall of the ruble, Moscow foreign exchange dealers estimated.
    This is the result of EU and US condemnation on Russia. Foreign investors are pulling out en mass, stock market is crumbling, major companies are going down the drain (gazprom is a huge russian company).

    If the EU follows through with trade restrictions on Russia, Russia will lose over 50% of it's trade income since trade with the EU is over 50% of the total trade that Russia does. It's almost 80% of all goods and services trades, 50% is total like... with natural resources and whatever.

    The US also threatened to do the same... and that's pretty much all the major trade partners that Russia has.
    -But Rainman, what about China?
    China is a really bad trading partner to make a financial surplus with for anything that's not natural resources. They're like a natural resource vampire.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Quote Originally Posted by Rainman05 View Post
    Russian stock exchanges take a tumble over Crimea conflict | Business | DW.DE | 03.03.2014

    This is the result of EU and US condemnation on Russia. Foreign investors are pulling out en mass, stock market is crumbling, major companies are going down the drain (gazprom is a huge russian company).

    If the EU follows through with trade restrictions on Russia, Russia will lose over 50% of it's trade income since trade with the EU is over 50% of the total trade that Russia does. It's almost 80% of all goods and services trades, 50% is total like... with natural resources and whatever.

    The US also threatened to do the same... and that's pretty much all the major trade partners that Russia has.
    -But Rainman, what about China?
    China is a really bad trading partner to make a financial surplus with for anything that's not natural resources. They're like a natural resource vampire.

    The EU almost certainly won't stop importing Russian energy. More than one third of its crude oil comes from Russia and more than 30% of its natural gas comes from Russia.

    http://epp.eurostat.ec.europa.eu/sta...imports%29.png

    The energy gap is too great to make such a cutoff of energy imports feasible. Ironically, at least in the short-term, the events in Ukraine could boost energy prices leading to more income, not less, for Russia.

    Finally, during the 1970s, following the Arab oil embargo, Secretary Kissinger once suggested an energy sharing arrangement between the U.S. and its major partners should a supply disruption take place. This idea, had it been implemented, could have made a reduction in Russian energy imports more feasible, as each partner would then bear a share of the reduction in supply, making the "hit" on any single partner much less severe. That wasn't implemented. Also, China is energy hungry. That's the one resource it covets, as energy supply is essential to helping it sustain its economic growth.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Here's another source:

    BBC News - Russian rouble hits new low against the dollar and euro

    Russian rouble hits new low against the dollar and euro
    I love this picture:

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    These economic problems began before the issues with Ukraine, for example look at the exchange rate Dollar vs Ruble in the past year or so.
    The Russian economy was and is still slowing down, people as well as politicians started talking about "tightening the belts" i.e tough times are ahead of us since mid 2013, so it's not a big surprise that the dramatic events of the past few days had drastic consequences on the already weakened Russian economy.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Quote Originally Posted by Rainman05 View Post
    Here's another source:

    BBC News - Russian rouble hits new low against the dollar and euro


    I love this picture:
    Today, global markets are down on account of the shock of what happened and uncertainty. Once the markets sort things out and greater certainty concerning what lies ahead emerges, stabilization and partial recovery are viable scenarios.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Quote Originally Posted by Fallenangel View Post
    These economic problems began before the issues with Ukraine, for example look at the exchange rate Dollar vs Ruble in the past year or so.
    The Russian economy was and is still slowing down, people as well as politicians started talking about "tightening the belts" i.e tough times are ahead of us since mid 2013, so it's not a big surprise that the dramatic events of the past few days had drastic consequences on the already weakened Russian economy.

    Fallen.
    IMO, this is very important background information. Indeed, the economic softness in Russia, and some other parts of the developing world, have led to declines in BRIC financial markets.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Quote Originally Posted by donsutherland1 View Post
    The EU almost certainly won't stop importing Russian energy. More than one third of its crude oil comes from Russia and more than 30% of its natural gas comes from Russia.

    http://epp.eurostat.ec.europa.eu/sta...imports%29.png

    The energy gap is too great to make such a cutoff of energy imports feasible. Ironically, at least in the short-term, the events in Ukraine could boost energy prices leading to more income, not less, for Russia.

    Finally, during the 1970s, following the Arab oil embargo, Secretary Kissinger once suggested an energy sharing arrangement between the U.S. and its major partners should a supply disruption take place. This idea, had it been implemented, could have made a reduction in Russian energy imports more feasible, as each partner would then bear a share of the reduction in supply, making the "hit" on any single partner much less severe. That wasn't implemented. Also, China is energy hungry. That's the one resource it covets, as energy supply is essential to helping it sustain its economic growth.
    No, I agree, but you don't need to stop the trade... just reduce it by a bit to make massive hurt. Or threaten to reduce it by a bit.
    Restrict != annul or close. It means restrict. Diminsh.

    Russia won't sign a deal with China for energy supply in the way the Chinesse want it. The Russians are wanting to sell it at a high price because they know the Chinesse can afford it... and the chinesse don't like that. It's also the idea of dynamic cost vs static cost, the chinesse want 1 price for the next 10 years, the russians don't want that.

    Free trade is a good tool for world peace, I agree... but it's a deterrent to war. When people don't care anymore about trade, like Russia does, it's willing to take the econimic hit to take Crimea, then the whole thing stops working and then economy becomes a tool to use. And the EU is the one with the biggest handler on that tool. Russia can't afford to lose the almost 200bil euros it gets from the EU every year from trade. that's 10% of it's GDP.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Quote Originally Posted by Rainman05 View Post
    No, I agree, but you don't need to stop the trade... just reduce it by a bit to make massive hurt. Or threaten to reduce it by a bit.
    Restrict != annul or close. It means restrict. Diminsh.

    Russia won't sign a deal with China for energy supply in the way the Chinesse want it. The Russians are wanting to sell it at a high price because they know the Chinesse can afford it... and the chinesse don't like that. It's also the idea of dynamic cost vs static cost, the chinesse want 1 price for the next 10 years, the russians don't want that.

    Free trade is a good tool for world peace, I agree... but it's a deterrent. When people don't care anymore about trade, like Russia does, it's willing to take the econimic hit to take Crimea, then the whole thing stops working and then economy becomes a tool to use. And the EU is the one with the biggest handler on that tool. Russia can't afford to lose the almost 200bil euros it gets from the EU every year from trade. that's 10% of it's GDP.
    I could be wrong, but my guess is that the pain of reduced economic cooperation will be modest compared to the interests Russia believes it is securing. Moreover, if the pain reaches a certain threshold, one can't preclude Russia's retaliating via energy supply disruptions. It has engaged in resource nationalism before, so such a move wouldn't be far-fetched.

    Had the U.S. concluded its trade agreement with Russia, suspending the agreement might have made a larger impact. However, the U.S. was slow to do so and the agreement was not concluded. Suspending or canceling a possible agreement is not the same thing as suspending something after it has been implemented. The former would impose hypothetical costs. The latter would impose tangible costs.

    President Putin is guided by realpolitik. He does not see things the same way the West does. Perhaps, in part due to Russia's relatively underdeveloped markets (relative to the EU and U.S.), it is also psychologically easier for Putin to pursue a policy where national goals trump market considerations. Time will tell, but I suspect he's dug in on his course and expects that once the dust clears, businesses will begin returning to doing business with Russia a few years down the road, especially if energy resources become even more important.

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    Re: Russian stock exchanges take a tumble over Crimea conflict

    U.S. Stock Futures Down Sharply - WSJ.com

    U.S. Stock Futures Down Sharply
    32 “Whoever acknowledges me before others, I will also acknowledge before my Father in heaven. 33 But whoever disowns me before others, I will disown before my Father in heaven.
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    Re: Russian stock exchanges take a tumble over Crimea conflict

    Quote Originally Posted by donsutherland1 View Post
    I could be wrong, but my guess is that the pain of reduced economic cooperation will be modest compared to the interests Russia believes it is securing. Moreover, if the pain reaches a certain threshold, one can't preclude Russia's retaliating via energy supply disruptions. It has engaged in resource nationalism before, so such a move wouldn't be far-fetched.

    Had the U.S. concluded its trade agreement with Russia, suspending the agreement might have made a larger impact. However, the U.S. was slow to do so and the agreement was not concluded. Suspending or canceling a possible agreement is not the same thing as suspending something after it has been implemented. The former would impose hypothetical costs. The latter would impose tangible costs.

    President Putin is guided by realpolitik. He does not see things the same way the West does. Perhaps, in part due to Russia's relatively underdeveloped markets (relative to the EU and U.S.), it is also psychologically easier for Putin to pursue a policy where national goals trump market considerations. Time will tell, but I suspect he's dug in on his course and expects that once the dust clears, businesses will begin returning to doing business with Russia a few years down the road, especially if energy resources become even more important.
    If the US pushes for trade sanctions or restrictions or anything on Russia, you won't just have the US do that. You'll have a lot of other nations, like Mexico, Japan, etc.
    If the EU pushes for trade restrictions, as I said... the EU is Russia' biggest trading partner by far and anual trade is almost 10% of the GDP of Russia while less than 1% of the GDP of the EU. Cut that down by half and Russia loses, basically, 5% of it's gdp. Chop the trade of goods and services and Russia's export drop by 75% or more.

    The EU becomes more and more energy independent with each passing year.

    I don't deny that Putin makes calculated risks, I don't like the man, but I don't underestimate him. But yes, I do believe that what you say, psychologically, it is true, Putin does put national agenda over market considerations... but that's a fallacy because due to the fact that Russia is an underdeveloped market, the market can hit harder and the effects will be all the more crippling.

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