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Russian companies withdraw billions from west, say Moscow bankers

MildSteel

MildSteel

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Russian companies withdraw billions from west, say Moscow bankers - FT.com

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.

The flight comes as last-ditch diplomatic talks between Russia’s foreign minister and the US secretary of state to resolve the tensions in Ukraine ended without an agreement.

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The economic fallout from the crisis has begun. But Russia has over 400 billion in reserves. Those assets will be strained.
 
iguanaman said:
Don't underestimate the significance of this. Up until now there has been a mass exodus of funds to the West, and out of Putin's hands. Could this be another reason for this incursion? To teach the rich oligarchy that they dare not desert mother Russia?
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That's an interesting notion. It would be nice if you could provide a link supporting the flight of funds to the West.
 
Lavrov: Kerry made no threat of sanctions in talks - ITV News
Russia's Foreign Minister Sergei Lavrov has said US Secretary of State John Kerry made no mention of a threat of sanctions during the pair's private talks over the Ukraine crisis earlier today.

Mr Lavrov said he was aware of the reports of sanctions, which claim the US and EU are planning to freeze the assets and block the travel of up to 130 Russians if the Crimea referendum goes ahead on Sunday.

Mr Lavrov said such sanctions would be "counter-productive" and would not contribute to the countries' mutual interests.
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Perhaps what they talk about in private is opposite what they say in public.
 
MildSteel said:
That's an interesting notion. It would be nice if you could provide a link supporting the flight of funds to the West.
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Ukraine: US bonds pullout | Kitco News
"Ukraine: US bonds pulloutGuardian (UK)
By By Phillip Inman
Saturday March 15, 2014 12:00 AM

Financial markets were on high alert last night over the Ukraine crisis amid speculation that the Kremlin had pulled its vast US treasury bill holdings out of New York .

News that more than $100bn had been shifted out of the US in the past week - at least three times more than at any time since the financial crisis - prompted fears that Russia is preparing for a western backlash in the form of sanctions and is moving its funds to safe havens beyond US influence.

The bills were transferred out of the US central bank's deposit vaults last week, as the Obama administration increased the threat of sanctions in response to the growing crisis in east Ukraine . Analysts said that if the switch can be credited to Russia , it represents about 80% of the country's holdings in US Treasury bonds.

The Russian central bank is likely to be behind the move, though wealthy Russian business figures are also expected to be concerned that Washington -imposed sanctions will freeze funds they have parked with the US central bank. Alexei Miller , the boss of energy firm Gazprom , and Igor Sechin , who runs oil company Rosneft, are likely to be among the many senior figures in Moscow adversely affected by any targeted sanctions imposed on Russia ."

Is Russia Cashing In On Its US Treasury Holdings? | Kitco Commentary
"Is Russia Cashing In On Its US Treasury Holdings?
Friday March 14, 2014 14:13


Could Russia be cashing out on its U.S. Treasury holdings? Concerns over rising political tensions between the Russia and the West over the Ukrainian crisis have helped boost gold prices to their highest level in six months, as investors rush for cover into the traditional safe-haven asset.

U.S. Treasury securities held in for foreign official and international accounts slid $105 billion in the week ending March 12, according to a Wall Street Journal report. The decline was the largest retreat on record. As of December 31, both official and private Russian holdings totaled $138.6 billion of Treasury debt, the report said.

Some market watchers wonder if Russia is moving funds out of U.S. Treasury bond holdings into other accounts that it would be able to access in case economic sanctions are imposed over the current Ukrainian crisis. Moving a billion dollars is serious business, and this situation remains on edge. All eyes will be focused on the Crimean referendum on Sunday as citizens there vote on potential secession from the Ukraine in order to join Russia.

What does this show about gold? Gold is still reacting in its traditional safe-haven manner. Investor flows are returning to the gold market. Bullish sentiment is climbing. The yellow metal has posted a stunning and some would say surprising rally move since the start of 2014. There are many potential factors supporting the up move, including a spate of weaker-than-expected data in the U.S. throughout the first quarter, weakness in the U.S. dollar index and most recently safe-haven buying from the Ukrainian crisis."
 
Moot said:
Lavrov: Kerry made no threat of sanctions in talks - ITV News


Perhaps what they talk about in private is opposite what they say in public.
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A lot of what is said in public is for public domestic consumption. When you think about it, Europe's economy is very fragile right now. Substantial sanctions would likely trigger a disruption in gas supplies, which would damage Europe's already fragile economy, although Russia will bear the brunt of the pain. Unless this issue get's extreme. I don't think we will see any substantial sanctions as a result.
 
DaveFagan said:
Ukraine: US bonds pullout | Kitco News
"Ukraine: US bonds pulloutGuardian (UK)
By By Phillip Inman
Saturday March 15, 2014 12:00 AM

Financial markets were on high alert last night over the Ukraine crisis amid speculation that the Kremlin had pulled its vast US treasury bill holdings out of New York .

News that more than $100bn had been shifted out of the US in the past week - at least three times more than at any time since the financial crisis - prompted fears that Russia is preparing for a western backlash in the form of sanctions and is moving its funds to safe havens beyond US influence.

The bills were transferred out of the US central bank's deposit vaults last week, as the Obama administration increased the threat of sanctions in response to the growing crisis in east Ukraine . Analysts said that if the switch can be credited to Russia , it represents about 80% of the country's holdings in US Treasury bonds.

The Russian central bank is likely to be behind the move, though wealthy Russian business figures are also expected to be concerned that Washington -imposed sanctions will freeze funds they have parked with the US central bank. Alexei Miller , the boss of energy firm Gazprom , and Igor Sechin , who runs oil company Rosneft, are likely to be among the many senior figures in Moscow adversely affected by any targeted sanctions imposed on Russia ."

Is Russia Cashing In On Its US Treasury Holdings? | Kitco Commentary
"Is Russia Cashing In On Its US Treasury Holdings?
Friday March 14, 2014 14:13


Could Russia be cashing out on its U.S. Treasury holdings? Concerns over rising political tensions between the Russia and the West over the Ukrainian crisis have helped boost gold prices to their highest level in six months, as investors rush for cover into the traditional safe-haven asset.

U.S. Treasury securities held in for foreign official and international accounts slid $105 billion in the week ending March 12, according to a Wall Street Journal report. The decline was the largest retreat on record. As of December 31, both official and private Russian holdings totaled $138.6 billion of Treasury debt, the report said.

Some market watchers wonder if Russia is moving funds out of U.S. Treasury bond holdings into other accounts that it would be able to access in case economic sanctions are imposed over the current Ukrainian crisis. Moving a billion dollars is serious business, and this situation remains on edge. All eyes will be focused on the Crimean referendum on Sunday as citizens there vote on potential secession from the Ukraine in order to join Russia.

What does this show about gold? Gold is still reacting in its traditional safe-haven manner. Investor flows are returning to the gold market. Bullish sentiment is climbing. The yellow metal has posted a stunning and some would say surprising rally move since the start of 2014. There are many potential factors supporting the up move, including a spate of weaker-than-expected data in the U.S. throughout the first quarter, weakness in the U.S. dollar index and most recently safe-haven buying from the Ukrainian crisis."
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Wow! 100 Billion! That's amazing. I didn't know that much money could be moved so fast.
 
MildSteel said:
A lot of what is said in public is for public domestic consumption. When you think about it, Europe's economy is very fragile right now. Substantial sanctions would likely trigger a disruption in gas supplies, which would damage Europe's already fragile economy, although Russia will bear the brunt of the pain. Unless this issue get's extreme. I don't think we will see any substantial sanctions as a result.
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I agree. I don't think Europe has the stomach to put sanctions on Russia....unless the US provides incentives for them to do so
 
Moot said:
I agree. I don't think Europe has the stomach to put sanctions on Russia....unless the US provides incentives for them to do so
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Yep. Like you say public talk is probably different from what's going on in private. I think this guy pretty much sums it up.

Why the threat of economic sanctions doesn't scare Russia - CBS News

The United States is working on unspecified economic sanctions against Russia, but there's not much support from the allies.

The threat of economic sanctions has not kept Russia from taking a tighter hold on Ukraine's Crimean Peninsula.

Will Sparks is an analyst with the Eurasia Group, a leading political risk consultancy. Does he think the U.S. and Europeans are willing to let Putin keep Crimea?

"I don't think they much of a choice," Sparks said.

"The Europeans don't want a direct confrontation with the Russians because Europe draws 28 percent of its natural gas from Russia," he said.

Two-thirds of that gas travels in pipelines through Ukraine.

Germany gets 36 percent of its gas from Russia, Italy 27 percent, France 23 percent. The U.S. has little economic leverage; only 2 percent of its trade is with Russia.
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Well when the US and EU foolishly, imo, telegraph in advance their intentions, of course people are going to do what they can before the deadline hits to save what they can. If freezing assets is the plan, probably should keep that part under wraps until you're effectively already doing it.
 
MildSteel said:
A lot of what is said in public is for public domestic consumption. When you think about it, Europe's economy is very fragile right now. Substantial sanctions would likely trigger a disruption in gas supplies, which would damage Europe's already fragile economy, although Russia will bear the brunt of the pain. Unless this issue get's extreme. I don't think we will see any substantial sanctions as a result.
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You really shouldn't buy into the "Russia will have it worse" line. It is really just about getting the public on board with sanctions by convincing them the pain will be greater on the other side. Amazing how quick people forget that it was not too long ago when people were openly discussing the possibility of multiple European countries defaulting on their debts and collapsing the European banking system. By no means is Europe in a state where it could take an energy shock as extreme as what we are talking about. On the other hand, Russia still has other customers and it can divert some of its supply to those customers at much higher prices. They don't even have to shut off Europe's supply completely as any significant reduction would allow them to net much higher profits and sink the European economy at the same time.
 
Summerwind said:
Well when the US and EU foolishly, imo, telegraph in advance their intentions, of course people are going to do what they can before the deadline hits to save what they can. If freezing assets is the plan, probably should keep that part under wraps until you're effectively already doing it.
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The problem with that is the purpose is to stop someone from doing something by threatening them. You threaten them first, and then you act. It's just like with your kid, you don't want to punish them, so you threaten them first and see if they stop the undesirable behavior. If they don't stop then you execute your punishment.
 
The Russian stock market is in collapse and the ruble is at lowest in 10 years. This is just a pathetic move from putin loyalists. It's a dent in the EU market and the EU economy and it won't do much for Russia either. Pathetic really.
 
Demon of Light said:
You really shouldn't buy into the "Russia will have it worse" line. It is really just about getting the public on board with sanctions by convincing them the pain will be greater on the other side. Amazing how quick people forget that it was not too long ago when people were openly discussing the possibility of multiple European countries defaulting on their debts and collapsing the European banking system. By no means is Europe in a state where it could take an energy shock as extreme as what we are talking about. On the other hand, Russia still has other customers and it can divert some of its supply to those customers at much higher prices. They don't even have to shut off Europe's supply completely as any significant reduction would allow them to net much higher profits and sink the European economy at the same time.
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The problem for Russia is that they don't have the type of financial resources that the United States has. The United States has a currency that everyone accepts and they can essential print as much as needed. At least right now. Russia doesn't have that. Another thing is that Russia is too dependent on imports such as food. That's another weakness. Lastly, there economy is too dependent on oil exports. Basically what they have that others want is oil and military supplies. Other than that, it's nothing. So yeah, they will have the worst of it.
 
MildSteel said:
The problem for Russia is that they don't have the type of financial resources that the United States has. The United States has a currency that everyone accepts and they can essential print as much as needed. At least right now. Russia doesn't have that. Another thing is that Russia is too dependent on imports such as food. That's another weakness. Lastly, there economy is too dependent on oil exports. Basically what they have that others want is oil and military supplies. Other than that, it's nothing. So yeah, they will have the worst of it.
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Nonsense. Russia will lose money. Europe with lose electricity. The idea that Europe will just take it on the chin and smile is the same delusional thinking that typifies the ECB at present. All Russia needs is to cut them off for a little bit, not a long time and may not even have to completely cut them off so as to make money off the jacked-up prices. When the Arabs cut off oil it caused havoc and sent most major Western countries careening into severe recessions. At the time those economies were not particularly weak either. Europe is barely stable in growth, with it just one shock away from a serious decline at a time when they can most definitely not afford it.
 
Demon of Light said:
Nonsense. Russia will lose money. Europe with lose electricity. The idea that Europe will just take it on the chin and smile is the same delusional thinking that typifies the ECB at present. All Russia needs is to cut them off for a little bit, not a long time and may not even have to completely cut them off so as to make money off the jacked-up prices. When the Arabs cut off oil it caused havoc and sent most major Western countries careening into severe recessions. At the time those economies were not particularly weak either. Europe is barely stable in growth, with it just one shock away from a serious decline at a time when they can most definitely not afford it.
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Yeah and when Russia goes and tries to buy anything outside of Russia, they are not going to want rubles. You know what they want? Dollars. That's why the US can spend one trillion dollars a year on defense. Russia will have to draw on it's sizable reserves. But they are finite and when they get low, Russia just won't be able to get the things that they need like food, medicine, and heavy machinery.

Then Russia is going to need someone to sell the oil to. Their customer base will shrink. That's a problem.

Then Russian businesses need loans to operate. Who will loan them the money? Russian banks won't be able to provide enough. That's a problem.
 
MildSteel said:
Yeah and when Russia goes and tries to buy anything outside of Russia, they are not going to want rubles. You know what they want? Dollars. That's why the US can spend one trillion dollars a year on defense. Russia will have to draw on it's sizable reserves. But they are finite and when they get low, Russia just won't be able to get the things that they need like food, medicine, and heavy machinery.

Then Russia is going to need someone to sell the oil to. Their customer base will shrink. That's a problem.

Then Russian businesses need loans to operate. Who will loan them the money? Russian banks won't be able to provide enough. That's a problem.
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Most of the problems you cite have viable and relatively immediate alternatives, even if the threat was as severe as you argue and these were short-term problems. You just don't seem to get it though. All of those problems center around money. For Europe, money would not be the main concern. Money does not keep your house warm unless you burn it. You can't put money in your gas tank. No amount of money is going to get a power plant running. You need energy for those things. Sure, some parts of Europe get a lot of energy from elsewhere, but there isn't a whole lot of it out there in the first place. Finding new sellers is a lot harder than finding new buyers, especially when you have such a large gap to fill. They won't be able to fill the gap. As a result, many countries will have to severely ration existing fuel reserves, blackouts will become regular occurrences in some of these countries, travel and shipping will sputter, businesses will shutter or cut hours, and many factories will stop running since they depend on that Russian tea. Talk about getting loans, banks will have cash-starved citizens banging at their doors to empty their savings accounts since all their wages will be getting eaten up by exorbitant fuel costs, assuming they have wages to get eaten up.

The lucky parts of Europe, the ones who are essentially self-reliant or answer to other energy masters, will have a different problem. The German economic engine will be dying as the East goes dark. No matter how independent they are of Russia's pipeline empire, they still depend on the gracious patronage of their fellow euros who are oil and gas vassals of Moscow. At the same time the European financial environment is already littered with land mines capable of blowing a hole in its economy. Barreling towards a trade war with Russia would be prancing along that mine field like someone looking to end up in the morgue. People saying Russia would be hit harder are little different from the people who insisted a company like Lehman Brothers would never be allowed to fail and that even if it did we could take it. Most of the big-wigs who say that sort of thing probably do not believe it themselves, but they need to keep up confidence and just hope they never get caught peddling the snake oil of hope. The only way it works is if they never have their bluff called. If it did come to that then, sooner or later, Brussels would cave and Washington would be on its own.
 
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