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Russian President Vladimir Putin’s meddling in Ukraine is starting to cost Russia dearly in financial markets.

Observations from around the globe.

1) The price to protect Russian bonds against default, already the highest among the world’s four largest emerging markets, has surged since the July 17 incident in which a Malaysia Air Airliner was shot down by what most experts believe to be a missile supplied to the Ukrainian separatists by Russia. The Micex Index resumed its decline wiping out about $28bn in market value since the Crimean invasion.

2) The cost of protecting Russian bonds against default for five years rose about 23 basis points to 207 basis points this month, the highest among the world’s largest emerging markets including Brazil, India and China.

3) Russia has had its credit rating cut to BBB- by Standard and Poor's, the third reduction since the Crimean invasion. BBB- is the lowest investment grade ranking available to economies the size of Rusia's. Global investors withdrew $348m from Russian bond and stock funds since the end of February.

4) Russian corporate debt sales overseas are down 67% this year just as cheap global borrowing costs spur record issuance worldwide.

5) Russia’s foreign reserves have slid by 17 percent in the last six months.

6) Russia’s market slump is exacerbating an overall economic slowdown. Russian Deputy Economy Minister Andrey Klepach said this month the $2-trillion economy posted zero growth in the second quarter when compared with the first. That follows a 0.5% contraction in the January-to-March period.

7) The 19 richest Russians lost $17.4bn since the start of the year. By comparison, the richest 64 Americans have seen their wealth go up $55bn.

8) "The market is sending a signal that Russia should avoid becoming an outcast and avoid shutting itself out of global markets," said Kapital Asset Management’s chief investment officer in Moscow,

9) Russia cancelled its first rouble bond auction in three months, citing "unfavourable market conditions", its finance ministry said last Tuesday.

10) British Prime Minister David Cameron on Monday raised the prospect of a EU-wide block on defence exports to Russia, as well as targeted sanctions against the "cronies and oligarchs" around Mr Putin unless the country drops its support of the separatists

11) Spiro Sovereign Strategy's Nicholas Spiro in London reacting to Cameron's announcement noted that, "The big difference between the recent deterioration in sentiment towards Russia and the pressure on other emerging market assets is that in the case of Russia it is almost entirely driven by the actions of one man. While there’s no question that Russia’s economy is in a dire state right now for a variety of reasons, sentiment towards Russian assets is still strongly, and negatively,  influenced by perceptions of what Mr Putin will do."


BUT.....

12) A number of analysts believe that Russia will periods of short-term market volatility because of its strong foreign-reserve and fiscal accounts.  "I don’t see any material reason to be overly concerned about the value of Russian assets for long-term investors," head of research at Ashmore Group, Jan Dehn, has observed. "Ultimately investors tend to focus quite closely on the underlying resilience that’s embedded in the Russian economy by virtue of its very high foreign-exchange reserves and very low levels of debt," he said.

Here is one of the strongest indicators of that resiiene: Russia’s debt equalled just 13% of gross domestic product last year, compared with the global average of 79%, while its foreign reserves were the fifth-largest in the world.

Originally posted to murphthesurf3 on Sun Jul 27, 2014 at 06:41 PM PDT.

Also republished by PostHuffPost: Connection-Conversation-Community .

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Comment Preferences

  •  Tip Jar (23+ / 0-)

    "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

    by murphthesurf3 on Sun Jul 27, 2014 at 06:41:40 PM PDT

  •  Will the bonds, credit ratings, and markets (2+ / 0-)
    Recommended by:
    limpidglass, cotterperson

    equate to a decline in GDP?

    You may be right, but I have to wonder if the statistics you cite are the same thing as "the Russian Economy".

    •  Well, reading through half a dozen article (1+ / 0-)
      Recommended by:
      cotterperson

      that seems to be the general opinion...I am no expert, just passing on what is appearing in the international press.

      "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

      by murphthesurf3 on Sun Jul 27, 2014 at 07:17:21 PM PDT

      [ Parent ]

  •  Classic - accuse the other guy of what you're... (7+ / 0-)

    doing.

    Putin's Ukranian gambit? What a crock.

    Putin is reacting to our neocons' Ukrainian gambit. Putin is reacting the same way we would react if the Chinese staged a coup in Mexico and told all the expatriate Americans there that they were under suspiscion of treason.

    Your title is classic propaganda. Then you recite the effects of all the deliberate attempt to restart the Cold War for the benefit of the MIC. I am sick of my tax dollars being spent of foreign entanglements when our infrastructure, our schools, and our society is being starved.

    I am so sick of this propaganda campaign against "the other". Russians were "the other" for so long. The residual reflex to pledge allegiance whenever the word "commie" comes up.

    Why don't we try cooling things down instead of rushing intelligence advisors and military aid whenever we get the chance? Perhaps because that is all America has to offer the world anymore.

    Diary's like this make me despair there is anyone left in "mainstream" politics who wants peace, not economic austerity and war for profit.

    •  It's such a crock. (5+ / 0-)

      But when I read stuff like that, it reminds me that Americans richly deserve their coming economic and political fate.


      _______________
      For an idea that does not at first seem insane, there is no hope.
                  -- Albert Einstein:  far left, emo-prog, socialist.

      by Pluto on Sun Jul 27, 2014 at 08:18:24 PM PDT

      [ Parent ]

    •  Apparently folks have been brainwashed. (3+ / 0-)

      Is there any other explanation?

    •  Interesting take on what I wrote and on what I (6+ / 0-)

      did not write but you assume I meant.

      You will note that I do not cheer for the impact on the Russian economy but report it.

      But since you have leapt to the conclusion that I am some kind of neocon apologist: whether U.S. or Russian.

      I certainly do not assume that Putin is a "commie".

      I find it difficult to see where your argument takes you. Let me ask: do you regard Putin (with the overwhelming support of the Duma and public opinion) as justified in his actions in the Crimea and in East Ukraine?

      My title is NOT propaganda. Gambit (a device, action, or opening remark, typically one entailing a degree of risk, that is calculated to gain an advantage.) fits Putin's strategy very well. It is not, by that definition, a condemnation.

      As far as cooling things down a bit- I'd love to hear your suggestions in that regard.....

      "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

      by murphthesurf3 on Sun Jul 27, 2014 at 08:46:23 PM PDT

      [ Parent ]

      •  crickets (2+ / 0-)
        Recommended by:
        murphthesurf3, charlatan

        ^^^...^^^...^^^...^^^...

      •  The tone of your diary is hostile to Putin (2+ / 0-)
        Recommended by:
        fran1, unfangus

        and to Russia. As is the tone of nearly all reporting about Ukraine in Western media. It is not objective, but rather opinionated and one-sided.

        To cool things down, it would help to avoid pejorative terms like "Putin's meddling". And maybe try to be a little less gleeful about the financial damage we are causing Russia.

        •  It could be objective and one-sided. (2+ / 0-)
          Recommended by:
          Mark Lippman, charlatan

          (Not that it necessarily is, but much like we say re: evolution and climate change, there aren't two sides to every issue.) And people could disagree about Ukraine and still express hostility to Putin for a whole host of reasons... I don't see why he deserves a neutral POV on a progressive blog, given his ideology and practices.

          As far as the economic damage goes, I've been impressed how surgically-specific these sanctions are compared to our usual blunt-force, blanket sanctions. You can read the full list here - it's either high-ranking officials, military commanders, and oligarchs or financial institutions and certain business sectors (e.g. firearms). The idea is to hit the people in power directly while mitigating the impact this has on ordinary Russians, which is ideal if you're going to apply sanctions at all.

          As per below, I'm not yet convinced that the recent dip is a result of international blowback against Russia: their economy is a roller coaster even at the best of times. It's tied too strongly to raw materials export (i.e. petro products) without sufficient diversity or regulatory mechanisms to mitigate price fluctuations. Russia's also playing a long game here re: shifting its economy to the BRICS nations, so this is a complicated picture. We won't be able to tell what kind of impact the sanctions have had for some time, except to the extent that they needle the people in power.

          Saint, n. A dead sinner revised and edited. - Ambrose Bierce

          by pico on Mon Jul 28, 2014 at 09:37:32 AM PDT

          [ Parent ]

          •  You have a point when you say (0+ / 0-)
            I don't see why he deserves a neutral POV on a progressive blog, given his ideology and practices.
            •  Very much agree, his is really a neocon positon (0+ / 0-)

              which is, the last time I looked, not terribly welcome at sites like this one.

              "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

              by murphthesurf3 on Tue Jul 29, 2014 at 10:19:54 PM PDT

              [ Parent ]

          •  I'd love to rec this but I ran out of time. (1+ / 0-)
            Recommended by:
            pico

            Your argument is right in line with my thinking from start to finish.

            Actions by European powers today continues the idea of sanctions targeting the top of the socio-economic pyramid with the U.S. leading the way. Certainly a welcome change from the Bush era modus operandi of "send more guns".

            Good analysis of the resource exporting mercurial Russian macro to micro economy strengthens your overall argument. Bravo.

            "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

            by murphthesurf3 on Tue Jul 29, 2014 at 10:18:35 PM PDT

            [ Parent ]

        •  Given that Putin, backed by the Russian Duma, (0+ / 0-)

          seized Crimea and has since sponsored and supported the E. Ukrainian separatist movements, I think that "meddling" is a very neutral term.

          One has to look pretty far afield to find support for Putin' actions. China...maybe....who else?

          "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

          by murphthesurf3 on Tue Jul 29, 2014 at 10:13:46 PM PDT

          [ Parent ]

    •  No reponse so far.....computer broken? (0+ / 0-)

      You seemed so certain?

      "It is better to light one candle than curse the darkness." (Adlai Stevenson in praise of Eleanor Roosevelt) (Glowing Candle Avatar Adopted in 1986)

      by murphthesurf3 on Mon Jul 28, 2014 at 04:22:08 AM PDT

      [ Parent ]

  •  The Russian market is very volatile in the (5+ / 0-)

    short term - I'd put more focus on point 12 than the others. If this persists over time, then I'd agree that they're experiencing some real blowback. But it's true that they dip and peak wildly over the year, especially in comparison to our comparatively stable market.

    Saint, n. A dead sinner revised and edited. - Ambrose Bierce

    by pico on Sun Jul 27, 2014 at 08:27:17 PM PDT

  •  Only thing Pootie Poot cares about is... (0+ / 0-)

    his approval rating:

    80%  positive - Russians
    90%  positive - Republicans
    99%  positive - modern Liberals
    100% positive - Oligarchs

  •  A day or two ago (4+ / 0-)

    The Economist had an article that began thus:

    ONE trillion dollars. That may be the cost to Russian investors of Vladimir Putin’s rule. It is the equivalent of about $7,000 for every Russian citizen.

    The calculation stems from the fact that investors regard Russian assets with suspicion. As a result, Russian stocks trade on a huge discount to much of the rest of the world, with an average price-earnings ratio (p/e) of just 5.2. At present, the Russian market has a total value of $735 billion. If it traded on the same p/e as the average emerging market (12.5), it would be worth around $1.77 trillion.

    By contrast Zimbabwe, despite a kleptocratic government, no national currency, and hyperinflation in its recent past, has a p/e just under 12, almost par for the emerging markets.
  •  Is he going to pull a "Napoleon" and return to a (0+ / 0-)

    "Continental" economy -- basically one that ignores foreign currency entirely?

    That's what the Ruble was in the Soviet era.  Plus they still get "hard" currency from selling energy and resources to Europe.

    Tsar Putin may go there.  Or his calculus may be "once I've got the Ukrainian territory it will be a fiat accompli."

    (one that Europe will have to accept.)

    Personally, I think this is giving him reason(s) to accelerate the process.  It wasn't hard enough and fast enough to make him balk.

    Happy little moron, Lucky little man.
    I wish I was a moron, MY GOD, Perhaps I am!
    —Spike Milligan

    by polecat on Mon Jul 28, 2014 at 08:36:54 AM PDT

    •  Nah, he's just shifting to other markets, (0+ / 0-)

      i.e. BRICS. They've been building an economic partnership to decrease reliance on the U.S. and Europe. I think he's perfectly happy to accelerate this process, too.

      Saint, n. A dead sinner revised and edited. - Ambrose Bierce

      by pico on Mon Jul 28, 2014 at 09:26:34 AM PDT

      [ Parent ]

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