Ukraine claimed at pixel time to have fired on a number of Russian tanks crossing its borders.
Being invaded by Russia is not very conducive to a country’s GDP. But also, bizarre as it seems if its armour really is aflame in the Donbas, Russia is also the owner of Ukrainian sovereign debt. This has some precarious terms (for the borrower) restricting growth in debt to GDP to below 60 per cent. Read more
Here’s some Tina Fordham while we await developments… Read more
Given that modern-day warfare must at some point involve drones or autonomous vehicles, it makes sense that modern-day propaganda wars should involve Twitter and social media.
The battle for cyber hearts and minds in that regard is now getting really interesting.
One need only do a casual Twitter search for “пустые полки“, the Russian for empty shelves, to see what we mean.
The backstory here is that in retaliation for US and EU sanctions, Russia has decided to ban the importation of large categories of food products from each. Read more
Russia’s ESPO crude blend determines the key compensation rate for Russian oil production.
As analysts at JBC Energy note on Monday, however, the crude now trades at its weakest differential to Dubai crude — the benchmark it is most commonly compared to — since it became an established blend on the market in 2010.
Whilst the analysts are quick to point out that there are legitimate fundamental reasons for the weakness, it should not go unnoticed that some regular ESPO customers seem to be missing from the market. Read more
Click for the Russian government’s official decree banning food imports from the US, EU, Canada, Australia and the Kingdom of Norway…
“From Nord Stream in the Baltic, to Russian bank subsidiaries in Austria…”
Shares in Gazprom, a company that made $32bn in net income last year, trade at only 2.6 times forward earnings.
So it’s not as if plenty of foreign fund managers weren’t already pretending that the Moscow market has been wiped from the face of capitalism.
On the other hand — via Bloomberg on Friday (and more from the WSJ): Read more
Was Rosneft an arm of the Russian state in 2004?
For anyone looking at its shareholder list — or the background of Igor Sechin, chairman of the board of directors at the time — back then, it might hardly seem a taxing question. But it’s not the question the arbitration tribunal saw as important in Monday’s Yukos ruling.
This was whether Rosneft was specifically acting on behalf of the state when it played its part in the dismemberment of Yukos in 2004. (State responsibility in international law is a tricky subject.)
In an astonishing passage, the tribunal is sceptical that there is evidence of Rosneft acting in this way — until it notices the reflections of the man in the Kremlin from the time… Read more
Another excerpt from Monday’s ruling by an arbitration tribunal, awarding $50bn to be paid by Russia to Yukos ex-shareholders…
As part of the damages from Russia’s expropriation of Yukos’ assets — the tribunal also had to work out interest. This is an important part of any arbitration case looking at financial losses incurred years ago. Although actually, there is surprisingly little guidance on what rate to choose. And the rate used by the tribunal here is (excuse the pun) interesting. Read more
Here’s how the tribunal of the Permanent Court of Arbitration worked out the figure, after finding in favour of former Yukos shareholders on Monday…
What happens when you raise rates by 2.5 percentage points, within a period of six months, for an economy that might only grow 0.2 per cent this year?
We’re not sure. Read more
Given that Russian subjects are reportedly being force fed a diet of Putin-esque mis-information over the downing of Malaysia Airlines Flight 17, it seems worth noting what strategists employed by Russian investment banks are saying about the threat of deeper sanctions against Russia.
Here’s Charlie Robertson, global chief economist at Renaissance Capital (emphasis ours)… Read more
From the US Treasury’s Office of Foreign Assets Control on Wednesday:
The following transactions by U.S. persons or within the United States involving the persons listed below are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity of these persons (listed below), their property, or their interests in property…
Note that wording carefully. “US persons” could extend beyond the US. Meanwhile “new debt of longer than 90 days maturity” could extend beyond US dollar debt.
It does not, however, include US dollar clearing generally, the US Treasury says. Nor, it seems, CDS which references prohibited underlying debt.
Now note whose debt — not all transactions; debt — US banks, US clearing systems, and US investors may be prevented from dealing with accordingly: Read more
Russia says Ukraine hasn’t paid interest due June 20 on that $3bn eurobond.
Ukraine said on Thursday that it had. Read more
That’s the Russian president on the left, rainbow-mantled former General Secretary Jiang Zemin on the right… and Gazprom’s gas deal not pictured because it is presently nowhere to be found. Read more
The rally on Russia’s Micex stock index, at pixel time — Sberbank’s up 9 per cent — after President Putin decided Ukraine has been left weakened enough maybe doesn’t need a referendum in the east after all. This time. Read more
As the FT reports on Wedneday, France’s Socgen has taken a €525m writedown on the goodwill of its Russian assets, becoming the first big Western bank to suffer significant financial damage from the crisis in Ukraine.
The losses emanate mostly from the bank’s rouble exposure and its ownership of the Rosbank subsidiary, which accounts for 5 per cent of the group’s total revenues. Read more
The currency devaluation and official borrowing (to help finance a still-wide government deficit) are expected to push public sector debt up to 57 percent of GDP…
– IMF announcement of $17bn loan programme for Ukraine
Although don’t worry — that’s a whole 3 per cent before a unique debt threshold clause conceivably allows the Russian government to convert $3bn of Ukrainian bonds, which it owns, into demand money. Read more
In Putin’s Russia, risk prices you. That includes tyres. Keeping an eye out for signs and signals from the Russian economy amid the Ukraine crisis… we note Citi’s Philip Watkins on some big drops in tyre sales: Read more
The prospect of selling any sovereign territory to resolve disputes may seem like a taboo — especially so when it comes to the conflicted territory of Crimea. However, Joseph Blocher and Mitu Gulati, both law professors at Duke University, argue that such a “market” should in future be considered in public international law.
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At least Nomura acknowledge the absurdity… anyway, all Ukrainian roads lead to political uncertainty.
This guest post on the Ukraine crisis is from Jorge Mariscal and Alejo Czerwonko, emerging markets chief investment officer and emerging markets economist, respectively, at UBS Wealth Management.
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The Russian market has turned wary of “synergies” at Novatek.
From the Wall Street Journal last year: Read more
Russian stocks having a bad morning following the sanction filled night before:
That’s the Micex off 3 per cent and the RTS off 3.7 per cent at pixel… Read more
That’s banks’ exposure to Russia by major economy, put together using BIS data by Gilles Moec and team at Deutsche. Click the image to enlarge. Read more
There’s a familiar name on the latest Specially Designated Nationals List in the US sanctions against Russia…
TIMCHENKO, Gennady (a.k.a. TIMCHENKO, Gennadiy Nikolayevich; a.k.a. TIMCHENKO, Gennady Nikolayevich; a.k.a. TIMTCHENKO, Guennadi), Geneva, Switzerland; DOB 09 Nov 1952; POB Leninakan, Armenia; alt. POB Gyumri, Armenia; nationality Finland; alt. nationality Russia; alt. nationality Armenia (individual) [UKRAINE2]… Read more
When your creditor takes some of your territory — can you make that territory take some of your debt? Mitu Gulati, a law professor at Duke University, last wrote for us on Russia’s $3bn Ukrainian bond. With Russia reinforcing its annexation of Crimea, Mitu considers Ukraine’s options with its debt after the secession.
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Or, why investors might be less than sanguine about sanctions against Russia.
We could start with the OFZs.
What to do when your creditor invades? Beyond its occupation of Crimea, Russia remains a lender to Ukraine — even as IMF teams ponder the Kiev government’s financial sustainability. Mitu Gulati, a law professor at Duke University, considers both sovereigns’ options.
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If you take the blue pill, the story ends. You wake up in your bed and believe exactly what the statistics tell you to believe. You take the red pill — you stay in Wonderland and I show you what the statistics just can’t see.
What we’re talking about is hidden debt. The debt that’s out there but which we can’t currently see or assess. That is, dark debt which as yet hasn’t been factored in or priced into asset prices that influence our financially abstracted version of reality.
We have of course been here before. During the subprime crisis unexpected sums of dark debt emerged from off-balance sheet bank liabilities, SIVs and such the like. The impact, as we all now know, was immense.
But there’s a very good reason to suspect that “dark debt” hasn’t gone away entirely. It may, as it turns out, still be lurking out there somewhere. Still skewing our perception of reality as it always did. Read more