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Senior Advisor

Will more sanctions be applied to Russia?

It's an interesting question because Russia may be calling 'uncle' in Ukraine after reversing policy there and saying Ukraine has the right to control the rebel areas and is no longer calling for autonomy or independence there. The fronts have fallen quiet the last day or so while the US has said it is allowing antitank technology to be shipped to Ukraine.

 

Obama is scheduled to impose more sanctions on Russia this week. With Russia teetering on the brink will Obama go through with it or will a de facto deal be recognized that Russia will be allowed to 'save face' and de-escalate? This would probably destroy rebel resolve if their main benefactor tells them to give it up and be reabsorbed. It would be a huge victory for the Western policy of sanctions and punch a hole in the thought Russia is invincible along its own borders. It would also be a huge victory for the idea that modern trade is more powerful than captive markets imposed by force.

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Honored Advisor

Re: Will more sanctions be applied to Russia?

Russians flock to stores as ruble remains volatile

russia-ruble-spending.jpg

Dec. 17, 2014: A couple carry a television set they purchased from a shop in St. Petersburg, Russia. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP)

The Russian government looked at ways of easing the selling pressure on the ruble Wednesday amid fears the country may face a full-blown bank run and as consumers look to buy big-ticket items before prices rise.

Deputy Finance Minister Alexei Moiseyev was quoted by the Interfax news agency as saying that the government is going to sell foreign currency "as much as necessary and as long as necessary." That, the hope is, would relieve the pressure on the ruble, particularly against the dollar.

The ruble has lost more than 50 percent of its value this year. After posting fresh losses early Wednesday, the ruble recovered some ground and was 0.9 percent lower at 68 rubles at 1.15 p.m. Moscow time.

The ruble has suffered catastrophic losses this week as traders fretted over the impact of low oil prices on the Russian economy as well as the impact of Western sanctions imposed over Russia's involvement in Ukraine's crisis.

It has shed 15 percent of its value this week despite Tuesday's surprise move by Russia's Central Bank to raise its benchmark interest rate to 17 percent from 10.5 percent, which was intended to make it more attractive for currency traders to hold onto their rubles. At one point on Tuesday, it was down 20 percent.

In light of the currency's slide, Prime Minister Dmitry Medvedev hosted a meeting with the heads of Russia's largest exporters and pledged to implement a "package of measures" to stop the decline of the ruble. He said the details of the measures to be pursued will be hammered out at the meeting and these will be only "market steps."

"This is a very dangerous situation, we are just a few days away from a full-blown run on the banks," Russia's leading business daily Vedomosti said in an editorial on Wednesday. "If one does not calm down the currency market right now, the banking system will need robust emergency care."

Another option available to the Russian authorities to stem the selling tide could be imposing capital controls, but Russia's Economic Development Minister Alexei Ulyukayev on Tuesday denied that the government was considering doing so. However, he said the rate hike came too late.

The collapse of the national currency has spurred Russians to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple has halted all online sales in Russia. Swedish furniture giant IKEA is also due to raise prices Thursday, raising speculation that its stores will be very busy over the next few hours.

Whatever happens with the ruble over the coming days, the Russian economy is set to shrink next week by 0.8 percent if oil prices stay above $80 per barrel. With the oil prices the way they are, below $60, the Russian economy could contract by up to 5 percent.

Andrei Klepach, deputy chairman of the state-owned VEB bank, said in comments carried by Tass that the budget up to $1.6 billion because of a weaker ruble but he warned that "the economy is collapsing."

The ruble is likely to come under more pressure this week as President Barack Obama is expected to sign legislation authorizing new economic sanctions on Russia.

Russian officials sought to project a message of confidence on state television, dwelling on the advantages of ruble devaluation, such as a boost to domestic manufacturing.

The German government's coordinator for relations with Russia, Gernot Erler, said the economic crisis in Russia was largely the result of the drop in oil prices, not the sanctions imposed by the West.

"It's an illusion to think that if the sanctions were to fall away tomorrow, the Russian economy would suddenly be all right again," Erler told rbb-Inforadio on Wednesday.

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A rush to buy what foreign goods are left in the country

 

A return to the good old days of standing in line at stores with empty shelves.

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Honored Advisor

Re: Will more sanctions be applied to Russia?

 

 

Interesting piece from Paul Craig Roberts on this.

 

https://www.youtube.com/watch?v=SRrNs4mlHMA 

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Senior Advisor

Re: Will more sanctions be applied to Russia?

There is no doubt oil prices are a hammer on the Russian economy. However, there is NO DOUBT  the Saudis are in the drivers seat on dropping prices (as they always have been) and that they have a tremendous amount to gain by weakening the Russian/Iranian partnership over nuclear aspirations that threaten them. This is geopolitical/economic warfare at it's fiercest, and a rare confluence of coommon objectives between the Saudis and the West.

 

In a sense Saudi 'sanctions' compliment Western financial sanctions which are compounded by Russian 'payback' reducing mainly European imports that further reduce the options for Russian trade. The Saudis are killing two birds with one stone regarding oil competition (Russia included) and reducing Russian influence at a critical time.

 

NO doubt in my mind that the recent reversal of Russias official stance on Ukraine is an effort to lift the burden of sanctions that bite. But the Saudi 'sanctions' may not go away soon.

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Senior Advisor

What will be iinteresting to watch will be .....

...... whether there is progress on the negotiations with Iran. If Iran gives up the nuclear drive it will be with Russian encouragement and Iranian budget and economic stress from low oil prices.

 

The Saudi's aren't going to pass up this opportunity to put the squeeze on.

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Senior Advisor

Re: Will more sanctions be applied to Russia?

Interesting that Roberts is a darling of RT news (Russia Today). Although I think he has some relevant points he's all over the map in terms of his conclusions.

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Honored Advisor

Re: Will more sanctions be applied to Russia?

All summer it was speculated that Putin would put Europe`s dice in the vise over heating gas this winter...well it looks like that problem is "solved".  I guess, what may that mean when we get to spring as far as oil prices? 

 

Roberts said something interesting about `Russia just shouldn`t let the Ruble be traded against the Dollar reserve currency`..then it can`t be manipulated.  And we have been hearing that Russia and China have been stock piling gold, if they wanted to play hardball the opposite side of the "naked gold short" could be taken and delivery demanded of the physical...now that would be interesting watching the rats scurry...however I hear "casinos" don`t like card counters  Smiley Happy   Their house, their rules.

 

But, could that have something to do with taxpayers being now on the hook for risky derivatives?  I don`t know enough about it, maybe that wouldn`t apply.

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Senior Advisor

Re: Will more sanctions be applied to Russia?

Russia has no choice regarding the $ being the global standard as oil is priced in $. There is no other standard that Russia could take advantage of. No one would give gold for rubles. As a gold producer Russia could sell gold and get $US.

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Senior Advisor

Re: Will more sanctions be applied to Russia?

Must not be to concerned with their financial well being if their rushing in to buy flat screen TV's.

Times must be real tough.
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Honored Advisor

Re: Will more sanctions be applied to Russia?

Apple shut down online buying with Ruples too.

Gotta stay entertained
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