17 Dec 2014
The economic crisis Russia is facing is severe - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that the economic crisis Russia is facing is severe. However, talk of an imminent Russian default is misplaced.
Key Quotes:
"Russia appears to have $380-$400 bln of reserves".
"Not all of these are liquid. Many in the blogosphere heralded Russia’s purchases of gold as a way to diversify away from fiat currencies. Russia has more than 10% of its reserves in gold and it is cumbersome to use to intervene or to offset a currency mismatch. Of course, it earns no yield either. Another $170 bln of reserves are part of the two sovereign wealth funds Russia has established. These investments might not be particularly liquid either".
"According to the central bank's figures, Russia has a total of about $54 bln of foreign currency bonds coming due in H1 15. Most of this (~$40.5 bln) is bank debt. There is about $13 bln of foreign currency denominated corporate bonds maturing and about $500 mln of hard currency sovereign debt maturing. For all of next year, Russia has an estimated $102 bln external debt maturing. And another $100 bln in 2016".
"In the mean time, Russian oil companies are earning dollars (mostly) from its foreign sales. Although the oil and gas sales earn fewer dollars, those few dollars still turn into more roubles. Indeed, Russian companies with substantial foreign sales are in a relatively good position. This is to say that Russia's debt servicing ability is far from exhausted".
Key Quotes:
"Russia appears to have $380-$400 bln of reserves".
"Not all of these are liquid. Many in the blogosphere heralded Russia’s purchases of gold as a way to diversify away from fiat currencies. Russia has more than 10% of its reserves in gold and it is cumbersome to use to intervene or to offset a currency mismatch. Of course, it earns no yield either. Another $170 bln of reserves are part of the two sovereign wealth funds Russia has established. These investments might not be particularly liquid either".
"According to the central bank's figures, Russia has a total of about $54 bln of foreign currency bonds coming due in H1 15. Most of this (~$40.5 bln) is bank debt. There is about $13 bln of foreign currency denominated corporate bonds maturing and about $500 mln of hard currency sovereign debt maturing. For all of next year, Russia has an estimated $102 bln external debt maturing. And another $100 bln in 2016".
"In the mean time, Russian oil companies are earning dollars (mostly) from its foreign sales. Although the oil and gas sales earn fewer dollars, those few dollars still turn into more roubles. Indeed, Russian companies with substantial foreign sales are in a relatively good position. This is to say that Russia's debt servicing ability is far from exhausted".