300K barrels per day = 109mn barrels a year. At a 9% discount rate - remember China is investing in 3% treasuries today - this would suggest a $25 oil price assumption. At a 15% discount rate - to put Russia geopolitical risk etc etc - we get $37 oil price assumption. Clearly Russia is reconciled to the new reality.
Russia in 2008 is different from Russia in 1998. It still has ton of forex reserves to buy time till the end of this year, where it could do deals like this to shore its forex. Ruble has been a one way bet in the last two months, but Russia is far from collapse compared to other East European countries. What Putin needs to do is to convince Russians not to convert their rubles into dollars en masse, because then we get a self fulfilling prophecy.
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Yes, Russia is different. But the problem is the following:
1. It is a hydro-carbon based economy and there has been a huge negative terms-of-trade shock. There is an economic argument for resetting the real effective exchange rate. I am sure there are FEER models out there for Russia which will tell us the broad range of adjustment required. So ruble weakness is not pure speculation. The only question is how much.
2. The world is in a very serious recession. Everyone is cutting rates and Bank Rosi is hiking to increase the cost of carry for ruble shorts. That is not sustainable.
The economy will weaken significantly with obvious consequences: revenue shortfall on top of the one resulting from falling oil and unemployment shooting up with serious political consequences.
The market knows that hikes in times of economic distress will not succeed.
Unless oil recovers or capital controls are imposed, I am not sure how the situation will stabilize.
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