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Russia's financial and political situation is pretty much the same as it was last time I wrote.
One thing that hasn't been widely publicized: guess who's back in town? Yep: Anatoly Chubais is once again the man doing the talking with Western investors. As far as I know, he doesn't have any permanent position with the government, nor is he expected to, but he's Russia's special envoy to the financial community. I think they're still banking on the Chubais name and the Chubais image to promote confidence in the financial community. Meanwhile, the government has exchanged much of its short-term debt for longer-term dollar-denominated debt. In other words, they've gotten an extension of time to pay, though they'll have to pay it back in dollars. This is not an unmixed blessing: I suspect the dollar denomination was insisted upon because the US dollar is a much harder currency (i.e., like Visa, it's everywhere you want to be) than the ruble. Since the lenders are facing a longer period before they get their money, they seem to be insisting on a more reliable currency once they get it. This doesn't augur well for what they expect will happen in Russia in the meantime. Even if conditions don't get so bad (like, say, massive rioting, or a *cough* *cough* hostile takeover in the Kremlin) that they won't want to spend or invest in Russia, they may fear accelerating inflation, the danger of which we've discussed before. I didn't pick those examples out of a hat. They seem to be serious possibilities. Dear Sergei Kiriyenko: We know Russia is really deeply in debt. Indeed, while only a short month ago it was "only" 30% of Russia's gross domestic product, now it's over 44% and the percentage is rising. And we also know it's being paid off on terms only a Mafia don could love: those short-term treasury bills that just got restructured were on a 100% annual rate. That's bad news for more reasons than one. And as you recently put it, "The financial market has practically ceased to exist." |
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