Ambrose Evan’s Pritchard (loved by some, loathed by others) is at it again:
- Russia is at increasing risk of a full-blown financial crisis as the West tightens sanctions
- Russia’s private companies have been shut out of global capital markets almost entirely since the crisis erupted
- This has caused a serious credit crunch, and raised concerns that firms may not be able to refinance debt without Russian state support
- “No Eurobonds have been rolled over for six weeks” said an official from a major Russian bank. “Companies have to roll over $10bn a month and nothing is moving. The markets have been remarkably relaxed about this, given how dangerous it is. Russia’s greatest vulnerability is the bond market,” he said.
- Lars Christensen from Danske Bank said Russia’s economy is already in recession & may contract further if there are fresh sanctions
- Risks a repeat of events in 2008 when capital flight set off serial defaults and a banking crisis: “There is a credit squeeze under way and a significant shock to the cost of capital. This could prove to be as bad as the Lehman crisis for Russia. Capital outflows have already been $65bn so far this year, compared to $135bn in late 2008,” he said.
- “Markets seem to be betting that the Kremlin can’t let things get worse in Ukraine because it would be insane, yet it is happening it anyway. We think there will be a much more serious correction in the Russian markets,” he said.
Russia’s bond market is Achilles Heel as showdown with West escalates
Wait till machine gun guy hears about this. Then he’ll get really upset.
