Demura new information about the ruble exchange rate. From Demura on sanctions and the ruble exchange rate: “Russia is following the path of Venezuela
Amid news of the United States introducingunprecedented sanctionsagainst the Russian Federation, which this time, among other things, will also affect the largest state-owned banks, we are seeing a rapid decline in the ruble exchange rate. Your opinion on what the consequences are for Russian economy, the sanctions announced last week will entail for the Putin government and for ordinary Russians, as well as what their purpose is, said the famous economist, financial and stock market analyst Stepan Demura. Writes
– Against the backdrop of news about tightening sanctions, the ruble is rapidly falling. This morning the dollar was already worth 69 rubles. 30 kopecks Do you think the decline will continue?
- It will continue. The first target there is 75, and then we’ll see.
– You say “we’ll see.” What does it mean? What, in your opinion, does the ruble exchange rate depend on?
– This has nothing to do with sanctions. Look at what's happening in emerging markets, with emerging market currencies, with debt. developing countries. Sanctions have a very indirect relationship to this.
– So you think that the reason for this drop is not the sanctions that were announced by the United States last week?
– It’s not me who thinks, the graphs show it. The market shows this. Sanctions are, you know, “the icing on the cake,” “the last hundred in the coffin of Putinism.”
– How far do you think the States are ready to go?
– The question is different: for how long. Or rather, it all depends on how soon our wonderful leaders return to reality from their strange cartoon world. Everything depends on them, not on the States. The States have everything ready to simply erase the economic, financial system Russia from the face of the earth. Everything depends on the Kremlin, not on the United States. They have been preparing for a long time, all the laws have been adopted, everything is legalized, so now everything depends on the adequacy of the Kremlin, on how adequate it is.
– Do you think that if the Kremlin does not change its policy, sanctions will still be introduced?
- To the fullest! And they’ll throw something else on top just to be sure.
- Yes, even without the “top”, such a good list turns out...
- No, it’s still possible there. In my opinion, what has already been adopted and what is currently under development is about 20-30 percent of what is possible.
– What do you mean when you say “thrown on top”? What will they “throw on”?
– Direct supply sanctions on everything that is imported. No food safety, no drug safety. Moreover, our government has already shown that it is ready to crush food with imported tractors and bulldozers, so, in principle, there are no moral restrictions in the West now. Even, for example, in the situation with Iran and North Korea, they never imposed sanctions on medicines and food. And then the Russian government itself imposed sanctions against itself, or more precisely, against its own people, on food. Therefore, there are no moral restrictions from the point of view of the United States and the West. Let's just say, we got ourselves into trouble. They can simply leave the country without diesel fuel, without gasoline, because the catalysts and all the equipment are mostly Western (meaning equipment that produces more or less normal gasoline and diesel). The Chinese will not supply anything, because they do not want to run into even greater sanctions. Perhaps they will not agree to a drug embargo; after all, they are civilized people, unlike us. A lot can be done: simply ban all banks and funds from working with any assets in Russia, again go through the oligarchs with a skating rink, so there is a lot that can be done here.
– And if all this is done, what awaits Russia then?
- And what do you think? Stone Age. And there is no need to bomb anything.
– Some experts believe that the new sanctions are aimed at encouraging the so-called. “Putin majority” to anti-government protests. What is your opinion on this matter?
– If earlier sanctions were mainly against our “dear” oligarchy, they (the States - ed.) probably hoped that one of them would make the right decision, but these people are incapable of anything other than cutting through the budget and state property, so now a new wave of sanctions resembles “carpet” bombings against “terpiloids”. Since Putin, our “Tsar-Father,” really has support among the population, it means they will have it based on the population. This is what they are now starting to do.
The population will be left, as Comrade Volodin has already announced, without pensions, without money for subsistence, without food, without medicine. Amazing!
– Regarding Volodin’s speech: Do you think that pensions will still be abolished?
– You can expect anything from our government, so such hints and in direct text are practically... The “Terpiloids” were told: “Guys, there is not enough money for you, not enough for yourself. Live as you want." That's all.
– When do you think pensions will be cancelled?
- I don't know. The question here is not “When?”, but “What?”. Plus or minus a year or two, here, in this situation, this does not matter.
– Yesterday Siluanov said that due to “inconsistent US policy” the Russian Ministry of Finance does not rule out abandoning the dollar in payments for oil supplies. How realistic is such a threat?
- Please refuse. But you see, now you get foreign currency for oil, and then you will receive tugriks, which no one except a couple of countries accepts. Oil (delivery contracts) have been traded in euros since 2006. You can say whatever you want, but this is from the series “They scared the hedgehog with their bare butt.”
– In general, what do you think: what do the States want to achieve with their sanctions? What is their purpose?
“They want to achieve compliance with the norms of international law, since in Crimea and Donbass Russia violated all norms of international law and the Budapest Memorandum, and made the States look like complete idiots, that they cannot fulfill the guarantees that they give. And in general it turns out that annexation of territories and redivision of borders is possible. This is a serious challenge to the existing world order and international law. The main goal of the States is to restore the status quo. And the second goal - Trump, at a press conference with Putin, said that the most important thing in life for him is the non-proliferation of nuclear weapons. And apparently, Comrade Kim Jong-un talked to Trump for a long time and, probably, he told him where they got their missiles and nuclear weapons. The same thing with Iran - where do they get missiles and missile technology for nuclear weapons. In general, everything here is somehow very sad for Putin’s Russia. Somehow they got involved with the wrong person; this is a very strong opponent, as practice shows.
– What do you think: given everything that is happening, is hyperinflation possible in Russia?
– It’s possible, of course. We are following the Venezuelan scenario, the Venezuelan scenario one to one.
– And the last question: How far will the ruble slide? What is your forecast?
– My forecast is old, it has not changed: the ruble has no bottom. Name any figure - we can do it within one and a half to two years. Old forecasts remain valid. The numbers were 97-125, so in a year and a half we will see, maybe even higher. I say again: the ruble has no bottom. For some reason, everyone forgets that the ruble should actually now have three more zeros. The same people who were in power then are still in power, they are doing the same thing, so the only thing that slightly delayed the final “death” of the ruble was the high oil prices that have existed since the mid-2000s. Now the fairy tale is over, everything returns to normal. Nothing good should be expected. Everything is lost: technology is lost, engineering and technical personnel are lost, production is lost - everything. We have nothing but oil. Well, gas and all sorts of minerals...
The well-known Russian trader, as well as financial analyst and commentator Stepan Demura, in an interview given to the Business Gazeta publication, discussed the situation with the new, unprecedentedly harsh sanctions imposed by the United States on Russia, and also made a disappointing forecast regarding the future of the ruble, the exchange rate of which is relative to the dollar may soon rise to 120 rubles.
Sanctions will deal a severe blow to the Russian economy
In his commentary, Demura paints a bleak outlook for the Russian economy in light of the new American stations: as we know, many in Russia harbor hopes that, like the previous ones, they will have only a limited effect. Demura is in a hurry to dispel these hopes. According to him, the new package of sanctions seriously strengthens American positions in relation to Russia, which, already to a large extent, was cut off from global financial markets after 2104. New sanctions bring this situation to its logical conclusion, therefore, after Trump signs these sanctions, “of which no one doubts,” this will first kill the ruble: investors will no longer be able to play carry trade with Russian sovereign obligations and corporate securities, “ thus, these sanctions will simply destroy the Russian financial market,” says Demura. Secondly, at Russian treasury Serious problems will begin due to a decrease in gas and oil revenues. The expert repeats that the new sanctions are very serious, and only very stupid and not far-sighted people can laugh at them. And, worst of all, the sanctions regime against Russia has been established seriously and for a long time - not one of the presidents, not Trump himself, nor any next president, according to the approved text of the new law, has the right, without the consent of the legislative branch, to cancel or change by his own decision anti-Russian sanctions. “They have now become part of American law, sanctions after which can only be lifted by Congress.” In addition, in the end, things may come to the point that the West will refuse to lend to Russia at all, which will hit the ruble very hard, especially taking into account the upcoming payments on the debts of Gazprom Rosneft and other state corporations. According to the expert, in a normal situation, debts are refinanced - that is, new loans are taken out to pay off old debts. If the West decides to stop lending to borrowers from Russia altogether, then in order to pay off debts they will have to give up foreign exchange reserves, which, as you understand, will hit the ruble very hard.
As for the consequences for the Russian economy as a whole, they will be truly destructive. Due to a lack of funds in the Russian budget, problems have already arisen with financing government projects; access to advanced technologies will be even more difficult. Corporate defaults can be expected. Our “favorite” oligarchs already have liabilities exceeding their assets, and new sanctions only worsen this situation. Demura also commented on official statistics and reports from the government and the Central Bank, according to which the macroeconomic situation in the country looks quite stable. According to him, all such forecasts are of little value. Usually everything happens exactly the opposite, says Demura, and continues: “if the authorities assure you that everything is fine, then expect another financial and economic collapse.” According to Demura, this collapse is really just around the corner, and the first victim of this collapse will be the ruble. Moreover, oddly enough, the upcoming collapse of the ruble is not directly related to anti-Russian sanctions: the ruble will collapse in the near future on its own. First of all, this is due current situation in global financial markets, mainly in the debt markets of developing countries, from which there is a flight of investors, which may soon become panicky. “We should expect an imminent decline in markets and a flight from risky assets, which include bonds of developing countries, including Russia and their companies. At one time, speculators entered into these assets with huge “leverage” (purchase valuable papers on borrowed funds brokers - approx. ed.), says a famous trader.
However, we can soon expect the crowd principle to come into play when several major players rush to dump ruble assets, considering that the risks are already too great, others will rush to follow this example, and I will save myself in the dollar.
Demura predicts a collapse in the ruble exchange rate in the coming weeks
The collapse of the ruble will begin this August, says Demura, who does not agree with the majority opinion. Stepan Demura is confident that we should expect figures in 97 and 125 rub. per dollar. This could happen either before the end of this year or at the beginning of the next. Moreover, the situation is foreign exchange market will not be connected in any way with the presidential elections since the Russian authorities are simply not able to influence it. The government has no available funds, and the financial market in Russia is completely at the mercy of Western money when it comes to the debt and foreign exchange markets. At the same time, the notorious “airbag”, or Russian gold reserves, which, as we know, exceed $412 billion, cannot save the ruble from collapse. Because, in fact, reserve fund Russia has already spent almost completely, and the fund for future generations is almost half. Because the funds of this fund were “unclear where they were invested.” That is, in fact, the country’s gold and foreign exchange reserves are not that large. Especially in comparison with the total external debt of state and corporate. According to Demura, everything that the Central Bank has available today will not be enough even to pay the majority of the Russian debts— The Central Bank has liquid reserves significantly less than external debt. “There is simply no money for the stability of the ruble,” Demura summarizes, continuing that this is the real reason for the introduction of the notorious floating exchange rate. The ruble could collapse by half at any moment.
Europe will not help the Kremlin
Stepan Demura is confident that Russia’s hopes for the European Union to resist American sanctions are groundless. According to the analyst, the fact is that the European Union, specifically in order to reduce the share of Russian oil and gas in its market, has already made a political decision regarding the diversification of energy suppliers, “for this we must say a big thank you to Vladimir Putin and his policies.” Ultimately, this will lead to the fact that the export revenues of Russian oil and gas exporters will be seriously reduced, and this, naturally, will lead to the fact that the income Russian budget will be reduced even more. There is no point in seeing any special malicious intent in the Americans’ desire. “As they say in business, it’s nothing personal—they just want to take advantage of the current situation,” the analyst is confident.
Shale gas supplies from the USA could ruin Gazprom
Stepan Demura also ridiculed the assertion of a number of officials and experts that American liquefied gas, given the cost of transporting it to consumers in Europe, will be much more expensive than Russian gas, which, as is known, comes to Europe via pipeline. A well-known trader suggests leaving these statements “on the conscience” of those experts and officials who make such statements. Since, in fact, already now the cost of American gas delivered to Europe by tanker and liquefied (turned back into a gaseous state) does not exceed 100 US dollars per 1000 cubic meters. At the same time, Gazprom cannot sell gas at a price below $150 per thousand cubic meters, without the work being a loss. “Look at what could be disadvantageous for Europe in reorienting to liquefied gas supplied from the USA or Qatar,” Demura sneers. Europe will never object to the supply of liquefied gas from the United States, if only because it leads to lower prices for consumers and diversifies the market, the famous trader continues, and recalls that the so-called experts a few years ago “beat themselves in the chest” and argued that the shale revolution in the United States would never cause a reduction in energy prices. Moreover, Demura emphasized that the shale revolution in the United States continues. There has been an increase in the number of gas hubs designed for the export of liquefied gas. In addition, development of a new very large deposit shale oil, about which Texas oilmen themselves say that they are ready to give this gas for free, if they are ready to sign contracts for oil supplies. This proves that natural gas, as an energy carrier, is becoming extremely cheap in the context of the shale revolution.
Speaking with journalists about American sanctions, Demura also touched upon the topic that is currently being discussed in the Russian media, regarding the fact that the United States intends to hinder the construction of the Nord Stream 2 gas pipeline; he doubted the need to build a new gas pipeline, since Nord Stream 1" is underloaded. He suggested that the real reason that Russian authorities they want to build this gas pipeline are corrupt. “I think it’s all about construction contracts,” says the expert. In his opinion, contracts of this type are the most tasty morsels of government orders, not counting kickbacks. This explains all the excitement around Nord Stream, Turkish Stream, or the Power of Siberia gas pipeline. “The guys are digging the ground, and the infrastructure is more expensive than gold,” says Demura.
In addition, the expert recalled that many European companies find themselves in a difficult situation after Trump signs the new sanctions law. This will call into question such Russian projects, like the Turkish Stream, since the pipes of this gas pipeline along the bottom of the Black Sea were to be laid by an Italian company, which may now fall under sanctions. But don’t be upset, because no one needs the Turkish Stream except Gazprom, Demura is sure. He explains this by the fact that work has already begun on laying a gas pipeline to Turkey from the Israeli giant Leviathan field, which is located in the Mediterranean Sea. It will be ready in 2018. Thus, Türkiye is turning into the largest hub for the supply of Middle Eastern gas to the European Union. This situation will further worsen Russia's position in the European market.
Material prepared by Alexandra Melnik
Economics / Politics / Society 27-Aug, 08:149 14 745 43
New sanctions that will be introduced on August 27 will seriously affect the exchange rate Russian currency. The dollar exchange rate in Russia could jump to 70-75 rubles, they believe.
Stepan Demura believes that the dollar exchange rate will be in the range of 75-80 rubles, other analysts are more cautious. The second stage of US sanctions could collapse the ruble to 100-125 per US dollar.
“The actions of the Central Bank and the ruble exchange rate are things that are very, very indirectly connected. Don’t think that since the Central Bank won’t do something until the end of September, everything will begin to strengthen. Understand that the Central Bank is a very small player in the global financial market“It doesn’t have resources, it doesn’t have currency, it doesn’t have professionals.”- Demura noted, therefore, according to him, the movements of the Central Bank of the Russian Federation will have little effect on the fall of the ruble.
“The President of the United States, the State Department and the Ministry of Finance have some room for maneuver, depending on the behavior of the Kremlin.
If he does not break away from reality and demonstrates common sense, which means that something will be postponed until later or will not be used at all. But if everything remains as it is, then they will completely screw you up.
Neither the government nor the Central Bank can do anything about this. They lack the resources and personnel to develop coherent economic and financial policies.” - noted the analyst.
He also advised to prepare for the worst: - “The movie starts now. The situation will be like in 2008 – early 2009, during the global financial crisis. But it won’t go away quickly and won’t end. And it will only get worse.”
Other analysts are similarly pessimistic. And despite the fact that the ruble is still actively supported by the government, with high oil, everything could turn out badly.