Sanctions payback: Russia wants firms to default on western loans


Sanctions payback: Russia wants firms to default on western loans

[color-box color=”green”]De-Dollarization: Russia Wants Firms To Default On Western Loans, Ban Firms From Using FX/FX Loans [/color-box]

Let’s start with some classic Russian politics. Finance Minister Anton Siluanov is drawing up Russia’s economic strategy for 2016, including the government budget. Siluanov – essentially a liberal, in favor of foreign investment – will present his proposals to the Kremlin by the end of this month. So far, nothing spectacular. But then, a few days ago, Kommersant leaked that Russia’s Security Council asked presidential aide Sergei Glazyev to come up with a separate economic strategy, to be presented to the council this week. This is not exactly a novelty, as the Russian Security Council in the past has asked small strategy groups for their economic assessment.

The Security Council is led by Nikolai Patrushev, the former head of the Federal Security Service. He and Siluanov are not exactly on the same wavelength. And here’s where the plot thickens. Glazyev, a brilliant economist, is a Russian nationalist – sanctioned personally by the US.

Glazyev is arguably going no holds barred. He is in favor of barring Russian companies from using foreign currency (which makes sense); taxing the conversion of rubles to foreign currencies (same); banning foreign loans to Russian firms (depending if they are not in US dollars or euro); and – the smoking gun – requiring Russian companies that have Western loans to default. Predictably, some sectors of US ‘Think Tankland’ went bonkers, stating with utmost certainty that “the Russian energy sector would not be able to find much financing without connections to the West.” Nonsense. Russian firms would easily find financing from Chinese, Japanese or South Korean sources.

Whatever measure of attention Glazyev will get inside the Kremlin, the whole episode already means that Moscow harbors no illusions in the near future regarding the exceptionalists (one just has to look at the presidential candidates, from ‘El Trumpissimo’ to ‘The Hillarator’); as Russian Deputy Foreign Minister Sergei Ryabkov recently put it, “[we] should expect toughening of the sanctions pressure.”  Once thing though is absolutely certain; Moscow won’t bend over backwards to “pacify” Washington.  Full Story

[color-box color=”blue”]In theory, Russia could do this with very little fallout as the West is no longer it any money. Defaulting on $700 billion will more than make for the money they have lost due to lower oil prices and sanctions the West applied on them. Putin is said to be giving serious consideration to this idea, and if Russia puts this strategy into play, Europe could really suffer.  Russia can easily get financing from Asia and Europe will still need to buy oil and gas from Russia so the net result will be a win for Russia.  The U.S has pushed Russia and China into each other’s arms and together they are invincible. [/color-box]

Game Plan 

Make sure you have some gold and silver bullion on hand. Don’t jump into Gold stocks yet and use strong pullbacks to open positions in market leaders and or blue chip companies.


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