Furious Russia, Downgraded To Just Above Junk By S&P, Proposes "Scorched Earth" Retalia... - 0 views
www.zerohedge.com/...scorched-earth-retaliation-aga
war & peace sanctions Russia U.S.-foreign-policy monetary-policy BRICS
shared by Paul Merrell on 26 Apr 14
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a few hours ago that joke of a rating agency, Standard & Poor's, which also earlier announced it was "affirming" France at an AA rating making it very clear it will no longer accept being sued for telling the truth and downgrading sovereigns or otherwise have its offices abroad raided, not only upgraded Cyprus from B- to B (please deposits your funds in Cyprus banks now: they are safe, S&P promises), but - far more importantly - delivered a political message to the Kremlin, and downgraded Russia from BBB to BBB-, one short notch away from junk status. This was the first downgrade of Russia by S&P since December 2008.
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Russia's response was prompt. First, in retaliation to the downgrade, Russian economy minister Alexei Ulyukaev said S&P’s downgrade of Russia’s rating was expected by investors, won’t significantly change their behavior, adding the obvious that the decision to cut Russia’s rating was partly political, partly based on economic situation. In other words, entirely symbolic - it is not as if Russia has access to bond markets anyway, plus as we wrote earlier this week in "Why Putin Is Smiling At The Bond Market's Blockade Of Russia", it is not as if it needs them. But far more importantly, and ahead of yet another round of western sanctions which appears imminent unless Obama is to look even more powerless than he currently is (granted, a difficult achievement), Russian presidential adviser Sergei Glazyev proposed plan of 15 measures to protect country’s economy if sanctions applied, Vedomosti newspaper reports, citing Glazyev’s letter to Finance Ministry. According to Vedomosti as Bloomberg reported, Glazyev proposed:
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Russia should withdraw all assets, accounts in dollars, euros from NATO countries to neutral ones Russia should start selling NATO member sovereign bonds before Russia’s foreign-currency accounts are frozen Central bank should reduce dollar assets, sell sovereign bonds of countries that support sanctions Russia should limit commercial banks’ FX assets to prevent speculation on ruble, capital outflows Central bank should increase money supply so that state cos., banks may refinance foreign loans Russia should use national currencies in trade with customs Union members, other non-dollar, non-euro partners In other words, a full-blown scorched earth campaign by Russia.
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Granted, Russian holdings of US Treasurys are not that substantial (and could be monetized entirely in three months of POMO by the Fed), and western financial linkages to Russia, aside from trade routes, are not life-threatening, but if Russia were to take the baton, and other BRIC countries, already furious by the recent US decision to not boost their IMF status, follow suit, then Obama's life is about to become a living nightmare. Especially, if that most important BRIC member - China - does any of the many things it can do to indicate if, in this brand new Cold War, it is with or against the US... Finally, those curious what are the linkages between the west and Russia are, review our recent post on the matter: All You Need To Know About Russia, In Charts.