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Last Updated: Oct 8, 2008 - 12:34:40 PM |
Instead, I see a number
of surprising moves by the government. For example, the authorities
permitted the Central Bank to extend loans to Russian banks without
requiring collateral. How is that possible? Of the 500 banks in Moscow,
I suppose 400 launder their money -- and now they can get credit
without collateral as well.
Are things really all that bad? After all, it is natural for the stock
market to take a dive with so many margin calls coming in.
A few Russian companies are extremely overburdened with debt. This
pertains primarily to Oleg Deripaska's United Company RusAl and MTS,
Russia's largest cellular provider. RusAl shares have been leveraged
and re-leveraged through the roof. That's how it goes; when the margin
call sounds, the shares have to be sold.
What's so bad about that? Nothing really. RusAl's shares will lose
value, and somebody will buy them for a song. Fine. Many Russian
companies have absolutely no problem with liquidity. Billionaire
Mikhail Prokhorov has a ton of cash. The Magnitogorsk Iron & Steel
Works also has a heap of currency because the company's accountants
have probably never heard the word "derivatives." Surgutneftegaz has
more cash than it can count.
Yevgeny Chichvarkin, former co-owner of the successful but
debt-burdened Yevroset chain, recently sold his company for about $500
million in cash. Stephen Jennings of Renaissance Group also recently
sold half his company for $500 million -- just a year after rejecting a
$2 billion buyout bid from VTB.
Despite all of this, nothing has changed for consumers. Yevroset has
not stopped selling cellular phones, and Renaissance Capital continues
to provide its financial services. Why should Deripaska's fate -- or
the fate of any other businessperson deep in debt -- differ from
Chichvarkin's fate?
The government's intervention is far from risk-free. It is behaving as
if its gold and currency reserves were unlimited. They are immense, but
they are not unlimited.
Russia has an official who has always been opposed to senseless
expenditures -- Finance Minister Alexei Kudrin. However, aside from
him, Russia also has the KIT-Finance investment bank that got burned on
the mortgage credit market. Kudrin took great pains to turn that bank
around, and in the end he saved it. It's clear that after the Kremlin
brought KIT-Finance back from the edge, Kudrin cannot veto efforts by
other top officials to bail out companies with which they have personal
ties. That would be perceived as playing unfairly.
Russia has another official who knows what to do with the state debt:
Kudrin's former deputy finance minister, Sergei Storchak.
Unfortunately, Storchak has been jailed on charges of fraud. Maybe in
the state's hour of need they will let him out.
Russia's economy works like this: Russia sells oil and gas and uses the
proceeds to buy everything else -- from Mercedes cars to cement. For
now, the economic crisis has affected only the elite by redistributing
their business shares.
Naturally, everything I've said here makes sense only as long as the
U.S. mortgage meltdown does not drive oil prices down too far. If that
happens, it will become clear that the world is, in fact, unipolar. It
will prove that the United States is a superpower -- not because it
sends tanks and troops abroad, but because its financial problems will
have triggered a global crisis.
Source:Ocnus.net 2008
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