Stepan Demura: If Trump sign the law on new sanctions, it will kill the ruble
Known trader predicts the fall of the Russian currency in August and rapid replacement of Russian gas to Europe, US
Today, Russia has announced the first steps in response to the received on the eve of the US Congress a package of anti-Russian sanctions. Meanwhile their introduction into effect appears increasingly inevitable. About what it threatens Russia's economy, the budget and the financial markets, in an interview with "Business Online» said a well-known financial analyst Stepan Demura. According to him, it can cause serious damage to the ban on the purchase of Russian securities - domestic market completely at the mercy of the "hot" capital from the West.
"Sanctions, in fact, to impose a ban on any INVESTMENTS IN RUSSIAN OIL AND GAS"
- The new package of anti-Russian sanctions adopted by the US House of Representatives, the emphasis is on building opposition to Russian export pipelines, first of all, "North Stream - 2". In your opinion, it will not cause a response from the European Union, which is interested in the supply of our gas?
- No, of course, no European resistance to the sanctions package will not cause. The fact that the European Union some time ago took the political decision to diversify energy supply sources. In essence, this means a reduction in the share of Russian oil and gas to the European market and an increase in the share of liquefied natural gas, including shale oil from the US and from other supplier countries. The EU has long harness, but quickly go. And their decision in principle will lead to an overall reduction in revenue from the export of Russian energy resources and, consequently, a drop in revenues of the Russian budget. A new US sanctions only reflect the desire of Americans to take advantage of this changed reality.
- But Russian officials and some experts say that the American liquefied natural gas, taking into account the cost of transportation and liquefaction much more expensive Russian pipeline. It turns out that Europe arm-twisting, forcing to buy more expensive energy instead of cheap Russian.
- Nothing like that does not work. Let these arguments remain on the conscience of Russian officials and so-called experts. There are totally transparent price of spot gas market. So now American gas after delivery to Europe and liquefaction (ie conversion back into a gaseous state) costs about $ 100 per thousand cubic meters. While for the "Gazprom" price bottom, below which sell gas only at a loss, it is somewhere in the $ 150 per thousand "cubes". That look, that there may be disadvantageous for Europe in terms of reorientation for the supply of liquefied natural gas from the United States and Qatar. Europe will not be any objection to the US liquefied natural gas. For Europeans, the increase of its supply - is only a plus, as supplies from overseas to diversify European gas market and lead to a decline in its prices. As for the opinion of our so-called experts, that these same people were saying that the American gas never come to the European market, and even earlier about the fact that the shale revolution in North America does not lead to a reduction in oil and gas prices. You should not rely on such obviously biased estimates because life has already repeatedly demonstrated their falsity.
- shale gas revolution in America is going on?
- Of course. Including a growing number of hubs, designed for export of liquefied natural gas. And in Texas, beginning to develop a new, very large deposit of oil shale. In this field so much associated gas that Texan oilmen say: "We will be giving away free gas is subject to the signing of contracts on the supply of oil." This is an indication that energy source such as natural gas, oil shale in a revolution becomes very cheap.
- You do not agree with the view that new anti-Russian sanctions are intended to give US suppliers of gas to the Russian advantage in the European market?
- Sanctions are not to blame. Simply products of "Gazprom" ceases to be competitive on the international market. Our monopolist low cost gas production (about 25 - 30 dollars per thousand "cubes"), but it's all done on the old infrastructure, including export infrastructure. Creating a new and maintenance of the current sharply increases the cost of gas for consumers. In the end, as I said, to break even for the supply of "Gazprom" in Europe is located at 150 - $ 160 for 1 thousand cubic meters. Americans easily interrupt the price of its more low.
- The law on the new US sanctions explicitly states that the United States will oppose the construction of the "Nord Stream - 2", and impose sanctions for all companies and individuals who are at the same time invest in the construction of any Russian pipeline of $ 1 million or 5 million for of the year. This could complicate the prospects for the construction of new export pipelines from Russia?
- First of all we must understand that we have these new pipes are not very much and need. Why worry about the fate of "Nord Stream - 2", when the "Nord Stream - 1" stands underutilized? Why are we interested in building is essentially unnecessary new capacities on pumping gas to the West? I think the whole thing in a contract for construction. Excavation and laying of infrastructure - this is the most tidbits of the state order, not to mention the kickbacks. Hence all the hype around the "Nord Stream - 2", "Turkish stream" or "Force Siberia." Guys dig the ground infrastructure turns out more expensive than gold.
- By the way, the "Turkish Stream". There are in fact a pipe under the Black Sea, in my opinion, the Italian technology company should be laid. Once Donald Trump will sign a new sanctions law, the company immediately fall under US sanctions that prohibit anyone, including technical, facilitating the construction of Russian export pipelines. This is a big problem for our gas industry and the oil industry?
- Yes, of course, many European companies find themselves in a difficult situation, not only those who help us to lay export pipelines. in fact the sanctions imposed ban on any investment in the Russian oil and gas sector. But this is not important. "Turkish Stream", but "Gazprom", no one needs. The fact is that the Israelis have already started laying its pipeline to Turkey on the Israeli side of the giant gas field "Leviathan" in the Mediterranean Sea. So Turkey is anyone turns into a hub for supply of gas to Europe in the Middle East. Russia's "Stream" for it is not such a fundamental importance. Israel gas pipeline to Turkey will be ready next year.
"The CIA and the FBI now properly gives the president the US report on the Russian oligarchs"
- The Russian government and expert circles there is a perception that the US sanctions, including the new, even will cause some economic damage, but very limited. As far as another piece of anti-Russian actions, in your opinion, is serious and whether it is able to trigger a new economic crisis in Russia?
- Yes, we often talk about the ridiculous penalties. However, we are seeing as the sanctions are becoming more ridiculous, but for some reason do not want to laugh especially. In fact, a new package of sanctions greatly tightens the US position with regard to Russia. And so we were largely cut off from the world financial markets. New sanctions make it final cutting. If Trump sign the law on new sanctions (what the question really is not necessary), it is, first of all, kill the ruble, because investors will not be able to conduct operations carry trade (borrowing in a stable currency with low interest rates and invest in a volatile currency high rates - Ed) c and Russian government and corporate securities... Our financial market these restrictive measures by the United States simply destroyed. Second, begin serious problems with the completion of the Russian treasury at the expense of oil and gas revenues. Therefore, I repeat: the new US sanctions - this is very serious and laugh just stupid and short-sighted people can over them.
In addition, to make matters worse for the Russian economy, now the sanctions against Russia went really long. Neither Trump nor any other US president, according to the text of the new law, will not his decision to cancel the anti-Russian sanctions. The sanctions are now codified. It is the law, not the edicts of the US President or the decision of the US Treasury. Now, only Congress can lift sanctions.
- The text of the new sanctions law really has instructed the US Treasury to consider the consequences of a possible ban on the purchase of American investors Russian government and corporate bonds. This is what it turns out that it can reach the general failure of the West to give Russia's debt?
- That's how it turns out. Possible ban on the purchase of Russian debt and damage the American west as a whole the banking system will not cause, because the amount of net public debt at the Russian funny. However, in conjunction with the corporate debt exceeds $ 500 billion, but by world standards it is quite a bit. For the West, the damage from the Russian ban lending and our issuers will not be, but the ruble is going to hit very hard, considering the forthcoming payments on debts of "Rosneft", "Gazprom" and the other state-controlled corporations. Usually refinanced debt, ie the payment of old debts come from new loans. If the West in general will refuse to lend to us, will have to give the payment of the debt accumulated foreign exchange reserves, which hit (and badly damage) on the ruble.
- The sanctions list includes a limited number of Russian banks and companies, even the largest. Able to borrow in the West will have smaller banks, which "share" with fell under the sanctions Sberbank, VTB, "Rosneft" and others. This solution to the problem?
- It depends on the Americans. Today, certain Russian companies and banks are not under sanctions, and tomorrow - already under sanctions.
- It seems we have a few who read the text of the controversial bill itself. There's generally a lot of interesting and at the same time little-known details?
- they are missing. Get at least the situation that the US intelligence agencies - both financial and, for example, the CIA, the FBI, Department of Homeland Security - now have to provide periodically to the US president reports on our so-called oligarchs, who have assets, and actually living outside Russia as well as their relatives and of all the people involved in their financial schemes. And most importantly, the US intelligence agencies are required to report on the origin of the capital of these immigrants from Russia. And since these sources of capital, in terms of American law, is very, very uncertain, our oligarchs will be very hard to live in the West and working with Western banks. They will have all the forces (and costly) to avoid a prison sentence abroad, as the experience of a fugitive Ukrainian oligarch Dmitry Firtash. He was arrested in Austria on request FBI and was released only under unprecedented in European jurisprudence the pledge of 125 million euros. So fun to be in the near future. A new portion of US sanctions - this is a very serious step with far-reaching consequences.
"FIRST GOAL attack on the ruble - IT 97 and 125 rubles to the dollar"
- What are the consequences of the entry into force of new US sanctions will have on the whole for the Russian economy?
- There will be a problem of being unable to fund a number of government programs because of lack of funds in the budget of Russia. It will be even more limited access to technology. It is also possible corporate defaults. Our "favorite" of the oligarchs, and so the liabilities exceed the assets, and the move of the US Congress only exacerbates the situation.
- So far, according to the official statistics and reports of the Government and the Central Bank, the macroeconomic situation in Russia looks quite stable. It seems to be renewed GDP growth, the ruble is stable for quite some time, inflation has dropped to record lows in the entire post-Soviet history ...
- Just look at the predictions the past few years our official economists and monetary authorities to understand that these predictions are worth little. Usually everything happens exactly the opposite compared to official estimates and the economic forecasts. At the household level can give advice if the authorities say that all is well, then, once the financial and economic collapse is not far away.
- What, in your opinion, would be a possible scenario of the crisis caused by the new anti-Russian sanctions?
- The ruble will fall first. However, the sanctions it has a direct relationship. The Russian currency has to fall off in the short term and without the tightening of anti-Russian sanctions.
- What is the main reason for a possible new wave of the weakening of the ruble?
- This is dictated by the situation on world financial markets, mainly in the developing country debt market. Although, of course, the coming collapse of the ruble, many we want to be written off entirely on sanctions on the evil Uncle Sam on Russophobia.
- What's the objective, market-based reasons for the attack on the ruble?
- The market situation is negative for the Russian currency. Soon will start falling markets and the flight from risky assets, which include bonds of developing countries and their companies. Speculators have entered into these risky assets with a huge "shoulder" (the purchase of securities with borrowed money brokers - Ed.).. Soon the work principle of the crowd, where several players will start to drop ruble assets, deciding that the risk was too great, and the rest will follow suit. Despite the fact that the dollar is in words - the most hated asset, speculators will run it into dollars.
- And when to expect the beginning of the flight from the ruble-denominated assets?
- I think the collapse of the ruble will begin in August.
- So soon? And for a bottom, in your opinion, can sink the ruble, say, before the end of this year?
- The first goal of the attacks of speculators on the ruble - is 97 and 125 rubles per dollar. When speculators strikes this purpose - this year or next, - hard to say. The exact time is not so important, the main thing that the target of the ruble figures very clearly designated.
- Russian presidential election in March next year are supposed to delay the fall of the ruble. Authorities are unlikely to allow the collapse of the national currency to the re-election Vladimira Putina. Do not agree?
- No, with the presidential elections, the situation is not related to the foreign exchange market. And the influence it the Russian authorities have by and large do not. CB does not have spare cash, our financial market is completely dominated by a "hot" Western capital. Basically we are talking about the bond and currency markets. Analysts, of course, will say that before the election the ruble hold, or, on the contrary, to speculate on why the government has not kept the ruble from collapse before the election. But all this has nothing to do with the real market processes.
- According to official reports, Russia's international reserves exceed $ 412 billion. Is such a solid airbags will not be enough to keep the ruble from falling?
- These reserves include two government fund. Reserve have already spent almost entirely, and future generations of the Fund by 40 percent somewhere already razderbanit that is invested. Therefore, foreign exchange reserves are no longer quite so big. especially if we compare the remains of these reserves to total external debt - corporate and governmental. Everything that now has the Central Bank, if you have to deduct the import payment, which is required in the country 3 - 6 months, is not enough to pay even greater part of Russian debt. Liquid reserves Now the CB 2 - 2.5 times less than the total external debt. CB unable to ensure long-term stability Ruble. It is elementary not have the money. Hence the introduction of a floating exchange rate, which in practice means that at any time the ruble could crash twice.
- The outflow of capital, intensified in the second quarter - is the first signs of future shocks?
- The outflow of capital - something hard to track. There it is necessary to understand in detail, whether there was a payment of large sums of foreign debt or real capital flight. The overall figures, which are issued by officially meaningless. Here the whole point in detail.
"Since March 2018, it will collapse in oil prices up to 12 or even 9 dollars per barrel"
- C Ruble clear. A new US sanctions affect the price of oil can?
- No, the sanctions on the oil market is not affected. Even if the big mess in the Middle East - military action in Syria, Iraq and even add to this diplomatic war with Qatar, the Saudis - had no effect on the price of oil, what can we say about the new anti-Russian sanctions. They is not listed as an outright ban on imports of Russian energy, which would probably keep oil quotations from the new fall.
- Why is it that even the military-political crisis does not affect the energy market in the main oil and gas region of the world?
- Note that all these events affected the oil market only when the barrel price rose. It grew out of the actions of speculators, primarily due to an overabundance of dollar liquidity, due to the "quantitative easing", ie, pumping money into the economy Western. Events in the Middle East is only used by speculators as a newsworthy to further heat up the market and push prices higher. But when the price of oil falls (again for reasons purely financial and even psychological), political events nothing to do with the fall of the market can not. The market simply does not pay attention to this so-called force majeure. Not a variety of political events determine the market movement, and movement of the market determine our perception of these events.
- Why the price of oil hovered around $ 50 a barrel?
- Because it is always hanging completing correction in oil prices before the new fall. The oil market just took a break before going down well - by 15 percent.
- And to what price levels of oil drops in the short term?
- According to the American variety Light Sweet price probably will fall to $ 34 -35 per barrel (currently above $ 48 - Ed.)..
- What are the reasons may be for such a decline?
- fundamental reasons special there. The main reason - half a million so-called oil traders and the wave theory of their behavior. After the fact can be explained by a drop anything. For example, the deceleration of the world economy, the fall in demand for oil, or something else.
- It is fashionable to talk about the fall in oil prices due to the spread of electric vehicles.
- Similarly, electric fault and solar panels.
- It turns out that a real change in the dynamics of energy consumption has no effect on the oil market?
- That's right, is not affected. A simple example: we were all witnesses of how the price of oil is less than a year fell from $ 140 per barrel to $ 30. In this case, the balance of the real demand and supply of oil changed to a maximum of 2 per cent. That's all. Does the balance of the market movements are not affected.
- Then, perhaps, affect the Fed's policy.
- Now that's more like it. Recently, however, the Fed's policy is quite stable, pumping liquidity markets continues.
- Janet Yellen, the head of the US Federal Reserve, still slowly raises, although at the last meeting and left it unchanged at 1 - 1.25 percent per annum. Money but are more expensive. Whether it is pushing oil prices down?
- Already there are voices that offer a significant rate increase was a mistake. So that the stability is likely to remain. The oil market is left to itself, or rather the ebb and flow of speculative capital.
- Is it possible that the price of oil, for whatever reasons, suddenly grows back back to $ 100 a barrel, that would solve many of the problems of the Russian economy?
- This scenario can be ruled out hope for increase in oil prices is not worth it. In the coming year, this just does not happen. But will remain on the current levels of oil prices. The cost of a barrel will fluctuate in the range of 30 to 60 dollars, I would say, to March 2018 (just before the presidential elections in Russia, but it is pure coincidence). Then it will collapse in oil prices up to 12 or even 9 dollars per barrel.
- But such a sharp fall in than can be triggered?
- So-called deleveraging. This term refers to a sharp decline in leverage. Banks at times reduce the limits on lending transactions with securities and above all with the most risky, which include oil futures. Speculators are fleeing from ruin, rush to dump assets, and we will see the crisis a la 2008.
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