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Business / Finance

With the ruble sanctions on the edge

Banki.ru: themes of the day 25.02.2019 at 21:06

Banking and financial news on the website Banki.ru

High oil prices and a pause in trade war keep the ruble from the yearly highs. But this is a temporary lull: the impending anti-sanctions able to send our currency into another knockdown.

the calm before the storm

the Russian foreign exchange market still lives in suspense. Many, seemingly most innocent, the statement by the fed or new allegations by U.S. congressmen immediately lead to the weakening of the ruble. For example, in mid-February, our national currency slipped sharply against the dollar and the Euro amid reports that five U.S. senators introduced a bill on new sanctions against Russia. Moreover, the text of the bill has not been announced, released only release. But this was enough for the dollar at the close of the market rose above 67 rubles.

Now foreign exchange rates hold near lows 2019, however, this strengthening may be temporary. Oil hits record (Brent price went much over $ 67 per barrel), while exporters began the season of paying taxes. But this week the dollar exchange rate can reach up to 67 rubles, said the chief economist of Alfa Bank Natalia Orlova. "First, the situation around Baring Vostok has not been resolved and would have significant negative consequences for the investment climate. Second, the Ministry of economic development estimated GDP growth in January to just 0.7%. Thirdly, next week should be submitted to the private report of spectracolor USA Robert Mueller about Russia — although all the details of the report are unlikely to be known, it will significantly affect the context for further discussion of anti-Russian sanctions in U.S. Congress", — she wrote in the review.

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All of these factors together with the uncertainty of prospects of trade relations between the U.S. and China are creating a very nervous mood among investors. After the January influx of foreign capital again in February, there is an outflow of money, according to EPFR Global, for the week from 14 to 20 February, from the funds of Russian shares and bonds have been withdrawn 127 million dollars. "The issue of possible sanctions from the United States is now creating serious uncertainty in the Russian market", — says the analyst UK "alpha-Capital" Daria Zhelannova. Most investors fear the introduction of the ban on the purchase of new issues of government debt and restrictions on dollar transactions of banks. The analyst does not undertake to judge what will be the consequences of their imposition, especially as oil prices are still rising, and the Central Bank may again resort to stop currency interventions.

How to support the ruble

However the ruble in any case will be under pressure. The more opportunities our financial authorities are not so much. To increase the rate regulator, it seems, has no plans, and to support the exchange rate through intervention of the authorities, all the forces are accumulating foreign exchange reserves and sovereign wealth Fund, is unlikely. Especially in terms of upcoming external debt payments peak which will be in March. According to Central Bank data, net payments of 40 largest borrowers in March will be the highest since April 2018.

there is another way to support the national currency — to stop buying dollars and euros on the market. Such measures of the Central Bank came in August last year. However, according to Natalia Orlova, the ruble it helped a little. "Despite the actions of the Central Bank, the ruble nonetheless failed to strengthen in September and December last year, indicating that the negative sentiment in the market," she points out. In the second half of the dollar rose against the ruble by 11.7%.

besides, Orlov continues, investors completely ignored the improvement in the current account in Russia in 2018. Also followed a positive reaction to that company Rusal and En+ have been removed from the SDN list. This generally indicates a weak sensitivity of the foreign exchange market to positive news, concludes the analyst.

in addition, the amount of oil revenues that the country receives due to the high prices on the world market, may also be reduced. Not only because of unfavorable market conditions, or trade wars, but because of production cuts. The Deputy Minister of energy Pavel Sorokin in an interview with "Vedomosti" said that now the cost of oil production in Russia is 25 dollars per barrel. It is clear that even if the world market price falls to $ 40, to sell raw materials to our exporters will still be profitable. Gradually, however, the country will go to the development of less expensive stocks, the cost of production will rise, and today's $ 60 to $ 70 per barrel will not be enough, warned the official. This means that the government will have to find money to support the oil industry. Otherwise, the flow of petrodollars that support afloat our currency, can significantly shoal.

Not all sanctions are equally useful

But more and harder on ruble could hit new sanctions, the number of which seems to be closer to ten. Last year U.S. lawmakers proposed a list of sanctions bills that would put pressure on the Russian economy. Among the possible sanctions:

— the blocking of assets and prohibition of dollar payments of state banks and state-owned companies;

— the prohibition of investment in new national debt;

— restrictions on the financing of energy projects;

— the extension of personal sanctions against officials and oligarchs;

— the recognition of Russia as a state sponsor of terrorism;

— cybersale in response to a disinformation campaign.

While in the United States held midterm elections, and then there was "shutdown", American policy was not to sanction, however, in February of this year a new bill Defending American Security from Kremlin Aggression Act (DASKA) of 2019, joined this list a number of measures against oil and gas companies, banks, IT and shipbuilding. However, the latest information about which of them can be taken yet. This gave reason for optimism analysts who believe that the introduction of such a ban is unlikely. Moreover, in some cases, may hurt the interests of American investors. For example, in the case of the ban on the calculations for state-owned banks hurt the reputation of the dollar, says analyst "Discovery Broker" Andrei Kochetkov. "Disconnecting from dollar payments will be another powerful incentive for dismantling the global role of the dollar as universal means of payment. In Europe already form the basis for the transition to settlements in Euro with their counterparties," he says.

Experts remind that the initiative of senators consistently receive negative reviews of the U.S. Treasury, as may affect the economic interests of the United States. For example, the freezing of assets of Russian state-owned banks will lead to the fact that they refuse to service their external obligations, and that directly hit the financial institutions in the USA. Therefore, a high probability that all of these proposals would block us Treasury. To enjoy this, however, is premature. Even if they are not finally adopted, warming the geopolitical situation is not visible and, therefore, do not expect a big interest in the market and the inflow of direct investment, says the head of operations on the Russian stock market IR "freedom Finance" George Vashchenko. According to him, although the state has ways to raise the attractiveness of the OFZ and at the same time to strengthen the ruble, increasing their profitability, but changes in monetary policy can be expected. Therefore, in the first quarter of 2019, the dollar can vary from 65 to 69 rubles.

the Unstable ruble

"In none of these sanctions bills, most likely, will not be accepted", — considers the Director of analytical Department IK "Region" Valery Weisberg. However, it does not exclude that may follow personal sanctions against major Russian entrepreneurs in the framework of CAATSA (act of 2017, introducing stalking close to the Kremlin oligarchs). "Certainly, the Russian currency will be under pressure for a long time, but there are no specifics on new sanctions, market participants pay attention to rising oil prices and the weakening of world currencies the dollar," — says the analyst IFC "solid" Vadim Kravchuk. At the same time he does not exclude that the detention of the founder of Baring Vostok Michael Calvey can accelerate the adoption of sanctions. "Experience shows that Washington is actively fighting for the rights of its citizens abroad, which much went to Turkey last year. New levers of influence on Russia to come up with is already difficult enough, almost everything is in the draft laws, but to expedite consideration of a lawsuit against Calvey could," he said.

As an analyst at Promsvyazbank Michael Poddubsky, the key risk for the ruble is the bill providing introduction of sanctions against our banks, which promote activities aimed at "interference in democratic institutions in other countries."

But there wasn't any certainty as to what sanctions will be taken, foreign exchange market, he said, will continue to be volatile. Moreover, when the duty of their absence, the ruble has all chances to strengthen. According to analysts, by the end of March — beginning of April, the dollar may drop to 63-65 rubles. However, by the end of the year, he predicts the weakening of the ruble. "Since the middle of the second quarter the current account will start to sink seasonal, and against this background a stronger influence on the exchange rate may begin to provide the implementation of the budget rule. All this, coupled with our conservative view on oil prices in the second half of this year leads us to expect renewed pressure on the ruble exchange rate and the movement of the dollar/ruble to the benchmark of 70 rubles per dollar," — said Poddubsky.

"Finam" point to another factor — the increasing of capital flight. Last year the country spent 67.5 billion dollars, in January this year — $ 10.4 billion. Investment company analyst Mikhail Aristakesyan does not exclude that due to the uncertainty on sanctions and growth in the developed markets the export of capital from the private sector and this year will remain high. Sectoral sanctions could lead to further growth of capital flight, depriving Russian companies to refinance debts.

If there is a ban on debt, it will literally bring down the ruble. According to Weisberg, we may see the dollar at 75-77 rubles. "The others are discussing in USA measures, if implemented, will have substantially less effect for our currency," he said.

albert KOSHKAROV, Banki.ru

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