Russians laughing at sanctions? Pure bluster

[ProSense]

Yesterday, word spread that the Russians were laughing in the face of sanctions. Yet the events leading up to the sanctions tell a different story.

Russia capital flight $45-50 bln this year, full year may be $130 bln -Goldman

(Reuters) - Capital flight from Russia has risen sharply since the start of this year to $45-$50 billion, Goldman Sachs said on Thursday, predicting full-year outflows could be as much as $130 billion, or double 2013 levels..its calculations show capital outflows have jumped 60 percent from year-ago levels as the economy slows and the threat of Western sanctions bites. It also slashed its forecast for Russian economic growth this year to 1 percent.

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"The Achilles heel of the Russian economy remains the flow abroad of Russian capital following any shock. We would also think that any sanctions or even the threat of sanctions will be ultimately targeted at these flows," Goldman analysts Clemens Grafe and Andrew Matheny said in a note.

<...>

Grafe and Matheny calculate that total net private capital outflows amounted to $45-50 billion in the year to date, or more than a 10th of Russia's economic output in the first 2014 quarter. The outflows also represent a big jump over the $28 billion that left the country in the first three months of 2013...Their models indicate total capital outflows for the year of $130 billion.

If confirmed, the data indicates growing pressure on the Russian economy which is already showing its slowest growth since 2008. Official data shows capital flight was $62.7 billion in 2013, with outflows totalling $420 billion since 2008.

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http://www.reuters.com/article/2014/03/13/ukraine-crisis-russia-capital-idUSL6N0MA2N720140313

Russian Richest Face Margin Calls With Billions at Stake

By Robert LaFranco and Alex Sazonov

Alexander Lebedev is concerned.

“Russian businessmen are very scared,” the 54-year-old former billionaire, who served in the Soviet embassy in London during the Cold War and owns Russia’s National Reserve Corp., said by phone. “There are risks to the Russian economy. There could be margin calls, reserves might be drawn down, exchange rates may fall and prices will rise. This worries me.”

Billionaires in Russia and Ukraine risk further losses as market volatility and the threat of Iran-style economic sanctions intensify following Russia’s incursion into Crimea. Since Feb. 28, the day unidentified soldiers took control of Simferopol Airport in southern Ukraine, Russia’s 19 richest people have lost $18.3 billion, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 300 richest wealthiest people.

“The instability caused by the situation in Crimea could be a problem for the oligarchs,” Yulia Bushueva, who helps manage $500 million at Arbat Capital in Moscow, said in a telephone interview. “If a billionaire pledged their stakes in publicly traded companies as collateral for a line of credit, they could face margin calls and have to re-negotiate with banks.”

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The European Union last week froze the assets of 18 Ukrainians, including “hundreds of millions of euros” in the Netherlands controlled by former President Viktor Yanukovych and his son, Oleksandr, Dutch Finance Minister Jeroen Dijsselbloem said March 6...Dmitry Firtash, a 48-year-old Ukrainian billionaire who made his fortune importing Russian natural gas, was arrested in Vienna Wednesday by an organized-crime unit of the Austrian police on a warrant issued by the U.S. Federal Bureau of Investigation, according to a statement by the country’s Interior Ministry.

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http://www.bloomberg.com/news/2014-03-14/russian-richest-face-margin-calls-with-billions-at-stake.html

Russian government admits economy in crisis as Ukraine weighs

By Darya Korsunskaya and Lidia Kelly

(Reuters) - Russia's government acknowledged for the first time on Monday that the economy was in crisis, undermining earlier attempts by officials to suggest albeit weakening growth could weather sanctions over Ukraine.

Moscow markets wait to see the full scale of western measures over the seizure of Ukraine's Crimea and support of its referendum to join Russia, after losing billions of dollars in recent weeks in state and corporate money.

For weeks, Russian officials have said the confrontation between Moscow and the West over Ukraine that threatens economic sanctions and asset freezes would "weigh on the economy".

Although not speaking directly about the impact from the conflict, Deputy Economy Minister Sergei Belyakov said on Monday the economy was in trouble.

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http://www.reuters.com/article/2014/03/17/us-russia-economy-crisis-idUSBREA2G0RF20140317

Doesn't seem funny yet.

Russian upper house speaker calls U.S. sanctions "political blackmail"

(Reuters) - The speaker of Russia's upper house of parliament on Monday denounced as "political blackmail" U.S. sanctions imposed by the White House on her and 10 other Russian and Ukrainian officials over Moscow's takeover of Crimea.

"This is an unprecedented decision. Such a thing was unheard of even during the Cold War," Valentina Matviyenko, 64, Russia's leading female politician and its third highest-ranking figure, told the Interfax news agency.

"This is political blackmail," Matviyenko said, adding that the sanctions would not hurt her as she said she held "no accounts and no property abroad."

http://uk.reuters.com/article/2014/03/17/ukraine-crisis-usa-matviyenko-idUKL6N0ME43Q20140317

No, that doesn't seem like laughing.

[deaniac21]

1. I know of 11 people that are

in a world of hurt.

[ProSense]

2. That would be

"I know of 11 people that are in a world of hurt."

...more than 25 wealthy and influential people in addition to those previously sanctioned. More on the potential impact of sanctions.

Londongrad Dealmakers Face Sanctions Hit After $180 Billion Boom

By Matthew Campbell and Morgane Lapeyre

Russian companies have made $180 billion in deals globally in the past two years, providing steady profits to London bankers, lawyers, and image crafters as the city has become a hub for such transactions. Sanctions planned by the U.S. and European Union threaten that business.

The potential fallout highlights the web of connections linking Russia to the global financial system. Since many large Russian companies are controlled by the state or by billionaires with close ties to President Vladimir Putin, even narrowly targeted sanctions could hurt their global operations.

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“There’s a huge amount of business, both industrial and financial, in both directions between the West and Russia,” said Dominic Sanders, a partner in Moscow at law firm Linklaters. “The further the sanctions and retaliation go, the greater the pain.”

While wealthy Russians have fanned out across Europe, with businesses incorporated in Luxembourg and Cyprus and homes in Switzerland and the south of France, their impact has been most keenly felt in the British capital. Advisory professionals in the city, dubbed “Londongrad” in a 2010 book by journalists Mark Hollingsworth and Stuart Lansley, have been instrumental in Russian deals.

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The instability spawned by the Ukraine crisis is beginning to dent that. Billionaire Vladimir Evtushenkov’s children-goods retailer Detsky Mir Group is postponing a planned London share sale because of tensions over Crimea, according to people familiar with the matter. The company declined to comment.

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http://www.businessweek.com/news/2014-03-17/londongrad-dealmakers-face-sanctions-hit-after-180-billion-boom

Foreign Investors in Russia Vital to Sanctions Debate

By LANDON THOMAS JR.

As the United States and Europe move to punish Russia for its conduct in Ukraine and Crimea with official sanctions, a subtle approach could prove more powerful: pressuring large global investors to reduce their sizable holdings in Russia.

Since central banks began injecting enormous amounts of cash into the worldwide economy in 2009, more than a quarter of a trillion dollars has flowed into the coffers of Russia Inc., part of a broad push by yield-hungry investors into emerging markets.

Most has found its way to companies controlled by the state. Gazprom, the Russian energy giant at the heart of evolving dispute with the West, counts the American mutual fund giants Pimco and BlackRock among its largest investors and creditors...some analysts and economists are pushing for an end to this easy money, a move that would choke off critical funds.

Officials are not likely to take such a major step soon — or ever. Governments are loath to interfere with the free flow of capital; the Obama administration has urged caution in pushing measures that might upset fragile markets. And institutions, with a penchant for profit, generally do not like such restrictions.

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http://dealbook.nytimes.com/2014/03/17/foreign-investors-in-russia-vital-to-sanctions-debate/

France Threatens to Cancel Russian Ship Contract Over Crimea Annexation

—By Kevin Drum

So what can Europe do to express its displeasure over Russia's annexation of Crimea? Robert Farley writes that France is currently building a pair of amphibious helicopter carriers for Russia's Pacific fleet:

That sale is now in considerable doubt. Because of Russia’s invasion and presumed annexation of Crimea, the European Union is considering a variety of sanctions against Moscow. The biggest stick, in military terms, may be the Mistrals, a pair of 21,000 ton warships capable of carrying over a dozen helicopters, in addition to a well-deck for amphibious landing craft. That the Russians chose to name the second ship Sevastopol, after a city not in Russian possession until after the recent invasion, only makes the sale so much uglier from the European point of view.

....The purchase of the Mistrals (which was to include a pair of ships built under license in Russian yards) was controversial in Russia, given that it represented a transfer of scarce defense monies to a major foreign contractor. Some Russian analysts also expressed concern about what technologies the ships would include. However, given the inability of Russian yards to turn out large, quality ships since the end of the Cold War, the Mistrals represented the best chance of adding aviation and amphibious capabilities to Russia’s decaying fleets.

That final sentence is crucial. Russia didn't agree to buy French ships because it wanted to. It signed a deal to buy French ships because it had to. The Russian military may still be able to take on Crimea or South Ossetia—neither one larger than Vermont—but it no longer has the capability to do much more. For all his nationalistic bluster, Vladimir Putin has done nothing to address this shortfall, contenting himself instead with creating a comfortable, oligarchic state that can, for the time being, live off its mineral wealth. Putin may or many not decide to invade Eastern Ukraine, but if he does, he'll only do it if he believes that Ukraine will fall with barely a shot fired. He really can't afford to fight a serious war.

In any case, the French foreign minister said today for the first time that the Mistral deal might well be canceled—but only if other countries pitch in. "We will ask others, and I'm thinking namely the British, to do the same with the assets of the Russian oligarchs in London," he said in a TV interview. "Sanctions have to be shouldered by everyone."

http://www.motherjones.com/kevin-drum/2014/03/france-threatens-cancel-russian-ship-contract-over-crimea-annexation

[roguevalley]

9. zillionares in a ponzi game country getting it in the backside.

sounds like justice to me. They can always use the hitler excuse. all the 1% do.

[okaawhatever]

3. No kidding, and the serious effects will be longer term. China will benefit, though, because the

Russians have to put their money somewhere and China is the one country they know won't ever impose sanctions.

[FarCenter]

4. Obama recognizes 7 Russians for services to the Great Patriotic Cause; prepares additional awards

So how many billions of assets were actually blocked?

Will Obama's approval rating rise to 50% before Putin's falls to 60%?

[ProSense]

5. Putin

isn't laughing: http://www.democraticunderground.com/10024685340

[FarCenter]

6. A démarche is to be expected.

This is pro forma diplomacy.

[ProSense]

7. Sure, like bluster. n/t

[ProSense]

8. Kick! n/t

[Cha]

10. Yesterday some duers were laughing with them.. ooops.

No, I wouldn't imagine Russia would take kindly to sanctions when it thinks it can do whatever it wants without any repercussions.

[Ken Burch]

12. There aren't any DU'ers who support Putin. There honestly aren't.

There are simply some people who reject the idea that this is just about Putin being a horrible person. What is so terrible about admitting that it's not THAT simple?

Or about pointing out that it's not as though the West could beat the guy easily if only Obama would act like Reagan on bath salts?

[The Magistrate]

14. A Number Of People, Sir, Clearly Support Putin's Actions In Crimea

A number of people also clearly accept every jot and tittle of the official Kremlin line on events in the Ukraine over the last few months.

While themselves engaged in supporting what amounts to an invasion and is certainly an imperialist venture put in motion by a genuine fascist, they devote a fair amount of time to calling people who disagree with them war-mongers and bed-mates of neo-nazis and such like.

[The Magistrate]

11. Russia's Economy Is Quite Vulnerable, Ma'am

[cherokeeprogressive]

13. This does.

[ProSense]

15. Russia Sees Billions Spent on Crimea as Putin Pushes Treaty ...

Russia Sees Billions Spent on Crimea as Putin Pushes Treaty (1)

By Olga Tanas and Anna Andrianova

Russian lawmakers are preparing to ratify a treaty this week to annex Crimea, hailing as a victory the return of the Black Sea peninsula that may require billions of dollars even as the national economy comes under strain.

Parliament plans to finish all legal procedures to accept the breakaway region into Russia this week, Sergei Mironov, leader of the Just Russia party, told reporters today in Moscow.

President Vladimir Putin, facing the weakest economic outlook in four years and forecasts of surging capital outflows, is defying Western threats of sanctions and pressing ahead with plans to absorb Crimea, a predominantly Russian-speaking region that houses the Black Sea Fleet. Putin blamed the West for forcing him into a corner and vowed to protect those of Russian heritage from Ukrainian nationalists. Crimea will need billions of dollars of investment in infrastructure, according to Russia’s Economy Ministry.

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Even before the protests in Kiev turned deadly last month, Russian Deputy Economy Minister Andrey Klepach said capital outflows were increasing and may reach $35 billion in the first quarter, more than half of the $63 billion for all of 2013.

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http://www.businessweek.com/news/2014-03-19/russia-sees-billions-of-crimean-spending-as-putin-pushes-treaty

Investors are fleeing Russia and they are losing billions of dollars
http://www.democraticunderground.com/10024685574