Later: ruble falls sharply as Russia relaxes controls. Reuters.
- question not asked: why did Russia relax controls?
Original Post
On April 6, 2022, I suggested that indications were such that Russia's economy would implode this summer.
I'm not exactly sure what metric one uses to determine whether a country's economy implodes or not, but a "first external default in a century" is probably as good a metric as any.
Russia’s first external default in a century now looks all but inevitable after another brutal week for the country’s finances.
First, the Treasury halted dollar debt payments from Russia’s accounts in U.S. banks, ramping up its restrictions on the country. Then, when an attempted hard-currency payment was blocked, Russia breached the terms on two bonds by paying investors rubles instead of dollars.
That pushed the countdown clock a step closer to default. It’s been ticking since Russia invaded Ukraine in February, and the U.S. and others swiped back with a clampdown on banks, companies and oligarchs. A freeze on the central bank’s foreign reserves unplugged Russia from the global financial system, making it the world’s most-sanctioned nation in a matter of days.
In addition, things have gotten so bad for Russia that its finance ministry calls for a new banking system organized by BRICS: Brazil, Russia, India, China, and South Africa.
Excuse me while I wipe the coffee that just blew out my nose.
Russia, hit by Western sanctions, has called on the BRICS group of emerging economies to extend the use of national currencies and integrate payment systems, the finance ministry said on Saturday.
Sanctions have cut Russia off from the global financial system and from nearly half of its gold and foreign exchange reserves, which stood at $606.5 billion in early April.
On Friday, Finance Minister Anton Siluanov told a ministerial meeting with BRICS, which consists of Brazil, Russia, India, China and South Africa, that the global economic situation had worsened substantially due to the sanctions, the ministry's statement said.
At least I was reminded that "BRICS" exists and what it stands for. I haven't seen that acronym in years.
And, of course, China and others are calling bankers around the world to declare the yuan the world's new reserve currency.
Excuse me again.
But look at that: $606.5 billion in gold and foreign exchange reserves.
Saudi Arabia has about $415 billion foreign currency reserves; I don't know if that includes gold, but probably not. At this link, some estimate total reserves (includes gold, current US dollars) is around $475billion.
With Saudi "struggling" financially to defend itself against Yemeni "terrorists," one can only imagine how much money Putin's War is costing the Russians.
This, from Reuters, might give us some idea of how much this is costing the Russians, "Russia increases its emergency spending fund by $3.5 billion."
