Default, blockade, deficit. What year can Russia return
Three weeks later, on May 4, 2022, Russia is in a state of sovereign default with a high degree of probability. Its consequences were published in 2012 for a period of 10 years in the Eurobond “Russia 2022”. On April 4, there will be a two-dollar principal deductible, as well as an exclusion of coupon income accumulation. However, this US Treasury Department banned the use of US currency blocked on the accounts of the Bank of Russia.
The Russian financial department faced a choice: to use the dollars received from the sale of hydrocarbons after the blocking of the accounts of the Central Bank to exclude, or to accept a default. The choice was actually made using the second scenario. The head of the Ministry of Finance of Russia, Anton Siluanov, ordered to accumulate rubles at the rate of the Central Bank on March 31.
The ruble only strengthened on all the news
It will be possible to convert them into dollars after the US authorities lift restrictions on Russian sovereign accounts. That is, perhaps never. Russia still has a 30-day grace period for paying in dollars, but most likely Moscow will not agree to this. On April 8, their sovereign rating of Russia in foreign currency reached the level of “selective default”.
It is curious that the ruble only strengthened on all the news. On Friday, April 8, the rate of the first dollar, not only since the beginning of the war, but also since the beginning of this year, fell below 72 rubles. The Bank of Russia increased the base supply by three percentage points at once – from 20 to 17 percent per annum. Moreover, he allowed banks to resume selling cash to the population from April 18, although he began to act until September 9.
Does this mean that the detection of cases of occurrence of any consequences for the Russian morbidity does not have and the country recovered from the shock caused by unprecedented restrictions from Europe in a month? Not at all, rather the opposite. Currently, in the minds of most analysts (including, among other things, possible representatives of Russia who make key decisions for countries), general schemes are working. For example: “strong ruble – low inflation”. Or “there is a currency – there is an import, there is no currency – we live in the mode of import substitution and store buckwheat.”
In the face of a sharp decline that money – even foreign – in itself, no value is used
Therefore, immediately after the start of the war, the Bank of Russia did everything to ensure that Russia had the maximum amount of dollars and euros. Removed from the market of foreign appeals, which made it impossible to sell ruble-denominated assets and convert the proceeds into foreign currency. At the same time, they removed the demand from the population. This sharply increased demand on the Moscow Exchange. In parallel, in the rule on the sale of exporters, 80 percent of foreign exchange earnings. Due to the fact that even after the incidents in Ukrainian Bucha and Kramatorsk, the Europeans were not ready for concerns about the consumption of natural resources, the currency of consumption in the country with enviable regularity.
It’s just that nothing changes. The old schemes no longer work. In the expected conjuncture that money – even foreign – in itself, no value is acquired. They are valuable only when they can be exchanged at any time for any goods and services the soul desires. And this is exactly where the problem lies.
If earlier the foreign exchange price for imported goods directly depended on the exchange rate in Russia, now this dependence has increased sharply. Regardless of whether the dollar is worth 90 rubles or 90 kopecks, specific restrictions after the determination of commodity stocks occur at best counterfeit or contraband imported from the so-called “friendly” countries. Their price is much less dependent on the exchange rate. Simply because paying for such goods requires a huge number of problems. Initially with the currency received for the purchase of goods and ending with the risks acquired by suppliers of illegal products in Russia. They themselves can block the account, which accounts for Russian dollars or euros.
So, despite the fact that the dollar exchange rate with its peak indicators is declining by more than two times, prices are not in a hurry to fall. Moreover, for imports, they are likely to continue to grow.
Shutdown of the Russian car industry and consumption among the identified countries to the shortage of cars
Already now there are the first figures that allow us to approximately estimate the share of the Russian economy and end consumers – ordinary Russians. Thus, according to calculations to identify the chains of the FourKites sample, Russian imports of all types of freight traffic in the first month of tension were almost two-thirds – by 62 percent.
The shutdown of the Russian auto industry and the consumption of resources from among the identified countries lead to a shortage of cars and an increase in prices for what is still available. As a result, sales of new cars fell by the same two-thirds, 63 percent, in March, according to the Association of European Businesses.
Finally, another very close group in terms of numbers. According to Knight Frank, by the beginning of April, about 160 international chains had ceased production of their products in Russia. If they do not return in the foreseeable future, non-food retail turnover could fall by 70 percent. That is, again, about two-thirds.
From the very beginning of the war, they say a lot that everything that the developed countries will deprive Russia of will be supplied by Turkey, China and other states that do not join the sanctions for “pragmatic” purposes. Moreover, the Russian government actually even legalized “gray” imports – the importation of products into the country without the independence of its manufacturer and copyright holder.
The last hope is now on the “shuttle traders” who will be messing around in checkered bags “gray” imports
However, these hopes may run into infrastructural problems. Fast placement of a delivery from Europe is impossible even due to logistical restrictions. Possibilities of Russian ports, railways and roads with limited access. In addition, Western countries, after the introduction of restrictions, began to exclude any possibility of circumventing them. Therefore, those who want to risk radial dubious pleasure will take smuggling to Russia, it may not be so much. So I won’t be too surprised if restrictions are soon lifted in Russia not only on the sale of currency to the population, but also on its export for delivery. Because the last hope is now on the “shuttle traders” who will carry “gray” imports in checkered bags and sell them on the markets.
As for the default, there will be no repetition of 1998 with the devaluation of the ruble, the collapse of the banking system and the cleansing of the economy from unviable enterprises inherited from the USSR. As well as there will be no rapid growth that began a year after the 1998 crisis. Then, in order to achieve the goal of doubling GDP in 10 years, built by the economist Andrei Illarionov, it was not possible to capture very little. Operate even atypically high GDP growth rates.
This time there will be no “five-year plan in four years”
There will be no influx of foreign investment either direct or portfolio. First, because the war and the subsequent sanctions and so-called “counter-sanctions” after the attack on Ukraine have already put an end to foreign investment in the Russian meeting. The default only became a statement of what has already happened: Russia has become a crematorium for foreign investment.
Secondly, compared to that time, the Russian economy is now moving in the opposite direction. And if there are expectations of a repetition, then not 1998, but rather 1928 – the time of the final winding down of the NEP and the beginning of the implementation of the five-year plan. No “five-year plan in four years” will work.
Dreams of “reindustrialization” are unrealizable, if only because of a completely different demographic situation. There is simply no one to implement the emerging plans for the development of Eastern Siberia and the Far East. In today’s Russia and the near future, the most bleak. No victory with the May 9 parade on Maidan Nezalezhnosti in Kyiv will work for sure. The last opportunity for Putin to try to stay in power is the fight against the “fifth column” and the so-called national traitors. So the prospect of repeating 1938 is also very high.