Thursday, October 2, 2014

Financial Comment - Musical numbers heat up Putin's chair

40, 93, 1095

These numbers should be music to the ears of all Ukrainians.

40 Russian rubles for one US dollar. Well, 25-30 kopeks less than that. At last, on the verge of October 2014, an exchange rate considered laughable a year ago. But the Russians are not laughing anymore.

$93 for one barrel of Brent crude oil (West Texas Intermediate is currently at $90/barrel) – down from almost $115 four months ago and below the level which makes Mother Russia’s state budget sustainable. Russian and Ukrainian conspiracy theorists have been saying for six months now that cheaper oil is Obama’s and the Saudis’ trick (Iran’s ayatollahs joined the theory about three months ago). This logic follows the “trick” that was played by the dignitaries of the same countries 28 years ago when they left Soviet department stores empty, with nothing else but canned seaweed from Sakhalin on shiny shelves (maybe some gassed mineral water too), for several years. Western analysts and media are talking about the abundant supply of oil too, by the way, as the main reason for the current oil price decline.

1,095 points currently on the RTS Russian stock index. Prior to now, the index was below 1,100 points in March, during the Russian “polite” annexation of Crimea. According to Russia, it is not involved in the war in the Donbas? Its artillery is not killing Ukrainians and decimating Ukrainian cities, towns and villages? Russia does not control separatists? The RTS index paints a different picture, which indicates that the EU and the U.S. do not buy all that and are promising to keep the sanctions – until Crimea is returned to where it belongs.

If only these three “magic” numbers (ruble exchange rate, price of oil and the RTS index level) keep moving in the same direction as they have up to now, the chair under someone in the Kremlin may become a bit too hot.

By: Ukrainian Credit Union Limited

No comments:

Post a Comment