Central Bank Scheme

In February of last year I started to list the banks that had been shut down (retroactive from 1 January 2016) by Russia’s Central Bank. The idea was to see if they could beat their own record from 2015. Last week the final bank was closed for the year and when tallied the Central Bank did indeed beat their own record from 2015: 97 banks shut their doors in 2016 as compared to the 93 closed by the Central Bank in 2015. To put that in perspective, 32 Russian banks lost their licences in 2013, and 86 in 2014.

In December 2015, Sberbank’s German Gref predicted that 10% of Russian banks would have their licences pulled in 2016. That would have been approximately 70. The Central Bank exceeded that.

Gref said that he supported the revoking of licenses from banks that are involved in “anything other than banking activities,” Interfax reported.

In May this year the Russian news agency Rosbalt reported:

The Central Bank is selling this process as an anti-corruption campaign to clean up the banking sector. There are too many banks, the narrative goes. Thus it is necessary to close the weaker players, many of whom are using their clients’ money to make bad loans to themselves and their cronies, and moving the money offshore. See, for example, billionaire Alexander Lebedev’s version of events here.

Former deputy chairman of Russia’s Central Bank Sergei Aleksashenko wrote in October that the scheme:

“…has already cost over one and a half trillion rubles and, taking into account the interest to be paid, the federal budget is going to have to shell out considerably more than two trillion rubles.”

It does not appear that this process will end anytime soon. In July of 2015, VTB’s Andrei Kostin “…predicted that 500 Russian banks will be shut down over the next 5 years…”

“There are too many banks in Russia now — about 800 institutions. In five years, this number may be reduced by 500, but we could achieve a steady level even with 100 banks,” Kostin said in an interview with the German newspaper Die Welt, according to Interfax.

Work But No Pay

“The current economic crisis is in many ways different from the 2008 economic crisis.” People are not being laid off “en masse”. Instead, Dmitry Remezov writes:

“Many [employers] prefer to cut wages or send employees on unpaid leave. They have also started to increase the delay of salaries. Therefore a sharp surge in registered unemployment has not occurred, but there has become an enormous reservoir of hidden unemployment.”

In Primorye, for example, thousands of workers are owed hundreds of millions of rubles, though officially the unemployment rate sits at 5.9%.

One indicator of how bad the situation is in Russia’s Far East is that since the beginning of 2016, approximately 4000 people attempted to migrate to South Korea to work without visas, but were turned away. It is unclear how many tried and succeeded.

“The Russian Foreign Ministry called the situation in Vladivostok “appalling” and compared it to the 1990s, when thousands of Primorye residents also sought salvation from lack of money in South Korea.”

On the opposite side of the country, in Kaliningrad, wages fell and hidden unemployment increased due to the region’s loss of its status as a “special economic zone”.

According to a local trade union leader:

“Enterprises have cut working hours, people were more likely to be sent on unpaid leave. This is especially noticeable in the private sphere. But the general crisis also affected public sector workers: they also started curtailing wages and earning capacity. In general, people are living worse.”

He said that the reason there has been little “social unrest” is due to three factors:

  1. “…that job cuts took place progressively”;
  2. “the salary cuts were small”; and
  3. “part of the dismissed workers managed to find another job with roughly the same level of pay.”

“Employers curtailed production…. Therefore, workers gradually changed workplaces. And the salaries at the enterprises in the Kaliningrad region are small. Even at “Avtotor” [the local automobile manufacturing company] which imagines itself a leader of regional industry, the wages of mechanics and assemblers are often less than the average for the industry. Therefore it was not difficult for people to get another job with the same “not exorbitant” salaries,” he said.

“The crisis has hit the economy of the Russian regions in varying degrees.” In Kaluga, for example, the authorities shut down the central market.

“According to Rosstat, the unemployment rate in Kaluga is 4%, which is higher than the average for the Central Federal District (3.4%). Three hundred workers from the market who had to join the army of the unemployed, came to the rally.”

Of course, the places with the highest unemployment rate are in the North Caucasus Federal District [Chechnya, Daghestan, Ingushetia, etc.]. “As a whole, the unemployment rate in the district was 10.7%. The leaders are Ingushetia (29.7%) and Karachevo-Cherkessia (16%).”

“The high level of corruption and the outflow of the qualified workforce leads to higher unemployment in many Russian regions,” said State Duma deputy and vice-president of the Confederation of Labor of Russia, Oleg Shein. “And the North Caucasus Federal District has been hit the hardest by these social plagues.”

And it is driving local investment away, Shein continues. Not only will outsiders not want to invest there, but neither will local businesses seek to expand in the region, but look outside of it.

“Another factor undermining economic development is the departure of most of the skilled working population. This factor too has hit the regions of the North Caucasus Federal District, guaranteeing economic depression.”

“There was a serious “emigration” of ethnic Russians and Ukrainians from the North Caucasus which peaked in the 1990s. This departure was an additional blow to the local economy. And agriculture cannot be the basis of the national economy in the 21st century. It is, indeed, the product that provides the security of the country, but it does not create a high added value.” said Oleg Shein.

In Rostov the general director of a coal company was arrested and charged under several articles of Russia’s Criminal Code. The company itself is undergoing bankruptcy proceedings. The miners have not been paid and have been holding protests. “The total amount of the debt to the miners was 340 million rubles.” 2300 employees have been affected by the ongoing problems. “Many could not find new jobs locally and have left the region to work in other cities.”

“The leader of the protests said he believes regional authorities and law enforcement agencies are responsible for the current crisis…. The government has long turned a blind eye to the violations of the company.”

And in Tolyatti the automobile component manufacturer AvtoVAZ Aggregate owes 1500 employees back pay.

Photo of AvtoVAZ Aggregate taken in 2010 (from Wikipedia entry)


“The company was declared bankrupt in August and the top managers of the company were involved in criminal cases. According to the prosecutor’s office, the debt amounted to almost 53 million roubles as of 1 November.”

The head of the trade union at Tolyatti noted that over 40% of the shares of “AvtoVAZ” are owned by a company registered in the British Virgin Islands. “The reason for not paying workers is that there is no money. The court bailiff could not find the account of director Viktor Kozlov. We understand that the money went offshore. Perhaps in the near future this will be the case for many companies: no money, because they go offshore to violin and cello [a reference to the Rodulgin story and the Panama Papers.]”

The situation where people are formally employed, but not paid, has become one of the signs of the current crisis.


The Moscow Times reports:

“The decline of the Russian economy has slowed, according to the State Statistics Service.”


“The Economic Development Ministry has forecast that GDP would drop by 0.6 percent in 2016 and increase by 0.6 percent in 2017. At that rate, the Russian economy would rebound to the level of 2014 no sooner than 2020. The baseline scenario for long-term forecast assumes stagnation…”


“…former Finance Minister Alexei Kudrin said that the macroeconomic situation has improved and that the focus has shifted to the microeconomic level where reforms are needed.”

In separate comments, Kudrin “…compared the situation in today’s Russia to the late Soviet period. According to him, Russia is now facing the same risks – decentralization and the regionalization of the country…”

“The USSR collapsed not due to a weak army and not in connection with a weak KGB. It collapsed because it was an inefficient, bereft economic model.”

Kudrin also said that “…the main risks [for Russia today] are economic inefficiency and the inability to be technologically advanced.”

According to the Economic Development Ministry’s target scenario, economic growth will exceed 4 percent annually as early as 2018 — but only if Russia makes the transition to an investment model by which companies achieve increased revenues through lower costs, an improved business climate, and support from non-raw materials exports.

“One federal official points out, however, that effective investment does not consist of simply laying pipes in the ground or building bridges that go nowhere. The problem is that the crisis is affecting actual projects that under way, and fiscal policy is skewed away from supporting investment in infrastructure and human capital and toward social and defense spending.”

And that is exactly what Russia’s 2017-2019 budget is proposing:

To put that in context:

In a poll published last week, 48% of Russians said the economic situation has worsened in recent years. This is compared to 37% who said they thought so when asked the same question in September.

Almost 32% of respondents thought that the situation in the country will get worse in the next year or two. And another 13% of those polled thought the crisis will last more than two years.

3/4 reported that they were affected by the crisis, and more than 27% of respondents stated that they have been hit hard by the recession. An increasing number of Russians are afraid of losing their jobs, and complain about pay cuts and wage arrears. Rosstat says that total wage arrears in Russia increased by 3.6% between 1 Sept & 1 Nov, reaching 3.79 billion rubles.

Russians continue to save money on food, clothing, & shoes, as well as entertainment. 24% said they have reduced spending on medication. Saving on consumption remains the main form of adaptation to the crisis. People have begun to stockpile food. Nearly 31% said they are gardening more at their dachas. But only a few Russians have said that to combat the crisis, they have found a second job or some part-time work.

People have adapted to the weak economy and are prepared for a long life under poor conditions. But a sociologist told Vedomosti that the crisis would not have a negative impact on the government, as “the population resides in apathy.”

Anti-Corruption Campaign

Russians woke this morning to the news that the Investigative Committee [known as SledKom, in Russian] had detained the Minister of Economic Development, Alexei Ulyukaev.

A statement was released at three o’clock this morning, but it appears to have been taken down at the time I am writing this.

As usual, most of what is happening and what happened are mere conjecture and speculation based on rumors. But according to Bloomberg, the charges relate to Rosneft’s recent purchase of a controlling stake in Bashneft. Allegedly, Ulyukaev took a “$2 million bribe related to his ministry’s approval of the sale of a 50 percent stake in Bashneft…”

“Ulyukaev was caught red-handed while taking a bribe. We are talking about extortion, the dual threats against representatives of Rosneft,” a SledKom representative told Interfax.

Rosneft paid $5 billion for the stake (which was over-priced, as I pointed out at the time).

As usual, there was some hysteria among Western analysts, but Chatham House’s Ilya Zaslavskyi had a more level-headed opinion:

According to Gazeta.ru, Ulyukaev wrote a resignation letter in October, and approval was expected after budget discussions in the Duma. The reason for his resignation was due to his poor forecasts of the macroeconomic situation in Russia.

Meduza reminded its readers:

“His [Ulyukaev’s] ministry was not afraid to give tough forecasts – in particular, the Ministry of Economic Development in October suggested that in the next 20 years the country’s economy expects stagnation, GDP growth would be below average. Ulyukaev said that the country’s economy as a whole needed to adapt to the new foreign policy conditions, including sanctions.”

The first Deputy Chairman of Russia’s Central Bank, Sergei Shvetsov, told reporters:

“I have great respect for Alexei Valentinovich [Ulyukaev]. He is the last person anybody would suspect of anything like that…. What is written in the press seems absurd. Right now nothing is clear.”

Or as the President of Russian Union of Industrialists and Entrepreneurs said:

What I think is happening here, however, is a little more mundane that it first appears. Yes, a Minister has been detained, and accused of corruption. But this goes back to the Sergei Ivanov interview I highlighted a few weeks ago. At the time, Ivanov said that the government would continue its anti-corruption efforts. What he meant, of course, was not that there would be an actual effort to crack down on corruption, but that they would make a show of it for the general population. And I think that is why we are seeing this drama played out in the media.

Capital Outflow

The Russian Regime appears to be very concerned with the potential impact that a further weakening of the ruble would have and have been warning about it. There have been several articles (some of which I have highlighted here already) mostly pointing to the fact that Rosneft’s lack of ready cash could cause major problems for the Russian currency come December.

According to Russia’s Central Bank Russian companies have $21.6 billion in external debt due by the end of the year, and another $15.2 billion due by the end of the first quarter of 2017. This does not include banks or other financial institutions.

As for the banks, Raiffeisenbank analysts predict a further outflow of capital.

“Since the beginning of the year, foreign currency in corporate accounts decreased by $20.5 billion or 14%.”

That is, every 7th dollar has left.

“Foreign exchange reserves of the banking system, the reserves on the accounts in foreign banks – remained at its lowest level in 5 years and reached $20.4 billion, down by 20% from the beginning of the year.”

The columnist Sergei Shelin wrote earlier this week that a drop in the price of oil could hurt the ruble too. But, he says, the main thing is that people panic. There are three things that could happen with the ruble:

“A more or less marked weakening of the ruble in the coming months is quite possible, although not guaranteed.”

The rising price of oil may prevent this, however. But Shelin writes, “I do not believe this is very likely.”

Second, if the ruble is again weakened, he says, “it is unlikely to be on the same scale as two years ago or even one year ago.”

And third, Shelin does not rule out “a powerful devaluation” but for this to happen, there would have to be external shocks, “such as the collapse of the global energy market, or some major adventures on the domestic and external fronts.”

Foreign Direct Investment

Kommersant reports:

According to the UN Conference on Trade and Development, in 2015 Foreign Direct Investment [FDI] increased by 40% (up to $1.76 trillion) worldwide, and close to the pre-crisis figure of 2007 ($1.9 trillion). Inflows to developed countries increased by 46% (to $962.5 billion), in developing [countries] by 9% (to $764.7 billion).

At the same time, Russia’s share in the global flow of FDI has fallen to its lowest value since 2001 – 0.6%.

As a result, the country has dropped from the top 20 recipients of investment, but remains on the list of the world’s 20 biggest investors ($26.5 billion).

According to research by the consulting firm A.T. Kearney, among the most reliable countries for investments is the US (2.02 of a maximum 3 points), China (1.82 points), and Canada (1.80 points).

In turn, Russia fell into the last rating in 2013 (11th place). More than 50% of respondents… said that the volume of direct investments could increase in the event of the settlement of the conflict in Ukraine, the lifting of sanctions, and easing of geopolitical tensions.

In April 2014, the Polish company LPP SA, which owns the brands Reserved, Cropp, and House, announced the reduction of investments in Russia due to the significant weakening of the ruble. At the beginning of the year, potential investments were estimated at $130 million.

In the first quarter of 2014, Morgan Stanley reduced its investments in Russia by 30% to $27 million. In particular, the US investment bank completely left the retail group X5.

In July 2014, the European Bank for Reconstruction and Development halted new investment in Russia, and in September the US investment group Blackstone left the country.

In September 2015 against the backdrop of falling oil prices,Total SA reported a decrease in investment by 15% to $20 billion in 2016. In January of this year, [state-controlled oil company] Zarubezhneft purchased from the French company 20% of the Kharyaginskoye project.

What is left out of Kommersant’s explanation is one crucial point: FDI is merely a number quantifying how much money is brought into a country from outside. But it does not indicate who is doing the investing. So, for example, a company that is registered in Cyprus which invests money in Russia is counted as FDI, even though Russians are the beneficial owners. This skews the statistics and does not give an accurate assessment of what is really taking place.

Draft Budget In Denial

The Russian government gave its conditional approval this week for the 2017-2019 draft budget.

But opposition politician Vladimir Milov told Radio Svoboda in an interview yesterday that the government’s new budget is really not so new. In fact, not much in it has changed from previous budgets. The government is banking on the fact that the economic situation that the country finds itself in will be resolved in the next few years.

“This very much reflects the policy that those in power currently hold: the authorities are waiting, [hoping] that they [the West] will partially remove the sanctions, that the inflow of loans from Western financial markets will resume, that the price of oil will increase.”

The budget does not anticipate “any new shocks to the economy”, and has “not prepared for the possible risks”, Milov says. But the government is rather hoping for “some improvement”.

“In my opinion, this is a gross mistake, because the risk of deterioration of the economic situation is manifold.”

And in the meantime, ordinary people are suffering, Milov continues. “A key factor, which is now pulling down the Russian economy, is the decline in purchasing power.”

“People who depend on the budget [pensioners, and the like],” he says, “will not be able to maintain consumption at the current level.”

Besides decreased purchasing power, there are “serious prospects of ruble devaluation.”

Russia is still importing about 50% of consumer goods, despite the embargo on certain foreign goods (mostly from countries within the EU), Milov claims.

“Of course, any devaluation of the ruble leads to the fact that those wages and pensions, which are denominated in rubles, are in fact depreciated.”

If one year ago, 50,000 rubles bought you some amount of goods, that same amount will now get you 10% less.

“It could happen again. A new blow to consumer demand. People will buy less. Accordingly, businesses that operate in the domestic market will be ruined, sales will fall.”

Milov brings up the debt problems that Rosneft faces, which I have written about twice this week [here & here]. Rosneft was able to support the ruble in December 2014, but now it likely could not do so.

Manufacturing is also suffering, and will continue to do so. Companies have been hesitant to stop production because this means layoffs, and layoffs mean protests. So instead they’re continuing to produce durable goods like cars (even though demand has fallen 30-40%). They have cut production a little bit but not to match the decrease in demand. So what will happen? “This will lead to overstocked warehouses.” And eventually the result will be the same, anyway, and layoffs will take place. “…at some point, these plants will have to fire people, to cut production.”

But again, the draft budget does not anticipate this.

The draft budget also foresees a decrease in the budget deficit from 3.15% in 2017 to 1.15% in 2019. But how?

The traditional solution has been for the government to tap into the two reserve funds that are held by the Ministry of Finance: the Stabilization Fund, and the National Welfare Fund. But, as I have mentioned before, both of those accounts are expected to be depleted within the next 6 months or so. After that, the government will likely turn to borrowing from external sources to cover any losses. In addition, the National Welfare Fund should not be used for deficit spending, as it is supposed to cover future pension payments.

Another option would be to increase taxes, but businesses are already overburdened, Milov tells Svoboda, and this would only drive more of them underground or out of business. So the government is hoping that the price of oil will increase so they can cover the deficit with that.

“…I think their expectations are over optimistic on covering the deficit,” Milov concludes.

“…unfortunately, the problems facing our country and the economy are so serious that there is every reason to suspect that such conditional optimism of the government is not justified…” and the budget is “completely unprepared” for any crisis scenario.

Rosneft Debt

More bad news about Rosneft.

The Central Bank’s governor, Elvira Naibullina, told reporters this week that “she saw no risk to the ruble from oil firm Rosneft possibly buying its own shares from state holding company Rosneftegaz.”

But Raiffeisenbank is saying that Rosneft’s expansion plans could cause problems for the ruble.

Rosneft could reduce the sale of foreign currency earnings on the Moscow Stock Exchange in 2017 and cause a “double blow” to the ruble.


Rosneft is the biggest single seller of dollars on the Moscow Stock Exchange. In 2015, the company sold $45.5 billion and in 2014, it sold more than $90 billion.

But due to its rapid expansion and current debt problems (which I discussed here earlier this week), Rosneft may have to cut back on that activity.

Analysts at Raiffeisenbank calculated that at the end of the first half of the year, Rosneft had about $20 billion in foreign currency on their accounts, another approximately $4 billion that the company should obtain from the sale of shares in Vankorneft and Taas-Yuryakh.

That is it should have $24 billion in readily available foreign currency.

Of that [$24 billion], $5 billion [it was actually $5.3 billion – ed.] was spent on the purchase of Bashneft (the transaction was completed on 12 October), $4.7 billion in scheduled loans are due by the end of the year. Another $11 billion will be used to buy back its own shares from the State.

That is, as mentioned above, Rosneft plans to participate in its own privatization by buying the 19.5 percent stake in itself that the State will put up for sale before the end of the year.

If it does so, Raiffeisenbank says that “…at the end of the year Rosneft will have about $5.7 billion (including rubles), which covers only half of the $11.7 billion debt that needs to be paid in 2017…”

“In the next year, Rosneft could reduce the sale of foreign currency earnings to replenish its foreign exchange assets depleted due to the repurchase of shares (in the case of “self-privatization”), at least until the resale of shares to foreign investors,” warned Raiffeisenbank analyst Denis Poryvai.

In his view, the result is a double blow for the ruble: the company will take a substantial amount of currency from accounts in Russian banks, as a result of which the market will run short of dollar liquidity, and later reduce the sale of foreign currency earnings on the stock exchange.


Brain Drain

More bad news for the future of Russia’s economy: Rosbalt reports on the phenomenon of “brain drain” from Russia. That is highly skilled workers needed to drive innovation are fleeing Russia en masse.

What the researchers found is that the lack of competitive salaries and poor working conditions are contributing “to the ongoing “brain drain” from the country.

According to the report titled “Emigration from Russia at the end of the 20th to the beginning of the 21st century”, “the number of Russian citizens living abroad today is much higher than the figure of 1.5 million people officially passing as emigrants.”

“…1.5 million are those who hold Russian passports, came to the Russian consulate, and stood there to be registered.” However, added the director of the Institute of World Economy and International Relations [Evgeny Gontmakher], “a lot more Russian citizens live there without coming to the Russian Consulate and not being registered, that is why they are not present in Russian statistics (of emigrants), they appear to live in Russia.”

The Moscow Times reported:

The real number of Russians emigrating abroad is between three and four times higher than official data, according to a report published by Russia’s Committee of Civil Initiatives.

Official U.S. data for 2014, for example, registered 4.7 times as many Russians immigrating to the country than Russia’s state statistics agency Rosstat, with the same tendency apparent with Germany (5 times higher), Spain (19 times higher) and the Czech Republic (20 times higher).

Gontmakher compared the situation in Russia with that of India, and says that Russia does not compare favorably.

Highly skilled Indians at one time traveled en masse mainly to the US. They created there the foundations for entire sectors, IT, for example. Now, however, there is quite a large return [home] of the Indians, because India has established a number of points of real development. On returning home from the US, an Indian specialist receives a salary that is not inferior to what he received in the US, while he lives in his native, familiar environment. And the flow (of specialists) is now going in the opposite direction. The same situation is taking place in China.

Russia, meanwhile, continues to lose highly skilled professionals as the working conditions in Russian research institutes continues to deteriorate. “Words and appeals to return are one thing, but real conditions are another,” stated the expert.

But it’s not just poor working conditions or bad salaries. There is a real lack of opportunity for people to improve their lives. Innovation is not encouraged. And even if you do invent something patent rights are highly questionable, with little recourse in the courts if someone does steal your intellectual property. Who would stay in such an environment?

The Deluge

Sergei Shelin writes in Rosbalt:

The new Duma, hastily convened for stamping multiple emergency laws and, in particular, the draft budget for next year, will have to first approve the final version of the 2016 budget. It was just released by the Ministry of Finance and was full of surprises.

Though federal revenue this year will be significantly lower than planned, government spending increased significantly (from 16.1 trillion to 16.4 trillion), the “open” part of government spending has been reduced by almost 0.4 trillion and the “closed” has grown about 0.7 trillion.

“Closed” consists of secret and top secret, he notes, “firstly, the military (but not only them).”

Almost everything that is connected with the immediate benefit to ordinary citizens, is to be put under the knife, in contrast to last year, they are no longer hesitant and even transfers to the Pension Fund increased by a couple hundred of billions of rubles. But the main prize is prepared for the military. More precisely, the military industrialists, as you might expect.

“In making these proposals,” he continues, “the Finance Ministry has abruptly changed course…”

“Numerous statements by Finance Minister Anton Siluanov expressed the invincible will to further reduce the budget deficit by cutting down on government spending, including the military, and to reduce inflation to the unprecedented in the post-Soviet era four percent in the next two to three years.”

The budget deficit could be as high as 3.9%, he writes. The Russian Finance Ministry has already conceded that they have exceeded their targets, and that the deficit could sit at 3.7% by the end of 2016. Shelin also acknowledges that the government is manipulating these numbers, and using the Reserve Fund to cover their losses, among other things.

The current relative stability of the Russian economy and finance (albeit without any prospects for the transition to growth), slowing the rate of decline in living standards and a fairly impressive reduction of inflation – is the fruit of the policy of containment of public expenditure, which, until recently, was held by Siliuanov’s Ministry of Finance, in alliance with Nabiullina’s Central Bank.

I do not know if this is a one-off surge in government spending, which will happen between October and December, but if something like that will continue in 2017… stability can be scrapped.

Shelin then attempts to defend Finance Minister Siluanov, and places the blame at Putin’s door:

The supervisor of Anton Siluanov is Vladimir Putin. The reason for the sudden change in the budget views of Minister can only be obtained on his [Putin’s] orders.

It is clear that first and foremost this is an additional lever for the Supreme Commander and the Minister-redistributor will be only an advisor and a responsible executor [of the President’s will].

The author thinks that there are two explanations for what is happening. One is political. The so-called “detente” with the US is not working. Syria is a problem, and the new report about the shooting down of the Malaysian flight MH17 did not help matters. Meanwhile, the Russians have halted cooperation on a 2000 agreement on disposal of weapons-grade plutonium.

So the emotional atmosphere in October can in principle be considered suitable for impulsive arms build-up, without regard for economic consequences.

But you cannot count, because financial realism sometimes (and this is not uncommon) coexists with the most acute foreign policy conspiracy theories.

Shelin also suggests that the move could be what he calls “tactical”. Essentially that the government is robbing Peter to pay Paul (to use the cliche). Which he already suggested in his reference to the Reserve Fund.

There is one other explanation that Shelin does not offer. The Reserve Fund and the National Welfare Fund fell by nearly 155 billion rubles in September. The two funds collectively have about $105 billion left in them (on paper, anyway). If the government stays on this trajectory, the funds will likely run out in the next six months. And after that, it is unclear what the government will do.

They are still offering bonds and so on, but the money they are getting from that is minimal at best. Their privatization scheme scam (which I have written about previously) is not going well. Bloomberg recently reported that the government took a loss on its sale of a stake in diamond miner, Alrosa.

I don’t anticipate that the newly re-instituted sales of stakes in Bashneft and Rosneft will go any better.

And what then?

Après nous le déluge

After us, the deluge