How much does Russia cost? Near zero, according to investors from around the world. The world’s largest sovereign wealth fund, Norway, estimated on Thursday that its investment in Russia, or $ 2.7 billion in assets, was “lost.” Their value would be divided into ten, according to a “very, very uncertain” estimate, admits Nikolai Tangen of the sovereign wealth fund. On Thursday morning, in a long press release, Societe Generale pointed out that can “take” the loss of its Russian banking subsidiary, even valued at zero (compared to € 2.1 billion at the end of 2021). He no longer rules out the spin-off from his subsidiary Rosbank, which was very profitable before Russia’s invasion of Ukraine.
Decline of over 90% of Russian securities in London
Faced with international sanctions, this is a total flight of all Russian assets. Russia’s banking system is paralyzed, with the Moscow Stock Exchange closing on Monday. Russian companies listed abroad have collapsed on the London Stock Exchange, such as Sberbank, oil giants Rosneft and Lukoil (whose board has just called for a halt to fighting) or even gas giant Gazprom (still exempt from sanctions), which lost more than 90% of their value in a few days. However, it is no longer possible to sell, the London Stock Exchange has stopped all listings of Russian securities and derivatives.
The Russian government is preparing new measures to stem the flow of capital. The central bank has already introduced capital controls, such as requiring Russian exporters to convert 80% of their income into rubles or banning Russians from sending money abroad. Nevertheless, the ruble continues to fall into hell as the central bank raises its interest rate to 20%.
Speculative category
The world’s leading provider of stock indices, MSCI, has just excluded Russia from its emerging market indices. “Russian stocks are not subject to investment,” MSCI said. Another index provider, London-based FTSE Russell, made the same decision. This will isolate Moscow a little more, given the burden of index management, especially in developing countries, and cause a massive sell-off of Russian securities at the earliest opportunity.
Russia’s central bank has decided not to pay coupons on government bonds in rubles held by international investors. The measure does not apply to international foreign currency bonds, but this announcement is very similar to the beginning of bankruptcy. In addition, rating agencies S&P, Moody’s and Fitch have reduced Russia’s debt to the speculative category, meaning that Russia is unlikely to repay its debt.
To non-payment?
But its ability to pay is not so much in question – Russia has something to pay for thanks to its foreign exchange reserves (40% of GDP) – as its “technical” inability to do so because of sanctions. Some of Russia’s central bank assets are indeed frozen, making it difficult to adopt any measure to support the ruble. International bonds are expected to mature by $ 700 million by mid-March. The default would be the first time since the 1998 Russian crisis. “The point of the story is that Russia must get out of all portfolios,” Vincent Mortier of Amundi, Europe’s first asset manager, told AFP.
Eric Benham
March 3, 2022, 7:59 p.m.