The Bear Squeezes Back:
Ruble Rises Against Dollar:
By Duncan Cameron
December 25, 2014 "ICH"
The latest of a series of
official Canadian verbal darts aimed at
Russian President Vladimir Putin was published December
15 on BuzzFeed.
The content was propaganda or
would have it ,
advertorial. It was part of a Department of
Foreign Affairs, Trade and Development (DFATD)
campaign surrounding Stephen Harper's announcement of
new sanctions against Russia, which, no
surprise, coincided withupdated
On December 16 headlines
Routed." The impression re-enforced was that
Russia faced severe financial problems, and
that investor support for its economy was
sliding. The ultimate U.S. objective of
forcing regime change in Russia through
economic sanctions aimed at limiting its
influence in Ukraine seemed to be on track.
The Russian ruble had been
falling in value against the U.S. dollar. It
fell as much as 11 per cent on Dec. 16.
Speculators borrowed rubles in the morning
and sold them for dollars immediately. At
the end of that day, the rubles were bought
back for 11 per cent less, the loan repaid,
and the speculators picks up an 11 per cent
profit in one day, just short of 4,000 per
cent if it could be sustained for a year.
Except that on December 17,
the Russian Central Bank intervened in the
foreign exchange market to support the value
of the ruble. By selling from its deep U.S.
dollar reserves, the Russians were able to
drive up the value of the ruble, forcing
speculators to take huge losses. The new
headline was "Ruble Surges."
Later last week, and again to
start the week of December 22, the ruble has
been gaining ground against the dollar. The
engineer of the turnaround is Ms.
Elvira Nabiullina ,
Governor of the Bank of Russia, the first
woman to head a G8 central bank, and
formerly economic adviser to Putin.
By defeating attempts to
drive its currency down, the Russian Central
Bank had executed a procedure known as a
"bear squeeze," the bears being those who
believed the ruble would fall in value.
Feeding this belief was major
misinformation, and misunderstanding of the
Russian economic and financial situation.
While an almost 50 per cent
decline in the price of oil has hurt Russian
export earnings, the even greater fall in
the value of the ruble has meant that the
ruble value of the oil exports has not
Sanctions introduced by the
West against Russia are a form of hot
economic warfare. But the attack on the
ruble resulted in a competitive currency
devaluation for Russia, limiting its ability
to import from the West (saving foreign
currency), and protecting the value of its
declining volume of exports by increasing
the number of dollars it receives for each
As Michael Hudson has explained ,
Putin has responded to the U.S.-led
sanctions movement by diversifying oil and
gas exports towards China and Turkey, and
signing sales agreements in rubles or
currencies other than the U.S. dollar. By
abandoning the U.S. dollar as its trading
currency, and accepting payments in Chinese
yuan, for instance, Putin is signalling his
desire to break the stranglehold the U.S.
currency has enjoyed over oil and gas trade,
and within the world economy.
On December 22, China announced its
willingness to support the ruble through
currency swaps from its $4-trillion
Russia has a favourable
balance of trade and healthy foreign
exchange reserves. Its overseas assets
exceed its overseas debts. Contrary to
reports from even American liberals such as Paul
Russia is well placed to meet its overseas
payments, as French specialist Jacques Sapir has
The Russian economy grew on
average by nearly seven per cent per year
from 1999-2008 (Putin took power in 2000)
before it tanked in the world financial
crisis of 2008. While U.S. and Eurozone
(except Germany) economic growth remained
about zero from 2008 until 2013, Russia grew
slowly in that period.
Importantly, in 2014 the
level of Russian government debt is small at
16 per cent of GDP, especially when compared to
other industrial countries such as France or
the U.K., where it is over 90 per cent.
Russian corporate debt
especially in banking and in the oil and gas
sector has grown and
because these companies are tied to the
Russian state their operations remains
vulnerable to Western sanctions.
Russia is attempting to
divert its purchases of foodstuffs to
non-Western countries and wants to adopt an
aggressive import substitution policy for
manufacturing. Instead of importing
manufacturing goods it wants foreign
manufactures to re-locate to Russia and
produce for the large domestic market.
Russia is a nuclear power. In
another era, when Canada practiced
diplomacy, the goal would have been to
reduce tensions between the U.S. and the
Russian bear. Today, as DFATD resorts to
BuzzFeed, shows the Conservatives eschew
foreign policy as such, preferring to
promote themselves as pro-American or
pro-Ukrainian with the voting public.
An experienced observer, Patrick
former political counsellor at the Canadian
Embassy in Moscow, has serious
NATO policy, but foreign policy distinctions
do not trouble Foreign Minister Baird or the
Prime Minister. The oafs are in charge in
Duncan Cameron is the
president of rabble.ca and
writes a weekly column on politics and
to editor for rabble.ca-node-115240]
for article rabble.ca-node-115240]
Ruble Gains 4th Day
as Russia Exporter Demand Outweighs S&P Risk:
The ruble gained for a fourth day as tax
payments and speculation Russian exporters
are being pushed to sell foreign currency
outweighed concern that the sovereignís
credit rating will be cut to junk.
controls arrest Russian ruble's slide:
The rouble hit its highest levels in two
weeks on Tuesday, shored up by informal
capital control measures designed to head
off a repeat of the inflation and protests
that marked Russia's 1998 financial crisis.
Russia Offers Dollar
Loans to Aid Banks Before Debt Payments:
The Bank of Russia will offer banks
four-week and one-year funding in dollars
and euros, backed by foreign-currency loans
to large exporters, according to a statement
today. The instrument will be available to
banks with equity of at least 100 billion
rubles ($1.8 billion) until 2018.