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People wait in a line to pay for their purchases at the IKEA store on the outskirts of Moscow, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Pavel Golovkin)
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December 17, 2014 - RUSSIA
- Russian consumers flocked to the stores Wednesday, frantically buying
a range of big-ticket items to pre-empt the price rises kicked off by
the staggering fall in the value of the ruble in recent days.
As
the Russian authorities announced a series of measures to ease the
pressure on the ruble, which slid 15 percent in the previous two days
and raised fears of a bank run, many Russians were buying cars and home
appliances — in some cases in record numbers — before prices for these
imported goods shoot higher.
The Swedish furniture giant IKEA
already warned Russian consumers that its prices will rise Thursday,
which resulted in weekend-like crowds at a Moscow store on a Wednesday
afternoon.
Shops selling a broad range of items were reporting
record sales — some have even suspended operations, unsure of how far
the ruble will sink. Apple, for one, has halted all online sales in
Russia.
"This is a very dangerous situation. We are just a few
days away from a full-blown run on the banks," Russia's leading business
daily Vedomosti said in an editorial Wednesday. "If one does not calm
down the currency market right now, the banking system will need robust
emergency care."
Alyona Korsuntseva, a shopper at IKEA in her 30s,
said the current jitters surrounding the Russian economy reminded her
of the 1998 Russian crisis when the ruble tumbled following the
government's default on sovereign bonds.
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People wait in a line to pay for her purchases at the IKEA store on the outskirts of Moscow, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Pavel Golovkin) |
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A couple carry a television set they purchased from a shop in St. Petersburg, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Dmitry Lovetsky) |
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A woman waits in a line to pay for her purchases at the IKEA store on the outskirts of Moscow, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Pavel Golovkin) |
"What's pressuring us is
the fact that many people (back then) rushed to withdraw money from bank
cards, accounts," she says. "We want to safeguard ourselves so that
things wouldn't be as bad they were back then."
Consumers are
buying durable goods as they are seen as better investments than most
Russian stocks. And, an overwhelming majority of Russians cannot afford
to buy land or real estate.
Earlier this week, the ruble suffered
catastrophic losses as traders continued to fret over the combined
impact of low oil prices and Western sanctions over Russia's involvement
in Ukraine's crisis.
Some signs emerged Wednesday that the
ruble's freefall may have come to an end and the currency could recover,
at least in the short-term. After posting fresh losses early Wednesday,
the ruble rallied more than 10 percent to around 60 per dollar at 9
p.m. Moscow time (1800 GMT, 1 p.m. EST).
Analysts credited a series of reassuring statements from the Central Bank and the government for the improving ruble backdrop.
First,
Deputy Finance Minister Alexei Moiseyev said the government will sell
foreign currency from its own reserves "as much as necessary and as long
as necessary."
Then the Central Bank announced an expanded series
of measures to help calm the situation such as giving banks more
freedom to increase interest rates on retail deposits and offering them
more flexibility to deal with the ruble's depreciation on their balance
sheets.
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A man pushes a cart with his purchases at the IKEA store on the outskirts of Moscow, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Pavel Golovkin) |
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A young woman waits in a line to pay for her purchases at the IKEA store on the outskirts of Moscow, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Pavel Golovkin) |
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A man carries a dishwasher machine he purchased from a store in St.Petersburg, Russia, Wednesday, Dec. 17, 2014. The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the ruble will go, while Apple halted all online sales in Russia. (AP Photo/Dmitry Lovetsky) |
Neil Shearing, chief emerging markets economist at
London-based Capital Economics, said the "authorities have at last
started to develop a strategy for containing the effects of the ruble's
collapse on the banking system and wider economy."
Tom Levinson,
chief foreign exchange and rates strategist at Sberbank CIB, agreed,
saying the Central Bank could ease pressure on the ruble, even without
massively spending its reserves.
"If they can provide measures
that help secure the banking sector, provide confidence to investors and
also to the population as a whole ... that could be the first toward
stabilizing the situation," Levinson said in an interview. "Long way to
go, but we are seeing some positive steps at last."
The ruble's
tailspin continued Tuesday, despite a surprise move by Russia's Central
Bank to raise its benchmark interest rate to 17 percent from 10.5
percent — a move aimed to make it more attractive for currency traders
to hold onto their rubles.
Should the current attempts to shore up the ruble fail, then the Russian authorities could be imposing capital controls.
However,
Russia's Economic Development Minister Alexei Ulyukayev has denied the
government is considering doing so. While easing pressure on the ruble,
the move would shatter Russia's already tarnished reputation to
investors.
Russian officials, meanwhile, have sought to project a
message of confidence on state television, dwelling on the advantages of
ruble devaluation, such as a boost to domestic manufacturing.
There
are fears that the ruble could come under further pressure this week as
President Barack Obama is expected to sign legislation authorizing new
economic sanctions against Russia.
Whatever happens with the
ruble, the Russian economy is set to shrink next year by 0.8 percent,
even if oil prices stay above $80 per barrel. If oil prices stay at the
current level of around $60, the Central Bank said the Russian economy
could contract by nearly 5 percent.
The German government's
coordinator for relations with Russia, Gernot Erler, said the economic
crisis in Russia was largely the result of the drop in oil prices, not
the sanctions imposed by the West.
"It's an illusion to think that
if the sanctions were to fall away tomorrow, the Russian economy would
suddenly be all right again," Erler told rbb-Inforadio on Wednesday. -
Daily Mail.
Russian Bank Run Could Be ‘in the Cards,’ UralSib Capital Says
The
Russian economy may come to “a sudden stop” and a bank run “could be in
the cards,” according to an analyst at Moscow brokerage UralSib
Capital.
“A full-blown currency and financial-crisis scenario
seems to be unfolding in Russia in what was supposed to a quiet week as
we head into the holiday season,” Slava Smolyaninov, deputy head of
research, wrote in an e-mailed report today. “There is a risk that the
economy will come to a sudden stop, along with the banks and the overall
financial system. Hence, we may have underestimated the level of
financial risk in the event of a full-fledged panic. A bank run could be
in the cards.”
Smolyaninov didn’t reply to a call or an e-mail
seeking comment. UralSib Capital is a unit of a bank that is the 13th
largest consumer lender in Russia, according to its website.
Banks
in Moscow, including Citigroup Inc. (C), ZAO Raiffeisen and
Khanty-Mansiysk Otkritie Bank, yesterday reported a surge in demand for
foreign currency as the ruble continued to slide after a plunge in oil
prices. The currency has lost almost half its value against the dollar
this year, a decline yesterday’s interest-rate increase initially failed
to halt.
OAO Sberbank (SBER), Russia’s biggest lender, Alfa Bank
and consumer lender TCS Bank responded today by offering clients higher
interest in rubles in a bid to retain deposits.
“The financial
system and banks in particular are clearly in danger as a crisis of
trust seems to be developing as well,” Smolyaninov wrote. “We believe
the worst is yet to come.”
Russia’s ruble-denominated Micex Index
(INDEXCF) fell 1.7 percent today, while the dollar-denominated rallied 7
percent by 3:05 p.m. The ruble rebounded, snapping seven days of losses
against the dollar, and gaining 2.3 percent to 65.95. -
Bloomberg.