http://dealbook.nytimes.com/2014/12...column-region®ion=top-news&WT.nav=top-news
By
Jenny Anderson and
Andrew Roth December 17, 2014
LONDON — Trading in the Russian ruble was volatile early Wednesday morning, rallying briefly on news that the Finance Ministry was ready to sell some of its foreign currency reserves, and then weakening again.
The ministry said Wednesday morning that
it was prepared to sell as much as $7 billion of those reserves to support the ruble, which a senior official said was “extremely undervalued.”
We will sell “as much as we need to,” Alexei V. Moiseev, the deputy finance minister, told journalists, the Interfax news agency reported. Separately, Interfax said that the Finance Ministry had already begun selling currency reserves.
The ruble was at 68.25 to the dollar in midmorning trading. It closed at 67.50 on Tuesday, when it swung wildly to about 80 rubles to the dollar after opening the day at 64.
“It’s already been a roller coaster,” said Luis Costa,
Citigroup’s head of strategy for Central and Eastern Europe, the Middle East and Africa.
Mr. Costa said the market welcomed news that there would be a meeting on Wednesday of the central bank, the Foreign Ministry and important Russian companies.
“We are seeing the level of sophistication and synchronization of efforts here to stem the ruble’s slide is gaining more traction,” he said.
Traditionally, the Russian Central Bank has managed the ruble rate. Since transitioning to a free-float model last month,
the bank has sold more than $10 billion in foreign currency to support the ruble in December, including nearly $2 billion on Monday alone.
Some traders and strategists said the Finance Ministry’s announcement would have little effect. They noted that the ministry’s decision to sell foreign currency reserves was no different than the central bank’s efforts, which had done little to help the ruble.
“It’s dollars from the same source,” said one senior trader, who spoke on the condition of anonymity because he was not authorized to speak to the news media. The central bank has sold tens of billions of dollars, he said, “and look what that has done.”
The ruble has lost about half of its value as oil prices have plummeted and as Russia has felt the increasing weight of economic sanctions. On Monday, the central bank drastically raised interest rates to 17 percent from 10.5 percent in an emergency bid to halt the currency’s slide. But rather than reverse the downturn, the move accelerated the panic, as the market interpreted it as an act of desperation.
On Tuesday, traders said the ruble’s weakness reflected concerns about the impact of Russian households’ selling their currency as well as the fear that the government might impose capital controls. Mr. Costa said he did not think that would happen.
“I still believe Russia is far away from capital controls,” he said. “I truly believe the authorities understand if they delve into strong capital controls, credit worthiness will be the main victim.”
Nevertheless, market participants remain on high alert. On Tuesday, MSCI, a New York-based provider of indexes, said it was closely monitoring recent economic developments in Russia. The company said it might exclude its Russia index from its MSCI Emerging Markets Index if Russian authorities were to carry out restrictive measures, such as foreign exchange controls.
Depending on developments, MSCI said it might reclassify its MSCI Russia Index as a stand-alone market or pre-emptively replace local listings with liquid depositary receipts to avoid a potential exclusion.
In a sign of how Russia’s currency volatility is starting to affect Western companies, Apple said on Tuesday that it had stopped online sales of its products in Russia because of the ruble’s tumbling valuation against other currencies like the dollar and the euro.
Some automobile dealerships in Moscow, particularly those selling luxury vehicles, halted sales, citing the currency’s instability. Managers at Major Auto, a leading dealer of imported cars, told customers they were not taking orders for BMWs, Jaguars, Land Rovers, Toyotas and others either because they had no cars left in stock or had been told not to make any more sales. Used cars were also not being sold. Several of the dealerships raised prices this month, and a manager at Major Auto’s Jaguar dealership interviewed on Tuesday said sales had increased at least 50 percent in the past month.
In Russia, the sell-off has ignited tempers. The central bank has come under criticism from politicians and even from Aleksei Ulyukayev, the finance minister, for not taking drastic and earlier measures to stem the currency’s losses. Mr. Ulyukayev said the central bank should have raised interest rates sooner.
Jenny Anderson reported from London, and Andrew Roth from Moscow. Chad Bray and Mark Scott contributed reporting from London.
http://www.nytimes.com/2014/12/18/w...ould-push-putin-to-close-deal-on-ukraine.html
By
ALISON SMALEDEC. 17, 2014
BERLIN — The turmoil in the Russian economy appears to be encouraging Moscow to seek compromise in the crisis over
Ukraine, although President
Vladimir V. Putin has proved so erratic in past months that Western leaders are wary of proclaiming progress, officials and analysts said Wednesday.
On Sunday and again on Tuesday night — after days in
which the ruble gyrated wildly, raising the possibility of a broader financial crisis that could saddle Mr. Putin with deeper economic and political problems — the Russian president spoke by phone with his Ukrainian, German and French counterparts. Statements released afterward in all four capitals talked of moving quickly to cement
a cease-fire broadly observed since last week in eastern Ukraine.
Mr. Putin may make his intentions clearer at his annual news conference on Thursday. European leaders will meet later Thursday and Friday in Brussels amid growing indications that pro-Russian separatists and Ukrainians could meet Sunday or Monday for talks under European auspices.
One wild card is the threat by the United States to move ahead with a new round of sanctions against
Russia.
The White House said Tuesday that President Obama, despite misgivings about falling out of step with European allies and complicating the talks, would sign newly passed legislation expanding the financial sanctions and providing additional military aid to Ukraine.
While leaving the United States at risk of becoming out of step with Europe, which is not seeking tighter sanctions, the new legislation could also help pressure Mr. Putin to seal a deal on Ukraine now that would relieve some of the pressure on the Russian economy.
On Tuesday, Secretary of State John Kerry said that sanctions “could be lifted in a matter of weeks or days” depending on how Mr. Putin acts.
In Moscow, some analysts said the Kremlin appeared to have started moving toward a more flexible position on Ukraine before the ruble’s nose dive, but the currency crisis of the past few days made progress imperative.
“It seems like the new economic situation will inevitably force Russia to focus on the domestic crisis,” said Fyodor Lukyanov, the editor of the journal Russia in Global Affairs.
At the same time, Mr. Lukyanov said, Mr. Putin is unlikely to abandon the separatists in eastern Ukraine.
“Putin’s credibility might be seriously damaged by this economic crisis,” he said. “If in reaction he begins to clearly give up on Ukraine, that will be detrimental to his position and he cannot afford it.”
For some days, Russia experts in financial markets have suggested that Mr. Putin might agree to measures that essentially would freeze the conflict in eastern Ukraine, allowing aid into the region and halting hostilities, at least for the winter.
That arrangement would still allow Mr. Putin to claim he was preventing Ukraine from any further move toward the European Union or NATO membership, said Christopher Granville, a Russia expert and managing director of Trusted Sources, an emerging markets research firm in London.
