As Zero Hedge
first reported today, shortly before noon one (and
subsequently more) FX brokers advised clients that any existing Ruble positions would be forcibly closed out because "
western banks have stopped pricing USDRUB",
over concerns of Russian capital controls. Ironically, it was this
forced liquidation of mostly short RUB positions that pushed the RUB
higher, which in turn had a briefly favorably impact on energy
commodities and risk assets, as the market had by then perceived the
Ruble selloff as excessive. Of course, since nothing had actually
changed aside from a temporary market technical, the selloff promptly
resumed into the close of trading once the market finally understood
what we had explained hours previously.
And unfortunately for the bulls, various falling knife-catchers, and
those who hope the Russian situation will stabilize imminently with or
without capital controls, it appears things in Russia are about to get a
whole lot worse because as the
WSJ reports, the next driver of the Russian crisis is likely to come from within the banking system itself because
"global
banks are curtailing the flow of cash to Russian entities, a response
to the ruble’s sharpest selloff since the 1998 financial crisis."
Presenting Russia's banks: now cut off from the outside world as the
second cold war goes nuclear, at least when it comes to the financial
system:
Such banks as Goldman Sachs Group Inc. this week started rejecting
requests from institutional clients to engage in certain
ruble-denominated repurchase agreements and other transactions designed
to raise cash, according to people familiar with the matter.
Bankers and traders say the moves to restrict some ruble transactions
have become increasingly widespread among major Western financial
institutions this week, even as the same institutions continue to try to
profit from the ruble’s wild swings. The moves, which the banks
are deploying to protect themselves against further swings in the
currency, have the potential to add to the strain on Russia’s financial
system.
Goldman in recent days largely stopped doing longer-term
ruble-denominated repurchase agreements, or repos, in which securities
or other assets are swapped in exchange for cash, said a person familiar
with the matter. The Wall Street bank is still doing short-duration ruble repos, those that mature in less than a year, this person said.
And where Goldman goes, everyone else follows, even though according to the WSJ this has not happened, yet:
Other banks, including Bank of America Corp. and Citigroup Inc.,
haven’t changed their trading with Russia or in rubles, according to
people familiar with those banks.
They will, it is only a matter of time. Meanwhile, the entire Russian
capital market, and not just its currency, is becoming isolated from
the rest of the Western world:
In one sign of the banking industry’s hasty retreat, the London-based
manager of an emerging-markets hedge fund said Tuesday that he couldn’t
get any banks to trade Russian government bonds with him.
Of course, anyone who read our article in early November explaining "
How The Petrodollar Quietly Died, And Nobody Noticed",
predicting the crunch in global intermarket liquidity as a result of
the collapse in crude, would know this is coming. As for the death of
the Petrodollar we warned about, a death which has resulted in the
disintegration of market volume just as warned, suddenly everyone is
noticing.
Regardless, what all of the above means is that Russia now has at
best a few weeks in which to find an alternative source of short-term
funding. One coming from the East.
The question is will Putin swallow his pride and proceed with the
next logical step as the Eurasian axis realizes the time to abandon the
dollar has long past, that now only actions matter and not words, and
joins forces with China in a new monetary union, one which combines the
Ruble and the Yuan, and is backed by China's gold and Russia's natural
resources, as cheap as they may be for the time being... until one or
more of the largest middle-east oil exporters experiences a major and
"unexpected" geopoolitical incident, one which sends the price of oil
soaring right back up.
