Russia is making the US motor companies look like pikers when it come to burning through cash. If OPEC does cut production to increase the price, can you believe that Russia will not pump to fill the gap? Not likely.
______________________________
Rouble exodus hits Russia credit rating
By Catherine Belton in Moscow
Published: December 8 Financial Times
Russia on Monday became the first G8 country since the start of the financial crisis to have its credit rating downgraded after Standard and Poor’s took fright at the recent exodus from the rouble and sharp drop in oil prices.
S&P said it had lowered Russia's foreign currency credit rating by one notch from BBB+ to BBB because of the “rapid depletion” of the country’s foreign exchange reserves and the “difficulty of meeting the country’s external financing needs”. It said the outlook for the rating was negative.
Russia’s reserves have fallen by $128bn since August to $455bn, as the country battles the capital flight that began following the war with Georgia and escalated as the oil price fell and the global crisis worsened.
S&P said Russia could be forced to spend all $200bn now parked in its two sovereign wealth funds on recapitalising the banking system and covering fiscal deficits in 2009 and 2010.
The agency expects Russia to run a current account deficit next year of 2.6 per cent of gross domestic product due to the oil price fall, putting further pressure on the balance of payments.
“There are a lot of layers of concern,” said Frank Gill, primary credit analyst at Standard and Poor’s. “There are macroeconomic and political risks . . . and Russia has not operated a current account deficit since 1997 and that was less than 1 per cent of GDP.”
Vladimir Putin, Russia’s prime minister, has staked his political credibility on avoiding a sharp rouble depreciation.
The thought of devaluation raises the spectre of the 1998 rouble crash that wiped out Russians’ savings, although economists say any devaluation this time would be far less severe.
