Ye Tan: Russia's Debt Crisis Is On The Verge Of Fire

Oil prices plunged sharply due to Ukraine's geopolitical sanctions against Russia. In October 14th, crude oil prices in the New York Mercantile Exchange fell 4.5% to $81.84 a barrel, which has fallen 20% since the beginning of June. This is the lowest closing level since June 2012. That day, the world Crude oil benchmark Brent crude oil fell 4.3% to $85.04 a barrel, a nearly four year low, and the largest percentage decline since September 2011 in the price of Brent crude. Some analysts expect oil prices to fall.

Russia does not hold oil pricing power. New York and Beihai and Middle East crude oil have fallen. Russia has no chance to return to heaven. There are two main reasons for the fall in crude oil, that is, the global real economy is sluggish and oil production is rising. The real economy is sluggish. At present, non human resources can be recovered, and it needs a long cycle to pick up.

As for oil producing countries, the collective reduction of output is not the case for Russia. The Wall Street Journal reported that since 2004, the US oil production has increased by 56%, equivalent to 3 million 100 thousand barrels per day in the traditional production fields such as Oklahoma and the Gulf of Mexico. Meanwhile, the demand for gasoline and other fuels in the United States has dropped by 8%. In the short term, the US crude oil reserves can leveraging the price of the international crude oil market. In the crude oil market, the United States and the Middle East countries have a decisive influence.

OPEC, which accounts for 1/3 of the world's oil production, has yet to reach a consensus on reducing production capacity. The core countries have insufficient willingness to buy Saudi Arabia, saying they have prepared the price of crude oil to drop to $80 a barrel, equivalent to a rope set on the neck of Russia.

The main oil - dependent countries are unhappy, and Russia is one of the big powers. According to Zhang Kang, deputy director of the Advisory Committee of petroleum exploration and Development Research Institute of Sinopec, Russia's oil output is close to the peak before the collapse of the former Soviet Union, reaching 5.262 billion tons in 2012. With the fall in oil prices, Russian oil export revenues have not increased. According to the Russian Federation customs bureau, in the first half of this year, the total value of Russian oil exports decreased by 3.5% compared with the same period in 2013, to 81 billion 68 million US dollars, and volume and price fell.

Russia is highly dependent on oil and gas export revenues, which account for about half of its federal budget revenue. According to the Russian Federation savings bank, Russia can maintain a balance between oil price and US $104 per barrel. EvgenyNadorshin, chief economist at AFKSistema, a Russian conglomerate, said that if oil prices stayed near $90 a barrel, the Russian economy might begin to shrink before the end of the year. If oil prices fall below $80 a barrel, Russia may have to cut spending.

Sensitive funds are voting with feet. On the one hand, the Russian enterprises and banks that are sanctioned need us dollars to trade; on the other hand, Russia's economic prospects are bleak and its capital escapes from Russia, causing ruble price to drop steadily.

In order to prevent the rouble from falling, the Central Bank of Russia has invested $6 billion in 10 days since October 3rd to intervene in the foreign exchange market and ended in a crushing defeat. President of the Russian central bank admitted that the central bank could not compete with the market. This year, the rouble has fallen by about 18% against the US dollar. Russia had to take out the US dollar from its spare purse, and Treasury Secretary Si Lou Aranoff said in October 15th that the Treasury would give billions of dollars from its budgetary funds to the market in a month, and then put it in the bank's account by auction. Rouble Under pressure.

　　 Russia The central bank reserves about US $450 billion, including US dollars, gold and so on. Rating firm's Fitch estimates that sanctions may cost 15% of Russia's gold and foreign exchange reserves. By the end of 2014, Russia's gold and foreign exchange reserves are expected to drop to US $450 billion, to 400 billion US dollars by the end of 2015. The reality is even more brutal. This year, the Russian government's foreign exchange reserves have dropped by 55 billion US dollars, of which about 40 billion US dollars are used to support the ruble exchange rate. At present, Russia's foreign exchange reserves are only 452 billion dollars. Unfortunately, the price of gold is also weak. According to the Ministry of finance, Russia's foreign debt has reached US $732 billion 46 million at the end of 2013, and the current level of foreign reserves has not been able to cover such a huge amount of foreign debt.