[flight_from_kamakura]

hmm, i'm pretty confident about what i'm saying here, but i'm not interested in stepping on anyone's toes, and indeed, it looks like there's new data there that i'll have to look at (there's lots of q3 data yesterday and today to look at). so though i don't really buy the economist/reuters line on all this, for now i'll admit that it may be that you're more right than i am.

just a few things that i'll take immediate issue with though, real quick. as i'm sure you know, a large portion of the stabilization reserves are held in a mix of currencies, and the foreign currency reserves are mostly debt, meaning that they'll be somewhat isolated from the ruble's current troubles. also, inflation has been huge in russia since the fall of communism, and it's been hovering around 12-14% since october 2007 (and it was a high 8-10% in the months before that), and the central bank has basically committed to maintaining there or lowering it a little, which sounds weird until you realize how unevenly it's distributed (ie. regional differences, price controls, etc). you can't look at inflation in russia the same way you do in other places. as for resource prices, oil is the only one that's dropping faster than the ruble, and that's affecting exports because of relatively high delivery costs and export duties (which have dropped considerably, by the way).

also, as i'm sure you know, a lot of these firms in difficulty were massively overleveraged, mostly in sectors based on domestic consumption. capital has dried up for these losers, and we can look at the example of vancouver to get a sense of how this works. dropping steel orders on the domestic side means dropping coal orders on the domestic side. but international demand in these domains remains strong (in this instance at least...and i've got a copy of steelworld right here that tells me so!) and the russian government has been suspending or pushing back export duties across the board - in timber, in metals, coal, heck, they cut the oil export duty nearly in half. and though i may be wrong on this, i've read nowhere serious (yet) that we've seen declines aside from the timber drops attributed to weak harvest and oil export drops. the reuters article seems deliberately to be sensationalizing the drop by talking to a coal producer obviously selling to domestic steel concerns (thus likely having no export license and being especially dependent on said domestic demand). this, to me, is a pretty weak anecdotal example.

finally, as for foreign direct investment, i've seen no real decline, though with capital flight and the perception of increased risk, the loans are being backed by equity stakes, which is a pretty fair deal, in many minds, given the obvious strengths of these companies. incidentally, this is probably part of the reason that the government is shoring up the big players with lots of foreign debt right off - because widespread default would lead to significant foreign ownership of these resources companies, deemed strategic. anyway, the way it seems to be working is that an entity like deutschebank puts up a loan for something like vedba or norilsk and then the vtb puts walks in to provide the guarantee.

edit: though it may sound ludicrous, i think russia right now is in a great position.