Andrey Lemeshko and Yuliya Fedorinova — Crashing Ruble Means Russia Has Cheapest Costs for Gold

What’s more, the country’s central bank is buying up gold from domestic companies as efforts to curb the economic crisis decrease its foreign currency reserves.… 

“By boosting gold purchases, the central bank reacted to sanctions,” Orlova said by telephone. “The regulator just wanted to diversify its international reserves basket away from dollars and euros as relations with the U.S. and Europe turned into a crisis.”

The Russian central bank buys gold from domestic producers through the commercial banks, increasing bank reserves, and can sell gold for USD or EUR as needed in lieu of holding foreign reserves. This reduces Russia's need to obtain foreign currency to meet balance of payments, for example, or to support the fx rate.

The bank spent about $88 billion last year in an effort to prop up the ruble. At the same time, its gold hoard increased to 38.8 million ounces at the end of 2014, the most in at least two decades, according to International Monetary Fund data. That’s valued at almost $50 billion at current prices.

With production costs declining and the market price of gold increasing, gold is the new oil for Russia.

Bloomberg Business
Crashing Ruble Means Russia Has Cheapest Costs for Gold
Andrey Lemeshko and Yuliya Fedorinova

Chris Weafer — Putin stays

Although not saying so publicly, the Kremlin has adopted a deliberate strategy –to let the rouble continue falling and accept the painful economic consequences over the medium term as the 'lesser of two evils.' The weak rouble protects the country’s budget revenues and provides a soft stimulus for domestic manufacturers. It allows the country to survive the crisis but at the expense of growth and investment flows, both of which are being sacrificed over the medium term in order to try and remain in a relatively better shape to recover after the crisis and also to ensure that any loss of public support for the government is contained. As the Kremlin sees it, trying to limit the decline in financial reserves in order to protect the budget, and to preserve the investment grade rating, is a better strategy than burning though the money while oil remains weak.…

Open Democracy
Putin stays

Chris Weafer, co-founder of Macro Advisory, and former Chief Strategist at Sberbank CIB

John Helmer — The Oligarchs To Lead Russia A Dance In 2015 – Choosing Your Partners When You Are At War

Machinations in Russia. Alexei Kudrin is the person to watch.

Alexei Kudrin, the former finance minister (right), started by criticizing Putin and Nabiullina last week for their timing on managing the rouble crisis. For Kudrin’s tweets, click. This week Kudrin has announced through the Financial Times that Putin is obliged to choose between capitulation in eastern Ukraine and capitulation on the home front. 

“As for what the president and government must do now,” Kudrin declared, “the most important factor is the normalisation of Russia’s relations with its business partners, above all in Europe, the US and other countries.” Kudrin claimed to the newspaper that 40% of the rouble depreciation is due to the sanctions war. 

Kudrin announced his candidacy for prime minister in Washington in September of 2011, before he was fired; Putin said at the time that Kudrin had suffered abreakdown. This time Kudrin’s candidacy to run Russia is sponsored from London, as he places himself at the head of what the Kremlin faction of security officials is calling the Fifth Column. The security faction is led by chief of staff Sergei Ivanov; it is represented in public by the Novorussian commander Igor Strelkov. Read more. 

Look back at the table setting — at Friday’s meeting with the oligarchs, Ivanov was in first place on Putin’s right.

Dances with Bears

The Oligarchs To Lead Russia A Dance In 2015 – Choosing Your Partners When You Are At War

John Helmer

Sergey Aleksashenko — Russian Central Bank Has Right Strategy - But Lousy Tactics

• Former Russian Central Banker says overall strategy of floating and devaluing the ruble is sound
• Identifies errors by the Central Bank as the primary cause of the ruble crash

Russia Insider

Russian Central Bank Has Right Strategy - But Lousy Tactics
Sergey Aleksashenko | Financial Times

Preface by Alexander Mercouris

RT — Slumping ruble should push Russia to ‘live in new reality’ – Bank chief

The plunging ruble is a signal for the Russian economy to adapt to new conditions, Russia’s Central Bank Chair Elvira Nabiullina said, following the surprise midnight decision to hike the key interest rate to 17 percent.… 

“We must learn to live in a new reality, to focus more on our own resources to finance projects and give import substitution a chance,” the bank chief said in a televised address Tuesday.… 

Nabiullina said that the Central Bank has special tools not to restrict development and growth within Russia, citing finance of investment projects, and small and medium-sized business and commodity exports as target industries.

RT
Slumping ruble should push Russia to ‘live in new reality’ – Bank chief

Neil Wilson — Russian Roulette

Neil schools the Russian government and central bank about handling a currency crisis.

3spoken
Russian Roulette
Neil Wilson