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Furious Russia, Downgraded Just Above Junk By S&P, Proposes "Scorched Earth" Retaliation on NATO
Zero Hedge ^ | 04/25/2014 | Tyler Durden

Posted on 04/25/2014 7:30:37 AM PDT by SeekAndFind

Cyprus and Russia - what's the difference (aside from the fact that the former was a money laundering offshore center of the latter until last year of course)?

If you said one is a lackey to statist, selfish banker interests, and after having its economy thoroughly destroyed by the great doomed European sociopolitical (and pathological) experiment, came crawling back to its Eurozone masters, while the other couldn't care one bit about Pax Petrodollariana and the global central bank cabal, you are right. In which case it will also be clear why a few hours ago that joke of a rating agency, Standard & Poor's, which also earlier announced it was "affirming" France at an AA rating making it very clear it will no longer accept being sued for telling the truth and downgrading sovereigns or otherwise have its offices abroad raided, not only upgraded Cyprus from B- to B (please deposits your funds in Cyprus banks now: they are safe, S&P promises), but - far more importantly - delivered a political message to the Kremlin, and downgraded Russia from BBB to BBB-, one short notch away from junk status. This was the first downgrade of Russia by S&P since December 2008.

WSJ reports:

"In our view, the tense geopolitical situation between Russia and Ukraine could see additional significant outflows of both foreign and domestic capital from the Russian economy and hence further undermine already weakening growth prospects," S&P wrote in its report.

 

Moscow's MICEX stock index fell by 1.5% after the move. The ruble weakened 0.6% against the dollar to 35.977.

 

A further cut to junk status would be a big move, given Russia's relatively modest level of debt, according to Tim Ash, an economist at Standard Bank.

 

"But if the crisis in Ukraine deteriorates further, and we see sustained capital flight and pressure on the ruble and Russian markets further, then it is possible," he said.

Russia's response was prompt.

First, in retaliation to the downgrade, Russian economy minister Alexei Ulyukaev said S&P’s downgrade of Russia’s rating was expected by investors, won’t significantly change their behavior, adding the obvious that the decision to cut Russia’s rating was partly political, partly based on economic situation. In other words, entirely symbolic - it is not as if Russia has access to bond markets anyway, plus as we wrote earlier this week in "Why Putin Is Smiling At The Bond Market's Blockade Of Russia", it is not as if it needs them.

But far more importantly, and ahead of yet another round of western sanctions which appears imminent unless Obama is to look even more powerless than he currently is (granted, a difficult achievement), Russian presidential adviser Sergei Glazyev proposed plan of 15 measures to protect country’s economy if sanctions applied, Vedomosti newspaper reports, citing Glazyev’s letter to Finance Ministry. According to Vedomosti as Bloomberg reported, Glazyev proposed:

In other words, a full-blown scorched earth campaign by Russia.

Granted, Russian holdings of US Treasurys are not that substantial (and could be monetized entirely in three months of POMO by the Fed), and western financial linkages to Russia, aside from trade routes, are not life-threatening, but if Russia were to take the baton, and other BRIC countries, already furious by the recent US decision to not boost their IMF status, follow suit, then Obama's life is about to become a living nightmare. Especially, if that most important BRIC member - China - does any of the many things it can do to indicate if, in this brand new Cold War, it is with or against the US...

Finally, those curious what are the linkages between the west and Russia are, review our recent post on the matter: All You Need To Know About Russia, In Charts.



TOPICS: Business/Economy; Military/Veterans; Society
KEYWORDS: bonds; crimea; crimeadoesntpay; crimedoesntpay; cyprus; europeanunion; france; germany; nato; russia; russiacreditrating; sandp; sp; ukraine; ukrainecrisis; unitedkingdom

1 posted on 04/25/2014 7:30:37 AM PDT by SeekAndFind
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To: SeekAndFind

EVERYTHING YOU NEED TO KNOW ABOUT RUSSIA TODAY


2 posted on 04/25/2014 7:31:55 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind

BRIEF HISTORY OF THE RUSSIAN EMPIRE


3 posted on 04/25/2014 7:32:46 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind

MORE RECENT HISTORY OF RUSSIA AND THE SOVIET UNION


4 posted on 04/25/2014 7:33:47 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind


5 posted on 04/25/2014 7:37:17 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind
It is the financial channel that has seen the fastest impact, with substantial private capital outflows already having taken place, and much more expected to flow out in the coming months.


6 posted on 04/25/2014 7:37:54 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind

Hoo boy. And children in charge over here..


7 posted on 04/25/2014 7:39:12 AM PDT by SueRae (It isn't over. In God We Trust.)
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To: SeekAndFind

Interesting charts...


8 posted on 04/25/2014 7:40:57 AM PDT by Eric in the Ozarks (Rip it out by the roots.)
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To: SeekAndFind

Some interesting comments on that site like:

No need to worry until Russia demands payment for its gas from Europe in gold.

Which is precisely what will happen once these stupid bastards have frozen them out of the bond markets.

Then you know the shooting war is about to start because Russia won’t give a shit about downgrades once they have gold in money, and neither will anyone else.

Europe will want this ended, very quickly.


9 posted on 04/25/2014 7:41:17 AM PDT by McGruff (Clinton had his Kosovo, Obama has his Ukraine.)
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To: SeekAndFind

The simple answer would be for all of those nations to freeze Russian assets until Russia backs off from Ukraine.....except that all of Europe has made itself a hostage to Russian natural gas. Just like I predicted when the first talks on those gas lines began. Sometimes, it’s simply depressing to be right.


10 posted on 04/25/2014 7:41:18 AM PDT by Pecos (The Chicago Way: Kill the Constitution, one step at a time.)
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To: Pecos

There’s a reason for nationalism, to make yourself immune from what other countries do.

The currently system of globalization is a trap, and one day that trap is going to close in on us.


11 posted on 04/25/2014 7:42:49 AM PDT by dfwgator
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To: SueRae

And children in charge over here..

*********
Yes, they’re like children playing with hand grenades.

This little game has the very real potential for some type of deadly miscalculation and things could quickly spiral out of control. This is no time for amateur hour.


12 posted on 04/25/2014 7:49:24 AM PDT by Starboard
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To: Starboard

Like teenagers with car keys and access to the liquor cabinet.


13 posted on 04/25/2014 7:51:09 AM PDT by dfwgator
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To: McGruff

Agree. Good post.


14 posted on 04/25/2014 7:51:16 AM PDT by Starboard
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To: SeekAndFind

If they were BBB before then Russian finances have been shakey for a while and their bonds haven’t been a smart investment for some time. For God’s sake Greece is better than that and they’re an economic basket case.


15 posted on 04/25/2014 7:55:18 AM PDT by DoodleDawg
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To: Eric in the Ozarks

RE: Interesting charts...

Not mine. I give credit to the folks at the ZERO HEDGE site.


16 posted on 04/25/2014 8:00:32 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind

Hmmm.

Is the S&P joining in with the Obama adm. and liar Kerry?

I thought only the New York Times did that?

/sarcasm.


17 posted on 04/25/2014 8:02:01 AM PDT by Laissez-faire capitalist
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To: SeekAndFind
Furious Russia ... Proposes "Scorched Earth" Retaliation

We will bury you.

18 posted on 04/25/2014 8:34:23 AM PDT by MUDDOG
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To: SeekAndFind

If Russia stops their tungsten exports will America be able to maintain it’s gold supply? :)


19 posted on 04/25/2014 9:43:52 AM PDT by Rockpile
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To: SeekAndFind

Not to worry, with Obummer running the country, we’ll be there too.


20 posted on 04/25/2014 9:52:41 AM PDT by Vinylly (?)
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