At 04.00 am the snow-plough that helpfully clears our streets of this weekend’s heavy fall slightly prangs the Lexus parked below my bedroom window: its owners sleep more heavily than me so I listen, sing-songly, to the car alarm for 24 minutes (2 ½ minutes of alarms, in nicely varying tones, followed by a thirty second interval of silence, before it starts all over again).
As the snow-plough withdrew, taking what I guess was a fender with it; it made a soothingly crunching sound…
So, 04.09 am, I find myself thinking about ruble re-valuation – apropos yesterday’s post – it comes to me that there is a very good reason for Russia to re-value.
The Ruble is storming in the forex markets; and structurally has lots of strength to come. Russia hates the US dollar ideologically and, given its last four years’ performance against the RUR, Russia hates it financially as well.
An OPEC-for-gas between Russia, Iran and Qatar (that gas-field with a flag) is looking more likely. But would they want to price gas in USD? They would not. If you had an OPEC-for-gas it would be their choice as to their pricing currency. The Euro is a possibility, but ideologically, the Euro is hardly more popular with either Russia or Iran.
Why not piece gas/MMbtu in Rubles? You revalue the Ruble – at, let’s say 1 RUR = US$4 – and then it makes a good reserve currency for gas. And Iran would love it. Qatar would not object. Ruminations on Russia had a pithy comment on why an OPEC-for-gas should not work; but since when did economics get in the way of ideology?
And why not change the reserve currency for oil? You see Venezuela complaining? (actually, I think China and Japan would, so scrap that). And friends in the Gulf tell me the Emirates and Saudi are sick of their currencies, pegged to oil prices of course and therefore to the USD, slip-sliding as well.
The Ruble as the reserve currency for hydro-carbons? Oh yes. Definitely a possibility. And a *huge* political win in Russia. Instant hero-status for a newly-minted President Medvedev: “Russia *is* the beating heart of the world economy” etc. Fab spin.
Separately, a great brokers’ note from RenCap today, on matters Ukrainian:
“The government has prepared a decree allowing customs and the tax service to countermand 'illegal' court rulings….
“The aim of the new measure is to reduce corruption in the judiciary, sending a message to bribers that the rulings for which they pay will not be enforced, and to judges that they will be held more accountable in future.
“Though the intention is laudable, we think any measure that allows court rulings to be ignored, no matter how exceptional the circumstances, is a fundamental threat to the rule of law and gravely misguided. Unless the government provides substantial clarifications as to how its idea will work, it risks sending the wrong signals to the investment community and electorate alike.”
Personal experience reminds me – having had a client on the shit-end of this stick – you can buy a Ukrainian Supreme for about $50k a decision. Remind me, why was the Orange revolution such a break with the past?
Democracy, with out an independent judiciary, is not progress at all. There is no democracy without rule of law. And there is, literally, more rule of law in Russia.
Blogging tonight in my usual haunt – memo to self: sort out home Wi-fi – I can barely hear myself think. There are only 11 people in the bar. Six of them, sitting together, are damn near shouting. Every other word is ‘f******’; they are drunk and being staggering sexist; indifferent to the fact that all the staff speak fluent English. These are braying, arrogant, appalling expats: 40 minutes in their company and I am coming round to Zhirinovsky’s POV.
PS: if you are about to do business with CB Richard Ellis in Moscow, tell them to have their boys learn how to behave when out in public (the downside, boys, of loud, drunken conversations is we know who you are!). Although illuminating to hear one of you say: “I won’t get out of bed for any deal worth less than 1,000 sqm to me”; which at current market rates I calculate is about $83,000. Tossers!