Russia Analyzes Diminishing Options, Institutional Investors Brace

Sovereign Wealth Funds and Russia

The Kremlin is embarking on a series of measures to counter inflation and rapid currency devaluation. The rapid fall in oil prices, coupled with Western sanctions have crippled Russia’s economy and put massive strains on its economic system. Meanwhile, oil and metal conglomerates have been hoarding hard currency. To counter this trend, Russian government officials have been pleading that Russian corporate CEOs slowly begin converting their earnings into rubles. Furthermore, if this action is not taken seriously, Russia’s State Duma, the lower house of parliament, may pass a bill to require exporters convert 50% of earnings.

The Belarus central bank imposed full-blown capital controls.

The ruble has lost as much as 59% of its value this year. On December 22nd, the Central Bank of Russia announced a plan to provide a 30 billion ruble loan facility (US$ 530 million) to assist Trust Bank, as other major Russian banks had no interest in acquiring the troubled financial institution. In addition, the central bank will put Trust Bank, a top #30 Russian bank, under supervision from Russia’s Deposit Insurance Agency.

Private money has been flowing out of Russia than institutional money. Institutional investors have exposures to Russia, especially through index vehicles. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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