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Tuesday, 3 January 2017

Russia: Inside the private bank backed by the state

Russia: Inside the private bank backed by the state:
"As 2014 drew to a close, Rosneft, Russia’s state-run oil company, faced a dire situation. Plummeting global oil prices, a rapidly devaluing rouble and western sanctions left the company with no obvious way to refinance the $18bn debt that was due to mature in just a few weeks.

With little room to manoeuvre, Rosneft set in motion one of the most audacious trades in Russia’s short capitalist history — and nearly brought down the economy in the process. The company quietly issued Rbs625bn in bonds to an unnamed intermediary, which then used them as collateral to obtain reverse repo loans — deals to purchase securities with an agreement to sell them later at a higher price — from the Russian central bank. The intermediary then passed on the dollars to Rosneft, allowing it to raise short-term capital.

Currency investors thought that Igor Sechin, Rosneft’s powerful chief executive, was effectively shorting the rouble and they pushed it to record lows. “The deal negatively stirred up the market,” tweeted Alexei Kudrin, the former finance minister. “Extremely bad timing.” Later, Vladimir Putin, Russia’s president, gave Mr Sechin a public dressing-down."

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