IMF's $3.8bn lost defending rouble

THE RUSSIAN central bank chief, Sergei Dubinin, last night admitted that some $3.8bn of the $4.8bn (pounds 3bn) advanced by the International Monetary Fund has been blown since 20 July 20 in a futile attempt to shore up the rouble.

The admission, which underlines the increasing desperation of Russia's financial position, came as the Russians were forced to withdraw plans to restructure 278 billion roubles (pounds 25bn) of short-term government debt in the face of veiled legal threats from Western investment bankers.

These followed complaints that the proposals accompanying Monday's devaluation were grossly discriminatory to foreigners, who account for around 25 per cent of the existing stock of short-term government debt.

Credit Suisse First Boston, believed to be among the hardest-hit of Western investment banks, said foreign holders would have got only a third of what Russians were entitled to.

Western analysts warned yesterday of a very real threat now of wholesale default.

The focus of the crisis is the GKO, or Gekko, rouble government debt market. However, there is concern about a further $10bn of dollar-denominated debt known as MINFins, which are also held to a large extent by foreign investors, all of which could now be at risk.

There were allegations yesterday that MICEX, the Moscow foreign exchange market, had been taking advantage of the confusion by refusing to honour margin calls on futures contracts.

Foreign investors - mainly big investment banks and hedge funds - have been big players in the Gekko market because of the very high yields which enabled investors to more than double their money in a matter of months. But, as one trader admitted yesterday: "Western investors had factored in the risk of devaluation, but not devaluation and debt restructuring at the same time."

The CSFB warning highlights growing fears that the crisis could snowball, with catastrophic knock-on effects for other emerging markets. Russia's total sovereign debt, according to debt rating agency Fitch IBCA, is $141bn, up $11bn from the end of last year.

"In the past two weeks spreads on Brazilian Brady bonds have widened some 200 basis points due to Russian fallout," said Kasper Bartholdy at CSFB. "To refinance all its external debt at this extra cost would imply, for Brazil alone, an extra $3bn a year."

The Russian authorities together with Deutsche Bank and JP Morgan, the two institutions advising the Russians on the debt restructuring, were last night locked in meetings with the big Western investors.

As part of the latest IMF package agreed in July, Russia was to refinance part of its debt obligations through a $2bn Eurobond issue this autumn. But even if the present impasse can be resolved, the likelihood of getting such an issue away looks very slim.

Japan is dragging its heels on about $800m worth of loans committed to Russia despite a plea from Moscow to pay up.

Commentators were also expressing doubts about the next tranche of IMF money due in September. Mohamed El-Erian, head of emerging markets at Salomon Smith Barney, said key elements will have to be renegotiated. This requires tough decisions at a time when the impact on ordinary Russians is starting to bite. "The opposition will intensify its attacks on the government now the financial debacle is having an adverse impact on the average Russian," he says. "The position will get worse rather than better."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence