The real proof of just how screwed Russia’s economy is
The Russian ruble is in freefall, and the Russian stock market apparently isn’t even opening this week, for fear it’ll fully collapse if it does. But if you want real proof that the Russian economy is screwed to the point that it’s not going to bounce back, take a look at what some of Russia’s partners are doing.
One day after British oil giant BP announced it was dumping its 20% stake in Russian oil giant Rosneft, Shell is selling off all of its joint ventures with Russian oil company Gazprom. Bloomberg says that Shell is already warning investors about the ugly impact this will have on its bottom line.
Let’s be clear here. Companies this large – particularly the kind of soulless oil companies who were willing to get into bed with Putin to begin with – never want to make moves that are this unprofitable. BP and Shell aren’t selling off their ownership in Russian oil companies for moral reasons, or even PR reasons; it’s just too expensive.
The only reason BP and Shell doing this is because their investments are about to become worthless anyway. On the London Stock Exchange on Monday, Rosneft lost more than 40% of its value, and Gazprom lost more than 50% of its value. Investors are clearly signaling that they expect Russian oil companies to become financially worthless no matter how much oil they pull out of the ground, because they’ll have a hard time selling it to anyone. International transactions are mostly frozen, and with hyperinflation taking off in Russia, it’s not clear that the Russian people will even be able to afford gas.
Moreover, BP and Shell must not be expecting the likes of Rosneft of Gazprom to bounce back any time soon, not next week, not next month, not next year, or else they’d be quietly hanging onto their shares, in the hope of eventually recouping their losses.
So this isn’t merely a matter of the Russian ruble or the Russian stock market going through a down stretch. This is a matter of the world’s most soulless oil companies betting that the Russian economy won’t come back to life on any timeline they care to think about. When you consider that the Russian government itself owns the largest stake in Rosneft and Gazprom, this is wealth being directly removed from the pockets of Vladimir Putin and his oligarchs and set on fire in front of their faces.
