Russia is not ready for a serious banking war - Katasonov

2024 Author: Seth Attwood | [email protected]. Last modified: 2024-01-16 18:34

Unfortunately, our media is dominated by a "shabby" attitude towards the threats of the West regarding the introduction of large-scale economic and banking sanctions against Russia. And this is sometimes considered a manifestation of "patriotism" in our country. I am by no means a supporter of being timid and currying favor with the West. But I think that we need to move away from lightweight comments and assessments of the consequences of Western sanctions, since they do not mobilize us to seriously prepare for an economic war. Moreover, there is always a risk that the "cold" war will develop into a "hot"

1. ANY WAR REQUIRES A PRELIMINARY CALCULATION

For several months now, the West has been threatening with a full-scale economic war against Russia, which involves covering entire sectors of the Russian economy. Three sectors of the Russian economy most often appear in Western statements on "sectoral" sanctions: oil and gas, defense and banking. Obviously, before making concrete decisions on sanctions, the West calculates the consequences of such decisions, including the consequences for both the enemy and the West.

Let's try and we make a rough calculation of this kind of consequences for the banking sector of the Russian economy. A scenario of a war aimed at "complete destruction" of enemy assets is considered. Not the entire spectrum of consequences is taken into account, but only (of our foreign assets and assets of foreign investors in the Russian Federation). Behind the "frame" of our analysis are other types of military-economic actions, first of all, blocking payments and settlements, bans on the issuance of new loans and opening accounts for legal entities of the Russian Federation, etc.

A blow to the enemy's assets can be delivered in the form of:

Let's find out which side is profitable and which is not profitable to start a full-scale banking war. By the way, such an analysis helps to understand what preventive measures Russia could take in order to minimize its damage in such a war.

2. INTERNATIONAL INVESTMENT POSITION OF THE RUSSIAN FEDERATION - A TOOL FOR ASSESSING THE RISKS OF ECONOMIC AND BANKING WAR

For this, let us refer to the data of the Bank of Russia on the international investment position, which reflects the ratio of non-resident assets in the Russian economy and Russian assets abroad. Table 1-3 are the most recent data of the Bank of Russia - as of January 1, 2014.

Tab. one

	External liabilities	External assets	Net investment position
Total:	731 959	1 009 951	-277 992
Short term	97 497	716 628	-619 131
Long term	634 463	293 323	341 140

Tab. 2

	External liabilities	External assets	Net investment position
Total:	732, 0	1 010, 0	-278, 0
Government bodies	66, 7	62, 6	4, 1
central bank	16, 1	470, 2*	-454, 1
Banks	214, 4	254, 4	-40, 0
Other sectors	434, 8	222, 8	212, 0

Tab. 3

	External liabilities	External assets	Net investment position
Total	214 394	254 401	40 007
Short term	60 372	115 458	55 086
Debt instruments in private equity	3 621	664	2 957
Debt securities	2 601	357	2 244
Loans and loans	1 901	15 161	-13 261
Cash foreign currency	0	5 826	-5 826
Current accounts and deposits	49 487	86 055	-36 568
Others, including overdue debt	2 768	10148	-7380
Long term	154 021	138 943	15 078
Debt instruments in private equity	889	882	7
Debt securities	5 128	34 141	-29 014
Loans and loans	0	54 979	-54 979
Deposits	146 958	43 311	103 647
Other	1 047	5 630	-4 583

Normal 0 false false false RU X-NONE X-NONE

The information contained in table. 3 can be supplemented with the data of the Bank of Russia published in "". All indicators are given in rubles. So, the assets of foreign investors in the banking sector of the Russian Federation increased in 2013 by 10.9% and reached 5.9 trillion. rub. (the bulk of this amount is loans to Russian banks). And the assets of Russian banks abroad (mainly interbank loans) grew by 18.2% and reached 7.6 trillion. rub. Thus, the net claims of the banking sector of the Russian Federation on non-residents (foreigners) increased over the year from 1, 1 trillion. up to 1.7 trillionrub. The Russian banking sector has moved far beyond the limits of national jurisdiction, which creates serious risks.

In the referenced document, the following information is of particular interest. Half of the interbank loans attracted from abroad fell on 5 Russian banks, and 4 of them are banks included in the "top-20". And half of the interbank loans provided to non-residents fell on 3 banks, also from the "top - 20". Although credit institutions are not named in the Bank of Russia document, it is easy to guess that most likely they are Sberbank, VTB, Gazprombank and, probably, Alfa-Bank (VEB, which has a special status, is not considered in the Bank of Russia document).

The information contained in the table. 1-3, requires some comments

concerns the assessment of the size of Russian assets abroad. At one time, we made estimates of the real scale of foreign assets of Russian banks, enterprises and individuals, taking into account the illegal export of capital, which differed greatly from the official data (). At the beginning of the last decade, according to our estimates, the real volumes of Russia's foreign assets (excluding international reserves) were 2 - 2.5 times higher than the official estimates of the Bank of Russia. It is difficult to say what the real scale of foreign assets is today. The figures quoted by the Bank of Russia, in our opinion, are quite seriously underestimated, since (despite the complete currency liberalization of cross-border capital movements) it is obvious that, taking this into account, the consequences of the banking (and economic) war for Russia may be more severe. than it follows from the conclusions of the previous section. However, from our point of view, the monetary assets transferred from Russia to offshores are, in any case, almost a “cut off chunk” for us (even if there was no economic war).

In our calculations, we are primarily interested in the part of assets that is associated with Western countries. Some of the assets will probably not be involved in the economic war, but not very significant. According to our estimates, approximately 90% of the foreign assets of the Russian Federation are in Western countries and territories controlled by the West (offshore). Approximately the same 90% of foreign assets in the Russian Federation are represented by Western countries and territories under its control. It can be assumed that a more subtle analysis, taking into account only those assets that are related to Western countries, would not significantly change the overall proportion between our assets abroad and their assets in Russia.

3. INTERNATIONAL INVESTMENT POSITION OF POTENTIAL ENEMIES OF RUSSIA

For a more complete understanding of the balance of power in a possible future banking war, it is advisable to get acquainted with the data on the international investment position of the United States and its allies - the countries of Europe and Japan. To do this, we will use the most recent data from the Bank for International Settlements - These data as of the end of the first quarter of the current year are shown in Table 4.

Tab. 4.

The country	Foreign assets	Obligations to non-residents	Net international investment position *.
USA	2967, 0	3923, 3	956, 3
Great Britain	5021, 1	4385, 4	-635, 7
Japan	3238, 5	1313, 5	-1925, 0
France	2585, 9	2324, 9	-261, 0
Germany	2535, 2	1932, 6	-602, 6
Switzerland	1001, 3	872, 8	-128, 5
Russia	294, 8	275, 5	-19, 3

*

As evidenced by the data table. 4?, for many, it is probably a surprise that the United States in terms of the amount of foreign assets of its banking sector today is not in first, but only in third place, after Great Britain and Japan. The last two countries do possess gigantic foreign banking assets in the form of loans issued, deposits placed, securities purchased, and stakes in the capital of foreign banks (subsidiary banks). The Russian banking sector has an order of magnitude less foreign assets than US banks and 17 times less than UK banks. In terms of liabilities to non-residents, the US banking sector is in second place, only slightly behind UK banks. In terms of foreign liabilities of the banking sector, Russia is more than 14 times behind the United States and almost 16 times behind the UK.

from Western countries, only the US banking sector has an excess of foreign liabilities over foreign assets, and the excess is very significant - almost 1 trillion. dollars. All other developed countries, on the contrary, have an excess of assets over liabilities. At the same time, Japan has a particularly striking asymmetry, its foreign assets exceed its foreign liabilities by almost 2.5 times, and in absolute terms this excess is a record amount exceeding 1.9 trillion. In other words, the American banking sector acts in the world as a net debtor (net debtor), and all other developed countries act as net creditors (net creditors). Of course, this situation, all other things being equal, allows Washington to more confidently (compared to other Western countries) make decisions on banking sanctions against unwanted states, including Russia. Banks in Western Europe and Japan will seek to exercise restraint on the banking war against Russia.

the banking systems of the United States and its allies are in a different "weight category" than the banking system of Russia. Certainly, some Western banks may seriously suffer or even go to the “other world” as a result of the “exchange of blows”. But on the whole, in the event of a banking war "of complete defeat", the losses of Russia's geopolitical opponents will not be critical for them. However, for individual Western countries, the magnitude of these losses can vary significantly. For this, it is advisable to consider the international investment position of the banking sector of the Russian Federation in a geographical context.

4. INTERNATIONAL INVESTMENT POSITION OF RUSSIA IN GEOGRAPHICAL SECTION

Let us turn to the information of the Bank of Russia concerning the geographical structure of the distribution of liquid assets of Russian banks abroad (Table 5). As of January 1, 2013, the volume of such assets amounted to 104.6 billion dollars. Almost 93% of them were in non-CIS countries.

Tab. 5.

The country	Bln. Doll.	% of the total
Total	104, 6	100
CIS countries	7, 6	7, 3
Non-CIS countries	97, 0	92, 7
Great Britain	27, 6	26, 4
USA	14, 2	13, 6
Germany	13, 1	12, 5
Cyprus	10, 2	9, 8
Holland	4, 1	3, 9
Switzerland	3, 7	3, 5
France	3, 6	3, 4
Italy	3, 3	3, 2
Other non-CIS countries	17, 2	16, 4

The largest part of the most liquid foreign assets of Russian banks (deposits, loans, correspondent accounts, cash) does not belong to the United States, as many believe, but to Great Britain. There our banking assets are twice as large as in the United States. London in terms of sanctions always goes hand in hand with Washington. If Washington decides to freeze foreign assets of Russian banks, one can expect that about 40% of all foreign assets will be frozen immediately (26.4% - Great Britain, 13.6% - USA). And 80% of foreign assets of Russian banks are concentrated in the USA, Great Britain and six more countries (Germany, Cyprus, Holland, Switzerland, France, Italy), the financial and banking systems of which are controlled by Washington

It is also worthwhile to pay attention to the geographical structure of the distribution of the international reserves of the Russian Federation. Here is the latest data from the Bank of Russia (as of September 30, 2013,% of the total): France - 32, 0; USA - 30, 8; Germany - 19, 1; Great Britain - 9, 2; Canada - 3.0; international organizations - 1, 7; others - 13, 4. For comparison, I will give data on the geographical structure of the international reserves of the Russian Federation as of mid-2006 (% of the total): USA - 29, 4; Germany - 21, 1; Great Britain - 13, 9; France - 11, 4; Switzerland - 8, 6; Netherlands - 4, 9. You can see that for 2006-2013. the United States' share of Russia's international reserves remained unchanged. There was only a redistribution of the shares of other leading Western countries. Suddenly, France came to the fore, and countries such as Switzerland and the Netherlands went into the background. Whatever it was, but practically all of the international reserves of the Russian Federation are placed in those countries that are under the strict control of Washington. France, which currently houses almost 1/3 of all international reserves of the Russian Federation, is no exception in this regard

5. PRELIMINARY CONCLUSIONS AND RECOMMENDATIONS

The first part of the article presented the official data of the Bank of Russia, supported by some expert and unofficial estimates. From the point of view of assessing our capabilities to withstand a large-scale economic war in the West, the statistics we have presented allow us to draw the following conclusions.

1. In the event of an economic war "for total destruction", Russia may suffer greater losses than our adversary. Net losses could amount to $ 288 billion (the difference between the volume of non-resident assets in Russia and the volume of Russian assets abroad). And this is without taking into account those huge assets that have been formed abroad over many years as a result of illegal export of capital and which are not reflected in the statistics of the Bank of Russia.

2. At the same time, the structure of external liabilities and external assets of the Russian Federation should be taken into account. In the external liabilities of the Russian Federation (i.e., assets of non-residents in the Russian economy), long-term liabilities clearly prevail (86.7%). At the same time, short-term assets prevail in foreign assets of the Russian Federation (71, 0%). Such a structure is beneficial to Russia, since it is much easier and faster to roll up short-term assets than long-term assets. However, this feature of the asset structure can be viewed as an advantage only on the eve of the start of a major economic war. After the start of such a war, the enemy can freeze all of our assets abroad, including short-term ones. If we managed to withdraw more than $ 700 billion of our short-term investments from abroad, the West would find itself in an extremely losing position (the net investment position of the Russian Federation in long-term assets was plus $ 341 billion at the beginning of the year).

3. The banking sector plays a major role in shaping the international investment position. The banking sector in a broad definition (banks + Central Bank) accounts for 31.5% of all non-resident assets in the Russian economy. The share of the banking sector in the broad definition of the foreign assets of the Russian Federation is 71.7%. The net investment position of the banking sector in a broad definition is minus $ 494 billion, which is almost 1.8 times the net investment position of the entire Russian Federation. A blow can be expressed in the following actions:

4. It follows from the above that the role of the banking sector in the economic war can hardly be overestimated. The banking sector needs a program to prepare for such a war. The situation for the Russian banking sector is not hopelessly bad, since almost half of the foreign assets of Russian banks are short-term assets. With a properly structured policy, such assets could be “curtailed”. At the same time, long-term assets prevail in the structure of foreign assets in the banking sector of the economy (72.0%). These are mainly long-term bank deposits. Such assets cannot be quickly withdrawn from Russia. Or the withdrawal is associated with high losses. In terms of long-term assets of the banking sector, the advantage in the economic war is on the side of Russia, i.e. potential losses of foreign banks may exceed the losses of Russian banks.

5. In the above-mentioned banking program of preparation for an economic war, an important role should be assigned to the Bank of Russia., because it significantly participates in the formation of the international investment position of the Russian Federation (almost half of Russia's foreign assets are the international reserves of the Central Bank). because he is the regulator of the banking sector. We have already noted that the share of short-term assets in the foreign assets of Russian banks is high. The international reserves of the Bank of Russia contain both short-term and long-term assets. According to our estimates, approximately in a 50:50 ratio. The Central Bank itself does not represent such a grouping on its website. In any case, according to our estimates, the aforementioned program could ensure a prompt withdrawal from the blow of at least $ 350-400 billion of our assets abroad. During this time, foreign banks would have managed to withdraw their Russian assets worth $ 60 billion from the blow. Not only within the international investment position of the Russian banking sector, but also within the entire international investment position of the Russian Federation.

6. It is necessary to urgently withdraw the foreign assets of Russian banks from the United States and countries under their control. Also, urgent measures should be taken to change the geographical and currency structure of the Bank of Russia international reserves.

7. Considering that foreign assets and liabilities to non-residents of the banking sector of the Russian Federation are concentrated in only a few banks (primarily VEB, VTB, Sberbank, Gazprombank, Alfa-Bank), it would not be difficult for the Bank of Russia to develop and ensure control over the implementation of the training program. the country's banking sector to economic war.

6. FINAL RECOMMENDATIONS

But, as the English say,). The main stumbling block for the effective preparation of Russia for the banking (and economic) war on the part of the West is our monetary authorities (the Ministry of Finance and the Central Bank). So much has been said and written about this! In order to understand how our Central Bank is “preparing” for economic sanctions, it is enough, for example, to get acquainted with such a fresh document as “” (No. 2 (6), June 2014). The document is impressive, about 100 pages. So in it only once, on page 78, the word “sanctions” is mentioned (in the “Risk Assessment” section), and there are no words at all about recommendations (and, moreover, an action program) to overcome or mitigate this risk! The Bank of Russia does not notice the sanctions! How can one disagree with the fact that even not the most radical domestic economists began to call the Central Bank of the Russian Federation a "branch of the US Federal Reserve", "the fifth column", "an agent of influence" of Washington.

Thus, the final recommendation (not the Bank of Russia, but mine) is the following:.