Russian Food Suppliers Have Begun Halting Shipments

17 December, 2014

Until now, when it comes to the fallout in the Russian economy from the crude price plunge leading to a collapse in the Russian currency, most of the interest has been on how the Russian financial system recovers and/or survives and just as importantly, what Putin's response would be. Just yesterday, we wrote that as a result of capital controls fears, many western banks led by Goldman Sachs had halted liquidity to Russian clients and other local entities.

However while the adverse impact on the Russian banking system has been mostly confined to the upper class - since there is virtually no middle class in the country to speak of - the second cold war of words, which rapidly morphed into a very hot financial war, is about to hit the very ordinary Russian on the street, because as Russia's Vedomosti reports, citing vegetable producer Belaya Dacha, juice maker Sady Pridoniya and others, Russian suppliers are suspending food shipments to stores because of unpredictable FX movements. And it is about to get worse: very soon Russians may have to live without imported alcohol because at least on supplier of offshore booze, Simple, halted shipments in "a two-day pause” to see what happens with the ruble, Vedomosti reports.

The full story from Vedomosti:

Food retailers are faced with a halt in the supply of deliveries, according to both suppliers and retailers. The main reason - the jumps in the currency jumps and the devaluation of the ruble, which makes it impossible to plan activities in the current environment.

The largest domestic producer of juices "Gardens of the Don" has suspended shipment of products at the old prices to a number of trading companies due to the sharp depreciation of the ruble, the company said. The reason is that the cost of its products is more than 70% denominated in foreign currencies.

Gardens of the Don will ship products "first of all to all network companies who understand the situation and accept the new prices." From 16 to 21 December 2014 the company has suspended shipping to merchants who did not give a definitive answer on the adoption of higher prices, explained the producer of such juices as "Gardens of the Don" "Golden Russia" "My" "Juicy world" and others.

Shipments were also stopped by a major distributor and importer of alcohol, Simple, told "Vedomosti" an employee of a major retailer. He was informed yesterday that the Simple warehouse would be closed. A company representative confirmed the suspension: the company took "a two-day pause."

"We, as a company that depends on the value of currencies, can do nothing in this situation. We are putting prices in rubles, prices in Uslovniye Yedintsy (UY) or 'conditional units' are not acceptable under the current laws - reported a representative Simple CEO Maxim Kashirin. "Buying the currency now or taking out a bank loan, is impossible: banks will not finance receivables ".

According to him, restaurants and retailers will pay with a long delay, the federal network - up to several months.

Kashirin says that Simple hopes to resume the next day delivery, but "The decision will largely depend on what will happen on the foreign exchange market." "If everything will fluctuate with the speed with which fluctuates now, we will not be able to give a long delay, great discounts. Most likely, we will be forced to sell, let's say, on a prepaid basis" he fears.

Large fish suppliers that operate on imported raw materials, have also begun to suspend deliveries. December 16 during the "Orgy" period in the foreign exchange market, the company suspended shipments to counterparties for one day, told "Vedomosti" employee of a large fishing company. According to him, the company now operates in normal mode, the issue of increasing prices is discussed. However, due to the sharp depreciation of the ruble with all counterparties company now works exclusively on a prepaid basis: "There are no delays. "

And so on.

Which is why tomorrow's annual address by Putin to the nation will be, as has been dubbed, his "moment of truth" because while patriotic fervor is still high and the population is willing to suffer runaway inflation for a short period of time, even the greatly suffered Russian population will meet its breaking point. The question is when, and whether that will take place before or after the US shale industry reaches its own breaking point, at which point Saudi Arabia will finally release the price of oil which it has, according to all the "supply-siders", been holding back. Alas, as we and others have demonstrated, that breaking point will most certainly not come for many more months to come. Which means that Putin better find an alternative soon, because if and when the food (and vodka) of Russians' is impaired, then things have a tendency to get very bad.

Russian Stocks Soar 17% -

Most Since 2008; Ruble Back

Below 62/US

Zero Hedge,

17 December, 2014

After falling for 15 of the last 16 days, the RTS (Russian Stocks) are surging 17% today, extending gains post CBR 7 Measures, the most since October 2008.The Ruble is soaring also - back below 62/USD.

RTS biggest gain since Oct 2008...

Juiced by the CBR Measures...

Charts: bloomberg

Russian Central Bank

Releases 7 Measures It Will

Take To Stabilize The

Financial Sector

Zero Hedge,

17 December, 2014

In its latest effort to counter financial instability - and show its commitment to maintaining order and support for the economy - Russia's Central Bank (CBR) has unveiled 7 new measures... Ranging from bank recaps to measures aimed at helping manage interest-rate and credit risks, the reaction in the Ruble is positive for now... as perhaps, taking a lesson from the US, The CBR removes Mark-to-Market accounting for various credit instruments.

The Central Bank of the Russian Federation (Bank of Russia)

On measures of the Bank of Russia to maintain the stability of the Russian financial sector

1. The Bank of Russia will introduce a temporary moratorium on the recognition of the negative revaluation of securities portfolios of credit institutions and non-credit financial institutions, which will reduce the sensitivity of market participants to market risk.

2. To limit the impact of the revaluation of foreign currency denominated assets and liabilities on prudential requirements of credit institutions, the Bank of Russia plans to provide credit institutions temporary right to use in the calculation of prudential requirements on transactions in foreign currency rate calculated in the previous quarter.

3. The Bank of Russia will improve the mechanism of credit institutions in foreign currency. Within the framework of a currency Repo planned additional auctions for various periods of time if necessary. As part of the mechanism for providing loans to credit institutions secured by non-marketable assets (according to the Regulation number 312-P), is scheduled to begin providing loans to banks in foreign currency, secured credit claims in foreign currency to non-financial organizations.

4. The Bank of Russia considers the central counterparty on the Moscow Stock Exchange as an important institution for centralized distribution of liquidity among all financial market participants - both credit and non-credit financial institutions.

To ensure the sustainability of the stock market for the Bank of Russia, if necessary, will provide support to the central counterparty on the Moscow Stock Exchange, market participants have confidence in the reliability of centralized clearing and continuity of its functions.

5. To empower Interest Rate Risk Management The Bank of Russia plans to:

- Temporary (up to 07.01.2015) not to apply the restriction values of the total cost of consumer credit (loan) at the conclusion of credit and microfinance institutions in consumer contracts (loan);

- Increase the range of the standard deviation of market interest rates on deposits in banks from the estimated average market interest rate to a maximum of 3.5 percentage points (instead of 2 percentage points at the moment).

6. To enhance the management of credit risks, the Bank of Russia intends to:

- To give credit institutions an opportunity not to impair the quality assessment of debt service, regardless of the assessment of the financial position of the borrower on loans restructured, for example, in the case of changes in the currency in which the loan is denominated, regardless of changes in the maturity of the loan (principal and (or) percent ), the interest rate;

- To give credit institutions an opportunity to make a decision on non-worsening assessment of the financial position of the borrower for the purpose of provision for losses if the changes in financial position due to the action imposed by individual foreign countries restrictive economic and (or) policy measures (Annex to the letter of the Bank of Russia from 21.10.2014 ? 184 -T);

- To increase the period during which the credit institution has the right not to increase the size Actual provision of loans to borrowers, financial position, and (or) quality of debt service, and (or) as collateral for loans has deteriorated as a result of an emergency, from 1 year to 2 years.

- To increase the period during which a credit institution can not form a provision for possible losses on loans for investment projects, while maintaining other existing minimum reserve requirements set depending on the number of years, the lack of payments on investment loans or entering the minor size;

- To cancel the increased rate risk with respect to loans to leasing and factoring companies - participants of the banking group, which includes the lending bank;

- Introduce a reduced weighting factor of risk for the ruble-denominated loans to Russian exporters under an insurance contract EXIAR (Export Insurance Agency of Russia).

7. In order to maintain the stability of the banking sector in the face of increased interest rate and credit risks of a slowdown of the Russian economy the Bank of Russia and the Government of the Russian Federation prepare measures to recapitalize credit institutions in 2015.

* * *

So far a modestly positive reaction the Ruble...