Place your bets, ladies and gentlemen

“It’s not so much a case of the rouble falling out of bed. It’s more that it fell out of bed, rolled down the stairs, and spilled out into the street.” Financial Times

President Putin took time out from his busy schedule to meet with Elvira Nabiullina, Governer of the Central Bank, who had called him at some ungodly hour this morning to say that they really needed to talk.

Vladimir Vladimirovich I hope this is going to be worth it.

Elvira Sahipzadovna I’m a little bit worried about the rouble.

VV  You want a pay rise?

ES  No, I’m being paid in dollars so it’s fine. We could be facing a full-blown currency crisis.

VV  Do you have any good news?

ES  I think we should do nothing.

VV  That works for me.

ES  Only not everybody agrees.

VV  They’re traitors.

ES  I’m giving everybody the same story. The rouble is trading close to its fundamental levels …

VV  What’s that mean?

ES  It doesn’t mean anything, that’s the point. I’m saying we won’t intervene in the FX market unless the FX rate volatility threatens financial stability. And there aren’t such risks now.

VV  We intervened in Ukraine, and that worked okay, and in Syria, which is looking good, so why can’t we intervene in the FX?

ES  We don’t have the firepower.

VV  You know how much we’ve spent on the military?

ES  Yes, and …. well … mmm …  with respect that’s part of the problem.

VV  I thought you were on my side? And what about the reserves?

ES  If we intervene, and with oil and gas so low, and GDP dropping, and not balancing the budget …

VV  My head is spinning.

ES  We’ll have burned through the reserves by the election in September, and I remember you saying that we needed to keep that money to throw at people. So I think the only thing we can do is brazen it out.

VV  I like that idea. Didn’t I say yesterday somewhere that low exchange rates had opened up “additional opportunities” for Russian business?

ES  Yes. I didn’t know you were going to say it.

VV  And didn’t Dima say something?

ES  Yes. I’ve got it here. “The rate is definitely changing, the rate is volatile, but it’s hardly a collapse. There’s no reason to believe the central bank doesn’t have any plans to escape a genuine collapse. Mr Putin has no plans to hold a crisis meeting on the rouble this week.”

VV  There you are then. If we say it isn’t a crisis, it isn’t a crisis.

ES  But it’s not true.

VV  Where is everybody?

ES  In Davos.

VV  Why can’t they go skiing in Russia?

ES  Oleg’s there. He had a bit of a go at me, told state television that my policy amounted to “doing nothing.”

VV  I’ll call him. Anything else?

ES  Alexei’s there as well. Said we need to prepare for oil as low as $16 per barrel. Said we don’t know what the lowest point will be. But it’ll be lower than what we’re seeing today.

VV He’s allowed to say those things. So we’re agreed then. I just want to say thank you, Elvira Sahipzadovna. I enjoy our little chats. Very productive. Let me know if you need me to say anything.