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Russia’s exposure

rublecrisisrussiaI seem to be starting the new year off on a gloomy note and I assure you that is not my natural state of mind at all. Certainly a glass half full rather than half empty mentality. However this is going to be an interesting year across the globe and one economy that is certainly exposed is Russia

Frankly many will take some pleasure from seeing Putin struggle but whether we like it or not, a struggling significant economy affects us all. The overriding problem with Russia’s economy is of course its over reliance on commodities, most significantly oil and gas.

The price falls have affected Russia badly as have the sanctions. The more worrying news is that the prospects are not looking good in the medium to long term. Oil is now being produced on a huge scale with new technologies such as shale.

So what does this mean? The first issue that could affect us is the exposure to our banks. Luckily for the UK this would appear to be similar to the exposures to the Greek economy. Low.

This however is a summary of where there will be some concern (from this excellent New York Times article)

Largely because of Raiffeisen and Bank Austria, a unit of the Italian bank UniCredit, Austria is the eurozone country most exposed to tumult in Russia. The maximum potential loss is about 4 percent of Austrian gross domestic product, according to Oxford Economics.

French bank exposure to Russia is about 2 percent of G.D.P., according to figures from 2013, while for Italy the figure is about 1 percent. For Germany, Spain and most other eurozone countries, the exposure is well below 1 percent of G.D.P.

In a report in October, the Bank of France estimated that the country’s largest banks had loans and other investments in Russia of 47.3 billion euros, or $59.2 billion, at the end of 2013, a substantial sum but far less than their exposure to Western European countries like Switzerland or Belgium.

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