The snow is falling

OR DO WE REALLY CALL IT SNOW. The newspapers write that the flakes that has come down has dissolved due to small dust particles from the major factories around Moscow. In the humid air at high altitude the particles has acted as catalysts for snow crystals. Artificial snow in other words, (and under the same principle as the ground for rain villages in Moscow that in the summer produces the parades and outdoor events to clear the clouds of water vapor.) But the great snow fall is yet to come even if it did not show up in December.

HOW IS IT WITH THE Russian ruble? Well, actually a little bit in the same direction. The ruble has since former President Putin took office in 2000 remained steady around the level of 24 rubles to one U.S. dollars (it is still the currency in which most often is the aiming symbol.) Graphically, the exchange rate RUB / USD looked like a horizontal line. However, now something has happened. In recent months, the ruble by about a week at a time has fallen against the dollar, so that when we previously had a dollar, we must now pay 30 rubles to the dollar that earlier cost 24. It is a loss with almost one ruble a week. But the big case has not arrived. But more people talk about a devaluation of the ruble and the figures of 20-30 percent are mentioned, but mostly in the English-speaking press. The Russian press is far more cautious and prefers to speak about foreign rather than on domestic problems.

YET IT IS NOW OFFICIAL in Russia that the country is in the middle of a "finansovyj crisis". For those of us who remember 1998, it feels familiar. 1998 was the year when Russia adjusted its foreign payments and the Russian ruble crashed. Almost over one night, the ruble fell to one quarter of its previous value against all currencies recognized. The uncertainty over the ruble value stayed for a long time. Although it was not allowed to charge in foreign currency in Russia, the standard after the crash in 1998 was that prices in shops, restaurants and hotels were paid in dollars. The landlords rents and sellers prices for apartments were regularly paid in dollars. Yes, almost all but the smallest establishments began to use U.S. dollars prices. Of course, since U.S. dollars payments were not allowed, the prices geshwinnt were counted in rubles in payment. Nobody wanted to make themselves officially guilty of currency offenses.

TO MAKE THE whole process easier, many small shops also set up exchange offices right next to the checkouts, where they could exchange their dollars (the way they got them) to rubles, which meant that the payment in rubles almost became a technical issue. More conservative traders, who feared that it would appear as if it internally, through pricing, in dollars transcended to prohibited acts of foreign currency. They began to set prices in "units" instead. The value of such an "entity" by chance happened to coincide with the current dollar exchange rate - a typical "smart" Russian solution to ignore the rules. The confidence in the ruble during this time was down to the bottom. As the ruble strengthened in the 2000's, it received the status it had before 1998 and there has been talk about that it soon could be out on the world market as one of the major currencies. The pricing has even gone back to being named in the ruble on the currency-sensitive real estate market.

BUT BACK TO THE SIMILARITIES between 1998 and the last weeks in 2008. Then, just as now they blame the financial crisis in Russia from countries abroad. Oil and commodity prices went down. Then, just as now, foreign investors were quick to move the capital to safe suburbs outside Russia and the Russian stock market plummeted by 90 percent (this year 75 percent at the most and it is not certain that it is final yet). People were also incapable on the Russian side to professionally manage the PR and communications issues in the crisis context. It feels very familiar even today. The "foreign contamination" which Russia now recognizes was preceded by less successful political statements concerning individual Russian banks or companies, which foreign shareholders perceived as signs of an imminent government attack. However, it has probably been rather an expression of the fairly direct and dramatic way that Russians sometimes express themselves in, which, admittedly, may have their special charm just in the right context. If you have been in Russia you are aware of this. But for investors in Russian companies on the New York or London stock exchange with the already shaky nerves, it is not helpful to hear a Russian minister expressing his appreciation that some banks will disappear. To deal with relations to foreign investors via the press is probably just a Russian parade today as it was in 1998.

AND YET THERE ARE MAJOR DIFFERENCES. Many of today's leading politicians drew important conclusions from the crisis in 1998. Throughout the 2000's, Russia has pursued prudent and safe financial and tax policies, which means that the country in a clever way has benefitted from the increase in oil and commodity prices. Russia has thus during the eight years under Putin succeeded in building up the world's third largest foreign reserves. Leading conservative politicians as the Finance Minister Kudrin has fought hard and successfully against a growing pressure. One major difference between the 1998 crisis and today is that Russia now has its foreign reserves and a large buffer to cope with during the downturn.

THE FOREIGN EXCHANGE RESERVES have been largely based on Russia's massive oil revenues. With rising oil prices - again, of course, in dollars - and with a smart management of taxes on the oil-exporting companies, the foreign exchange reserves increased over the past 10 years to reach a record level of almost unimaginable 600 billion U.S. dollars in early August 2008. The positive balance of trade (the ratio between the price of exported (read oil) and imported goods) as a result of increased oil prices is of course the main cause of the ruble strengthened position in recent years. There is a high awareness of this in Russia. Just as you can ask an assistant in one of many street shops in Moscow on the current dollar exchange rate, you can wave to a man in a taxi any time on the street and ask the driver about the current price of Urals Crude (Russian crude oil). Awareness of the dollar, oil prices and the relationship between them and the ruble is common. The declining prices of oil are now also the main cause of the falling ruble.