On 2014-03-15, at 10:49 AM, Shane Mage wrote:
> One question being scrupulously unasked by all the MSM: how much Russian debt is on the balance sheets of European--especially German--banks? That censorship seems to be in effect because the likelihood of default is directly--maybe even disproportionally--proportional to the severity of sanctions. One big failure might even have the effect of a nuclear bomb under the Euro-American financial system. Anybody here remember Kreditanstalt Verein? One would hope that there are people in power who do!
See below. A Russian default could well push the tottering European banks over the edge along with the rest of the global financial system, which is why proibably most of the talk in Berlin, London, Paris, and Washington this weekend is about how to defuse tensions:
"It isn’t just German exporters that are fretting, and lobbying with all their might. Russia, with an economy that is already stagnating, and dogged by vicious bouts of capital flight, has $732 billion in foreign debt. Relatively little of it is sovereign debt, but nearly $700 billion is owed by banks and corporations – most of them owned or controlled by the Kremlin. Oil major Rosneft and gas mastodon Gazprom owe $90 billion combined to foreign entities; the four state banks Sberbank, VTB, VEB, and Rosselkhozbank owe $60 billion. Some of this debt matures this year and next year.
"US banks are marginally involved. Between Bank of America, Citigroup, JPMorgan, and Wells Fargo, they have only $24 billion on the line. But European banks and insurance companies are up to their dirty ears in this suddenly iffy and potentially toxic Russian debt.
"When it comes due, it will have to be rolled over, and some of the companies will need to borrow more, simply to stay afloat. Alas, the current sanction regime of visa bans for the elite, asset freezes, and trade restrictions could make that difficult. Then there’s the threat, now more broadly but still unofficially bandied about, that Russian companies should simply default on this $700 billion in debt in retaliation for the sanctions.
"Some European banks, including some German banks, might crater. Even the possibility of a major loss would further rattle the confidence in these banks with their over-leveraged and inscrutable balance sheets and their assets that are still exuding whiffs of putrefaction. And this sort of fiasco, as the financial crisis has made clear, has an unpleasant way of snowballing – and taking down the already shaky global economy with it.
"During the financial crisis, German exports collapsed, banks toppled and got bailed out, and the economy experienced its two worst quarters in the history of the Federal Republic. No politician in Germany has any appetite to re-experience that. And the banking industry, with its powerful and long tentacles winding their way through the hallways and doors of the German government, has been assiduously at work, quietly and behind the scenes, to whittle any sanctions down to irrelevance."