Now here is an example of the blogosphere at its best.
- Step #1: We put up a post analyzing the Russian stock market crash.
- Step #2: Posting a link, commenter “Dobo” shows us a report on Kavkaz Centre talking up an interview by former deputy PM Boris Nemstov on the same subject.
- Step #3: We ask for a link to the source interview.
- Step #4: Another commenter (“Felix“) provides it.
- Step #5: Our expert translator Dave Essel offers his brilliant English rendering. Mind you, all this is gratis, work donated to help the people of Russia escape from dictatorship.
- Step #6: We publish it (after the jump). But for this chain of events, Mr. Nemtsov’s brave insights might never have seen the light of day in English. It makes us a very formidable community. Let’s have more of the same, shall we?
It Will Be a Black September
Russians Are Advised To Stock Up On Dollars
Moscow, 17 September 2008
Translated from the Russian by Dave Essel
Tatyana Krasnogorova interviews Boris Nemtsov on Novy Region.
The financial crisis will affect most aspects of the lives of Russians: food prices will rise by 30%, small banks will go bankrupt, and we can forget about getting any consumer loans.
So said the former vice-premier of the Russian government, one of the founders of the Union of Right Forces, in an interview with RIA New Region.
He noted that September 2008 could well be called a ‘black month’ for Russia and advised Russian citizens to buy dollars. As he sees it, the only good news that may come this month is that house prices should fall.
“Today’s events and the default of 1998 are similar only in that both are financial crises. This new crisis, however, is of a quite different nature. In 1998, we suffered a budgetary crisis but this year it is above all the corporate sector that will be touched: banks, corporations such as Gazprom, Rosneft, and others”, said Nemtsov.
The former vice-premier believes that bankruptcy threatens the whole of the banking sector. However, it will be mainly small and medium banks that will go bust.
“Russia’s banks have been working mainly thanks to cheap and long money from the West. This money flow has come to a stop today and many banks will not be able to refinance themselves as a result. On the other hand, they have given out too many consumer and mortgage loans, returns on which will not be seen for a number of years.” Nemtsov sees small and medium banks going bust as a result if they don’t get any support.
Meanwhile, he reckons that state support will be given only to state banks such as VTB, Sberbank, Gazprombank, which will be propped up to the bitter end, making inflation rise as a result.
The former vice-premier predicts that there will be a rapid knock-on effect on all Russian business. Russians will see a sharp rise in prices of food and utilities – in the order of 25-30%. In addition, he noted that one of the most tragic consequences will be how heavily share-owners who bought during the so-called “national IPO” will be hit.
About 500 thousand people bought shares in this “people’s IPO” – mainly shares in VTB, Sberbank, and Rosneft. At the time of issue, Vladimir Putin said that these would be a solid investment and people bough shares at 13.6 kopecks. Today VTB’s shares stand 2.5 kopecks. “People have lost 80% of their money,” Nemtsov notes.
The only good thing to be coming out of this, he says, is that property prices, in particular of apartments, will drop considerably.
“House prices will fall hard. However, property developers and building companies who borrowed heavily to finance their activities may go under since people will not be buying homes and there will be no income to repay these loans. We may well see some giants crumbling,” says Nemtsov.
He adds that it will now be practically impossible to obtain consumer credits.
“Credits will become to all intents and purposes impossible to obtain, either not offered or only offered at massive interest rates. Forget about buying a car or applying for a mortgage,” the former vice-premier told Novy Region.
“The situation in America is nowhere near as bad,” he pointed out.