“In America, toxic mortgage-backed securities sank mighty investment banks. In Russia, it is the empires of the oligarchs and the loans they took out from Western banks, using shares in their companies as collateral, that are at risk.”

“In a number of cases the value of shares pledged by Russia’s rich has fallen below the value of the loans, an ominous sign for the market here, where the benchmark RTS index is already down 71 percent from its peak in May.”

“Western banks are not immune. Their exposure to oligarch debt came into focus last week when the Russian central bank reported that, all told, Russian companies have to repay $47.5 billion to foreign creditors by the end of this year, and $160 billion by the end of 2009.”

“If banks require businesses to sell shares to repay these loans, “the Russian stock market could come down like a house of cards,” Michael Kavanagh, a mining sector analyst at Uralsib bank, said.”

“This could be a game changer for a lot of very, very large players,” Rory MacFarquhar, an economist at Goldman Sachs in Moscow, added. “The ground is shifting under them.”

You must be logged in to post a comment.