“Every time you think, ’No, he wouldn’t, would he?’ Well, yes, he would,” Hill said.

“What Russia did in the last few years was basically build buffers that are suited to defend against the kinds of sanctions that came in 2014,” Mr. Kluge said. “But against the sanctions that have come now, there’s simply no proper defense.”

What is mostly at risk: agriculture and oil and gas

The thing that is incredible about the Russian financial collapse is that Russia spent six years building a financial fortress and it was basically gone in one weekend.

• Big c/a surplus
• Low gov't debt/GDP
• High levels of real rates

And in one weekend, none of it mattered.

1. 📊Economy

   • “What Russia did in the last few years was basically build buffers that are suited to defend against the kinds of sanctions that came in 2014,” Mr. Kluge said. “But against the sanctions that have come now, there’s simply no proper defense.”
   • "Russia would not be able to afford this war were it not for the fact that oil and gas prices are ratcheting up [...] Right now you’re fueling the invasion of Ukraine”
   • Mexico not sanctioning russia

2. 🟩Bond markets

   1. Russia’s biggest foreign bond, a $7bn bond maturing in 2047, halved in price to 35 cents on the dollar
   2. Russia it's not paying coupons to foreigners on local government bonds.
   3. Ukrainian war bonds is also difficult -
   • Stocks tank
   • Money markets are now betting the European Central Bank will not deliver its first rate hike until January 2023
     • Given the high proportion of EUR in Russia’s FX reserves, it was likely that any money market collateral problems were more likely to rear their ugly head in EUR govt bond markets rather more quickly than the US
     • Germany’s Federal Debt Office reportedly taking steps to ease the crunch in Europe’s money markets immediately following Russia’s invasion of Ukraine.
     • Meanwhile, dollar funding costs have been rising along with the FRA/OIS spread, a gauge of funding stress.

3. 🌽Agriculture

   • Wheat prices
   • Wheat jumped the most since 2010 in Chicago, capping the biggest monthly gain in six years as Russia’s invasion of Ukraine chokes supplies from a major breadbasket and sends shock waves through crop markets.
     • Wheat futures soared as much as 8.7% on Monday -- rising by the exchange limit -- while other crops from corn to palm oil also rallied.
       • Most-active wheat futures advanced 8.6% to settle at $9.34 a bushel in Chicago. Prices soared about 23% in February, the biggest monthly gain since 2015.
     • Corn futures in Chicago also rose by the exchange limit, while soybeans climbed as much as 4.4%.
   • Russia produces 10% of global oil and supplies 40% of Europe's gas. It is the world's largest grains and fertilisers exporter, top palladium and nickel producer, third-largest exporter of coal and steel, and fifth-largest wood exporter.
   • Wheat and corn fast climbing, and so are all kinds of vegetable oils. The European benchmark for milling wheat has set a fresh all-time high this morning
   • huge moves in all commodities

4. 🏦Monetary policy

   Sanctioning a central bank is a very big deal 🚧

   • How will global demand for dollars as a safe haven, mesh with the Fed’s desire to tighten policy to counter inflation?

   “If you sanction Russia and thus block hundreds of billions of dollars in the global balance sheet, you have to ask yourself: what happens to the other side of the balance sheet? Reserves are Russia’s assets, they are someone else’s liabilities, who in turn has balanced that liability with an asset and so on. Those chains can be ramified and complicated.”

   • Central bank"paralyze the assets of Russia’s central bank" & "freeze its transactions.”
   • Rough estimates of reserves
   • As well as almost 2,300 tonnes of gold.
     • Gold
   • Most of Russia’s reserves are in institutions outside of the country -  have charted - 78% of that $630 billion is held in China, France, Japan, Germany, the U.S., the U.K. and elsewhere.
     • China, which houses about 14% of Russia’s reserves might backstop him
       • Graphs
     • Bloomberg News estimates that in a worst-case scenario that Russia will retain access to only $230 billion of its $630 billion hoard
     • BREAKING: Russia's government will spend up to 1 trillion rubles to buy shares of companies that have been sanctioned
   • Russian central bank sells $26 billion at limitless one-day repo auction
   • How to think about Russia’s reserve assets
   • CIPS
   • SWIFT

5. 🇷🇺Currency

   • Stopping the central bank using its securities to stabilise the rouble would, therefore, involve instructing the financial intermediaries that feature on this chain — brokers, custodians, central security depositories, foreign-exchange dealers, and correspondent banks — to freeze assets and stop acting on behalf of the central bank.
   • Why hasnt ruble fallen more?
     • At current trade volumes, exporters and Russian banks (the biggest and third biggest still have SWIFT access) can likely buy over $1.5 bn in rubles per day, 50% more than the central bank bought last Thursday using its reserves 4/n

6. 🏨Companies

   1. Shell announced that it will exit from equity partnerships with Russia’s Gazprom, including a 27.5% stake in Sakhalin-II liquefied natural gas export facility
      1. Puts more pressure on western companies to divest
         1. French energy-giant Total is staying in Russia.
   2. Western banks and businesses added to the governments’ actions by halting operations in Russia and sales to Russian companies. Many cited the risks of potentially violating sanctions. More broadly, businesses prize stability, and invasions create chaos.
   3. Sanctions on semiconductor chips have cut off much of Russia’s tech and manufacturing industries. The country has only a few, mostly outdated semiconductor factories and is dependent on parts and patents from Western companies.
   4. "Banks in the allied countries could be facing more than $100 billion of losses now that sanctions have largely cut off the Russian financial system from access to... major currencies.”

7. 👪People

   1. That presumes, of course, that Putin sympathizes with the hardships that average Russians are about to endure

8. 🛢️Energy markets

   😠the biggest risk of deploying the oil and gas weapon, is military rather than economic.

   • At current prices, Russia earns north of $1 billion a day exporting its oil and gas, and cutting that equals the economic decapitation of the regime. Putin has already threatened nukes
   • Canada just announced it will ban imports of Russian oil
   1. The IEA agreed today to release 60 million barrels of oil from emergency stocks to provide stability to global oil markets following Russia’s invasion of Ukraine
   2. BRENT's six-month calendar spread is signalling a severe shortage of oil as sanctions cut off exports from Russia.
   3. OPEC's Feb oil output boost exceeds target for first time in months
      1. The deal calls for a 400,000 bpd increase in February from all OPEC+ members, of which 254,000 bpd is shared by the 10 OPEC producers the agreement covers.
      2. Western countries have contingency measures. Washington, in talks with European nations and the International Energy Agency, has drafted a plan to release between 60 and 75 million barrels from the West strategic petroleum reserves as soon as this week

• Russian convoy runs out of gas
  • oil. Up 17% in two days
  • natural gas skyrocketing
• But Kyiv is pleading for it to stop. “We insist on a full embargo for Russian oil and gas,” Ukrainian Foreign Affairs Minister Dmytro Kuleba tweeted  over the weekend. “Buying them now means paying for the murder of Ukrainian men, women and children.”
  • Russia exports about 8 million barrels a day of crude, refined petroleum products and other oil liquids, a significant chunk of global demand of about 100 million bd
  • How get rid of oil?
    • As for oil, the single best way to permanently crash the oil price is to switch to electric vehicles, since transportation still represents the bulk of petroleum demand:

1. Crypto
   1. The biggest risk to BTC future is its use to circumvent sanctions. Not understanding this is pure hubris.
   2. Russia WILL NOT use crypto to evade sanctions - perception seems to be that they will
   3. Data from blockchain research firm Arcane Research shared with Motherboard shows that USDT/RUB (Tether/Russian ruble) trading volume on Monday broke a new record with $34.94 million.
      1. “Interestingly, the stablecoin trade volume outpaces that of the BTC/RUB trade volume. While the BTC volume has obviously accelerated, the tendency seems to be that Russian traders prioritize dollar exposure at the moment,” Lunde said.
      2. On Monday, major cryptocurrency exchanges including Binance and Coinbase declined a request from the Vice Prime Minister of Ukraine to ban all Russian users, citing the possible harm, while emphasizing that the companies are complying with all official sanctions.
   • Volume