The question going forward is whether Russia burns through its foreign currency reverses first, or just goes directly to manufacturing another currency crisis:
Russia’s gold and foreign exchange reserves fell by $15 billion last week alone, its central bank said Thursday, to $515.7 billion from a total that had neared $600 billion in early August. This week’s rate of decline would drain it by an additional $150 billion if not slowed by the end of the year, and an official from one major Western bank predicted the central bank will spend even more this week. Another $70 billion is promised from the reserves to a bailout for Russia’s financial sector.
With the reserves falling, the cost of insuring Russia’s sovereign debt against default has hit records, with credit-default swaps now trading at distressed levels — above 1,000 basis points, meaning it can cost at least half the amount of the debt to insure it for five years, which is four times what it cost a month ago.
Some Western bankers say their Russian counterparts are cutting back cross-border lending in rubles to stem the outward flow of capital. Top central bank officials called in several heads of Western banks in Moscow last weekend to complain that they were sending rubles injected by the central bank out of the country, according to the Western bank official, who was briefed on the session. A central bank spokesman declined to comment.