Record oil prices could lead to collapse in Russian market

But for the time being this does not stop either Russian or Western buyers, who are continuing to pump money into the Russian market, thus blowing up its “bubble”. It is difficult to say how much patience or money investors will have, but it is clear that even a small correction could turn into a global collapse. The same thing is happening on the property market. When acquiring accommodation in order to obtain profit, investors are expecting a certain level of return. If it is lower, then money will be diverted to other spheres and a global sell-off will begin on the property market. However, this is being averted by a large excess of demand over supply. The large amount of free money is leading the population into debt for life: the size of consumer credit is growing from year to year, as is the share of non-repayment. Several banks are already incurring losses because their clients are unable to correctly calculate the extent of their wealth. A collapse in the stock market and property market will provoke a global crisis in the banking sector – the share of “bad” debts will grow many times over.

Such a pessimistic scenario need not take place in the very near future, but above all oil prices may be the impulse for it: if the crisis around Iran is resolved, oil prices may drop to 50 dollars a barrel. In that case some investors will undoubtedly rush to make a profit, withdrawing their money from Russian oil companies. This will be the beginning of the end for the bubble whose growth we are now watching.

Source: Politcom

Translated by James Platt