Friday, November 28, 2014

Bloomberg News - Russian Recession Risk Seen at Record as Oil Saps Economy

Photographer: Andrey Rudakov/Bloomberg
Foreign currency exchange rates sit illuminated on an electronic sign outside a currency exchange bureau in Moscow, Russia. The ruble has weakened more than 25 percent against the dollar in the past three months, the worst-performer among more than 170 currencies tracked by Bloomberg
Russia will sink into recession at a Urals price of $80 a barrel, seven years after its economy grew 8.5 percent when its chief export oil blend averaged near $70, according to a Bloomberg survey of analysts.
Urals at $80, or about $3 cheaper than its average in the month through November 15, will tip Russia into a contraction, according to the median estimate of 32 economists. The probability of a recession in the next 12 months rose to 75 percent, the highest since the first such survey more than two years ago, according to another poll.
Russia, which receives about half of its budget revenue from oil and gas taxes, is closing in on its first slump since 2009 after dodging recession this year as it lurched from one crisis to another following the takeover of Crimea from Ukraine in March. Consumer spending, which accounts for half of the $2 trillion economy, is failing to make up for lost revenue with oil mired in a bear market amid concerns over a global glut.
“Growth in domestic demand, which has been the major driver for the last several years, is almost exhausted,” Anna Bogdyukevich, an economist at ZAO UniCredit Bank, said by e-mail. “The economy may contract even if the oil price remains at its current level for an extended period of time.”
Besieged by U.S. and European sanctions over Ukraine, the economy is hamstrung by shrinkinginvestment, the biggest capital outflow since 2008 and the fastest inflation in more than three years. The central bank last month brought its key interest rate to the highest since it was introduced 13 months ago.

Recession Looms

“Capital flight, inflation, higher interest rates, financial turmoil and increasing numbers of company defaults will grow into recession within the next 12 months,” Wolf-Fabian Hungerland, an economist at Berenberg Bank in Hamburg, said by e-mail. “This year Russia will manage to get away without recession. But recession is on its way.”
The ruble has weakened more than 25 percent against the dollar in the past three months, the worst-performer among more than 170 currencies tracked by Bloomberg.
Brent, the grade of oil traders look at for pricing Russia’s main export blend, fell below $75 a barrel for the first time since September 2010 after OPEC kept its oil production unchanged at yesterday’s meeting.
Urals prices averaged $82.67 per barrel Oct. 15-Nov. 15, compared with $91.75 a month before, according to the Finance Ministry in Moscow.
Given OPEC’s decision, an oversupply of oil in the market will persist, said Maxim Oreshkin, head of the Russian Finance Ministry’s department of strategic planning.

‘Moderately Optimistic’

“In these circumstances, even a scenario of $80 a barrel in the coming years can already be seen as moderately optimistic,” he said in a statement yesterday. “This situation once again confirms our position that Russian fiscal policy should adapt to new oil prices, which may remain low for an extended period of time.”
The central bank has lowered its forecast for economic growth in its main outlook for 2015 to zero and pushed back its estimate for meeting an inflation target of 4 percent by one year from 2016, according to revisions published Nov. 10.
Gross domestic product will expand 0.1 percent in 2015, down from 0.8 percent predicted a month ago, according to economists in a separate Bloomberg survey. Inflation will reach 9 percent this quarter and 9.3 percent in the first three months of 2015, before starting to slow down, according to economists’ median estimates.

Four Increases

Consumer-price growth accelerated to 8.3 percent in October, the fastest since July 2011. Policy makers have raised their main rate four times by a cumulative 400 basis points since March to rein in inflation. The Bank of Russia increased the benchmark to 9.5 percent percent from 8 percent when it last reviewed borrowing costs Oct. 31.
The key rate will drop to 8 percent by the end of the first quarter in 2016 and fall to 7.5 percent three months later, according to the median estimate of 15 economists in a survey. The central bank is considering potential monetary easing starting from the second half of next year, Governor Elvira Nabiullina said this week.
The regulator hasn’t intervened on the currency market since Nov. 10. It moved to a free-floating exchange rate ahead of schedule this month after its rules-based interventions drained its reservesby about $90 billion since the beginning of the year to $420.4 billion.

Currency Interventions

The central bank will resume its discretionary currency interventions if the ruble weakens to 50 per dollar, according to the median estimate of 23 economists.
The Bank of Russia may still conduct “large-scale” interventions if it sees risks to financial stability, Nabiullina told lawmakers in Moscow two days ago.
“If at these oil price levels we hit 50 or very close in rubles per dollar, we expect the central bank to intervene to shake up and blow out speculators,” Vladimir Miklashevsky, a strategist at Danske Bank A/S, said by e-mail. “At the current oil price, we do not exclude touching 50 as geopolitical woes can escalate at any moment.”
To contact the reporters on this story: Andre Tartar in London at; Anna Andrianova in Moscow at

Thursday, November 27, 2014

BBC News - Juncker reveals giant EU investment plan

European Commission President Jean-Claude Juncker has given details of a €315bn (£250bn; $393bn) investment plan to kick-start Europe's economy.
At its heart is a new €21bn fund that would provide loans for infrastructure projects. Mr Juncker hopes most of the rest of the money will come from private backers.
Only €16bn of the original money would come from the European Union budget.
However, critics doubt it can attract so much private investment.
There was immediate scepticism from the European Trade Union Confederation (ETUC) whose General Secretary, Bernadette Segol, suggested the Commission was "relying on a financial miracle like the loaves and fishes".
She said she did not believe that €315bn could be raised from €21bn, a leverage factor of 15 which the ETUC argued was "almost certainly unrealistic".
The Commission believes it could create up to 1.3 million jobs with investment in broadband, energy networks and transport infrastructure, as well as education and research.
This is the new Commission's big idea. It is the EU's New Deal.
To a large extent it will be judged by its success or failure.
The markets are currently awash with money. The big test is whether they will invest in Europe where the economy is stagnating and confidence is low.
"Europe needs a kick-start and today the Commission is providing the jump leads," Mr Juncker said as he detailed his ambitious five-year planat the European Parliament in Strasbourg.
European Commission President Jean-Claude Juncker (26 Nov)Mr Juncker said Europe needed a kick-start and the Commission was offering the jump-leads
He said Europe had to face "the challenge of a generation" head-on, without a money-printing machine, and described his plan as the greatest effort in recent EU history to trigger additional investment without changing the rules.
The plan would take the burden off national governments, already facing big debts after the financial crisis. But they could contribute to the fund if they wished, and would be asked to come up with a list of projects with "high socio-economic returns" that would start between 2015 and 2017.
Illustrating the type of projects he has in mind, Mr Juncker said he had a vision of:
  • Schoolchildren walking into a brand new classroom equipped with computers in the Greek city of Thessaloniki
  • European hospitals saving lives with state of the art medical equipment
  • French commuters charging electric cars on motorways in the same way as petrol stations are used now
  • Households and companies becoming more energy efficient
The Commission and the European Investment Bank (EIB) would create the fund's €21bn reserve, according to Mr Juncker, which would then enable the EIB to fund loans worth €63bn. Private investors would be expected to put forward the lion's share of the money, some €252bn.
Pope Francis in Strasbourg (25 Nov)Pope Francis likened Europe to a grandmother on Tuesday, "no longer fertile and vibrant"
Mr Juncker's speech came a day after Pope Francis addressed the same parliament, criticising an "elderly and haggard" Europe that had become less and less of a protagonist.
Initial reaction to Mr Juncker's plan came from Chancellor Angela Merkel, who told the German parliament that her government supported the package in principle, but it had to be clear to everyone where the projects were in the future.
The Commission president, who came to office at the start of November, said he could not promise how much investment would go to each country, but he argued that investment in one country could only be good for growth in another.
Structural reforms were necessary to modernise Europe's economy and fiscal responsibility was needed to restore confidence in public finance, but now investment had to be boosted as well, he said.
The start of the former Luxembourg prime minister's term as president has been overshadowed by his country's role in a tax break row.
Hundreds of multi-national firms were reportedly attracted to Luxembourg in legal tax avoidance schemes. Mr Juncker was prime minister at the time but denies wrongdoing.
Although a vote against him is due to take place at the European Parliament on Thursday, it is unlikely to attract widespread support.

Wednesday, November 26, 2014

Reuters News - U.S. economy resilient in third quarter as global growth cools

A bucket is lifted by scaffolding workers at the Washington Monument (R) at sunrise in Washington March 15, 2013. The U.S. Capitol is seen at left. REUTERS-Gary Cameron
 A bucket is lifted by scaffolding workers at the Washington Monument (R) at sunrise in Washington March 15, 2013. The U.S. Capitol is seen at left.
(Reuters) - The U.S. economy grew at a much faster pace than initially thought in the third quarter, pointing to strengthening fundamentals that should help it weather slowing global demand.
The Commerce Department on Tuesday raised its estimate of GDP growth to a 3.9 percent annual pace from the 3.5 percent rate reported last month, reflecting upward revisions to business and consumer spending, as well as to inventories.
The rise in output followed a 4.6 percent advance in the prior three months to mark the two strongest back-to-back quarters since the second half of 2003. It underscored the economy's resilience against a backdrop of a Japanese recession, an anemiceuro zone and a slowing China.
"This report will go some way in providing further confirmation about the sustainability of the current economic recovery," said Millan Mulraine, deputy chief economist at TD Securities in New York.
Economists had expected growth would be trimmed to a 3.3 percent pace. When measured from the income side, the economy grew at its fastest pace since the first quarter of 2012.
But the otherwise upbeat picture was marred somewhat by other data showing consumer confidence sliding to a five-month low and a further moderation in house price gains.
U.S. stocks were little changed while the dollar slipped against a basket of currencies. Prices for U.S. Treasury debt rose marginally.
The ebb in consumer confidence in November was surprising given falling gasoline prices and a firming jobs market.
"Economic growth is strong and getting stronger by the day. The consumer gets it, even if they aren't yet saying it," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
The third quarter was the fourth out of the past five that the economy has expanded above a 3.5 percent pace, well above the level economists consider to be trend.
Some of the momentum appears to have carried over into the final three months of the year, with data from manufacturing to employment and retail sales suggesting continued strength.
But with inventories rising more than previously estimated in the third quarter, economists expect the pace of restocking to slow, holding growth below a 3 percent pace in the fourth quarter.
Highlighting the economy's strong fundamentals, growth in domestic demand was raised to a 3.2 percent pace from the previously reported 2.7 percent rate.
"This is vindication for the Federal Reserve that they downplayed concerns overseas and it's appropriate to speak about rate hikes next year," said Christopher Low, chief economist at FTN Financial in New York.
The U.S. central bank has kept benchmark borrowing costs near zero since December 2008, but is expected to start raising them around the middle of next year.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised up to a 2.2 percent pace in the third quarter from the previously reported 1.8 percent rate.
Business spending on equipment was raised to a 10.7 percent rate from a 7.2 percent. While exports grew, the pace was less brisk than previously reported, leaving trade contributing only 0.78 percentage point to GDP growth instead of 1.32 percentage points.
Growth in wages and salaries was revised lower for both the second and third quarters. Economists said that brought the GDP-based wages and salaries measures into line withearnings figures from the government's survey of nonfarm employers.
"This should ease concerns that the Fed was falling behind the curve due to mismeasured wage inflation data," said Michael Feroli, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Paul Simao)

Tuesday, November 25, 2014

BBC News - Oil price slide and sanctions 'cost Russia $140bn'

The falling oil price is costing Russia up to $100bn a year, while Western sanctions have hit the country by $40bn, its finance minister has said.
Anton Siluanov made the comments on Monday at an international financial and economic forum in Moscow.
Reports on Monday suggested Russia could cut its oil production by about 300,000 barrels a day in an attempt to support the oil price.
Opec members meet in Vienna this week where falling prices will be discussed.
Vladimir Putin has said that Russia could suffer "catastrophic consequences" from sanctions, the falling oil price and the sliding rouble, while claiming they would have knock-on effects for other countries.
"The modern world is interdependent. It's far from guaranteed that sanctions, the steep fall in oil prices and the loss of value of the national currency will lead to negative results or catastrophic consequences only for us," the Russian president told TASS, the official news agency, on Sunday.
The European Union and the United States imposed sanctions on Russia following its annexation of the Crimea region in Ukraine and its alleged involvement in eastern Ukraine.
Member of the Opec oil cartel may decide to cut production to support prices. Brent crude was trading at $80.25 a barrel on Monday, down 11 cents, while US crude was 10 cents lower at $76.41.
Iran, Libya and Venezuela have urged other Opec members to support oil prices by reducing output, although Kuwait has said that a cut was unlikely.
The oil price has been falling since the summer on abundant global supply, partly due to the US shale boom, and lower demand in Europe and Asia. Brent crude has fallen by more than a third and hit a four-year low of $76.76 a barrel on 14 November.
Daniel Bathe, of Lupus alpha Investment, said: "The market would question the credibility of Opec and its influence on global oil markets if there were no cut."
Saudi Arabia, Opec's biggest producer and exporter, has sent mixed messages about a possible cut. Olivier Jakob, an analyst at Petromatrix, said the Saudis could be influenced by the conclusion of talks about Iran's nuclear programme in Vienna on Monday, which are being extended until next summer.
Russian energy minister Alexander Novak said last week that Moscow was considering cutting its oil output, but said the measure had yet to be agreed.
The rouble gained more than 2% against both the US dollar and euro on Monday, helped by the slight recovery in oil prices.
The currency has fallen by almost 30% against the dollar this year.
Russia's central bank had been spending billions in a bid to prop up the rouble, but said earlier this month that it would limit its intervention.

Monday, November 24, 2014

Bloomberg News - How the EU Plans to Turn $26 Billion Into $390 Billion

Photographer: Ian Waldie/Bloomberg
European Commission President Jean-Claude Juncker is due to announce the three-year initiative in coming days
The European Union is planning a 21 billion-euro ($26 billion) fund to share the risks of new projects with private investors, two EU officials said.
The new entity is designed to have an impact of about 15 times its size, making it the anchor of the EU’s 300 billion-euro investment program, according to the officials, who asked not to be named because the plans aren’t final. European Commission President Jean-Claude Juncker is due to announce the three-year initiative this week.
The commission will pledge as much as 16 billion euros in guarantees for the vehicle, which will also include 5 billion euros from the European Investment Bank, the officials said. Loans, lending guarantees and stakes in equity and debt will be part of its toolbox, with the goal to jumpstart private risk-taking so that stalled projects can get off the ground.
Juncker’s investment plan aims to combine EU resources and regulatory changes “to crowd in more private investment in order to make real investments a reality,” EU Vice President Jyrki Katainen said on Nov. 14 in Bratislava. The plan is one element of the EU’s economic strategy and “not a magic wand with which we will be able to miraculously invest ourselves out of a difficult economic climate,” he said.
Europe is struggling to spur economic growth as it emerges only slowly from waves of crisis. The 18-nation euro area is forecast to see growth of just 0.8 percent this year, according to EU forecasts, while the region’s unemployment rate of 11.5 percent masks rates of about 25 percent inGreece and in Spain.

‘What We Must’

The euro is on course for a fifth monthly decline after European Central Bank President Mario Draghi said last week that ECB officials “will do what we must” to spur inflation. The single currency was little changed at $1.2404 against the U.S. dollar at 7:38 a.m. in London after declining 1.2 percent on Nov. 21.
While the Juncker proposal involves seeding investment in infrastructure and other fields, the 21 billion-euro sum with a proposed leverage rate of 15 times risks disappointing markets.
Even with additional funds of 30 billion euros and a more modest leverage rate of 10 times, “the plan may not be credible as a start,” Royal Bank of Scotland Plc analysts including Alberto Gallosaid Nov. 18. All the same, if the European Central Bank became involved in joint action with the EIB, “it could be a game changer for Europe,” they said.

Broad Range

The fund is designed to make use of existing resources and not require any new cash infusions from member nations, the EU officials said. The EIB will house the fund, which will have its own management and be able take on a broad range of roles. It will be able to operate with fewer restrictions than earlier initiatives, like a project-bond program that is only available to cross-border ventures.
The EU is preparing a list of projects alongside that could take shape quickly. Because the fund will be able to bear some of the risk of starting projects, it may offer a way around national budget constraints and private-sector reluctance to take on new risk, according to the officials.
“We need a step change in efforts to tackle the obstacles hampering private investment and to optimize the use of public investment in Europe,” Emma Marcegaglia, president of the BusinessEurope federation of employer groups, said on Nov. 21. The group released a report on investment in Europe calling for the EU to lower national barriers, improve regulation and lower the costs of doing business inside the 28-nation bloc.
To contact the reporter on this story: Rebecca Christie in Brussels at

Friday, November 21, 2014

Bloomberg News - SNB Can Take Further Steps to Defend Cap, Zurbruegg Says

The Swiss National Bank will defend its cap of 1.20 per euro on the franc and won’t hesitate to enact supplementary measures, Governing Board Member Fritz Zurbruegg said.
“The SNB will continue to enforce the minimum exchange rate with the utmost determination,” Zurbruegg said in a speech yesterday in Geneva, reiterating the stance taken by the central bank at its most recent policy decision. “To this end, it is prepared to purchase foreign exchange in unlimited quantities and to take further measures immediately if required.”
The franc hit a 26-month high versus the euro this week as investors bet the European Central Bank will enact still more stimulus to shore up inflation. The SNB set the 1.20 limit three years ago after the franc nearly shot to parity with the euro amid Europe’s sovereign debt crisis. SNB policy makers have said a negative interest rate is in their toolkit.
“For us negative rates are a complementary measure,” Zurbruegg said. They’d have a bigger impact in Switzerland than in the euro area because of the permanent excess liquidity in the country, he said, reiterating comments from a month ago.
The franc traded at 1.2020 per euro at 8:49 a.m. in Zurich today, little changed from yesterday.
The SNB’s balance sheet has expanded by more than a third in the past three years because of currency interventions to enforce the cap. Nearly half its foreign exchange holdings are in euros and a quarter in dollars.

Asia Potential

“We see further potential in Asia as we move forward and it will not surprise you to hear that we see China playing an increasingly important role here,” Zurbruegg said, explaining that Chinese central government bonds were of interest due to risk diversification.
The SNB in July announced it had agreed a renminbi swap-agreement with the People’s Bank of China, which will allow the purchase and repurchase of as much as 150 billion renminbi ($24.5 billion) over the next three years.
“We intend to make use of this quota in the foreseeable future,” Zurbruegg said, adding that the SNB would only be investing in central government bonds with maturities of up to 50 years.
On Nov. 30 Swiss voters will decide on a measure that would require the SNB to hold at least 20 percent of its assets in gold and never sell any. While the initiators argue it would preserve national wealth, the government and the central bank oppose it, saying it would impede fulfillment of theprice stability mandate.
According to a poll published by gfs.bern this week, 38 percent backed the measure, while 47 percent are opposed it, with 15 percent still undecided.
“The SNB considers the initiative to be unnecessary and harmful,” Zurbruegg said yesterday.
To contact the reporter on this story: Catherine Bosley in Zurich at

Thursday, November 20, 2014

Reuters News - Special Report: Crimean savers ask: Where's our money?

People stand in line to withdraw money at an automated teller machine (ATM) of Ukrainian bank Privatbank in Simferopol, in this March 14, 2014 file photo.  REUTERS-Vasily Fedosenko-Files
People stand in line to withdraw money at an automated teller machine (ATM) of Ukrainian bank Privatbank in Simferopol, in this March 14, 2014 file photo.
(Reuters) - Outside a high-rise building on the outskirts of this disputed region's capital, a steady stream of frustrated residents exited a government office, clutching folders of bank records and shaking their heads in disgust.
    "They are not returning the money," complained Margarita Pobudilova, a 77-year-old retired factory worker who for months has been unable to access more than $3,000 of her life savings.

    Ten months after Russia invaded this Black Sea peninsula and seized it from Ukraine, the financial fallout is still being felt. Thousands of ordinary citizens have little or no access to their funds. Losses for Ukrainian banks continue to mount as billions of dollars worth of loans they issued in Crimea go unpaid. Lawyers for the banks are preparing legal actions against Russia, which confiscated many of the banks' buildings, equipment and cash.
Meanwhile, Crimea has been thrust into a kind of technological time warp: Most ATMs no longer accept non-Russian bank cards; foreign credit cards can't be used to buy things. Most non-local mobile phones can't receive a signal. And even if they could, calling other Crimeans is complicated: Most of the peninsula's residents recently had to get new mobile phone numbers because Ukrainian services were cut off.
    The banking and phone chaos are another front in the conflict between Ukraine andRussia.
    In Crimea, which has been part of Ukraine for 60 years, Russia has basically blown up the existing banking system, forcing Ukrainian banks to close, banning the Ukrainian currency and replacing the region's retail banking network almost overnight. The resulting economic turmoil has shuttered some businesses and complicated life for thousands, forcing people to deal with a Kafkaesque bureaucracy to try to get their money returned.
    For all the havoc Russian President Vladimir Putin's conquest has caused, many living here don't blame him for their hardship. In interviews, residents accused Ukrainian banks and the government in Kiev of stealing their money. That distrust indicates – at least for now – a victory for Russia in the propaganda war and suggests that Kiev's chances of regaining the peninsula soon are slim.
    The international community has condemned Russia's annexation of Crimea, with the United States and the European Union imposing economic sanctions on Russian individuals, companies and banks. Russia has retaliated with its own sanctions and support for pro-Russian separatists in eastern Ukraine.
    Andriy Pyshnyy is chairman of the management board of Ukraine's state-owned Oschadbank, which until March had 296 branches in Crimea. He described how one day they were taken over by Russian banks. "In the evening (our) outlets work," he said. "In the morning, a new bank is opened and just the name is changed to RNCB Bank." Russian National Commercial Bank is one of at least 30 Russian banks that have rushed in to fill Crimea's financial vacuum.
    Many in Crimea – where average monthly wages last year were less than $400 – still can't access their Ukrainian bank accounts.
    The situation was exacerbated in April when Putin offered Crimeans who had leased their cars through Privatbank, Ukraine's largest bank, some unusual financial advice.
    Toward the end of a live television broadcast in which Putin answered viewers' questions, he dipped his hand into a folder and read out this one: "I hired a car on lease from Privatbank. It will take me only two years to repay the loan," he said. "Privatbank no longer operates in Crimea. What am I supposed to do?"
    The president's answer: "Please use the car and don't worry."
    The remark may have been related to an ongoing feud between Putin and Ihor Kolomoisky, one of Privatbank's largest shareholders. Russia has accused Kolomoisky of funding Ukrainian battalions fighting the separatists.
    In any case, following Putin's suggestion, thousands of individuals and companies that had borrowed money from Ukrainian banks stopped repaying their loans.
    "If the ruler of the country told them not to pay, why would they pay?" asked Alexander Dubilet, chairman of Privatbank, which had lent more than $1 billion in Crimea.
    In all, Ukrainian banks had loaned Crimean businesses and individuals about $1.8 billion at the time Crimea was annexed, according to Ukraine's central bank.
    Pyshnyy of Oschadbank says "99.99 percent" of its loans in Crimea - which totaled more than $500 million - are now delinquent.
    The surge in bad loans has made it more difficult for Ukrainian banks to repay Crimean depositors, according to an official with Ukraine's central bank. The fact that the Russians also seized many of their branch offices and records didn't help, either. "To function properly, we need ... access to our branch network, our outlets, our ATMs, to our documents, our files," Pyshnyy said.
    To help Crimeans, Moscow has been compensating depositors with accounts at Ukrainian banks through a fund that insures Russian bank deposits. According to the Fund for the Protection of Depositors in Crimea, which is part of Russia's Deposit Insurance Agency, as of Nov. 6 it had paid out more than $500 million to 196,400 depositors.
    The compensation is capped. Yevgenia Bavykina, Crimea's new deputy prime minister in charge of economic affairs, told Reuters last month that depositors were owed more than $425 million in part because the fund has a limit of about $15,000 per bank account.
    She said the fund still hopes to repay depositors the rest of their money by selling property confiscated from Ukrainian banks. Crimea's government also is urging people who took out loans to repay them to the deposit protection fund, rather than to Ukrainian banks. Expressing confidence they will comply, she said, "People here are notable for their decency and their volunteering."
    Bavykina said the fund has compensated most people who have applied. In thousands of cases, however, it has had difficulty verifying exactly how much money was on deposit, she said.
    With no Ukrainian bank branches left operating in Crimea, the required verification records often aren't available, frustrated Crimeans say.
    Pobudilova, the retired factory worker, had invested about $3,600 in a one-month deposit at Ukraine's Kyiv Rus Bank in February. By the time her investment matured, the Russians had invaded Crimea, and Ukrainian banks were being forced out. She said she has no access to the money because the bank blocked her debit card.
    She applied to the deposit protection fund, but was told it could not compensate her unless her investment contract with her bank was extended. The fund advised her to write to Kyiv Rus Bank.
    Her grandson, Vladimir, said she tried to contact the bank. "They did not even want to talk to her," he said.
    Kyiv Rus Bank declined to comment.
    Pobudilova said she had planned to give the money to her grandchildren but now doesn't know what to do. "The fund is saying I am supposed to receive the extended contract from the bank," she said. "I'm 77 years old. I'm not able to deal with that."
    In another case, a retiree named Iryna, who declined to provide her last name, said she has no access to more than $100,000 on deposit at Privatbank and has received no satisfaction from either the fund or the bank.
    She said her problems began with her passport. She has lived in Crimea for 40 years but had replaced her passport two years ago in Ukraine's capital, Kiev, after the pages split apart. The new passport stated she lived in Kiev.
    After the annexation, she said, "I realized I was in trouble." She said she spent months trying to change her passport to list her address in Crimea, eventually going to court.
    When she tried to withdraw her money from Privatbank, she said the bank only offered her a five-year savings agreement that paid 7 percent annual interest – much less than Ukraine's annual inflation rate. She said she refused. Privatbank said it could not comment on the specifics of her case without more information.
    By the time she won her court case and obtained an official document stating she is a Crimea resident, she said she had missed the deposit protection fund's deadline for applying.
    The fund is now offering her only partial compensation. "I will lose lots of money," she said. "And I need that money for my son's education."
    Legally, Ukrainian banks are required to repay Crimean depositors because Ukraine does not recognize the Russian annexation, said Oleksandr Pysaruk, first deputy governor of the National Bank of Ukraine, the country's central bank. But he said the hundreds of millions of dollars in delinquent loans make that difficult.
    "If you're liable on the savings but the loans don't get repaid, you've got a capital hole," he said.
    Ukrainian banks' policies towards their Crimean customers vary. Some give priority to Crimeans who have moved to other parts of Ukraine. But only 19,150 people out of a population of nearly two million have migrated, according to Ukraine's Ministry for Social Policy. As for delinquent loans, Privatbank is continuing to charge interest; Oschadbank's chairman says his bank isn't. "We want to understand the position of the borrowers," said Pyshnyy.
    Executives with state-controlled Ukrgasbank in Kiev, which had 11 branches in Crimea, said any of its customers there could travel to other parts of Ukraine and withdraw their deposits. By August, depositors had withdrawn 80 percent of the $25 million in funds on deposit.
    Oschadbank has a similar policy of allowing customers to access their funds elsewhere in Ukraine, and "is the only bank in Ukraine where the individuals' funds and placements are guaranteed by the state for 100 percent," said Pyshnyy. He said the bank carefully checks records submitted by customers, especially those who still reside in Crimea. "We want to be sure about any cheating of the bank by customers."
    Pysaruk, the central bank official, said some Crimeans have tried to double-dip by seeking compensation from both the Russian fund and Ukrainian banks. "We don't have numbers, but they were not just random occasions," he said.
    Privatbank, which in Crimea had 321,000 clients with deposits, has suspended all of its bank accounts there. Crimeans who have moved elsewhere in Ukraine can receive part of their deposits back, Dubilet said. For those still living in Crimea, "we're asking our clients to wait some time until we have solved these issues in the courts."
    How long that will take remains unclear.
    The Crimean protection fund said it has paid out more than $250 million to 109,300 Privatbank customers. But Privatbank and other banks do not know which of their depositors have been reimbursed or how much.
    Privatbank chairman Dubilet said the Russians seized more than $150 million of the bank's real estate and equipment, $30 million from its safes and another $10 million from its ATMs. In April, Privatbank sold its Moscow subsidiary, saying it was the victim of "unprecedented political pressure" by Russian authorities.
    Dubilet said Privatbank hasn't yet calculated its total losses in Crimea. He said its lawyers are considering legal action against Russia in several jurisdictions. Meanwhile, a Crimean court ruled this week that Privatbank owes local depositors $232 million and should pay them back.
Privatbank's problems in Russia and Crimea appear to be related to a nasty spat between Putin and Kolomoisky, a billionaire businessman who is one of the bank's largest shareholders.
    In March, after Kolomoisky was appointed governor of a region in eastern Ukraine, Putin called him "a unique imposter." In telling Crimeans not to worry about car loans owed to Privatbank, Putin added, "If Mr. Kolomoisky and Mr. Finkelshtein don't want your money, it's their problem." Boris Finkelshtein is the former head of Privatbank's Crimea operations.
    Russian authorities later launched a criminal case against Kolomoisky, issuing an arrest warrant, confiscating some of his property in Russia and accusing him of organizing and funding Ukrainian forces in the separatist conflict. The case remains open.
   At a press conference in March, Kolomoisky referred to Putin as "completely unstable, completely mad. He has this messianic urge to restore the Russian empire to the borders of 1913 or the Soviet Union to the borders of 1991."
    Kolomoisky didn't respond to a request for comment.
    Dmitry Peskov, Putin's spokesman, said the president had no conflict with Kolomoisky. "The only thing is that Mr. Kolomoisky is sponsoring units of extremists in the eastern regions (of Ukraine). This is the problem, and this is the reason why he's being treated in Russia as a guy sponsoring extremists."
    As for Putin's suggestion not to repay loans to Privatbank, Peskov said the president was referring to the fact that the banks' branches were closed. "That's the meaning: because if you don't have any branch to make a payment then you don't pay."
    The tensions between Kiev and Moscow will make it harder to solve problems like the one Ukraine's central bank faces. The Russians did not confiscate the central bank's building in Simferopol, but the bank has no access to about $250 million in Ukrainian currency in its vault.
    Pysaruk, the first deputy governor, said the bank has held discussions with Russia's central bank and while the Russians indicated they might be willing to buy the building and return the cash, no agreement has been reached.
    Calling the annexation of Crimea "a land grab," Pysaruk said Russia should be responsible for all costs, including compensating Ukrainian banks for their losses. "The simplest way, if you ask me, would be for the Russians to pick up the check for everything," he said.
(Additional reporting by Natalia Zinets in Kiev,; Maya Nikolaeva in Paris and Michael Shields; in Vienna; Edited by Simon Robinson)