Russian billionaire Oleg Deripaska said the euro may fall to parity with the dollar, opening the floodgates to cheap imports into Russia and forcing a ruble devaluation to preserve the country’s competitiveness.
“I’m surprised some still believe in the euro,” Deripaska, 43, owner of a fortune that Forbes estimates at $16.8 billion, said yesterday in an e-mailed reply to questions. “The crisis in Europe is developing fast” and “against that background I don’t rule out that the euro’s rate will equal the dollar’s in about a year and a half.”
A “collapse” of the common currency is the biggest concern for Deripaska’s business empire, which includes United Co. Rusal, the world’s biggest aluminum maker, he said. Europe accounted for 56 percent of Rusal’s revenue in the first half. Most commodities trade in dollars and a stronger U.S. currency makes them more expensive for buyers with other currencies.
The European Union, Russia’s largest trading partner, is battling to staunch a debt crisis that has so far cost five leaders their jobs, threatening to trigger another global recession. Policy makers declared this month for the first time that debt-encumbered countries can be ejected from the 17-nation bloc.
The euro strengthened the most in a week against the dollar amid speculation European Central Bank buying of Italian and Spanish bonds will stem surging borrowing costs in the region. The shared currency advanced 0.4 percent to $1.3510 at 10:18 a.m. in New York and rose 0.3 percent to 103.92 yen, after dropping to 103.41 on each of the past two days, the lowest level since Oct. 10.
Deformed or Broken Up
“The European monetary union may be deformed or break up,” said Deripaska, ranked by Forbes as Russia’s fifth-richest man. “The Europeans will, sooner or later, have to print money to save banks -- not Italy or Spain, but their own banks.”
Rusal is seeking to diversify from its traditional markets and aims to boost sales in China from next year, the company’s management said Nov. 14. Euro devaluation will have the most negative effect on China, which counts the currency union as its largest export destination, Deripaska said.
A recession in Europe, combined with the currency’s slump, will be a double shock for the world’s second-biggest economy, he said.
“Everything will depend on the reaction of Chinese authorities,” Deripaska said. “If they begin to weaken the yuan’s rate against the euro, it may provoke a series of competitive devaluations in other countries that fear an influx of goods from China.”
A weaker euro “will tremendously affect commodity markets and investment” and may force Russia to follow suit to retain competitiveness against European rivals, Deripaska said. The Russian currency is the second-best performer versus the euro so far this quarter behind Brazil’s real among the 25 emerging-market currencies tracked by Bloomberg.
“Imagine the flood of goods unleashed from Europe to Russia, from agriculture to industry,” Deripaska said. While the country may benefit from importing cheaper equipment, “the fundamental principles of monetary policy must be changed, giving companies access to longer-term and cheaper credit.”
In 2009, Rusal signed a $17 billion accord with creditors in Russia’s biggest corporate restructuring, which included more than 70 Russian and foreign banks. The Moscow-based company in October refinanced an $11.4 billion debt that remained two years after restructuring, reducing interest rates and removing restrictions on investments and dividends.