US banks are starting to make big investments in Russia again, and it could be a sign of a looming economic crash for the former superpower. That's the verdict that consultant Ray Soifer is drawing from the most recent set of figures from the Federal Financial Institutions Examination Council.
According to the data, which cover the period to the end of 2002, total US bank exposure to Russia now stands at $3.89 billion. That might not sound much, but, says Soifer, head of Soifer Consulting: "the last time it was that high was just before the crash in 1998. It had reached $6 billion, and had got there in rapid order. That's happening again." At the end of June 2001, according to FFIEC, exposure to Russia was $1.435 billion, increasing to $2.124 billion by the year-end. That's a 271% increase in 18 months.
Soifer, who's been studying the data from the FFIEC regularly since 1994 when he was an analyst at Brown Brothers Harriman, says that such rapid increases often end up with one outcome. "Numbers changing that quickly is a good indication of trouble ahead," he says. "We saw it in Russia in 1998, and we saw it in Latin America in 1994 in the run-up to the Tequila crisis.