Russian Conundrum - It seems like everyone is talking about Russia today. For a declining regional power, they're on or near the front page of every major publication. As consumers of content, we can't get enough.
The War in Ukraine, Putin's Price Hike, the Nord Stream Pipeline, Backdoor Energy Deals with India and China. The news is all over the map.
One place where we haven't been giving the Ruskis credit is in their central bank's response to, well, everything.
Back in March, the USD-Russian Ruble exchange rate was 139 rubsickles to the dollar. Today, the exchange rate is hovering around 55. This is the strongest the Ruble has been in Dollar terms in the better part of a decade.
One reason for this could be backdoor payments for Russian energy exports in currencies other than the dollar. Sanctions be damned, Russia is still selling energy in a geopolitically sensitive world where energy security is national security.
One of the most recent potential converts away from the Dollar is Turkey. Energy officials in the Turkish government are considering buying Russian energy using their beloved, hyperinflated Lira. Their goal: spend Lira sooner rather than later to help slow the decline of Turkish foreign cash reserves.
Turkey and Russia have an interesting past. A first wave joining member of NATO during the Cold War in 1952, Turkey straddles many sensitive lines between East and West, often choosing whatever the hell side that benefits them the most in the short term.
Most of you won't remember this, but Turkey was actually kicked out of the F-35 program a few years ago after receiving a shipment of S400 Triumph/SA-21 Growler Surface to Air missile systems from Russia… the same S400 systems that are struggling to help Russian forces gain any sort of air superiority in Ukraine as I write this, mind you.
Turkey still has these S400 missile systems, but as recently as last month, Joey B supported a Turkish bid to snatch up a couple squadrons worth of F-16s. There's a political shell game happening in Congress and within the defense industrial base right now, but it's likely that this foreign military sale might cross the finish line.
During his most recent visit to Tehran, Putin was overheard saying that he wants to cozy up to both Iran and Turkey.
But as it turns out, the Russian people are already pretty close to the Turks, like literally neighbors. Turkey has always been a garden spot for Russian vacationers, but the Russians are taking this to an entirely new level.
Amid hyperinflation, the Turkish housing market has gone bat-shit insane. And as the Lira has been debased, foreigners have rolled in to scoop up good deals when there's blood in the water. Year-over-year, foreigners have accounted for more than 5% of total home sales in all of Turkey.
Who is the largest expatriate community doing all the buying, you ask? Obviously, since this is a rant about Russia, the Russians.
Rich Russians accounted for more than 21% of these transactions. According to the Turkish Statistical Institute, Russians have topped the list of foreign buyers for two consecutive months.
But the Turks aren't dumb; they just passed a law moving the minimum purchase price for foreign sales from $250k to $400k. This drove a surge in homebuying, similar to some of the FOMO we saw domestically with sub-3% mortgage APRs.
It remains to be seen if the Russian red housing wave will continue now that the min-transaction dollar amount has almost doubled, but it does tell me something about diplomacy: money talks.