- Markets respond to wider sanctions on Russia for its invasion of Ukraine
- UK crisis live blog
The earlier sharp declines in the rouble were in Asian trading. On the Moscow exchange, the rouble initially fell 15% to 95.48 per dollar before extending losses to 21.6%, taking the rouble to 100.96 per dollar.
Neil Shearing, group chief economist at Capital Economics, is predicting a decline in Russian GDP of about 5% this year. He said about the exclusion of some Russian banks from the Swift payments system:
The list of institutions affected has yet to be released, but when it is it’s worth watching whether Gazprombank is included (since it handles a large share of Russia’s energy exports this could have implications for energy flows). However, so far at least the West has stopped short of a ban on energy imports from Russia, which would be the most powerful sanctions they could implement.
This is perhaps a more significant move since it will substantially reduce the ability of the CBR to liquidate its foreign assets to support the ruble and help Russian firms service FX-denominated liabilities. Around 40% of Russia’s international reserves are held in the financial systems of the countries that have signed up to these sanctions.
Key areas to watch going forward are whether the US adds the CBR to its “Specially Designated Nationals” list, which would ban US entities from dealing with the central bank and therefore acting on its behalf, and whether the US introduces ‘secondary sanctions’ that would affect any foreign entity dealing with the CBR. Another key area to watch is whether the CBR sanctions contain a carve out for sovereign debt repayments (we expect that they will).
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