Economic sanctions hit Ruble

Saturday, July 19th, 2014 6:39:07 by
russian ruble

The new sanctions imposed by the U.S. and the European Union on Russia have been quick to take effect. The ruble depreciated Thursday to its lowest against the dollar since March, when Russia started operations in Crimea, and the bag was left Moscow 2.31% amid fears that Russian companies are facing problems of liquidity after new restrictions on access to finance.

The U.S. Treasury on Wednesday issued a list of sanctions by sector, mainly affecting the banking and energy, as well as companies in the defense industry. Sanctions affect bank Vnesheconombank (VEB), a public development bank and Gazprombnak, the third largest bank with assets of 3.8 trillion rubles, representing 6.9% of the financial system. In the energy sector, the sanctions affect two strategic companies, Rosneft, Russia’s largest oil company, equivalent to 11.3 % of GDP, and Novotek (0.9% of GDP) assets. These companies are prevented from accessing new financing by banks or U.S. investors. The EU, meanwhile, has suspended the financing of new projects by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).

Russian President Vladimir Putin criticized the “aggressive” Western reaction to the Ukrainian conflict and warned it will have a “boomerang effect” that will harm U.S. interests, reports Bloomberg. Not only Rosneft is 20% owned by British Petroleum, which was left Thursday by 1.9 % compared to 4.3 % of the Russian company, and has a partnership with Exxon to carry out an exploration project in the Arctic is now at risk.

These are the toughest sanctions to date 2.5 – level of 3, say analysts, and “will make it difficult for the companies concerned to attract financing for their new projects, like the proposed joint exploration of Rosneft in the Arctic and Exxon, one of the major concerns, ” the economists at Nomura said in a note to clients.

In fact, conflict with Crimea and the first round of sanctions led to an outflow of capital from the country of more than 50,000 million fearing harsher measures that involved freezing the assets of the country. “The full impact of the latest round of sanctions will be limited, in part thanks to strong international investment position of Russia, mainly due to reserves for 480,000 million in government hands,”  claimed in an email William Jackson, economist at Capital Markets in London. That means that the Moscow government will come to the rescue of Russian companies and banks in the next year at the time of having to refinance debt of $ 75,000 million. In any case, the measure threatens to slow the ailing Russian economy, which grew just 0.9% in the first quarter.

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