Russia and Ukraine began ceasefire negotiations on Monday (28). Officers from the Russian and Ukrainian armies met near the Belarusian border. Meanwhile, Russian troops have faced unexpected resistance in Ukraine’s smaller towns, where the army and civilians maintain their positions to defend the country. There is no doubt that the conflict will be brief, given the disparity of forces. But even after the last shot is fired, the attack on Russia is likely to continue, this time on the economic front.
Despite not having militarily supported Ukraine, the United States and Europe have launched heavy economic sanctions against Russia. The Russian central bank and other financial institutions were cut from the Swift financial remittance platform, which integrates banks in several countries. In practice, this shutdown disconnected the Russian financial system from the global network.
The British government blocked the sale of Russian public and private bonds on the British market and also froze the assets of Russian billionaires. In general, these oligarchs have strong ties to the Russian government and tend to invest in the UK, which is closer geographically (and more regulatory tolerant) than the US market. Hence the nickname “LondonGrado” to the English capital, as if the seat of the British government were a Russian city.
The initial impacts were a sharp drop in the markets. The US S&P 500 index is down 1%, and European indices are down between 1.5% in London and 3% in Milan.
The ruble collapsed. The dollar rose from 83 rubles on Friday (25) to 120 rubles on Monday, which forced the Central Bank of Russia to raise interest rates from 9.5% per annum to 20%, in order to try to contain speculation.
And the effects on the real economy can already be felt. On Monday, Rosaviatsia, the authority that regulates airspace, banned companies from 36 countries from flying over Russian territory, a move that is expected to affect the results of the sector as a whole.
According to the partner at independent analysis firm Nord, Renato Breia, the impact of the measures will be felt throughout the economy, although the conflict appears to be brief. “There will be a ‘second derivative’ impact, with rising commodity and energy prices and renewed problems in global supply chains,” he said.
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