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Following the Russian invasion of Ukraine late last month, the US, UK, EU, Japan and a number of other countries began imposing new sanctions against Russia as their main response to the crisis. Indeed, in lieu of military intervention, this “economic war” on Russia targets the country’s banks and financial institutions, oil, gas, and high-tech companies, as well as Russian oligarchs, businessmen, and political figures who are part of President Putin’s inner circle.

Irena Shoeg

Head of MENA & CIS Desks

With sanctions targeting nearly 80% of the total banking assets in Russia and major banks like Sberbank and VTGB Bank, and with several institutions cut off from the SWIFT international payment system, the effects on the Russian economy and its financial system can already be seen. Most significantly, trust in and the value of the ruble has collapsed, triggering rising prices — which are liable to affect even locally produced items like wheat — and attempts by the population to withdraw cash before they no longer can.

The above is despite efforts by Putin over the past eight years to make the country as “immune” as possible to sanctions. Although he built-up the fourth largest foreign currency reserve in the world — valued at about  USD 630 billion — as such a buffer, the US, UK, EU, and Canada’s  sanctions on the Russian Central Bank has largely deprived Putin the access to the funds he planned to use for both the war in Ukraine and to prop up the economy in the face of the predicted global financial response.

As the invasion continues, we expect divestment to continue, as companies distance themselves to reduce both moral and financial exposure while additional countries impose and expand sanctions against Russia.

With historically neutral countries like Switzerland announcing that it will adopt the EU designations and Singapore, which rarely issues sanctions of its own, announcing that it will also impose “appropriate sanctions and restriction”, the writing on the wall seems clear.

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