by Brayden Yee
A list of global sanctions was just issued to Russia in the midst of their invasion into Ukraine on February 24th. The sanctions, along with the plummeting of the Ruble, will likely leave the Russian economy in ruins and make their stock market uninvestable.
The indications are already showing, although the Russian stock exchange was closed on Monday, Russian stocks tanked last week. There have also been worries for American investors, with DOW, S&P, and NDAQ tumbling last week due to concerns about Russian exports.
Global sanctions were issued to Russia on Monday, with the United States, United Kingdom, and the European Union all agreeing to remove seven Russian banks from SWIFT, an international messaging service regarding financial systems.
The sanctions are targeting Russian finance, energy, and transportation sectors, with trade bans to go along with it. Even Switzerland, a historically neutral country, has agreed to the EU sanctions to a degree. Switzerland is a center to many wealthy Russian Oligarchs and stated that it's freezing the assets of certain individuals immediately.
France, Japan, Australia, New Zealand, Taiwan, the US, and the UK have all also announced their position on the sanctions. All the countries have agreed to place trade limitations on the country, mainly targeting the export of Russian technology.
The Russian stock exchange is also looking increasingly uninvestable. Russian equity funds plunged 23% in the last year, bonds have decreased as the inherent risks have become much more intense, and investors are finding it increasingly difficult to trade with the ruble, which they are now stepping away from.
The ruble has tumbled 30% in comparison to the US dollar after the announcement of blocking Russia from SWIFT. US officials have further stated that Germany, France, the UK, Italy, and Japan have taken action to target the Russian Central Bank.
In response, the Russian Central Bank has announced that they will be increasing their interest rates by more than double in order to try and stabilize the ruble. The key interest rate is set to go from 9.5% to 20%. Lines for depositors to withdraw money have grown immensely, and banks are now introducing limits to control the outflow of money in the country. The ATM rush comes from the sanctions levied upon Russia, resulting in the ruble dropping in value.
Russian oil has risen around 9% up to $113.65 per barrel, the highest since 2014. Many investors are hesitant to invest in oil as traders and refineries are worried about being caught in the sanctions. The price increase will result in the rising cost of travel and commuting across the world, increased inflation, and may be harmful for economic growth.
This myriad of economic pressure has only just been implemented, the full effects of which will be seen in the coming weeks. Putin himself has stated that he is unfazed by western nations’ economic attacks, but with his unpredictable nature, it’ll be seen whether or not he is simply making a bluff.
edited by William Cao and Vishal Krishnaiah
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