No, Western sanctions have not worked on Russia, at least yet; U.S. to lift fertilizer ban

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Joseph P Chacko
Joseph P Chacko
Joseph P. Chacko is the publisher of Frontier India. He holds an M.B.A in International Business. Books: Author: Foxtrot to Arihant: The Story of Indian Navy's Submarine Arm; Co Author : Warring Navies - India and Pakistan. *views are Personal

Western sanctions against Russia do not work, Polish Prime Minister Mateusz Morawiecki wrote on Twitter on April 3.

Morawiecki cited the ruble’s exchange rate, which had returned to its value before the beginning of the military special operation in Ukraine.

“This means that our actions did not work out the way the leaders (of Western countries. – Approx. ed.) wished,” Morawiecki wrote.

Meeting debt obligations

Sanctions pressure on Moscow has already turned into economic problems for the U.S. and Europe, causing a severe increase in fuel and food prices. But, Russia continues to fulfil its debt obligations, despite attempts by the West to paralyze the country’s economy, writes Business Insider.

In an interview with the publication, expert Hassan Malik explained that many investors doubted the solvency of the Russian side, given the scale of the sanctions imposed against it. However, as journalists stressed, Moscow sent payments on bonds for $447 million at the end of March.

“Russia has managed to meet all of its debt obligations. This may be due to the fact that a default on debt obligations will deal a more serious blow to it than to the rest of the world,” the article says.

In turn, the expert Varut Prombun noted that before the start of the military operation in Ukraine, the bonds of Gazprom and VTB gave high returns.

“They are definitely capable of paying their debts,” Varut said.

Bloomberg predicted record profits

If the key buyers of Russian energy resources do not impose an embargo on their imports, Moscow could earn almost $321 billion from them, reaching a record positive balance, writes Bloomberg.

The agency calls the expected figures for trade and balance of payments “brilliant”.

“Despite <…> stifling pressure on Russian finances from abroad, Bloomberg Economics expects Moscow to earn almost $321 billion this year from energy exports, more than a third more than in 2021. Russia can also expect a record current account surplus, which the Institute of International Finance (IIF) believes could reach $240 billion.

According to the report of the IIF group, the current sanctions have not been able to stop the influx of “hard currency” into Russia.

Experts also noted that the income from the sale of energy carriers allowed Moscow to mitigate the consequences of severe restrictive measures imposed by the West.

On March 15, the European Union decided to ban the assignment of credit ratings to legal entities, organizations or bodies established in Russia. Earlier, for the same reason, Fitch Ratings withdrew the ratings of Russian companies. Russia’s Issuer Default Ratings in foreign and local currencies were at ‘C’ before the withdrawal.

Lifting of sanctions against Russian fertilizers

The U.S. is set to lift sanctions against fertilizers from Russia. The continuation of sanctions would lead to an even more significant increase in prices for agricultural products, which are already rising, accelerating food inflation, a global problem. Russia has announced its decision to sell wheat only to friendly countries. 

Sanctions on Russia and the reverse effect

On February 24, Russia launched a special military operation in s against Ukraine. The U.S. and Western countries announced large-scale sanctions against Moscow, primarily in the banking sector and the supply of high-tech products. Individual brands left the country in droves.

Moscow called these measures an economic war like no other. The authorities expressed their readiness to fulfil social obligations within Russia. The Russian Central Bank took measures to stabilize the situation in the foreign exchange market. Russia announced the transfer of payments for gas supplies to unfriendly countries into rubles. In addition, the Russian government prepared a plan to counter restrictive measures, which includes about a hundred initiatives. The amount of its funding is about a trillion rubles.

Strengthening restrictive measures against Russia will be a “strength test” for Western countries and may break their unity, writes the German newspaper Handelsblatt.

As a consequence of the tightening of the sanctions on Moscow for the West, the author of the article Torsten Rike writes that the West will spend higher on energy and food. It will also lead to the loss of jobs and the arrival of millions of refugees.

In the past, economic sanctions, for the most part, did not work because they were too weak. Now the sanctions against Russia can become more arduous and “the negative consequences for us,” the publication says.

Unlike Iran, Venezuela and the DPRK, it is emphasized that Russia is tightly integrated into the world economy, and ties with it are significant for Europe and, in particular, Germany.

“The split of the world economy into hostile blocs will hit these countries even harder,” Ricke said.

The observer also said that China could help Russia nullify the West’s actions. He wrote that the western intention to isolate Moscow was also not supported by many countries in Africa, Latin America and Asia since they would have to suffer the most from rising energy and food prices.

Strengthening Rouble

The recent strengthening of the ruble in the foreign exchange market is attributed to a decrease in imports. Experts say that the strengthening is aided by a sharp reduction in imports. It resulted in a decrease in demand for foreign currency from importers.

The ruble was also supported by the introduction of a 12 per cent commission on the purchase of foreign currency and the decision to transfer payment for gas into rubles.

But the Bank of Russia has taken measures to stimulate imports. The regulator recommended that the banks set exchange rates for importing companies, the maximum deviation of which should not exceed two rubles from the exchange rate. This may reduce the existing excess dollar supply in the foreign exchange market, but the strengthening of the ruble may slow down.


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