Russia Ukraine: Economic shockwaves in Russia as US responds to invasion

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Russia’s invasion of Ukraine has sent shockwaves through financial markets around the world as stock markets plunge.

The Russian stock market plunged and the ruble slumped to its lowest level since President Vladimir Putin ordered the invasion of Ukraine.

The military action sent economic shock waves around the world.

Global stocks fell on Thursday and oil prices crossed the $100 mark for the first time in more than seven years.

Asian, European and American stock markets plunged.

The Australian equity market plunged $73 billion yesterday. The ASX is expected to open lower today, with futures down 3%.

Follow our live coverage of the Russian-Ukrainian conflict here

Frankfurt and Paris lost up to 5% for part of the trading session as investors fled risky stocks.

Gold, a safe haven in these troubled times, climbed to over US$1,923 an ounce.

Over $150 billion has been wiped from the Russian stock market. The MOEX Russia index fell off a cliff. It is down about 50% from its October high.

The market capitalization of Russia’s largest bank Sberbank has almost halved.

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Bloomberg reporter Tracy Alloway noted, “Russian assets are quickly becoming untradable.

Meanwhile, shares of Russian metal giants Polymetal and Evraz fell 38% and 30% respectively in London.

The cost of insuring Russian debt against default has also skyrocketed. The Bank of Russia has announced its intention to intervene in the foreign exchange market.

Yesterday, the United States, the European Union and Australia imposed new economic sanctions on Russia.

Latvian Prime Minister Krisjanis Karins described Russian President Vladimir Putin as “a deceived autocrat creating misery for millions of people”.

US President Joe Biden announced tough new sanctions this morning. But he did not pull the trigger on what some consider his most powerful economic weapon: cutting Russia off from SWIFT, which is used to facilitate financial transactions between banks around the world.

The price of oil is skyrocketing

After weeks of warnings from the United States and other powers, Russian President Vladimir Putin ordered a full-scale offensive against his neighbor, infuriating world leaders and pledging to tighten sanctions against Moscow.

The price of oil has since exploded.

European benchmark Brent prices briefly topped $105 a barrel for the first time since 2014. Aluminum and wheat rose to record highs on fears over output from the top Russian exporter.

Petrol prices in Australia are already high, reaching nearly $2 a liter in many places – and they are set to rise.

“The latest twist from the Russia-Ukraine crisis is expected to keep commodity prices high in the weeks and months to come,” analysts at Capital Economics said.

“And if the situation escalates into a bigger and wider conflict between Russia and the West, commodity prices could rise further from here.”

Biden announces tough sanctions

Russia was hit this morning with new painful sanctions.

The measures target Russia’s two largest banks, which will have their assets frozen and cut off from US dollar transactions, while state-owned energy giant Gazprom and other big companies will be unable to raise funding in Western markets.

“This is going to impose a significant cost on the Russian economy, both immediately and over time,” US President Joe Biden said in a speech at the White House.

However, the sanctions fell short of what some observers expected, including failing to cut Russia off from SWIFT, the global messaging system used to move money around the world. .

This would have hampered the country’s ability to take advantage of the global energy market, which largely operates in US dollars.

“It’s always an option but right now it’s not the position the rest of Europe wants to take,” Biden told reporters.

But he said “the sanctions we have imposed go beyond SWIFT. The sanctions we have imposed exceed anything that has ever been done.

And Mr Biden said sanctions aimed directly at Russian leader Vladimir Putin remained an option.

“It’s not a bluff, it’s on the table,” he said in response to a question.

Russia’s Huge Cash Reserve

Moscow has taken steps to protect its economy after it was hit with sanctions from 2014 when it invaded and annexed Crimea in southern Ukraine, including by stockpiling silver and gold.

Russia’s public debt stands at just 18% of the country’s GDP, far less than most major economies, and it has foreign exchange reserves of $643 billion at the end of last week, data shows. official.

Elina Ribakova of the Institute of International Finance, a global banking association, told AFP that the stockpiling was “a very deliberate shift in macroeconomic policy to meet geopolitical ambitions”.

“They have a piggy bank that can protect them and support the economy even when there is a deficit,” she said.

IIR executive vice-president Clay Lowery said Russia would feel pain and that while some steps were missed, there was room for escalation.

“The bottom line is that these sanctions will have a significant impact on Russia’s overall economy, and average Russians will feel the cost,” Lowery, a former senior US Treasury official, said in a statement.

The sanctions target Sberbank and VTB Bank, the country’s two largest banks accounting for about half of the banking system and “$46 billion in foreign exchange transactions worldwide” every day, the Treasury said.

— with AFP

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