LONDON — Following the latest round of international sanctions against Russia for its invasion of Ukraine, Russian assets are becoming “non-investable,” according to Goldman Sachs.
ONE Important measures aimed at freezing the Central Bank of Russia Foreign exchange reserves are around $630 billion, preventing the central bank from buying the Russian ruble from Western financial institutions and liquidating assets. This follows last week’s measures that effectively excluded Russian banks from the Western financial system.
Over the weekend, the US, European allies and Canada also agreed to cut key Russian banks from the SWIFT messaging system, which connects more than 11,000 banks and financial institutions in more than 200 jurisdictions physical.
New US sanctions against Russia’s banking powers Sberbank and VTB will be enacted on March 26, although many details of the new sanctions are still being discussed by different governments. disclosure.
Kamakshya Trivedi, co-head of forex, rates and emerging markets strategy at Goldman Sachs, told CNBC on Monday that the move will prove to be the most significant to date, as it removes “the line” Moscow’s primary and first line of defense” against the drop in local property prices.
The The Russian ruble fell another 29% against the dollar early Monday morning to hit all-time lows before recovering some mid-afternoon losses, while Central bank more than doubled the country’s key interest rate from 9.5% to 20% in an attempt to offset the risks of further falling prices and inflation.
Trivedi believes that currencies and other assets will continue to weaken and fluctuate.
“If you think about the annexation of Crimea in 2014 and the whole period 2014-2015 – when it was the end of the year, the violence escalated in the Donbas, the price of oil plummeted – there was a decline in the Russian reserves. up to $100 billion… and there have been very substantial daily interventions during that period,” he said.
Trivedi said these moves underscore the role of reserves in stabilizing currencies, noting that even at the time, the ruble saw a significant sell-off.
“So when you fast-forward to today, if that primary defense mechanism is completely inaccessible or inaccessible to the Russian authorities, then that means assets The local damage is much more severe and I think that’s what you’re seeing,” he added.
“I think those assets, beyond the technical view of how people trade in them, will become increasingly uninvestable for many global investors.”
With Russian assets under “stressful” and “sustained” pressure, he suggested that emerging market countries are commodity producers and away from the immediate “conflict stage”. – such as Latin America and the Gulf – could present a more attractive medium-term proposition for investors.
However, with more details on the enforcement of sanctions still being released and some differences between the US and the EU in terms of targeted institutions, it may be too early to discern the full impact. enough of these latest developments for the center. Bank.
‘Hybrid War’
Former Central Bank of Russia Vice President Sergey Aleksashenko told CNBC on Monday that volatility could be limited until full enforcement becomes clear, but new sanctions could put the bank at risk. Central must stop.
“If we believe that the European Union and the US and the G-7 members will freeze and freeze all central bank assets and accounts, that means that the gold that the central bank have the next day $135 billion, physical gold held in Russia. , and approximately $60 billion in renminbi (China), that’s it,” he said.
“That means no dollars, no euros, while the demand for the yuan in Russia is very small. Moreover, a central bank in this situation would not be able to sell its gold. , because no bank will pay in euros or in dollars, and to sell for yuan is stupid.”
Such a situation would prevent the CBR from carrying out its day-to-day activities effectively and could be seen as an act of “hybrid warfare”.
“It was not the United States or the European Union that started the war. Russia started the war against civilization, against the 21st century, against the whole world,” he said, adding that the Russian president Vladimir Putin has had a long time. waging this war until the West is forced to respond with punitive economic measures.
“If Russia wants to use the tools of current civilization, if Russia wants to use the tools of the globalized economy, the globalized world – the US dollar, the euro, the British legal system , the American legal system, the European-Russian legal system should behave itself according to the rules,” said Aleksashenko.
