Russia imposes new sanctions on the financial and energy sectors

Western countries and their allies, including Japan, imposed financial restrictions on Russia after the end of February Vladimir Putin President began an invasion of Ukraine. Moscow has responded by placing obstacles in the way of Western businesses and their allies leaving Russia, and in some cases seizing their assets.

Although it is widely believed that European and American sanctions harm Western allies more than Russia, according to a recent study by the American Yale University, it is factually not true that punitive measures do not work. According to their research, Russia is actually being “crippled” by Western responses. Moscow is falsifying economic data, Yale therefore concluded based on consumer and transport data, as well as statements from trade partners – banks, consulting firms – that they have caused decades of damage to the sanctions.

Mainly the withdrawal of Western companies broke the economy: Putin lost the multinationals responsible for generating 40 percent of Russia’s GDP. We have written in detail in this analysis about exactly what kind of damage this entails.

Russian sanctions on sanctions have arrived

A decree signed by President Vladimir Putin and published on Friday immediately bans investors from countries that support sanctions against Russia from selling assets in production sharing agreements (PSAs), banks, strategic companies, energy equipment companies and other projects from oil and gas production. to coal and nickel extraction.

According to the decree, Putin could issue a special dispensation in certain cases to allow the deals to continue, and the government and the central bank must draw up a list of banks for the Kremlin’s approval. Investors not mentioned by name in the decree, writes in its summary a Reuters.

Actions similar to the Russian ones have already been decided: in April, Putin forbade withdrawing companies to take their assets with them, and their nationalization was also allowed. Thus, many companies are left with two options: either leave everything behind, or find a Russian buyer. A striking example is the situation of Renault, which was forced to sell its Russian interest, Lada, for 1 ruble.

Similar capital controls were already in effect: Russian companies were not allowed to sell foreign currency, and currency exchange options were also limited for the population. All these steps generated an artificial demand for the ruble, whose exchange rate is strong on paper, but in practice, with Russian inflation levels between 15-20 percent, it only represents the foreign trade balance, and is actually a weak currency.

This makes the move even more painful for Western companies

The ban applies to almost all major financial and energy projects in which foreign investors still have a stake, including the Sakhalin-1 oil and gas project. On Thursday, Russian state oil major Rosneft blamed Exxon Mobil for declining production at the Sakhalin-1 field group after the US energy major said it was in the process of transferring its 30 percent stake to another party.

Separately, a government decree signed on Aug. 2 gave foreign investors in the Sakhalin-2 liquefied natural gas (LNG) project — Royal Dutch Shell and Japanese companies Mitsui & Co and Mitsubishi Corp — one month to claim their stakes in the new entity that will replace the existing project. . The new decree does not cover the Sakhalin-2 project. Shell has been looking for ways to exit, while the Japanese government has reiterated that Japanese companies want to keep their stakes there.

Banks also get slapped

Italy’s UniCredit and Intesa, the US Citi Group and Austria’s Raiffeisen are still looking for exit options from Russia, while others such as Societe Generale and HSBC have already found a way out.

Citigroup declined to comment on Friday, but the bank said in a statement on Thursday that it will continue to reduce its operations and exposure to Russia. Citigroup has stopped entering into new business and recruiting new clients in Russia.

On June 30, the big bank reported $8.4 billion in exposure to Russia, compared to $7.9 billion at the end of the first quarter. The exposure increased due to the paper appreciation of the ruble.

Source: by

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