“Russian economy will be greatly affected” (Kofas)

gallery- “Russia is gradually being separated from the rest of the world, especially economically, which will have a huge impact.” Earlier this week, Clement Beaune, Secretary of State for European Affairs, said. What is the overall impact of recent Western sanctions on the Russian and global economies?

BRUNO DE MOURA DEFERNANDES- Sanctions are still underdeveloped and take various forms, so it is difficult to quantify the overall impact on Russia’s gross domestic product (GDP) at this stage, but the Russian economy will have a major impact. Will receive. Europe, the United Kingdom, the United States and Japan have decided to block the reserves of the Central Bank of Russia. This is one of the key steps to reduce the possibility that the Central Bank of Russia will limit the impact of sanctions on the Russian economy.

This war will also affect the world economy. Some countries have announced that they will stop exporting certain commodities, especially technical commodities, to Russia. Since these countries are importers of intermediate products, their suppliers are also affected.The impact is spillover because the production chain is global Finally In many countries.

Finally, when it comes to raw materials, the prices are already rising, so the production costs of companies are rising. Gas and energy prices are generally rising. Rising grain prices affect both consumers and breeders, or even those who process them. Inflation in Europe is accelerating, especially due to soaring commodity prices. This rise in inflation leads to lower purchasing power and lower consumption by consumers. Finally, current uncertainty can impact investment. At this time, Russia has not yet announced reciprocal measures, but each new sanction will affect its activities.

Russia: How Western Sanctions Affect Russians’ Everyday Life

The ruble collapsed on Monday and the Central Bank of Russia raised its key rate by 10 points. Does the Central Bank of Russia still have ammunition to deal with galloping inflation? Can Russia compensate for the damage caused by these measures?

The situation is very complicated for the Central Bank of Russia. There are about $ 640 billion in foreign exchange reserves, but the European Union estimates that almost half of these foreign exchange reserves are abroad and are currently blocked. This limits their use. In addition, most of the reserves are based on gold. Gold is illiquid and the price can fall due to a large sale. The question is also related to China’s support: will Beijing provide liquidity to Russia? The Central Bank of Russia has two options. One is to raise interest rates. The second solution may be to manage capital, which can have a serious impact on activities.

In Russia, Western sanctions are pushing up interest rates and plunging the ruble

By excluding certain Russian banks from the Swift messaging system, several offices have already gone bankrupt in Europe. Is the European banking system widely open to the public in Russia?

Some European banks may suffer from this situation as they have local subsidiaries or significant exposures. However, the European system is robust and at this stage we do not consider financial risk to be one of the most important risks for Europe.

Ukraine: Western countries separate Russia from the Swift interbank network (economic nuclear weapons)

When it comes to energy, Europe still relies heavily on Russian gas. Could this not limit the outcome of the sanctions, especially as energy benefits from certain exemptions from sanctions?

The challenge for European countries is to effectively sanction Russia without much difficulty, especially with regard to energy issues. Russia accounts for about 50% of gas imports from Germany and Italy. Therefore, it is necessary to avoid soaring gas prices and supply problems. The overall difficulty is finding a happy medium, knowing that Russia should be interested in continuing to export gas and oil to record forex inflows.

Russian oil: why going without it is a real challenge

On the European side, business and financial circles are concerned about the continued and intensifying conflict in Ukraine. What is the impact of such a war on the European economy in the short term? What can the European Central Bank (ECB) do in the face of all these uncertainties?

At the March 10 meeting, the ECB will face a major dilemma. If the market is very tight and activity is ticking, do we need to raise interest rates and withdraw financial support to curb inflation highlighted by rising commodity prices? Despite different thoughts among the governors, the market is now looking forward to a wait-and-see position from the ECB. The ECB may decide to support the economy and guarantee financial stability by maintaining an asset purchase program and not raising interest rates quickly. We need to keep an eye on it and observe how things change over the next few days.

The last barometer released shortly before the conflict broke out, mentioning an extension of supply chain turmoil. To what extent does this dispute risk amplifying these difficulties in the euro area?

This barometer confirmed that supply problems would continue for a few more months, but realized that these problems had peaked. They should have declined gradually so that they would be absorbed by the end of the year in most sectors. This dispute suspends or controls certain flows to or from Russia. Russia has a strategic position in the world in the production of certain metals such as palladium, aluminum, nickel and copper. Therefore, it is expected that more tension will be applied to these metals. In general, this situation exacerbates supply chain difficulties and negatively impacts the global economy.

Before the war in Ukraine, French companies were suffering from supply difficulties

The barometer also recalls that there is a real risk of social tension in the context of a pandemic. How can this conflict exacerbate these social pressures?

Covid-related pandemics have exacerbated social pressure by creating inequality and frustration. Rising inflation related to the situation in Russia and Ukraine will increase tensions. It should be remembered that Russia and Ukraine are major producers of grain, and rising food prices are already creating strong social pressures, for example in Kenya and Malawi. The more energy and food prices are affected, the greater the risk of social tension. This automatically leads to increased poverty and inequality.

Interview with Gregoire Normande