Page 24 - bneMag April 2022 Russia living with sanctions

24 I Cover story bne April 2022
A second problem with the current regime is that while they have struck at Russia’s money and business they remain limited. For example, while Russia’s two biggest banks, Sber (formerly known
as Sberbank) and VTB Bank, were immediately banned from the SWIFT system and together account for about half the Russian banking sector by assets, only a total of seven from Russia’s 374 banks have been banned from using SWIFT.
In particular, the financial arm of Russia’s gas champion, Gazprombank, has been specifically excluded from the ban so that it can accept payments for gas exports to Europe. This has left a huge hole in the financial sector and gas trade sanctions that sees billions
of dollars a week pour into Russia’s coffers and long-term will leave a very serviceable conduit into the global financial system that the Kremlin can use more of less unfettered.
Moreover, at the end of March Russian President Vladimir Putin announced
a rubles-only-for-gas scheme where EU customers would be forced to pay for their gas imports using Russia’s national currency. While at first glance this appears to be a pure accounting trick that makes little difference to Russia’s economy or the value of the ruble, it actually blows a hole in the sanctions regime by making it impossible to sanction Gazprombank or freeze the gas payment funds.
A third problem is that not everyone
has signed up to the sanctions regime.
It remains an almost exclusively G7 affair, championed by the US, UK and EU. During the UN General Assembly vote on March 3 to condemn Russia’s invasion of Ukraine 141 countries
voted for the motion but 35 notably abstained. Most of Africa and all of Central Asia, India and China all sat on the sidelines. The Middle East voted to condemn Russia, but their sovereign wealth funds working in Russia have only “suspended” business while the war continues. Latin America, where Russia
has many friends thanks to both the BRIC organisation and its open support of Venezuela in its show down with the US, can also be relied on for help.
Russia has been working actively to develop deeper ties with the EM world and won much goodwill and kudos during the coronavirus (COVID-19) pandemic by being generous with
its Sputnik V deliveries, while the developed world hoarded their own vaccines for their own use before releasing them to the rest of the world in what has been dubbed “vaccine apartheid.”
How bad will sanctions be?
The jury is still out on how bad the effects of the sanctions will be. The economic impact is just starting to make itself felt in Russia with mixed results.
The immediate impact on the economy has been hard as the war and the financial sanctions have already impacted business with new supply
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