Page 10 - bne IntelliNews monthly magazine December 2024

10 I Companies & Markets bne December 2024
US financial sanctions on Russia are working, but yet to affect trade volumes significantly
Ben Aris in Berlin
Since December 2023, the US administration has been intensifying its pressure on Russia's financial system with its so-called strangulation sanctions, making it progres- sively more difficult for the country to finance its imports.
Despite traders’ growing problems with getting paid, the new tougher financial sanctions have primarily hurt Russia’s small- and medium-sized enterprises (SMEs), while the big Chinese and Russian entities continue to find workarounds, and trade volumes between Russia and its partners have been largely unaffected, apart from outages that last for only a few months while new payment methods are found, OSW reported in a recent note.
According to the Central Bank of Russia (CBR), the value
of imports for the first eight months of 2024 only fell by approximately 8% year on year, while exports saw a modest decline of more than 1%. Though these changes seem relatively contained, the rising cost of imported goods and longer delivery times have hurt as they are contributing to a persistent inflationary pressure, which has forced the CBR to hike the prime interest rates to 21% in October that is crushing growth and investment.
The US's escalation began with granting the Treasury Depart- ment authority in December 2023 to impose secondary sanc- tions on entities aiding Russia's military-industrial base. By restricting their access to the US financial market, Washington has targeted significant parts of the Russian financial sector, including major institutions like the Moscow Exchange (MOEX), the National Clearing Centre, and the National Payment Card System, which issues MIR bank cards. Additionally, sanctions were imposed on various banks, including the Shanghai branch of VTB, Gazprombank and the Russian Agricultural Bank. The knock-on effect lead to a number of Chinese and Turkish banks cutting ties to their Russian clients in April. Companies in China, Turkey and the UAE are increasingly being targeted by the US Office of Foreign Assets Control (OFAC), reflecting the widen- ing net cast by the US and, more selectively, the EU.
"Foreign banks, primarily those from China, Turkey, Armenia and Kazakhstan, have increasingly refused to accept payments from Russia," OSW says.
The most severely affected sectors have included cars, electronics and Indian steel imports, with mounting challenges in processing payments. Most payments are reportedly being
US financial sanctions on Russia are the most effective yet, but have not badly affected trade volumes as the Russia and the US continue to play a game of whack-a-mole. / bne IntelliNews
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