Russia's recovery from economic recession could be complicated by sanctions announced recently by US President Donald Trump, with still greater potential of painful restrictions on investors and Russian companies seeking to raise capital in Western markets. This year, the US Treasury initiated new sanctions against Russian persons and entities for activities including the alleged poisoning in the UK of former FSB Officer Skripal and his daughter as well as Moscow's alleged meddling in the 2016 US presidential election.

  • The sanctions announced in April targeted seven Russian oligarchs and the 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, Russian Financial Corporation Bank, striking at allies of President Vladimir Putin. Several titans of Russia’s private industry, including Suleiman Kerimov, Oleg Deripaska, and Viktor Vekselberg, were among those targeted.
  • Share prices of sanctioned companies fell in the next day's trading after sanctions were announced. Share prices on the Rusal, for which Deripaska is president, slumped by 18 percent, a record low. Russian stock indexes RTS and MOEX also declined: RTS lost about 11 percent, and MOEX about 8 percent.
  • The US also announced sanctions in March to address ongoing cyber-attacks emanating from Russia as well as for Russia's alleged election interference. The sanctions targeted five entities and 19 individuals.

Soft oil prices and tight monetary and fiscal policy only exacerbated the effects of targeted sanctions by the US, EU, and Canada—later joined by Australia, Japan, and Switzerland, among others—on the Russian economy during 2014 to 2015. Among the most powerful sanctions imposed, the US joined the EU in 2014 in sectoral sanctions on Russia's financial, defense, and energy sectors, to include Russia's largest bank (Sberbank), a major arms maker and arctic (Rostec), and deepwater and shale exploration by its biggest oil companies (Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft). As a countermeasure to these sanctions, in August 2014, Russia banned food imports from countries that had imposed sanctions against it. 

  • During 2015, Russian GDP decreased sharply by 3 percent, the ruble depreciated by more than 50 percent against the US dollar, and inflation increased from six to 13 percent.
  • Russian companies struggled during 2014 and 2015 to raise funding on western capital markets because of financial sanctions, with new credit falling below potential levels by the equivalent of 1 to 2 percent of GDP per year, according to the Institute of Economic Forecasting of the Russian Academy of Sciences.
  • Sanctions made not only inward investment fall, but outward as well, a trend economists attribute to reduced purchasing activity in the US and the UK.
  • Sanctions have also reshaped US-Russia trade dynamics. Since 2013, Russian commodity exports to the US have decreased by 48 percent and now make up only 3.3 percent of Russia's total exports. Russia's imports from the US have decreased as well, falling by 44 percent, and now constituting 6 percent of total Russian imports. Learn more about how sanctions affected Russia's trade with the EU and other countries here.

Additional US sanctions were expected this month in response to Russia's alleged support for Syria's chemical weapons attack on civilians as well as an expansion of sanctions to include new Russian sovereign debt but neither has been implemented. Market damage from US sanctions is already measurable, however, and has the potential to grow as uncertainty takes hold in markets and among investors.

  • The US Treasury Department decided that expansion of sanctions on Russian debt will hurt global financial markets and businesses of Russian and US investors and has shelved these sanctions. Meanwhile, President Trump publicly walked back his plans to impose sanctions related to the reported chemical attacks in Syria.


رؤى ذات صلة من Knoema

Russian's Seeking Security in Cash

As the coronacrisis reached Russia this spring, ordinary citizens and business turned to cash to guard against the uncertainties of 2020. By early October, an estimated 12.1 trillion rubles were in circulation. While cash holdings have been on the rise for the better part of the last decade in Russia, the growth rate of cash holdings outside the banking system (a.k.a. M0) quadrupled between March (7.1%) and October (28.3%). The growth in cash holdings during the April-June period was largely COVID-related. Since mid-summer, however, Russian's were likely equally driven to withdraw...

Russia Has Lost Access to $400B of Foreign Exchange Reserves

(4 March 2022) The US, the EU, the UK and other allied countries have imposed sanctions against the Central Bank of Russia to limit Moscow's ability to use its foreign exchange reserves to support the Russian financial system after the largest Russian banks were cut off from the global financial messaging system SWIFT. Due to high world oil and gas prices, Russia's foreign exchange reserves had increased to a record $643 billion as of Feb. 18, 2022*Since 2014, when the first Western sanctions were imposed against Russian banks and businesses, the Central Bank of Russia has...

US-Russia Summit | Negotiations From A Position of Strength Or Seeking A Compromise

(15 June 2021) On June 16, the meeting of the presidents of the United States and Russia will take place in Geneva. This will be the first in-person meeting of the US and Russian presidents since 2019. It can be said without exaggeration that the results of the US-Russia summit will determine the state of the global order for many years ahead (at least till 2024, the year of the next presidential elections in the United States and Russia). So the main question about the summit is, Will the United States and Russia find common ground and begin to work out ways to compromise on key...

Russia: COVID-19 Death Figures Reveal Discrepancies in Counting Standards

Why is it that Russia has reported the second-largest number of confirmed cases of COVID-19 globally and yet it’s ranked 140th out of 163 countries based on death rate from COVID-19, breaking the general rule of ‘more cases - more deaths’? We had a few theories: Russia is extremely successful in treating COVID-19, Russians are highly resistant to the virus, or the death toll is simply undercounted. We dug in and found that death classification practices vary significantly across countries despite the availability of guidelines for classifying coronavirus deaths published by the...