INSUBCONTINENT EXCLUSIVE:
Western sanctions, which were substantially enhanced, have started to bite RussiaThe Western sanctions, which were substantially enhanced
during the weekend, have started to bite Russia, with the rouble plunging nearly 30 per cent to a record low after President Vladimir Putin
put Russia's nuclear deterrent on high alert on Sunday.Russia's isolation has started to deepen after its Ukraine invasion, the biggest
assault on a European state since World War Two and fresh Western Sanctions in response."Western leaders are escalating sanctions against
Russia, with one of the most severe measures so far being to sanction the Central Bank of Russia (CBR) - limiting the CBR's ability to
USD/RUB is currently being quoted 25 per cent higher than Friday's close," said Chris Turner, Global Head of Markets at ING."Measures to
sanction the CBR are having their intended consequences of weakening the rouble
Having suffered a variety of crises in recent decades, Russian residents are very sensitive to the USD/RUB exchange rate, and clearly, the
current rouble decline is hitting home," he added.A decision by Western allies on Saturday to block "selected" Russian banks from the
Society for Worldwide Interbank Financial Telecommunication (SWIFT) payments system will inflict a crippling economic blow to Russia,
slowing trade and making transactions costlier.And the allies still have room to do more.The SWIFT is a secure messaging system to ensure
rapid cross-border payments, which has become the principal mechanism to finance international trade."It really is a dagger into the heart
of Russian banks," Kim Manchester, whose firm provides financial intelligence training programs to institutions, told Reuters.Manchester
said the Biden administration had been selective in its sanctions, leaving room to tighten further by blocking more banks and eventually
"It is a creeping barrage."According to reports, Russia's central bank raised its key rate to an unprecedented 20 per cent from 9.5 per
cent in a desperate bid to shore up the rouble amid crippling Western sanctions.The sanctions hit the rouble hard when markets opened on
Monday, with the currency diving as much as 29.67 per cent to a record low of 119.5 per dollar."We have just seen the CBR raise rates a
staggering 10.5 per cent to 20 per cent
This looks like a package of measures to defend the rouble, including new mandatory sales of 80 per cent of FX revenues for Russian
companies," said ING's Mr Turner."This latter measure looks to prevent the kind of FX hoarding seen during the Crimea crisis of 2014 when
Russian energy companies were alleged to have held onto FX earnings and contributed to heavy rouble losses during that period," he added.But
system and was backed by Britain, others, such as Germany, worried about the possible impact on their economies and companies.The ramp-up in
tensions heightened fears that oil supplies from the world's second-largest producer could be disrupted, sending crude prices higher while
global equities declined."With Western nations moving to extreme sanctions very quickly - e.g
measures to sanction the CBR are now starting to draw parallels with Iran - investors will be nervous that Western leaders bite the bullet
prices - gas, oil, certain precious/industrial metals and softs such as wheat, will continue to rise, and this supply shock should be a
negative for activity and equities," he added.For now, though, the sanction's intentions seem to be aimed in the right direction.
