Your eyes are not deceiving you. Your calendar really did just tick over to May 2023. Crazy as that is, it’s not crazier than the fact that 15 months after the start of the Russia/Ukraine troubles, the conflict continues. Today, we’re going to look at the financial impact of the Russian sanctions. Following that, we’ll give you the lowdown on market events this week. Let’s go!
The sanctions explained
The sanctions are a series of economic and financial sanctions imposed on Russia by the United States, the European Union, and other countries in response to the Russian invasion of Ukraine in February 2022.
The sanctions were primarily designed to damage the Russian economy, putting pressure on the Russian government to withdraw its troops from Ukraine.
The sanctions cover a wide range of measures, including:
#1 Financial sanctions
The United States and the European Union have frozen the assets of the Russian central bank and major Russian banks.
They’ve also prohibited Russian banks from accessing the SWIFT financial messaging system. Which is pretty much a must-have these days.
#2 Export controls
The US and EU have also imposed export controls on a wide range of Russian goods and technologies, including semiconductors, aircraft, and software.
Added to that, the list of sanctioned products includes (among others):
● crude oil (from December 2022) and refined petroleum products (from February 2023), with limited exceptions
● coal and other solid fossil fuels
● steel, steel products and iron
● gold, including jewellery
● cement, asphalt, wood, paper, synthetic rubber and plastics
● seafood and liquor (e.g. caviar, vodka)
● cigarettes and cosmetics
The intention is to dent Russia’s industrial and natural resource capacity, major sources of income for the Russian economy.
#3 Visa and individual restrictions
The United States and the European Union have also imposed visa restrictions on specific Russian officials and oligarchs, while also sanctioning individual Russians deemed responsible for the invasion of Ukraine.
According to Consilium, the EU has frozen €21.5 billion of assets in the EU and has blocked €300 billion of the Central Bank of Russia’s assets within the EU and G7. Wow.
What’s the impact?
Well, these measures have certainly taken their toll on the Russian economy.
The Russian stock market lost more than half of its value in 2022, and, according to the World Bank, the IMF and the OECD, Russia’s gross domestic product (GDP) dropped by 2.1% in 2022. Though, that’s far lower than the gigantic 11% that the World Bank originally predicted.
But these sanctions haven’t only hurt Russia, the impact has been felt worldwide, having had a negative impact on the global economy. In 2022, the price of oil and gas rose sharply following the start of the war, and this has contributed to higher inflation in many countries.
2023, however, has been a slightly different story.
The sanctions haven’t stopped Russia selling oil, one of its key exports. Moscow’s exports of crude oil and oil products rose in March to their highest level since April 2020, jumping by 600,000 barrels a day. The rise lifted Russia’s estimated revenue from oil exports to $12.7 billion last month.
So, have the sanctions worked? Well, it’s hit and miss. But the overarching goal of changing the will of the Russian government seems far from being achieved. As with all news, it’s important to sift truth from rumour and see the bigger picture.
How have the sanctions impacted you? Have you noticed a big difference and how has the impact changed over the course of the conflict? Join the debate by tweeting us at @_contentworks!
Top trading events week commencing 01/05/23
Here are some major market events for this week.
Monday, 1 May
● EUR — Eurozone Economic Forecasts (10:00 AM GMT); German Industrial Production (10:00 AM GMT)
● GBP — UK Construction PMI (9:30 AM GMT)
Tuesday, 2 May
● USD — US Consumer Confidence (10:00 AM GMT); US Durable Goods Orders (10:00 AM GMT); US New Home Sales (10:00 AM GMT)
Wednesday, 3 May
● USD — US GDP (13:30 PM GMT); US Personal Consumption Expenditures (13:30 PM GMT); US Core PCE Price Index (13:30 PM GMT)
Thursday, 4 May
● USD — US ISM Manufacturing PMI (14:00 PM GMT); US ADP Employment Report (13:15 PM GMT); US Initial Jobless Claims (13:30 PM GMT)
Friday, 5 May
● USD — US Non-Farm Payrolls (13:30 PM GMT); US Unemployment Rate (13:30 PM GMT); US Average Hourly Earnings (13:30 PM GMT)
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