Video loading...
Beijing, 23 Feb (Xinhua) -- In response to Russia's recognition of the "Donetsk People's Republic" and the "Luhansk People's Republic" established by the non-governmental armed forces in eastern Ukraine, the United States and other Western countries imposed the first wave of sanctions on Russia on 22 February, involving finance, energy and other fields.
Some analysts believe the latest sanctions have had limited impact on both Russia and the West.
Video footage taken on Feb. 22 shows U.S. President Joe Biden speaking at the White House about the situation in Ukraine announcing economic sanctions against Russia. (Photo by Xinhua news agency reporter Liu Jie)
The first round of financial sanctions involved some banks
On the same day, the United Kingdom imposed sanctions on five banks, including the Bank of Russia and the Bank of Industrial Communications of Russia. The European Union will publish a list of Russian financial institutions that intend to freeze their assets. The U.S. sanctions include the Russian Foreign Economic Bank, the Russian Bank of Industrial Communications and its subsidiaries on the grounds that they provide support to the Russian military.
Olivier Dolgaon, a partner at Ashhurst Law Firm who specializes in economic sanctions, believes that Russian financial institutions have long been prepared and have already repatriated many funds back to China. The impact of the move on the Russian economy is limited.
Ashhurst Law Firm is headquartered in London, the capital of the United Kingdom.
A senior Ecbbank official said Western banks had limited access to Russian financial institutions. The implication is that sanctions will not be reversed. However, Agence France-Presse reported that there are still several Western banks operating in Russia, including The Italian Yuxin Bank, the Austrian Reif Eisen Bank, and the Ross Bank of Societe Generale.
According to Agence France-Presse, the purpose of financial sanctions is to prevent Russia from raising funds from international capital markets or to impact the Russian ruble exchange rate, thereby weakening the ability of ordinary Russians to buy imported goods.
On 21 February, at united Nations headquarters in New York, the Security Council held an emergency meeting to consider Ukraine. (Photo by Xinhua news agency reporter Wang Ying)
Energy sanctions measure risk
At present, the first round of Western sanctions is not very destructive in the energy field. Dorgon said the first wave of sanctions was "in line with a strategy of gradual measures to protect the (European) energy sector from being affected.".
The German government decided on the 22nd to suspend the certification process of the "Nord Stream-2" natural gas pipeline. According to Agence France-Presse, the pipeline has not been put into operation since it was completed, and the suspension is more "symbolic".
In Dorgon's view, existing sanctions are consistent with previous initiatives in protecting Europe's economic interests.
Andrew Lawson, an expert on Russian affairs at the Center for Strategic and International Studies, a Think Tank in Washington, said the current initiatives did not look as harsh as U.S. President Joe Biden had threatened and "would not drive Russia to change course."
For the EU, sanctions on Russia's energy sector require carefully calculated risks. 40% of Europe's gas needs are imported from Russia. This gives the Russian side a bargaining chip. Agence France-Presse said that if Europe stopped importing gas from Russia, it might be able to survive the next few months, but in the long run, it could cause serious economic distress. Other gas exporters such as the United States and Qatar will find it difficult to significantly increase their exports to Europe in the short term.
Refugees from eastern Ukraine arrive in Nizhny Novgorod, Russia, by train on Feb. 22. (Xinhua News Agency, photo by Roman)
Tensions are pounding commodity markets
Escalating tensions in Ukraine have already taken a toll on international commodity markets. International oil prices approached $100 a barrel on the 22nd, not seen since 2014, and natural gas prices also rose.
According to international rating agency Fitch, Russia occupies a key position in the international commodities trading market, accounting for about 10% of the global crude oil market.
Russia is also a major exporter of palladium, nickel and aluminum, which has seen record high prices. Russia is also a major wheat exporter, and together with Ukraine, it accounts for a quarter of global wheat exports.
If the prices of these commodities rise, it will be transmitted to consumers and weaken their purchasing power, and inflation has become a major headache for decision-makers in western countries such as the United States.
According to Agence France-Presse, tensions in Ukraine have added uncertainty to the European economy. However, Neil Shirin, chief economist of Kaitou International Macroeconomic Consulting, believes that in most cases, the economic impact on countries outside Russia and Ukraine may be limited.
Even Germany, the EU member state with the closest economic ties to Russia, has a limited share of exports to Russia.
For Ukraine, however, the consequences may be unbearable. Sheering said Ukraine's economic situation was "extremely fragile" and it was likely that more financial assistance from outside would be needed in the coming months. (Hu Ruoyu)