It's been over half a year since the United States and European Union first imposed sanctions on Russia, and they have since tightened them. High uncertainty has triggered massive capital outflows, while currency volatility and borrowing costs have surged.
The first rounds of sanctions against Russia have produced real economic pain, limiting access to capital markets and increasing the cost of borrowing. Are things going to take a turn for the worse? To what extent will the Russian economy deteriorate?
Latvian fishing industry could lose up to $225 million because of anti-Russia sanctions, Latvian Agricultural Minister assumed.
Economic sanctions imposed on Moscow over the conflict in Ukraine might threaten Russia’s energy future – a serious threat many analysts say, given the country’s over reliance on oil and gas revenues.
The import substitution phenomenon has given a positive impulse to Russia’s manufacturing production. The seasonally adjusted HSBC Russia Manufacturing Purchasing Managers’ Index was above the 50 threshold in July-August, indicating cautious expansion, amid overall slowing consumer demand.
After the West imposed three rounds of economic sanctions, Russia retaliated with a ban on imports of food and agricultural products from the EU, US, Canada, Australia and Norway. Beef, pork, fish, fruit, vegetables and dairy products from were banned for one year.
Geopolitical risks and increased financial market volatility have taken their toll on investment in Russia. In the first quarter of 2014 capital expenditure dropped by 7% year-on-year and improved slightly in the second quarter contracting by 2.1% year-on-year.
Russia’s financial sector is becoming increasingly affected by the current geopolitical tensions and related economic sanctions. The sanctions led to increased volatility on the foreign exchange market and a significant depreciation of Russia’s national currency.
With sanctions weighing on business sentiment, Russia’s economy has been losing loads of capital this year. Capital flight from Russia is now dominated by heightened uncertainty and a depreciating ruble.
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