Russia’s official claimants will survive the “emotional” market reaction


A Kremlin spokesperson argues that Russia will survive the “emotional” financial market reaction to Moscow’s invasion of Ukraine as Western nations, including the United States, begin to sanction Russia’s substance while promising stricter disciplinary action. did.

Russia has prepared enough safety tools to overcome market volatility, Russian diplomat Dmitry Peskov Said Moscow has taken all necessary steps to limit market reaction in the short term.

Over the past few years, Russia has taken steps to mitigate the potential for Western sanctions on its economy. By the end of January, Russia’s foreign exchange reserves were a record $ 630 billion, the fourth highest in the world.

Only 16 percent of the country’s foreign exchange reserves are occupied by the US dollar. This is far less than the 40 percent share of the dollar held five years ago. About 13% of reserves are RMB Chinese.

Moscow has reduced its reliance on foreign investment and lending and sought more business opportunities in the non-Western market. The debt of the Russian government is only 20 percent of the country’s GDP.

The annual budget is in the black, so Moscow does not have to borrow money. Russia is also taking steps to establish a new international payment system so that it does not rely on the SWIFT payment service managed by Western banks.

“What Russia is doing is effectively building an alternative financial system to withstand the impact of sanctions that the West may impose,” said Coriolis Technologies CEO. Dr. Rebecca Harding said. BBC..

“But all of this has short-term pain, and the vulnerability of the Russian system is that the web is very thinly spread all over the world.”

Despite Russia’s long preparations, Western sanctions may prove that it is a bit unbearably difficult. The UK has announced sanctions on five Russian banks. Germany has suspended the certification of the Nord Stream 2 pipeline, and the United States has announced sanctions on two Russian financial institutions.

Strict sanctions from the United States and the EU have allegedly been taken, including the possibility of blocking technology exports to Russia. Such a move would seriously damage Russian tech companies that rely on Western hardware and software imports.

Moscow tried to avoid reliance on the US dollar, but it is still closely tied to the US currency. Over 50% of Russia’s exports continue to be priced in dollars, with an additional 30% priced in euros.

The Russian currency, the ruble, faces the risk of a significant depreciation against the dollar and euro, pushing up inflation, which is already at its highest level in six years.

After Russia’s invasion of Ukraine, the ruble crashed to the lowest level since 2016 on Thursday, forcing the Moscow Stock Exchange to suspend trading activities. Investors ran for safe currencies such as the US dollar, the Japanese yen and the Swiss franc.

In the short term, investors are likely to continue to support these three currencies to avoid risk exposure, MUFG analyst Lee Hardman said.

“In contrast, the risks of rubles and other European currencies, which are more sensitive to the negative spillover effects of military action in Ukraine, are still on a downtrend,” Hardman added.

Naveen Athrappully

follow

Naveen Athrappully is a news reporter covering business and global events in The Epoch Times.

Posted on