Russia is trying to fight back sanctions, whats their efforts?
Targeted by unprecedented economic sanctions from the West and other countries, Russia announced countermeasures this week. The threat of nationalization of foreign assets is becoming clearer, but its main lever remains the energy tap. Russia is trying to fight back sanctions, are they going to be successful?
He is a great boxer sent to the ropes. He gets up, staggers a little, tries to get his ideas back in place after the shock, and sets off again, even if it means unleashing a few furious blows into the void. The sanctions against Russia adopted by the West were as radical as they were unexpected. They pushed the ruble into the ravine, with a 40% drop in one week. The Moscow Stock Exchange has remained closed since Monday and is not expected to reopen until March 5, 2022. But Russia’s response is gradually falling into place.
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The latest example to date, on Wednesday March 2, 2022, the Russian central bank announced that it was prohibiting foreigners from selling their stakes in companies established on the territory. An attempt to stem the haemorrhage, while the announcements of departures of multinationals followed one another during the week, the oil giants BP, Shell and Exxon Mobil, to name but a few, abandoning their assets without even trying to resell.
These measures to prevent the flight of capital also target individuals, since it is now forbidden to leave the country with the equivalent of more than 10,000 Dollars in cash.
The specter of nationalization
Whether the Russians will go so far as to nationalize the assets of Western companies remains to be seen. Dmitry Medvedev, Vladimir Putin’s liege man and now deputy chairman of the country’s security council, has waved the threat several times in recent days.
“We will seize the assets of foreigners and foreign companies in Russia, depending on what this or that country has introduced as anti-Russian sanctions. It is possible that we nationalize the property of nationals of unfriendly countries, ”he told a newspaper won over to the government’s cause earlier this week, comments reported by Courrier International.
“The effect of nationalization for companies based in Russia would be felt above all on activity, with supply disruptions. The impact would probably be greater than the issue of asset losses, ”explains Philippe Métais, business lawyer at Bryan Cave Leighton Paisner. TotalEnergies, for example, derives a significant portion of its production from its activity in Russia.
Russia is trying to fight back sanctions in the sky
The Kremlin has for its part endorsed several retaliatory measures, the impact of which is however more symbolic than economic. Russian airspace is now closed to nearly 40 countries, in response to the latter’s decision to do the same. Many Western companies have already stopped serving the largest country in the world.
Still in the air, the Russian authorities are withdrawing from satellite launches thanks to Soyuz. The Russians present on the Kourou space base, in Guyana, were thus evacuated. Three launches were planned during the year. The National Center for Space Studies (Cnes) reassured about the ability to find alternatives.
On Wednesday March 2, 2022, Russia demanded that the United Kingdom, which took part in the sanctions, withdraw from Project OneWeb, a satellite constellation project to bring the Internet. A launch is scheduled for March 5, via Soyuz, from Kazakhstan.
Russia is trying to fight back sanctions by energy lever
Still, the main lever for Russia is the energy tap. Europe imports almost 40% of its gas from Russia, which is also the world’s second largest oil exporter. The barrel (brent) is above 100 dollars because of the crisis, and OPEC+, the organization which brings together producing countries and of which Russia is an important member, decided on March 2 to slightly increase its production , which will maintain record prices. The price of gas is also at peaks.
If it is difficult for Europe to permanently do without Russian hydrocarbons as they are, the firm Energy Aspects, a consulting firm in the raw materials sector, argued at the end of the day on Wednesday March 2, 2022 that most “European oil majors do not buy Russian oil, and only a few European refiners and brokers touch it”, because these big companies fear being caught up in the sanctions against Russia.
Photo explanation: Vladimir Putin at the II Global Manufacturing and Industrialisation Summit (2019-07-09)