Russia laughs off the West’s sanctions

Investors wait to find out the full extent of the West's sanctions against Russia.

Andrew Van Sickle
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published
in News

"The big question for investors" after the Crimean referendum, says Economist.com's Buttonwood blog, is the extent of Western sanctions against Russia, and Russia's response.

Early this week, as Russia's president, Vladimir Putin, annexed Crimea, the EU's measures looked "as frightening as a few plastic crocodiles in a children's paddling pool", says Christian Ultsch in Austria's Die Presse.

A travel ban and bank-account freeze for eight pro-Russian Crimean leaders and 13 minor Russian politicians will hardly have the Kremlin shaking in its boots. America at least targeted a few members of Putin's entourage, while Russia's G8 membership has been suspended.

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It looks as though the US and EU "are more interested in window dressing than imposing real economic and financial hardship", says Alex Brummer in the Daily Mail. Russia has laughed off the sanctions.

While tensions look set to escalate further, a full-blown trade war seems unlikely given the close ties between Russia and Europe. Russia supplied 30% of Europe's gas in 2013, notes Capital Economics, but Europe won't want to face an energy squeeze and Russia will be reluctant to risk further undermining confidence among its European gas customers.

Given all this, we would drip-feed money into the Russian stock market, which as we noted two weeks ago is so cheap it looks as though almost all the potential bad news for the Russian economy is in the price.

Perhaps the one scenario that could send it down even further and terrify other markets would be an unexpected invasion of Russian-speaking eastern Ukraine and a consequent civil war. That would make gold a better short-term bet.

Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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