WORLDWIDE: HEADLINES
Explainer: Western Sanctions On Banks Only Scratch Surface Of Fortress Russia
The United States, the European Union and Britain announced new sanctions on Russia on Tuesday after Moscow’s recognition of two separatist regions in Ukraine as independent entities.
Chief among their targets: Russian banks and their ability to operate internationally.
Yet the impact of the new sanctions is likely to be minimal. Western governments – for now – are preferring to keep the much larger sanctions packages that they have planned in reserve should the crisis escalate.
It means Russian bankers or their Western counterparts with exposures to the country won’t be losing much sleep.
Indeed, U.S. banks are not expecting global sanctions to have a major impact on American bank businesses or spark contagion risk, given lenders have little exposure to the Russian economy, said three executives familiar with industry thinking.
Here’s how the banks are being targeted and which measures might hit harder:
WHAT HAS BEEN ANNOUNCED SO FAR?
European foreign ministers agreed to sanction 27 individuals and entities, including banks financing Russian decision-makers and operations in the breakaway territories.
The package of sanctions also includes all members of the lower house of the Russian parliament who voted in favour of the recognition of the breakaway regions.
Britain imposed sanctions on Gennady Timchenko and two other billionaires with close links to Russian President Vladimir Putin, and on five banks – Rossiya, IS Bank, GenBank, Promsvyazbank and the Black Sea Bank.
The lenders are relatively small and only military bank Promsvyazbank is on the Russian central bank’s list of systemically important credit institutions.
Bank Rossiya is already under U.S. sanctions from 2014 for its close ties to Kremlin officials.
Washington imposed sanctions on Promsvyazbank and VEB bank.
Full coverage: REUTERS
Britain Mistakenly Puts Russian Central Bank’s Address On Sanctions List
Britain on Tuesday mistakenly assigned the address of the Russian central bank to a privately held bank with close links to Russian President Vladimir Putin that was the target of sanctions announced by Prime Minister Boris Johnson.
Johnson slapped sanctions on five private banks including Bank Rossiya, which the government said was “privately owned by elite Russian billionaires with direct links to Putin”, but spared Russia’s largest state banks for now.
The government mistakenly listed Bank Rossiya’s address as “Neglinnaya, 12, Moscow, 107016, Russia” which is the address of Russia’s central bank, known in Russian as “Bank Rossiya.”
The private Bank Rossiya is based in the northern Russian city of St Petersburg. Neglinnaya Street in Moscow has been home to a Russian or Soviet central bank office for at least a century.
The British foreign office later issued an update to make “administrative corrections to two listings under the Russia sanctions regime” which gave the bank’s correct address.
The Russian central bank in Moscow did not reply to a Reuters request for comment, but a source close to the bank said their understanding was that it was a mistake and that it had had no impact on the bank’s operations.
Full coverage: REUTERS
WORLDWIDE: FINANCE/BUSINESS
Stocks Regroup As Investors Hold Their Breath On Ukraine
Asian stocks steadied on Wednesday and demand for safe-havens waned a little as investors regarded Russian troop movements near Ukraine and initial Western sanctions as leaving room to avoid a war, while a rate hike lifted New Zealand’s dollar.
Commodity prices remain elevated, however, and traders are still nervous over the situation on Europe’s eastern edge.
Overnight oil struck a seven-year high while the S&P 500 index (.SPX) tipped into correction territory, having dropped more than 10% from January’s record peak.
S&P 500 futures were up 0.4% in early Asia trade, after U.S. President Joe Biden left the door open to diplomacy as he announced sanctions on two Russian banks and some elites close to President Vladimir Putin.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.1%. Japan’s Nikkei (.N225) was closed for the Emperor’s birthday holiday.
“The market sees the various sanctions … as modest and perhaps not as aggressive as feared,” said Chris Weston, head of research at brokerage Pepperstone.
“For now, one could assess there is a vibe across markets that Russian troops will hold Donbass, but push no further,” he added, referring to the parts of eastern Ukraine that Russia has recognised as independent and has sent troops to reinforce.
The European Union and Britain also announced plans to target banks and Russian elites while Germany halted Russia’s Nord Stream 2 gas pipeline, leading to a nearly 11% leap in Europe’s benchmark gas price.
Wheat futures had also leapt on Tuesday, posting the sharpest leap in three-and-a-half years and corn futures hit an eight-month high on concern that conflict could disrupt grain supply from the Black Sea export region.
“In short, investors are worried about a stagflationary shock to Europe and, to a lesser degree, the global economy generally,” said Shane Oliver, chief economist at AMP Capital in Sydney.
Full coverage: REUTERS
Safe Havens Yen, Franc Retreat, Kiwi Jumps After RBNZ Meeting
The dollar was on the front foot against the safe-haven Japanese yen and Swiss franc on Wednesday, as whipsawed markets looked to get a handle on the latest developments around Ukraine, though heightened nervousness kept most major pairs fairly muted.
Away from the threat of a full-scale Russian invasion of Ukraine, the New Zealand dollar jumped 0.44% after the Reserve Bank of New Zealand raised interest rates, and said more tightening could be necessary.
One U.S. dollar was worth 115.03 yen in early Asia trade, with the greenback having climbed steadily overnight from its near three-week low of 114.48 hit Monday, and at 0.9210 francs, after a 0.63% overnight rally.
Both safe haven assets had been advancing for the past week as rising tensions in Ukraine sent investors seeking safety.
The tensions reached crisis point this week when Russia ordered troops into separatist regions of eastern Ukraine, Western nations responded with sanctions, and threatened to go further if Moscow launched an all-out invasion of its neighbour.
However, the euro was comparatively unaffected, and was last at $1.1331, marginally higher in early Asia, having traded choppily this week, but without finding a clear direction.
Sterling was steady at $1.35890, and left the dollar index, which tracks the currency against major peers at 96.026, barely changed this week.
“Russia‑Ukraine tensions remain front of mind,” said analysts at CBA in a morning note to clients, but they added “the market reaction is modest so far because the Russian, European and U.S. actions have been flagged for some time.”
High prices for energy, partly a result of the situation in Ukraine, and other commodities helped the Australian dollar rise to $0.7235 on Wednesday, its highest in nearly two weeks.
On the global monetary front, the Reserve Bank of New Zealand gave investors a reminder that central bank policy was still a major factor in currencies.
Full coverage: REUTERS
Oil Pulls Back On View Western Sanctions On Russia Won’t Choke Supply
Oil prices took a breather on Wednesday after surging to seven-year highs in the previous session as it became clear the first wave of U.S. and European sanctions on Russia for sending troops into eastern Ukraine would not disrupt oil supply.
At the same time, the potential return of more Iranian crude to the market, with Tehran and world powers close to reviving a nuclear agreement, also kept a lid on prices, which hit seven-year highs in the previous session.
Brent crude fell 13 cents, or 0.1%, to $96.71 a barrel at 0142 GMT, after soaring as high as $99.50 on Tuesday, the highest since Sept. 2014.
U.S. West Texas Intermediate (WTI) crude futures fell 6 cents, or 0.1%, to $91.85 a barrel, after hitting $96 on Tuesday.
Prices jumped on Tuesday on worries that western sanctions on Russia for sending troops into two breakaway regions in eastern Ukraine could hit energy supplies, but the United States made it clear there would be no impact on energy exports.
“The sanctions that are being imposed today as well that could be imposed in the near future are not targeting and will not target oil and gas flows,” a senior U.S. State Department official told reporters late on Tuesday.
Sanctions imposed by the United States, Britain and the European Union on Tuesday were focused on Russian banks.
Further dampening prices was the possible return of more than 1 million barrels per day of crude from Iran, as diplomats said Iran and world powers were on the verge of reaching an agreement to curb Tehran’s nuclear programme.
“Diplomats agree that negotiations have reached the end game, signalling potential relief for global oil markets,” ANZ Research analysts said in a note.
Full coverage: REUTERS
