The Western reaction has been primary centred on establishing further economic sanctions on the Russian Federation and high net worth Russian Oligarchs in an attempt to dissuade the Kremlin’s aggression and hinder its ability to penetrate further into Ukraine.

Of the most significant developments over the weekend was the US, UK, Europe, Canada and Japan blocking ‘certain’ Russian banks from accessing Swift. This follows the UK government placing sanctions on some 100 Russian businesses and individuals. In the last few hours, Chancellor Rishi Sunak has also announced a ban on transactions involving Russia’s Central Bank which will disable British firms’ ability to transact with Russia’s finance ministry and its sovereign wealth.

Th first tranche of measures announced in Parliament on 22nd February included sanctions on Rossiya, IS Bank, General Bank, the Black Sea Bank and the Promsvyazbank. However, many argue that these sanctions have thus far been ineffectual at stopping Putin’s campaign. Hence, Ministers in Westminster have received requests to establish sanctions on a list of 35 oligarchs and “enablers” close to the Russian Federation’s decision-making process (a list written up by Alexei Navalny).

Meanwhile, over in the US, Washington imposed sanctions on one of the largest investment companies in Russia, VEB bank. However, it is important to consider that there is a one-month grace period in order to ensure that any contracts which may involve American firms can be settled which hence undermines the sanction’s effectiveness.

Officials within the Kremlin have stated that Russia is well prepared for any such sanctions with for example, Russian economists expecting that the sanctions to cause a 2% loss to GDP. However, given the tense situation in Russia and the slide in the ruble, there are concerns over the possibility of a bank run in Russia. Moreover, given this situation, the Russian rouble has fallen by 30% in opening market hours today, pushing Moscow to double its interest rate from 9.5% to 20%.

The Guardian has more:


Foreign Policy​​​​​​
The ongoing crisis in Ukraine saw major developments in countries’ froing policy over the weekend, as political leaders and diplomates look for ways to navigate the crisis

Starting with Ukraine, Volodymyr Zelensky said that envoys would meet for peace talks with Russian diplomats at an undisclosed location close to the Belarusian border, in an effort to demonstrate to his citizens that he is willing to pursue every avenue available – both diplomatic and militarily. However, given that missile strikes targeting Kyiv over the weekend came from Belarus and the Russian ally has been used as a launch pad to attack Ukraine from the North, President Zelenski has said that he is sceptical of the prospect of a meaningful negotiation.

In solidarity with Ukraine, and Zelensky whose election in 2019 ran on a pro-EU manifesto, Brussels announced a major shift in their foreign policy insofar as they will provide military material – a move hitherto not done in the Union’s history. The commission will seek to utilise some £378m of EU funds, to finance arms to Ukraine with a further £42m for non-lethal equipment such as medical supplies.

Similarly, in a separate announcement, Olaf Scholz also said that Germany would be sending weapons to Ukraine. Again, this represents a major shift in their foreign policy as like Japan, after the Second World War and subsequent reunification, Germany has sought a de facto defensive army and been reluctant to supply arms to campaigns abroad. However, Berlin has now said that it send 400 German-made RPGs to Ukraine via the Netherlands and 14 armoured personnel carriers. Furthermore, Scholz announced an additional £84 bn for the German army and a commitment to ensure that Nato’s military spending target of 2% of GDP was met. This change in foreign policy of course follows Berlin’s recent decision to not allow the authorisation of Gazprom’s Nord Stream 2 which is significant given that Germany imports some 55% of its gas imports from Russia. Hence, over the weekend, Scholz announced the construction of two new liquefied natural gas (LNG) terminals in Schleswig-Holstein and Lower Saxony, which will enable the country to import LNG from markets such as America. Berlin will be keen to alleviate the pressure on its energy crisis given that in futures trading, German power for March jumped as much as 58%.


Market Reactions
Safe-haven assets such as gold have seen considerable appreciation with the commodity hitting 15-month high of $1,973 USD/t.oz last week before trading to around $1,900 this morning.

The prevailing risk-off sentiment has also feed into USD strength with the DXY up around 1.15% percent since last Tuesday.

Of course, last week we saw oil rise above $100dpb for the first time in 7 years – with Brent reaching highs of $105dpb before falling down to around $102dpb at the moment. Indeed, Goldman Sachs have stated that a supply shock to Oil from the conflict could see prices rise 25% to $125 a barrel by May.


Week Ahead
The Market’s primary focus will of course be centred on the ongoing developments in Ukraine and this week is relatively light on Data. Nevertheless, on Tuesday at 7am, German CPI figures are published where the market is predicting a 5.4% print. Then on Friday, we have Non-Farm payrolls expected at 438k down from a previous 467k in January and EUR retail sales which will be significant to see the extent to which rising inflation is affecting consumers inclination to spend.


Have a great day.


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