Essentially, the West took down Russian finances in one day. The situation is likely to become worse than in 1998 because now there is no positive end. All Russia's capital markets appear to be wiped out & they are unlikely to return with anything less than profound reforms.
The Moscow stock markets have closed & Russian stocks are no longer traded in New York, presumably all 31 soon gone in London. The three big foreign banks in Moscow are likely to withdraw: Raiffeisen, Societe General & Unicredit: No profitable business in sight.
After Russia has fallen out of the international payments system, it is very cumbersome to sell to Russia. It is likely to be blacklisted by FATF soon. Why even try to sell there? You don't know whether you will be paid. Lots of companies stop selling to Russia.
Under these circumstances, it is pretty impossible to invest in Russia. Smaller existing investments are likely to withdraw, while BP and Shell are already withdrawing. Total might be the last to remain, but the US might impose blocking sanctions on Novatek.
Western companies have all reasons to stay away from Russia. First, they face sanctions risks, as sanctions often change suddenly. Second, they are facing credit & financial risks w/o insurance in sight. Third, they run reputational risks being involved in crime.
What will happen to the Russian economy?
1. The ruble is likely to continue collapsing. In 1998 - 75%, in 2014 -50% - at least 50% now.
2. Inflation will swing up with the collapsing ruble, perhaps to 50%, at least 20%.
3. In 2015, GDP fell by 2.5%, in 1998 by 5%, more now.
1. The ruble is likely to continue collapsing. In 1998 - 75%, in 2014 -50% - at least 50% now.
2. Inflation will swing up with the collapsing ruble, perhaps to 50%, at least 20%.
3. In 2015, GDP fell by 2.5%, in 1998 by 5%, more now.
Nobody can claim that Western sanctions don't matter any longer. The critical factor is the US dollar. When enough of national financial system is excluded from the $, the national economy is toast regardless of reserves, interest rates & institutions.
Yes, the Russian economic collapse is already worse than in 1998. Then the Russian stock market fell by 94% altogether. In the last two weeks it has already fallen by 98% in London. In 1998, the whole government had to got. High time for the failures Putin & Mishustin to go!
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