Hi all,
Share you thoughts about sanctions vs Russia.
Russian government says that sanctions will not cause much of damage to Russian economy, and that US economy will suffer more from those sanctions. On the other hand, US government says that Russia will get extremely poor and will suffer severe damage.
Your POV who is BSing ? Please state valid reasons.
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USA was very smart in its sanctions as it doesnt target Russia as a whole, but the small elite circle of Putin and his friends. The oligarchs and friends of Putin should feel discomfort from the sanctions, as their wives and children are all abroad and they are pretty much cut off from using euros and dollars by the sanctions (obviously they have stashed but you get the point).
I say this was a smart move by the USA because it targets a specific number of people instead of the Russian population as a whole, which is innocent. However, the Russian system is such that this small circle of people, through many holding companies and subsidiaries, owns and operates most of Russia's business.
This means thats the sanctions definitely have an effect on Russia, they already have affected Russia by slowing down growth. which was already expected to be less than 1%; it is possible that Russia actually enters a recession this year. The question is, will this be a long term effect and will the sanctions continue. Russia and USA are playing a publicised chess game and I dont think either side will back down easily and this could lead to the isolation of Russia. However, Europe will not be happy about that for many reasons.
Now as to how it affects Russian IB. Most deals have been stalled, both ECM and M&A due to market volatility and overall recent drop in the markets. Russian government owned banks run the show here in Russia but they are seeing international investors and clients back out from deals either due to the market uncertainty, or simply because they dont want anything to do with the Russian government (it is also possible that these banks will have sanctions imposed on them also).
Meanwhile BBs in Russia have it even worse, as business for them is drying up quicker than for Russian banks, and they are also exposed to the Russian government imposing sanctions on them in retaliation.
To answer your question, both sides are BSing, the sanctions will hurt Russia, but it will not make Russia severely poor and damaged. Unfortunately the situation is getting uglier by the minute and I see no resolution in sight, as with every day it is harder for either side to back down without losing face.
Great detailed answer. I think so too, but I believe both sides might severely be hurt, for instance NASA is about to have small problems with flying to space (transport).
Just as McCain made a joke about not being able to take his spring break vacation in Siberia, the Russians don't care much. The move is mostly symbolic.
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