Sanctions against Russia: the growing tension of the authorities

On March 5, Singapore joined Western technological and financial sanctions against Russia. Previously, several other Asian countries, including Japan and South Korea, made a similar decision. Taiwan also joined the restrictions.

International concerns also impose more sanctions. Withdrawing Visa and Mastercard from Russia will have serious consequences for banking sector customers. From March 10, services will not be provided for cards issued by local banks outside the country.

For the first time, Vladimir Putin commented on Western restrictions – in his opinion “they are like declaring war on Russia.” The President of the Russian Federation announced that the government will intensify its measures to counter its negative consequences.

The government’s actions continue to focus on stabilizing financial conditions. On March 5, Putin signed a decree giving Russian borrowers the right to temporarily pay in rubles their foreign currency obligations to creditors of sanctioned countries. The government list includes nearly 50 countries, including all member states of the European Union, the United States of America and the United Kingdom (see тверждён перечень недружественных России стран). In fact, this implies a mandatory currency conversion at the Central Bank rate (CBR), in addition, the funds will be paid into accounts in Russian banks. On February 2, the Central Bank of Jordan temporarily suspended payments of obligations to foreign customers, including. On ruble bonds issued by the Ministry of Finance of the Russian Federation. As a result of these actions, on March 6, Moody’s lowered Russia’s credit rating to Ca, the second lowest in the rating scale. According to the agency, the central bank’s control over capital flows is likely to significantly impede the country’s external debt payments and lead to its bankruptcy.

Moreover, the CBR has issued instructions limiting the value of foreign remittances made by natural persons to PLN 5,000. dollars per month. The authorities also lowered the value-added tax rate for gold purchases to 0%. This is to encourage their purchase, especially for convertible currencies. Due to the imposed restrictions, the Central Bank of Canada held large quantities of this mineral, which made it difficult for it to exchange the currency it needed. In an attempt to curb price hikes in the food market, the government of the Russian Federation on March 5 canceled existing restrictions on the import of vegetables from nine countries, including Turkey, Armenia, Azerbaijan, Belarus, Uzbekistan and Egypt. In addition, Belarusian companies will again be able to export meat, milk and animal feed to Russia. As part of supporting small and medium-sized enterprises, the government has also prepared a program of preferential loans (the maximum interest rate is 15%) with a total amount of 0.5 trillion rubles (about 4.8 billion US dollars).

On the news about the possible bankruptcy of Russia in terms of credit obligations, the dollar appreciated against the ruble by more than 15% and at the opening of today’s quotes it was necessary to pay more than 138 rubles for it. The Moscow Stock Exchange will remain closed on March 7 and 8. Natural gas prices on the fund exchange rose to more than $2,600 per thousand. M3. Oil prices – due to the uncertainty about the future of the Russian oil sector – also rose significantly, and on March 7 a barrel of Brent crude oil was already pushed around $130. However, Russian Urals crude, priced per barrel from Brent crude, is trading at a huge discount, averaging $15-20 per barrel.

The consequences of sanctions are mounting in Russia. Restrictions on the aviation sector and fear of confiscation of chartered aircraft at foreign airports have in fact led to the suspension of most foreign connections by local carriers. The largest of them, such as Aeroflot or S7, temporarily suspended all foreign flights, except for those bound for Belarus. In addition, flights to Russia were also suspended by foreign airlines, such as Azerbaijan Airlines – due to insurance problems with their devices flying in this direction.

At the same time, an increasing number of grocery stores in the country have introduced restrictions on the purchase of basic food products (sugar, flour, salt or oil).


  • Putin’s statement on sanctions notes that after nearly 10 days of massive restrictions imposed by the West on the Kremlin, concerns about the crisis are growing in many sectors of the economy. However, this does not seem to stop the president in his quest to gain control of Ukraine and escalate the costs of the conflict for the West as well.
  • Moscow’s unilateral decision to transfer foreign loan obligations to Russia and pay them in rubles will be a violation of the terms of the agreements concluded with the lenders. In fact, this will translate into bankruptcy of the state. In March 2022, domestic companies, including Gazprom and Rosneft, will have to provide creditors with billions of dollars in interest on the loans obtained. They may have the currency they need, but government restrictions prevent them from transferring that money abroad. On the other hand, the authorities can make payments in rubles in any amount, because the CBR can print the necessary sums of money if necessary.
  • Termination of cooperation with Russia by the Visa and Mastercard operators, which account for about 65% of global transactions, will mean the suspension of service of cards issued by Russian banks outside the Russian Federation (cards of US sanctioned banks lists are no longer supported by these payment systems). On its territory, such cards will continue to be dealt with by the local national payment card system until the date of their expiration. Russian MIR cards are currently accepted abroad only in Turkey and Vietnam, and also in some countries of the former Soviet Union, including Belarus and Kyrgyzstan. Therefore, banks in Russia are looking for ways to bypass the imposed restrictions, and most of all, to extend the validity period of already issued cards. They also plan to expand cooperation with other payment systems, including China’s UnionPay or Japanese JCB. Some local banks (eg Gazprombank) already issue domestic MIR cards with foreign partners, thanks to which they can be used in many countries where MIR, JCB or UnionPay cards are transacted.
  • Russia cannot reap the full benefits of higher oil prices. Although its oil and gas exports are not subject to sanctions yet, some companies (for example from Finland and Sweden) are quitting buying their raw materials from the spot market. In addition, the price of Russian Ural oil is significantly overestimated compared to the Brent brand (a record discount, more than 28 US dollars, was obtained by the Shell concern). Moreover, its shipping rates have increased several times, and its insurance has also increased. Western countries are currently unable to completely abandon Russian oil (it accounts for about 8% of world oil supply, i.e. 5 million barrels per day), but they can significantly reduce their purchases. In 2021, revenues from the oil and gas sector accounted for about 35% of Russian budget revenues and about 55% of export earnings.
  • Russian airlines, hit hard so far by Western sanctions, are trying to devise a strategy to limit losses. They plan to direct charter planes to run domestic flights and delegate their own devices to foreign planes. However, this solution does not allow to overcome another problem facing the industry, such as spare parts and service (including periodic inspections). For some time, aircraft can be kept in good condition thanks to, for example, items removed from other machines, but over time, foreign aircraft in Russia will not be safe.

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