Update on sanctions and the CBR measures to calm the market

Over the weekend (26-27th February) the US, Canada and European allies announced additional list of sanctions on Russia:

  1. The EU, the US and Canada and the UK sanctions against the international reserves of the Central Bank of Russia (CBR)
  2. Selected Russian banks are to be switched off from SWIFT payment system
  3. The EU sanctions against some organizations in the defense and aircraft fields. Measures include prohibition of technology and supply for selected organisations. Additionally, the leasing of aircraft of European manufacturers to Russian airlines is prohibited
  4. Further EU sanctions against Russia’s financial sector:
    • The EU banned listing of shares of Russian state-owned companies (with a state share of more than 50%) on European stock exchanges
    • The EU implemented sanction measures against certain banks (including Rossiya, Alfa-bank, Otkrytie). Foreign investors cannot trade securities of the named banks issued after 12th of April 2022
    • The EU banks are banned from accepting deposits from Russian individuals and institutes larger than 100 thousand euros. The UK earlier introduced a similar ban for deposits above 50 thousand pounds sterling.

SWIFT exclusion is planned only for some of Russian banks and not the whole financial system. The details of which particular banks will be targeted are not public yet, however the European Commission stated that the changes will concern already sanctioned banks. Likely the ones which are already were cut from FX transactions – Sber and VTB. Thus there is no new material changes there. Russian government will likely reroute international payments through other Russian banks that are still connected to the dollar financial system and are not under sanctions. Additionally, in order to prepare for SWIFT sanctions Russia has previously developed a local alternative to the SWIFT system – SPFS – which connects more than 300 organizations. As at the end of 2020 about 20% of the Russian financial traffic was going through the local system. This will allow to ensure the continuity of payments within the country.

The sanctions against the CBR reserves cause concern. As of 18th of February 2022 Russia’s international reserves amounts to around USD 643bn. Based on statement by Josep Borrell and our own estimates sanctions may affect up to 50% of the reserves, which may cause difficulties for the CBR to stabilise rouble.

The CBR has already took several measures to support the economy, the sanctioned banks and to calm down the markets:

  • The CBR hiked it key rate to 20% to compensate the rouble devaluation and inflation risks
  • The CBR and the Ministry of Finance obliged Russian exporters to sell 80% of foreign currency revenues
  • For FX and other transfers within the country the CBR will use SPFS instead of SWIFT. Almost all Russian banks are connected to it
  • The banks and other financial institutions in Russia will be allowed to reflect the value of the securities as of February 18th 2022[1]
  • The CBR will provide rouble and USD liquidity to the Banking system
  • The foreign investors are not allowed to sell their holdings of rouble bonds and equities on the Moscow exchange
  • The Moscow exchange halted trading of rouble securities on 28th of February (see or previous communication).

The Prime Minister Mikhail Mishustin announced that the government will provide its plan of economic support shortly.

Further risks for the rouble and macroeconomic stability come from potential interruptions of exports of oil and gas, and other goods from Russia or possible freeze of payments for the exports. So far the export of oil and gas from Russia go in ordinary regime. Even gas pipeline through Ukraine works normally.

The rouble stability is the key for inflation expectations and macroeconomic stability. High oil and gas and other commodity prices will be supporting current account. Imports are likely to be disrupted. And capital flight is limited due to the inability of foreign investor to sell their rouble holdings. The US dollar supply will now be huge both technically and politically. Due to the expected interruption in imports, the purchase of foreign currency will be carried out only by individuals and Russian legal entities for savings (speculation). Until the end of the week, the rouble exchange rate may strengthen from the current level. The Central bank seems to be in a position to keep a lid on the rouble depreciation.


[1] Systemically important financial institution: Sberbank, VTB, Tinkoff (TCS), Gazprombank, Alfa Bank, Unicredit Bank, Sovkombank, Otkritie Bank, Rosbank, Raiffeisen, PSB, MKB, Russian Agricultural Bank

Authors: Vladimir Tsuprov, CIO, Gennady Sukhanov, Head of Research & Deputy Head of Equities, Egor Kiselev, Head of International Business & Investment Marketing, Marina Tsutskiridze, Investment Specialist, Aleksandra Kuznetsova, Investment Specialist

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