Sanctions against Russia will have an unprecedented global impact

Financial sanctions announced against Russia after the attacks on Ukraine in recent weeks, which include freezing assets, blocking access to new financing, imposing restrictions on certain types of operations, and excluding Russian banks from the Association for International Interbank Financial Communication (SWIFT). It affects at least 70% of the assets of the Russian banking system.

According to estimates of the American company CIAL Dun & Bradstreet, devoted to the analysis of business risks, Russian banks conduct daily transactions for 46 thousand million dollars, 80% of which are in dollars, since almost 84% of Russian export income is in dollars. and the euro.

In its analysis of the global repercussions of the crisis between Russia and Ukraine, the US company specifies that Russian banks will have to change dollars into local currencies or channel them through alternative means, such as the Message Transfer Fund System (SPFS), which handles about a fifth of domestic transactions, from partners Big business like China, or the increased use of central bank digital currencies.

The US government led by Joe Biden and European countries imposed additional sanctions on President Putin and approved sanctions against the Russian Central Bank, as well as the expulsion of several Russian financial institutions from the SWIFT system.

According to the company, “Although the sanctions imposed on Russian leaders are largely symbolic, the sanctions against the country’s central bank and some of its largest financial institutions could be a devastating blow, with serious repercussions for the economy and companies.”

Indeed, the European subsidiary of Russia’s largest bank, Sberbank, has been authorized to declare bankruptcy, having been hit hard by sanctions, the European Union’s banking watchdog reported a few days ago.

domino effect

In the case of SWIFT, the White House, along with France, Germany, Italy, the United Kingdom and Canada, announced the expulsion of seven Russian banks from this highly secured network that links thousands of financial institutions.

While the Office of Foreign Assets Control, affiliated with the US Treasury Department, imposed sanctions on seven large Russian financial institutions and 13 Russian companies, it was confirmed that the family of companies of these companies includes 16,748 entities spread over 21 countries, according to the study.

OFAC’s 50% rule imposes penalties on companies whose joint ownership of sanctioned parties is 50% or more. In addition to causing financial disruption to the final parent companies in Russia, the sanctions will also disrupt entities in other countries that do business with the sanctioned companies.

Russian entities owe international banks more than $121 billion, according to the Bank for International Settlements (BIS), which suspended Russia’s membership last week. European banks have accumulated more than 84,000 million dollars in total debt. France, Italy and Austria were the hardest hit. Meanwhile, it owes US banks $14.7 billion.

Supply chains at a standstill

According to CIAL Dun & Bradstreet, at least 374,000 companies around the world rely on Russian suppliers and more than 90% of the companies are located in the United States.

While at least 241,000 companies rely on Ukrainian suppliers. More than 93% of these companies are located in the United States. Other affected countries are Canada, Italy, Australia, China and Brazil.

Russian companies obtain goods and services from at least 92,000 companies located in other countries. About 55% of these companies are located in the United States, China, India, Germany and the United Kingdom.

Valueseleconomista.mx

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