In the news, you will have seen that Vladimir Putin’s invasion of Ukraine has led to a wide combination of sanctions by the European Union and the United States. With more pressure from the rest of the world, Russians find themselves increasingly cut off, isolated and restricted.
But has there been an impact on the ruble? What measures have the UK placed on Russian banks? Are there any other sanctions against the nation?
This article will bring the latest updates regarding the newest sanctions. Let’s take a look.
What Has Happened To The Ruble?
Since Vladimir Putin invaded Ukraine, there has been huge lines around Russia for ATM access, with many residents rushing to withdraw cash as there are fears electronic banking could break down in the nation.
Both foreign currency and rubles have been taken out by residents, however, the current ruble value has plummeted to less than 1 cent, a record low. People watched their savings disappear on Monday as the Moscow stock exchange went into free-fall.
After the United States, along with other nations froze much of its foreign reserves, the Russian Central Bank more than doubled its key interest rate to 20%.
Now, according to the Moscow Times, many ATMs in Moscow could no longer serve euros and dollars. All Russians have been banned from transferring foreign currency abroad by The Kremlin.
What Measures Have The UK Put In Place For Banks?
Foreign Secretary Liz Truss has warned of economic hardship in the UK. The conflict could last for months and even years, so the UK has been told to prepare for economic sacrifices.
Fresh sanctions have been announced to target Russia’s biggest banks, banning high-tech exports to slow down the economy of the nation. These laws will block Russian banks from clearing transactions in foreign currencies, as well as freezing the assets of three further Russian banks.
In addition, to impact Russia’s economy for years to come, more legislation will be placed to ban exports of high-tech goods, such as microelectronics, marine and navigation equipment, hitting the country’s financial sector. This will also prevent banks from clearing their payments in sterling.
More than 50 per cent of Russian trade denominated in dollars or sterling, Russia will have less power when trading with the world. Banks such as Sberbank, the largest Russian bank will be hit hard.
Other banks, such as VEB, Otkritie Bank and Sovocombank will have their assets frozen in the UK, isolating Russian companies from access to UK capital markets.
Could Energy Prices Rise Due To Sanctions Against Moscow?
Around 20.8% of the UK business market is accounted for by Gazprom Energy, a subsidiary of Russia’s state-owned gas and oil giant. Increasing sanctions against Moscow may lead to higher energy bills for UK businesses if the key Russian-owned supplier is blacklisted.
Since 2010, the state-owned gas and oil company has been one of the largest suppliers of gas for UK businesses. They supply gas and electricity to factories, businesses and public sector customers, with more than 178,000 sites across the UK being supplied in 2020.
Any further disruption to the supply, especially during the current energy crisis may see customers’ bills increase dramatically. With record gas prices on the wholesale market, there could be huge concerns if the rates rise even higher.
Gazprom, the parent company of Gazprom Energy accounts for 13% of global gas production. If tensions escalate further, mainland Europe could be hit the hardest, with nations such as Germany receiving 40% of its gas supply from Russia.
Roughly half of the UK’s gas is imported, a third from Norway and Russia being the fourth largest market for UK gas imports in 2021. Around 5% of UK imports are from Russia, almost £1bn of Russian gas purchased.
If Russia is to reduce gas deliveries to Europe, it will need to be received from another location. This will likely be liquefied natural gas or LNG, increasing competition for supplies, driving up prices and consumer bills even more. However, if the UK can produce additional gas, the process will be supported.
Knock On Effect Of Russia Sanctions On The Energy Market
Europe is heavily dependent on fossil fuel imports, with the majority coming from Russia. However, to speed up the transition to renewable sources, the EU is looking at what new technologies can address the energy demand.
The pull away from Russian fossil fuel supplies is increasing the demand for other supplies of fossil fuels from elsewhere. There are a lot of critics that state boosting coal and LNG imports, especially immediately after the COP26 climate conference.
By the end of 2022, the European Commission announced that it is aiming to reduce EU demand for Russian gas by two-thirds. Before 2030, there is a focus on gaining energy independence from Moscow.
Increased demand on fossil fuels have led to price rises in the UK, however, now may be a good time to see how much energy you use. You can try this electricity usage calculator to see the amount of energy you are using, as well as if you can save money.
But would this harm the nation’s economy? Well, only around 13% of Russia’s budget revenue comes from gas exports, so many not much. This means that right now, cutting off the central bank is more effective than cutting off oil and gas supplies.
Each year, Europe imports around 400 billion cubic metres (bcm) of gas. 175–200bcm comes from Russia. Is there a way to find alternative solutions to this large amount of gas?
With Russia producing and exporting about a tenth of the world’s global oil, disruptions to this flow would result in exorbitant oil prices. On Monday, records were broken at a 14-year high of $139. This will lead to hitting more vulnerable oil-dependent economies such as India.
What Other Sanctions Have Been Placed On Russia?
In addition to the sanctions placed on Russian banks, other sectors have been hit hard too. The sports industry has seen a wide array of rules and restrictions put on teams and organisations.
Fifa and Uefa have suspended all Russian football clubs and national teams, with the men’s team ruled out of World Cup play-off matches and the women’s team restricted from this summer’s Euro 2022 competition.
Europa League side Spartak Moscow have also been kicked out, as well as Gazprom having their sponsorship, ripped up with Uefa. There was widespread criticism from other nations, leading to the latest bans.
The Republic of Ireland and Scotland joined several other nations, including Northern Ireland, England and Wales refused to play against Russia. In their group for the next tournament was Poland, the Czech Republic and Sweden, who also refused to play.
On May 28th, the 2022 Champions League final was due to be played in St Petersburg. However, it has now been relocated to Paris, with several clubs have disassociated themselves from Russia.
Russia’s national airline Aeroflot have seen their sponsorship with Manchester United terminated and Bundesliga club Schalke cancelling its partnership with main sponsor Gazprom.
The Formula 1 Grand Prix in Russia has been cancelled, along with World Rugby suspending Russia and Belarus from international and cross-border competition until further notice.
What About Petrol Prices?
For the first time, the cost of filling an average family car with diesel has topped £90. This week, we saw the biggest daily rise since 2000 as the average price of a litre of diesel rose 3p overnight to a record 165.24p.
Roughly 18% of diesel and 8% of oil imports is imported from Russia. After soaring wholesale costs, there are more calls for the UK intends to phase out its imports by the end of 2020.
Right now, it costs £87 to fill up a 55-litre family car with petrol, £7 higher than it was at the start of the year. For diesel drivers, there has been an £8 increase to £90 for the first time.
With price cap warnings and soaring energy bills, many households have been hit hard recently. However, UK homes can search here to find the cheapest energy deals on the market.
The United States has immediately banned Russian oil and gas with the UK giving its market, businesses and supply chains time to replace Russian imports. Sanctions in western countries will add to the already high oil prices in the coming weeks.
There are other options on the table, with possible deals to unlock supplies from Iran or Venezuela. However, both nations are currently facing their problems and talks are reportedly making very slow progress.
The largest sources of road diesel in 2020 were from Saudi Arabia, the Netherlands and Russia, accounting for 62% of total road diesel imports in 2020. Out of the biggest economies, the UK is one of the largest importers of diesel.
An increased need to transition to alternative supplies is more prevalent than ever. However, it isn’t just fuel and energy to worry about, but also other commodities like wheat and metals.
More energy suppliers are looking to use renewable fuel sources and try to meet their green goals. This list of energy suppliers can help to show you which ones are green efficient, as well as which ones will bring you the best deal.
By cutting the second-largest gas producer and third-largest oil producer from the global supply, it will only lead to massive impacts on consumers. The UK government faces increasing pressure to offer more support to tackle the fuel poverty crisis.
Are Prices Rising In Russia?
Shoppers in Russia are stating that price increases for some products, mainly electronics and appliances have seen rises due to the latest restrictions. There has been a ramp-up for domestic production of food due to previous sanctions, however, many people rely on imports such as medication and tech.
There is uncertainty over future prices, leading to many residents stocking up. Russia’s largest supermarket chains have agreed to limit price increases to no more than 5% for dairy and bakery goods, sugar and some vegetables.