The impact of sanctions against Russia

President of the European Council Herman van Rompuy, Canadian Prime Minister Stephen Harper, French President Francois Hollande, British Prime Minster David Cameron, U.S. President Barack Obama, German Chancellor Angela Merkel, Japanese Prime Minister Shinzo Abe, Italian Prime Minister Matteo Renzi and President of the European Commission Jose Manuel Barroso attend a meeting of the G7 leaders on March 24, 2014 in The Hague, Netherlands. The G7 countries are meeting to discuss the recent developments in Ukraine, and to consider their response and any sanctions to be imposed upon Russia in answer to its annexing of the Crimea region.

President Obama was in Europe Monday, discussing economic pressure on Russia. He’s also warning of potentially stronger sanctions, “a greater cost,” if Russia keeps at it in Ukraine.

Current sanctions include a number of Russian government officials and oligarchs, as well as Bank Rossiya, described by the U.S. Treasury Department as “the personal bank for senior officials of the Russian Federation.”

On its face, sanctioning one bank and a handful of Russian billionaires may not sound like a sweeping move. But because of their broad network of affiliated companies and deep involvement with Russian business and politics, the impact could potentially be more widespread than it may first appear.

Russia’s currency and stock market have both fallen in recent days, impacting an economy that was lacklustre even before the crisis in Ukraine. Now potential investors in Russia are thinking twice, worried that the next round of sanctions could target their interests. That means Russia could lose out on the business deals and investment it needs.

Russia’s Economy By The Numbers, by Marketplace’s Tobin Low


How much Russia’s key index is down. YTD, representing tens of billions in company value destroyed.


How much the conversion rate of 1 ruble to $1 has fallen.

Mark Garrison: Russia’s key stock index is down nearly 14% this year. That’s tens of billions in company value gone. This as the ruble has sunk. Cliff Kupchan of Eurasia Group lays out the sanctions so far.

Cliff Kupchan: We sanctioned a number of oligarchs very close to Mr. Putin, but only one company, Bank Rossiya, which is alleged to run a lot of the Kremlin’s money.

A handful of Russian billionaires may not sound like a sweeping move, but it’s more than you might think.

Christopher Swift: It’s also every single entity that these individuals own or control.

International lawyer Christopher Swift of Foley & Lardner points out that these oligarchs weave tangled webs.

Swift: Because a lot of these individuals operate their business empires through third-party proxies and shell companies in Europe and North America, the scope is much broader than most people assume just looking at this list.

And that’s before we get to what else the U.S. and allies could do.

Juan Zarate: These are the initial stages of what could be a more comprehensive financial isolation campaign.

Juan Zarate is senior adviser at the Center for Strategic and International Studies. Russia had economic trouble well before the crisis in Ukraine.

Zarate: I think there had already been questions as to the strength of the Russian economy. And then you add to this the uncertainty as to what may come and I think investors are starting to worry as to what the next stages are.

Which means, says Cliff Kupchan, that even companies not on the list could suffer.

Kupchan: Everybody’s now wondering what Russian companies indeed are off limits. Should I consummate a deal with x Russian company or will I be sanctioned?

Harsher sanctions aren’t in place yet. But global business leaders are starting to act like they’re coming. That means Russia could lose out on deals and investment it needs. I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.


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