Sanctions are harnessed for a long time – Kommersant

A high current account surplus softened the effects of financial sanctions imposed last year by the G7 countries on the Russian economy in connection with the Russian military operation in Ukraine — restrictions on access to foreign financial markets are more effective for countries with a trade deficit, experts say Institute of International Finance (IIF). In this case, trade restrictions are also more difficult to implement: the receipt of export earnings makes it possible to find new import channels – this is evidenced by the statistics of deliveries to countries neighboring the Russian Federation, the institute notes.

The financial sanctions imposed on the Russian economy last year can be extremely effective for countries with a current account deficit that borrow funds from abroad – restricting access to financial markets leads to large losses and is seen as a serious threat to financial stability, follows from the review. Institute of International Finance. For the Russian economy, the effect of sanctions was less significant, analysts admit. After the initial shock associated with the freezing of assets of the Bank of Russia and the imposition of sanctions against Russian credit institutions, financing conditions began to soften. This was facilitated by the transfer of operations from sanctioned banks to those that did not face such restrictions.

Selective restrictions, such as the current one for the Russian Federation, lose their influence significantly if they are applied to countries with current account surpluses. “The accumulation of foreign assets stops only if sanctions are extended to all banks, but such a measure would be equivalent to an energy embargo (export is impossible if there is no infrastructure for making payments),” the IIF explains. From the point of view of the initiators of sanctions, in this case, only the restriction of trade operations turns out to be effective – in particular, through the “ceilings” of prices for oil and oil products (their effect also depends on the height of the set bars). Recall that the surplus of the current account of the balance of payments of the Russian Federation last year increased 1.9 times – to $227.4 billion (for comparison: China’s current account surplus increased by 32% last year, to $417.5 billion – the maximum since 2008) . This year, however, the Bank of Russia predicts a much larger contraction in the current account surplus, to $47 billion.

In turn, export restrictions can limit access to Western technologies even in the face of a trade surplus, but the implementation of these restrictions is already complicated by trade flows – this is shown, in particular, by export statistics from China and Germany. In the first case, deliveries almost doubled to Belarus and more than 1.5 times to Georgia, as well as to Kazakhstan (growth weakened after a peak in the second quarter) and Uzbekistan; in the second, exports more than tripled to Uzbekistan, two and a half times to Kazakhstan, more than doubled to Azerbaijan, and, to a lesser extent, to Georgia and Belarus, according to IIF calculations. “As long as Russia earns significant amounts of foreign exchange earnings, it will have the means to import the necessary goods,” the institute believes.

Note that the EU has already promised that the new package of sanctions will be aimed at preventing such flows of goods, the export of which to the Russian Federation is limited – Chinese and Iranian companies may also fall under secondary sanctions. At the G-7 summit next week, engagement with China is expected to be discussed more broadly in terms of “risk reduction” in bilateral trade.

Tatyana Edovina