Skip to main content

If you are wondering how serious this whole Russia invading Ukraine thing is, well, consider this: The last time Russia invaded Ukraine, the Swiss did nothing. This time, they’re giving up centuries of neutrality and fealty to the sacrosanctity of a secret bank account.

After a meeting with the Swiss Federal Council, Switzerland’s president, Ignazio Cassis, said that the country would immediately freeze the assets of Russia’s president, Vladimir V. Putin, Prime Minister Mikhail V. Mishustin and Foreign Minister Sergey V. Lavrov, as well as all 367 individuals sanctioned last week by the European Union…. It also joined European neighbors in closing its airspace to Russian aircraft, except for humanitarian or diplomatic purposes….

Swiss national bank data showed that Russian companies and individuals held assets worth more than $11 billion in Swiss banks in 2020. As a hub for the global commodities trade, Switzerland also hosts numerous companies that trade Russian oil and other commodities.

It's also serious enough to have blown up the post-Cold War financial and economic order like so many apartment blocks in Kyiv.

In just days, Russia has been all-but-unplugged from a global system that powered its transition from a closed, government-controlled economy to a more modern one that yielded Western goods, foreign travel and a middle-class lifestyle.

“Today, Russia’s financial system and economy are facing a totally abnormal situation,” the usually reserved Bank of Russia Gov. Elvira Nabiullina, dressed in black, said Monday.

Indeed, it does, as Nabiullina is all-too-personally aware.

The Biden administration announced additional sanctions against Russia’s central bank on Monday, a move that effectively prohibits Americans from doing any business with the bank as well as freezes its assets within the United States…. “No country is sanctions-proof and Putin’s war chest of $630 billion in reserves only matters if he can use it to defend his currency,” a second senior administration official said Monday.

As far as another central bank is concerned, however, it’s really not all that big a deal.

The first rate rise is only expected to be a quarter of a percentage point as opposed to a supersized half-point increase as some have speculated, given concerns about how Russia’s assault on Ukraine could temper economic growth, and earlier resistance from many Fed officials…. “It doesn’t look like the situation in Ukraine, as horrible as it is, changes the basic fact that the Federal Reserve is facing, which is that monetary policy is very far from neutral,” said Andrew Levin, who worked at the central bank’s board for two decades and now teaches at Dartmouth College, referring to the level of interest rates that is neither accommodative nor restrictive.

But it’s certainly a big deal if you’re an American and enjoy trading Russian stocks, or a European who for some reason has her life savings deposited with a Russian bank, or a British oil company with extensive (and expensive) ties to the pariah nation.

NYSE’s website said the exchange had halted the trading of Russian telecom operator Mobile TeleSystems PJSC, mining and steel company Mechel PAO and online real-estate classifieds company Cian PLC due to “regulatory concern.”

Nasdaq halted the trading of several other Russian companies, including search-engine operator Yandex NV and online retailer Ozon Holdings, citing “news pending.”

Sberbank Europe and two other subsidiaries were set to fail, after "significant deposit outflows" linked to "geopolitical tensions", according to the ECB. Austria's Financial Market Authority imposed a moratorium on Sberbank Europe, which is based in the country.

Rosneft accounts for around half of BP's oil and gas reserves and a third of its production and divesting the 19.75% stake will result in charges of up to $25 billion, the British company said, without saying how it plans to extricate itself.

Of course, not everyone is forcing themselves to extricate themselves from the Russian energy market.

As the U.S. and its Western allies wage economic war against the Kremlin to coerce it into abandoning its invasion of Ukraine, policy makers have tailored their pressure campaign to protect their energy supply, prevent a surge in oil prices and minimize the damage on their own economies.

Well, while that economic war has in many way been far more effective than those policymakers could have reasonably hoped, it has not exactly coerce Vladimir Putin from pulling out of Ukraine, nor to prevent that surge in oil prices.

Crude prices swung sharply and eclipsed $100 a barrel last week for the first time in about eight years after Russian airstrikes hit Ukraine and threatened to disrupt the movement of oil and other materials from the region…. “The speed of the moves is actually what scares me the most,” said Rebecca Babin, senior energy trader at CIBC Private Wealth, U.S. She expects oil to soar if even more punitive measures are imposed on Russian energy companies and banks.

Switzerland says it will freeze Russian assets, setting aside a tradition of neutrality. [NYT]
The West’s Sanctions Barrage Severs Russia’s Economy From Much of the World [WSJ]
Biden administration expands sanctions against Russia, cutting off U.S. transactions with central bank [CNBC]
Ukraine war unlikely to deflect Fed from path of interest rate rises [FT]
NYSE and Nasdaq Halt Trading in Russian Stocks [WSJ]
Russia's Sberbank in Europe faces closure after savers demand money [Reuters]
BP quits Russia in up to $25 billion hit after Ukraine invasion [Reuters]
Russia Sanctions Over Ukraine Largely Spare Energy Sector, Vital to Europe [WSJ]
Investors Bet Oil Still Has Room to Run After Touching $100 [WSJ]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Related

putin

Maybe Serving As Payment Agent For Sovereign Debt Is Another Business Citi Should Get Out Of

At least when it comes to rogue states and uniquely recalcitrant debtors.

putin

Putin’s Foray Into Ukraine Is Already Disrupting The West

Chaos and uncertainty are an end in and of themselves.

rosneft

The Strong U.S. Economy Can, And Should, Weather Sanctions On Russian Oil And Gas

It seems extremely callous to discount even the possibility of sanctioning Russia’s energy sector.

ackman-biden-beach

Bill Ackman Would Have Turned Russia Into A Sheet Of Nuclear Glass By Now

Wartime dispatches from Russia, Ukraine and the CNBC studios.