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Russia's recovery from economic recession could be complicated by sanctions announced recently by US President Donald Trump, with still greater potential of painful restrictions on investors and Russian companies seeking to raise capital in Western markets. This year, the US Treasury initiated new sanctions against Russian persons and entities for activities including the alleged poisoning in the UK of former FSB Officer Skripal and his daughter as well as Moscow's alleged meddling in the 2016 US presidential election.

  • The sanctions announced in April targeted seven Russian oligarchs and the 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, Russian Financial Corporation Bank, striking at allies of President Vladimir Putin. Several titans of Russia’s private industry, including Suleiman Kerimov, Oleg Deripaska, and Viktor Vekselberg, were among those targeted.
  • Share prices of sanctioned companies fell in the next day's trading after sanctions were announced. Share prices on the Rusal, for which Deripaska is president, slumped by 18 percent, a record low. Russian stock indexes RTS and MOEX also declined: RTS lost about 11 percent, and MOEX about 8 percent.
  • The US also announced sanctions in March to address ongoing cyber-attacks emanating from Russia as well as for Russia's alleged election interference. The sanctions targeted five entities and 19 individuals.

Soft oil prices and tight monetary and fiscal policy only exacerbated the effects of targeted sanctions by the US, EU, and Canada—later joined by Australia, Japan, and Switzerland, among others—on the Russian economy during 2014 to 2015. Among the most powerful sanctions imposed, the US joined the EU in 2014 in sectoral sanctions on Russia's financial, defense, and energy sectors, to include Russia's largest bank (Sberbank), a major arms maker and arctic (Rostec), and deepwater and shale exploration by its biggest oil companies (Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft). As a countermeasure to these sanctions, in August 2014, Russia banned food imports from countries that had imposed sanctions against it. 

  • During 2015, Russian GDP decreased sharply by 3 percent, the ruble depreciated by more than 50 percent against the US dollar, and inflation increased from six to 13 percent.
  • Russian companies struggled during 2014 and 2015 to raise funding on western capital markets because of financial sanctions, with new credit falling below potential levels by the equivalent of 1 to 2 percent of GDP per year, according to the Institute of Economic Forecasting of the Russian Academy of Sciences.
  • Sanctions made not only inward investment fall, but outward as well, a trend economists attribute to reduced purchasing activity in the US and the UK.
  • Sanctions have also reshaped US-Russia trade dynamics. Since 2013, Russian commodity exports to the US have decreased by 48 percent and now make up only 3.3 percent of Russia's total exports. Russia's imports from the US have decreased as well, falling by 44 percent, and now constituting 6 percent of total Russian imports. Learn more about how sanctions affected Russia's trade with the EU and other countries here.

Additional US sanctions were expected this month in response to Russia's alleged support for Syria's chemical weapons attack on civilians as well as an expansion of sanctions to include new Russian sovereign debt but neither has been implemented. Market damage from US sanctions is already measurable, however, and has the potential to grow as uncertainty takes hold in markets and among investors.

  • The US Treasury Department decided that expansion of sanctions on Russian debt will hurt global financial markets and businesses of Russian and US investors and has shelved these sanctions. Meanwhile, President Trump publicly walked back his plans to impose sanctions related to the reported chemical attacks in Syria.

 

Related Data Insights

Russian economic situation

   Pressured by the western sanctions and the lower oil prices, Russian economy shows more signs of weakness. Real wages and personal incomes at the end of 2014 fell year over year for the first time since 2009. Investments continue to fall for 12 consecutive months. Russian international reserves are lower than during the global financial crisis 2008-09. Rised interest rates makes more difficult tomakecredit payments, overdues reached new historical highs.    Revised forecasts for Russian GDP in 2015 are -3.0% and -2.9% (IMF and The World Bank, accordingly). Source: Short-term indicators for Russian economy, January 2015

Population Projections (1950 - 2050)

              The current world population of 7.2 billion is projected to increase by 1 billion over the next 12 years and reach 9.6 billion by 2050, according to a report, which points out that growth will be mainly in developing countries, with more than half in Africa. Population of developed regions will remain largely unchanged at around 1.3 billion from now until 2050. In contrast, the 49 least developed countries are projected to double in size from around 900 million people in 2013 to 1.8 billion in 2050.

Trade Policy Review Body - Russian Federation

The WTO General Council meets as the Trade Policy Review Body to undertake trade policy reviews of Members under the TPRM and to consider the Director-General's regular reports on trade policy developement. The TPRB is thus open to all WTO Members. The current chair is Ms. Irene B. K. YOUNG (Hong Kong, China).   Event Holder: World Trade Organization Source of data: Merchandise trade matrix, imports and exports of total all products, annual, 1995-2014, WTO statistical data sets, 1948-2014

Russia: Trade with Countries That Imposed Sanctions Against It

In August, 2014, as a counter-move to the economic sanctions imposed against Russia for its annexation of Crimea and intervention to Eastern Ukraine, Russia banned food imports from 10 countries: the US, the EU, Canada, Australia, Norway, Ukraine, Albania, Montenegro, Iceland, and Liechtenstein. The embargo ended 1 January 2018. The visualizations below highlight the trade effects of the embargo.