Russian President Vladimir Putin chairs a meeting with members of the Security Council via video link in Moscow, Russia May 13, 2022. Sputnik/Mikhail Metzel/Kremlin via REUTERS

LONDON, May 13 (Reuters) – A set of sanctions imposed on Russia, its key businesses and its business and political elite following Moscow’s invasion of Ukraine is set to trigger a deep recession in Russia.

Here is a summary of the economic consequences and Russian retaliatory measures:

ECONOMY

According to the Yale School of Management, nearly 1,000 Western companies have abandoned or reduced their activities since the start of the conflict.

The government expects the economy to contract by 8.8% this year and not return to its pre-invasion size until 2026. Some independent forecasters expect a double-digit contraction.

Shortly after the invasion, the central bank raised rates from 9.5% to 20% to support the ruble and contain soaring inflation, which peaked at 2.22% per week in early March. Annual inflation at the beginning of May was still close to 18%.

Strict capital controls and a requirement for exporters to convert at least 80% of their earnings into foreign currency drove the ruble to multi-year highs against the dollar and euro in early May, with the benchmark interest rate lowered to 14%.

On May 13, Moscow’s RTS (.IRTS) index of ruble-denominated stocks was down around 9% since the day before the invasion, while the ruble-based MOEX (.IMOEX) was down by 24%. The FTSEurofirst 300 index of major European stocks fell 5%.

GAS STOP

On March 31, President Vladimir Putin demanded companies based in “hostile countries” – those that had imposed sanctions on Russia – to pay for their energy in rubles rather than the dollars or euros stipulated in their contracts. . Read more

The European Union said this would involve carrying out transactions with Russia’s central bank for currency conversion – which is prohibited by EU sanctions.

Faced with resistance from European customers and a lack of clarity on how to make payments, Russia cut off Poland and Bulgaria for refusing to pay in roubles.

On May 3, Putin presented new measures against a list of individuals and companies from “hostile countries”. Read more

Russian companies and individuals would be prohibited from doing business with those on the list, even if they fulfilled existing contracts and obligations.

The list, published on May 11, included the former German unit of Russian gas producer Gazprom and its subsidiaries serving gas consumption in Europe, as well as the owner of the Polish section of the Yamal-Europe gas pipeline. Read more

On May 12, Gazprom announced that it would stop exporting gas to European countries through the pipeline, which Germany said would lead to an overall drop of 3% in Russian gas deliveries. Read more

INVESTMENT PROHIBITION

The central bank has banned foreigners from selling Russian securities and halted payments to foreigners who hold locally issued Russian sovereign debt. Read more

Loans and credits in ruble to people from “hostile countries” are prohibited, and Russian companies are not allowed to pay dividends to foreign shareholders in “hostile countries”.

Loan repayments from Russian companies to foreign investors can only be made in rubles to a special Russian bank account.

The central bank and the Ministry of Finance of Russia may, however, grant exceptions to these guidelines.

The Kremlin has ordered public companies listed in Russia to delist certificates of deposit – an instrument that represents shares – from foreign trading platforms unless they are exempt. Read more

Several Russian companies have used certificates of deposit traded in London and New York to take advantage of foreign investment. The law does not affect companies whose primary listing is overseas, such as Yandex or TCS Group.

EXPORT BAN AND “PARALLEL IMPORTS”

Russia has banned the export of more than 200 products to “hostile countries”, covering specific telecommunications, medical, automotive, electrical, electronic and agricultural goods.

Under a decree passed in May, Moscow allowed companies to import proprietary products made in the West – such as cars and smartphones – without the manufacturer’s permission and resell them in Russia. This decision was aimed at maintaining Russian consumers’ access to Western brands. Read more

AIRCRAFT SEIZED

Russia has closed its airspace to European and American airlines, forcing some long-haul flights to Asia to take longer routes.

Russia has said it will return no more than 400 planes leased to Western companies based in Russia, seizing nearly $10 billion worth of planes. Read more

Russia has also sanctioned a host of Western politicians, including lawmakers and ministers in the US, EU, Britain, Canada and other countries, as well as other officials and journalists. , in response to similar measures by these countries.

Reuters reporting; Editing by Kevin Liffey and Angus MacSwan

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