Currently, Europe imports roughly 40% of its natural gas from Russia, though that percentage varies by country, according to European Union data. In Europe, where Russia is the EU’s biggest oil trading partner, that number is much higher. imports of oil and refined products, or about 672,000 barrels a day, came from Russia last year. imports of Russian oil, petroleum, and liquefied natural gas. senators Joe Manchin, D-W.V., and Lisa Murkowski, R-Alaska, said Wednesday they were working on a bill to ban U.S. The West still isn’t hitting Russia where it hurts the mostĪ lot of economic experts are now saying that if the U.S., European Union, and other allied nations really want to punish Putin, they will have to take action to limit its oil and gas exports. from transacting with them, it isn’t clear exactly how Russia will be able to make payments to international counterparties. “designated entities” list, barring financial firms that also do business in the U.S. With many Russian banks cut off from SWIFT or now on the U.S. Defaulting would also mean hurting foreign money managers as a way of getting back at the EU and the U.S.īut it doesn’t have to-Russia has the money to make the payments, especially as long as it can keep selling oil and gas.Ī bigger issue may be the technical and legal challenges of actually processing the bond payments. Russia could choose to default on these payments to conserve cash.
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Its first principal payment, $2 billion, is due on April 4. But the coupon payments are relatively small its first interest payment since it invaded Ukraine, of $107 million, is due on March 16, with another coupon payment for $359 million due on March 31, according to Reuters. The country does have about $40 billion of foreign-denominated sovereign debt, and it has never missed an interest or coupon payment on those bonds in its history. So, including all exports, the country was running a hefty current account surplus of about $40 billion for the quarter. Russia’s imports over the same period totaled $90 billion. Meanwhile, Russia also exported another $70 billion worth of other goods, including non-energy commodities such as iron and other metals in the third quarter of 2021, according to Bank of Russia figures. In practice, actually selling oil and gas on the international market may be far more difficult-more on that in a minute.) So right now, the country is still able to earn significant amounts from those resources. Sanctions imposed on Russia so far explicitly exempt payments for oil and gas sales. So Russia’s earnings in the current period could be significantly higher. And, remember, that was before a huge spike in energy prices that the Ukraine crisis itself has precipitated. The country earned about $63 billion from international oil and gas sales in the third quarter of 2021, the last period for which Bank of Russia figures are available.
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The Russian economy might be taking some serious hits, but Moscow still has tools at its disposal to keep its hard currency reserves from being completely exhausted.
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“What’s very possible is they hit a point where the pain starts getting more difficult for Putin to manage, even though he has absolute power.” Russia’s moves to stop financial free fall But he added that doesn’t mean the sanctions won’t have a political effect. “It doesn’t feel like that’s very realistic to hope for,” he said. Russia may be seriously hurt from sanctions, but it will not run out of cash fast enough to save Ukraine, Kenneth Rogoff, an economics professor at Harvard University and former International Monetary Fund and U.S. Still, most of Russia’s military equipment is produced domestically using domestic raw materials, so Putin may be able to get away with covering those costs with inflated rubles. One estimate, from the Ukrainian-based Centre for Economic Recovery, a think tank close to Ukraine’s government, has estimated that first five days of the war may have cost Russia as much as $7 billion in direct military costs. Russia spent about $62 billion on its military in total in 2021, and the invasion of Ukraine may send that figure soaring. That includes some $132 billion in gold that it holds in the Bank of Russia’s own vaults, as well as foreign currency that it holds domestically or holds abroad in countries like China, that have not agreed to enforce sanctions against Russia. and various other governments said they would cut off the Bank of Russia’s ability to access foreign exchange reserves held in their territories.
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But Russia can likely still tap around $300 billion in foreign currency and gold reserves after the U.S.