Russia says the economy is suffering “serious blows” with increasing isolation

“Russia’s economy is being hit hard,” Kremlin spokesman Dmitry Peskov told foreign journalists. “But there is a certain safety margin, there is potential, there are some plans, the work is underway.”

Peskov was answering a question about US President Joe Biden’s remark in his speech on the state of the union that the Russian economy has been left to “shake” by sanctions.
Sberbank (SBRCY), Russia’s largest creditor, said on Wednesday it was leaving Europe, with the exception of Switzerland, after Austrian banking regulators forced it to close its Vienna-based EU subsidiary. The European Central Bank warned earlier this week that Sberbank Europe was likely to fail after depositors rushed to withdraw their money following Western sanctions on much of Russia’s financial system.

Sberbank said its subsidiaries had faced “extreme leakage and a number of security concerns for its employees and offices”, the group said in a statement, adding that it had been prevented from rescuing them by order of Russia’s central bank. .

Another push from Russia: Three shipping companies will not sail there

Banking sanctions are part of a broader package of measures taken by the West, unprecedented in scale against Russia’s economy, to cut off funding for Russian President Vladimir Putin’s military efforts. France estimates that $ 1 trillion in Russian assets have been frozen, including about half of the Russian government’s military reserves.

Moscow has responded with a series of emergency measures aimed at preventing a financial meltdown, halting the country’s cash flow and maintaining foreign exchange reserves. The central bank has more than doubled interest rates to 20% and banned Russian brokers from selling securities held by foreigners.

More capital control

Russia’s stock market closed on Monday and has not reopened since. The central bank said it would remain closed on Wednesday. The government has ordered exporters to exchange 80% of their foreign currency earnings for rubles and banned Russian citizens from making bank transfers outside the country.

On Tuesday, the government said Putin was working on a decree that would prevent foreign companies from leaving their Russian assets – an attempt to prevent an eviction that picked up speed this week. Putin also signed a decree banning people from taking more than $ 10,000 or the country’s foreign currency equivalent, state news agencies TASS and RIA reported.

The central bank went further on Wednesday in an attempt to stem the flow of money from the country. He stopped transfers abroad from accounts held by non-resident legal entities and individuals from a number of countries. The restriction does not apply to Russian citizens.

“Conditions in the Russian financial system and the wider economy are likely to worsen in the coming days and weeks, as sanctions already announced take their toll and future sanctions add to the continuing negative shock,” wrote Behrenberg senior economist Kalum Pickering. research note. Wednesday.

“In the foreseeable future, Russia will remain isolated from the Western world and major global markets.

Oil companies are leading corporate evictions

Russia’s energy resources have not been directly targeted by Western sanctions, but many of the world’s largest oil companies are leaving the country or halting new investments in exploration and development projects.

Moscow is also struggling to sell supplies of Russian crude oil to traders and refineries worried they will be caught in a network of financial sanctions. Tanker operators are also wary of the risk to ships in the Black Sea.

ExxonMobil said on Tuesday that it was abandoning its latest project in the country, Sakhalin-1, which has been declared “one of the largest single international direct investments in Russia”. A subsidiary of Exxon was the operator of the project and the company’s decision to withdraw will end its presence in Russia for more than 25 years.

BP (BP), Shell (RDSA) and Norwegian Equinor all said this week that they intend to leave their Russian business in the event of a billion-dollar blow to their balance sheets. of France TotalEnergies (TOT) stopped new investments.

Apple, the world’s most valuable company, announced on Tuesday that it had stopped selling all its products in Russia due to the invasion of Ukraine. Apple also said it has restricted access to digital services, such as Apple Pay, in Russia and has restricted access to Russian state-owned media applications outside the country.

Ford said on Tuesday it was suspending operations in Russia, which takes effect immediately. IN the carmaker has a 50% stake in Ford Sollers, a joint venture with Russia’s Sollers.

Boeing suspends support for Russian airlines. A company spokesman said on Tuesday that Boeing was suspending “parts, maintenance and technical support services for Russian airlines” and had also “suspended major operations in Moscow and temporarily closed our Kyiv office”.

Airbus also said it was suspending maintenance and spare parts services for Russian airlines.

– Charles Riley, Nathan Hodge, Chris Liakos, Vanessa Yurkevich, Matt Egan and Angus Watson contributed to this report.