Economic Sanctions have resulted in slow growth for Russia’s economy. Sanctions are penalities made by countries to another. Such as financial sanctions, military sanctions, diplomatic sanctions, sport sanctions, etc.

Despite the recent installation of capital controls in Russia, money is departing the nation, and foreign investment that would have gone to Moscow will be diverted elsewhere, according to Robert Wright, a senior faculty fellow at the American Institute for Economic Research. “With the Russian stock market shut down people won’t be putting any more money into it,” he says. This means a sudden decrease in investment from private investors for Russian businesses would result in a slower expansion for Russian firms, causing a more stagnant economy.

Economic Sanctions Imposed:

USA barred Russia from making debt payments, by using the $600m it holds in US banks, making it much harder for Russia to be able to repay its international loans. As over $100m (£81m) payment has to be made, but due to the sanctions, it’s unable to.

The US and other western countries have banned their citizens from doing business with Russian government-linked firms, which will impact the government’s revenue. Western governments have also worked with other countries to restrict the ability of Russian state-owned businesses to raise funds on international stock exchanges, disrupting their ability to sell shares. Western financial sanctions have made it difficult for Russia’s central bank to buy foreign currency to make debt payments, forcing it to look to other sources.

The US has restricted Russian access to the American financial system by banning Russian banks from using the SWIFT system, which speeds up international payments, and placing sanctions on Russian banks and other firms. The EU has limited Russian access to European financial markets by freezing the assets of major Russian banks. Which is worth up to $630bn (£470bn) of reserves it has in foreign currencies. It also placed sanctions on major Russian oil and gas companies. The US sanctioned the biggest state-owned Russian banks and imposed travel bans on senior Russian political figures.

USA is banning all Russian oil and gas imports, which would significantly affect the net exports of Russia, as Russia’s main export is to oil, and that to western countries such as the US. Hence, this would cause a magor decline in Aggreagte Demand than anticipated and therefore, cause the Russian economy to become more stagnant.

Unfortunate Timing:

Recently, there has been a major increase in oil and gas prices, hence countries are more hesitant to impose economic sanctions on Russian Oil and Gas, as this would further restrict the supply causing a further spike in gas prices.

Such as the EU, who will halt Russian coal by August. But are less eager on imposing restrictions on Russian gas, as they rely on it for over 40% of their gas needs. In March, they had said to reduce imports by over two-thirds within a one-year time frame.

Other Sanctions:

• Travel Bans are occurring, where there is a ban on all Russian flights from the following: UK, US, EU & Canadian Airspace.
• Ban on the imports of Russian Gold
• A sudden increase on Russian imports in the UK by over 35%, such as vodka.
• Trading is suspended in Russia from companies like: Coca-Cola, Starbucks, Marks&Spencers and even McDonalds

By Anshjeet Singh