THE BATTLE IS AS SUCH BETWEEN THE PROCESSES OF GLOBALIZATION ON THE ONE HAND, AND NATIONAL ECONOMIC AND SECURITY INTERESTS ON THE OTHER, WHICH WAS IN BROAD TERMS ALSO THE HALLMARK OF THE LATE 19TH CENTURY AND THE PERIOD LEADING UP TO WORLD WAR I.


 Russian economy, and indeed Russian asset prices. The latest set of US sanctions targeting oligarchs and businesses in the resource sector look to be  in response to the annexation of the Crimea, above  transactions. However whether the sanctions’ impact prove to be durable is open to debate.    far more extensive than any of the sanctions that were imposed at the time. Eminently energy sector sanctions remain a complete taboo area, above all given that Russia supplies some 40% of European gas. Perhaps rather more instructive are the measures that Russia was forced to take assist the likes of Gazprom to repay foreign currency debts in the wake of that energy price collapse. For example Gazprom issued bonds denominated in Roubles, which were then bought by Otkritie, and swapped with Russia’s central bank for foreign currency. Such  the negative impact on banks’ capital positions, and in light of Russian central bank governor Nabiullina’s ongoing crusade to clean up the banking sector and strengthen bank capital positions, which has seen more than 450 banks closed and 3 of the larger banks bailed out in 2017, and thus would probably only be possible via the state controlled giants VTB and Sberbank for any protracted period.


That said, Russia’s economy has recovered from the oil price induced recession, thanks in no small part to the oil price recovery, which has facilitated a rebound in FX reserves to around $460 Bln, having collapsed from $500 Bln in January 2014 to $350 Bln by April 2015. However, Russia’s economy remains chronically over-dependent on its resource and agricultural sector (last year’s colossal wheat  its infrastructure heavily underdeveloped, and the  crunch in terms of real personal disposable incomes, even if this has been anything like the experience of the 1990s. As such Russia’s economy still needs a lot of investment, above all from abroad, though clearly Europe and the U.S. will no longer be the willing partners that they once were. Fortunately for Russia, relations with China have probably never been better, and its deepening ties with OPEC, above all the GCC   and energy interests, as well as alternative sources of  economy remain a very real threat, and it remains to be seen whether the prospect of a post-Putin power vacuum emerges.


Marc Ostwald E: marc.ostwald@admisi.com T: +44(0) 20 7716 8534


9 | ADMISI - The Ghost In The Machine | March/April 2018


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