Large Russian banks in March 2014 were forced to work on a plan B in case of more negative consequences of the geopolitical events of the period. Since then, sanctions spiral on a number of new reasons unwound very much. Nevertheless, some of the American elite and the establishment are discussing new restrictions, which may be unprecedented.
Relevant ministries and agencies, as well as the Central Bank has repeatedly voiced that they will resort to non-market measures only in case of emergency. However, given the close attention of journalists only to a single phrase, the banker, the impression that delicately monitoring of public opinion – are the Russians the monetary constraints against the background of a number of unpopular measures taken after the presidential elections.
The media launched into a heated debate – “What if…?” In case of realization of the hard scenario of hypothetically possible, all Russian citizens, government and the corporate sector will be completely cut off from cashless dollar settlement. Even if someone in the 10 years since the last global crisis, have forgotten the mantra of the high degree of globalization and integration, the Economics textbooks remind us that Russia is a “small open economy”. Any external shocks immediately impact on the main macroeconomic indicators: the exchange rate (until the appearance of “black” currency market), inflation and household incomes, and after some time-and in the labour market. In the worst scenario, this can lead to economic and social disaster.
It is premature to give estimates and projections as unclear the exact parameters of the restrictions and possible exceptions, because American business is at a certain scenario may also incur a loss (not catastrophic, but still corresponding to the visible loss of the market). It is obvious that for very large transactions (for example, Russian oil giants) will still remain the theoretical possibility to circumvent the sanctions through a number of Asian and middle Eastern banks. The economic feasibility for the US in such hard constraints will be called into question, and, most likely, the final version of the sanctions imposed will be the subject of political bargaining and business lobby in the United States.
Willingness to form major
If, however, comes to extreme measures, commercial banks are likely not enough cash to meet its obligations. The accumulated international reserves of the Bank of Russia can theoretically cover a significant part of foreign exchange liabilities, but there are a number of problems.
First, part of the international reserves invested in instruments which in certain circumstances may not be enough liquidity – U.S. debt securities, Depositary receipts, gold.
Second, when individual analysts give a comparison of international reserves of the Russian Federation and foreign currency deposits, they do not consider that the Bank of Russia, there are no significant reserves of dollars in cash, so even technically this coating can’t quite place.
Finally, in the third: reserves and determination of their use is not unlimited. In addition to deposits, there is a very large foreign debt (mainly corporate sector) and regular foreign trade operations. Even if there is political will to support them with the resources of the Central Bank, its huge reserves still barely enough for a few blocks. In addition, circulation and transport across the border are now in the competence of the Eurasian economic Union to discuss in this context only the fate of the deposits.
And yet, still the probability of the most negative scenarios of sanctions is not very high: to the North Korea or even Iran, we are still very far away. Everyone understands that sanctions against Russia will result in significant losses for both sides, and then hope for the best remains.