-
[ ... ] From an economic standpoint, if the objective is to hit Russia’s economy, it is the energy sector that you need to touch. Clearly, there is a cost for the rest of the world that that entails. When news broke overnight of oil sanctions potentially being imposed, the price of oil spiked to just over $140 a barrel, so there would be a cost to the rest of the world were we to go down that route. [ ... ] but, as a rough rule of thumb, energy is about half of Russia’s exports and about 15% of its economy—more if you include all the associated services.[1]
We consider later in this report the impact of energy sanctions, both upon Russia (in this chapter) and upon the UK (in paragraphs 57 to 64 in Chapter 3).
- On 28 February 2022, the UK Government, alongside similar moves by the United States, the European Union and Canada, announced restrictions on the ability of UK nationals and companies to undertake financial transactions involving the Central Bank of the Russian Federation (CBR), the National Wealth Fund, and the Ministry of Finance of the Russian Federation.[2] According to one estimate, the UK holds 4.5% of the CBR’s reserves.[3]
- Mr Shearing described the scale and effect of these sanctions:
[ ... ] we have seen Russia’s foreign exchange reserves and the foreign assets held at the central bank increased to just over $600 billion. They are parked in different currencies—dollars, euros, yen, sterling and so on. As a result of these sanctions, we have frozen just over half of those reserves, so those can’t be used.
The central bank cannot process any foreign exchange transactions, defend the rouble when the rouble collapses, sell its foreign exchange reserves and buy the rouble to prevent it falling further, or help domestic companies access foreign currency for transactions. So it has completely frozen the financial system in Russia, with respect to external transactions. As part of the modern global economy—what was the 11th-largest economy in the global economy—that has a huge effect.[4]
- SWIFT, an acronym for The Society for Worldwide Interbank Financial Telecommunication, is a messaging system which allows banks around the globe to communicate quickly and securely about cross-border payments. It is a member-owned co-operative based in Belgium, made up of global banks.[5] On 2 March SWIFT announced that it would cut off seven Russian and three Belarusian banks from its system with effect from 12 March 2022:
- ↑ Q3
. See also Q66 . - ↑ GOV.UK, News Story: UK Statement on Further Economic Sanctions Targeted at the Central Bank of the Russian Federation, 28 January 2022, accessed 15 March 2022
- ↑ Statista, Who holds Russia’s Central Bank reserves? 28 February 2022, accessed 15 March 2022
- ↑ Q32
- ↑ SWIFT, Organisation and Governance, accessed 15 March 2022
