Flow of investments into Russia
On July 16, the U.S. imposed additional sanctions against Russia for their continued support of pro-Russian separatists in Ukraine. These sanctions primarily target the Russian economy and the flow of investments into it. They have been issued against companies in Russia’s defense industry and energy industry. They have also been issued against important Russian banks and individuals.
Among those on target, sanctions imposed against Rosneft, Novatek, and Gazprombank will hurt the Russian economy the most.
What do the additional sanctions mean?
The imposition of sanctions on Russian firms basically means that the U.S. will no longer invest in these companies. The U.S. Treasury Department as well as any corporate or individual in the U.S. is effectively banned from providing closed medium- and long-term dollar funding to the two banks and energy companies that were in the sanctions list.
Technically, this third round of sanctions prohibits American banks and investors from tendering loans with a maturity of more than 90 days to either of Rosneft, Novatek, Gazprombank, or Vnesheconombank.
However, these sanctions don’t freeze those four companies’ assets or prohibit U.S. firms or companies from doing business with them. It’s only aimed at disrupting the flow of investments into these firms which serves as fuel for their growth engines. Investment flow to Russia have already taken a hit in the past few months. As a result, major U.S. listed exchange-traded funds (or ETFs) investing in Russia such as the Market Vectors Russia ETF (RSX) and the SPDR S&P Russia ETF (RBL) have also seen a decline in performance as investor confidence in the Russian economy is dwindling.
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