Ukraine: Dominic Raab hails UK economic sanctions on Russia
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Monday saw the ruble crash to record lows against the dollar following discussions of a potential ban on exports of Russian oil and gas. After falling in value as far as 1.55 to the dollar the ruble has staged a marginal comeback as divisions emerged in the plans for an embargo. Despite the apparent push from the US, Germany has dismissed the plans citing concerns for the Eurozone’s energy supply which is currently reliant on Russia for 40 percent of its demand. German chancellor Olaf Scholz said: “Europe deliberately exempted Russia energy exports from sanctions.
“There is currently no other way of securing Europe’s supply of energy for heating, for mobility, for power supply and for industry.”
Following this, the ruble saw a quick rebound reversing some of Monday’s loses however it has since stalled, settling around 1.36 to the dollar.
While resistance from countries such as Germany and the Netherlands leaves the EU divided on an embargo the possibility remains that the US may push ahead on its own, with a vote potentially coming this week.
A senior US official, who declined to be named, told Reuters no decision had been made but “it is likely just the US if it happens.”
Meanwhile Russia has retaliated by threatening to close its main gas pipeline to Germany if an embargo goes ahead.
Russian Deputy Prime Minister Alexander Novak warned a rejection of Russian oil would have “catastrophic consequences” with prices potentially reaching $300 (£228.56) a barrel.
With energy exports so far remaining one of the few areas not touched by sanctions, new restrictions here could serve as a major blow taking the ruble lower.
Confidence in the ruble has been severely shaken by the range of economic sanctions already seen so far.
Last week saw widespread scenes of Russians queueing at cash machines and currency exchanges to withdraw money or convert it into safer forms such as the dollar.
Meanwhile President Putin has issued a decree for Russian firms to pay foreign creditors in perceived “unfriendly” countries in rubles.
Russian businesses will also need government approval if they want to work with individuals or companies on the list, which includes all EU member states, the US and UK.
Despite the decree energy giant Gazprom has recently made payments on a $1.3 billion (£0.99bn) debt in dollars, claiming the transfer was made before the sanctions.
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Analysts as Saxo Bank pointed out: “The real test will come on March 16th as Russia is due $117 million (£89.14m) worth of coupons payments on Eurobonds.
“Payment in rubles in this case could trigger a default.”
While extreme in its losses, the ruble is not alone among currencies falling in the wake of the conflict.
Both the pound and euro have slumped given the greater exposure of Europe to Russian energy.
Meanwhile traditional safe haven currencies such as the dollar and the Swiss franc have seen gains with the franc reaching parity with the Euro on Monday.
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