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Chronicle of world’s economic war against Russia: Outflow of capital by by year-end to reach $151 billion

The assortment of sausage products in the Russian Federation is reduced over the refusal of the EU to supply casings for them. Photo: RBC

The assortment of sausage products in the Russian Federation is reduced over the refusal of the EU to supply casings for them. Photo: RBC

After attacking Ukraine, Russia has faced economic problems and sanctions from many countries and international organizations. In the Russian Federation itself, the authorities call it an economic war. The Page has prepared a compilation of the latest posts about this as of April 29th.

Economy

The Central Bank of the Russian Federation lowered the key rate for the second time in a month, this time to 14%. It accompanied this decision with the following comments:

  • inflation dynamics will depend on how import substitution proceeds and how quickly imports of finished goods, raw materials, and components recover. At the end of the year, inflation will be 18–23%;
  • the growth of the risk premium in lending rates and the tightening of banks' requirements for borrowers lead to a decrease in lending activity, especially in the retail market;
  • there is a contraction of consumer and business activity. Consumer demand is declining, people's propensity for savings is growing. Enterprises experience significant difficulties in production and logistics due to changes in the country and commodity structure of exports and imports;
  • GDP will shrink by 8-10% at the end of the year, mainly due to supply-side factors. At the same time, the economy will not grow in 2023: the Central Bank predicts GDP dynamics from -3 to 0%. The decline in the potential of the economy may be more significant than assumed in the baseline scenario.

The Central Bank doubled its forecast for capital outflow from the country this year. The regulator now expects that figure to reach $151 billion.

Some of the investment projects in the Russian economy have lost their relevance, in the current conditions they will not be completed, and it takes time to prepare new ones, Elvira Nabiullina, governor of the Central Bank, said.

The assortment of sausage products may decrease over the EU ban on supplying artificial casings for sausages and frankfurters to Russia. The EU countries supplied more than 70% of all imported sausage casings to the Russian Federation.

The third British hotel operator in Russia, InterContinental Hotel Group (Holiday Inn, InterContinental, Crowne Plaza, and Indigo hotels), has begun preparations for leaving Russia.

Norway announced closing its borders and ports for Russian trucks and ships. The restrictions will not affect fishing vessels and the territory of Svalbard.

McDonald's suffered a loss of $127 million, of which $27 million was used to pay employees, suppliers, and rent, and $100 million was written off from unsold stocks.

The Austrian oil and gas company OMV wrote off almost 2 billion euros of assets in Q1 over the loss of income from the Nord Stream 2 project and operations related to Russia. Over the Russian counter-sanctions, it lost the possibility to get dividends from a joint venture with Gazprom.

Sanctions

German Vice Chancellor and Economy Minister Robert Habeck said that Germany would not block the EU's oil embargo against Russia. According to him, the decision will be difficult and will cause huge price increases and supply disruptions. "But we are no longer talking about a national catastrophe," Habeck said. In recent weeks, Germany has found alternative energy suppliers and is now ready to support a phased ban on Russian oil.

Germany is ready to consider the issue of sanctions against Russia's largest bank, Sberbank. Earlier, Germany opposed tough restrictions on the bank, including disconnecting it from SWIFT. Berlin feared that such sanctions would hinder oil and gas payments.

U.S. President Joe Biden proposed to simplify the procedure for using property confiscated from Russian oligarchs to help Ukraine. He also proposes to impose criminal liability for getting income from corrupt deals with Russia.

Society

Breakthrough Prize, foundation of Russian-born entrepreneur Yuri Milner and his wife, announced that it would donate $100 million to refugees from Ukraine. The initiative will also involve companies with investments from the Milner Foundation: Airbnb, Spotify, and Flexport. "My paternal family is Ukrainian, and as a child I spent many years there with my cousins. Our duty now is to respond to the urgent needs of the refugees," Milner said.

Dating Group has blocked access to its sites for users from Russia and Belarus. Dating Group is a global dating company with 140 million users, 45 dating apps in its portfolio, and 100 countries covered by its products. Dating, Dil Mil, Once, AnastasiaDate, AsianDate, YourTravelMates and others are among its services.

The Latvian Parliament banned local athletes, coaches, and teams from participating in any tournaments and competitions in Russia and Belarus. Latvian teams are also prohibited from participating in any international tournaments in which more than half of the participants represent Russia and Belarus.

The organizers of the 2023 Universiade decided to relocate it from Yekaterinburg.

Contrary to general trend

Russian businessmen who want to transfer their funds from sanctions-dangerous jurisdictions to the United Arab Emirates have found an influential ally. Mansour bin Zayed Al Nahyan, Deputy Prime Minister of the United Arab Emirates, member of the royal family and owner of the English football club Manchester City, began helping them.

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