Russia Expects $321 Billion in Energy Exports in 2022 Despite Recent Sanctions
Despite severe Western sanctions levied against Russia since its war with Ukraine began Feb. 24, Russia is expected to earn nearly $321 billion from energy exports in 2022, an increase of more than a third over 2021,
Bloomberg News reported.
Moscow’s economy has survived a full month of sanctions and is emerging with a relatively strong balance sheet, as many of its strategic trading partners remain dependent on its energy exports, and the Institute of International Finance (IIF) said that Russia’s budget surplus may reach a record high of $240 billion.
“The single biggest driver of Russia’s current account surplus continues to look solid,” said IIF economists in a March 31 report cited by Bloomberg News. “With current sanctions in place, substantial inflows of hard currency into Russia look set to continue.”
The situation may change completely, however, in case of a full embargo on energy sales.
The IIF said that an energy embargo by the European Union and the leading industrial nations that form the G-7 could require Russia to cut more than 20 percent of its energy exports and lose $300 billion, depending on global price swings.
Key trading partners in Russia’s traditional export base, such as the members of the EU, are looking for alternative gas suppliers and are halting new energy contracts in condemnation of the war in Ukraine.
However, other trading partners who have remained loyal to Moscow, such as India and China, are getting steep discounts, with India paying $35 less per barrel than Russia’s pre-war prices,
Bloomberg reported.
OPEC and the oil-producing states along the Persian Gulf have said they’re committed to the energy-production agreements that are already in place, rather than boosting output to address soaring prices in the wake of the Russia–Ukraine conflict.
Some EU countries such as Germany and Hungary, which are heavily dependent on Russian oil and gas, are reluctant to place energy exports on a list of sanctions, while other EU states are rushing to cut their dependence on Russia.
German industry leaders have said they oppose sanctions or political pressure that would prompt a full energy embargo on Russia.
German Finance Minister Christian Lindner said April 4 that Germany will reject a proposed EU embargo on Russian gas imports despite increasing pressure to impose sanctions on Russia’s energy sector over the escalating violence in Ukraine.
“We are dealing with a criminal war,” said Lindner before an EU meeting April 4 in Brussels.
“It is clear we must end as quickly as possible all economic ties to Russia. We must plan tough sanctions, but gas cannot be substituted in the short term. We would inflict more damage on ourselves than on them,” he said.
President Vladimir Putin of Russia demanded that all foreign payments from countries deemed “unfriendly” must now pay for Russian oil and gas by converting their currency into rubles, after Western nations froze Russia’s foreign exchange reserves.
The United States and the United Kingdom, both of which are less dependent on Russia for their energy needs than other nations, have imposed direct bans on energy imports from Russia.
Oil and gas account for about half of Russia’s total exports and contributed about 40 percent to its state revenues in 2021, Bloomberg News reported.
Despite the hesitancy of some customers to cut Russian oil exports,
output fell 26.4 percent in the week ending March 26.
Goldman Sachs economist Clemens Grafe predicts a 20 percent decline of imports to Russia in 2022, which is double the expected 10 percent decline in exports,
Business Insider reported.
Grafe also said that the Russian economy will shrink by 10 percent this year and see 20 percent inflation, its worst economic situation since the 1990s.
Euro Feels Weight of French Election Concerns, More Russia Sanctions
The
euro weakened on Tuesday with the Swiss franc and the Swedish crown the winners as French election worries and the chance of more sanctions against
Russia unnerved investors.
French financial markets acknowledged the possibility of right candidate Marine Le Pen beating President Emmanuel Macron in this month’s elections, with sharp losses on Paris blue chip index and government bonds.
Concerns about the outcome of the French elections have prompted traders in the euro to slowly ramp up buying put options around the $1.07-$1.09 levels for end April expiry, Refinitiv data shows.
Against the U.S. dollar, the single currency briefly fell to more than a one-week low of $1.0956. The euro reached a one-month high of $1.1185 just days earlier amid increased optimism over an end to the
Ukraine conflict.
“The single currency continues to underperform the broad G10 space as growth risks persist from events in Eastern Europe,” said Simon Harvey, head of FX analysis at Monex Europe.
Expected price swings for the euro, or implied volatility climbed to three-week highs as traders braced for more sanctions.
“Sentiment around the single currency is becoming more bearish by the day,” Harvey said.
The euro’s biggest losses on Tuesday were against the Swedish crown and Swiss franc, with falls of 0.4 percent and 0.2 percent respectively.
The United States and European countries pledged on Monday to punish Moscow over alleged civilian killings in northern Ukraine. The Kremlin denied accusations related to the murder of civilians.
New sanctions could include restrictions on the billions of dollars in energy that Europe imports from Russia.
Elsewhere, the Australian dollar jumped to a nine-month high after the country’s central bank signaled higher interest rates were closer.
The Aussie surged 1.23 percent to $0.7639, its strongest since June 14, after the Reserve Bank of Australia (RBA) dropped its pledge to be “patient” on tightening policy, while holding the key rate at a record low for now, as was widely expected.
The dollar index eased 0.07 percent to 98.902 from a one-week high of 99.083 reached overnight.
The greenback was flat against the yen at 122.73 yen, broadly tracking moves in long-term U.S. Treasury yields, as it continued to consolidate around 122.5 after retreating from a multi-year high of 125.105 on March 28.
Stocks, Oil, Bond Yields Edge up Ahead of Expected New Russia Sanctions
Traders were back on
Russia sanctions watch on Tuesday with oil, inflation-sensitive bond yields, and
stocks all edging higher ahead of an expected new measures from the West in coming days.
Europe saw the STOXX 600 index nudge 0.3 percent higher as oil, industrial, tech, and insurance stocks all made ground, while the euro clawed back a sliver of the 1.8 percent it had lost against the dollar in recent days.
With investors waiting on the new batch of sanctions—most likely on Wednesday according to France’s European Affairs Minister—oil was up 1 percent, lifting benchmark German Bund and U.S. Treasury bond yields due to the prospect of higher
global inflation.
Ewan Markson-Brown, a fund manager at CRUX Asset Management, said the global economy’s path was now highly dependent on how the war in
Ukraine progresses, and how policymakers in the U.S. and China manage the respective economic challenges.
“I think we have had the main (sanctions) crunch already. The variable will be if Germany stops taking Russian gas,” Markson-Brown said. “That is something that would definitely take the European markets down.”
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3 percent to 602.2. China and Hong Kong markets were closed for a holiday, but it was the strongest level since Russia sent its troops into Ukraine on Feb. 24.
Japan’s Nikkei also closed up 2 percent, the S&P/ASX 200 index rose 0.2 percent in Australia, while South Korean stocks added 0.1 percent.
Aussie Dollar
In the currency markets, the Australian dollar had jumped to a nine-month high of $0.7612 after its central bank signaled higher interest rates were closer.
“Geopolitical shocks historically did not tend to dominate the markets for long,” global markets strategists at JPMorgan said in a note, adding that U.S. rate hike cycles didn’t tend to hurt stock markets much either, “at least not in the early stages.”
S&P 500 stock futures barely budged and Nasdaq futures slipped 0.05 percent after Wall Street climbed on Monday, supported by tech shares.
The euro was steady at $1.0967 after dropping for the last three sessions.
The prospect of a Russian sovereign debt default was back in play too, after U.S. authorities prevented banks there from processing Moscow’s latest government bond payment, after weeks have allowing them to do so.
Global markets were otherwise looking to Wednesday’s release of minutes from the Federal Reserve’s last policy meeting for hints on how much the U.S. central bank will raise interest rates next month. The ECB will publish its equivalent minutes on Thursday.
The potential for more sanctions meant oil prices resumed their rise in commodity markets, along with signs that Iran nuclear talks had stalled.
Brent crude futures gained 1.7 percent to $109.35 a barrel. U.S. West Texas Intermediate futures rose 1.6 percent. Copper was up 0.7 percent, though gold slipped 0.2 percent to $1,928.7 per ounce.
“The base case is that we enter a period of stagflation, but it is short lived,” CRUX’s Markson-Brown said, referring to the phenomenon where inflation soars but growth grinds to a halt.
Peru Imposes Curfew to Stymie Protests Over Rising Fuel Costs
Peruvian President Pedro Castillo imposed a
curfew in the capital, Lima, on Tuesday, banning people from leaving their homes in an attempt to curb protests against rising fuel and fertilizer costs that have spread throughout the country.
“The cabinet has agreed to declare a ban on the mobility of citizens from 2 a.m. through 11:59 p.m. of Tuesday April 5 to protect the fundamental rights of all people,” Castillo said in an address broadcast nationwide just before midnight.
On Monday, a wave of protests against rising fuel and fertilizer prices, triggered by Russia’s invasion of
Ukraine, continued into their second week, while the government scrambled to bring prices down.
The protests represent a harsh reality for the embattled presidency of leftist Pedro Castillo, a peasant farmer and school teacher who won election last year with the overwhelming support of the rural poor.
But his support has quickly waned, even in rural regions, and hovers at about 25 percent nationwide. In his eight months in office, Castillo has survived two impeachment attempts and cycled through an unprecedented number of Cabinet members.
The protests have become increasingly violent and at least four people have been killed, the government said.
On Monday, protesters burned toll booths and clashed with police near the southern city of Ica.
“This strike isn’t happening just here, it’s all over Peru,” said one protester in Ica, who declined to be identified.
The turmoil erupted last week as farmers and truckers blocked some main highways to Lima, leading to a sudden surge in food prices.
The government responded over the weekend with a proposal to forego most taxes on fuel in an attempt to lower prices, while also raising the minimum wage by about 10 percent to 1,205 soles ($332) a month.
Peru has also issued an emergency declaration for its agricultural sector due to rising fertilizer prices triggered by Western sanctions on Russia, a major exporter of potash, ammonia, urea, and other soil nutrients.
Like many countries, Peru was already battling high inflation before the war. In March, inflation hit a 26-year high, largely driven by rising fuel and food prices.
New Zealand Sanctions 36 Russian Oligarchs Including Chelsea Football Club Owner
The
New Zealand (NZ) government has rolled out a new wave of sanctions targeting oligarchs with close personal ties to President Vladimir Putin or the Russian government, including Chelsea Football Club owner Roman Abramovich.
Foreign Minister
Nanaia Mahuta announced that the sanctions on a further 36 individuals came into effect on March 5.
“This list includes some of Russia’s richest businesspeople, as well as chairs and chief executives of some of Russia’s biggest companies,” she said in a
media release. “They will not be able to travel to Aotearoa New Zealand, move assets here, or use our financial systems to hide from sanctions imposed by other countries.”
Abramovich was disqualified from running the English Premier League team Chelsea after he was sanctioned by UK authorities. However, the billionaire has vowed to sell the club and direct the proceeds toward aiding the Ukrainian people.
Authorities have also been involved in highly publicized seizures of luxury villas, yachts, and private planes.
Emeritus legal professor Gabriel Moens has raised concerns over the lack of transparency from democratic governments in identifying targets for sanction.
“Simply being an acquaintance of Vladimir Putin is neither a satisfactory nor a sufficient reason for depriving them of their property.” he wrote in
The Epoch Times. “The reality is that there are oligarchs who oppose the invasion and are prepared to use their resources to help the victims of Putin’s war of aggression.”
The foreign minister said further measures would be enacted in the coming weeks.
“New Zealand is appalled at reports over the weekend showing the targeted killing and abuse of civilians, as Russian troops withdraw from areas of Ukraine,” Mahuta said.
She said through the sanctions, New Zealand would work with the international community to put pressure on people supporting Putin
“[It will also] send a clear message that this illegal invasion cannot continue and that the brutality and inhumane acts from Russian troops cannot be tolerated,” she said.
Prime Minister
Jacinda Ardern said Russia needed to answer to the world for the reported atrocities its troops have done.
She added that New Zealand had joined the international community in referring Russia to the International Criminal Court but stopped short of called Putin a war criminal.
“Ultimately, it is for the International Criminal Court to make that determination but I think the evidence is there. New Zealand is supporting the prosecutors and gathering that evidence and making sure that Russia is held to account,” she told reporters on March 4.
Meanwhile, the Russian ambassador remains in New Zealand with Ardern saying the government was keeping diplomatic options open but would not rule out expelling him in the future.
“When it comes to expelling ambassadors, that also means you lose your diplomatic representation,” she said. “It is an absolute option for us, it just so happens that we prioritised what we consider much more impactful options at this stage.”
JPMorgan CEO Warns of Possible $1 Billion Russia Loss
JPMorgan could lose about $1 billion on its
Russia exposure, Chief Executive
Jamie Dimon said on Monday, detailing the extent of the bank’s
potential losses from the conflict in
Ukraine for the first time.
In his keenly watched annual letter to shareholders, the chairman and chief executive of the biggest U.S. bank by assets also urged the United States to increase its military presence in Europe and reiterated a call for it to develop a plan to ensure energy security for itself and its allies.
Dimon did not provide a time frame for JPMorgan’s potential Russia losses but said the bank was concerned about the secondary impact of Russia’s invasion of Ukraine on companies and countries. Russia calls its actions a “special operation.”
Global banks have detailed their exposure to Russia in recent weeks but Dimon is the most high-profile world business leader yet to comment on the broader impact of the conflict.
“America must be ready for the possibility of an extended war in Ukraine with unpredictable outcomes. We should prepare for the worst and hope for the best,” he wrote.
Dimon may continue as chairman when he eventually relinquishes his role as chief executive, the bank said Monday.
The disclosure, in a report to shareholders ahead of JPMorgan’s annual meeting in May, said the bank had found that most major shareholders want Dimon to remain chairman.
The board also said that it was inclined as a “general policy” to separate the jobs of chairman and chief executive after Dimon is gone. Many shareholders have a general preference to separate the posts, it said.
Dimon has made something of a joke of perpetually saying he will resign in five years. In 2019, he said the five-year clock had actually begun.
In his letter to shareholders, Dimon addressed the relationship between the United States and China and said the United States should revamp its supply chain to restrict its scope to suppliers within the United States or to only include “completely friendly allies”. He urged the United States to rejoin the Trans-Pacific Partnership (TPP), one of the world’s biggest multinational trade deals.
Commenting on the macroeconomic environment, Dimon said the number of Federal Reserve interest rate hikes “could be significantly higher than the market expects.” He also detailed the bank’s rising expenses, in part due to technology investments and acquisition costs.
The letter is Dimon’s 17th as CEO. While Dimon is not the only CEO of a top U.S. bank to write such letters, his have become must-reads among Wall Street’s elite and policymakers for the view they provide into his political and economic ideas.
‘Fortress Balance Sheet’
This year’s letter comes as the Russia-Ukraine war and high inflation are hurting the economy, and as Dimon faces new skepticism from investors over expenses.
Some question his plans to increase spending on the bank’s information technology and campaigns to take market share in businesses and geographies where JPMorgan currently trails competitors, such as in Germany and the United Kingdom.
JPMorgan decided earlier this year to hold its first investor day since the pandemic began to address doubts about its spending plans. The meeting will be held on May 23.
Dimon has spent more than a decade building what he calls the bank’s “fortress balance sheet,” and he said it is now robust enough that JPMorgan could withstand losses of $10 billion or more and “still be in very good shape.”
While Dimon wrote that he is not worried about the bank’s exposure to Russia, he said the war in Ukraine will slow the global economy and will impact geopolitics for decades.
“We are facing challenges at every turn: a pandemic, unprecedented government actions, a strong recovery after a sharp and deep global recession, a highly polarized U.S. election, mounting inflation, a war in Ukraine, and dramatic economic sanctions against Russia,” he said.
On acquisitions, Dimon said that the bank will be reducing stock buybacks over the next year to meet capital increases required by federal rules “and because we have made some good acquisitions that we believe will enhance the future of our company.”
JPMorgan has been on a buying spree, spending nearly $5 billion on acquisitions over the past 18 months. Dimon said that will increase “incremental investment expenses” by roughly $700 million this year.
Investments in technology will add $2 billion to expenses this year, Dimon said.
ExxonMobil Suspends Russian Far East LNG Project: Interfax
ExxonMobil has suspended its liquefied natural gas project in Russia’s Far East, Interfax news agency quoted a
Russian governor as saying on Monday, after the firm announced plans to quit the country following Western sanctions.
ExxonMobil said last month it would exit its Russian oil and gas operations, which it had valued at more than $4 billion, and halt new investment due to sanctions on Russia over Ukraine.
The decision would see Exxon pull out of managing large oil and gas production facilities on Sakhalin Island in Russia’s Far East, and put the fate of a proposed multi-billion dollar
LNG facility there in doubt.
Exxon had planned to build the Far East Liquefied Natural Gas (LNG) project with annual capacity of more than 6 million tonnes as part of Sakhalin-1 consortium led by Russian energy giant Rosneft.
“The project, which the Americans—Exxon—had announced at the port of De Kastri with the pipe from Sakhalin, it is frozen until further notice from them,” Interfax quoted the Khabarovsk region’s governor Mikhail Degtyaryov as saying.
“Why has it been done? I am astonished, this is a shot in the foot.”
Exxon in Moscow referred Reuters to the company’s announcement about its decision to leave the business in Russia on March 1.
Local archive:
