Sanctions hurt Russia, but still far from changing minds. [View all]

[another_liberal]

Source: Reuters

(Reuters) - Sanctions on Russia over its actions in Ukraine have compounded the impact of oil's plunge but Moscow may have the financial buffers to hold out for two years without a change in policy. European governments meet next week to review the sanctions, imposed after Russia annexed Crimea last March and threw its support behind pro-Moscow separatists in eastern Ukraine.

The West's response centred first on financial and travel restrictions on key individuals but by mid-year it had effectively cut off overseas funding to corporate Russia. Although there was scepticism at the outset, these measures have hurt, particularly combined with the parallel collapse in oil, Russia's major export. Their impact has far outweighed Russian counter punches to European agricultural imports or the cancellation of its South Stream gas export pipeline through southern Europe. "The big hit to Russia has really come from the oil price but extra shrapnel has come from sanctions," said Chris Weafer, senior partner at Macro-Advisory consultancy in Moscow.

Many dispute U.S. President Barack Obama's assertion that Russia's economy is now 'in tatters' -- a jobless rate of just over 5 percent and total external debts of about 30 percent of national output are just two raw numbers that would make some European leaders jealous. But the fabric has been badly damaged. Reeling from 50 percent tumbles in both oil prices and the rouble, output is forecast to contract by up to 5 percent this year, inflation is already well into double digits and corporate finance has all but seized up.

According to Thomson Reuters data, Russian companies have sold only eight foreign currency bonds totalling less than $5 billion since last March and none since November. That compares with 52 bonds worth about $34 billion in the prior 12 months. "Policymakers who devised these sanctions can be satisfied the intermediate goal has been achieved -- if that goal was to damage Russia's economy," said Christopher Granville, managing director of London-based consultancy Trusted Sources. "But the whole logic of the sanctions policy is that it leads to the ultimate goal of getting the Putin administration to rethink its strategy towards Ukraine."

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Read more: http://www.reuters.com/article/2015/02/04/us-investment-russia-sanctions-analysis-idUSKBN0L80W720150204

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Russia has an unemployment rate of just five percent and external debt totaling only thirty percent of GDP? If they still can manage numbers like that after a year of ever-increasing sanctions and six months of ever-decreasing oil prices, it's clear this anti-Russian economic siege of ours is not going to be the quick and easy victory many originally thought.