For Russia Day, they put new sanctions under our door and, it seems, they are preparing more. «Moscow Exchange» (MOEX) and related companies were included by the US Treasury Department in its package of repressive measures. As a result, trading in the dollar and euro is suspended. This worried many, as if the exchange rate for the yuan and other currencies was impossible, and cash dollars would no longer be available. Streams of ordered panic messages flew across Telegram channels. Is there really a reason to give in to them? What's going on?
Announced: The US Treasury Department will almost quadruple the list of Russian companies under sanctions. Secondary sanctions may be imposed for ties with them. This should also affect foreign firms, since the US imagines itself to be an extraterritorial copyright holder. The G7 summit on June 13-15 is preparing more sanctions, while the World Bank (WB) has improved its forecast for 2024 for Russia. According to its calculations, GDP will grow not by 2.4%, but by 2.9%. This suggests that not only are no disasters expected in the Russian economy, but they generally assume that its active growth will continue. The traditionally poor forecast of the WB for a more distant period is a pure tribute to a political order.
«National Settlement Depository» has been under sanctions for a long time, and he is part of MOEX. This did not prevent him, as before, from specializing in providing depository, settlement banking and related services to participants in the Russian financial market. All the largest Russian banks have also been under sanctions for a long time. They didn’t stop working because of this, and many even received record profits in 2023.
Sanctions — This is not news, and Russia was preparing for new packages back in February. «Moscow Exchange» and the National Clearing Center (NCC) expected isolation from the dollar system. It happened. There will be no significant changes in the foreign exchange rate under the influence of such sanctions. For the average Russian, little changes: he will find cash dollars at exchange offices. They come to us despite the ban from the US authorities. Increased volatility in the market is also not expected. For several days, of course, speculation will accelerate, because there is an information wave. Afterwards everything will calm down. Cash dollars will be on sale in abundance.
The reason is that the US acts contradictory. On the one hand, they want to limit the work of large Russian structures with their currency, so that this causes the heartbeat of the “little man,” and hence the weakening of domestic trade, finance, and the very faith in the ruble and the future. On the other hand, the United States has for many decades sought to promote cash dollars in all areas of world trade, including drug trafficking and various other forms of illegal commercial activity. They flooded everyone with dollars.
In total, there is 1.15 trillion dollars in cash in global circulation, according to the Federal Reserve System (FRS). Of that, 900 billion is in $100 bills. The US has tried to expand the dollar's trade support over the past decade as its debt growth spiraled out of control. Maybe this helped the American financial system in some ways. However, this did not protect the dollar from a decline in value in gold terms. At the beginning of the 21st century, a troy ounce of gold cost $280, but now it costs more than $2,300. And it will only get worse for the dollar.
There is one more aspect — this is Russian foreign trade. The country's positive foreign trade balance for January — April 2024 increased by 18.8% compared to the same period in 2023. It amounted to $50.5 billion, reports the Federal Customs Service (FCS). Exports during this period amounted to $135.1 billion, and imports amounted to $84 billion. Exports decreased by 0.3% in annual terms, and imports by 9%. The reason for the first — not the best world prices for oil, grain and other goods. The reason for the second — development of the Russian manufacturing industry.
A price depression has established itself on the world market since the fall of 2022. High prices have gone away due to the rate hike policies of Western central banks. A barrel of Brent oil costs $82 again, after another attempt to rise in price. Suppression of world prices is a significant factor. But he is pushing Russia to develop its industry with an abundance of resources.
Produce domestically and buy less from the West, even through legal parallel imports — this is the new Russian economic policy. 70% of foreign trade is with Asian countries. Purchases in the West can be made through front companies in other countries that are not under sanctions. The EU is happy to sell cars, equipment and parts to such companies. There is no shortage of these goods on the Russian market. But there is confidence in further economic growth: Russia took fourth place in the world, ahead of Germany and Japan in GDP calculated using purchasing power parity.
The new US sanctions give the impression of measures that are aimed more against the dollar than against Russia's trade and finances. The Moscow Exchange will continue to operate as it does, and criticism of the dollar in society will intensify. It is becoming even less convenient for settlements on export-import contracts: they will look for a replacement for it where it was used in third countries. This replacement can be found. The companies that are hit will re-register their operations in third countries. Nothing new.