What Stops Russia? - Real Time Insight

Today, EU diplomats weigh sweeping new Russian sanctions.

The sanctions include a proposal to ban all Europeans from purchasing any new debt or stock issued by Russia's largest banks, according to a proposal seen by the Financial Times.

The sanctions measure, contained in a 10-page options memo prepared by the European Commission and distributed to national capitals, also proposes barring the Russian banks from listing new issues on European exchanges, preventing them from using London or other EU stock markets to raise funds from non-Europeans.

The last few weeks, Russian-listed shares have pulled back again. So did U.S. listed shares like Yandex (YNDX). But not as much as some would have guessed. More Russian investors are holding positions this time, not selling. The rest of global markets have moved higher. That says to me that Putin is rethinking his next moves, and it is not scaring investors much.

Do investors think sanctions don't work?

Nobody knows what comes next inside Ukraine, least of all me. They don't call it the Fog of War for nothing. Coming events could be all bad news for investors, or it could be all good news, or it could be a mixture of both.

Regardless of war events, Ukraine is not directly involved in the world economy or world financial markets. Ukraine is most like Argentina in this sense. It was a basket case for a long time before the war. Deplorable internal conditions bought this conflict.

What about Russia?

IMF data says Russia has $2.1 trillion in U.S. dollar GDP in 2014. The world economy has $76.8 trillion. That gives Russia a 2.7% world GDP share. 97.3% of world output is not built there.

2014 GDP, current prices and in U.S. dollars
Russia 2.1
China 10.9
India 2.2
Brazil 2.2
South Africa 0.4
BRICS subtotal 17.8
USA 17.5
Euro Area 13.4
World 76.8
Source: IMF

With a fraction of the population, Russian GDP gets to $2.1 trillion, comparable to India at $2.2 trillion and Brazil at $2.2 trillion, solely by exporting oil and natural gas to Europe.

Can the Russian tail wag the World dog? - Only if a full energy embargo is put in place by Europe. I don't think European politicians have the kahunas for that.

My RTI Question: What Stops Russia?

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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