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New Russia sanctions - will they bite?

Friday, September 12, 2014 - 02:15

Europe's latest round of sanctions on Russia takes hold, with the proviso they could be lifted if Ukraine's fragile ceasefire holds. Joel Flynn looks at what impact they might have on a Russian economy already verging on recession and a rouble at record lows.

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Dawn in Donetsk - a prisoner exchange between Ukrainian government forces and pro-Russian rebels. The ceasefire here is holding - a fragile truce now in place for over a week. But new European Union sanctions on Russia have now come into force - targeting Moscow for what they see as efforts to destabilise Ukraine. Russian Foreign Minister Sergei Lavrov said these now threaten the peace process. Even before they came into effect this morning, government officials were denouncing them as undermining the peace deal. Speaking at a conference in Kiev, Ukrainian President Petro Poroshenko said the fresh sanctions were the clearest of messages. SOUNDBITE: Ukrainian President, Petro Poroshenko, saying (English): "Ukraine never ever has such a level of support in the world and in Europe." It might not all be bad news though - the EU has dangled the prospect of dropping some sanctions if the ceasefire in Ukraine continues to hold. A chink of light for a Russian economy precariously poised. And a rouble that's been on a rapid slide. Marshall Gittler is an FX analyst. SOUNDBITE: IronFX Head of Global FX Strategy, Marshall Gittler, saying (English): "Even assuming that the Ukraine situation stabilises, confidence has been shaken in Russia. I think the economic fundamentals for the Rouble are negative anyway. The question is the pace of decline - if the Ukraine stabilises, the Rouble will probably decline at a much slower pace. Obviously if the Ukraine heats up again then pow, it's collapse." Russian companies too are continuing to suffer from sanctions. Banks and arms makers are being hit hard. Depressed oil prices are exacerbating worries for companies like Rosneft, as well as Transneft and Gazprom Neft - though Gazprom itself is still noticeably exempt. Barclays' Will Hobbs says investors should look elsewhere. SOUNDBITE: Barclays VP Research, Economics & Strategy, Will Hobbs, saying (English): "There's no prospect that I can see of this getting any easier, so for the moment we've been saying to investors that there are many easier ways of getting access to the oil price than trying to invest in Russian equities." For many, the situation in Ukraine has changed little; it's one dominated by uncertainty. But with each further step and sanction, the stakes are almost certainly getting higher.

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New Russia sanctions - will they bite?

Friday, September 12, 2014 - 02:15