Many Countries Including the USA and European Union Member States, Decided to Impose Heavy and Comprehensive Economic Sanctions Against Russian Federation
Following Russian Federation’s (“Russia”) invasion of Ukraine, many countries, especially the European Union ("EU") member states, the United States ("US"), United Kingdom (“UK”), Japan and Canada, agreed on imposing heavy economic sanctions against Russia. Switzerland also stated that it will act in accordance with the EU decisions as regards the economic sanctions to be applied to Russia.
The content and nature of these sanctions are summarized below under five main headings:
1. Financial Markets
Expulsion of Russian Banks from SWIFT
Among the economic sanction decisions taken by Western countries, the most radical one is the expulsion of some Russian banks from the international payment system SWIFT. Since the SWIFT system is a system concerning all payments made in foreign currency, it is foreseen that any international economic exchange that Russia will carry out will be affected by the sanction. Therefore, the sanction is expected to have certain economic impacts also on Turkey, which has intense commercial relations with Russia.
It should be noted that some Russian banks and payments related to energy trade might be excluded from the scope of the sanction. Despite possible exceptions, it is predicted that the economic activities carried out with Russia will be adversely affected in terms of speed, cost and general payment risks.
Although it is expected that Turkey will be able to make payments for energy imports from Russia within the framework of the above-mentioned potential sanction exceptions, it will become clear only in the coming days whether it will be allowed to make payments in Dollars for energy trade.
Considering the effect of the removal of Russia from the SWIFT system on the credit card payments of Russian tourists in Turkey, it is predicted that Russians will be able to make payments with credit cards through the Mir Card system, to which Turkey's leading banks have been integrated since 2019, and through non-sanctioned banks and national currencies.
Freezing of the Russian Central Bank’s Assets
Within the scope of the sanctions, the assets of the Russian Central Bank in the EU, the US, the UK, Japan and Canada got frozen. In this way, it is aimed to prevent the Russian Central Bank from selling assets abroad in order to support Russian banks and companies by using its high foreign exchange reserves, a significant part of which is found in the Western countries.
Ban on Transactions with the Russian Central Bank
The US banned transactions with the Russian Central Bank, Wealth Fund and the Ministry of Finance. An exception is granted for conducting energy trade transactions with the Russian Central Bank until mid-June 2022.
The UK introduced a similar ban on transactions with the Russian Central Bank.
2. Commodity Trading
Societe Generale and Credit Suisse, two of Europe's largest banks, stopped financing commodity trade from Russia.
ING Group and Rabobank of the Netherlands also decided to limit loan grants for commodity purchases from Russia.
Two of China's largest public banks restricted financing for the purchase of Russian commodities. Industrial & Commercial Bank of China stopped issuing letters of credit after the invasion of Ukraine.
Considering that both Russia and Ukraine are prominent actors in the global trade of grain, vegetable oil, steel and energy, it is predicted that closure of their ports and prevention of sailing of vessels in the region will adversely affect the prices of products such as sunflower oil, corn and wheat. The partial halt in shipments from the Black Sea, an important transit route for global commodity trade, may lead to higher raw material prices.
3. Energy
In addition to the adverse effects of the sanctions on the financial markets on Russian energy trade, additional sanctions targeting directly the energy market were also being granted. The EU banned the sale, transfer, and the export of goods and technology necessary for the processing of crude oil to Russia.
4. Technology
The export of some technological products and technologies, including microprocessors and equipment required for microchip production, to Russia is restricted by Western countries. The US also banned the export of high-tech products to Russia.
5. Transportation
In addition to the EU countries, Canada, the UK, Iceland, Norway and Switzerland decided to close their airspace to Russian aircraft.
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