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Mark Segal's avatar

Because Russia started this war, Russia will need to end it by leaving Ukraine. I don't think it likely that Ukraine, the US and the EU will countenance any other outcome, as it would deliver a message that powerful countries can invade and annex neighbouring countries with impunity, not an acceptable world order. Only then will it become relevant to consider the joint problems of sanctions and reparations, as relief from the former will likely be the leverage for exacting the latter, and that process can extend over decades.

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Michael Wild's avatar

I strongly recommend the YouTube videos by ‘Joe Blogs’ on the effect on sanctions on the Russian economy. They appear to be kicking in significantly. The cap of $60 a barrel on Russian crude is being widely observed. Consumers – especially China and India- rather like cheap oil and know that Russia has nowhere else to go. My understanding is that they are negotiating prices below the cap. This price cap has only kicked in late 2022/early 2023. Furthermore China and India have no interest buying refined oil product because they have their own refineries and can make more money buying cheap Russian oil and refining it themselves. Income from gas and oil are down over 40% compared to last year and that’s going to hurt. Russia’s arms export industry is struggling to find electronic components and this war has hardly been a good advertisement for it. While the rouble recovered in mid-2022 it has been steadily declining in the last 3 months and dropping not only against the US currency but also the Chinese and Indian.

My feeling is the medium to long term outlook for Russia’s economy is somewhere between bad and grim. My feelings is that sanctions tend to be sticky and I can’t see Western governments are going to resist pressure of large businesses clamoring to go back to Russia. The Russian market is not remotely as attractive as the Chinese. As for the Western dilemma of what to do if the Russians go back to the Feb 2022 boundaries – I’ll believe that when it happens!

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