In the latest turn of events, Russia and the West have been throwing economic sanctions at each other after the annexation of Crimea. Recall that the US and the European Union have threatened to impose sanctions on Russia, which included travel bans on Russian officials and freezing their assets, should President Vladimir Putin decide to take over Crimea.
This tension escalated more than a month ago, when several protesters in Ukraine rallied to overthrow the previous Ukrainian President for allying with Russia instead of accepting a bailout deal from the EU. When a new interim leadership was announced, Putin was displeased and announced a takeover of Ukraine’s Crimea territory.
A few days ago, the US and EU released lists of banned Russian officials and leaders involved in the annexation of Crimea. Russia responded by releasing their own list of banned US officials, including McCain and Boehner. US plans to take action against Bank Rossiya, whose largest shareholder is the “personal banker” of Putin and several top Russian officials.
Economic Sanctions to Backfire on EU?
Analysts are expecting another round of sanctions to be announced this week, as neither party is willing to let up. This could come in the form of more banned officials or possibly targets against energy companies in Russia.
However, some caution that this could backfire on the EU, as Russia is the single-largest energy supplier to the region. In fact, Russia is also the EU’s third biggest partner when it comes to international trade, next to the US and China. Sanctions on Russian energy companies could have serious repercussions on oil supply and possibly the euro zone’s economic performance.
Traders are likely to keep close tabs on any updates concerning Russian economic sanctions this week and price in the possible impact on the EU economy. Further signs of conflict could be negative for the euro and riskier currencies while signs of a resolution could spark a relief rally.
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