How Much Impact Will New Sanctions Have On Russia?

Linda Wertheimer talks with Financial Times reporter Kathrin Hille in Moscow about the economic impact on Russia of accumulating Western sanctions.

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LINDA WERTHEIMER, HOST:

Just how much of an impact will these sanctions have on the Russian economy? For some answers to that, we spoke with reporter Kathrin Hille in Moscow. She covers Russia for the Financial Times. Good morning.

KATHRIN HILLE: Good morning, Linda.

WERTHEIMER: First of all, what has been the response in Moscow to the new sanctions? What's the Russian government going to do?

HILLE: That's the big question everyone wants an answer to right now. The Russian government has over the last day been surprisingly quiet. And I think one of the reasons is that at the moment, we see that pressure is building from some of the people who would like the Russian government to take more extreme or more - make a more drastic response. For example, there are some deputies in the Duma - in parliament - who have proposed that the government should ban some of the world's biggest accounting firms from Russia in retaliation to the latest sanctions. So whether the Russian government will go down that path and maybe take some other extreme measures, like nationalizing assets of foreign banks or oil companies in Russia, we don't know yet.

WERTHEIMER: After Russia annexed Crimea, the United States and the European Union went after individuals close to Russian President Vladimir Putin. These new sanctions are targeting big businesses, big areas of the economy. How vulnerable is the Russian economy to this?

HILLE: There will be a very direct impact from this because this new kind of sanctions blocks a major avenue for financing for Russian businesses and most importantly, for big Russian banks. So as some people I spoke to yesterday expressed that you might see the channels for financing being gummed up. There are some 160 billion U.S. dollars in refinancing needs - in debts coming due over the next 12 months. This covers, like, state banks, nonfinancial state enterprises, but also the entire private sector. We'll have to see how much of that can be refinanced and where from. And so far, the U.S. moved first and that was already proving quite painful. But now you've got the European capital markets, which have been an even more important source of financing for the Russian economy in recent years, joining in as well. So you could argue that actually - that Russia has nowhere to go and nowhere to turn. One of the big questions is whether Asia and especially China and Chinese banks can jump in and help out a bit. We don't know that yet.

WERTHEIMER: Is there any chance that business people in Russia and others who are interested in getting things moving again - that the sanctions will get Putin to change course in Ukraine?

HILLE: Here in Russia, very few people believe that. When we have a chance to speak to senior business leaders or people we believe can talk to Putin or have certain ties to him - what we've been hearing over the past week or so is that a few of them are very worried and think that the government should change course. But at the same time, they don't dare speak up. And they don't have any confidence that the government actually will change course.

WERTHEIMER: Kathrin Hille, if the U.S. and the EU decide to pour it on, what would you think would be the next step if they want to increase the pressure?

HILLE: Well, for the U.S., if we look at the latest sanctions the U.S. has adopted, there is one very big player missing - Sberbank - the state owned bank that is Russia's largest lender has so far not been put on the U.S. sanctions list. So I think that would probably be the next one. And then there are lots more large Russian companies that either the U.S. or the EU or both of them together could target with these sectoral sanctions.

WERTHEIMER: Kathrin Hille is Moscow bureau chief for the Financial Times. Thank you very much.

HILLE: Thank you, Linda.

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