With one thing it is hard to argue: every time the undersigned leaves the country for a long vacation the markets are not calm. If travel agents were still relevant I could probably pay for my vacations by selling a butterfly strategy. Because with each passing day the picture may change sharply and since most of the updates you receive from the media anyway, we will concentrate here on two aspects: the economic consequences of the situation as it is today and the significance of the various sanctions on Russia. As for the first part, it seems inevitable to admit that at least as of today, the war between Russia and Ukraine has no real economic implications for us or for countries that are significant to the Israeli investor. It’s not that there are no risks, is it possible that Putin will decide to continue west and visit Chelm in Poland (six and a half hours by car, a little more in an APC)? ? Definitely but it’s still an extreme event.
Similarly, when talking about the use of Western doomsday weapons – Russia’s disengagement from the Swift system, it should be remembered that Doomsday weapons are usually kept for Doomsday and not thrown away in the first act. Europeans understand that the reaction to Russia’s total disconnection from global financial systems could be millions of citizens freezing cold in their homes. The German Chancellor’s announcement yesterday of investment in the construction of two LNG terminals and substantial coal and natural gas reserves also shows that the Germans understand well the tangle they are in and are working to get out of it but this is of course a process that will take time. It is therefore more likely that in the meantime, the planned sanctions regarding the Swift system will not include the transactions of the Russian energy companies. In addition, according to most estimates, not all Russian banks will be cut off from the Swift, so it is likely that the move will lead mainly to damage to the efficiency of the financial system, a damage that will of course adversely affect the Russian economy but not its collapse.
And what about the rest of the sanctions announced? In principle, the purpose of such sanctions announced by Europeans and Americans is to harm Russia’s foreign trade and thereby lead to the collapse of the ruble, a sharp rise in inflation and a social uprising. However, in the case of Russia three mitigating circumstances that make sanctions weaker in the short and medium term: First, Russia has come prepared for the economic battlefield when since 2014 Russia has built huge foreign exchange reserves of $ 640 billion (38.5% of GDP), not only that but The debt-to-GDP ratio of Russia is very low (17.9%) with a foreign currency share of less than $ 40 billion and only half of it is held by foreign investors. In other words, Russia has enough foreign exchange reserves to support the economy. Second, if the disadvantage of semi-autocratic rule is that one day your country attacks another country and you have nothing to do about it then the advantage is that systems and state institutions work much more efficiently and quickly than in a democracy Should interest rates be raised immediately to persuade foreigners to keep their money in Russia? Check. This is not enough and should simply be banned from withdrawing money? Double check. Do you need to offset the effects of the sanctions? Do you know how to say Russian in internal criticism? The Russians do not. The (partial) disconnection from the Swift system will make it difficult, but trust Putin and the Chinese to find ways to get around it. .
Bottom line, The impact of events in Ukraine, as they appear today, will be reflected in rising inflation worldwide. This is certainly unpleasant but also not something that should lead to a significant and horizontal harm to the profitability of firms in the US, Europe or Israel.